Press Release

October 20, 2017, 4:47 PM EDT

Synchrony Financial Reports Third Quarter Net Earnings of $555 Million or $0.70 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE: SYF) today announced third quarter 2017 net earnings of $555 million, or $0.70 per diluted share. Highlights for the quarter included:
  • Net interest income increased 11% from the third quarter of 2016 to $3.9 billion
  • Loan receivables grew $6 billion, or 9%, from the third quarter of 2016 to $77 billion
  • Purchase volume increased 4% from the third quarter of 2016
  • Strong deposit growth continued, up $5 billion, or 9%, over the third quarter of 2016
  • Renewed relationships: Yamaha, BrandsMart U.S.A., Nautilus, Mars Petcare, and Evine
  • Launched new programs with At Home and zulily
  • Launched new 2% Cash Back value proposition at PayPal
  • Launched new CareCredit Dual Card™
  • Quarterly common stock dividend payment of $0.15 per share and repurchased $390 million of Synchrony Financial common stock

“Our focus on strong organic growth across our sales platforms has helped deliver another solid quarter. Renewing key relationships remains a priority—we recently renewed several programs in addition to launching two new ones. Compelling value propositions are integral to driving program growth and we are pleased to continue to launch innovative solutions that provide value to our partners and cardholders. Our deposit base comprises a significant portion of our funding and, as such, generating deposit growth through attractive rates and great customer service is a priority,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We have maintained solid returns and a strong balance sheet and remain focused on returning capital to shareholders.”

Business and Financial Highlights for the Third Quarter of 2017

All comparisons below are for the third quarter of 2017 compared to the third quarter of 2016, unless otherwise noted.

Earnings

  • Net interest income increased $395 million, or 11%, to $3.9 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 13%.
  • Provision for loan losses increased $324 million to $1.3 billion driven by credit normalization and loan receivables growth.
  • Other income was down $8 million to $76 million, primarily due to higher loyalty program expense, partially offset by higher interchange revenue.
  • Other expense increased $99 million to $958 million, primarily driven by business growth.
  • Net earnings totaled $555 million compared to $604 million in the third quarter of 2016.

Balance Sheet

  • Period-end loan receivables growth remained strong at 9%, primarily driven by purchase volume growth of 4% and average active account growth of 4%.
  • Deposits grew to $54 billion, up $5 billion, or 9%, and comprised 73% of funding compared to 71% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $22 billion, or 24% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 17.3% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.2%.

Key Financial Metrics

  • Return on assets was 2.4% and return on equity was 15.3%.
  • Net interest margin increased 40 basis points to 16.74%.
  • Efficiency ratio was 30.4%, compared to 30.6% in the third quarter of 2016, driven by strong positive operating leverage. Year-to-date efficiency ratio was 30.3%, compared to 31.0% in the prior year.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.80% compared to 4.26% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.95% compared to 4.39% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.97% compared to 5.82% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 11%, driven primarily by period-end loan receivables growth of 9%. Purchase volume growth was 4% and average active account growth was 3%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 11%, driven primarily by period-end loan receivables growth of 9%. Purchase volume growth was 6%, adjusted to exclude the impact from the hhgregg bankruptcy, and average active account growth was 9%. Loan receivables growth was led by home furnishings and automotive.
  • CareCredit interest and fees on loans increased 9%, driven primarily by period-end loan receivables growth of 10%. Purchase volume growth was 9% and average active account growth was 9%. Loan receivables growth was led by dental and veterinary.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed February 23, 2017, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. 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 20, 2017, 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 32017#, and can be accessed beginning approximately two hours after the event through November 3, 2017.

About Synchrony Financial

Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 365,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial offers private label credit cards, Dual Card™ and general purpose co-branded credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial, www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

*Source: The Nilson Report (June 2017, Issue # 1112) - based on 2016 data.

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 securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; 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 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 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, 2016, as filed on February 23, 2017. You should not consider any list of such factors to be an exhaustive statement of all of 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 capital ratios, 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'17 vs. 3Q'16

Nine Months Ended

YTD'17 vs. YTD'16

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2017

2017

2017

2016

2016

2017

2016

EARNINGS

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$3,876

$3,637

$3,587

$3,628

$3,481

$395

11.30%

$11,100

$9,902

$1,198

12.10%

Retailer share arrangements

(805)

(669)

(684)

(811)

(757)

(48)

6.30%

(2158)

(2091)

(67)

3.20%

Net interest income, after retailer share arrangements

3,071

2,968

2,903

2,817

2,724

347

12.70%

8,942

7,811

1,131

14.50%

Provision for loan losses

1,310

1,326

1,306

1,076

986

324

32.90%

3,942

2,910

1,032

35.50%

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

1,761

1,642

1,597

1,741

1,738

23

1.30%

5,000

4,901

99

2%

Other income

76

57

93

85

84

(8)

-9.50%

226

259

(33

-12.70%

Other expense

958

911

908

918

859

99

11.5

2,777

2,498

279

11.20%

Earnings before provision for income taxes

879

788

782

908

963

(84)

-8.70%

2,449

2,662

(213

-8.00%

Provision for income taxes

324

292

283

332

359

(35)

-9.70%

899

987

(88

-8.90%

Net earnings

$555

$496

$499

$576

$604

($49)

-8.10%

$1,550

$1,675

($125)

-7.50%

Net earnings attributable to common stockholders

$555

$496

$499

$576

$604

($49)

-8.10%

$1,550

$1,675

($125)

-7.50%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

$0.70

$0.62

$0.61

$0.70

$0.73

($0.03)

-4.10%

$1.93

$2.01

($0.08)

-4.00%

Diluted EPS

$0.70

$0.61

$0.61

$0.70

$0.73

($0.03)

-4.10%

$1.93

$2.01

($0.08)

-4.00%

Dividend declared per share

$0.15

$0.13

$0.13

$0.13

$0.13

$0.02

15.40%

$0.41

$0.13

0.28

NM

Common stock price

$31.05

$29.82

$34.30

$36.27

$28.00

$3.05

10.90%

$31.05

$28.00

3.05

10.90%

Book value per share

$18.40

$18.02

$17.71

$17.37

$16.94

$1.46

8.60%

$18.40

$16.94

1.46

8.60%

Tangible common equity per share(1)

$16.15

$15.79

$15.47

$15.34

$14.90

$1.25

8.40%

$16.15

$14.90

1.25

8.40%

Beginning common shares outstanding

795.3

810.8

817.4

825.5

833.9

(38.6)

-4.60%

817.4

833.8

(16.4)

-2.00%

Issuance of common shares

-

-

-

-

-

-

-

-

-

-

-

Stock-based compensation

0.1

0.2

-

-

0.1

-

-

0.3

0.2

0.1

50%

Shares repurchased

(12.8)

(15.7)

(6.6)

(8.1)

(8.5)

(4.3)

50.60%

(35.1)

(8.5)

(26.6)

NM

Ending common shares outstanding

782.6

795.3

810.8

817.4

825.5

-42.9

-5.20%

782.6

825.5

(42.9)

-5.20%

Weighted average common shares outstanding

787.3

804

813.1

820.5

828.4

(41.1)

-5.00%

801.3

832.1

(30.8)

-3.70%

Weighted average common shares outstanding (fully diluted)

790.9

807.4

817.1

823.8

830.6

(39.7)

-4.80%

805

834.1

(29.1)

-3.50%

(1) 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'17 vs. 3Q'16

Nine Months Ended

YTD'17 vs. YTD'16

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2017

2017

2017

2016

2016

2017

2016

PERFORMANCE METRICS

 

 

 

 

 

 

 

 

 

 

 

Return on assets(1)

2.40%

2.20%

2.30%

2.60%

2.80%

 

-0.40%

2.30%

2.70%

 

-0.40%

Return on equity(2)

15.30%

13.80%

14.10%

16.20%

17.30%

 

-2.00%

14.40%

16.60%

 

-2.20%

Return on tangible common equity(3)

17.40%

15.70%

16.10%

18.40%

19.60%

 

-2.20%

16.40%

18.90%

 

-2.50%

Net interest margin(4)

16.74%

16.20%

16.18%

16.26%

16.34%

 

0.40%

16.38%

16.05%

 

0.33%

Efficiency ratio(5)

30.40%

30.10%

30.30%

31.60%

30.60%

 

-0.20%

30.30%

31%

 

-0.70%

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

4.99%

4.93%

4.97%

5.04%

4.93%

 

0.06%

4.96%

4.95%

 

0.01%

Effective income tax rate

36.90%

37.10%

36.20%

36.60%

37.30%

 

-0.40%

36.70%

37.10%

 

-0.40%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

 

 

 

 

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

4.95%

5.42%

5.33%

4.65%

4.39%

 

0.56%

5.23%

4.54%

 

0.69%

30+ days past due as a % of period-end loan receivables(6)

4.80%

4.25%

4.25%

4.32%

4.26%

 

0.54%

4.80%

4.26%

 

0.54%

90+ days past due as a % of period-end loan receivables(6)

2.22%

1.90%

2.06%

2.03%

1.89%

 

0.33%

2.22%

1.89%

 

0.33%

Net charge-offs

$950

$1,001

$974

$847

$765

$185

24.20%

$2,925

$2,292

$633

27.60%

Loan receivables delinquent over 30 days(6)

$3,694

$3,208

$3,120

$3,295

$3,008

$686

22.80%

$3,694

$3,008

$686

22.80%

Loan receivables delinquent over 90 days(6)

$1,707

$1,435

$1,508

$1,546

$1,334

$373

28%

$1,707

$1,334

$373

28%

Allowance for loan losses (period-end)

$5,361

$5,001

$4,676

$4,344

$4,115

$1,246

30.30%

5,361

$4,115

$1,246

30.30%

Allowance coverage ratio(7)

6.97%

6.63%

6.37%

5.69%

5.82%

 

1.15%

6.97%

5.82%

 

1.15%

BUSINESS METRICS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(8)

$32,893

$33,476

$28,880

$35,369

$31,615

$1,278

4%

$95,249

$90,099

$5,150

5.70%

Period-end loan receivables

$76,928

$75,458

$73,350

$76,337

$70,644

$6,284

8.90%

$76,928

$70,644

$6,284

8.90%

Credit cards

$73,946

$72,492

$70,587

$73,580

$67,858

$6,088

9%

$73,946

$67,858

$6,088

9%

Consumer installment loans

$1,561

$1,514

$1,411

$1,384

$1,361

$200

14.70%

$1,561

$1,361

$200

14.70%

Commercial credit products

$1,384

$1,386

$1,311

$1,333

$1,385

($1)

-0.10%

$1,384

$1,385

($1)

-0.10%

Other

$37

$66

$41

$40

$40

($3)

-7.50%

$37

$40

($3)

-7.50%

Average loan receivables, including held for sale

$76,165

$74,090

$74,132

$72,476

$69,316

$6,849

9.90%

$74,803

$67,364

$7,439

11%

Period-end active accounts (in thousands)(9)

69,008

69,277

67,905

71,890

66,781

2,227

3.30%

69,008

66,781

2,227

3.30%

Average active accounts (in thousands)(9)

69,331

68,635

69,629

68,701

66,639

2,692

4%

69,319

66,204

3,115

4.70%

LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$13,915

$12,020

$11,392

$9,321

$13,588

$327

2.40%

$13,915

$13,588

$327

2.40%

Total liquid assets

$16,391

$15,274

$16,158

$13,612

$16,362

$29

0.20%

$16,391

$16,362

$29

0.20%

Undrawn credit facilities

 

 

 

 

 

 

 

 

 

 

 

Undrawn credit facilities

$5,650

$6,650

$5,600

$6,700

$7,150

($1,500)

-21.00%

$5,650

$7,150

($1,500)

(21.0%

Total liquid assets and undrawn credit facilities

$22,041

$21,924

$21,758

$20,312

$23,512

($1,471)

-6.30%

$22,041

$23,512

($1,471)

(6.3%

Liquid assets % of total assets

17.71%

16.76%

18.14%

15.09%

18.77%

 

-1.06%

17.71%

18.77%

 

(1.06%

Liquid assets including undrawn credit facilities % of total assets

23.82%

24.06%

24.43%

22.52%

26.98%

 

-3.16%

23.82%

26.98%

 

(3.16%

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

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

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

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

(8) 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.

(9) 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'17 vs. 3Q'16

Nine Months Ended

YTD'17 vs. YTD'16

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2017

2017

2017

2016

2016

2017

2016

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$4,182

$3,927

$3,877

$3,919

$3,771

$411

10.90%

$11,986

$10,763

$1,223

11.40%

Interest on investment securities

51

43

36

28

25

26

104%

130

68

62

91.20%

Total interest income

4,233

3,970

3,913

3,947

3,796

437

11.50%

12,116

10,831

1,285

11.90%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

219

202

194

188

188

31

16.50%

615

539

76

14.10%

Interest on borrowings of consolidated securitization entities

65

63

65

64

63

2

3.20%

193

180

13

7.20%

Interest on third-party debt

73

68

67

67

64

9

14.10%

208

210

(2)

-1.00%

Total interest expense

357

333

326

319

315

42

13.30%

1,016

929

87

9.40%

Net interest income

3,876

3,637

3,587

3,628

3,481

395

11.30%

11,100

9,902

1,198

12.10%

Retailer share arrangements

(805)

(669)

(684)

(811)

(757)

(48)

6.30%

(2158)

(2091)

(67)

3.20%

Net interest income, after retailer share arrangements

3,071

2,968

2,903

2,817

2,724

347

12.70%

8,942

7,811

1,131

14.50%

Provision for loan losses

1,310

1,326

1,306

1,076

986

324

32.90%

3,942

2,910

1,032

35.50%

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

1,761

1,642

1,597

1,741

1,738

23

1.30%

5,000

4,901

99

2%

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interchange revenue

164

165

145

167

154

10

6.50%

474

435

39

9%

Debt cancellation fees

67

68

68

68

67

-

-

203

194

9

4.60%

Loyalty programs

(168)

(206)

(137)

(157)

(145)

(23)

15.90%

(511)

(390)

(121)

31%

Other

13

30

17

7

8

5

62.50%

60

20

40

NM

Total other income

76

57

93

85

84

(8)

-9.50%

226

259

-33

-12.70%

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Employee costs

335

321

325

315

311

24

7.70%

981

892

89

10%

Professional fees

161

158

151

164

174

(13)

-7.50%

470

474

(4)

-0.80%

Marketing and business development

124

124

94

130

92

32

34.80%

342

293

49

16.7

Information processing

96

88

90

88

87

9

10.30%

274

250

24

9.6

Other

242

220

248

221

195

47

24.10%

710

589

121

20.5

Total other expense

958

911

908

918

859

99

11.50%

2,777

2,498

279

11.2

Earnings before provision for income taxes

879

788

782

908

963

(84)

-8.70%

2,449

2,662

(213)

-8.00%

Provision for income taxes

324

292

283

332

359

(35)

-9.70%

899

987

(88)

-8.90%

Net earnings attributable to common shareholders

$555

$496

$499

$576

$604

$49

-8.10%

$1,550

$1,675

$125

-7.50%

SYNCHRONY FINANCIAL

STATEMENTS OF FINANCIAL POSITION

(unaudited, $ in millions)

 

Quarter Ended

Sep 30, 2017 vs. Sep 30, 2016

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2017

2017

2017

2016

2016

Assets

 

 

 

 

 

 

 

Cash and equivalents

$13,915

$12,020

$11,392

$9,321

$13,588

$327

2.40%

Investment securities

3,317

3,997

5,328

5,110

3,356

(39)

-1.20%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

53,997

52,550

50,398

52,332

47,517

6,480

13.60%

Restricted loans of consolidated securitization entities

22,931

22,908

22,952

24,005

23,127

(196)

-0.80%

Total loan receivables

76,928

75,458

73,350

76,337

70,644

6,284

8.90%

Less: Allowance for loan losses

(5,361)

(5,001)

(4,676)

(4,344)

(4,115)

(1,246)

30.30%

Loan receivables, net

71,567

70,457

68,674

71,993

66,529

5,038

7.60%

Goodwill

991

991

992

949

949

42

4.40%

Intangible assets, net

772

787

826

712

733

39

5.30%

Other assets

1,986

2,888

1,838

2,122

2,004

(18)

-0.90%

Total assets

$92,548

$91,140

$89,050

$90,207

$87,159

$5,389

6.20%

Liabilities and Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$54,232

$52,659

$51,359

$51,896

$49,611

$4,621

9.30%

Non-interest-bearing deposit accounts

222

226

246

159

204

18

8.80%

Total deposits

54,454

52,885

51,605

52,055

49,815

4,639

9.30%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

11,891

12,204

12,433

12,388

12,411

-520

-4.20%

Bank term loan

-

-

-

-

-

-

-

Senior unsecured notes

8,008

8,505

7,761

7,759

7,756

252

3.20%

Total borrowings

19,899

20,709

20,194

20,147

20,167

-268

-1.30%

Accrued expenses and other liabilities

3,793

3,214

2,888

3,809

3,196

597

18.70%

Total liabilities

78,146

76,808

74,687

76,011

73,178

4,968

6.80%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

-

Additional paid-in capital

9,429

9,415

9,405

9,393

9,381

48

0.50%

Retained earnings

6,543

6,109

5,724

5,330

4,861

1,682

34.60%

Accumulated other comprehensive income:

(40)

(49)

(55)

(53)

(24)

(16)

66.70%

Treasury Stock

(1,531)

(1,144)

(712)

(475)

(238)

(1,293)

NM

Total equity

14,402

14,332

14,363

14,196

13,981

421

3%

Total liabilities and equity

$92,548

$91,140

$89,050

$90,207

$87,159

$5,389

6.20%

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Quarter Ended

 

30-Sep-17

30-Jun-17

31-Mar-17

31-Dec-16

30-Sep-16

 

 

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

$11,895

$37

1.23%

$10,758

$28

1.04%

$10,552

$21

0.81%

$12,210

$17

0.55%

$12,480

$16

0.51%

Securities available for sale

3,792

14

1.46%

5,195

15

1.16%

5,213

15

1.17%

4,076

11

1.07%

2,960

9

1.21%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

73,172

4,111

22.29%

71,206

3,858

21.73%

71,365

3,811

21.66%

69,660

3,851

21.99%

66,519

3,705

22.16%

Consumer installment loans

1,543

35

9%

1,461

34

9.33%

1,389

32

9.34%

1,373

31

8.98%

1,333

31

9.25%

Commercial credit products

1,392

36

10.26%

1,378

34

9.90%

1,317

34

10.47%

1,386

36

10.33%

1,401

35

9.94%

Other

58

-

-

45

1

NM

61

-

-

57

1

NM

63

-

-

Total loan receivables, including held for sale

76,165

4,182

21.78%

74,090

3,927

21.26%

74,132

3,877

21.21%

72,476

3,919

21.51%

69,316

3,771

21.64%

Total interest-earning assets

91,852

4,233

18.28%

90,043

3,970

17.68%

89,897

3,913

17.65%

88,762

3,947

17.69%

84,756

3,796

17.82%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

877

 

 

829

 

 

802

 

 

739

 

 

862

 

 

Allowance for loan losses

(5,125)

 

 

(4,781)

 

 

(4,408)

 

 

(4,228)

 

 

(3,933)

 

 

Other assets

3,517

 

 

3,303

 

 

3,177

 

 

3,479

 

 

3,189

 

 

Total non-interest-earning assets

(731)

 

 

(649)

 

 

(429)

 

 

(10)

 

 

118

 

 

Total assets

$91,121

 

 

$89,394

 

 

$89,468

 

 

$88,752

 

 

$84,874

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$53,294

$219

1.63%

$51,836

$202

1.56%

$51,829

$194

1.52

$51,006

$188

1.47%

$47,895

$188

1.56%

Borrowings of consolidated securitization entities

11,759

65

2.19%

12,213

63

2.07%

12,321

65

2.14%

12,389

64

2.06%

12,254

63

2.05%

Bank term loan

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Senior unsecured notes

8,251

73

3.51%

7,933

68

3.44%

7,760

67

3.50%

7,757

67

3.44%

7,448

64

3.42%

Total interest-bearing liabilities

73,304

357

1.93%

71,982

333

1.86%

71,910

326

1.84%

71,152

319

1.78%

67,597

315

1.85%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

232

 

 

218

 

 

240

 

 

176

 

 

204

 

 

Other liabilities

3,154

 

 

2,752

 

 

2,995

 

 

3,321

 

 

3,175

 

 

Total non-interest-bearing liabilities

3,386

 

 

2,970

 

 

3,235

 

 

3,497

 

 

3,379

 

 

Total liabilities

76,690

 

 

74,952

 

 

75,145

 

 

74,649

 

 

70,976

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,431

 

 

14,442

 

 

14,323

 

 

14,103

 

 

13,898

 

 

Total liabilities and equity

$91,121

 

 

$89,394

 

 

$89,468

 

 

$88,752

 

 

$84,874

 

 

Net interest income

 

$3,876

 

 

$3,637

 

 

$3,587

 

 

$3,628

 

 

$3,481

 

Interest rate spread (1)

 

 

16.35%

 

 

15.82%

 

 

15.81%

 

 

15.91%

 

 

15.97%

Net interest margin (2)

 

 

16.74%

 

 

16.20%

 

 

16.18%

 

 

16.26%

 

 

16.34%

(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-17

30-Sep-16

 

 

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

$11,073

86

1.04%

$12,132

$46

0.51

Securities available for sale

4,732

44

1.24%

2,932

22

1

Loan receivables:

 

 

 

 

 

 

Credit cards, including held for sale

71,920

11,780

21.90%

64,701

10,573

21.83%

Consumer installment loans

1,465

101

9.22%

1,240

86

9.26%

Commercial credit products

1,363

104

10.20%

1,367

103

10.06%

Other

55

1

2.43%

56

1

2.39%

Total loan receivables, including held for sale

74,803

11,986

21.42%

67,364

10,763

21.34%

Total interest-earning assets

90,608

12,116

17.88%

82,428

10,831

17.55%

Non-interest-earning assets:

 

 

 

 

 

 

Cash and due from banks

836

 

 

1,041

 

 

Allowance for loan losses

(4,774)

 

 

(3,752)

 

 

Other assets

3,334

 

 

3,222

 

 

Total non-interest-earning assets

(604)

 

 

511

 

 

Total assets

$90,004

 

 

$82,939

 

 

Liabilities

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Interest-bearing deposit accounts

$52,325

615

1.57%

$45,915

539

1.57%

Borrowings of consolidated securitization entities

12,096

193

2.13%

12,441

180

1.93%

Bank term loan(1)

-

-

-

742

31

5.58%

Senior unsecured notes

7,983

208

3.48%

6,957

179

3.44%

Total interest-bearing liabilities

72,404

1,016

1.88%

66,055

929

1.88%

Non-interest-bearing liabilities

 

 

 

 

 

 

Non-interest-bearing deposit accounts

230

 

 

215

 

 

Other liabilities

2,971

 

 

3,211

 

 

Total non-interest-bearing liabilities

3,201

 

 

3,426

 

 

Total liabilities

75,605

 

 

69,481

 

 

Equity

 

 

 

 

 

 

Total equity

14,399

 

 

13,458

 

 

Total liabilities and equity

$90,004

 

 

$82,939

 

 

Net interest income

 

$11,100

 

 

$9,902

 

Interest rate spread (2)

 

 

16%

 

 

15.67%

Net interest margin (3)

 

 

16.38%

 

 

16.05%

(1) The effective interest rate for the Bank term loan for the 9 months ended September 30, 2016 was 2.48%. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.

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

(3) 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, 2017 vs. Sep 30, 2016

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2017

2017

2017

2016

2016

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$14,402

$14,332

$14,363

$14,196

$13,981

$421

3%

Total common equity as a % of total assets

15.56%

15.73%

16.13%

15.74%

16.04%

 

-0.48%

Tangible assets

$90,785

$89,362

$87,232

88,546

$85,477

$5,308

6.2

Tangible common equity(1)

$12,639

$12,554

$12,545

12,535

$12,299

$340

2.8

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

13.92%

14.05%

14.38%

14.16%

14.39%

 

-0.47%

Tangible common equity per share(1)

$16.15

$15.79

$15.47

$15.34

$14.90

$1.25

8.4

REGULATORY CAPITAL RATIOS (2)

 

 

 

 

 

 

 

Basel III Transition

Total risk-based capital ratio(3)

18.70%

18.70%

19.30%

18.50%

19.50%

 

 

Tier 1 risk-based capital ratio(4)

17.30%

17.40%

18%

17.20%

18.20%

 

 

Tier 1 leverage ratio(5)

14.60%

14.80%

14.80%

15%

15.40%

 

 

Common equity Tier 1 capital ratio(6)

17.30%

17.40%

18%

17.20%

18.20%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio(6)

17.20%

17.20%

17.70%

17%

17.90%

 

 

(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, 2017 are preliminary and therefore subject to change.

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

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

(5) 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.

(6) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.

SYNCHRONY FINANCIAL

PLATFORM RESULTS

(unaudited, $ in millions)

 

Quarter Ended

3Q'17 vs. 3Q'16

Nine Months Ended

YTD'17 vs. YTD'16

 

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Sep 30,

Sep 30,

2017

2017

2017

2016

2016

2017

2016

RETAIL CARD

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$26,347

$27,101

$22,952

$28,996

$25,285

$1,062

4.20%

$76,400

$72,246

$4,154

5.70%

Period-end loan receivables

$52,119

$51,437

$49,905

$52,701

$48,010

$4,109

8.60%

$52,119

$48,010

$4,109

8.60%

Average loan receivables, including held for sale

$51,817

$50,533

$50,644

$49,476

$47,274

$4,543

9.60%

$51,002

$46,119

$4,883

10.60%

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

54,471

54,058

55,049

54,489

52,959

1,512

2.90%

54,639

52,834

1,805

3.40%

Interest and fees on loans(2)

$3,102

$2,900

$2,888

$2,909

$2,790

312

11.20%

8,890

7,989

$901

11.30%

Other income(2)

$61

$25

$77

$70

$70

$9

-12.90%

163

218

$55

-25.20%

Retailer share arrangements(2)

$795

$657

$681

$801

$752

$43

5.70%

$2,133

$2,069

$64

3.10%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$4,178

$3,930

$3,686

$4,194

$4,152

$26

0.60%

$11,794

$11,447

$347

3%

Period-end loan receivables

$16,153

$15,595

$15,320

$15,567

$14,798

$1,355

9.20%

$16,153

$14,798

$1,355

9.20%

Average loan receivables

$15,848

$15,338

$15,424

$15,076

$14,367

$1,481

10.30%

$15,538

$13,786

$1,752

12.70%

Average active accounts (in thousands)(3)

9,183

9,031

9,090

8,844

8,461

722

8.50%

9,108

8,261

$847

10.30%

Interest and fees on loans

559

533

515

$523

$505

$54

10.70%

$1,607

$1,429

$178

12.50%

Other income

2

6

4

$3

$3

$1

-33.30%

$12

$10

$2

20%

Retailer share arrangements

$9

$9

$1

$9

$3

$6

NM

$19

$17

$2

11.80%

CARECREDIT

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

2,368

2,445

2,242

$2,179

$2,178

$190

8.70%

$7,055

$6,406

649

10.10%

Period-end loan receivables

8,656

8,426

8,125

$8,069

$7,836

$820

10.50%

$8,656

$7,836

820

10.50%

Average loan receivables

8,500

8,219

8,064

$7,924

$7,675

$825

10.70%

$8,263

$7,459

804

10.80%

Average active accounts (in thousands)(3)

5,677

5,546

5,490

5,368

5,219

458

8.80%

5,572

5,109

463

9.10%

Interest and fees on loans

$521

$494

$474

$487

$476

$45

9.50%

$1,489

1,345

$144

10.70%

Other income

$13

$26

$12

$12

$11

$2

18.20%

$51

31

$20

64.50%

Retailer share arrangements

$1

$3

$2

$1

$2

$1

-50.00%

$6

$5

$1

20%

TOTAL SYF

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$32,893

$33,476

$28,880

$35,369

$31,615

$1,278

4%

$95,249

$90,099

$5,150

5.70%

Period-end loan receivables

$76,928

$75,458

$73,350

$76,337

$70,644

$6,284

8.90%

$76,928

$70,644

$6,284

8.90%

Average loan receivables, including held for sale

$76,165

$74,090

$74,132

$72,476

$69,316

$6,849

9.90%

$74,803

$67,364

$7,439

11%

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

69,331

68,635

69,629

68,701

66,639

2,692

4%

69,319

66,204

3,115

4.70%

Interest and fees on loans(2)

$4,182

$3,927

$3,877

$3,919

$3,771

$411

10.90%

$11,986

$10,763

$1,223

11.40%

Other income(2)

$76

$57

$93

$85

$84

$8

-9.50%

$226

$259

$33

-12.70%

Retailer share arrangements(2)

$805

$669

$684

$811

$757

$48

6.30%

$2,158

$2,091

$67

3.20%

(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,

2017

2017

2017

2016

2016

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$14,402

$14,332

$14,363

$14,196

13,981

Less: Goodwill

(991)

(991)

(992)

(949)

(949)

Less: Intangible assets, net

(772)

(787)

(826)

(712)

(733)

Tangible common equity

$12,639

$12,554

$12,545

$12,535

12,299

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

344

337

340

337

299

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

$12,983

$12,891

$12,885

$12,872

$12,598

Adjustment related to capital components during transition

142

146

154

263

273

Basel III - Common equity Tier 1 (transition)

$13,125

$13,037

$13,039

$13,135

$12,871

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$13,125

$13,037

$13,039

$13,135

$12,871

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

1,001

985

954

994

923

Risk-based capital

$14,126

$14,022

$13,993

$14,129

$13,794

ASSET MEASURES

 

 

 

 

 

Total average assets(2)

$91,121

$89,394

$89,468

$88,752

$84,874

Adjustments for:

 

 

 

 

 

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

(1304)

(1,325

(1,358

(1,059

(1,117

Total assets for leverage purposes

$89,817

88,069

88,110

87,693

83,757

Risk-weighted assets - Basel III (fully phased-in) (3)

$75,614

74,748

72,596

75,941

70,448

Risk-weighted assets - Basel III (transition) (3)

$75,729

74,792

72,627

76,179

70,660

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$18.40

$18.02

$17.71

$17.37

$16.94

Less: Goodwill

(1.27)

(1.25)

(1.22)

(1.16)

(1.14)

Less: Intangible assets, net

(0.98)

(0.98)

(1.02)

(0.87)

(0.90)

Tangible common equity per share

$16.15

$15.79

$15.47

$15.34

$14.90

(1) Regulatory measures at September 30, 2017 are presented on an estimated basis.

(2) Total average assets are presented based upon the use of daily averages.

(3) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets.
Contact:

Synchrony Financial
Investor Relations:
Greg Ketron, 203-585-6291
or
Media Relations
Lisa Lanspery, 203-585-6143