Executive Summary / Key Takeaways

• OneMain Holdings ($OMF) is demonstrating robust capital generation and improving credit performance, driven by its disciplined underwriting, strategic product expansion, and a unique omnichannel model serving the non-prime consumer.
• The company's "front book" of loans, originated under a tightened credit posture since August 2022, now constitutes 90% of receivables, leading to significant improvements in delinquency and net charge-offs, with full-year 2025 NCOs guided to the lower half of the 7.5%-7.8% range.
• Strategic investments in auto finance (post-Foursight acquisition) and BrightWay credit cards are fueling diversified receivables growth, with managed receivables crossing $25 billion for the first time in Q2 2025, and total revenue growth expected at the high end of 6%-8% for 2025.
• OMF maintains a fortress balance sheet with unparalleled funding access, evidenced by $1.8 billion raised in Q2 2025 and a 24-month liquidity runway, providing a competitive edge in volatile capital markets.
• The company's proprietary data science, advanced analytics, and omnichannel distribution are core technological differentiators, enabling high-quality originations and operational efficiencies, positioning OMF for sustained profitable growth and enhanced shareholder value.

A Century of Consumer Finance Evolution: OneMain's Enduring Strength

OneMain Holdings, Inc. ($OMF) stands as a venerable institution in the consumer finance landscape, tracing its roots back to 1912. The company has evolved significantly from its origins as Springleaf Holdings, Inc., notably through its 2015 acquisition of OneMain Financial from Citigroup (C). This pivotal integration transformed OMF into a diversified financial services holding company, strategically expanding beyond its historical monoline focus on personal loans. Today, OMF serves over 3.5 million customers across 47 states through a unique omnichannel model, blending a robust physical branch network with sophisticated digital platforms and central operations. This blend allows OMF to offer a seamless experience, catering to customers' preferred interaction channels—in person, online, or over the phone—a critical differentiator in the non-prime lending segment.

The company's strategic evolution has been underpinned by a deep understanding of the non-prime consumer, a segment often underserved by traditional financial institutions. OMF's core business revolves around originating, underwriting, and servicing personal loans, secured auto financing, and credit cards, complemented by optional credit and non-credit insurance products. This multi-product, multi-channel approach has expanded its addressable market tenfold, allowing it to meet diverse customer needs and progress towards financial well-being.

Technological Edge: Data Science and Digital Innovation

At the heart of OneMain's operational effectiveness and competitive advantage lies its proprietary data science and advanced analytics capabilities. The company leverages sophisticated credit models and new data sources to automate critical processes like income verification and collateral details. This technological backbone enables OMF to maintain a disciplined and conservative underwriting posture, even as it drives growth. For instance, over 60% of new originations consistently come from its top two credit tiers, a testament to its ability to identify and attract high-quality borrowers within the non-prime space.

The benefits of this technological differentiation are tangible and quantifiable. Automated income verification, for example, not only enhances accuracy but also improves the customer experience, leading to a higher application pull-through rate. Similarly, the development of streamlined and faster processes for loan renewals for high-performing customers, and the ability to enable cross-buy of personal loans through the credit card app, demonstrate a continuous focus on operational efficiency and customer convenience. These digital enhancements have translated into measurable improvements, such as service calls per customer for the credit card business being down more than 40% year-over-year, as more customers utilize the app for self-service features like payments and balance checks. OMF's R&D initiatives are continuously focused on refining these models and digital tools, with the stated goal of enhancing efficiency, reducing acquisition costs, and strengthening its competitive moat by providing a superior, data-driven customer experience.

Competitive Positioning in a Dynamic Landscape

OneMain operates in a competitive consumer finance environment, facing both direct and indirect rivals. Direct competitors include established players like Discover Financial Services (DFS), Synchrony Financial (SYF), LendingClub Corporation (LC), and Enova International (ENVA). OMF's unique omnichannel model, particularly its extensive branch network, provides a significant competitive moat. This physical presence fosters deeper customer relationships and trust, especially among non-prime borrowers who may prefer in-person interactions or require more personalized service. This contrasts with DFS and LC, which primarily emphasize digital-first approaches, potentially giving OMF an edge in segments where high-touch service and local presence are valued.

While DFS is known for its technological efficiency and broader data analytics, and LC for its lean online scalability, OMF's integrated insurance offerings and secured lending products provide a unique value proposition that can lead to higher customer retention and potentially superior margins through bundled services. SYF, with its strong retail partnerships, offers wide accessibility, but OMF's direct-to-consumer model and focus on comprehensive financial solutions differentiate its approach. OMF's robust funding model, characterized by unparalleled market access and execution regardless of the environment, also provides a competitive advantage. The company's ability to consistently raise capital, as evidenced by its recent $1.8 billion funding in Q2 2025, allows it to make every desired loan, a capability some competitors may lack in volatile capital markets. This financial strength, coupled with its disciplined underwriting, positions OMF favorably against rivals who might be more susceptible to funding constraints or less experienced in managing non-prime credit cycles.

Strategic Discipline Yields Credit Resilience

The period from 2022 to 2024 presented significant macroeconomic headwinds, including a challenging post-COVID inflationary environment. OneMain responded decisively, implementing a tightened underwriting posture in August 2022. This involved applying an additional 30% stress assumption to its credit models, ensuring that loans originated since then would remain profitable even if losses were to increase by that margin, targeting a 20% return on equity hurdle. This conservative approach has been instrumental in shaping the company's improving credit profile.

The "front book" of loans originated under this tightened credit box now comprises a substantial 90% of total receivables as of Q2 2025, up from 84% in Q4 2024. This transition is a primary driver of the positive credit trends observed. For the three months ended June 30, 2025, the 30-plus delinquency rate was 5.07%, down 29 basis points year-over-year. Consumer loan net charge-offs for Q2 2025 were 7.2%, a notable 110 basis points improvement year-over-year. This reinforces management's view that consumer loan losses peaked in the first half of 2024. Recoveries remain strong, amounting to $87 million in Q2 2025, or 1.5% of receivables, well above pre-pandemic levels. The allowance for finance receivable losses stood at $2.8 billion at June 30, 2025, with a reserve coverage of 11.5%, which has remained flat due to a conservative macroeconomic overlay, despite improving credit metrics.

Diversified Growth Engines: Auto and Credit Cards

OneMain's growth strategy extends beyond its core personal loan business, which continues to see enhancements. Initiatives like an improved debt consolidation offering, automated income verification, and streamlined loan renewals are driving higher application pull-through rates. A new channel enabling credit card customers to cross-buy personal loans through the app is also showing promising early results with excellent credit performance and low acquisition costs.

The acquisition of Foursight Capital LLC in April 2024 significantly bolstered OMF's auto finance capabilities. The auto business, now fully integrated under the OneMain auto brand, ended Q2 2025 with over $2.6 billion in receivables. In the last year, active dealers grew by 14%, and quarterly originations increased by 29%, adding over $400 million in receivables. Auto portfolio pricing has moved up nicely, and credit performance is in line with expectations and better than comparable industry performance. This segment is viewed as a key driver of future profitable growth.

The BrightWay credit card business, rolled out in August 2021, is another strategic growth area. While growth has been measured due to market uncertainty, the portfolio reached $752 million in receivables by Q2 2025, up 61% year-over-year, serving over 920,000 customers. The revenue yield on the credit card portfolio improved by 140 basis points year-over-year in Q2 2025. Credit card losses were in the mid-19% range in Q2 2025 (19.8% in Q1 2025) and are expected to decline by approximately 150 basis points in the second half of 2025 due to portfolio seasoning. Management anticipates that, at maturity, the credit card business's capital generation return on receivables will be similar to personal loans, despite higher revenue yields absorbing higher losses.

Fortress Balance Sheet and Capital Allocation

OneMain's balance sheet strength and diversified funding program are critical competitive advantages. The company maintains a 24-month liquidity runway and consistently demonstrates unparalleled market access. In Q2 2025 alone, OMF raised $1.8 billion through two issuances: an $800 million unsecured bond at 7.125% due 2032 (callable in three years), and a $1 billion revolving ABS with a cost of funds under 5%. These proactive measures have significantly reduced near-term maturities, with only about $400 million of March 2026 bonds remaining outstanding and no further unsecured maturities until January 2027. Bank facilities totaled $7.5 billion at Q2 2025, with $9.7 billion in unencumbered receivables. Net leverage stood at 5.5x at the end of Q2 2025, flat to the prior quarter.

Capital allocation priorities remain consistent: strategic investment in the business (new products, data science, digital innovation), a strong regular annual dividend ($4.16 per share, yielding approximately 7% at current prices), and opportunistic share repurchases. In the first half of 2025, OMF repurchased approximately 780,000 shares for $37 million, already outpacing the 755,000 shares repurchased in all of 2024, reflecting increased excess capital generation. The company is also exploring the formation of OneMain Bank, an industrial loan company (ILC), which could further diversify funding, simplify its operating model, and enhance efficiencies in its credit card business, all without the parent company becoming a bank holding company.

Outlook: Capital Generation on an Upward Trajectory

OneMain's management is confident in its ability to deliver significantly increased capital generation in 2025 compared to 2024, driven by strong operational momentum and improving credit trends. For the full year 2025, the company has updated its guidance:

• Total Revenue Growth: Expected to be at the high end of the previously provided 6% to 8% range.
• C&I Net Charge-offs: Expected to come in between 7.5% and 7.8%, narrowing to the lower half of the original guidance range.
• Managed Receivables Growth: Maintained at 5% to 8%.
• Operating Expense Ratio: Maintained at approximately 6.6%.

This positive outlook assumes a steady macroeconomic environment without significant changes in inflation or unemployment. Management emphasizes that their underwriting models incorporate a 30% stress assumption, providing a built-in cushion even if economic conditions were to deteriorate. While the non-prime consumer has shown resilience, supported by a solid labor market and wage growth, OMF remains vigilant, continuously monitoring macroeconomic indicators and customer behavior. The company's long history of serving the non-prime consumer, combined with its conservative underwriting and robust balance sheet, positions it favorably to capitalize on opportunities and mitigate potential risks.

Conclusion

OneMain Holdings is executing a compelling investment narrative, demonstrating how disciplined strategy and operational excellence can drive consistent capital generation in the dynamic consumer finance sector. By leveraging its deep understanding of the non-prime consumer, its unique omnichannel distribution, and its advanced data science capabilities, OMF has successfully tightened its credit box, optimized pricing, and diversified its product offerings. The strong performance of its "front book" loans, coupled with the strategic expansion into auto finance and credit cards, underpins a clear trajectory of improving credit metrics and robust revenue growth.

The company's fortress balance sheet and unparalleled access to funding provide a significant competitive advantage, enabling it to pursue growth initiatives and return capital to shareholders through dividends and share repurchases. While macroeconomic uncertainties persist, OMF's conservative underwriting posture and proactive risk management provide a substantial buffer. For investors, OneMain represents a resilient financial services company poised for continued capital generation growth, driven by its strategic foresight, technological leadership, and unwavering commitment to its core business model.