Sallie Mae names Hilton exec as next CEO
NEWARK – Sallie Mae, the student loan company, announced in a surprise Thursday that Jonathan Witter, an executive at Hilton hotels, will replace CEO Raymond Quinlan, effective April 20.
Witter, 50, who currently serves as chief customer officer for Hilton Worldwide Holdings, will lead his first company after spending time in leadership roles at Hilton, Capital One, Morgan Stanley, and Wachovia. He will also join the company’s board of directors.
Quinlan, 68, will continue to serve as chairman on the board until Sallie Mae’s annual meeting of shareholders, set for June 18, when it will appoint a new chairman and Quinlan will exit completely.
In a statement, Witter said that he was “excited to assume the role as Sallie Mae’s next CEO.”
“Sallie Mae has a rich history of helping students build prosperous futures and, as their needs grow and change, we will be there to support them,” he added. “I look forward to working closely with the board, management team, and talented employees to leverage the company’s momentum and competitive position to realize the value inherent in Sallie Mae.”
In its announcement, Sallie Mae touted Witter as an “industry veteran who brings nearly three decades of executive leadership, banking expertise, and operational management” and called him a “strategic leader with a demonstrated ability to improve top- and bottom-line performance, while enhancing customer experience.”
At Hilton since 2017, Witter oversees the company’s global brands, marketing, loyalty and partnerships, information technology, and strategy teams. His prior roles included seven years at Capital One, ending as president of retail and direct banking; a year at Morgan Stanley, ending as chief operating officer of its retail banking group; and five years at Wachovia, ending as executive vice president and head of general bank distribution.
Witter earned a Master of Business Administration in finance and entrepreneurial management from The Wharton School and a bachelor’s degree in economics from Vanderbilt University.
Paul Child, lead independent director of Sallie Mae’s board, said the leadership transition was the “culmination of a thoughtful succession planning process to ensure that Sallie Mae is best positioned to continue delivering sustainable long-term value creation.” He noted that they considered a number of candidates before choosing Witter.
“Jon is an experienced financial services executive with a strong track record of operational excellence and customer engagement. We look forward to an exciting new chapter for Sallie Mae under Jon’s leadership,” he said.
Child said that the outgoing CEO “has been successful in managing the company’s efforts to build a market-leading brand, expand Sallie Mae’s products and offerings, and create a culture of exceptional service. The Board is grateful for his numerous contributions and appreciates that he will provide counsel and assistance during the upcoming transition period.”
Quinlan, who has led Sallie Mae for the last six years, said he was “proud of what we have accomplished” during his tenure.
“I am confident it’s the right time to transition the company to its next generation of leadership, and that under Jon, Sallie Mae will continue to perform and deliver on its long-term growth plans,” he said in a statement.
Quinlan made in excess of $6.2 million in 2018, including an $850,000 base salary, $3.5 million in his management incentive plan, and $1.8 million in long-term incentives, according to the company’s 2019 proxy statement.
Witter will make an annual salary of $950,000, according to the company’s 8-K filing to the U.S. Securities and Exchange Commission. He will also receive a starting stock grant worth $3.25 million in company shares.
Sallie Mae had not previously disclosed that it was looking to transition Quinlan out of his role prior to Thursday’s announcement, but Moshe Orenbuch, analyst at Credit Suisse who tracks Sallie Mae, said that it appeared to be “part of natural succession planning.”
“We think [Witter’s] experience will be positive as marketing channels have become increasingly diverse with search, social, influencer marketing. Additionally, fintechs are elevating the bar for digital experience and we believe that Jon will help Sallie maintain a high-quality loan application and payments process, for the desktop and in app,” Orenbuch told his investors in a Thursday note. “We think he is likely to expand Sallie’s relationship with the borrower as well. This should be a positive for Sallie’s ongoing evolution.”
The origins of Sallie Mae, known officially as SLM Corp., date back 48 years when it was formed as a government-supported enterprise. It cut its government ties following regulatory changes, privatizing its business in 2004.
In April 2014, Quinlan took over Sallie Mae from then-CEO Jack Remondi amid its spinoff of its education loan management and servicing operation into Navient Corp. Remondi would become CEO at Navient, where he remains today.
Sallie Mae Bank, SLM’s subsidiary, funds and originates private education loans, or those for consumers that are not made, insured or guaranteed by a government. It is the nation’s largest private student loan leader, signing loans with nearly 456,000 families in 2019. As of Dec. 31, 2019, it held $22.9 billion in net outstanding loans.
With its prominent Newark headquarters overlooking Interstate 95 and a smaller New Castle office, the company employs more than 1,000 people in Delaware.
As CEO, Quinlan has worked to create a high-quality loan portfolio that can be securitized for further sale. He also oversaw Sallie Mae’s decision last year to stop offering personal consumer loans in favor of focusing on student loans. The company told investors that it had $984 million in outstanding personal loans as of Dec. 31, 2019, that it would manage, but would not originate any new such loans in 2020.
He’s also lowered expenses in recent years as the company fought to increase its stock value, which Quinlan told investors in a Jan. 23 earnings call that the company believes is “significantly undervalued.” In response, the company has a $600 million stock buy back plan for 2020 – it bought 17 million shares last year for $167 million – to boost its value.
To date, Quinlan has overseen a share value increase of about 23% since he took over in 2014 but it hasn’t exceeded $13 a share in that time. Still, Sallie Mae holds a $4.6 billion market cap with a five-year compound annual revenue growth rate of more than 15%.
He has also overseen negative press for the company though. In the past few years, the company was the target of lawsuits by the attorneys general of Mississippi and Illinois for alleged predatory loan practices. Then in October 2019, Sallie Mae was criticized for flying 100 staff members to a Hawaiian resort to celebrate signing $5 billion in student loans in one year.
News of the switch at the top did not appear to immediately spur investors to buy Sallie Mae, however, as the stock’s value dropped almost 5% from $10.91 a share Wednesday to $10.39 a share at close Thursday.
Analysts had mixed reactions to the news of Witter’s hiring. While Credit Suisse ranked Sallie Mae as an outperforming stock with a target price of $14.50, Oppenheimer ranked it a performing equity, meaning it would match the greater market’s movement.
“This change combined with the three-year plan announced on the previous earnings call does muddy the waters a bit because some investors may say, is there a chance the three-year plan is altered or the strategy changed? We think the new CEO will put his own stamp on the go-forward strategy but do think that many of the current strategy changes are likely driven by activist investors and remain largely in place,” the research firm wrote to investors Thursday. “We remain on the sidelines as we think some of the dust will likely need to settle and investors will need to hear the vision of the new CEO before they feel full confidence that the three-year plan is still intact.”
By Jacob Owens