Synchrony Financial Reports Second Quarter Net Earnings of $489 Million

7/22/16

STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE:SYF) today announced second quarter 2016 net earnings of $489 million, or $0.58 per diluted share. Highlights for the quarter included:

  • Net interest income increased 10% from the second quarter of 2015 to $3.2 billion
  • Loan receivables grew $7 billion, or 11%, from the second quarter of 2015 to $68 billion
  • Purchase volume increased 9% from the second quarter of 2015
  • Strong deposit growth continued, up $9 billion, or 23%, over the second quarter of 2015
  • Renewed key relationships – Ashley Homestore, Suzuki, VCA Animal Hospitals, and American Society of Plastic Surgeons
  • Signed new partnerships with Cathay Pacific and Fareportal
  • Launched Mattress Firm and Marvel card programs
  • Announced quarterly common stock dividend of $0.13 per share and share repurchase program of up to $952 million for the four quarters ending June 30, 2017


“We delivered another quarter of strong operational and financial performance with solid growth generated in each of our sales platforms. We signed several new partners and renewed key programs and increased deposits by $9 billion over last year to support our growing business,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “Furthermore, we are pleased to commence payment of dividends to our shareholders and opportunistically repurchase our stock. These actions not only reflect the strength of our capital position and financial performance, but also the power of our business model and our confidence in future opportunities.”

Business and Financial Highlights for the Second Quarter of 2016

All comparisons below are for the second quarter of 2016 compared to the second quarter of 2015, unless otherwise noted.

Earnings

  • Net interest income increased $305 million, or 10%, to $3.2 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 11%.
  • Provision for loan losses increased $281 million to $1,021 million due to higher loan loss reserve build and loan receivables growth in the second quarter of 2016.
  • Other income decreased $37 million to $83 million, driven by a $20 million gain on portfolio sales in the second quarter of 2015, and an increase in loyalty programs, partially offset by higher interchange income.
  • Other expense increased $34 million to $839 million, primarily driven by business growth.
  • Net earnings totaled $489 million compared to $541 million in the second quarter of 2015.

Balance Sheet

  • Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 9% and average active account growth of 8%.
  • Deposits grew to $46 billion, up $9 billion, or 23%, and comprised 71% of funding compared to 61% last year.
  • Fully paid off Bank Term Loan on April 5, 2016.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) of $21 billion, or 25% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 18.5% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 18.0%.

Key Financial Metrics

  • Return on assets was 2.4% and return on equity was 14.6%.
  • Net interest margin increased 9 basis points to 15.86%.
  • Efficiency ratio was 31.9%, a 157 basis point improvement from the second quarter of 2015, driven by positive operating leverage arising from strong revenue growth that exceeded expense growth.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 3.79% compared to 3.53% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.49% compared to 4.63% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 5.70% compared to 5.38% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 11%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 10%. Average active account growth was 7%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 13%, driven primarily by purchase volume growth of 16% and period-end loan receivables growth of 15%. Average active account growth was 13%. Loan receivables growth was led by the home furnishings and automotive product categories.
  • CareCredit interest and fees on loans increased 5%, driven primarily by purchase volume growth of 10% and period-end loan receivables growth of 10%. Average active account growth was 7%. Loan receivables growth was led by the dental and veterinary specialties.


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 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed February 25, 2016, the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and the Form 8-K furnished by the Company on June 14, 2016. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website atwww.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 one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 350,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial (formerly GE Capital Retail Finance) offers private label and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial,www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.