Press Release

October 19, 2018, 5:52 PM EDT

Synchrony Financial Reports Third Quarter Net Earnings of $671 Million or $0.91 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
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.

Conference Call and Webcast Information

On Friday, October 19, 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 32018#, and can be accessed beginning approximately two hours after the event through November 2, 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

3Q'18 vs. 3Q'17

Nine Months Ended

YTD'18 vs. YTD'17

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2018

2018

2018

2017

2017

2018

2017

EARNINGS

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$4,206

$3,737

$3,842

$3,916

$3,876

$330

8.50%

$11,785

$11,100

$685

6.20%

Retailer share arrangements

(871)

(653)

(720)

(779)

(805)

(66)

8.20%

(2244)

(2158)

(86)

4.00%

Net interest income, after retailer share arrangements

3,335

3,084

3,122

3,137

3,071

264

8.60%

9,541

8,942

599

6.70%

Provision for loan losses

1,451

1,280

1,362

1,354

1,310

141

10.80%

4,093

3,942

151

3.80%

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

1,884

1,804

1,760

1,783

1,761

123

7.00%

5,448

5,000

448

9.00%

Other income

63

63

75

62

76

(13)

-17.10%

201

226

(25)

-11.10%

Other expense

1,054

975

988

970

958

96

10.00%

3,017

2,777

240

8.60%

Earnings before provision for income taxes

893

892

847

875

879

14

1.60%

2,632

2,449

183

7.50%

Provision for income taxes

222

196

207

490

324

(102)

-31.50%

625

899

-274

-30.50%

Net earnings

$671

$696

$640

$385

$555

$116

20.90%

$2,007

$1,550

$457

29.50%

Net earnings attributable to common stockholders

$671

$696

$640

$385

$555

$116

20.90%

$2,007

$1,550

$457

29.50%

Adjusted net earnings (1)

$671

$696

$640

$545

$555

$116

20.90%

$2,007

$1,550

$457

29.50%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

$0.91

$0.93

$0.84

$0.49

$0.70

$0.21

30.00%

$2.68

$1.93

$0.75

38.90%

Diluted EPS

$0.91

$0.92

$0.83

$0.49

$0.70

$0.21

30.00%

$2.66

$1.93

$0.73

37.80%

Adjusted diluted EPS(1)

$0.91

$0.92

$0.83

$0.70

$0.70

$0.21

30.00%

$2.66

$1.93

$0.73

37.80%

Dividend declared per share

$0.21

$0.15

$0.15

$0.15

$0.15

$0.06

40.00%

$0.51

$0.41

$0.10

24.40%

Common stock price

$31.08

$33.38

$33.53

$38.61

$31.05

$0.03

0.10%

$31.08

$31.05

$0.03

0.10%

Book value per share

$19.47

$19.37

$18.88

$18.47

$18.40

$1.07

5.80%

$19.47

$18.40

$1.07

5.80%

Tangible common equity per share(2)

$16.51

$16.84

$16.55

$16.22

$16.15

$0.36

2.20%

$16.51

$16.15

$0.36

2.20%

Beginning common shares outstanding

746.6

760.3

770.5

782.6

795.3

(48.7)

-6.10%

770.5

817.4

(46.9)

-5.70%

Issuance of common shares

-

-

-

-

-

-

- %

-

-

-

- %

Stock-based compensation

2.4

0.3

0.2

0.1

0.1

2.3

NM

2.9

0.3

2.6

NM

Shares repurchased

(30.3)

(14.0)

(10.4)

(12.2)

(12.8)

(17.5)

136.70%

(54.7)

(35.1)

(19.6)

55.80%

Ending common shares outstanding

718.7

746.6

760.3

770.5

782.6

(63.9)

-8.20%

718.7

782.6

(63.9)

-8.20%

Weighted average common shares outstanding

734.9

752.2

763.7

778.7

787.3

(52.4)

-6.70%

750.2

801.3

(51.1)

-6.40%

Weighted average common shares outstanding (fully diluted)

738.8

758.3

770.3

784

790.9

(52.1)

-6.60%

755.7

805

(49.3)

-6.10%

(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

3Q'18 vs. 3Q'17

Nine Months Ended

YTD'18 vs. YTD'17

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2018

2018

2018

2017

2017

2018

2017

PERFORMANCE METRICS

 

 

 

 

 

 

 

 

 

 

 

Return on assets(1)

2.70%

2.90%

2.70%

1.60%

2.40%

 

0.30%

2.80%

2.30%

 

0.50%

Return on equity(2)

18.50%

19.40%

18.20%

10.50%

15.30%

 

3.20%

18.70%

14.40%

 

4.30%

Return on tangible common equity(3)

21.50%

22.10%

20.70%

12.00%

17.40%

 

4.10%

21.50%

16.40%

 

5.10%

Adjusted return on assets(4)

2.70%

2.90%

2.70%

2.30%

2.40%

 

0.30%

2.80%

2.30%

 

0.50%

Adjusted return on equity(4)

18.50%

19.40%

18.20%

14.90%

15.30%

 

3.20%

18.70%

14.40%

 

4.30%

Adjusted return on tangible common equity(5)

21.50%

22.10%

20.70%

17.00%

17.40%

 

4.10%

21.50%

16.40%

 

5.10%

Net interest margin(6)

16.41%

15.33%

16.05%

16.24%

16.74%

 

-0.33%

15.94%

16.38%

 

-0.44%

Efficiency ratio(7)

31.00%

31.00%

30.90%

30.30%

30.40%

 

0.60%

31.00%

30.30%

 

0.70%

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

4.82%

5.02%

5.07%

4.91%

4.99%

 

-0.17%

4.96%

4.96%

 

- %

Effective income tax rate

24.90%

22.00%

24.40%

56.00%

36.90%

 

-12.00%

23.70%

36.70%

 

-13.00%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

 

 

 

 

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

4.97%

5.97%

6.14%

5.78%

4.95%

 

0.02%

5.67%

5.23%

 

0.44%

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

4.59%

4.17%

4.52%

4.67%

4.80%

 

-0.21%

4.59%

4.80%

 

-0.21%

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

2.09%

1.98%

2.28%

2.28%

2.22%

 

-0.13%

2.09%

2.22%

 

-0.13%

Net charge-offs

$1,087

$1,159

$1,198

$1,141

$950

$137

14.40%

$3,444

$2,925

$519

17.70%

Loan receivables delinquent over 30 days(8)

$4,021

$3,293

$3,521

$3,831

$3,694

$327

8.90%

$4,021

$3,694

$327

8.90%

Loan receivables delinquent over 90 days(8)

$1,833

$1,561

$1,776

$1,869

$1,707

$126

7.40%

$1,833

$1,707

$126

7.40%

Allowance for loan losses (period-end)

$6,223

$5,859

$5,738

$5,574

$5,361

$862

16.10%

$6,223

$5,361

$862

16.10%

Allowance coverage ratio(9)

7.11%

7.43%

7.37%

6.80%

6.97%

 

0.14%

7.11%

6.97%

 

0.14%

BUSINESS METRICS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(10)

$36,443

$34,268

$29,626

$36,565

$32,893

$3,550

10.80%

$100,337

$95,249

$5,088

5.30%

Period-end loan receivables

$87,521

$78,879

$77,853

$81,947

$76,928

$10,593

13.80%

$87,521

$76,928

$10,593

13.80%

Credit cards

$84,319

$75,753

$74,952

$79,026

$73,946

$10,373

14.00%

$84,319

$73,946

$10,373

14.00%

Consumer installment loans

$1,789

$1,708

$1,590

$1,578

$1,561

$228

14.60%

$1,789

$1,561

$228

14.60%

Commercial credit products

$1,353

$1,356

$1,275

$1,303

$1,384

($31)

-2.20%

$1,353

$1,384

($31)

-2.20%

Other

$60

$62

$36

$40

$37

$23

62.20%

$60

$37

$23

62.20%

Average loan receivables, including held for sale

$86,783

$77,853

$79,090

$78,369

$76,165

$10,618

13.90%

$81,270

$74,803

$6,467

8.60%

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

75,457

69,767

68,891

74,541

69,008

6,449

9.30%

75,457

69,008

6,449

9.30%

Average active accounts (in thousands)(11)

75,482

69,344

71,323

71,348

69,331

6,151

8.90%

72,594

69,319

3,275

4.70%

LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$12,068

$15,675

$13,044

$11,602

$13,915

($1,847)

-13.30%

$12,068

$13,915

($1,847)

-13.30%

Total liquid assets

$18,214

$21,491

$18,557

$15,087

$16,391

$1,823

11.10%

$18,214

$16,391

$1,823

11.10%

Undrawn credit facilities

 

 

 

 

 

 

 

 

 

 

 

Undrawn credit facilities

$5,125

$6,500

$6,000

$6,000

$5,650

($525)

-9.30%

$5,125

$5,650

($525)

-9.30%

Total liquid assets and undrawn credit facilities

$23,339

$27,991

$24,557

$21,087

$22,041

$1,298

5.90%

$23,339

$22,041

$1,298

5.90%

Liquid assets % of total assets

17.42%

21.68%

19.42%

15.75%

17.71%

 

-0.29%

17.42%

17.71%

 

-0.29%

Liquid assets including undrawn credit facilities % of total assets

22.32%

28.24%

25.70%

22.01%

23.82%

 

-1.50%

22.32%

23.82%

 

-1.50%

(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

3Q'18 vs. 3Q'17

Nine Months Ended

YTD'18 vs. YTD'17

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2018

2018

2018

2017

2017

2018

2017

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$4,617

$4,081

$4,172

$4,233

$4,182

$435

10.40%

$12,870

$11,986

$884

7.40%

Interest on investment securities

77

93

72

58

51

26

51.00%

242

130

112

86.20%

Total interest income

4,694

4,174

4,244

4,291

4,233

461

10.90%

13,112

12,116

996

8.20%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

314

273

249

233

219

95

43.40%

836

615

221

35.90%

Interest on borrowings of consolidated securitization entities

86

80

74

70

65

21

32.30%

240

193

47

24.40%

Interest on third-party debt

88

84

79

72

73

15

20.50%

251

208

43

20.70%

Total interest expense

488

437

402

375

357

131

36.70%

1,327

1,016

311

30.60%

Net interest income

4,206

3,737

3,842

3,916

3,876

330

8.50%

11,785

11,100

685

6.20%

Retailer share arrangements

(871)

(653)

(720)

(779)

(805)

(66)

8.20%

(2244)

(2158)

(86)

4.00%

Net interest income, after retailer share arrangements

3,335

3,084

3,122

3,137

3,071

264

8.60%

9,541

8,942

599

6.70%

Provision for loan losses

1,451

1,280

1,362

1,354

1,310

141

10.80%

4,093

3,942

151

3.80%

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

1,884

1,804

1,760

1,783

1,761

123

7.00%

5,448

5,000

448

9.00%

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interchange revenue

182

177

158

179

164

18

11.00%

517

474

43

9.10%

Debt cancellation fees

65

66

66

69

67

(2)

-3.00%

197

203

(6)

-3.00%

Loyalty programs

(196)

(192)

(155)

(193)

(168)

(28)

16.70%

(543)

(511)

(32)

6.30%

Other

12

12

6

7

13

(1)

-7.70%

30

60

(30)

-50.00%

Total other income

63

63

75

62

76

(13)

-17.10%

201

226

(25)

-11.10%

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Employee costs(1)

365

351

358

330

333

32

9.60%

1,074

974

100

10.30%

Professional fees

232

177

166

159

161

71

44.10%

575

470

105

22.30%

Marketing and business development

131

110

121

156

124

7

5.60%

362

342

20

5.80%

Information processing

105

99

104

99

96

9

9.40%

308

274

34

12.40%

Other(1)

221

238

239

226

244

(23)

-9.40%

698

717

(19)

-2.60%

Total other expense

1,054

975

988

970

958

96

10.00%

3,017

2,777

240

8.60%

Earnings before provision for income taxes

893

892

847

875

879

14

1.60%

2,632

2,449

183

7.50%

Provision for income taxes

222

196

207

490

324

(102)

-31.50%

625

899

(274)

-30.50%

Net earnings attributable to common shareholders

$671

$696

$640

$385

$555

$116

20.90%

$2,007

$1,550

$457

29.50%

(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

Sep 30, 2018 vs. Sep 30, 2017

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2018

2018

2018

2017

2017

Assets

 

 

 

 

 

 

 

Cash and equivalents

$12,068

$15,675

$13,044

$11,602

$13,915

($1,847)

-13.30%

Debt securities

7,281

6,779

6,259

4,473

3,302

3,979

120.50%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

59,868

50,884

52,469

55,526

53,997

5,871

10.90%

Restricted loans of consolidated securitization entities

27,653

27,995

25,384

26,421

22,931

4,722

20.60%

Total loan receivables

87,521

78,879

77,853

81,947

76,928

10,593

13.80%

Less: Allowance for loan losses

(6223)

(5859)

(5738)

(5574)

(5361)

(862)

16.10%

Loan receivables, net

81,298

73,020

72,115

76,373

71,567

9,731

13.60%

Goodwill

1,024

1,024

991

991

991

33

3.30%

Intangible assets, net

1,105

863

780

749

772

333

43.10%

Other assets

1,769

1,761

2,370

1,620

2,001

(232)

-11.60%

Total assets

$104,545

$99,122

$95,559

$95,808

$92,548

$11,997

13.00%

Liabilities and Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$62,030

$58,734

$56,285

$56,276

$54,232

$7,798

14.40%

Non-interest-bearing deposit accounts

287

277

285

212

222

65

29.30%

Total deposits

62,317

59,011

56,570

56,488

54,454

7,863

14.40%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

14,187

12,170

12,214

12,497

11,891

2,296

19.30%

Senior unsecured notes

9,554

9,551

8,801

8,302

8,008

1,546

19.30%

Total borrowings

23,741

21,721

21,015

20,799

19,899

3,842

19.30%

Accrued expenses and other liabilities

4,491

3,932

3,618

4,287

3,793

698

18.40%

Total liabilities

90,549

84,664

81,203

81,574

78,146

12,403

15.90%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

- %

Additional paid-in capital

9,470

9,486

9,470

9,445

9,429

41

0.40%

Retained earnings

8,355

7,906

7,334

6,809

6,543

1,812

27.70%

Accumulated other comprehensive income:

(99)

(93)

(86)

(64)

(40)

(59)

147.50%

Treasury Stock

(3731)

(2842)

(2363)

(1957)

(1531)

(2200)

143.70%

Total equity

13,996

14,458

14,356

14,234

14,402

-406

-2.80%

Total liabilities and equity

$104,545

$99,122

$95,559

$95,808

$92,548

$11,997

13.00%

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Quarter Ended

 

30-Sep-18

30-Jun-18

31-Mar-18

31-Dec-17

30-Sep-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

$7,901

$39

1.96%

$13,097

$59

1.81%

$12,434

$47

1.53%

$13,591

$43

1.26%

$11,895

$37

1.23%

Securities available for sale

7,022

38

2.15%

6,803

34

2.00%

5,584

25

1.82%

3,725

15

1.60%

3,792

14

1.46%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

83,609

4,538

21.53%

74,809

4,010

21.50%

76,181

4,099

21.82%

75,389

4,161

21.90%

73,172

4,111

22.29%

Consumer installment loans

1,753

41

9.28%

1,648

37

9.01%

1,572

36

9.29%

1,568

36

9.11%

1,543

35

9.00%

Commercial credit products

1,355

37

10.83%

1,346

34

10.13%

1,286

36

11.35%

1,375

35

10.10%

1,392

36

10.26%

Other

66

1

NM

50

-

- %

51

1

NM

37

1

NM

58

-

- %

Total loan receivables, including held for sale

86,783

4,617

21.11%

77,853

4,081

21.03%

79,090

4,172

21.39%

78,369

4,233

21.43%

76,165

4,182

21.78%

Total interest-earning assets

101,706

4,694

18.31%

97,753

4,174

17.13%

97,108

4,244

17.72%

95,685

4,291

17.79%

91,852

4,233

18.28%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

1,217

 

 

1,161

 

 

1,197

 

 

1,037

 

 

877

 

 

Allowance for loan losses

-5,956

 

 

-5,768

 

 

-5,608

 

 

-5,443

 

 

-5,125

 

 

Other assets

3,482

 

 

3,068

 

 

3,010

 

 

3,219

 

 

3,517

 

 

Total non-interest-earning assets

-1,257

 

 

-1,539

 

 

-1,401

 

 

-1,187

 

 

-731

 

 

Total assets

$100,449

 

 

$96,214

 

 

$95,707

 

 

$94,498

 

 

$91,121

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$60,123

$314

2.07%

$57,303

$273

1.91%

$56,356

$249

1.79%

$55,690

$233

1.66%

$53,294

$219

1.63%

Borrowings of consolidated securitization entities

12,306

86

2.77%

11,821

80

2.71%

12,410

74

2.42%

12,425

70

2.24%

11,759

65

2.19%

 

-

 

- %

 

 

- %

 

 

 

 

 

 

 

 

 

Senior unsecured notes

9,552

88

3.66%

9,114

84

3.70%

8,795

79

3.64%

7,940

72

3.60%

8,251

73

3.51%

Total interest-bearing liabilities

81,981

488

2.36%

78,238

437

2.24%

77,561

402

2.10%

76,055

375

1.96%

73,304

357

1.93%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

275

 

 

270

 

 

300

 

 

218

 

 

232

 

 

Other liabilities

3,772

 

 

3,299

 

 

3,570

 

 

3,716

 

 

3,154

 

 

Total non-interest-bearing liabilities

4,047

 

 

3,569

 

 

3,870

 

 

3,934

 

 

3,386

 

 

Total liabilities

86,028

 

 

81,807

 

 

81,431

 

 

79,989

 

 

76,690

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,421

 

 

14,407

 

 

14,276

 

 

14,509

 

 

14,431

 

 

Total liabilities and equity

$100,449

 

 

$96,214

 

 

$95,707

 

 

$94,498

 

 

$91,121

 

 

Net interest income

 

$4,206

 

 

$3,737

 

 

$3,842

 

 

$3,916

 

 

$3,876

 

Interest rate spread (1)

 

 

15.95%

 

 

14.89%

 

 

15.62%

 

 

15.83%

 

 

16.35%

Net interest margin (2)

 

 

16.41%

 

 

15.33%

 

 

16.05%

 

 

16.24%

 

 

16.74%

(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)

 

Nine Months Ended

Nine Months Ended

30-Sep-18

30-Sep-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

$11,128

$145

1.74%

$11,073

$86

1.04%

Securities available for sale

6,475

97

2.00%

4,732

44

1.24%

Loan receivables:

 

 

 

 

 

 

Credit cards, including held for sale

78,227

12,647

21.62%

71,920

11,780

21.90%

Consumer installment loans

1,658

114

9.19%

1,465

101

9.22%

Commercial credit products

1,329

107

10.76%

1,363

104

10.20%

Other

56

2

4.77%

55

1

2.43%

Total loan receivables, including held for sale

81,270

12,870

21.17%

74,803

11,986

21.42%

Total interest-earning assets

98,873

13,112

17.73%

90,608

12,116

17.88%

Non-interest-earning assets:

 

 

 

 

 

 

Cash and due from banks

1,192

 

 

836

 

 

Allowance for loan losses

-5,779

 

 

-4,774

 

 

Other assets

3,188

 

 

3,334

 

 

Total non-interest-earning assets

(1399)

 

 

(604)

 

 

Total assets

$97,474

 

 

$90,004

 

 

Liabilities

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Interest-bearing deposit accounts

$57,941

$836

1.93%

$52,325

$615

1.57%

Borrowings of consolidated securitization entities

12,178

240

2.63%

12,096

193

2.13%

Senior unsecured notes

9,156

251

3.67%

7,983

208

3.48%

Total interest-bearing liabilities

79,275

1,327

2.24%

72,404

1,016

1.88%

Non-interest-bearing liabilities

 

 

 

 

 

 

Non-interest-bearing deposit accounts

282

 

 

230

 

 

Other liabilities

3,548

 

 

2,971

 

 

Total non-interest-bearing liabilities

3,830

 

 

3,201

 

 

Total liabilities

83,105

 

 

75,605

 

 

Equity

 

 

 

 

 

 

Total equity

14,369

 

 

14,399

 

 

Total liabilities and equity

$97,474

 

 

$90,004

 

 

Net interest income

 

$11,785

 

 

$11,100

 

Interest rate spread (1)

 

 

15.49%

 

 

16.00%

Net interest margin (2)

 

 

15.94%

 

 

16.38%

(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

Sep 30, 2018 vs. Sep 30, 2017

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2018

2018

2018

2017

2017

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$13,996

$14,458

$14,356

$14,234

$14,402

($406)

-2.80%

Total common equity as a % of total assets

13.39%

14.59%

15.02%

14.86%

15.56%

 

-2.17%

Tangible assets

$102,416

$97,235

$93,788

$94,068

$90,785

$11,631

12.80%

Tangible common equity(1)

$11,867

$12,571

$12,585

$12,494

$12,639

($772)

-6.10%

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

11.59%

12.93%

13.42%

13.28%

13.92%

 

-2.33%

Tangible common equity per share(1)

$16.51

$16.84

$16.55

$16.22

$16.15

$0.36

2.20%

REGULATORY CAPITAL RATIOS (2)

 

 

 

 

 

 

 

 

Basel III Fully Phased-in (3)

Basel III Transition

Total risk-based capital ratio(4)

15.50%

18.00%

18.10%

17.30%

18.70%

 

 

Tier 1 risk-based capital ratio(5)

14.20%

16.60%

16.80%

16.00%

17.30%

 

 

Tier 1 leverage ratio(6)

12.30%

13.60%

13.70%

13.80%

14.60%

 

 

Common equity Tier 1 capital ratio

14.20%

16.60%

16.80%

16.00%

17.30%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio

14.20%

16.60%

16.80%

15.80%

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 September 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. 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

3Q'18 vs. 3Q'17

Nine Months Ended

YTD'18 vs. YTD'17

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2018

2018

2018

2017

2017

2018

2017

RETAIL CARD

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$29,264

$27,340

$23,382

$29,839

$26,347

$2,917

11.10%

$79,986

$76,400

$3,586

4.70%

Period-end loan receivables

$60,564

$52,918

$52,531

$56,230

$52,119

$8,445

16.20%

$60,564

$52,119

$8,445

16.20%

Average loan receivables, including held for sale

$60,389

$52,427

$53,673

$53,256

$51,817

$8,572

16.50%

$55,522

$51,002

$4,520

8.90%

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

59,846

54,092

55,927

56,113

54,471

5,375

9.90%

57,140

54,639

2,501

4.60%

Interest and fees on loans(2)

$3,465

$2,993

$3,096

$3,133

$3,102

$363

11.70%

$9,554

$8,890

$664

7.50%

Other income(2)

$51

$48

$65

$49

$61

($10)

-16.40%

$164

$163

$1

0.60%

Retailer share arrangements(2)

($851)

($644)

($714)

($771)

($795)

($56)

7.00%

($2,209)

($2,133)

($76)

3.60%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$4,606

$4,288

$3,823

$4,366

$4,178

$428

10.20%

$12,717

$11,794

$923

7.80%

Period-end loan receivables

$17,639

$16,875

$16,513

$16,857

$16,153

$1,486

9.20%

$17,639

$16,153

$1,486

9.20%

Average loan receivables

$17,234

$16,562

$16,629

$16,386

$15,848

$1,386

8.70%

$16,810

$15,538

$1,272

8.20%

Average active accounts (in thousands)(3)

9,675

9,433

9,545

9,421

9,183

492

5.40%

9,569

9,108

461

5.10%

Interest and fees on loans

$601

$566

$562

$574

$559

$42

7.50%

$1,729

$1,607

$122

7.60%

Other income

$4

$4

$2

$2

$2

$2

100.00%

$10

$12

($2)

-16.70%

Retailer share arrangements

($17)

($7)

($4)

($5)

($9)

($8)

88.90%

($28)

($19)

($9)

47.40%

CARECREDIT

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$2,573

$2,640

$2,421

$2,360

$2,368

$205

8.70%

$7,634

$7,055

$579

8.20%

Period-end loan receivables

$9,318

$9,086

$8,809

$8,860

$8,656

$662

7.60%

$9,318

$8,656

$662

7.60%

Average loan receivables

$9,160

$8,864

$8,788

$8,727

$8,500

$660

7.80%

$8,938

$8,263

$675

8.20%

Average active accounts (in thousands)(3)

5,961

5,819

5,851

5,814

5,677

284

5.00%

5,885

5,572

313

5.60%

Interest and fees on loans

$551

$522

$514

$526

$521

$30

5.80%

$1,587

$1,489

$98

6.60%

Other income

$8

$11

$8

$11

$13

($5)

-38.50%

$27

$51

($24)

-47.10%

Retailer share arrangements

($3)

($2)

($2)

($3)

($1)

($2)

NM

($7)

($6)

($1)

16.70%

TOTAL SYF

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$36,443

$34,268

$29,626

$36,565

$32,893

$3,550

10.80%

$100,337

$95,249

$5,088

5.30%

Period-end loan receivables

$87,521

$78,879

$77,853

$81,947

$76,928

$10,593

13.80%

$87,521

$76,928

$10,593

13.80%

Average loan receivables, including held for sale

$86,783

$77,853

$79,090

$78,369

$76,165

$10,618

13.90%

$81,270

$74,803

$6,467

8.60%

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

75,482

69,344

71,323

71,348

69,331

6,151

8.90%

72,594

69,319

3,275

4.70%

Interest and fees on loans(2)

$4,617

$4,081

$4,172

$4,233

$4,182

$435

10.40%

$12,870

$11,986

$884

7.40%

Other income(2)

$63

$63

$75

$62

$76

($13)

-17.10%

$201

$226

($25)

-11.10%

Retailer share arrangements(2)

($871)

($653)

($720)

($779)

($805)

($66)

8.20%

($2,244)

($2,158)

($86)

4.00%

(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

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2018

2018

2018

2017

2017

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$13,996

$14,458

$14,356

$14,234

$14,402

Less: Goodwill

(1,024)

(1,024)

(991)

(991)

(991)

Less: Intangible assets, net

(1,105)

(863)

(780)

(749)

(772)

Tangible common equity

$11,867

$12,571

$12,585

$12,494

$12,639

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

311

287

278

254

344

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

$12,178

$12,858

$12,863

$12,748

$12,983

Adjustment related to capital components during transition

 

 

 

142

142

Basel III - Common equity Tier 1 (transition)

 

 

 

$12,890

$13,125

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$12,178

$12,858

$12,863

$12,890

$13,125

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

1,137

1,027

1,015

1,064

1,001

Risk-based capital

$13,315

$13,885

$13,878

$13,954

$14,126

ASSET MEASURES

 

 

 

 

 

Total average assets

$100,449

$96,214

$95,707

$94,498

$91,121

Adjustments for:

 

 

 

 

 

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

(1,836)

(1,670)

(1,560)

(1,392)

(1,304)

Total assets for leverage purposes

$98,613

$94,544

$94,147

$93,106

$89,817

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

$85,941

$77,322

$76,509

$80,526

$75,614

Risk-weighted assets - Basel III (transition)

 

 

 

$80,669

$75,729

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$19.47

$19.37

$18.88

$18.47

$18.40

Less: Goodwill

(1.42)

(1.37)

(1.30)

(1.29)

(1.27)

Less: Intangible assets, net

(1.54)

(1.16)

(1.03)

(0.96)

(0.98)

Tangible common equity per share

$16.51

$16.84

$16.55

$16.22

$16.15

ADJUSTED NET EARNINGS

 

 

 

 

 

GAAP net earnings

$671

$696

$640

$385

$555

Adjustment for tax law change(2)

-

-

-

160

-

Adjusted net earnings

$671

$696

$640

$545

$555

ADJUSTED DILUTED EPS

 

 

 

 

 

GAAP diluted EPS

$0.91

$0.92

$0.83

$0.49

$0.70

Adjustment for tax law change(2)

-

-

-

0.21

-

Adjusted diluted EPS

$0.91

$0.92

$0.83

$0.70

$0.70

(1) Regulatory measures at September 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