OneMain Holdings, Inc. Barclays 24th Annual Global Financial Services Conference

Welcome, Jenny. Thank you. Thank you for having me.

It's interesting. You can read the papers, you can look at all the stats out there, but frankly, when we look at our customer base, it doesn't match up with what we're seeing. Let me just talk a little bit about who our customers are. We don't use FICO to underwrite, but our average customer has about a 630 FICO, just to give you a sense. About half of them have been at their jobs for over 5 years. You're seeing 40% homeowners, so a really good—we call them hardworking Americans, $80,000 a year in annual income. Sort of your average American. When we look at payment behaviors, we're seeing really good payment behaviors, where you can then look at sentiment and you can spend time in the branches and you can feel that folks are trying to make things work.

But I think what you're seeing right now is that they're able to sort of move things around and make their family budgets work. So at the end of the day, right now, we're still seeing everyone work through it. I would say the pieces we'll be watching are obviously the two things you watch. You watch for employment, which right now we're seeing generally very good employment numbers, and then you also watch inflation, and there on inflation, fuel prices. We've seen very modest change on our card that we have. We now have some spend data, and so we're seeing a move that's pretty minor, 7.5% of our average spend was on gas, and that's moved to about 8% of average spend. So you're not seeing major shifts, but we'll watch gas prices, and we'll also watch for other pieces like electricity bills.

I think places where you can see major shifts very quickly are things that we would watch. But right now, really seeing good payment behavior.

Right. So that guide of 7.4%-7.9%, I think we're feeling very good about that guide. We saw really, really good year-on-year improvement. If I look at the second quarter-- First quarter, we were about one basis point year-over-year in our 30 to 89 delinquency improvement. And then if you looked at that second quarter, we were seven basis points in terms of that improvement. So we like that sort of movement. And if we look at to be at the low end of our guide, we talked a little bit about roll rates, but we've seen a little bit higher roll rates. If those were to continue, you would see us at the high end of our guide. You'd have to see the economy stay rather like it has been. To be at the low end, you'd have to see improvements in those roll rates.

We're really at that point in the year when that's going to be what affects our losses and maybe some improvement in the economy. But overall, I think we're feeling very good about the guide, very good about the long-term trajectory of losses.

Yeah. If I look in 2019, we were a personal loans company. That's what we did. It was a different economy, and we were in the 6%-7% guide. I think that relates to why you asked the question about the different products. If you looked at us today, I would think. If you look at our consumer loan book, that's personal loans and auto, and I would compare that back to that 2019 number. Then we'll talk about cards in a minute, but cards obviously comes with a different loss rate. Last year, we saw this massive improvement. We went from 8.2% losses to 7.65% losses. It was outsized improvement. This year, you mentioned it's been rather flat.

I think as we look forward, you're not always going to see an exactly linear path, but we feel pretty confident in that consumer loan loss level coming in below 7% over time. So I think you're going to see that get there. Then cards, which is included in our overall C&I, so it's consumer loans plus cards. Depending on the growth of cards and its percentage of the book, you're going to then see that impact our overall C&I loss number.

I was saying this earlier today to someone, but recoveries are such a core piece of what we do regularly, and just in the normal course of business. We, a little while back, invested more in our internal recovery capabilities. To talk about what some of those things are, that can be looking at the tools that you use and the models that you use to determine who you're going to contact, how you're going to contact them. Let me, just to give you some examples, it used to be you call the next person on your queue at the time that worked for you. Think about in today's day and age, you've got to think about, well, how can we predict what's the best time to call a customer? How can we predict what's the best method to reach them? Should we call them? Should we chat with them?