Navient’s Financial Exposure: Navigating Asset-Liability Funding Gaps and Interest Rate Risks

Navient Corporation (NAVI) has disclosed a new risk, in the Debt & Financing category.

Navient Corporation faces a potential financial risk due to its asset and liability funding gap, which arises from the mismatch in the underlying indices and reset frequencies of its assets and funding instruments. This gap exposes the company to interest rate risks, including basis and repricing risks, where indices may not move synchronously or at the same magnitude. Although management employs derivatives and interest rate swaps to mitigate these risks, market disruptions could lead to temporary divergences between indices, adversely impacting Navient’s earnings. The company’s asset-liability strategy aims for correlation, yet the inherent variability, notably in FFELP Loans, poses an ongoing challenge.

The average NAVI stock price target is $14.68, implying 3.16% upside potential.

To learn more about Navient Corporation’s risk factors, click here.