Street Calls of the Week
OneMain Holdings, Inc. (NYSE:OMF), a prominent player in the consumer finance industry, has been navigating a complex financial landscape characterized by evolving credit quality metrics and strategic growth initiatives. As the company seeks to balance expansion with risk management, investors and analysts are closely monitoring its performance and future prospects.
Company Overview and Market Position
OneMain Holdings specializes in providing personal loans and other credit products to consumers across the United States. With a market capitalization of approximately $7.3 billion as of September 2025, the company has established itself as a significant entity within the consumer finance sector. According to InvestingPro data, the company maintains a strong financial health score of 2.72 (rated as GOOD), supported by robust profitability metrics and positive price momentum.
The company’s stock has shown resilience in recent months, trading at $61.44 as of September 15, 2025, which is above several analyst price targets. This performance suggests a degree of investor confidence in OneMain’s business model and growth potential.
Financial Performance and Outlook
Analysts project earnings per share (EPS) growth for OneMain Holdings, with estimates for fiscal year 2025 at $6.59 and $8.60 for 2026. This anticipated increase in profitability is a positive indicator for the company’s financial health and operational efficiency.
Revenue growth projections are also encouraging, with management guiding for a 6% to 8% year-over-year increase. This growth is expected to be driven by a combination of portfolio expansion and strategic initiatives, particularly in the auto lending segment.
OneMain’s dividend yield, which stands at over 10%, is particularly attractive to income-focused investors. The company’s ability to maintain such a high yield could be seen as a sign of financial strength and commitment to shareholder returns.
Credit Quality and Risk Management
Credit quality remains a critical focus for OneMain Holdings, with recent data showing mixed trends. Aggregate trust delinquencies (DQs) were reported at 2.63% in August 2025, marking an increase of 23 basis points year-over-year. Similarly, net charge-offs (NCOs) rose to 6.56%, up 13 basis points from the previous year.
These increases in delinquencies and charge-offs have raised some concerns among analysts regarding the company’s loan portfolio quality. However, OneMain has emphasized its conservative underwriting standards and improved credit models as mitigating factors against potential risks.
The company’s loan portfolio is divided into two segments: the "back book" (loans originated before August 2022) and the "front book" (more recent originations). While the back book continues to pose challenges, its decreasing size and improving delinquency rates are positive signs. The front book, benefiting from enhanced underwriting practices, is expected to drive improvements in overall credit metrics.
Strategic Initiatives and Growth Opportunities
OneMain Holdings is actively pursuing growth opportunities, with a particular focus on expanding its auto lending business. This segment has shown promise, with receivables exceeding expectations and potentially becoming a key driver for long-term growth.
Another significant strategic initiative is the company’s pursuit of an Industrial Loan Company (ILC) banking license in Utah. If obtained, this license could provide OneMain with several advantages, including:
1. Enhanced capital generation capabilities
2. Expansion of the customer base
3. A more unified pricing strategy
4. Access to potentially cheaper deposit funding
These strategic moves demonstrate OneMain’s commitment to diversifying its revenue streams and strengthening its market position in the evolving financial services landscape.
Regulatory Environment and Challenges
As a consumer finance company, OneMain Holdings operates in a highly regulated environment. While specific regulatory challenges were not detailed in recent analyst reports, the company’s pursuit of an ILC banking license indicates a proactive approach to navigating the regulatory landscape.
The potential acquisition of a banking license would subject OneMain to additional regulatory oversight but could also open up new opportunities for growth and operational efficiency.
Market Outlook and Macroeconomic Factors
OneMain’s performance is closely tied to broader economic conditions, particularly consumer behavior and employment rates. The company has noted that its net charge-off guidance assumes a stable macroeconomic environment. However, management remains cautious due to ongoing economic uncertainties.
Analysts have observed that there has been no significant stress in consumer behavior to date, which bodes well for OneMain’s near-term prospects. Nevertheless, the company maintains a conservative stance in its underwriting and credit policies to buffer against potential macroeconomic headwinds.
Bear Case
How might rising delinquency rates impact OneMain’s financial stability?
The recent uptick in delinquency rates and net charge-offs poses a potential threat to OneMain’s financial stability. If this trend continues or accelerates, it could lead to increased loan loss provisions, which would directly impact the company’s profitability. Higher delinquencies may also necessitate tighter lending standards, potentially constraining loan growth and revenue generation.
Furthermore, persistent credit quality issues could affect investor confidence, potentially leading to a higher cost of capital for OneMain. This could, in turn, pressure the company’s margins and its ability to maintain its attractive dividend yield.
What risks does the company face in pursuing an industrial banking license?
While obtaining an industrial banking license presents opportunities, it also comes with significant risks. The regulatory approval process can be lengthy and costly, with no guarantee of success. If approved, OneMain would face increased regulatory scrutiny and compliance costs, which could strain resources and impact profitability in the short term.
Additionally, entering the banking sector would expose OneMain to new competitors and market dynamics. The company would need to quickly adapt to these challenges while maintaining its core consumer finance business. There’s also the risk that the expected benefits of the banking license, such as cheaper funding and expanded customer base, may not materialize as anticipated, potentially leading to underperformance relative to investor expectations.
Bull Case
How could the expansion into auto lending drive long-term growth?
OneMain’s expansion into auto lending represents a significant opportunity for long-term growth. The auto finance market is substantial and relatively stable, offering the potential for consistent revenue streams. As OneMain leverages its existing customer relationships and underwriting expertise in this new segment, it could capture market share and diversify its loan portfolio.
The auto lending business may also provide cross-selling opportunities for other financial products, enhancing customer lifetime value. Additionally, as the company gains experience in this sector, it could develop specialized offerings or target niche markets within auto finance, further driving growth and potentially improving margins.
What benefits could an industrial banking license bring to OneMain’s operations?
Obtaining an industrial banking license could be transformative for OneMain’s business model. The ability to accept deposits would provide a stable and potentially lower-cost funding source, reducing reliance on more expensive wholesale funding. This could improve the company’s net interest margin and overall profitability.
An ILC license would also allow OneMain to offer a broader range of financial products and services, potentially including checking accounts, savings products, and even credit cards. This expanded product suite could help attract new customers and deepen relationships with existing ones, driving revenue growth and customer retention.
Furthermore, the banking license could enhance OneMain’s credibility in the financial services market, potentially leading to improved terms with partners and counterparties. It may also open up new opportunities for strategic partnerships or acquisitions in the fintech and digital banking spaces.
SWOT Analysis
Strengths:
- Strong dividend yield attracting income-focused investors
- Improved underwriting practices and credit models
- Established presence in the consumer finance market
- Growing auto lending segment
Weaknesses:
- Increasing delinquency rates and net charge-offs
- Legacy loan portfolio ("back book") challenges
- High debt-to-capital ratio
- Dependence on stable macroeconomic conditions for performance
Opportunities:
- Expansion of auto lending business
- Potential acquisition of an industrial banking license
- Development of new financial products and services
- Technological advancements in credit scoring and risk assessment
Threats:
- Macroeconomic uncertainties and potential recession
- Regulatory changes in the consumer finance industry
- Increased competition from traditional banks and fintech companies
- Rising interest rates affecting borrowing costs and consumer demand
Analysts Targets
- Barclays: $56.00 (September 16th, 2025)
- Wells Fargo Securities: $60.00 (August 25th, 2025)
- RBC Capital Markets: $60.00 (May 21st, 2025)
- JMP Securities: $65.00 (April 30th, 2025)
- Northland Securities: $55.00 (April 8th, 2025)
OneMain Holdings, Inc. continues to navigate a complex financial landscape, balancing growth opportunities with credit quality management. While the company faces challenges related to rising delinquencies and economic uncertainties, its strategic initiatives in auto lending and potential banking expansion offer promising avenues for future growth. The company’s strong momentum is evident in its impressive 30.17% price return over the past six months, though InvestingPro analysis suggests the stock is currently trading above its Fair Value. Investors and analysts will be closely monitoring OneMain’s ability to execute on these strategies while maintaining financial stability in the evolving consumer finance market.
Want to make more informed investment decisions? Access the comprehensive Pro Research Report for OMF, available exclusively on InvestingPro, along with detailed financial metrics, analyst forecasts, and expert insights for over 1,400 US stocks.
This analysis is based on information available up to September 18, 2025.
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