Press Release

July 21, 2017, 2:46 PM EDT

Synchrony Financial Reports Second Quarter Net Earnings of $496 Million or $0.61 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE: SYF) today announced second quarter 2017 net earnings of $496 million, or $0.61 per diluted share. Highlights for the quarter included:
  • Net interest income increased 13% from the second quarter of 2016 to $3.6 billion
  • Loan receivables grew $7 billion, or 11%, from the second quarter of 2016 to $75 billion
  • Purchase volume increased 6% from the second quarter of 2016
  • Strong deposit growth continued, up $6 billion, or 14%, over the second quarter of 2016
  • Signed a new partnership with zulily
  • Launched new programs with Nissan and Infiniti
  • Renewed relationships: MEGA Group USA, City Furniture, and National Veterinary Associates
  • Announced new capital plan increasing quarterly common stock dividend to $0.15 per share and share repurchases of up to $1.64 billion of Synchrony Financial common stock

“Strong execution of our strategies yielded solid performance across our three sales platforms. Organic growth remains an important business driver and contributed meaningfully to this quarter’s results. Our focus on the application and development of digital innovations is yielding results as we continue to drive strong online sales volume growth and penetration. A primary funding objective for us is growing deposits, and we continued to execute on this, achieving double-digit growth again this quarter,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We were pleased to announce a meaningful increase in our capital return to shareholders through dividends and share repurchases--this is a key priority, along with continued growth of the business while maintaining solid returns and a strong balance sheet.”

Business and Financial Highlights for the Second Quarter of 2017

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

Earnings

  • Net interest income increased $425 million, or 13%, to $3.6 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 16%.
  • Provision for loan losses increased $305 million to $1,326 million driven by credit normalization and loan receivables growth.
  • Other income was down $26 million to $57 million, largely driven by an increase in loyalty programs expense.
  • Other expense increased $72 million to $911 million, primarily driven by business growth.
  • Net earnings totaled $496 million compared to $489 million in the second quarter of 2016.

Balance Sheet

  • Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 6% and average active account growth of 5%.
  • Deposits grew to $53 billion, up $6 billion, or 14%, and comprised 72% 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 17.4% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.2%.

Key Financial Metrics

  • Return on assets was 2.2% and return on equity was 13.8%.
  • Net interest margin increased 26 basis points to 16.20%.
  • Efficiency ratio was 30.1%, compared to 31.9% in the second quarter of 2016, driven by strong positive operating leverage.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.25% compared to 3.79% last year.
  • Net charge-offs as a percentage of total average loan receivables were 5.42% compared to 4.51% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.63% compared to 5.70% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 12%, driven primarily by period-end loan receivables growth of 10%. Purchase volume growth was 7% and average active account growth was 3%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 14%, driven primarily by period-end loan receivables growth of 11%. Purchase volume growth was 6%, adjusted to exclude the impact from the hhgregg bankruptcy, and average active account growth was 11%. Loan receivables growth was led by home furnishings and automotive.
  • CareCredit interest and fees on loans increased 12%, driven primarily by period-end loan receivables growth of 11%. Purchase volume growth was 11% and average active account growth was 10%. 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 June 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, July 21, 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 22017#, and can be accessed beginning approximately two hours after the event through August 4, 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 and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial, www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

*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

2Q'17 vs. 2Q'16

Six Months Ended

YTD'17 vs. YTD'16

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2017

2017

2016

2016

2016

2017

2016

EARNINGS

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$3,637

$3,587

$3,628

$3,481

$3,212

$425

13.20%

$7,224

$6,421

$803

12.50%

Retailer share arrangements

-669

-684

-811

-757

-664

-5

0.80%

-1,353

-1,334

-19

1.40%

Net interest income, after retailer share arrangements

2,968

2,903

2,817

2,724

2,548

420

16.50%

5,871

5,087

784

15.40%

Provision for loan losses

1,326

1,306

1,076

986

1,021

305

29.90%

2,632

1,924

708

36.80%

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

1,642

1,597

1,741

1,738

1,527

115

7.50%

3,239

3,163

76

2.40%

Other income

57

93

85

84

83

-26

-31.30%

150

175

-25

-14.30%

Other expense

911

908

918

859

839

72

8.60%

1,819

1,639

180

11%

Earnings before provision for income taxes

788

782

908

963

771

17

2.20%

1,570

1,699

-129

-7.60%

Provision for income taxes

292

283

332

359

282

10

3.50%

575

628

-53

-8.40%

Net earnings

$496

$499

$576

$604

$489

$7

1.40%

$995

$1,071

($76)

-7.10%

Net earnings attributable to common stockholders

$496

$499

$576

$604

$489

$7

1.40%

$995

$1,071

($76)

-7.10%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

$0.62

$0.61

$0.70

$0.73

$0.59

$0.03

5.10%

$1.23

$1.28

($0.05)

-3.90%

Diluted EPS

$0.61

$0.61

$0.70

$0.73

$0.58

$0.03

5.20%

$1.23

$1.28

($0.05)

-3.90%

Dividend declared per share

$0.13

$0.13

$0.13

$0.13

-

$0.13

NM

$0.26

-

$0.26

NM

Common stock price

$29.82

$34.30

$36.27

$28.00

$25.28

$4.54

18%

$29.82

$25.28

$4.54

18%

Book value per share

$18.02

$17.71

$17.37

$16.94

$16.45

$1.57

9.50%

$18.02

$16.45

$1.57

9.50%

Tangible common equity per share(1)

$15.79

$15.47

$15.34

$14.90

$14.46

$1.33

9.20%

$15.79

$14.46

$1.33

9.20%

Beginning common shares outstanding

810.8

817.4

825.5

833.9

833.8

-23

-2.80%

817.4

833.8

-16.4

-2.00%

Issuance of common shares

-

-

-

-

-

-

-

-

-

-

-

Stock-based compensation

0.2

-

-

0.1

0.1

0.1

100

0.2

0.1

0.1

100%

Shares repurchased

-15.7

-6.6

-8.1

-8.5

-

-15.7

NM

-22.3

-

-22.3

NM

Ending common shares outstanding

795.3

810.8

817.4

825.5

833.9

(38.6

-4.60%

795.3

833.9

-38.6

-4.60%

Weighted average common shares outstanding

804

813.1

820.5

828.4

833.9

-29.9

-3.60%

808.5

833.9

-25.4

-3%

Weighted average common shares outstanding (fully diluted)

807.4

817.1

823.8

830.6

836.2

-28.8

-3.40%

812.2

835.8

-23.6

-2.80%

(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

2Q'17 vs. 2Q'16

Six Months Ended

YTD'17 vs. YTD'16

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2017

2017

2016

2016

2016

2017

2016

PERFORMANCE METRICS

 

 

 

 

 

 

 

 

 

 

 

Return on assets(1)

2.20%

2.30%

2.60%

2.80%

2.40%

 

-0.20%

2.20%

2.60%

 

-0.40%

Return on equity(2)

13.80%

14.10%

16.20%

17.30%

14.50%

 

-0.70%

14%

16.30%

 

-2.30%

Return on tangible common equity(3)

15.70%

16.10%

18.40%

19.6

16.50%

 

-0.80%

15.90%

18.60%

 

-2.70%

Net interest margin(4)

16.20%

16.18%

16.26%

16.34%

15.94%

 

0.26%

16.19%

15.89%

 

0.30%

Efficiency ratio(5)

30.10%

30.30%

31.60%

30.60%

31.90%

 

-1.80%

30.20%

31.10%

 

-0.90%

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

4.93%

4.97%

5.04%

4.93%

5.07%

 

-0.14%

4.95%

4.97%

 

-0.02%

Effective income tax rate

37.10%

36.20%

36.60%

37.30%

36.60%

 

0.50%

36.60%

37%

 

-0.40%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

 

 

 

 

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

5.42%

5.33%

4.65%

4.39%

4.51%

 

0.91%

5.37%

4.63%

 

0.74%

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

4.25%

4.25%

4.32%

4.26%

3.79%

 

0.46%

4.25%

3.79%

 

0.46%

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

1.90%

2.06%

2.03%

1.89%

1.67%

 

0.23

1.90%

1.67%

 

0.23%

Net charge-offs

$1,001

$974

$847

$765

$747

$254

34%

$1,975

$1,527

$448

29.30%

Loan receivables delinquent over 30 days(6)

$3,208

$3,120

$3,295

$3,008

$2,585

$623

24.10%

$3,208

$2,585

$623

24.10%

Loan receivables delinquent over 90 days(6)

$1,435

$1,508

$1,546

$1,334

$1,143

$292

25.50%

$1,435

$1,143

$292

25.50%

Allowance for loan losses (period-end)

$5,001

$4,676

$4,344

$4,115

$3,894

$1,107

28.40%

$5,001

$3,894

$1,107

28.40%

Allowance coverage ratio(7)

6.63%

6.37%

5.69%

5.82%

5.70%

 

0.93%

6.63%

5.70%

 

0.93%

BUSINESS METRICS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(8)

$33,476

$28,880

$35,369

$31,615

$31,507

$1,969

6.20%

$62,356

$58,484

$3,872

6.6

Period-end loan receivables

$75,458

$73,350

$76,337

$70,644

$68,282

$7,176

10.50%

$75,458

$68,282

$7,176

10.5

Credit cards

$72,492

$70,587

$73,580

$67,858

$65,511

$6,981

10.70%

$72,492

$65,511

$6,981

10.7

Consumer installment loans

$1,514

$1,411

$1,384

$1,361

$1,293

$221

17.10%

$1,514

$1,293

$221

17.10%

Commercial credit products

$1,386

$1,311

$1,333

$1,385

$1,389

($3)

-0.20%

$1,386

$1,389

($3)

-0.20%

Other

$66

$41

$40

$40

$89

($23)

-25.80%

$66

$89

($23)

-25.80%

Average loan receivables, including held for sale

$74,090

$74,132

$72,476

$69,316

$66,561

$7,529

11.30%

$74,111

$66,377

$7,734

11.70%

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

69,277

67,905

71,890

66,781

66,491

2,786

4.20%

69,277

66,491

2,786

4.20%

Average active accounts (in thousands)(9)

68,635

69,629

68,701

66,639

65,531

3,104

4.70%

69,307

65,996

3,311

5%

LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$12,020

$11,392

$9,321

$13,588

$11,787

$233

2%

$12,020

$11,787

$233

2%

Total liquid assets

$15,274

$16,158

$13,612

$16,362

$13,956

$1,318

9.40%

$15,274

$13,956

$1,318

9.40%

Undrawn credit facilities

 

 

 

 

 

 

 

 

 

 

 

Undrawn credit facilities

$6,650

$5,600

$6,700

$7,150

$7,025

($375)

-5.30%

$6,650

$7,025

($375)

-5.30%

Total liquid assets and undrawn credit facilities

$21,924

$21,758

$20,312

$23,512

$20,981

$943

4.50%

$21,924

$20,981

$943

4.50%

Liquid assets % of total assets

16.76%

18.14%

15.09%

18.77%

16.94

 

-0.18%

16.76%

16.94%

 

-0.18%

Liquid assets including undrawn credit facilities % of total assets

24.06%

24.43%

22.52%

26.98%

25.47

 

-1.41%

24.06%

25.47%

 

-1.41%

(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

2Q'17 vs. 2Q'16

Six Months Ended

YTD'17 vs. YTD'16

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2017

2017

2016

2016

2016

2017

2016

Interest income:

                      

Interest and fees on loans

$3,927

$3,877

$3,919

$3,771

$3,494

$433

12.40%

$7,804

$6,992

$812

11.60%

Interest on investment securities

43

36

28

25

21

22

104.80%

79

43

36

83.70%

Total interest income

3,970

3,913

3,947

3,796

3,515

455

12.90%

7,883

7,035

848

12.10%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

202

194

188

188

179

23

12.80%

396

351

45

12.80%

Interest on borrowings of consolidated securitization entities

63

65

64

63

59

4

6.80%

128

117

11

9.40%

Interest on third-party debt

68

67

67

64

65

3

4.60%

135

146

-11

-7.50%

Total interest expense

333

326

319

315

303

30

9.90%

659

614

45

7.30%

Net interest income

3,637

3,587

3,628

3,481

3,212

425

13.20%

7,224

6,421

803

12.50%

Retailer share arrangements

-669

-684

-811

-757

-664

-5

0.80%

-1,353

-1,334

-19

1.40%

Net interest income, after retailer share arrangements

2,968

2,903

2,817

2,724

2,548

420

16.50%

5,871

5,087

784

15.40%

Provision for loan losses

1,326

1,306

1,076

986

1,021

305

29.90%

2,632

1,924

708

36.80%

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

1,642

1,597

1,741

1,738

1,527

115

7.50%

3,239

3,163

76

2.40%

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interchange revenue

165

145

167

154

151

14

9.30%

310

281

29

10.30%

Debt cancellation fees

68

68

68

67

63

5

7.90%

136

127

9

7.10%

Loyalty programs

-206

-137

-157

-145

-135

-71

52.60%

-343

-245

-98

40%

Other

30

17

7

8

4

26

NM

47

12

35

NM

Total other income

57

93

85

84

83

-26

-31.30%

150

175

-25

-14.30%

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Employee costs

321

325

315

311

301

20

6.60%

646

581

65

11.20%

Professional fees

158

151

164

174

154

4

2.60%

309

300

9

3%

Marketing and business development

124

94

130

92

107

17

15.90%

218

201

17

8.50%

Information processing

88

90

88

87

81

7

8.60%

178

163

15

9.20%

Other

220

248

221

195

196

24

12.20%

468

394

74

18.80%

Total other expense

911

908

918

859

839

72

8.60%

1,819

1,639

180

11%

Earnings before provision for income taxes

788

782

908

963

771

17

2.20%

1,570

1,699

-129

-7.60%

Provision for income taxes

292

283

332

359

282

10

3.50%

575

628

-53

-8.40%

Net earnings attributable to common stockholders

$496

$499

$576

$604

$489

$7

1.40%

$995

$1,071

($76)

-7.10%

SYNCHRONY FINANCIAL

STATEMENTS OF FINANCIAL POSITION

(unaudited, $ in millions)

 

Quarter Ended

Jun 30, 2017 vs. Jun 30, 2016

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2017

2017

2016

2016

2016

Assets

              

Cash and equivalents

$12,020

$11,392

$9,321

$13,588

$11,787

$233

2%

Investment securities

3,997

5,328

5,110

3,356

2,723

1,274

46.80%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

52,550

50,398

52,332

47,517

44,854

7,696

17.20%

Restricted loans of consolidated securitization entities

22,908

22,952

24,005

23,127

23,428

-520

-2.20%

Total loan receivables

75,458

73,350

76,337

70,644

68,282

7,176

10.50%

Less: Allowance for loan losses

-5,001

-4,676

-4,344

-4,115

-3,894

-1,107

28.40%

Loan receivables, net

70,457

68,674

71,993

66,529

64,388

6,069

9.40%

Goodwill

991

992

949

949

949

42

4.40%

Intangible assets, net

787

826

712

733

704

83

11.80%

Other assets

2,888

1,838

2,122

2,004

1,833

1,055

57.60%

Total assets

$91,140

$89,050

$90,207

$87,159

$82,384

$8,756

10.60%

Liabilities and Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$52,659

$51,359

$51,896

$49,611

$46,220

$6,439

13.90%

Non-interest-bearing deposit accounts

226

246

159

204

207

19

9.20%

Total deposits

52,885

51,605

52,055

49,815

46,427

6,458

13.90%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

12,204

12,433

12,388

12,411

12,236

-32

-0.30%

Bank term loan

-

-

-

-

-

-

-

Senior unsecured notes

8,505

7,761

7,759

7,756

7,059

1,446

20.50%

Total borrowings

20,709

20,194

20,147

20,167

19,295

1,414

7.30%

Accrued expenses and other liabilities

3,214

2,888

3,809

3,196

2,947

267

9.10%

Total liabilities

76,808

74,687

76,011

73,178

68,669

8,139

11.90%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

-

Additional paid-in capital

9,415

9,405

9,393

9,381

9,370

45

0.50%

Retained earnings

6,109

5,724

5,330

4,861

4,364

1,745

40%

Accumulated other comprehensive income:

-49

-55

-53

-24

-20

-29

145%

Treasury Stock

-1,144

-712

-475

-238

-

-1,144

NM

Total equity

14,332

14,363

14,196

13,981

13,715

617

4.50%

Total liabilities and equity

$91,140

$89,050

$90,207

$87,159

$82,384

$8,756

10.60%

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)

 

Quarter Ended

 

30-Jun-17

31-Mar-17

31-Dec-16

30-Sep-16

30-Jun-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

$10,758

$28

1.04%

$10,552

$21

0.81%

$12,210

$17

0.55%

$12,480

$16

0.51%

$11,623

$14

0.48%

Securities available for sale

5,195

15

1.16%

5,213

15

1.17%

4,076

11

1.07%

2,960

9

1.21%

2,858

7

0.99%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

71,206

3,858

21.73%

71,365

3,811

21.66%

69,660

3,851

21.99%

66,519

3,705

22.16%

63,876

3,432

21.61%

Consumer installment loans

1,461

34

9.33%

1,389

32

9.34%

1,373

31

8.98%

1,333

31

9.25%

1,233

28

9.13%

Commercial credit products

1,378

34

9.90%

1,317

34

10.47%

1,386

36

10.33%

1,401

35

9.94%

1,388

33

9.56%

Other

45

1

NM

61

-

-

57

1

NM

63

-

-

64

1

NM

Total loan receivables, including held for sale

74,090

3,927

21.26%

74,132

3,877

21.21%

72,476

3,919

21.51%

69,316

3,771

21.64%

66,561

3,494

21.11%

Total interest-earning assets

90,043

3,970

17.68%

89,897

3,913

17.65%

88,762

3,947

17.69%

84,756

3,796

17.82%

81,042

3,515

17.44%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

829

 

 

802

 

 

739

 

 

862

 

 

895

 

 

Allowance for loan losses

-4,781

 

 

-4,408

 

 

-4,228

 

 

-3,933

 

 

-3,732

 

 

Other assets

3,303

 

 

3,177

 

 

3,479

 

 

3,189

 

 

3,208

 

 

Total non-interest-earning assets

-649

 

 

-429

 

 

-10

 

 

118

 

 

371

 

 

Total assets

$89,394

 

 

$89,468

 

 

$88,752

 

 

$84,874

 

 

$81,413

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$51,836

$202

1.56%

$51,829

$194

1.52%

$51,006

$188

1.47%

$47,895

$188

1.56%

$45,523

$179

1.58%

Borrowings of consolidated securitization entities

12,213

63

2.07%

12,321

65

2.14%

12,389

64

2.06%

12,254

63

2.05%

12,211

59

1.94%

Bank term loan

-

-

-

-

-

-

-

-

-

-

-

-

65

7

NM

Senior unsecured notes

7,933

68

3.44%

7,760

67

3.50%

7,757

67

3.44%

7,448

64

3.42%

6,861

58

3.40%

Total interest-bearing liabilities

71,982

333

1.86%

71,910

326

1.84%

71,152

319

1.78%

67,597

315

1.85%

64,660

303

1.88%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

218

 

 

240

 

 

176

 

 

204

 

 

208

 

 

Other liabilities

2,752

 

 

2,995

 

 

3,321

 

 

3,175

 

 

3,002

 

 

Total non-interest-bearing liabilities

2,970

 

 

3,235

 

 

3,497

 

 

3,379

 

 

3,210

 

 

Total liabilities

74,952

 

 

75,145

 

 

74,649

 

 

70,976

 

 

67,870

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,442

 

 

14,323

 

 

14,103

 

 

13,898

 

 

13,543

 

 

Total liabilities and equity

$89,394

 

 

$89,468

 

 

$88,752

 

 

$84,874

 

 

$81,413

 

 

Net interest income

 

$3,637

 

 

$3,587

 

 

$3,628

 

 

$3,481

 

 

$3,212

 

Interest rate spread(1)

 

 

15.82%

 

 

15.81%

 

 

15.91%

 

 

15.97%

 

 

15.56%

Net interest margin(2)

 

 

16.20%

 

 

16.18%

 

 

16.26%

 

 

16.34%

 

 

15.94%

(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-17

30-Jun-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

$10,656

$49

0.93%%

$11,957

$30

0.50%

Securities available for sale

5,204

30

1.16%

2,918

13

0.90%

Loan receivables:

 

 

 

 

 

 

Credit cards, including held for sale

71,285

7,669

21.69%

63,781

6,868

21.65%

Consumer installment loans

1,425

66

9.34%

1,194

55

9.26%

Commercial credit products

1,348

68

10.17%

1,350

68

10.13%

Other

53

1

3.80%

52

1

3.87%

Total loan receivables, including held for sale

74,111

7,804

21.23%

66,377

6,992

21.18%

Total interest-earning assets

89,971

7,883

17.67%

81,252

7,035

17.41%

Non-interest-earning assets:

 

 

 

 

 

 

Cash and due from banks

816

 

 

1,131

 

 

Allowance for loan losses

-4,595

 

 

-3,661

 

 

Other assets

3,239

 

 

3,240

 

 

Total non-interest-earning assets

-540

 

 

710

 

 

Total assets

$89,431

 

 

$81,962

 

 

Liabilities

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Interest-bearing deposit accounts

$51,833

$396

1.54%

$44,914

$351

1.57%

Borrowings of consolidated securitization entities

12,267

128

2.10%

12,535

117

1.88%

Bank term loan(1)

-

-

-

1,118

31

5.58%

Senior unsecured notes

7,847

135

3.47%

6,709

115

3.45%

Total interest-bearing liabilities

71,947

659

1.85%

65,276

614

1.89%

Non-interest-bearing liabilities

 

 

 

 

 

 

Non-interest-bearing deposit accounts

229

 

 

221

 

 

Other liabilities

2,872

 

 

3,229

 

 

Total non-interest-bearing liabilities

3,101

 

 

3,450

 

 

Total liabilities

75,048

 

 

68,726

 

 

Equity

 

 

 

 

 

 

Total equity

14,383

 

 

13,236

 

 

Total liabilities and equity

$89,431

 

 

$81,962

 

 

Net interest income

 

$7,224

 

 

$6,421

 

Interest rate spread(2)

 

 

15.82%

 

 

15.52%

Net interest margin(3)

 

 

16.19%

 

 

15.89%

(1) The effective interest rate for the Bank term loan for the 6 months ended June 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

Jun 30, 2017 vs. Jun 30, 2016

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2017

2017

2016

2016

2016

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$14,332

$14,363

$14,196

$13,981

$13,715

$617

4.50%

Total common equity as a % of total assets

15.73%

16.13%

15.74%

16.04%

16.65%

 

-0.92%

Tangible assets

$89,362

$87,232

$88,546

$85,477

$80,731

$8,631

10.70%

Tangible common equity(1)

$12,554

$12,545

$12,535

$12,299

$12,062

$492

4.10%

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

14.05%

14.38%

14.16%

14.39%

14.94%

 

-0.89%

Tangible common equity per share(1)

$15.79

$15.47

$15.34

$14.90

$14.46

$1.33

9.20%

REGULATORY CAPITAL RATIOS(2)

 

 

 

 

 

 

 

Basel III Transition

Total risk-based capital ratio(3)

18.70%

19.30%

18.50%

19.50%

19.80%

 

 

Tier 1 risk-based capital ratio(4)

17.40%

18%

17.20%

18.20%

18.50%

 

 

Tier 1 leverage ratio(5)

14.80%

14.80%

15%

15.40%

15.70%

 

 

Common equity Tier 1 capital ratio(6)

17.40%

18%

17.20%

18.20%

18.50%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio(6)

17.20%

17.70%

17%

17.90%

18%

 

 

(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, 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

2Q'17 vs. 2Q'16

Six Months Ended

YTD'17 vs. YTD'16

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

2017

2017

2016

2016

2016

2017

2016

RETAIL CARD

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$27,101

$22,952

$28,996

$25,285

$25,411

$1,690

6.70%

$50,053

$46,961

$3,092

6.60%

Period-end loan receivables

$51,437

$49,905

$52,701

$48,010

$46,705

$4,732

10.10%

$51,437

$46,705

$4,732

10.10%

Average loan receivables, including held for sale

$50,533

$50,644

$49,476

$47,274

$45,593

$4,940

10.80%

$50,588

$45,536

$5,052

11.10%

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

54,058

55,049

54,489

52,959

52,314

1,744

3.30%

54,729

52,798

1,931

3.70%

Interest and fees on loans(2)

$2,900

$2,888

$2,909

$2,790

$2,585

$315

12.20%

$5,788

$5,199

$589

11.30%

Other income(2)

$25

$77

$70

$70

$69

($44)

-63.80%

$102

$148

($46)

-31.10%

Retailer share arrangements(2)

($657)

($681)

($801)

($752)

($656)

($1)

0.20%

($1,338)

($1,317)

($21)

1.60%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$3,930

$3,686

$4,194

$4,152

$3,903

$27

0.70%

$7,616

$7,295

$321

4.40%

Period-end loan receivables

$15,595

$15,320

$15,567

$14,798

$13,997

$1,598

11.40%

$15,595

$13,997

$1,598

11.40%

Average loan receivables

$15,338

$15,424

$15,076

$14,367

$13,554

$1,784

13.20%

$15,381

$13,492

$1,889

14%

Average active accounts (in thousands)(3)

9,031

9,090

8,844

8,461

8,153

878

10.80%

9,061

8,148

913

11.20%

Interest and fees on loans

$533

$515

$523

$505

$467

$66

14.10%

$1,048

$924

$124

13.40%

Other income

$6

$4

$3

$3

$3

$3

100%

$10

$7

$3

42.90%

Retailer share arrangements

($9)

($1)

($9)

($3)

($7)

($2)

28.60%

($10)

($14)

$4

-28.60%

CARECREDIT

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$2,445

$2,242

$2,179

$2,178

$2,193

$252

11.50%

$4,687

$4,228

$459

10.90%

Period-end loan receivables

$8,426

$8,125

$8,069

$7,836

$7,580

$846

11.20%

$8,426

$7,580

$846

11.20%

Average loan receivables

$8,219

$8,064

$7,924

$7,675

$7,414

$805

10.90%

$8,142

$7,349

$793

10.80%

Average active accounts (in thousands)(3)

5,546

5,490

5,368

5,219

5,064

482

9.50%

5,517

5,050

467

9.20%

Interest and fees on loans

$494

$474

$487

$476

$442

$52

11.80%

$968

$869

$99

11.40%

Other income

$26

$12

$12

$11

$11

$15

136.40%

$38

$20

$18

90%

Retailer share arrangements

($3)

($2)

($1)

($2)

($1)

($2)

NM

($5)

($3)

($2)

66.70%

TOTAL SYF

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$33,476

$28,880

$35,369

$31,615

$31,507

$1,969

6.20%

$62,356

$58,484

$3,872

6.60%

Period-end loan receivables

$75,458

$73,350

$76,337

$70,644

$68,282

$7,176

10.50%

$75,458

$68,282

$7,176

10.50%

Average loan receivables, including held for sale

$74,090

$74,132

$72,476

$69,316

$66,561

$7,529

11.30%

$74,111

$66,377

$7,734

11.70%

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

68,635

69,629

68,701

66,639

65,531

3,104

4.70%

69,307

65,996

3,311

5%

Interest and fees on loans(2)

$3,927

$3,877

$3,919

$3,771

$3,494

$433

12.40%

$7,804

$6,992

$812

11.60%

Other income(2)

$57

$93

$85

$84

$83

($26)

-31.30%

$150

$175

($25)

-14.30%

Retailer share arrangements(2)

($669)

($684)

($811)

($757)

($664)

($5)

0.80%

($1,353)

($1,334)

($19)

1.40%

(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,

2017

2017

2016

2016

2016

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$14,332

$14,363

$14,196

$13,981

$13,715

Less: Goodwill

-991

-992

-949

-949

-949

Less: Intangible assets, net

-787

-826

-712

-733

-704

Tangible common equity

$12,554

$12,545

$12,535

$12,299

$12,062

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

337

340

337

299

282

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

$12,891

$12,885

$12,872

$12,598

$12,344

Adjustment related to capital components during transition

146

154

263

273

266

Basel III - Common equity Tier 1 (transition)

$13,037

$13,039

$13,135

$12,871

$12,610

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$13,037

$13,039

$13,135

$12,871

$12,610

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

985

954

994

923

890

Risk-based capital

$14,022

$13,993

$14,129

$13,794

$13,500

ASSET MEASURES

 

 

 

 

 

Total average assets(2)

$89,394

$89,468

$88,752

$84,874

$81,413

Adjustments for:

 

 

 

 

 

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

-1,325

-1,358

-1,059

-1,117

-1,113

Total assets for leverage purposes

$88,069

$88,110

$87,693

$83,757

$80,300

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

$74,748

$72,596

$75,941

$70,448

$68,462

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

$74,792

$72,627

$76,179

$70,660

$68,188

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$18.02

$17.71

$17.37

$16.94

$16.45

Less: Goodwill

-1.25

-1.22

-1.16

-1.14

-1.14

Less: Intangible assets, net

-0.98

-1.02

-0.87

-0.9

-0.85

Tangible common equity per share

$15.79

$15.47

$15.34

$14.90

$14.46

(1) Regulatory measures at June 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
Samuel Wang, 203-585-2933