Synchrony Financial Reports Third Quarter Net Earnings of $671 Million

10/19/18

STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE:SYF) today announced third quarter 2018 net earnings of $671 million, or $0.91 per diluted share. Highlights included:

  • Net interest income increased 9% from the third quarter of 2017 to $4.2 billion
  • Loan receivables grew $11 billion, or 14%, from the third quarter of 2017 to $88 billion
  • Purchase volume increased 11% from the third quarter of 2017 to $36 billion
  • Deposits grew $8 billion, or 14%, from the third quarter of 2017 to $62 billion
  • Completed the U.S. PayPal Credit financing program acquisition on July 2, 2018, acquiring $7.6 billion in receivables and making Synchrony the exclusive issuer of PayPal Credit in the U.S.
  • Renewed relationships: Lowe’s, JCPenney, Associated Materials, and Generac
  • Added new partnerships: Fred Meyer Jewelers and Eargo
  • Expanded CareCredit network and enhanced mobile app capabilities
  • Paid quarterly common stock dividend of $0.21 per share and repurchased $966 million of Synchrony Financial common stock

“We generated strong results this quarter, adding a top new program with the completion of the acquisition of the U.S. PayPal Credit program, while also continuing to drive organic growth. In addition to renewing key partnerships, we won exciting new programs. We have also been expanding our valuable CareCredit network, entering more than 25 new markets over the last several quarters. We continue to invest in our digital capabilities and network, focusing on ease of card use across platforms, as well as card utility, enhancing our competitive position in the rapidly changing marketplace. We are also seeing other important elements of our business, such as credit quality, continue to perform in-line with our expectations,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.

Business and Financial Highlights for the Third Quarter of 2018

All comparisons below are for the third quarter of 2018 compared to the third quarter of 2017, unless otherwise noted.

Earnings

  • Net interest income increased $330 million, or 9%, to $4.2 billion, primarily driven by the PayPal Credit program acquisition and loan receivables growth. Net interest income after retailer share arrangements increased 9%.
  • Provision for loan losses increased $141 million, or 11%, to $1.5 billion, driven by the PayPal Credit reserve build partially offset by moderating credit trends.
  • Other income was down $13 million to $63 million.
  • Other expense increased $96 million, or 10%, to $1.1 billion, primarily driven by the PayPal Credit program acquisition and growth-related expenses.
  • Provision for income taxes was down 31%, primarily due to tax reform.
  • Net earnings totaled $671 million compared to $555 million last year.

Balance Sheet

  • Period-end loan receivables growth was 14%, purchase volume growth was 11% and average active account growth was 9%, primarily driven by the PayPal Credit program acquisition and growth.
  • Deposits grew to $62 billion, up $8 billion, or 14%, and comprised 72% of funding.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $23 billion, or 22% of total assets.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.2%, compared to 17.2%, reflecting the impact of capital deployment through the PayPal Credit program acquisition, growth, and continued execution of our capital plan.

Key Financial Metrics

  • Return on assets was 2.7% and return on equity was 18.5%.
  • Net interest margin was 16.41%.
  • Efficiency ratio was 31.0%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.59% compared to 4.80% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.97% compared to 4.95% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 7.11% compared to 6.97% last year.

Sales Platforms

  • Retail Card period-end loan receivables grew 16%, driven by the PayPal Credit program acquisition. Interest and fees on loans increased 12%, purchase volume growth was 11% and average active accounts increased 10%, all largely driven by the PayPal Credit program acquisition.
  • Payment Solutions period-end loan receivables grew 9%, led by home furnishings and power equipment. Interest and fees on loans increased 8%, primarily driven by the loan receivables growth. Purchase volume growth was 10% and average active accounts increased 5%.
  • CareCredit period-end loan receivables grew 8%, led by dental and veterinary. Interest and fees on loans increased 6%, primarily driven by the loan receivables growth. Purchase volume grew 9% and average active account growth was 5%.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed February 22, 2018, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.

About Synchrony Financial

Synchrony Financial (NYSE: SYF) is a premier consumer financial services company delivering customized financing programs across key industries including retail, health, auto, travel and home, along with award-winning consumer banking products. With more than $130 billion in sales financed and 74.5 million active accounts, Synchrony Financial brings deep industry expertise, actionable data insights, innovative solutions and differentiated digital experiences to improve the success of every business we serve and the quality of each life we touch. More information can be found at www.synchronyfinancial.com and through Twitter: @Synchrony.