Navient (NASDAQ:NAVI), a debt servicing company focused on student loans, saw its Q4 earnings beat Wall Street estimates, while net interest income came in worse than expected as it paid down its loan portfolios against a backdrop of high interest rates during the quarter.

The company also issued its outlook for 2023. It sees adjusted core EPS of $3.15-$3.30 compared with the $2.93 consensus estimate, and core earnings return on equity is expected to be in the mid-teens.

Net interest margin for its federal education loans segment in 2023 is anticipated to be 1.00%-1.10%, while NII for its consumer lending unit is target at 2.80%-2.90%. The company’s business processing division is expected to see EBITDA margin in the high teens.

NAVI gained 2.8% in after-hours trading.

Meanwhile, Q4 adjusted core EPS of $0.85, topping the $0.82 average analyst estimate, rose from $0.75 in Q3 and from $0.78 in the year-ago period.

Net interest income of $223M, falling short of the $245.2M consensus, slid from $240M in the prior quarter and from $314M a year earlier.

Expenses totaled $202M for the quarter ended Dec. 31, 2022, down from $225M for the quarter ended Sept. 30, 2022, and from $482M for the quarter ended Dec. 31, 2021.

For its education loans segment, NII of $115M slid from $120M in Q3 and from $140M in Q4, and provision for loan losses stayed at $0.

Likewise, its consumer lending unit saw NII of $147M drift down from $153M in Q3 and from $152M in Q4 2021, mostly due to the paydown of the non-refinance loan portfolio, partially offset by an increase in the net interest margin on the refinance loan portfolio. Loan loss provision of $17M vs. $28M in Q3 and $5M in Q4 2021.

Conference call on Jan. 25 at 8:00 a.m. ET.

See why Seeking Alpha contributor Gary Bourgeault warned investors last month that Navient (NAVI) could face a tough 2023.