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 Nine Months Ended Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
3Q'17 vs. 3Q'16 Sep 30,
2017
Sep 30,
2016
YTD'17 vs. YTD'16
EARNINGS
Net interest income $ 3,876 $ 3,637 $ 3,587 $ 3,628 $ 3,481
$ 395 11.3 % $ 11,100 $ 9,902 $ 1,198 12.1 % Retailer share
arrangements (805 ) (669 ) (684 ) (811
) (757 ) (48 ) 6.3 % (2,158 )
(2,091 ) (67 ) 3.2 %
Net interest income, after
retailer share arrangements 3,071 2,968 2,903 2,817 2,724 347
12.7 % 8,942 7,811 1,131 14.5 % Provision for loan losses
1,310 1,326 1,306 1,076
986 324 32.9 %
3,942 2,910 1,032 35.5 %
Net interest income, after retailer share arrangements and
provision for loan losses 1,761 1,642 1,597 1,741 1,738 23 1.3
% 5,000 4,901 99 2.0 % Other income 76 57 93 85 84 (8 ) (9.5 )% 226
259 (33 ) (12.7 )% Other expense 958 911
908 918 859
99 11.5 % 2,777 2,498
279 11.2 %
Earnings before provision for
income taxes 879 788 782 908 963 (84 ) (8.7 )% 2,449 2,662 (213
) (8.0 )% Provision for income taxes 324 292
283 332 359
(35 ) (9.7 )% 899 987 (88
) (8.9 )%
Net earnings $ 555 $ 496 $
499 $ 576 $ 604 $ (49 ) (8.1 )% $ 1,550
$ 1,675 $ (125 ) (7.5 )%
Net
earnings attributable to common stockholders $ 555 $ 496
$ 499 $ 576 $ 604 $ (49 ) (8.1
)% $ 1,550 $ 1,675 $ (125 ) (7.5
)%
COMMON SHARE
STATISTICS
Basic EPS $ 0.70 $ 0.62 $ 0.61 $ 0.70 $ 0.73 $ (0.03 ) (4.1 )% $
1.93 $ 2.01 $ (0.08 ) (4.0 )% Diluted EPS $ 0.70 $ 0.61 $ 0.61 $
0.70 $ 0.73 $ (0.03 ) (4.1 )% $ 1.93 $ 2.01 $ (0.08 ) (4.0 )%
Dividend declared per share $ 0.15 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $
0.02 15.4 % $ 0.41 $ 0.13 $ 0.28 NM Common stock price $ 31.05 $
29.82 $ 34.30 $ 36.27 $ 28.00 $ 3.05 10.9 % $ 31.05 $ 28.00 $ 3.05
10.9 % Book value per share $ 18.40 $ 18.02 $ 17.71 $ 17.37 $ 16.94
$ 1.46 8.6 % $ 18.40 $ 16.94 $ 1.46 8.6 % Tangible common equity
per share(1) $ 16.15 $ 15.79 $ 15.47 $ 15.34 $ 14.90 $ 1.25 8.4 % $
16.15 $ 14.90 $ 1.25 8.4 % Beginning common shares
outstanding 795.3 810.8 817.4 825.5 833.9 (38.6 ) (4.6 )% 817.4
833.8 (16.4 ) (2.0 )% Issuance of common shares - - - - - - - % - -
- - % Stock-based compensation 0.1 0.2 - - 0.1 - - % 0.3 0.2 0.1
50.0 % Shares repurchased (12.8 ) (15.7 ) (6.6
) (8.1 ) (8.5 ) (4.3 ) 50.6 %
(35.1 ) (8.5 ) (26.6 ) NM Ending common
shares outstanding 782.6 795.3 810.8 817.4 825.5 (42.9 ) (5.2 )%
782.6 825.5 (42.9 ) (5.2 )% Weighted average common shares
outstanding 787.3 804.0 813.1 820.5 828.4 (41.1 ) (5.0 )% 801.3
832.1 (30.8 ) (3.7 )% Weighted average common shares outstanding
(fully diluted) 790.9 807.4 817.1 823.8 830.6 (39.7 ) (4.8 )% 805.0
834.1 (29.1 ) (3.5 )%
(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 Nine Months
Ended Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
3Q'17 vs. 3Q'16 Sep 30,
2017
Sep 30,
2016
YTD'17 vs. YTD'16
PERFORMANCE
METRICS
Return on assets(1) 2.4 % 2.2 % 2.3 % 2.6 % 2.8 % (0.4 )% 2.3 % 2.7
% (0.4 )% Return on equity(2) 15.3 % 13.8 % 14.1 % 16.2 % 17.3 %
(2.0 )% 14.4 % 16.6 % (2.2 )% Return on tangible common equity(3)
17.4 % 15.7 % 16.1 % 18.4 % 19.6 % (2.2 )% 16.4 % 18.9 % (2.5 )%
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) 30.4 % 30.1 % 30.3 %
31.6 % 30.6 % (0.2 )% 30.3 % 31.0 % (0.7 )% 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 36.9 % 37.1 % 36.2 % 36.6 % 37.3 % (0.4 )% 36.7 % 37.1 %
(0.4 )%
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 24.2 % $ 2,925 $ 2,292 $ 633
27.6 % Loan receivables delinquent over 30 days(6) $ 3,694 $ 3,208
$ 3,120 $ 3,295 $ 3,008 $ 686 22.8 % $ 3,694 $ 3,008 $ 686 22.8 %
Loan receivables delinquent over 90 days(6) $ 1,707 $ 1,435 $ 1,508
$ 1,546 $ 1,334 $ 373 28.0 % $ 1,707 $ 1,334 $ 373 28.0 %
Allowance for loan losses (period-end) $ 5,361 $ 5,001 $ 4,676 $
4,344 $ 4,115 $ 1,246 30.3 % $ 5,361 $ 4,115 $ 1,246 30.3 %
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 4.0 % $ 95,249 $ 90,099 $ 5,150 5.7 % Period-end loan
receivables $ 76,928 $ 75,458 $ 73,350 $ 76,337 $ 70,644 $ 6,284
8.9 % $ 76,928 $ 70,644 $ 6,284 8.9 % Credit cards $ 73,946 $
72,492 $ 70,587 $ 73,580 $ 67,858 $ 6,088 9.0 % $ 73,946 $ 67,858 $
6,088 9.0 % Consumer installment loans $ 1,561 $ 1,514 $ 1,411 $
1,384 $ 1,361 $ 200 14.7 % $ 1,561 $ 1,361 $ 200 14.7 % Commercial
credit products $ 1,384 $ 1,386 $ 1,311 $ 1,333 $ 1,385 $ (1 ) (0.1
)% $ 1,384 $ 1,385 $ (1 ) (0.1 )% Other $ 37 $ 66 $ 41 $ 40 $ 40 $
(3 ) (7.5 )% $ 37 $ 40 $ (3 ) (7.5 )% Average loan receivables,
including held for sale $ 76,165 $ 74,090 $ 74,132 $ 72,476 $
69,316 $ 6,849 9.9 % $ 74,803 $ 67,364 $ 7,439 11.0 % Period-end
active accounts (in thousands)(9) 69,008 69,277 67,905 71,890
66,781 2,227 3.3 % 69,008 66,781 2,227 3.3 % Average active
accounts (in thousands)(9) 69,331 68,635 69,629 68,701 66,639 2,692
4.0 % 69,319 66,204 3,115 4.7 %
LIQUIDITY
Liquid assets Cash and equivalents $ 13,915 $ 12,020 $
11,392 $ 9,321 $ 13,588 $ 327 2.4 % $ 13,915 $ 13,588 $ 327 2.4 %
Total liquid assets $ 16,391 $ 15,274 $ 16,158 $ 13,612 $ 16,362 $
29 0.2 % $ 16,391 $ 16,362 $ 29 0.2 %
Undrawn credit
facilities Undrawn credit facilities $ 5,650 $ 6,650 $ 5,600 $
6,700 $ 7,150 $ (1,500 ) (21.0 )% $ 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 ) (6.3 )% $
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 Nine Months Ended Sep
30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
3Q'17 vs. 3Q'16 Sep 30,
2017
Sep 30,
2016
YTD'17 vs. YTD'16 Interest income: Interest and fees
on loans $ 4,182 $ 3,927 $ 3,877 $ 3,919 $ 3,771 $ 411 10.9 % $
11,986 $ 10,763 $ 1,223 11.4 % Interest on investment securities
51 43 36 28
25 26 104.0 % 130
68 62 91.2 % Total interest
income 4,233 3,970 3,913 3,947 3,796 437 11.5 % 12,116 10,831 1,285
11.9 %
Interest expense: Interest on deposits 219 202
194 188 188 31 16.5 % 615 539 76 14.1 % Interest on borrowings of
consolidated securitization entities 65 63 65 64 63 2 3.2 % 193 180
13 7.2 % Interest on third-party debt 73 68
67 67 64 9
14.1 % 208 210 (2
) (1.0 )% Total interest expense 357 333 326 319 315 42 13.3
% 1,016 929 87 9.4 %
Net interest
income 3,876 3,637 3,587 3,628 3,481 395 11.3 % 11,100 9,902 1,198
12.1 % Retailer share arrangements (805 ) (669
) (684 ) (811 ) (757 ) (48 ) 6.3
% (2,158 ) (2,091 ) (67 ) 3.2 % Net
interest income, after retailer share arrangements 3,071 2,968
2,903 2,817 2,724 347 12.7 % 8,942 7,811 1,131 14.5 %
Provision for loan losses 1,310 1,326
1,306 1,076 986
324 32.9 % 3,942 2,910
1,032 35.5 % Net interest income, after
retailer share arrangements and provision for loan losses 1,761
1,642 1,597 1,741 1,738 23 1.3 % 5,000 4,901 99 2.0 %
Other income: Interchange revenue 164 165 145 167 154 10 6.5
% 474 435 39 9.0 % Debt cancellation fees 67 68 68 68 67 - - % 203
194 9 4.6 % Loyalty programs (168 ) (206 ) (137 ) (157 ) (145 ) (23
) 15.9 % (511 ) (390 ) (121 ) 31.0 % Other 13
30 17 7 8 5
62.5 % 60 20 40
NM Total other income 76
57 93 85 84
(8 ) (9.5 )% 226 259 (33
) (12.7 )%
Other expense: Employee costs 335
321 325 315 311 24 7.7 % 981 892 89 10.0 % Professional fees 161
158 151 164 174 (13 ) (7.5 )% 470 474 (4 ) (0.8 )% Marketing and
business development 124 124 94 130 92 32 34.8 % 342 293 49 16.7 %
Information processing 96 88 90 88 87 9 10.3 % 274 250 24 9.6 %
Other 242 220 248
221 195 47 24.1 %
710 589 121 20.5 % Total
other expense 958 911 908 918 859 99 11.5 % 2,777 2,498 279 11.2 %
Earnings before provision for income
taxes 879 788 782 908 963 (84 ) (8.7 )% 2,449 2,662 (213 ) (8.0
)% Provision for income taxes 324 292
283 332 359 (35 )
(9.7 )% 899 987 (88 )
(8.9 )%
Net earnings attributable to common
shareholders
$ 555 $ 496 $ 499 $ 576 $ 604 $
(49 ) (8.1 )% $ 1,550 $ 1,675 $ (125 )
(7.5 )%
SYNCHRONY FINANCIAL STATEMENTS OF FINANCIAL POSITION
(unaudited, $ in millions) Quarter Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30, 2017 vs.
Sep 30, 2016
Assets Cash and equivalents $ 13,915 $ 12,020 $ 11,392 $
9,321 $ 13,588 $ 327 2.4 % Investment securities 3,317 3,997 5,328
5,110 3,356 (39 ) (1.2 )% Loan receivables: Unsecuritized loans
held for investment 53,997 52,550 50,398 52,332 47,517 6,480 13.6 %
Restricted loans of consolidated securitization entities
22,931 22,908 22,952
24,005 23,127 (196 ) (0.8 )%
Total loan receivables 76,928 75,458 73,350 76,337 70,644 6,284 8.9
% Less: Allowance for loan losses (5,361 ) (5,001 )
(4,676 ) (4,344 ) (4,115 ) (1,246 )
30.3 % Loan receivables, net 71,567 70,457 68,674 71,993
66,529 5,038 7.6 % Goodwill 991 991 992 949 949 42 4.4 % Intangible
assets, net 772 787 826 712 733 39 5.3 % Other assets 1,986
2,888 1,838 2,122
2,004 (18 ) (0.9 )% Total assets $
92,548 $ 91,140 $ 89,050 $ 90,207 $
87,159 $ 5,389 6.2 %
Liabilities and
Equity Deposits: Interest-bearing deposit accounts $ 54,232 $
52,659 $ 51,359 $ 51,896 $ 49,611 $ 4,621 9.3 %
Non-interest-bearing deposit accounts 222 226
246 159 204
18 8.8 % Total deposits 54,454 52,885 51,605 52,055
49,815 4,639 9.3 % Borrowings: Borrowings of consolidated
securitization entities 11,891 12,204 12,433 12,388 12,411 (520 )
(4.2 )% Bank term loan - - - - - - - % Senior unsecured notes
8,008 8,505 7,761
7,759 7,756 252 3.2 %
Total borrowings 19,899 20,709 20,194 20,147 20,167 (268 ) (1.3 )%
Accrued expenses and other liabilities 3,793
3,214 2,888 3,809 3,196
597 18.7 % Total liabilities 78,146
76,808 74,687 76,011 73,178 4,968 6.8 % Equity: Common stock 1 1 1
1 1 - - % Additional paid-in capital 9,429 9,415 9,405 9,393 9,381
48 0.5 % Retained earnings 6,543 6,109 5,724 5,330 4,861 1,682 34.6
% Accumulated other comprehensive income: (40 ) (49 ) (55 ) (53 )
(24 ) (16 ) 66.7 % 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 3.0 % Total liabilities and equity $
92,548 $ 91,140 $ 89,050 $ 90,207 $
87,159 $ 5,389 6.2 %
SYNCHRONY FINANCIAL AVERAGE BALANCES, NET INTEREST INCOME
AND NET INTEREST MARGIN (unaudited, $ in millions)
Quarter Ended
Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec
31, 2016 Sep 30, 2016 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 9.00 % 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
Sep 30, 2017
Nine Months Ended
Sep 30, 2016
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 1.00 %
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) 16.00 % 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
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30, 2017 vs.
Sep 30, 2016
BALANCE SHEET
STATISTICS
Total common equity $ 14,402 $ 14,332 $ 14,363 $ 14,196 $ 13,981 $
421 3.0 % 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) 18.7
% 18.7 % 19.3 % 18.5 % 19.5 % Tier 1 risk-based capital ratio(4)
17.3 % 17.4 % 18.0 % 17.2 % 18.2 % Tier 1 leverage ratio(5) 14.6 %
14.8 % 14.8 % 15.0 % 15.4 % Common equity Tier 1 capital ratio(6)
17.3 % 17.4 % 18.0 % 17.2 % 18.2 %
Basel III Fully
Phased-in Common equity Tier 1 capital ratio(6) 17.2 % 17.2 %
17.7 % 17.0 % 17.9 %
(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 Nine Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
3Q'17 vs. 3Q'16 Sep 30,
2017
Sep 30,
2016
YTD'17 vs. YTD'16
RETAIL
CARD
Purchase volume(1)(2) $ 26,347 $ 27,101 $ 22,952 $ 28,996 $ 25,285
$ 1,062 4.2 % $ 76,400 $ 72,246 $ 4,154 5.7 % Period-end loan
receivables $ 52,119 $ 51,437 $ 49,905 $ 52,701 $ 48,010 $ 4,109
8.6 % $ 52,119 $ 48,010 $ 4,109 8.6 % Average loan receivables,
including held for sale $ 51,817 $ 50,533 $ 50,644 $ 49,476 $
47,274 $ 4,543 9.6 % $ 51,002 $ 46,119 $ 4,883 10.6 % Average
active accounts (in thousands)(2)(3) 54,471 54,058 55,049 54,489
52,959 1,512 2.9 % 54,639 52,834 1,805 3.4 % Interest and
fees on loans(2) $ 3,102 $ 2,900 $ 2,888 $ 2,909 $ 2,790 $ 312 11.2
% $ 8,890 $ 7,989 $ 901 11.3 % Other income(2) $ 61 $ 25 $ 77 $ 70
$ 70 $ (9 ) (12.9 )% $ 163 $ 218 $ (55 ) (25.2 )% Retailer share
arrangements(2) $ (795 ) $ (657 ) $ (681 ) $ (801 ) $ (752 ) $ (43
) 5.7 % $ (2,133 ) $ (2,069 ) $ (64 ) 3.1 %
PAYMENT
SOLUTIONS
Purchase volume(1) $ 4,178 $ 3,930 $ 3,686 $ 4,194 $ 4,152 $ 26 0.6
% $ 11,794 $ 11,447 $ 347 3.0 % Period-end loan receivables $
16,153 $ 15,595 $ 15,320 $ 15,567 $ 14,798 $ 1,355 9.2 % $ 16,153 $
14,798 $ 1,355 9.2 % Average loan receivables $ 15,848 $ 15,338 $
15,424 $ 15,076 $ 14,367 $ 1,481 10.3 % $ 15,538 $ 13,786 $ 1,752
12.7 % Average active accounts (in thousands)(3) 9,183 9,031 9,090
8,844 8,461 722 8.5 % 9,108 8,261 847 10.3 % Interest and
fees on loans $ 559 $ 533 $ 515 $ 523 $ 505 $ 54 10.7 % $ 1,607 $
1,429 $ 178 12.5 % Other income $ 2 $ 6 $ 4 $ 3 $ 3 $ (1 ) (33.3 )%
$ 12 $ 10 $ 2 20.0 % Retailer share arrangements $ (9 ) $ (9 ) $ (1
) $ (9 ) $ (3 ) $ (6 ) NM $ (19 ) $ (17 ) $ (2 ) 11.8 %
CARECREDIT
Purchase volume(1) $ 2,368 $ 2,445 $ 2,242 $ 2,179 $ 2,178 $ 190
8.7 % $ 7,055 $ 6,406 $ 649 10.1 % Period-end loan receivables $
8,656 $ 8,426 $ 8,125 $ 8,069 $ 7,836 $ 820 10.5 % $ 8,656 $ 7,836
$ 820 10.5 % Average loan receivables $ 8,500 $ 8,219 $ 8,064 $
7,924 $ 7,675 $ 825 10.7 % $ 8,263 $ 7,459 $ 804 10.8 % Average
active accounts (in thousands)(3) 5,677 5,546 5,490 5,368 5,219 458
8.8 % 5,572 5,109 463 9.1 % Interest and fees on loans $ 521
$ 494 $ 474 $ 487 $ 476 $ 45 9.5 % $ 1,489 $ 1,345 $ 144 10.7 %
Other income $ 13 $ 26 $ 12 $ 12 $ 11 $ 2 18.2 % $ 51 $ 31 $ 20
64.5 % Retailer share arrangements $ (1 ) $ (3 ) $ (2 ) $ (1 ) $ (2
) $ 1 (50.0 )% $ (6 ) $ (5 ) $ (1 ) 20.0 %
TOTAL
SYF
Purchase volume(1)(2) $ 32,893 $ 33,476 $ 28,880 $ 35,369 $ 31,615
$ 1,278 4.0 % $ 95,249 $ 90,099 $ 5,150 5.7 % Period-end loan
receivables $ 76,928 $ 75,458 $ 73,350 $ 76,337 $ 70,644 $ 6,284
8.9 % $ 76,928 $ 70,644 $ 6,284 8.9 % Average loan receivables,
including held for sale $ 76,165 $ 74,090 $ 74,132 $ 72,476 $
69,316 $ 6,849 9.9 % $ 74,803 $ 67,364 $ 7,439 11.0 % Average
active accounts (in thousands)(2)(3) 69,331 68,635 69,629 68,701
66,639 2,692 4.0 % 69,319 66,204 3,115 4.7 % Interest and
fees on loans(2) $ 4,182 $ 3,927 $ 3,877 $ 3,919 $ 3,771 $ 411 10.9
% $ 11,986 $ 10,763 $ 1,223 11.4 % Other income(2) $ 76 $ 57 $ 93 $
85 $ 84 $ (8 ) (9.5 )% $ 226 $ 259 $ (33 ) (12.7 )% Retailer share
arrangements(2) $ (805 ) $ (669 ) $ (684 ) $ (811 ) $ (757 ) $ (48
) 6.3 % $ (2,158 ) $ (2,091 ) $ (67 ) 3.2 %
(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,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
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
(1,304 ) (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171020005107/en/
Synchrony FinancialInvestor Relations:Greg Ketron,
203-585-6291orMedia RelationsLisa Lanspery, 203-585-6143
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