KBRA Affirms Ratings for OneMain Holdings, Inc. and Subsidiary

KBRA affirms the Issuer rating of BB+ for OneMain Holdings, Inc. (NYSE: OMF; “the company” or “OneMain”), as well as the Issuer and senior unsecured debt ratings of BB+ for OneMain Finance Corporation (“OMFC”). Additionally, KBRA affirms the BB- rating for OMFC’s junior subordinated debt. The Outlook for all ratings is Stable.

Key Credit Considerations

OneMain’s ratings remain supported by continued, favorable operating results, including a 1H25 ROA of ~2.9% that represents more normalized return generation for the company following some modest slippage in FY24; noting that the 2.0% ROA reported for last year was still quite solid on both an absolute and comparative basis. As the industry-leading consumer installment lender, OneMain’s multiyear performance benefits substantially from a long operating history lending primarily to non-prime borrowers and a very capable management team. Supplementing its heritage, broad geographic U.S. branch footprint with a now well-developed digital origination platform, OneMain maintains a robust customer database, which, together with the company’s strong data analytics, puts it in an enviable position to assess and price risk better than many competitors without such well-developed business models. Additionally, the company’s longstanding business model that continues to incorporate extensive on-shore servicing capabilities and related staffing flexibility within OneMain’s existing employee base, is considered a distinct operating positive, particularly for weaker economic environments.

Deliberately managed product diversification into well-conceived credit card products, along with an indirect auto platform – supplemented by the company’s April 2024 acquisition of Foursight Capital – are considered a constructive evolution of OneMain’s operating profile; one which should serve the company investor constituencies and borrowers well. Regarding some deterioration in OneMain’s asset quality measures during 2023 / 2024 from unsustainably pristine 2021 and more normalized 2022, recent trends have improved materially, and we continue to expect the company to consistently reflect better-than-peer credit trends and generate comparatively solid risk-adjusted returns in most operating environments.

While OneMain operates a market-funded business model, the company has prudently achieved a balanced term debt profile, utilizing both well-laddered, senior unsecured debt and longstanding ABS programs, as well as maintaining substantial committed, multi-year conduit capacity as a contingent liquidity source. In recent years, the company’s superior liquidity and funding profile has been enhanced through the issuance of longer-term unsecured debt at attractive cost, a committed 5-year senior unsecured revolving credit facility, and whole loan flow sale agreements. OneMain’s total loss absorbing capacity (as a % of receivables) has remained fairly stable in recent years since CECL adoption and remains supportive of ratings.

Rating Sensitivities

The Stable Outlook suggests near term changes are unlikely; however, continued solid operating results, particularly in uneven economic environments, along with more conservative capital management, would be important drivers of positive rating momentum. An unexpected deterioration in asset quality, materially impacting earnings durability, would be viewed negatively, as would increasingly aggressive financial management.

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Methodologies