OneMain Financial: Lending to the Non-Prime Economy

Published: 2025-07-07 02:51:08 ET OMF

Published on 07/07/2025 at 02:51

By Grégoire Legrand

Founded in 1912 and headquartered in Evansville, Indiana, OneMain Financial is a leading provider of credit to nonprime customers. The company became OneMain Holdings in 2016 following Springleaf Financial Services' acquisition of OneMain Financial in 2015. Today, it ranks as the 7th largest branch-based consumer finance company in the U.S.

OneMain Financial runs entirely through its Consumer & Insurance (C&I) segment, focused on lending to non-prime borrowers. The core business includes fixed-rate personal loans, auto-finance contracts originated through dealers, and BrightWay credit cards - receivables bought directly from a partner bank. Loans typically run three to six years and come with no pre-payment penalties and additional income comes from in-house insurers, American Health & Life and Triton, which provide credit life, disability, unemployment, and collateral-protection coverage across almost all U.S. states and Canada.

Principal products:

Over the past decade, specialized consumer finance firms have filled gaps left by traditional banks, offering credit to underserved populations and driving financial inclusion at scale. In many emerging markets, they now account for over a third of all retail lending - and in segments like auto and consumer durables, that share exceeds 80%.

But the landscape is changing fast where digital-native players, rising customer expectations, and smarter AI tools are reshaping the rules. To keep up, traditional lenders need more than legacy scale - they need seamless mobile experiences, real-time underwriting, and tailored engagement.

OneMain operates in a large and growing market, with a total addressable market (TAM) of around $1.3 trillion, including $100 billion in personal loans, $550 billion in credit cards, and $600 billion in auto finance.

Loans are originated through 1,300+ branches, a phone center, and a digital platform with video ID and e-signature. A proprietary engine evaluates credit, income, and collateral, with pricing set to match non-prime risk and servicing needs. At the end of 2024, the company had $23.6 billion of finance receivables due from approximately 3.3 million customer accounts.

OneMain faces digital rivals such as Avant, LendingPoint, Oportun and Upgrade. Its consumer loans and credit cards compete with offerings from banks, credit unions, non-depository institutions, fintech platforms, auto finance companies, and other credit card issuers. It also faces pressure from Regional Management and World Acceptance, both smaller branch-based lenders serving similar non-prime borrowers and Enova which focuses more on short-term credit.

Personal loans remain the company’s largest product by volume, with $20.8 billion in outstanding balances. Texas leads at $2.05 billion (10%), followed by Florida and California, each contributing over $1.5 billion. While state-level balances stayed broadly stable year over year, “Other” states continue to represent the largest share at 44%, reflecting the company’s nationwide reach.

In auto finance, OneMain is diversified, with Florida ($159M), Georgia ($155M), and Texas ($141M) in 2024. Together, these three states account for over 20% of the total $2.1 billion auto finance portfolio. Florida and California also drive outsized performance on the recovery side, representing 22% of total auto recoveries for the year.

The credit card portfolio reached $643 million in 2024, with Texas, California, and Florida again ranking as top contributors. These three states combined make up nearly 40% of the total, highlighting overlap between credit card and loan customer bases. Growth was broad-based, with every listed state more than doubling card balances compared to 2023.

In 2024, OneMain Financial’s total revenue reached $4.5 billion, up 5.2% from the prior year. EPS felt 20% to $4.24 but set to increase by 43% in 2025 to $6 and to $9.71 in 2027. EBITDA reached $2.9 billion, while EBIT rose 5.7% to $2.7 billion. The EBITDA margin now exceeds 66% and is expected to decrease to 53% by 2026, with the EBIT margin holding between 55% and 60%. Net income decreased by 20.5% to $509 million and is projected to climb to $1.1 billion by 2027.

Management expects to return to 2022-level profitability by 2026, with ROE targeted at 36.4% and ROA at 3.3% while 2021 level with ROE of 40% and ROA of 6.46% shouldn’t be reach in the coming years. The group expect targeted margins of 17.16% (net) and 55.5% (operating) for 2026 and FCF should reach $739 million in 2025 and $1 billion in 2027. The Debt/EBITDA was 7.01x in 2024 and set to increase to 9.34x in 2025.

First-quarter 2025 net income climbed 37 % to $213 million, lifting diluted EPS to $1.78 from $1.29 a year ago.  Managed receivables expanded 12 % to $24.6 billion as consumer-loan originations jumped 20 % to $3.0 billion, driving total revenue up 10 % to $1.5 billion.  Interest income rose 11 % on receivable growth and better yields, offset partly by a 13 % rise in interest expense tied to higher funding needs.

The C&I segment delivered $207 million in adjusted net income and $1.72 in adjusted EPS, while capital generation improved to $194 million on stronger credit performance.  Management returned cash through a $1.04 quarterly dividend and $16 million of share buybacks while the provision for credit losses increased to $456 million.

OneMain’s 2024 valuation sits higher than its 10-year average: the stock trades at roughly 12.3x forward earnings versus a decade mean of 9.7x, with multiples projected to ease to 7.28x in 2026 and 5.83x in 2027. EV/revenue is broadly steady at 6.03x (vs. 5.5x historically). By comparison, 2024 P/E ratios for key peers are -1.99x for Oportun, 8.21x for Regional Management and 11x for World Acceptance.

OneMain’s nonprime borrowers make it vulnerable to economic shocks, yet the company’s tight credit controls, insurance income, and growing digital reach help offset the volatility. The group should benefit from increasing margins, receivables growing, and earnings set to rebound, if credit stays in check.

Grégoire Legrand