Press Release

April 20, 2018, 1:26 PM EDT

Synchrony Financial Reports First Quarter Net Earnings of $640 Million or $0.83 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE:SYF) today announced first quarter 2018 net earnings of $640 million, or $0.83 per diluted share. Highlights included:
  • Net interest income increased 7% from the first quarter of 2017 to $3.8 billion
  • Loan receivables grew $5 billion, or 6%, from the first quarter of 2017 to $78 billion
  • Purchase volume increased 3% from the first quarter of 2017 to $30 billion
  • Deposits grew $5 billion, or 10%, from the first quarter of 2017 to $57 billion
  • Added new partnerships: Crate and Barrel, jtv, and Mahindra
  • Renewed relationships: Nationwide Marketing Group, Briggs & Stratton, and American Signature Furniture
  • Expanded CareCredit network: American Veterinary Medical Association, American Med Spa Association, and Spa Industry Association
  • Quarterly common stock dividend payment of $0.15 per share and repurchased $410 million of Synchrony Financial common stock

“We started the year with solid results as we continued to drive organic growth, while also winning exciting new partnerships. Furthermore, we closed several key renewals during the quarter and made investments to help augment our capabilities. Innovative value propositions, compelling promotional offers, and robust data, analytics and digital capabilities, remain a hallmark of our business, and continue to drive value for our partners and cardholders,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “Returning capital to shareholders remains a key priority, and we are pleased to continue to return significant capital to shareholders through our dividend and share repurchase program, while also deploying capital through organic growth and program acquisitions.”

Business and Financial Highlights for the First Quarter of 2018

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

Earnings

  • Net interest income increased $255 million, or 7%, to $3.8 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 8%.
  • Provision for loan losses increased $56 million, or 4% to $1.4 billion primarily driven by credit normalization and growth.
  • Other income was down $18 million to $75 million, primarily due to higher loyalty program expense, partially offset by higher interchange revenue.
  • Other expense increased $80 million, or 9% to $988 million, primarily driven by growth and marketing.
  • Provision for income taxes was down 27%, primarily due to tax reform.
  • Net earnings totaled $640 million compared to $499 million in the first quarter of 2017.

Balance Sheet

  • Period-end loan receivables growth was 6%, primarily driven by purchase volume growth of 3% and average active account growth of 2%.
  • Deposits grew to $57 billion, up $5 billion, or 10%, and comprised 73% of funding compared to 72% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $25 billion, or 26% of total assets.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 16.8%.

Key Financial Metrics

  • Return on assets was 2.7% and return on equity was 18.2%.
  • Net interest margin was 16.05%.
  • Efficiency ratio was 30.9%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.52% compared to 4.25% last year.
  • Net charge-offs as a percentage of total average loan receivables were 6.14% compared to 5.33% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 7.37% compared to 6.37% last year.

Sales Platforms

  • Retail Card period-end loan receivables grew 5% reflecting broad-based growth across partner programs. Interest and fees on loans increased 7%, primarily driven by the loan receivables growth. Purchase volume and average active account growth was 2%.
  • Payment Solutions period-end loan receivables grew 8%, led by home furnishing and automotive. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 7%, adjusted to exclude the impact from the hhgregg bankruptcy, and average active account growth was 5%.
  • CareCredit period-end loan receivables grew 8%, led by dental and veterinary. Interest and fees on loans increased 8%, primarily driven by the loan receivables growth. Purchase volume grew 8% and average active account growth was 7%.

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 March 31, 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.

Conference Call and Webcast Information

On Friday, April 20, 2018, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on the Synchrony Financial corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 12018#, and can be accessed beginning approximately two hours after the event through May 4, 2018.

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.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; cyber-attacks or other security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed on February 22, 2018. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as “tangible common equity” and certain financial measures that have been adjusted to exclude the effects from the Tax Act, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.

 

SYNCHRONY FINANCIAL

FINANCIAL SUMMARY

(unaudited, in millions, except per share statistics)

 

Quarter Ended

1Q'18 vs. 1Q'17

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

EARNINGS

 

 

 

 

 

 

 

Net interest income

$3,842

$3,916

$3,876

$3,637

$3,587

$255

7.10%

Retailer share arrangements

(720)

(779)

(805)

(669)

(684)

(36)

5.30%

Net interest income, after retailer share arrangements

3,122

3,137

3,071

2,968

2,903

219

7.50%

Provision for loan losses

1,362

1,354

1,310

1,326

1,306

56

4.30%

Net interest income, after retailer share arrangements and provision for loan losses

1,760

1,783

1,761

1,642

1,597

163

10.20%

Other income

75

62

76

57

93

(18)

-19.40%

Other expense

988

970

958

911

908

80

8.80%

Earnings before provision for income taxes

847

875

879

788

782

65

8.30%

Provision for income taxes

207

490

324

292

283

(76)

-26.90%

Net earnings

$640

$385

$555

$496

$499

$141

28.30%

Net earnings attributable to common stockholders

$640

$385

$555

$496

$499

$141

28.30%

Adjusted net earnings (1)

$640

$545

$555

$496

$499

$141

28.30%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

Basic EPS

$0.84

$0.49

$0.70

$0.62

$0.61

$0.23

37.70%

Diluted EPS

$0.83

$0.49

$0.70

$0.61

$0.61

$0.22

36.10%

Adjusted diluted EPS(1)

$0.83

$0.70

$0.70

$0.61

$0.61

$0.22

36.10%

Dividend declared per share

$0.15

$0.15

$0.15

$0.13

$0.13

$0.02

15.40%

Common stock price

$33.53

$38.61

$31.05

$29.82

$34.30

($0.77)

-2.20%

Book value per share

$18.88

$18.47

$18.40

$18.02

$17.71

$1.17

6.60%

Tangible common equity per share(2)

$16.55

$16.22

$16.15

$15.79

$15.47

$1.08

7%

Beginning common shares outstanding

770.5

782.6

795.3

810.8

817.4

(46.9)

-5.70%

Issuance of common shares

-

-

-

-

-

-

-

Stock-based compensation

0.2

0.1

0.1

0.2

-

0.2

NM

Shares repurchased

(10.4)

(12.2)

(12.8)

(15.7)

(6.6)

(3.8)

57.60%

Ending common shares outstanding

760.3

770.5

782.6

795.3

810.8

(50.5)

-6.20%

Weighted average common shares outstanding

763.7

778.7

787.3

804

813.1

(49.4)

-6.10%

Weighted average common shares outstanding (fully diluted)

770.3

784

790.9

807.4

817.1

(46.8)

-5.70%

(1) Adjusted net earnings and Adjusted diluted EPS are non-GAAP measures. These measures represent the corresponding GAAP measure, adjusted to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The effects primarily relate to additional tax expense arising from the remeasurement of our net deferred tax asset to reflect the reduction in the U.S. corporate tax rate from 35% to 21%. For a corresponding reconciliation to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(2) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

SYNCHRONY FINANCIAL

SELECTED METRICS

(unaudited, $ in millions, except account data)

 

Quarter Ended

1Q'18 vs. 1Q'17

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

PERFORMANCE METRICS

 

 

 

 

 

 

 

Return on assets(1)

2.70%

1.60%

2.40%

2.20%

2.30%

 

0.40%

Return on equity(2)

18.20%

10.50%

15.30%

13.80%

14.10%

 

4.10%

Return on tangible common equity(3)

20.70%

12%

17.40%

15.70%

16.10%

 

4.60%

Adjusted return on assets(4)

2.70%

2.30%

2.40%

2.20%

2.30%

 

0.40%

Adjusted return on equity(4)

18.20%

14.90%

15.30%

13.80%

14.10%

 

4.10%

Adjusted return on tangible common equity(5)

20.70%

17

17.40%

15.70%

16.10%

 

4.60%

Net interest margin(6)

16.05%

16.24%

16.74%

16.20%

16.18%

 

-0.13%

Efficiency ratio(7)

30.90%

30.30%

30.40%

30.10%

30.30%

 

0.60%

Other expense as a % of average loan receivables, including held for sale

5.07%

4.91%

4.99%

4.93%

4.97%

 

0.10%

Effective income tax rate

24.40%

56%

36.90%

37.10%

36.20%

 

-11.80%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

Net charge-offs as a % of average loan receivables, including held for sale

6.14%

5.78%

4.95%

5.42%

5.33%

 

0.81%

30+ days past due as a % of period-end loan receivables(8)

4.52%

4.67%

4.80%

4.25%

4.25%

 

0.27%

90+ days past due as a % of period-end loan receivables(8)

2.28%

2.28%

2.22%

1.90%

2.06%

 

0.22%

Net charge-offs

$1,198

$1,141

$950

$1,001

$974

$224

23%

Loan receivables delinquent over 30 days(8)

$3,521

$3,831

$3,694

$3,208

$3,120

$401

12.90%

Loan receivables delinquent over 90 days(8)

$1,776

$1,869

$1,707

$1,435

$1,508

$268

17.80%

Allowance for loan losses (period-end)

$5,738

$5,574

$5,361

$5,001

$4,676

$1,062

22.70%

Allowance coverage ratio(9)

7.37%

6.80%

6.97

6.63%

6.37%

 

1%

BUSINESS METRICS

 

 

 

 

 

 

 

Purchase volume(10)

$29,626

$36,565

$32,893

$33,476

$28,880

$746

2.60%

Period-end loan receivables

$77,853

$81,947

$76,928

$75,458

$73,350

$4,503

6.10%

Credit cards

$74,952

$79,026

$73,946

$72,492

$70,587

$4,365

6.20%

Consumer installment loans

$1,590

$1,578

$1,561

$1,514

$1,411

$179

12.70%

Commercial credit products

$1,275

$1,303

$1,384

$1,386

$1,311

($36)

-2.70%

Other

$36

$40

$37

$66

$41

($5)

-12.20%

Average loan receivables, including held for sale

$79,090

$78,369

$76,165

$74,090

$74,132

$4,958

6.70%

Period-end active accounts (in thousands)(11)

68,891

74,541

69,008

69,277

67,905

986

1.50%

Average active accounts (in thousands)(11)

71,323

71,348

69,331

68,635

69,629

1,694

2.40%

LIQUIDITY

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

Cash and equivalents

$13,044

$11,602

$13,915

$12,020

$11,392

$1,652

14.50%

Total liquid assets

$18,557

$15,087

$16,391

$15,274

$16,158

$2,399

14.80%

Undrawn credit facilities

 

 

 

 

 

 

 

Undrawn credit facilities

$6,000

$6,000

$5,650

$6,650

$5,600

$400

7.10%

Total liquid assets and undrawn credit facilities

$24,557

$21,087

$22,041

$21,924

$21,758

$2,799

12.90%

Liquid assets % of total assets

19.42%

15.75%

17.71%

16.76%

18.14%

 

1.28%

Liquid assets including undrawn credit facilities % of total assets

25.70%

22.01%

23.82%

24.06%

24.43%

 

1.27%

(1) Return on assets represents net earnings as a percentage of average total assets.

(2) Return on equity represents net earnings as a percentage of average total equity.

(3) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(4) Adjusted return on assets represents Adjusted net earnings as a percentage of average total assets. Adjusted return on equity represents Adjusted net earnings as a percentage of average total equity. Adjusted net earnings is a non-GAAP measure. For a corresponding reconciliation of Adjusted net earnings to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(5) Adjusted return on tangible common equity represents Adjusted net earnings as a percentage of average tangible common equity. Both Adjusted net earnings and tangible common equity are non-GAAP measures. For corresponding reconciliations to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(6) Net interest margin represents net interest income divided by average interest-earning assets.

(7) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.

(8) Based on customer statement-end balances extrapolated to the respective period-end date.

(9) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.

(10) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.

(11) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

SYNCHRONY FINANCIAL

STATEMENTS OF EARNINGS

(unaudited, $ in millions)

 

Quarter Ended

1Q'18 vs. 1Q'17

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

Interest income:

 

 

 

 

 

 

 

Interest and fees on loans

$4,172

$4,233

$4,182

$3,927

$3,877

$295

7.60%

Interest on investment securities

72

58

51

43

36

36

100%

Total interest income

4,244

4,291

4,233

3,970

3,913

331

8.50%

Interest expense:

 

 

 

 

 

 

 

Interest on deposits

249

233

219

202

194

55

28.40%

Interest on borrowings of consolidated securitization entities

74

70

65

63

65

9

13.80%

Interest on third-party debt

79

72

73

68

67

12

17.90%

Total interest expense

402

375

357

333

326

76

23.30%

Net interest income

3,842

3,916

3,876

3,637

3,587

255

7.10%

Retailer share arrangements

(720)

(779)

(805)

(669)

(684)

(36)

5.30%

Net interest income, after retailer share arrangements

3,122

3,137

3,071

2,968

2,903

219

7.50%

Provision for loan losses

1,362

1,354

1,310

1,326

1,306

56

4.30%

Net interest income, after retailer share arrangements and provision for loan losses

1,760

1,783

1,761

1,642

1,597

163

10.20%

Other income:

 

 

 

 

 

 

 

Interchange revenue

158

179

164

165

145

13

9%

Debt cancellation fees

66

69

67

68

68

(2)

-2.90%

Loyalty programs

(155)

(193)

(168)

(206)

(137)

(18)

13.10%

Other

6

7

13

30

17

(11)

-64.70%

Total other income

75

62

76

57

93

(18)

-19.40%

Other expense:

 

 

 

 

 

 

 

Employee costs(1)

358

330

333

318

323

35

10.80%

Professional fees

166

159

161

158

151

15

9.90%

Marketing and business development

121

156

124

124

94

27

28.70%

Information processing

104

99

96

88

90

14

15.60%

Other(1)

239

226

244

223

250

-11

-4.40%

Total other expense

988

970

958

911

908

80

8.80%

Earnings before provision for income taxes

847

875

879

788

782

65

8.30%

Provision for income taxes

207

490

324

292

283

-76

-26.90%

Net earnings attributable to common stockholders

$640

$385

$555

$496

$499

$141

28.30%

(1) We have reclassified certain amounts within Employee costs to Other for all periods in 2017 to conform to the current period classifications.

SYNCHRONY FINANCIAL

STATEMENTS OF FINANCIAL POSITION

(unaudited, $ in millions)

 

Quarter Ended

Mar 31, 2018 vs. Mar 31, 2017

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

Assets

 

 

 

 

 

 

 

Cash and equivalents

$13,044

$11,602

$13,915

$12,020

$11,392

$1,652

14.50%

Debt securities

6,259

4,473

3,302

3,982

5,313

946

17.80%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

52,469

55,526

53,997

52,550

50,398

2,071

4.10%

Restricted loans of consolidated securitization entities

25,384

26,421

22,931

22,908

22,952

2,432

10.60%

Total loan receivables

77,853

81,947

76,928

75,458

73,350

4,503

6.10%

Less: Allowance for loan losses

(5,738)

(5,574)

(5,361)

(5,001)

(4,676)

(1,062)

22.70%

Loan receivables, net

72,115

76,373

71,567

70,457

68,674

3,441

5%

Goodwill

991

991

991

991

992

(1)

-0.10%

Intangible assets, net

780

749

772

787

826

(46)

-5.60%

Other assets

2,370

1,620

2,001

2,903

1,853

517

27.90%

Total assets

$95,559

$95,808

$92,548

$91,140

$89,050

$6,509

7.30%

Liabilities and Equity

 

-

-

-

-

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$56,285

$56,276

$54,232

$52,659

$51,359

$4,926

9.60%

Non-interest-bearing deposit accounts

285

212

222

226

246

39

15.90%

Total deposits

56,570

56,488

54,454

52,885

51,605

4,965

9.60%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

12,214

12,497

11,891

12,204

12,433

-219

(1.8

Senior unsecured notes

8,801

8,302

8,008

8,505

7,761

1,040

13.40%

Total borrowings

21,015

20,799

19,899

20,709

20,194

821

4.10%

Accrued expenses and other liabilities

3,618

4,287

3,793

3,214

2,888

730

25.30%

Total liabilities

81,203

81,574

78,146

76,808

74,687

6,516

8.70%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

-

Additional paid-in capital

9,470

9,445

9,429

9,415

9,405

65

0.70%

Retained earnings

7,334

6,809

6,543

6,109

5,724

1,610

28.10%

Accumulated other comprehensive income:

(86)

(64)

(40)

(49)

(55)

(31)

56.40%

Treasury Stock

(2,363)

(1,957)

(1,531)

(1,144)

(712)

(1,651)

NM

Total equity

14,356

14,234

14,402

14,332

14,363

(7)

0.00%

Total liabilities and equity

$95,559

$95,808

$92,548

$91,140

$89,050

$6,509

7.30%

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Quarter Ended

 

31-Mar-18

31-Dec-17

30-Sep-17

30-Jun-17

31-Mar-17

 

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

 

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning cash and equivalents

$12,434

$47

1.53%

$13,591

$43

1.26%

$11,895

$37

1.23%

$10,758

$28

1.04%

$10,552

$21

0.81%

Securities available for sale

5,584

25

1.82%

3,725

15

1.60%

3,792

14

1.46%

5,195

15

1.16%

5,213

15

1.17%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

76,181

4,099

21.82%

75,389

4,161

21.90%

73,172

4,111

22.29%

71,206

3,858

21.73%

71,365

3,811

21.66%

Consumer installment loans

1,572

36

9.29%

1,568

36

9.11%

1,543

35

9%

1,461

34

9.33%

1,389

32

9.34%

Commercial credit products

1,286

36

11.35%

1,375

35

10.10%

1,392

36

10.26%

1,378

34

9.90%

1,317

34

10.47%

Other

51

1

NM

37

1

NM

58

-

-

45

1

NM

61

-

-

Total loan receivables, including held for sale

79,090

4,172

21.39%

78,369

4,233

21.43%

76,165

4,182

21.78%

74,090

3,927

21.26%

74,132

3,877

21.21%

Total interest-earning assets

97,108

4,244

17.72%

95,685

4,291

17.79%

91,852

4,233

18.28%

90,043

3,970

17.68%

89,897

3,913

17.65%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

1,197

 

 

1,037

 

 

877

 

 

829

 

 

802

 

 

Allowance for loan losses

(5,608)

 

 

(5,443)

 

 

(5,125)

 

 

(4,781)

 

 

(4,408)

 

 

Other assets

3,010

 

 

3,219

 

 

3,517

 

 

3,303

 

 

3,177

 

 

Total non-interest-earning assets

(1,401)

 

 

(1,187)

 

 

(731)

 

 

(649)

 

 

(429)

 

 

Total assets

$95,707

 

 

$94,498

 

 

$91,121

 

 

$89,394

 

 

$89,468

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$56,356

$249

1.79%

$55,690

$233

1.66%

$53,294

$219

1.63%

$51,836

$202

1.56%

$51,829

$194

1.52%

Borrowings of consolidated securitization entities

12,410

74

2.42%

12,425

70

2.24%

11,759

65

2.19%

12,213

63

2.07%

12,321

65

2.14%

Senior unsecured notes

8,795

79

3.64%

7,940

72

3.60%

8,251

73

3.51%

7,933

68

3.44%

7,760

67

3.50%

Total interest-bearing liabilities

77,561

402

2.10%

76,055

375

1.96%

73,304

357

1.93%

71,982

333

1.86%

71,910

326

1.84%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

300

 

 

218

 

 

232

 

 

218

 

 

240

 

 

Other liabilities

3,570

 

 

3,716

 

 

3,154

 

 

2,752

 

 

2,995

 

 

Total non-interest-bearing liabilities

3,870

 

 

3,934

 

 

3,386

 

 

2,970

 

 

3,235

 

 

Total liabilities

81,431

 

 

79,989

 

 

76,690

 

 

74,952

 

 

75,145

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,276

 

 

14,509

 

 

14,431

 

 

14,442

 

 

14,323

 

 

Total liabilities and equity

$95,707

 

 

$94,498

 

 

$91,121

 

 

$89,394

 

 

$89,468

 

 

Net interest income

 

$3,842

 

 

$3,916

 

 

$3,876

 

 

$3,637

 

 

$3,587

 

Interest rate spread (1)

 

 

15.62%

 

 

15.83%

 

 

16.35%

 

 

15.82%

 

 

15.81%

Net interest margin (2)

 

 

16.05%

 

 

16.24%

 

 

16.74%

 

 

16.20%

 

 

16.18%

(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.

(2) Net interest margin represents net interest income divided by average interest-earning assets.

SYNCHRONY FINANCIAL

BALANCE SHEET STATISTICS

(unaudited, $ in millions, except per share statistics)

 

Quarter Ended

Mar 31, 2018 vs. Mar 31, 2017

 

Mar 31,

Dec 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

2017

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$14,356

$

$14,234

$14,402

$14,332

$14,363

($7)

0%

Total common equity as a % of total assets

15.02%

 

14.86%

15.56%

15.73%

16.13%

 

-1.11%

Tangible assets

$93,788

$

94,068

$90,785

$89,362

$87,232

$6,556

7.50%

Tangible common equity(1)

$12,585

$

12,494

$12,639

$12,554

$12,545

$40

0.30%

Tangible common equity as a % of tangible assets(1)

13.42%

 

13.28%

13.92%

14.05%

14.38%

 

-0.96%

Tangible common equity per share(1)

$16.55

$

$16.22

$16.15

$15.79

$15.47

$1.08

7%

REGULATORY CAPITAL RATIOS (2)

 

 

 

 

 

 

 

Basel III Fully Phased-in (3)

Basel III Transition

Total risk-based capital ratio(4)

18.10%

 

17.30%

18.70%

18.70%

19.30%

 

 

Tier 1 risk-based capital ratio(5)

16.80%

 

16%

17.30%

17.40%

18%

 

 

Tier 1 leverage ratio(6)

13.70%

 

13.80%

14.60%

14.80%

14.80%

 

 

Common equity Tier 1 capital ratio

16.80%

 

16%

17.30%

17.40%

18%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio

16.80%

 

15.80%

17.20%

17.20%

17.70%

 

 

(1) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(2) Regulatory capital metrics at March 31, 2018 are preliminary and therefore subject to change.

(3) Amounts presented do not reflect certain modifications to the regulatory capital rules proposed by the federal banking agencies in September 2017, which among other things, may increase the risk weighting of certain deferred tax assets from 100% to 250% if the proposed rule becomes effective.

(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.

(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.

(6) Tier 1 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments. Tier 1 leverage ratios are based upon the use of daily averages for all periods presented.

SYNCHRONY FINANCIAL

PLATFORM RESULTS

(unaudited, $ in millions)

 

Quarter Ended

1Q'18 vs. 1Q'17

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

RETAIL CARD

 

 

 

 

 

 

 

Purchase volume(1)(2)

$23,382

$29,839

$26,347

$27,101

$22,952

$430

1.90%

Period-end loan receivables

$52,531

$56,230

$52,119

$51,437

$49,905

$2,626

5.30%

Average loan receivables, including held for sale

$53,673

$53,256

$51,817

$50,533

$50,644

$3,029

6%

Average active accounts (in thousands)(2)(3)

55,927

56,113

54,471

54,058

55,049

878

1.60%

Interest and fees on loans(2)

$3,096

$3,133

$3,102

$2,900

$2,888

$208

7.20%

Other income(2)

$65

$49

$61

$25

$77

($12)

-15.60%

Retailer share arrangements(2)

($714)

($771)

(795

($657)

($681)

($33)

4.80%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

Purchase volume(1)

$3,823

$4,366

$4,178

$3,930

$3,686

$137

3.70%

Period-end loan receivables

$16,513

$16,857

$16,153

$15,595

$15,320

$1,193

7.80%

Average loan receivables

$16,629

$16,386

$15,848

$15,338

$15,424

$1,205

7.80%

Average active accounts (in thousands)(3)

9,545

9,421

9,183

9,031

9,090

455

5%

Interest and fees on loans

$562

$574

$559

$533

$515

$47

9.10%

Other income

$2

$2

$2

$6

$4

($2)

-50.00%

Retailer share arrangements

($4)

($5)

($9)

($9)

($1)

($3)

NM

CARECREDIT

 

 

 

 

 

 

 

Purchase volume(1)

$2,421

$2,360

$2,368

$2,445

$2,242

$179

8%

Period-end loan receivables

$8,809

$8,860

$8,656

$8,426

$8,125

$684

8.40%

Average loan receivables

$8,788

$8,727

$8,500

$8,219

$8,064

$724

9%

Average active accounts (in thousands)(3)

5,851

5,814

5,677

5,546

5,490

361

6.60%

Interest and fees on loans

$514

$526

$521

$494

$474

$40

8.40%

Other income

$8

$11

$13

$26

$12

($4)

-33.30%

Retailer share arrangements

($2)

($3)

($1)

($3)

($2)

-

-

TOTAL SYF

 

 

 

 

 

 

 

Purchase volume(1)(2)

$29,626

$36,565

$32,893

$33,476

$28,880

$746

2.60%

Period-end loan receivables

$77,853

$81,947

$76,928

$75,458

$73,350

$4,503

6.10%

Average loan receivables, including held for sale

$79,090

$78,369

$76,165

$74,090

$74,132

$4,958

6.70%

Average active accounts (in thousands)(2)(3)

71,323

71,348

69,331

68,635

69,629

1,694

2.40%

Interest and fees on loans(2)

$4,172

$4,233

$4,182

$3,927

$3,877

$295

7.60%

Other income(2)

$75

$62

$76

$57

$93

($18)

-19.40%

Retailer share arrangements(2)

($720)

($779)

($805)

($669)

($684)

($36)

5.30%

(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.

(2) Includes activity and balances associated with loan receivables held for sale.

(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

SYNCHRONY FINANCIAL

RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES (1)

(unaudited, $ in millions, except per share statistics)

 

Quarter Ended

 

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

 

2018

2017

2017

2017

2017

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$14,356

$14,234

$14,402

$14,332

$14,363

Less: Goodwill

-991

(991)

(991)

(991)

(992)

Less: Intangible assets, net

-780

(749)

(772)

(787)

(826)

Tangible common equity

$12,585

$12,494

$12,639

$12,554

$12,545

Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)

278

254

344

337

340

Basel III - Common equity Tier 1 (fully phased-in)

$12,863

$12,748

$12,983

$12,891

$12,885

Adjustment related to capital components during transition

 

142

142

146

154

Basel III - Common equity Tier 1 (transition)

 

$12,890

$13,125

$13,037

$13,039

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$12,863

$12,890

$13,125

$13,037

$13,039

Add: Allowance for loan losses includible in risk-based capital

1,015

1,064

1,001

985

954

Risk-based capital

$13,878

$13,954

$14,126

$14,022

$13,993

ASSET MEASURES

 

 

 

 

 

Total average assets

95,707

94,498

91,121

89,394

89,468

Adjustments for:

 

 

 

 

 

Disallowed goodwill and other disallowed intangible assets (net of related deferred tax liabilities) and other

(1560)

(1392)

(1304)

(1325)

(1358)

Total assets for leverage purposes

$94,147

$93,106

$89,817

$88,069

$88,110

Risk-weighted assets - Basel III (fully phased-in)

$76,509

$80,526

$75,614

$74,748

$72,596

Risk-weighted assets - Basel III (transition)

 

$80,669

$75,729

$74,792

$72,627

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$18.88

$18.47

$18.40

$18.02

$17.71

Less: Goodwill

(1.30)

(1.29)

(1.27)

(1.25)

(1.22)

Less: Intangible assets, net

(1.03)

(0.96)

(0.98)

(0.98)

(1.02)

Tangible common equity per share

$16.55

$16.22

$16.15

$15.79

$15.47

ADJUSTED NET EARNINGS

 

 

 

 

 

GAAP net earnings

$640

$385

$555

$496

$499

Adjustment for tax law change(2)

-

160

-

-

-

Adjusted net earnings

$640

$545

$555

$496

$499

ADJUSTED DILUTED EPS

 

 

 

 

 

GAAP diluted EPS

$0.83

$0.49

$0.70

$0.61

$0.61

Adjustment for tax law change(2)

-

0.21

-

-

-

Adjusted diluted EPS

$0.83

$0.70

$0.70

$0.61

$0.61

(1) Regulatory measures at March 31, 2018 are presented on an estimated basis.

(2) Adjustment to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Act.
Contact:

Synchrony Financial
Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Sue Bishop, 203-585-2802
Susan.Bishopmangino@syf.com