OneMain Holdings, Inc. 2026 Q3 Earnings Call

Please go ahead, sir. Thank you, operator.

Good morning, everyone, and thank you for joining us. Let me begin by directing you to page 2, the Third Quarter 2026 Investor Presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. These forward-looking statements are subject to inherent risks and uncertainties, and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements.

If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, October 30, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question-and-answer session. I'd like to now turn the call over to Doug.

Thanks, Pete. Good morning, everyone. Thank you for joining us today. Let me begin with a few highlights from the quarter before I discuss momentum across the company as we continue to deliver profitable growth through disciplined execution and progress against our strategic priorities. Financial performance was great this quarter. Receivables continue to grow. Credit is moving in a decidedly positive direction. We further fortified our already strong balance sheet, and capital generation continues to grow. Capital generation for the quarter was $284 million, up 4% year-over-year. We're seeing excellent growth across our business while maintaining our conservative underwriting posture. The growth is driven by ongoing product innovation in our personal loans business and continued disciplined execution in our newer products, auto finance and credit cards. Receivables reached $28 billion in the quarter, which is a 9% year-over-year growth.

We saw good credit performance in the quarter. Our consumer loan, 30-89 delinquency, declined 12 basis points year-over-year, better than the 3 basis point decline we saw last quarter. Year-to-date, the decline has been 28 basis points, which compares positively to low single-digit declines in both the prior year and pre-pandemic years. We also saw improvement in later-stage delinquencies, with 90-plus delinquencies declining 9 basis points year-over-year, compared to a 3 basis point increase last quarter. These improving delinquency trends point to lower losses going forward, and we expect lower year-over-year losses in 2027, getting us closer to our longer-term normalized loss range for consumer loans. C&I net charge-offs were 7.2%, and consumer loan net charge-offs were 6.9%, both down significantly from last quarter.

We also continued to see good recoveries resulting from our efforts over the past several years to improve recovery capabilities across the business. We had 7% year-over-year growth in our consumer loan business. In our personal loan business, secured lending, which carries lower losses, accounted for nearly 60% of our originations this quarter. Our enhanced debt consolidation offering, new home fixture secured loan offering, and increased use of bank data all contributed to higher originations in personal loans. We are pleased with our loan growth, but as I've said before, growth is an outcome. Great lending businesses start with a disciplined credit box and build on that by innovating and executing on a thousand little things that add up to meaningful value creation.

Across OneMain, our team members are continuously finding ways to make better use of the rich data our business generates, refine our marketing to reach more customers, better tailor our offers to increase pull-through rates, improve our digital experience to make it easier for customers to do business with us, and drive efficiencies in our branch and operations. It is this focus on continuous improvement and execution that is driving the profitable growth that we see today. Turning to auto finance, receivables grew 16% year-over-year to $3.2 billion. We've increased application flow while maintaining our conservative underwriting standards by improving sales force productivity, expanding our dealer network, and deepening dealer relationships to generate more applications per dealer. As this business continues to mature, we expect to do more volume with our existing dealers. Importantly, credit performance in auto finance remains good and in line with our expectations.

Our credit card business delivered another strong quarter, with excellent results across all key metrics, and we now have 1.5 million customer accounts. Receivables have now reached $1.4 billion. Our expanded card offering and focus on customer experience are helping attract new customers and drive digital engagement. We are seeing this materialize both in our results and also reflected in frequent usage of our highly rated mobile app. Credit performance in the card business continues to improve, building on the momentum from the first half of the year, with lower losses and better delinquency trends compared to a year ago. We continue to drive down unit cost and generate greater operating leverage as we scale. We are very happy with the trends in our credit card business, which underscore the value this business brings to OneMain in terms of capital generation and diversification.

The strength of our balance sheet and funding program were again evident this quarter. In August, we raised $2.3 billion at very attractive pricing with tight spreads through three separate issuances on a single day. Once again, we demonstrated our leading access to the capital markets, even further fortifying our incredibly strong balance sheet with a long liquidity runway. Let me spend a minute discussing how we're investing in technology and digital capabilities to make it easier for customers to do business with us, support profitable growth, and improve efficiency. Over the past year, we've built a new mobile and web experience that has brought loans, credit cards, and our My Money financial wellness tool together in one place. We've now made this new mobile app experience available to all of our customers.

Customers can more easily manage their accounts, access tools to help with their financial lives, and explore personalized offers across our products. We're seeing growing engagement with our digital channels, creating additional opportunities to serve our existing customers, attract more customers, and make our business more efficient. We also recognize how AI could have significant potential across our business, and we're approaching it with discipline. Our approach is to apply the technology in those places where we see the clearest opportunities, starting with targeted use cases and expanding where the evidence supports further investment. Our internal use has focused on deploying AI to improve how our team members work today, with an eye towards automating high-volume manual processes and operations, helping team members in corporate functions work more effectively, and driving productivity and innovation in product and software development.

While we're also starting to pilot AI in selected lower-risk customer-facing interactions, these use cases carry a very high bar for accuracy, transparency, and trust. So we'll move very deliberately there and scale over time only where the results and customer experience support it. As we expand our use of AI, we have put in place a governance framework in which security, privacy, human accountability, and customer trust are foundational to how we deploy the technology. It's also important to remember that our branch network, deep customer relationships, and personalized service will remain key differentiators of OneMain, particularly when, as adoption of AI increases, customers will ascribe more value to trusted human interactions and guidance. Let me briefly touch on the consumer. The positive credit trends we see on our book are pointing to continued resiliency in our consumer base.

While higher oil prices and some inflationary pressure continue to create uncertainty in the macro picture, the labor market remains strong. Importantly, we don't underwrite to the generalized consumer. We offer personal loans, credit cards, and auto loans to customers who meet our conservative underwriting standards. At the end of the day, we hold a nationwide portfolio of risk, which is only a subset of the overall non-prime consumer base. Our data points to a stable and resilient customer. Turning to capital allocation, our priorities remain unchanged. We will continue to extend credit to every customer that meets our risk-return criteria, and we will invest in the business to innovate, meet customer needs, drive efficiency, and create long-term shareholder value. Our regular dividend, currently $4.20 per share on an annualized basis, represents a 7% yield at today's share price.

In the third quarter, we repurchased 538,000 shares for $34 million, bringing our total repurchases year-to-date to $171 million. As I have said, all things being equal, we expect incremental capital returns to be more weighted towards share repurchases going forward, while still maintaining our current dividend. As you can see, we had another strong quarter. OneMain's best-in-class data science and underwriting, experienced team with unparalleled expertise in serving the non-prime consumer, our digital and technology innovation, diverse product offering, and strong balance sheet create unique competitive advantages for our company, which are evident in the results this quarter. We are focused on building on these strengths by executing our strategic priorities and driving profitable growth across the business. With that, let me turn the call over to Jenny.