Sallie Mae's 2Q profit falls 72 percent

Net income fell to $266 million, or 50 cents per share, during the second quarter, from $966 million, or $1.03 per share, during the same quarter last year.

Sallie Mae's "core" earnings were $156 million, or 27 cents per share, in the second quarter, compared with $189 million, or 43 cents per share.

Core earnings exclude treatment for student loans bundled together as securities and derivatives, the complex financial instruments used as a hedge against interest rate swings.

Analysts polled by Thomson Financial, on average, forecast earnings of 40 cents per share for the quarter.

Core earnings include $53 million in charges related to restructuring at the company. Sallie Mae also reported $135 million in losses and other fees.

Sallie Mae's chief executive, Albert Lord, said in a statement, "Our funding costs have been extraordinarily high throughout 2008."

Net interest income, the difference between how much it costs a lender to borrow money and how much it receives from lending money, rose to $402.5 million during the second quarter, from $398.7 million during the second quarter in 2007.

Lord did noted spreads have narrowed recently, which could improve profitability in the future.

"Our earnings potential in 2008 and beyond is largely dependent on future funding costs," Lord said in the statement.