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DATE
Friday, Oct. 30, 2026
CALL PARTICIPANTS
- Head of Investor Relations - Peter R. Poillon
- Chairman and Chief Executive Officer - Douglas H. Shulman
- Chief Financial Officer - Jeannette E. Osterhout
TAKEAWAYS
- Capital Generation -- $284 million, up 4% year over year driven by receivables growth and operational discipline.
- Managed Receivables -- $28.1 billion, representing 9% year-over-year growth across all lending products.
- Net Finance Receivables -- $26.3 billion, compared to $24.5 billion in the third quarter of 2025.
- GAAP Net Income -- $185 million, representing a decline from $199 million in the prior year quarter.
- GAAP Diluted EPS -- $1.60, down from $1.67 in the third quarter of 2025.
- C&I Adjusted Diluted EPS -- $1.51, compared to $1.90 in the prior year quarter, reflecting higher provision expenses.
- Total Revenue -- $1.7 billion, up 7% year over year due to higher interest income and credit card fees.
- Net Interest Income -- $1.1 billion, reflecting a 7% increase in interest income that outpaced interest expense growth.
- Consumer Loan Originations -- $4.5 billion, up 17% year over year driven by personal loan innovation and auto finance scaling.
- 30-89 Day Delinquency Ratio -- 3.08%, a decline of 12 basis points year over year.
- 30+ Day Delinquency Ratio -- 5.34%, down 21 basis points year over year despite pressure from the legacy book.
- 90+ Day Delinquency Ratio -- 2.26%, reflecting a 9-basis-point decline year over year.
- C&I Net Charge-offs -- 7.2%, representing a 96-basis-point sequential improvement.
- Consumer Loan Net Charge-offs -- 6.9%, down 88 basis points sequentially from the second quarter of 2026.
- Credit Card Net Charge-offs -- 13.9%, a decline of 274 basis points year over year as the portfolio matures.
- Recoveries -- $101 million, up 15% year over year due to enhanced digital recovery strategies.
- Auto Finance Receivables -- $3.2 billion, growing 16% year over year as the dealer network expanded.
- Credit Card Receivables -- $1.4 billion, supported by a customer base that grew to 1.5 million accounts.
- Credit Card Revenue Yield -- 34.9%, up from both the previous quarter and the prior year period.
- Loan Loss Reserves -- $3.1 billion, resulting in a reserve coverage ratio of 11.7%.
- Operating Expense -- $453 million, up 6% year over year reflecting investments in data science and technology.
- Debt Issuance -- $2.3 billion, raised in August through a $1 billion two-year revolving ABS at 5.15%, a $680 million five-year revolving ABS at 5.47%, and a $600 million unsecured bond at 7.18%.
- Bank Data Adoption -- 40% of originations, up from 30% a year ago as more customers used digital bank data verification.
- 2026 Managed Receivables Guidance -- 9%, narrowed to the high end of the previous range due to strong momentum.
- 2026 C&I Net Charge-off Guidance -- 7.4% to 7.9%, narrowed to the higher end of the range.
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RISKS
- Shulman stated, "higher oil prices and some inflationary pressure continue to create uncertainty in the macro picture," noting that these factors could impact nonprime consumer resiliency.
- Osterhout warned that the "negative impact of the relatively small aging back book continues to linger on our balance sheet and disproportionately weighs on credit performance," as loans originated before August 2022 account for 10% of 30 plus delinquencies.
SUMMARY
OneMain Holdings, Inc. (NYSE:OMF) reported expansion across its diversified lending portfolio, with managed receivables increasing 9% year over year. Management indicated that credit performance improved throughout the quarter, highlighted by sequential declines in net charge-offs and a contraction in delinquency rates. The company remains focused on scaling its auto finance and credit card businesses while maintaining a conservative underwriting posture across all products. Significant liquidity was maintained through multiple capital market issuances, supporting a strategy of balanced capital returns via dividends and share repurchases.
- Management expects lower year-over-year losses in 2027 as Improving delinquency trends point toward normalized loss ranges.
- The credit card business achieved more than 80% growth in unit originations and purchase volume year over year.
- CEO Shulman stated, "growth is an outcome," noting that the company prioritizes a disciplined credit box over volume targets.
- The company set a record by raising $2.3 billion in the public markets through three separate transactions on a single day in August.
- A new mobile app experience consolidating loans, cards, and financial wellness tools is now available to all customers to drive digital engagement.
- Management is piloting AI in selected lower-risk customer interactions while focusing internal use on automating manual operations.
INDUSTRY GLOSSARY
- ABS: Asset-backed securities, financial instruments created by pooling loans and selling them as investment-grade debt.
- Back Book: Loans originated before a certain date (August 2022 in this context) that often carry different risk profiles than current originations.
- C&I: Consumer and Insurance, the primary operating segment for OneMain Holdings.
- CECL: Current Expected Credit Losses, an accounting standard that requires companies to reserve for the full life-of-loan expected losses at origination.
- Foursight: The auto finance business acquired by OneMain to expand its presence in the indirect auto lending market.
- Managed Receivables: A metric including all finance receivables owned by the company plus those serviced for third parties.
Full Conference Call Transcript
Operator: Good morning, everyone. Welcome to the OneMain Financial Third Quarter 26 Earnings Conference Call and Webcast. Hosting the call today from OneMain Peter R. Poillon, Head of Investor Relations. Today's call is being recorded. It is now my pleasure to turn the floor over to Mr. Peter Poillon, Please go ahead, sir.
Peter R. Poillon: Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the third quarter 26 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 And 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, have not been updated subsequent to this call. Our call this morning will include formal remarks from Douglas H. Shulman, our Chairman and Chief Executive Officer and Jeannette E. Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. I would like to now turn the call over to Douglas.
Douglas H. Shulman: Thanks, Peter, and 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 are 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 to 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.
And our enhanced debt consolidation offering new home fixtures 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 have 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 have increased application flow while maintaining our conservative underwriting standards by improving Salesforce 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. And 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 3 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 are 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 built a new mobile and web experience. That has brought loans, credit cards, and our MyMoney financial wellness tool together in 1 place. We have 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 are 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 are 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 and corporate functions work more effectively, and driving productivity and innovation in product and software development.
While we are 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 will move very deliberately there. and scale over time only when 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. And it is 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 do not 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.
And 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 thousand 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.
Jeannette E. Osterhout: Thanks, Douglas, and good morning, everyone. Let me begin by summarizing our strong third quarter results. We delivered excellent high quality originations and good credit performance with lower losses that are better than seasonal trends and improved delinquency metrics across all products. Providing a tailwind for further loss improvement ahead. We enhanced operating efficiency through disciplined expense management while continuing to invest in initiatives that strengthen the business. We also bolstered our balance sheet during the quarter with both unsecured and ABS issuances. Taken together, these results position us well for continued profitable growth over the medium and longer term.
Consumer loan originations increased 17% year on year in the quarter, while credit card unit originations and purchase volume each grew more than 80%. Consistent with our plan to scale the credit card business over time. Managed receivables grew 9% year on year, accelerating from 7% growth last quarter. As Doug said, we view growth as an outcome. And this quarter's combination of portfolio growth and improving credit performance is particularly encouraging. Funding and the strength of our balance sheet were once again highlights in the quarter. We raised $2.3 billion in the public markets through 3 separate issuances: across the ABS and unsecured markets. Providing excellent flexibility for future funding needs.
Additionally, we continued our share repurchases Year to date, we have repurchased $171 million of our shares which combined with our healthy dividend resulted in more than $500 million returned to shareholders so far this year. Third quarter GAAP net income was $185 million or $1.60 per diluted share. We generated C&I adjusted net income of $174 million or $1.51 per diluted share in the quarter. The strong loan originations and credit card purchase volume I mentioned earlier drove a $1.1 billion sequential increase in net finance receivables in the quarter.
This strong receivables growth resulted in a $146 million increase in our CECL loan loss reserve in the quarter, $85 million higher than in the third quarter of last year. Capital generation, the metric against which we manage and measure our business, totaled $284 million up 4% from $272 million in the third quarter of 25. Reflecting the continued growth of the business. Managed receivables ended the quarter at $28.1 billion up $2.2 billion or 9% from a year ago. Managed receivables at the end of September included $1.8 billion of finance receivables serviced for others. Third quarter originations of $4.5 billion increased 17% year on year.
In consumer loans, we delivered strong growth while maintaining our consistent and conservative underwriting. Driven by our innovative personal loans initiatives and continued scaling of our auto finance business. The personal loans initiatives we have progressed over the past several quarters continue to gain traction and attract customers to OneMain. Encouragingly, their early credit performance is in line or better than our expectation. The auto finance business, delivered strong growth, with third quarter originations up 26% year on year. As we continue to grow our dealer network and further penetrate dealer relationships. Our credit card business continued to build momentum. With unit originations up 84%, and purchase volume up 82% year on year.
We continue to benefit from the enhancements to our BrightWay offering. As we appeal to more customers and deepen engagement with existing customers. Overall, we are pleased with the pace and quality of the growth across the businesses which was achieved through superior execution while maintaining our conservative credit posture. Turning to yield. Third quarter consumer loan yield was 22.6%, up slightly year on year, even as the mix of our consumer loans portfolio has shifted towards more secured lending. Our asset yields remain strong as we continue to maintain our disciplined pricing. As market rates adjust in this dynamic rate environment, we will continue to monitor the market for opportunities to optimize pricing.
But we expect our consumer loan yields to hold at current levels through year end. Third quarter revenue yield in our credit card portfolio was 34.9%. Up from last quarter and a year ago. Total revenue in the third quarter was $1.7 billion up 7% year on year. Interest income of $1.5 billion grew 7% from the third quarter of last year, outpacing the 6% growth in average net receivables on our balance sheet. Other revenue of $211 million was up 5% from last year. Primarily due to higher credit card revenue as we grow the card business as well as higher servicing fees from our growing portfolio of loans serviced for third parties.
Interest expense for the quarter was $345 million up 8% compared to the third quarter of 25 driven by higher average debt to support our receivables growth. Our interest expense as a percentage of net receivables was 5.3% this quarter. An increase of 3 basis points from last quarter. As we look forward, we expect our funding costs to remain at approximately this level through year end. Our longer term staggered debt maturity will mitigate the impact of potentially higher market interest rates into the future. Third quarter provision expense was $615 million consisting of $469 million of net charge offs.
And a $146 million increase in reserves, which, as I mentioned earlier, was driven by the strong receivables growth during the third quarter, Policyholder benefits and claims expense for the quarter was $53 million up from $48 million in the third quarter of last year. We continue to expect quarterly PBMC expenses in the mid-$50 million range going forward. Let's turn to credit, starting on Slide 8. I would like to first highlight that unlike in prior quarters, all delinquency metrics on Slide 8 now reflect consumer loans, including Foursight. The auto finance business we acquired.
We now have enough combined quarterly results to provide a consolidated view of consumer loan delinquency metrics, which helps simplify the analysis of credit trends. As a reminder, including Foresight in our delinquency metrics, increases early stage delinquency rates but lowers the role to loss. Consistent with typical auto finance industry dynamics. 30-89 delinquency on September 30 was 3.08%. Down 12 basis points compared to a year ago. An improvement from the 3 basis point decline we saw last quarter.
On Slide 9, you will see that the 28 basis point year to date improvement in 30-89 delinquency was better than the low single digit improvements both last year and in the pre pandemic period, as delinquency continues to trend lower. 90 plus delinquency declined 9 basis points from a year ago, following the improvements in our 30-89% delinquency last quarter. 30 plus delinquency was 5.34%, down 21 basis points from the prior year an improvement from the flat year on year trend last quarter. We are encouraged by the improvement across all delinquency metrics this quarter. Which helps support our confidence in lower year on year losses in the fourth quarter and into 2027.
Before turning to net charge offs, I want to highlight the continued impact of our back book. Which consists of loans originated before August 2022. While representing just 3% of our total portfolio, it accounts for 10% of 30 plus delinquencies. Which is more than 2x the expected level for similarly seasoned loans. While our front book continues to perform in line with expectations, the negative impact of the relatively small aging back book continues to linger on our balance sheet and disproportionately weighs on credit performance. As we move into 2027, we expect this impact to continue to subside. Moving to net charge offs for the quarter. As shown on Slide 10.
Third quarter C&I net charge offs, which include the results from our growing higher yield, higher loss credit card portfolio, were 7.2%. Down 96 basis points sequentially, a notable improvement from the 56-basis-point sequential decline in this quarter last year. Consumer loan net charge offs, which exclude credit cards, were 6.9% in the third quarter. Down 88 basis points sequentially, also a notable improvement over the prior year's sequential drop. We are pleased to see the improvement we anticipated in year over year roll rate trends this quarter. Which we believe will continue through the end of the year.
Combined with the recent improvement in delinquency rates, these trends should drive notably lower loss rates year on year in the fourth quarter. Recoveries remained strong in the quarter. Increasing 15% year on year to $101 million. Recoveries as a percentage of average net receivables increased to 1.6% from 1.5% a year ago. Reflecting continued enhancements to our comprehensive loss recovery strategy. C&I net charge offs include a 35-basis-point contribution from our small but growing credit card business, which has higher yields and higher losses.
However, I would like to highlight the continued strong improvement in credit performance in our credit card business, Net charge offs declined 274 basis points year on year to 13.9% in the quarter, Given our strong performance throughout 2026, we expect full year credit card net charge offs to land comfortably within our longer term target range of 15% to 17%. 30 plus delinquency in our card business declined 105 basis points year on year. Giving us greater confidence that the loss improvement tailwind should continue. Our card business has delivered consistently strong credit performance over the past several quarters.
As we look ahead, we expect to continue to pursue growth with the same conservative approach we have taken since inception. Loan loss reserves ended the quarter at $3.1 billion with a reserve coverage ratio of 11.7%. Our loan loss reserve ratio increased 5 basis points from 11.6% last quarter. As expected, driven by the change in mix of our portfolio as our credit card business continues to grow in proportion to the total portfolio. In the third quarter, credit card receivables grew by $239 million or 21% sequentially. Accounting for approximately 20% of total net receivables growth in the quarter.
While the credit card reserve ratio was largely unchanged from the prior quarter, is nearly 2x higher than the reserve rate on consumer loans. As strong credit card growth is expected to continue to shift our portfolio mix, we expect the overall reserve rate will reach 11.8% in the fourth quarter. While there is a modest impact to our reserve ratio, the growth of the credit card business brings strong risk adjusted margins positive capital generation, and further diversifies our overall business for the longer term. Now let's turn to expenses on slide 11. Operating expenses were $453 million up 6% from a year ago compared to the 9% growth we saw in managed receivables.
The operating expense increase reflects continued investments in credit cards and auto finance, As well as enhancements to our data science technology, and digital capabilities. These initiatives support growth across our businesses by improving customer experiences increasing team member productivity, and expanding our data and analytical capabilities. While driving greater efficiency and scalability over time. Our OpEx ratio was 6.5%. Down from 6.7% last quarter and 6.6% a year ago. This improvement reflects our continued focus on expense discipline, and our ability to drive operating leverage while supporting business growth. Looking ahead, we will remain focused on balancing investment in opportunities that support future profitable growth and operating expense efficiency. Now turning to funding on Slide 12.
Where I will provide a bit more detail on our balance sheet. As I touched on earlier, we strengthened our balance sheet during the quarter. In August, we raised $2.3 billion across 3 issuances in 1 day, a record for OneMain. We issued a $1 billion 2-year revolving ABS at 5.15%. A $680 million 5-year revolving ABS at 5.47%, and a $600 million unsecured bond due in 2034 at 7.18%. Demand was strong across the 3 transactions, resulting in attractive spreads ahead of recent market rate increases. This strong execution reinforces the strength of our funding platform and our ability to raise capital even with an uncertain market backdrop.
Our bank lines are unchanged at $7.5 billion providing substantial liquidity and additional flexibility to our funding program. Our net leverage at the end of the third quarter was 5.5x. Flat compared to prior quarter and a year ago. And within our target range. Our balance sheet remains a key competitive advantage supported by staggered long term maturities a diversified funding mix, ample liquidity, and consistent market access. This combination provides flexibility supports stable execution, and positions us well through economic cycles and volatile credit markets. Turning to our full year 2026 guidance. Shown on slide 14. We are narrowing our full year managed receivables growth guidance range.
We now expect managed receivables to grow at the high end of our previous guidance range. To 9%. Reflecting the strong momentum across our 3 businesses We are also narrowing our C&I net charge off guidance range. We now expect C&I net charge offs to come in at the higher end of our previous guidance range of 7.4% to 7.9%. As I mentioned earlier, lower delinquencies and improving roll rate trends support our expectation for further year on year loss improvement in the fourth quarter and into 2027. We are maintaining our OpEx ratio guide of approximately 6.6% for the year. In closing, we are pleased with our performance and the momentum we continue to build across the business.
Healthy originations growth, improving credit trends, disciplined expense management, and our diversified funding program. Support our ability to drive continued capital generation growth in the years ahead. So with that, let me turn the call back over to Douglas.
Douglas H. Shulman: Thanks, Jenny. We had another strong quarter. And I feel great about the trajectory of our business. Growth accelerated across all products. Further demonstrating our ability to grow while maintaining our consistent and conservative underwriting posture and credit performance improved. Providing a clear path to lower and more normalized losses moving into 2027. These trends demonstrate the strength of our core business and the value of our investments in new products and innovation. In driving profitable growth. Looking ahead, we will build on this progress through disciplined execution to drive further gains in performance.
Combined with our strong balance sheet and consistent capital access, we are well positioned to deliver sustained growth in capital generation and strong returns to our shareholders. For the years to come. Before I close, I would like to thank our team members across all of OneMain whose hard work and dedication are at the heart of our success. And our mission to help hardworking Americans improve their financial well-being. With that, let me open it up to questions.
Operator: Thank you. We will now go to our first question, which is from the line of John Hecht with Jefferies. Please proceed with your question.
John Hecht: Morning, guys. Thanks for taking my questions.
Douglas H. Shulman: First 1 Good morning, John.
John Hecht: Thanks. 1 is just related to the accelerating growth in receivables. And I know some of this is related to the, the success of card and the auto segments but you also have very good momentum in personal loans. And we have also seen other--you know, some of them are peers, some of them may be, call it, indirect peers of yours. That have also had pretty strong growth and momentum in that category. So, Douglas, I guess, is there something going on, like, structural shift where maybe borrowers are using personal loans more than alternatives? And the market is shifting? Or what is your perspective, and what is going on there?
Douglas H. Shulman: You know, we I do not think there is necessarily a structural shift, or at least we are not seeing evidence of it. I think we are picking up market share. And, you know, we are especially pleased with the growth given how tight our credit box is and that we are staying disciplined around that. And so I think the growth we are generating--you know, we have been doing a lot of innovation around our personal loan product.
I have talked about debt consolidation, a home fixture-secured product, You know, bank data, about 40% of our originations now, people share bank data with us. that is up from 30% a year ago. that is a much more streamlined process than having to produce multiple pay stubs, get them verified. So it is just an easier process for folks. A lot of our digital processes are adding. And, obviously, we have a lot. We have very good brand pull through because, you know, we have got an excellent product at a fair price. that we treat them well, that we work with them, you know, when they have issues.
And then you add to that, you know, about 5 years ago, we decided to expand into auto and credit card, and we have done it in a very slow disciplined manner, again, with super tight credit posture, and those are now maturing in coming to bear. So, you know, we do not have evidence that it is a structural shift. We think it is just us continually improving, you know, the business and taking some market share from others.
John Hecht: Okay. that is that is great color. And then in the card segment, you know, still good growth and, I guess, good credit trajectory there. Maybe can you talk about the customer behavior? How much of these are, call it, unique customers versus cross sell? What. You know, when you. Is the what is the behavior of the customer? How quickly do they ramp in terms of revolving and so forth? Maybe just a little bit of detail there.
Douglas H. Shulman: Yeah. Look. As I said, for we actually launched our card business 5 years ago. We started with a whole bunch of test case to see how our marketing landed, how our product set landed, what was line usage, and most importantly, what was credit. And then we expanded places where we had good credit and the return on receivables and long term profitability was gonna meet our return hurdles. And so we have really been, you know, kind of step by step moving into the market. I think part of what you are seeing is just more refined models that, you know, with very high confidence in, credit, and you are seeing that come through in our credit results.
We have also now have refined and have more options in the market. Lower fees, higher rewards, no fees, you know, with modest rewards, So for different credit segments, we have got a variety of cards, and so we now have more of a full spectrum offering that allows, people to pick the kind of card they want with OneMain, where we started with just 2 basic cards. And then we have really refined our analytics And so we are now able to market to customers that are lower risk and more likely to use their line.
We have seen a little bit more line usage early on but that is specific because we have been, targeting those customers, in our in our marketing material. And so I think it is a, you know, it is a mix of things that have led us. I think line usage is pretty similar. It ramps, in a similar way. We do now have a much more refined line increase and line decrease program, which, you know, creates better credit. On the decrease side, obviously, a little growth on the increase side.
So I think it is just an amalgamation of you know, 5 years of experience, you know, together with our decades of experience serving the non prime consumer, and you are seeing, you know, really all the metrics come together. Great. Thanks very much.
Operator: Our next question is from the line of Arren Cyganovich with Truist Securities. Please proceed with your questions.
Arren Cyganovich: Thanks. I wanted to touch on credit. I think Jenny had said that you are seeing roll rate trend improvements. When I look at the I guess, roll rates to. From late to charge, at least on the metrics in my model, It looks like they are actually a little bit worse this quarter. But what roll rates were you referring to when you were talking about credit?
Jeannette E. Osterhout: Yeah. I am looking at the year over year roll rates So I think when I look at, let's just say, the 30 to 89 to 90 plus or the 90 plus to loss. That year over year roll rate is what I am looking at and starting to see improve. And I think we would started to see this pattern in the first quarter and talked a bit about it last quarter. And we are really starting to see that come out. When I look at losses, in the third quarter, as we went throughout the quarter, we also saw that year on year trend get better.
So if I then look at our year on year losses by the last month, we were seeing better year on year losses. So I do think that is how I am thinking about it. I think that might be slightly different than how you are looking at it, but I hope that helps.
Arren Cyganovich: Yeah. We can kinda discuss it later with IR. But the other question I had is also credit related. You know, as you are adding Foresight to the delinquencies, you know, how does that change the you know, historical seasonality aspects of it? And also, know, the stronger growth in auto and card you know, what are you seeing from credit seasoning? Is that 1 of the aspects that is sort of leading to this you know, more stubborn level of charge offs kind of notwithstanding the remaining 3% of legacy book?
Jeannette E. Osterhout: So I let me break that down into a couple pieces. Know, I let's just start with cards because that is probably the easier piece to pull apart. I mean, we have obviously been seeing really good trends on cards, both in delinquency and in losses. And that is helping and clearly a good trend. Then when you look at consumer loans, which now we have got, including Foursight, it changes some of the dynamics that we have, meaning traditionally, and I talked a little bit about this earlier, but you have hired in auto. You have hired and then better roles to loss.
I think we really see the same trends this quarter, I would just say, across the board, when I look at with and without Foursight. So I do not think it is changing the trends And you guys can see it. there is an appendix that shows you without Foresight in the in the presentation. But overall, I would say, you know, it is. We are really seeing the improvements in both delinquency and loss across all products. And you know, if I look back on Foursight, when we bought them, they were slightly more prime or slightly higher on non prime, I would say.
And we have been looking at finding where is the best place for us to compete. So there are differences there where we are moving the book. But overall, everything is performing in line with our expectations, and the trends are moving in the right direction.
Arren Cyganovich: Thank you.
Operator: Next questions are from the line of Mihir Bhatia with Bank of America. Please proceed with your questions.
Mihir Bhatia: Hi. Thanks for taking my question. I wanted to maybe start just staying on credit. I think you have talked about a path to normalize losses in 27. Maybe talk a little bit about what gives you that confidence, and are the bank data loans performing better? Really interested to see, like, what do you think could go wrong for 2027 to not be a better year, given current trends?
Jeannette E. Osterhout: Gotcha. Alright. You are right. We did we did say we see a good path forward. I mean, and when we think about getting to those historical levels, we are really focused on the consumer loan portfolio. So take cards out of that equation. And we think we are getting towards that loss level in 2027, getting towards that normalized, which would get closer to 7%, which is sort of the top end of that normalized range for next year. In terms of. That sort of assumes a steady macro environment. I think to the extent you saw some major shifts in inflation or unemployment? Obviously, those are the 2 big pieces that would affect that for next year.
You know, I just to be both. I always look at sensitivities on both sides. I would say if we were to start to see some further improvements, I mean, I think we still do not-- we have not come out with our full 2027 guide. And so when we come back next quarter, we can give you a better view, but I think there is some potential. You know, there is some range of outcomes that we are looking at.
Mihir Bhatia: Got it. Maybe just turning back to card returns for a second. Do the card returns do cards currently clear your return hurdle after the up upfront reserve? And as the line increases expand, what keeps losses from drifting up? As the book seasons?
Jeannette E. Osterhout: So I would say we really look at capital generation, which is not focused on the build-- the CECL build. So I would say in terms of capital generation, the credit card book is generating capital, and it is, you know, as I look at its past, 1 of the only products that I think you can have in the consumer lending business that will get you to a cap gen ROR that is above a personal loan cap gen ROR, and we are already on that path and on the positive side of that path. So I think we are very happy with the build out of that J curve.
So I think in general on cards, we are we are feeling quite good. I feel like every metric is moving in the right on both the top line and the bottom line. And when you sit down and look at the continued, I would say, lower hanging fruit that still sits with the card of where we can make further improvements and continue to conservatively grow, we feel, we feel very good.
Douglas H. Shulman: Our team can take you through it, though, but there is you know, it is a different cycle of losses. I mean, with a personal loan or an auto loan, you immediately have the whole loan on your book. It. Your generating interest, and it has very low losses. The first year. And then more losses as you get to out years. With the card, you do not have the full line. It takes, you know, 9 months to a year. For the line to build. So you are not immediately getting revenue And then losses actually peak a lot earlier in the first couple of years. And then you have got a stable customer in out years.
And so it is a different profitability you know, trend in card. And, you know, we run the company for the long term. And you know, we run it based on CapGen, which is just cash on cash. And you have gotta, you know, kind of ignore the CECL because you take big reserves up front. there is some penalties, in card. But it really sets the business up. well for, you know, the medium to longer term.
Mihir Bhatia: Got it. Thank you.
Operator: The next question is from the line of Moshe Ari Orenbuch with TD Cowen. Please proceed with your question.
Moshe Ari Orenbuch: Great. Thanks. Was hoping maybe to put a little bit more of a fine point on the charge off improvement. I guess when you when you look at the specific factors, right, I mean, obviously, the. If to the extent the card is growing faster, that will be somewhat of an upward pressure. But I would say, you know, better overall growth lower losses from the back book, the recoveries that you mentioned, Does it does it seem that we should see an improvement level that is better than what you are seeing currently in delinquency? Performance? Right?
In other words, if you have got 20 basis points year over year improvement in delinquency performance, should we be looking for a level of improvement in losses that is kind of better than that? And if it is not too much, maybe just kind of extend that to thinking about the reserve as well.
Jeannette E. Osterhout: Yes. Let me take that. So you are right. We did. We are seeing. Let me just think about the 20 basis point improvement in delinquency. I think really what you can do is look at take a look at our second quarter delinquency and you translate that forward for the fourth quarter, and that should get you to a year on year improvement. If you take the consumer loan delinquency, you are gonna apply more like a 2.4, 2.5 roll rate to that. So just to help on the math. Point there, and that can get you to. I think it is you are in the range. It could be. I think you are spot on.
It could be slightly more than the 20 basis point improvement that we saw, but it is in that range for the fourth quarter. And then you asked also about reserves. The reserve coverage and how to think about that going forward. I mentioned that we would expect it to go up to about 11.8 in the fourth quarter. I do think there is going to be some pressure coming from cards, but I also see some opportunity in the longer term you know, as the book improves. So I really think of that 8 as looking at the fourth quarter.
And then over time, I think there is some potential for that for those 2 of the tailwinds and the headwinds to weigh each other out a little bit in terms of the reserve for the longer term. I think I will probably come back next quarter and give you more of a view, but it depends so much on how you weight the consumer loan portfolio versus the card, just that 2 times loan reserve rate that we have for cards versus consumer loans even the smaller changes in cards as a percentage of the book can affect that loss ratio going forward.
Moshe Ari Orenbuch: Yeah. I mean, we can talk about it offline, but you know, a lot of the other card players are closer to 1.6 or 1.7, not 2. And your card losses are getting better. Maybe just a quick 1 just on the yields highlighted the pressure from faster secured growth, but you have also got you know, the card, you know, which you have mentioned the yield is almost-- you know, the revenue yield, maybe not all interest, but the revenue yield almost 35%. I guess, you know, as we sort of think about the mix of you know, of your business in, you know, in 2027?
How do you think about it from I mean, it feels like maybe there is a little bit lower yield, I guess, between auto and, you know, the secured personal. But that should also be contributing, I guess, from a. The standpoint of you know, of a of a loss rate. So I do not know if you can kind of think about that and, you know, kind of-- are there any things we should kinda take away from them?
Jeannette E. Osterhout: Yeah. Let me. So today, we sort of have those 2 separated out. We have our consumer loan yield, and then we have credit card revenue yield. And, you know, what I am hearing is maybe you want to do a total yield because it would be helpful for everybody. But if I take the consumer loan yield, that is been relatively flat and you are right. that is some of the movement to secured that we have seen, which a trade I think we are quite happy to make in terms of looking for the best ROE outcome. And I think there is some pressure there. there is also some pressure there from auto.
And so we have said we are at approximately a 60% secured mix on consumer loans. I think that is we are probably gonna be in around that ballpark as the auto business grows. And depending on what we do sort of with personal loans, you could see that potentially grow some more, and that will put more pressure there. So that is right. But credit card revenue yield, I mean, we talked about the 34.9% I am not-- you know, that will go a little bit. I do not expect it to continue to just build and build and build. We are pretty close to where I would expect it to start to peak.
You get some benefit there also from your. You know, it is both interest and fees. And I do think that is helpful as that business begins to grow, and it is obviously helpful to our overall return. So I think in terms of your statement and your hypothesis, we should expect that to grow going forward. And if you think in terms of a total yield type metric. Thank you.
Operator: Next question is from the line of Terry Ma with Barclays. Please proceed with your question.
Terry Ma: Hi. Good morning. This is Cordelia on for Larry. Thanks for taking my question. Just quick 1 on recoveries. This year, they have been pretty strong. Can you take a moment to touch upon what is driving the continued strength and just the durability of it moving forward? And sort of what investments you have made to improve it?
Jeannette E. Osterhout: Hi. Thanks. Yeah. We are we are pretty pleased with the strength of our recovery, and we have talked about it a couple times throughout this year. But in the third quarter, we continued to see recoveries increase about 15% year on year, and that recovery ratio that as a percent of ANR was about 1.56. So that is better than what we have seen in the third quarter of last year. And, you know, so those strong recoveries, where are they coming from? A lot of it is improvements that we have made.
And I talked about this on the last call, but it is about how we set up our operations, you know, who is making calls, when you are texting versus calling, who are you texting, at what time of day are you texting or calling? All of these pieces. So you can think of various analytical models that are put together to help you improve your recovery. And that is the internal recoveries. We are obviously always looking at sales as well and doing the analysis.
Is it better to hold to hold those customers on our sheet and hold them for ourselves to recover, or should we sell them to somebody else and that is really more of an economic trade and a decision based on where the market is. And our inventory and what it looks like. So I would say most of this improvement this quarter is really due to those internal strategies that we have put in place. And in terms of the durability, I mean, I think that is part of the game. You have got to constantly get better. that is how we run the company is just to constantly look for ways that we can improve.
Operator: Our next question is in the line of Michael Dunleavy with Deutsche Bank. Please proceed with your question.
Analyst: Hi. Thanks for taking my question. You talked about the impact on credit metrics as card becomes a bigger portion of the portfolio. And you mentioned the card yield as well, very high on the revenue side. But just to get a full picture of a mix shift, is there a normalized CapGen return profile that you would expect on card versus personal loan versus auto just to have, in the back of our heads?
Jeannette E. Osterhout: Sure. I mean, let's see. In terms of cap gen ROR, I can give you sort of the general model, which would be, you know, your personal loans you are going to be in the 4% to 5% range on a cap gen ROR. On auto, you are looking at something slightly lower, but you know that comes with lower losses, so we like that diversification there. And then on cards, I think it is gonna build over time eventually getting to a run rate where it is slightly higher than your personal loan. So that is sort of how I would think about it over time.
Douglas H. Shulman: You know, you are building and, obviously, some of that has to do with where you decide to play in the market as well. So it is about finding where. Auto is a highly competitive place. So you are. You need to sort of find your niche and your appetite on credit. And know, we have come out saying that on our card book, we are looking for more like a 15-17% loss rate that sort of puts us in the niche of where we would like to play on cards.
So you know, really, can think take break down your overall-- You know, we are looking at a 20% ROE across all of these products. that is how I think about it. And then the market dynamics and how you look at yield and losses, our OpEx, and our and our interest expense is sort of how you get to that calculation. But overall, I think that should give you a sense on the different cap gen RORs.
Analyst: Yeah. that is perfect. Thank you. And then on the reserve rate, about it potentially moving towards around 11.8%, could you just talk about how much of that might be driven by the mix shift between card and consumer loan and how much might come from the underlying rates on each of those?
Jeannette E. Osterhout: Oh, I would expect, that to come from the mix shift. I would not expect for that to come from increases in the underlying rates. So, I mean, we are looking at our models, and you are looking at the life when you when you put something up for CECL, you are looking at the life of the loan or it is so it is but I think it is much more based on the weighting.
Analyst: Okay. Perfect. Thank you.
Operator: The next question is from the line of Donald Fandetti with Wells Fargo. Please proceed with your questions.
Donald Fandetti: Yes. Can you talk about the second look auto loan volume and credit performance? And then, I guess, you know, while you talk about that, is that something you could do in cards as well? Or is that more of a long term?
Douglas H. Shulman: Yeah. I mean, we told you before we have a partnership with Ally where we get a second look got a couple other small ones. And, you know, far so good. We have got good application flow. The loss profiles, you know, varies similar to, or the credit profile overall is very similar to the rest of our auto book. Theoretically, we could do that with card. We actually know, right now, are getting plenty of demand, and our BrightWay card is resonating, in the market, and we like what we see. So you know, we always are looking for, you know, partnerships, new origination channels, in all of our products and are honing them.
So, you know, theoretically, we could, but it is not something we are actively pursuing right now. Got it. Thanks
Peter R. Poillon: Operator, we are up against the hour, And so let me thank everyone for joining us. Obviously, team is here for any follow-up and hope everyone has a great day.
Operator: Thank you, mister Schulman. Thank you, mister Osterhout. Again, ladies and gentlemen, this does conclude today's OneMain Financial third quarter 26 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.
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