Press Release

July 27, 2018, 2:12 PM EDT

Synchrony Financial Reports Second Quarter Net Earnings of $696 Million or $0.92 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE: SYF) today announced second quarter 2018 net earnings of $696 million, or $0.92 per diluted share. Highlights included:
  • Net interest income increased 3% from the second quarter of 2017 to $3.7 billion
  • Loan receivables grew $3 billion, or 5%, from the second quarter of 2017 to $79 billion
  • Purchase volume increased 2% from the second quarter of 2017 to $34 billion
  • Deposits grew $6 billion, or 12%, from the second quarter of 2017 to $59 billion
  • Closed the PayPal transaction on July 2, 2018, acquiring $7.6 billion in receivables and making Synchrony the exclusive issuer of PayPal Credit in the U.S.
  • Walmart program agreement will not be renewed and will expire July 31, 2019; expect strategic options will fully replace diluted earnings per share impact of program non-renewal (1)
  • Added new partnerships: Furniture Row and The Good Feet Store
  • Renewed relationships: Ashley HomeStore, Havertys, Sleep Number, LCA Vision, and Robbins Brothers
  • Launched a new Dual Card with Belk
  • Acquired Loop Commerce, a technology leader in digital and in-store gifting services
  • Announced new capital plan increasing quarterly common stock dividend to $0.21 per share and share repurchases of up to $2.2 billion of Synchrony Financial common stock

(1) Please refer to page 12 of the 2Q’18 Financial Results presentation included in Form 8-K filed July 27, 2018

“We have continued to deliver solid results, driving organic growth while launching new programs and renewing key relationships. We are pleased to have closed the PayPal transaction, which is now a top 5 program. Our relationship with PayPal is exactly what we look for in a program – strong engagement, significant growth opportunities, and good economic alignment with the partner. Extending this relationship will enable us to leverage new opportunities to meaningfully expand this program and drive growth. And while the Walmart program will not be renewed as we were unable to reach terms that made economic sense for our company and our shareholders, we have strategic options that we expect will fully replace the EPS impact,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We remain focused on the risk-adjusted returns of our programs and returning capital to shareholders, as evidenced by our actions this quarter, which included significantly increasing the quarterly common stock dividend and share repurchase program.”

Business and Financial Highlights for the Second Quarter of 2018

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

Earnings

  • Net interest income increased $100 million, or 3%, to $3.7 billion, primarily driven by loan receivables growth. Net interest income after retailer share arrangements increased 4%.
  • Provision for loan losses decreased $46 million, or 3%, to $1.3 billion, primarily driven by lower reserve build.
  • Other income was up $6 million to $63 million.
  • Other expense increased $64 million, or 7%, to $975 million, primarily driven by growth and strategic investments.
  • Provision for income taxes was down 33%, primarily due to tax reform.
  • Net earnings totaled $696 million compared to $496 million in the second quarter of 2017.

Balance Sheet

  • Period-end loan receivables growth was 5%, primarily driven by purchase volume growth of 2% and average active account growth of 1%.
  • Deposits grew to $59 billion, up $6 billion, or 12%, 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 $28 billion, or 28% of total assets, including pre-funding for PayPal acquisition.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 16.6%.

Key Financial Metrics

  • Return on assets was 2.9% and return on equity was 19.4%.
  • Net interest margin was 15.33%.
  • Efficiency ratio was 31.0%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.17% compared to 4.25% last year.
  • Net charge-offs as a percentage of total average loan receivables were 5.97% compared to 5.42% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 7.43% compared to 6.63% last year.

Sales Platforms

  • Retail Card period-end loan receivables grew 3%, solid growth was partially offset by the impact of underwriting refinements. Interest and fees on loans increased 3%, primarily driven by the loan receivables growth. Purchase volume growth was 1% and average active accounts were flat.
  • Payment Solutions period-end loan receivables grew 8%, led by home furnishing and automotive. Interest and fees on loans increased 6%, primarily driven by the loan receivables growth. Purchase volume growth was 9% and average active account growth was 4%.
  • 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 8% 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 June 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.

Conference Call and Webcast Information

On Friday, July 27, 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 22018#, and can be accessed beginning approximately two hours after the event through August 10, 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; our ability to realize the benefits of and expected capital available from strategic options; 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

2Q'18 vs. 2Q'17

Six Months Ended

YTD'18 vs. YTD'17

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2018

2018

2017

2017

2017

2018

2017

EARNINGS

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$3,737

$3,842

$3,916

$3,876

$3,637

$100

2.70%

$7,579

$7,224

$355

4.90%

Retailer share arrangements

(653)

(720)

(779)

(805)

(669)

16

-2.40%

(1373)

(1353)

(20)

1.50%

Net interest income, after retailer share arrangements

3,084

3,122

3,137

3,071

2,968

116

3.90%

6,206

5,871

335

5.70%

Provision for loan losses

1,280

1,362

1,354

1,310

1,326

(46)

-3.50%

2,642

2,632

10

0.40%

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

1,804

1,760

1,783

1,761

1,642

162

9.90%

3,564

3,239

325

10.00%

Other income

63

75

62

76

57

6

10.50%

138

150

(12)

-8.00%

Other expense

975

988

970

958

911

64

7.00%

1,963

1,819

144

7.90%

Earnings before provision for income taxes

892

847

875

879

788

104

13.20%

1,739

1,570

169

10.80%

Provision for income taxes

196

207

490

324

292

(96)

-32.90%

403

575

(172)

-29.90%

Net earnings

$696

$640

$385

$555

$496

$200

40.30%

$1,336

$995

$341

34.30%

Net earnings attributable to common stockholders

$696

$640

$385

$555

$496

$200

40.30%

$1,336

$995

$341

34.30%

Adjusted net earnings (1)

$696

$640

$545

$555

$496

$200

40.30%

$1,336

$995

$341

34.30%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

$0.93

$0.84

$0.49

$0.70

$0.62

$0.31

50.00%

$1.76

$1.23

$0.53

43.10%

Diluted EPS

$0.92

$0.83

$0.49

$0.70

$0.61

$0.31

50.80%

$1.75

$1.23

$0.52

42.30%

Adjusted diluted EPS(1)

$0.92

$0.83

$0.70

$0.70

$0.61

$0.31

50.80%

$1.75

$1.23

$0.52

42.30%

Dividend declared per share

$0.15

$0.15

$0.15

$0.15

$0.13

$0.02

15.40%

$0.30

$0.26

$0.04

15.40%

Common stock price

$33.38

$33.53

$38.61

$31.05

$29.82

$3.56

11.90%

$33.38

$29.82

$3.56

11.90%

Book value per share

$19.37

$18.88

$18.47

$18.40

$18.02

$1.35

7.50%

$19.37

$18.02

$1.35

7.50%

Tangible common equity per share(2)

$16.84

$16.55

$16.22

$16.15

$15.79

$1.05

6.60%

$16.84

$15.79

$1.05

6.60%

Beginning common shares outstanding

760.3

770.5

782.6

795.3

810.8

(50.5)

-6.20%

770.5

817.4

(46.9)

-5.70%

Issuance of common shares

-

-

-

-

-

-

- %

-

-

-

- %

Stock-based compensation

0.3

0.2

0.1

0.1

0.2

0.1

50.00%

0.5

0.2

0.3

150.00%

Shares repurchased

(14)

(10.4)

(12.2)

(12.8)

(15.7)

1.7

-10.80%

(24.4)

(22.3)

(2.1)

9.40%

Ending common shares outstanding

746.6

760.3

770.5

782.6

795.3

(48.7)

-6.10%

746.6

795.3

(48.7)

-6.10%

Weighted average common shares outstanding

752.2

763.7

778.7

787.3

804

(51.8)

-6.40%

757.9

808.5

(50.6)

-6.30%

Weighted average common shares outstanding (fully diluted)

758.3

770.3

784

790.9

807.4

(49.1)

-6.10%

764.3

812.2

(47.9)

-5.90%

(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

2Q'18 vs. 2Q'17

Six Months Ended

YTD'18 vs. YTD'17

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2018

2018

2017

2017

2017

2018

2017

PERFORMANCE METRICS

 

 

 

 

 

 

 

 

 

 

 

Return on assets(1)

2.90%

2.70%

1.60%

2.40%

2.20%

 

0.70%

2.80%

2.20%

 

0.60%

Return on equity(2)

19.40%

18.20%

10.50%

15.30%

13.80%

 

5.60%

18.80%

14.00%

 

4.80%

Return on tangible common equity(3)

22.10%

20.70%

12.00%

17.40%

15.70%

 

6.40%

21.50%

15.90%

 

5.60%

Adjusted return on assets(4)

2.90%

2.70%

2.30%

2.40%

2.20%

 

0.70%

2.80%

2.20%

 

0.60%

Adjusted return on equity(4)

19.40%

18.20%

14.90%

15.30%

13.80%

 

5.60%

18.80%

14.00%

 

4.80%

Adjusted return on tangible common equity(5)

22.10%

20.70%

17.00%

17.40%

15.70%

 

6.40%

21.50%

15.90%

 

5.60%

Net interest margin(6)

15.33%

16.05%

16.24%

16.74%

16.20%

 

-0.87%

15.69%

16.19%

 

-0.50%

Efficiency ratio(7)

31.00%

30.90%

30.30%

30.40%

30.10%

 

0.90%

30.90%

30.20%

 

0.70%

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

5.02%

5.07%

4.91%

4.99%

4.93%

 

0.09%

5.04%

4.95%

 

0.09%

Effective income tax rate

22.00%

24.40%

56.00%

36.90%

37.10%

 

-15.10%

23.20%

36.60%

 

-13.40%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

 

 

 

 

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

5.97%

6.14%

5.78%

4.95%

5.42%

 

0.55%

6.06%

5.37%

 

0.69%

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

4.17%

4.52%

4.67%

4.80%

4.25%

 

-0.08%

4.17%

4.25%

 

-0.08%

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

1.98%

2.28%

2.28%

2.22%

1.90%

 

0.08%

1.98%

1.90%

 

0.08%

Net charge-offs

$1,159

$1,198

$1,141

$950

$1,001

$158

15.80%

$2,357

$1,975

$382

19.30%

Loan receivables delinquent over 30 days(8)

$3,293

$3,521

$3,831

$3,694

$3,208

$85

2.60%

$3,293

$3,208

$85

2.60%

Loan receivables delinquent over 90 days(8)

$1,561

$1,776

$1,869

$1,707

$1,435

$126

8.80%

$1,561

$1,435

$126

8.80%

Allowance for loan losses (period-end)

$5,859

$5,738

$5,574

$5,361

$5,001

$858

17.20%

$5,859

$5,001

$858

17.20%

Allowance coverage ratio(9)

7.43%

7.37%

6.80%

6.97%

6.63%

 

0.80%

7.43%

6.63%

 

0.80%

BUSINESS METRICS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(10)

$34,268

$29,626

$36,565

$32,893

$33,476

$792

2.40%

$63,894

$62,356

$1,538

2.50%

Period-end loan receivables

$78,879

$77,853

$81,947

$76,928

$75,458

$3,421

4.50%

$78,879

$75,458

$3,421

4.50%

Credit cards

$75,753

$74,952

$79,026

$73,946

$72,492

$3,261

4.50%

$75,753

$72,492

$3,261

4.50%

Consumer installment loans

$1,708

$1,590

$1,578

$1,561

$1,514

$194

12.80%

$1,708

$1,514

$194

12.80%

Commercial credit products

$1,356

$1,275

$1,303

$1,384

$1,386

($30)

-2.20%

$1,356

$1,386

($30)

-2.20%

Other

$62

$36

$40

$37

$66

($4)

-6.10%

$62

$66

($4)

-6.10%

Average loan receivables, including held for sale

$77,853

$79,090

$78,369

$76,165

$74,090

$3,763

5.10%

$78,468

$74,111

$4,357

5.90%

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

69,767

68,891

74,541

69,008

69,277

490

0.70%

69,767

69,277

490

0.70%

Average active accounts (in thousands)(11)

69,344

71,323

71,348

69,331

68,635

709

1.00%

70,540

69,307

1,233

1.80%

LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$15,675

$13,044

$11,602

$13,915

$12,020

$3,655

30.40%

$15,675

$12,020

$3,655

30.40%

Total liquid assets

$21,491

$18,557

$15,087

$16,391

$15,274

$6,217

40.70%

$21,491

$15,274

$6,217

40.70%

Undrawn credit facilities

 

 

 

 

 

 

 

 

 

 

 

Undrawn credit facilities

$6,500

$6,000

$6,000

$5,650

$6,650

($150)

-2.30%

$6,500

$6,650

($150)

-2.30%

Total liquid assets and undrawn credit facilities

$27,991

$24,557

$21,087

$22,041

$21,924

$6,067

27.70%

$27,991

$21,924

$6,067

27.70%

Liquid assets % of total assets

21.68%

19.42%

15.75%

17.71%

16.76%

 

4.92%

21.68%

16.76%

 

4.92%

Liquid assets including undrawn credit facilities % of total assets

28.24%

25.70%

22.01%

23.82%

24.06%

 

4.18%

28.24%

24.06%

 

4.18%

(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

2Q'18 vs. 2Q'17

Six Months Ended

YTD'18 vs. YTD'17

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2018

2018

2017

2017

2017

2018

2017

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$4,081

$4,172

$4,233

$4,182

$3,927

$154

3.90%

$8,253

$7,804

$449

5.80%

Interest on investment securities

93

72

58

51

43

50

116.30%

165

79

86

108.90%

Total interest income

4,174

4,244

4,291

4,233

3,970

204

5.10%

8,418

7,883

535

6.80%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

273

249

233

219

202

71

35.10%

522

396

126

31.80%

Interest on borrowings of consolidated securitization entities

80

74

70

65

63

17

27.00%

154

128

26

20.30%

Interest on third-party debt

84

79

72

73

68

16

23.50%

163

135

28

20.70%

Total interest expense

437

402

375

357

333

104

31.20%

839

659

180

27.30%

Net interest income

3,737

3,842

3,916

3,876

3,637

100

2.70%

7,579

7,224

355

4.90%

Retailer share arrangements

(653)

(720)

(779)

(805)

(669)

16

-2.40%

(1373)

(1353)

(20)

1.50%

Net interest income, after retailer share arrangements

3,084

3,122

3,137

3,071

2,968

116

3.90%

6,206

5,871

335

5.70%

Provision for loan losses

1,280

1,362

1,354

1,310

1,326

(46)

-3.50%

2,642

2,632

10

0.40%

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

1,804

1,760

1,783

1,761

1,642

162

9.90%

3,564

3,239

325

10.00%

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interchange revenue

177

158

179

164

165

12

7.30%

335

310

25

8.10%

Debt cancellation fees

66

66

69

67

68

(2)

-2.90%

132

136

(4)

-2.90%

Loyalty programs

(192)

(155)

(193)

(168)

(206)

14

-6.80%

(347)

(343)

(4)

1.20%

Other

12

6

7

13

30

(18)

-60.00%

18

47

(29)

-61.70%

Total other income

63

75

62

76

57

6

10.50%

138

150

(12)

-8.00%

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Employee costs(1)

351

358

330

333

318

33

10.40%

709

641

68

10.60%

Professional fees

177

166

159

161

158

19

12.00%

343

309

34

11.00%

Marketing and business development

110

121

156

124

124

(14)

-11.30%

231

218

13

6.00%

Information processing

99

104

99

96

88

11

12.50%

203

178

25

14.00%

Other(1)

238

239

226

244

223

15

6.70%

477

473

4

0.80%

Total other expense

975

988

970

958

911

64

7.00%

1,963

1,819

144

7.90%

Earnings before provision for income taxes

892

847

875

879

788

104

13.20%

1,739

1,570

169

10.80%

Provision for income taxes

196

207

490

324

292

(96)

-32.90%

403

575

(172)

-29.90%

Net earnings attributable to common stockholders

$696

$640

$385

$555

$496

$200

40.30%

$1,336

$995

$341

34.30%

(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

Jun 30, 2018 vs. Jun 30, 2017

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2018

2018

2017

2017

2017

Assets

 

 

 

 

 

 

 

Cash and equivalents

$15,675

$13,044

$11,602

$13,915

$12,020

$3,655

30.40%

Debt securities

6,779

6,259

4,473

3,302

3,982

2,797

70.20%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

50,884

52,469

55,526

53,997

52,550

(1666)

-3.20%

Restricted loans of consolidated securitization entities

27,995

25,384

26,421

22,931

22,908

5,087

22.20%

Total loan receivables

78,879

77,853

81,947

76,928

75,458

3,421

4.50%

Less: Allowance for loan losses

(5859)

(5738)

(5574)

(5361)

(5001)

(858)

17.20%

Loan receivables, net

73,020

72,115

76,373

71,567

70,457

2,563

3.60%

Goodwill

1,024

991

991

991

991

33

3.30%

Intangible assets, net

863

780

749

772

787

76

9.70%

Other assets

1,761

2,370

1,620

2,001

2,903

(1142)

-39.30%

Total assets

$99,122

$95,559

$95,808

$92,548

$91,140

$7,982

8.80%

Liabilities and Equity

 

 

-

-

-

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$58,734

$56,285

$56,276

$54,232

$52,659

$6,075

11.50%

Non-interest-bearing deposit accounts

277

285

212

222

226

51

22.60%

Total deposits

59,011

56,570

56,488

54,454

52,885

6,126

11.60%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

12,170

12,214

12,497

11,891

12,204

(34)

-0.30%

Senior unsecured notes

9,551

8,801

8,302

8,008

8,505

1,046

12.30%

Total borrowings

21,721

21,015

20,799

19,899

20,709

1,012

4.90%

Accrued expenses and other liabilities

3,932

3,618

4,287

3,793

3,214

718

22.30%

Total liabilities

84,664

81,203

81,574

78,146

76,808

7,856

10.20%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

- %

Additional paid-in capital

9,486

9,470

9,445

9,429

9,415

71

0.80%

Retained earnings

7,906

7,334

6,809

6,543

6,109

1,797

29.40%

Accumulated other comprehensive income:

(93)

(86)

(64)

(40)

(49)

(44)

89.80%

Treasury Stock

(2842)

(2363)

(1957)

(1531)

(1144)

(1698)

148.40%

Total equity

14,458

14,356

14,234

14,402

14,332

126

0.90%

Total liabilities and equity

$99,122

$95,559

$95,808

$92,548

$91,140

$7,982

8.80%

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Quarter Ended

 

30-Jun-18

31-Mar-18

31-Dec-17

30-Sep-17

30-Jun-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

$13,097

$59

1.81%

$12,434

$47

1.53%

$13,591

$43

1.26%

$11,895

$37

1.23%

$10,758

$28

1.04%

Securities available for sale

6,803

34

2.00%

5,584

25

1.82%

3,725

15

1.60%

3,792

14

1.46%

5,195

15

1.16%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

74,809

4,010

21.50%

76,181

4,099

21.82%

75,389

4,161

21.90%

73,172

4,111

22.29%

71,206

3,858

21.73%

Consumer installment loans

1,648

37

9.01%

1,572

36

9.29%

1,568

36

9.11%

1,543

35

9.00%

1,461

34

9.33%

Commercial credit products

1,346

34

10.13%

1,286

36

11.35%

1,375

35

10.10%

1,392

36

10.26%

1,378

34

9.90%

Other

50

-

- %

51

1

NM

37

1

NM

58

-

- %

45

1

NM

Total loan receivables, including held for sale

77,853

4,081

21.03%

79,090

4,172

21.39%

78,369

4,233

21.43%

76,165

4,182

21.78%

74,090

3,927

21.26%

Total interest-earning assets

97,753

4,174

17.13%

97,108

4,244

17.72%

95,685

4,291

17.79%

91,852

4,233

18.28%

90,043

3,970

17.68%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

1,161

 

 

1,197

 

 

1,037

 

 

877

 

 

829

 

 

Allowance for loan losses

(5,768)

 

 

(5,608)

 

 

(5,443)

 

 

(5,125)

 

 

(4,781)

 

 

Other assets

3,068

 

 

3,010

 

 

3,219

 

 

3,517

 

 

3,303

 

 

Total non-interest-earning assets

(1,539)

 

 

(1,401)

 

 

(1,187)

 

 

(731)

 

 

(649)

 

 

Total assets

$96,214

 

 

$95,707

 

 

$94,498

 

 

$91,121

 

 

$89,394

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$57,303

$273

1.91%

$56,356

$249

1.79%

$55,690

$233

1.66%

$53,294

$219

1.63%

$51,836

$202

1.56%

Borrowings of consolidated securitization entities

11,821

80

2.71%

12,410

74

2.42%

12,425

70

2.24%

11,759

65

2.19%

12,213

63

2.07%

Senior unsecured notes

9,114

84

3.70%

8,795

79

3.64%

7,940

72

3.60%

8,251

73

3.51%

7,933

68

3.44%

Total interest-bearing liabilities

78,238

437

2.24%

77,561

402

2.10%

76,055

375

1.96%

73,304

357

1.93%

71,982

333

1.86%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

270

 

 

300

 

 

218

 

 

232

 

 

218

 

 

Other liabilities

3,299

 

 

3,570

 

 

3,716

 

 

3,154

 

 

2,752

 

 

Total non-interest-bearing liabilities

3,569

 

 

3,870

 

 

3,934

 

 

3,386

 

 

2,970

 

 

Total liabilities

81,807

 

 

81,431

 

 

79,989

 

 

76,690

 

 

74,952

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,407

 

 

14,276

 

 

14,509

 

 

14,431

 

 

14,442

 

 

Total liabilities and equity

$96,214

 

 

$95,707

 

 

$94,498

 

 

$91,121

 

 

$89,394

 

 

Net interest income

 

$3,737

 

 

$3,842

 

 

$3,916

 

 

$3,876

 

 

$3,637

 

Interest rate spread (1)

 

 

14.89%

 

 

15.62%

 

 

15.83%

 

 

16.35%

 

 

15.82%

Net interest margin (2)

 

 

15.33%

 

 

16.05%

 

 

16.24%

 

 

16.74%

 

 

16.20%

(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

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Six Months Ended

Six Months Ended

30-Jun-18

30-Jun-17

 

 

Interest

Average

 

Interest

Average

 

Average

Income/

Yield/

Average

Income/

Yield/

 

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-earning cash and equivalents

$12,768

$106

1.67%

$10,656

$49

0.93%

Securities available for sale

6,197

59

1.92%

5,204

30

1.16%

Loan receivables:

 

 

 

 

 

 

Credit cards, including held for sale

75,492

8,109

21.66%

71,285

7,669

21.69%

Consumer installment loans

1,610

73

9.14%

1,425

66

9.34%

Commercial credit products

1,316

70

10.73%

1,348

68

10.17%

Other

50

1

4.03%

53

1

3.80%

Total loan receivables, including held for sale

78,468

8,253

21.21%

74,111

7,804

21.23%

Total interest-earning assets

97,433

8,418

17.42%

89,971

7,883

17.67%

Non-interest-earning assets:

 

 

 

 

 

 

Cash and due from banks

1,179

 

 

816

 

 

Allowance for loan losses

(5,689)

 

 

(4,595)

 

 

Other assets

3,039

 

 

3,239

 

 

Total non-interest-earning assets

(1,471)

 

 

(540)

 

 

Total assets

$95,962

 

 

$89,431

 

 

Liabilities

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Interest-bearing deposit accounts

$56,832

$522

1.85%

$51,833

$396

1.54%

Borrowings of consolidated securitization entities

12,114

154

2.56%

12,267

128

2.10%

 

 

 

- %

0

0

0.00%

Senior unsecured notes

8,955

163

3.67%

7,847

135

3.47%

Total interest-bearing liabilities

77,901

839

2.17%

71,947

659

1.85%

Non-interest-bearing liabilities

 

 

 

 

 

 

Non-interest-bearing deposit accounts

285

 

 

229

 

 

Other liabilities

3,434

 

 

2,872

 

 

Total non-interest-bearing liabilities

3,719

 

 

3,101

 

 

Total liabilities

81,620

 

 

75,048

 

 

Equity

 

 

 

 

 

 

Total equity

14,342

 

 

14,383

 

 

Total liabilities and equity

$95,962

 

 

$89,431

 

 

Net interest income

 

$7,579

 

 

$7,224

 

Interest rate spread (1)

 

 

15.25%

 

 

15.82%

Net interest margin (2)

 

 

15.69%

 

 

16.19%

(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

Jun 30, 2018 vs. Jun 30, 2017

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2018

2018

2017

2017

2017

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$14,458

$14,356

$14,234

$14,402

$14,332

$126

0.90%

Total common equity as a % of total assets

14.59%

15.02%

14.86%

15.56%

15.73%

 

-1.14%

Tangible assets

$97,235

$93,788

$94,068

$90,785

$89,362

$7,873

8.80%

Tangible common equity(1)

$12,571

$12,585

$12,494

$12,639

$12,554

$17

0.10%

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

12.93%

13.42%

13.28%

13.92%

14.05%

 

-1.12%

Tangible common equity per share(1)

$16.84

$16.55

$16.22

$16.15

$15.79

$1.05

6.60%

REGULATORY CAPITAL RATIOS (2)

 

 

 

 

 

 

 

Basel III Fully Phased-in (3)

Basel III Transition

Total risk-based capital ratio(4)

18.00%

18.10%

17.30%

18.70%

18.70%

 

 

Tier 1 risk-based capital ratio(5)

16.60%

16.80%

16.00%

17.30%

17.40%

 

 

Tier 1 leverage ratio(6)

13.60%

13.70%

13.80%

14.60%

14.80%

 

 

Common equity Tier 1 capital ratio

16.60%

16.80%

16.00%

17.30%

17.40%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio

16.60%

16.80%

15.80%

17.20%

17.20%

 

 

(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 June 30, 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.

SYNCHRONY FINANCIAL

PLATFORM RESULTS

(unaudited, $ in millions)

 

Quarter Ended

2Q'18 vs. 2Q'17

Six Months Ended

YTD'18 vs. YTD'17

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2018

2018

2017

2017

2017

2018

2017

RETAIL CARD

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$27,340

$23,382

$29,839

$26,347

$27,101

$239

0.90%

$50,722

$50,053

$669

1.30%

Period-end loan receivables

$52,918

$52,531

$56,230

$52,119

$51,437

$1,481

2.90%

$52,918

$51,437

$1,481

2.90%

Average loan receivables, including held for sale

$52,427

$53,673

$53,256

$51,817

$50,533

$1,894

3.70%

$53,047

$50,588

$2,459

4.90%

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

54,092

55,927

56,113

54,471

54,058

34

0.10%

55,211

54,729

482

0.90%

Interest and fees on loans(2)

$2,993

$3,096

$3,133

$3,102

$2,900

$93

3.20%

$6,089

$5,788

$301

5.20%

Other income(2)

$48

$65

$49

$61

$25

$23

92.00%

$113

$102

$11

10.80%

Retailer share arrangements(2)

($644)

($714)

($771)

($795)

($657)

$13

-2.00%

($1,358)

($1,338)

($20)

1.50%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$4,288

$3,823

$4,366

$4,178

$3,930

$358

9.10%

$8,111

$7,616

$495

6.50%

Period-end loan receivables

$16,875

$16,513

$16,857

$16,153

$15,595

$1,280

8.20%

$16,875

$15,595

$1,280

8.20%

Average loan receivables

$16,562

$16,629

$16,386

$15,848

$15,338

$1,224

8.00%

$16,595

$15,381

$1,214

7.90%

Average active accounts (in thousands)(3)

9,433

9,545

9,421

9,183

9,031

402

4.50%

9,492

9,061

431

4.80%

Interest and fees on loans

$566

$562

$574

$559

$533

$33

6.20%

$1,128

$1,048

$80

7.60%

Other income

$4

$2

$2

$2

$6

($2)

-33.30%

$6

$10

($4)

-40.00%

Retailer share arrangements

($7)

($4)

($5)

($9)

($9)

$2

-22.20%

($11)

($10)

($1)

10.00%

CARECREDIT

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$2,640

$2,421

$2,360

$2,368

$2,445

$195

8.00%

$5,061

$4,687

$374

8.00%

Period-end loan receivables

$9,086

$8,809

$8,860

$8,656

$8,426

$660

7.80%

$9,086

$8,426

$660

7.80%

Average loan receivables

$8,864

$8,788

$8,727

$8,500

$8,219

$645

7.80%

$8,826

$8,142

$684

8.40%

Average active accounts (in thousands)(3)

5,819

5,851

5,814

5,677

5,546

273

4.90%

5,837

5,517

320

5.80%

Interest and fees on loans

$522

$514

$526

$521

$494

$28

5.70%

$1,036

$968

$68

7.00%

Other income

$11

$8

$11

$13

$26

($15)

-57.70%

$19

$38

($19)

-50.00%

Retailer share arrangements

($2)

($2)

($3)

($1)

($3)

$1

-33.30%

($4)

($5)

$1

-20.00%

TOTAL SYF

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$34,268

$29,626

$36,565

$32,893

$33,476

$792

2.40%

$63,894

$62,356

$1,538

2.50%

Period-end loan receivables

$78,879

$77,853

$81,947

$76,928

$75,458

$3,421

4.50%

$78,879

$75,458

$3,421

4.50%

Average loan receivables, including held for sale

$77,853

$79,090

$78,369

$76,165

$74,090

$3,763

5.10%

$78,468

$74,111

$4,357

5.90%

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

69,344

71,323

71,348

69,331

68,635

709

1.00%

70,540

69,307

1,233

1.80%

Interest and fees on loans(2)

$4,081

$4,172

$4,233

$4,182

$3,927

$154

3.90%

$8,253

$7,804

$449

5.80%

Other income(2)

$63

$75

$62

$76

$57

$6

10.50%

$138

$150

($12)

-8.00%

Retailer share arrangements(2)

($653)

($720)

($779)

($805)

($669)

$16

-2.40%

($1,373)

($1,353)

($20)

1.50%

(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

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2018

2018

2017

2017

2017

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$14,458

$14,356

$14,234

$14,402

$14,332

Less: Goodwill

(1,024)

(991)

(991)

(991)

(991)

Less: Intangible assets, net

(863)

(780)

(749)

(772)

(787)

Tangible common equity

$12,571

$12,585

$12,494

$12,639

$12,554

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

287

278

254

344

$337

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

$12,858

$12,863

$12,748

$12,983

$12,891

Adjustment related to capital components during transition

 

 

142

142

146

Basel III - Common equity Tier 1 (transition)

 

 

$12,890

$13,125

$13,037

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$12,858

$12,863

$12,890

$13,125

$13,037

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

1,027

1,015

1,064

1,001

985

Risk-based capital

$13,885

$13,878

$13,954

$14,126

$14,022

ASSET MEASURES

 

 

 

 

 

Total average assets

$96,214

$95,707

$94,498

$91,121

$89,394

Adjustments for:

 

 

 

 

 

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

(1,670)

(1,560)

(1,392)

(1,304)

(1,325)

Total assets for leverage purposes

$94,544

$94,147

$93,106

$89,817

$88,069

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

$77,322

$76,509

$80,526

$75,614

$74,748

Risk-weighted assets - Basel III (transition)

 

 

$80,669

$75,729

$74,792

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$19.37

$18.88

$18.47

$18.40

$18.02

Less: Goodwill

(1.37)

(1.30)

(1.29)

(1.27)

(1.25)

Less: Intangible assets, net

(1.16)

(1.03)

(0.96)

(0.98)

(0.98)

Tangible common equity per share

$16.84

$16.55

$16.22

$16.15

$15.79

ADJUSTED NET EARNINGS

 

 

 

 

 

GAAP net earnings

$696

$640

$385

$555

$496

Adjustment for tax law change(2)

-

-

160

-

-

Adjusted net earnings

$696

$640

$545

$555

$496

ADJUSTED DILUTED EPS

 

 

 

 

 

GAAP diluted EPS

$0.92

$0.83

$0.49

$0.70

$0.61

Adjustment for tax law change(2)

-

-

0.21

-

-

Adjusted diluted EPS

$0.92

$0.83

$0.70

$0.70

$0.61

(1) Regulatory measures at June 30, 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