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Synchrony Financial Reports Third Quarter Net Earnings of $1.1 Billion or $1.60 Per Diluted Share

Includes Benefit from Walmart Portfolio Reserve Reduction of $0.38 Per Diluted Share

STAMFORD, Conn., Oct. 18, 2019 /PRNewswire/ -- Synchrony Financial (SYF) today announced third quarter 2019 net earnings of $1.1 billion, or $1.60 per diluted share; this includes a $326 million pre-tax, $248 million after-tax, or $0.38 per diluted share benefit from a reduction in the reserve related to the sale of the Walmart consumer portfolio, which was completed in October. Highlights included*:

Synchrony Logo (PRNewsfoto/Synchrony)
  • Loan receivables decreased 5% to $83.2 billion; excluding the Walmart portfolio from both periods, loan receivables grew 6%
  • Net interest income increased 4% to $4.4 billion
  • Purchase volume grew 5% to $38.4 billion; and average active accounts grew 2% to 76.7 million
  • Deposits grew $3.7 billion, or 6%, to $66.0 billion
  • Completed the sale of the Walmart portfolio on October 11, 2019
  • Expanded and extended key strategic consumer credit relationship with PayPal: will become the exclusive issuer of a Venmo co-branded consumer credit card, which is expected to launch in the second half of 2020, and extended existing PayPal relationship
  • Renewed key Retail Card partnership: DICK'S Sporting Goods
  • Renewed key Payment Solutions partnerships: Polaris, La-Z-Boy and Conn's HomePlus
  • Expanded CareCredit credit card network to include 8,500+ Walgreens® and Duane Reade® stores and Loyale™ Healthcare and signed a new partnership with St. Luke's University Health Network
  • Paid quarterly common stock dividend of $0.22 per share and repurchased $550 million of Synchrony Financial common stock

"We continue to deliver strong results as we develop innovative and seamless digital consumer experiences driven by our technology and data investments. These capabilities have helped us grow organically, enabling the extension of key partnerships, while also helping us win new ones with fast-growing, digital-first partners. Our growth is supported by expanded acceptance and usage in our Home, Auto and CareCredit networks, and is funded through substantial growth in our direct-to-consumer deposit platform," said Margaret Keane, Chief Executive Officer of Synchrony Financial. "Our focus is on executing a capital allocation strategy that drives strong growth at attractive risk adjusted returns, while maintaining a strong balance sheet and the ability to return capital to shareholders."

* All comparisons are for the third quarter of 2019 compared to the third quarter of 2018, unless otherwise noted

Business and Financial Highlights for the Third Quarter of 2019

All comparisons are for the third quarter of 2019 compared to the third quarter of 2018, unless otherwise noted.

Earnings

  • Net interest income increased $183 million, or 4%, to $4.4 billion, primarily driven by loan receivables growth.
  • Retailer share arrangements increased $145 million, or 17%, to $1.0 billion, mainly driven by improved program performance and growth in loan receivables.
  • Provision for loan losses decreased $432 million, or 30%, to $1.0 billion, largely driven by the $326 million reserve reduction related to the Walmart portfolio.
  • Other income increased $22 million, or 35%, to $85 million.
  • Other expense increased $10 million, or 1%, to $1.1 billion.
  • Net earnings totaled $1.1 billion compared to $671 million last year.

Balance Sheet

  • Period-end loan receivables decreased 5%; excluding the Walmart portfolio from both periods, period-end loan receivables growth was 6%; purchase volume growth was 5% and average active accounts increased 2%.
  • Deposits grew to $66.0 billion, up $3.7 billion, or 6%, and comprised 76% of funding.
  • The Company's balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $21.7 billion, or 20.5% of total assets.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.5%, compared to 14.2%, reflecting the Company's strong capital generation capabilities while deploying capital through organic growth, program acquisitions, and continued execution of our capital plans.

Key Financial Metrics

  • Return on assets was 3.9% and return on equity was 28.3%.
  • Net interest margin was 16.29%.
  • Efficiency ratio was 30.8%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.47% compared to 4.59% last year; excluding the PayPal Credit program and the Walmart portfolio, the rate was flat compared to last year.
  • Net charge-offs as a percentage of total average loan receivables were 5.35% compared to 4.97% last year; excluding the PayPal Credit program and the Walmart portfolio, the rate decreased approximately 20 basis points compared to last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.74% compared to 7.11% last year.

Sales Platforms

  • Retail Card period-end loan receivables decreased 11%; excluding the Walmart portfolio from both periods, period-end loan receivables growth was 5% and driven by digital partners; interest and fees on loans increased 6%, primarily driven by loan receivables growth. Purchase volume growth was 5%, and average active accounts increased 1%.
  • Payment Solutions period-end loan receivables grew 7%, led by home furnishings and power products. Interest and fees on loans increased 6%, primarily driven by the loan receivables growth. Purchase volume growth was 5% and average active accounts increased 3%.
  • CareCredit period-end loan receivables grew 8%, led by dental and veterinary. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 10% and average active accounts increased 4%.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed February 15, 2019, and the Company's forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. 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 18, 2019, at 7:30 a.m. Eastern Time, Margaret Keane, Chief Executive Officer, Brian Doubles, President, and Brian Wenzel, 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 32019#, and can be accessed beginning approximately two hours after the event through November 1, 2019.

About Synchrony Financial

Synchrony Financial (SYF) is a premier consumer financial services company delivering customized financing programs across key industries including retail, health, auto, travel and home, along with award-winning consumer banking products. With more than $140 billion in sales financed and 80.3 million active accounts, Synchrony Financial brings deep industry expertise, actionable data insights, innovative solutions and differentiated digital experiences to improve the success of every business we serve and the quality of each life we touch. More information can be found at www.synchronyfinancial.com and through Twitter: @Synchrony.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "estimates," "will," "should," "may" or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; cyber-attacks or other security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislative and regulatory developments 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, 2018, as filed on February 15, 2019. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as "tangible common equity" and certain "Core" financial measures that have been adjusted to exclude amounts related to the Walmart portfolio, 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,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


3Q'19 vs. 3Q'18


Sep 30,
2019


Sep 30,
2018


YTD'19 vs. YTD'18

EARNINGS




















Net interest income

$4,389


$4,155


$4,226


$4,333


$4,206


$183

4.4%


$12,770


$11,785


$985

8.4%

Retailer share arrangements

(1,016)


(859)


(954)


(855)


(871)


(145)

16.6%


(2,829)


(2,244)


(585)

26.1%

Provision for loan losses

1,019


1,198


859


1,452


1,451


(432)

(29.8)%


3,076


4,093


(1,017)

(24.8)%

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

2,354


2,098


2,413


2,026


1,884


470

24.9%


6,865


5,448


1,417

26.0%

Other income

85


90


92


64


63


22

34.9%


267


201


66

32.8%

Other expense

1,064


1,059


1,043


1,078


1,054


10

0.9%


3,166


3,017


149

4.9%

Earnings before provision for income taxes

1,375


1,129


1,462


1,012


893


482

54.0%


3,966


2,632


1,334

50.7%

Provision for income taxes

319


276


355


229


222


97

43.7%


950


625


325

52.0%

Net earnings

$1,056


$853


$1,107


$783


$671


$385

57.4%


$3,016


$2,007


$1,009

50.3%

Net earnings attributable to common stockholders

$1,056


$853


$1,107


$783


$671


$385

57.4%


$3,016


$2,007


$1,009

50.3%





















COMMON SHARE STATISTICS




















Basic EPS

$1.60


$1.25


$1.57


$1.09


$0.91


$0.69

75.8%


$4.42


$2.68


$1.74

64.9%

Diluted EPS

$1.60


$1.24


$1.56


$1.09


$0.91


$0.69

75.8%


$4.40


$2.66


$1.74

65.4%

Dividend declared per share

$0.22


$0.21


$0.21


$0.21


$0.21


$0.01

4.8%


$0.64


$0.51


$0.13

25.5%

Common stock price

$34.09


$34.67


$31.90


$23.46


$31.08


$3.01

9.7%


$34.09


$31.08


$3.01

9.7%

Book value per share

$23.13


$22.03


$21.35


$20.42


$19.47


$3.66

18.8%


$23.13


$19.47


$3.66

18.8%

Tangible common equity per share(1)

$19.68


$18.60


$17.96


$17.41


$16.51


$3.17

19.2%


$19.68


$16.51


$3.17

19.2%

Beginning common shares outstanding

668.9


688.8


718.8


718.7


746.6


(77.7)

(10.4)%


718.8


770.5


(51.7)

(6.7)%

Issuance of common shares

-


-


-


-


-


-

- %


-


-


-

- %

Stock-based compensation

0.4


1.2


0.9


0.1


2.4


(2.0)

(83.3)%


2.5


2.9


(0.4)

(13.8)%

Shares repurchased

(15.6)


(21.1)


(30.9)


-


(30.3)


14.7

(48.5)%


(67.6)


(54.7)


(12.9)

23.6%

Ending common shares outstanding

653.7


668.9


688.8


718.8


718.7


(65.0)

(9.0)%


653.7


718.7


(65.0)

(9.0)%

Weighted average common shares outstanding

658.3


683.6


706.3


718.7


734.9


(76.6)

(10.4)%


682.5


750.2


(67.7)

(9.0)%

Weighted average common shares outstanding (fully diluted)

661.7


686.5


708.9


720.9


738.8


(77.1)

(10.4)%


685.6


755.7


(70.1)

(9.3)%





















(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)





















Quarter Ended




Nine Months Ended





Sep 30,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


3Q'19 vs. 3Q'18


Sep 30,
2019


Sep 30,
2018


YTD'19 vs. YTD'18

PERFORMANCE METRICS




















Return on assets(1)

3.9%


3.3%


4.3%


2.9%


2.7%



1.2%


3.8%


2.8%



1.0%

Return on equity(2)

28.3%


23.1%


30.4%


21.5%


18.5%



9.8%


27.2%


18.7%



8.5%

Return on tangible common equity(3)

33.4%


27.4%


35.8%


25.2%


21.5%



11.9%


32.2%


21.5%



10.7%

Net interest margin(4)

16.29%


15.75%


16.08%


16.06%


16.41%



(0.12)%


16.04%


15.94%



0.10%

Efficiency ratio(5)

30.8%


31.3%


31.0%


30.4%


31.0%



(0.2)%


31.0%


31.0%



- %

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

4.66%


4.78%


4.71%


4.79%


4.82%



(0.16)%


4.72%


4.96%



(0.24)%

Effective income tax rate

23.2%


24.4%


24.3%


22.6%


24.9%



(1.7)%


24.0%


23.7%



0.3%





















CREDIT QUALITY METRICS




















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

5.35%


6.01%


6.06%


5.54%


4.97%



0.38%


5.80%


5.67%



0.13%

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

4.47%


4.43%


4.92%


4.76%


4.59%



(0.12)%


4.47%


4.59%



(0.12)%

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

2.07%


2.16%


2.51%


2.29%


2.09%



(0.02)%


2.07%


2.09%



(0.02)%

Net charge-offs

$1,221


$1,331


$1,344


$1,248


$1,087


$134

12.3%


$3,896


$3,444


$452

13.1%

Loan receivables delinquent over 30 days(6)

$3,723


$3,625


$3,957


$4,430


$4,021


$(298)

(7.4)%


$3,723


$4,021


$(298)

(7.4)%

Loan receivables delinquent over 90 days(6)

$1,723


$1,768


$2,019


$2,135


$1,833


$(110)

(6.0)%


$1,723


$1,833


$(110)

(6.0)%

Allowance for loan losses (period-end)

$5,607


$5,809


$5,942


$6,427


$6,223


$(616)

(9.9)%


$5,607


$6,223


$(616)

(9.9)%

Allowance coverage ratio(7)

6.74%


7.10%


7.39%


6.90%


7.11%



(0.37)%


6.74%


7.11%



(0.37)%





















BUSINESS METRICS




















Purchase volume(8)(9)

$38,395


$38,291


$32,513


$40,320


$36,443


$1,952

5.4%


$109,199


$100,337


$8,862

8.8%

Period-end loan receivables

$83,207


$81,796


$80,405


$93,139


$87,521


$(4,314)

(4.9)%


$83,207


$87,521


$(4,314)

(4.9)%

Credit cards

$79,788


$78,446


$77,251


$89,994


$84,319


$(4,531)

(5.4)%


$79,788


$84,319


$(4,531)

(5.4)%

Consumer installment loans

$2,050


$1,983


$1,860


$1,845


$1,789


$261

14.6%


$2,050


$1,789


$261

14.6%

Commercial credit products

$1,317


$1,328


$1,256


$1,260


$1,353


$(36)

(2.7)%


$1,317


$1,353


$(36)

(2.7)%

Other

$52


$39


$38


$40


$60


$(8)

(13.3)%


$52


$60


$(8)

(13.3)%

Average loan receivables, including held for sale

$90,556


$88,792


$89,903


$89,340


$86,783


$3,773

4.3%


$89,752


$81,270


$8,482

10.4%

Period-end active accounts (in thousands)(9)(10)

77,094


76,065


74,812


80,339


75,457


1,637

2.2%


77,094


75,457


1,637

2.2%

Average active accounts (in thousands)(9)(10)

76,695


75,525


77,132


77,382


75,482


1,213

1.6%


76,653


72,594


4,059

5.6%





















LIQUIDITY




















Liquid assets




















Cash and equivalents

$11,461


$11,755


$12,963


$9,396


$12,068


$(607)

(5.0)%


$11,461


$12,068


$(607)

(5.0)%

Total liquid assets

$15,201


$16,665


$17,360


$14,822


$18,214


$(3,013)

(16.5)%


$15,201


$18,214


$(3,013)

(16.5)%

Undrawn credit facilities




















Undrawn credit facilities

$6,500


$7,050


$6,050


$4,375


$5,125


$1,375

26.8%


$6,500


$5,125


$1,375

26.8%

Total liquid assets and undrawn credit facilities

$21,701


$23,715


$23,410


$19,197


$23,339


$(1,638)

(7.0)%


$21,701


$23,339


$(1,638)

(7.0)%

Liquid assets % of total assets

14.35%


15.66%


16.47%


13.88%


17.42%



(3.07)%


14.35%


17.42%



(3.07)%

Liquid assets including undrawn credit facilities % of total assets

20.48%


22.29%


22.21%


17.98%


22.32%



(1.84)%


20.48%


22.32%



(1.84)%





















(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, plus other income, less retailer share arrangements.

(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) Includes activity and accounts associated with loan receivables held for sale.

(10) 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,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


3Q'19 vs. 3Q'18


Sep 30,
2019


Sep 30,
2018


YTD'19 vs. YTD'18

Interest income:




















Interest and fees on loans

$4,890


$4,636


$4,687


$4,774


$4,617


$273

5.9%


$14,213


$12,870


$1,343

10.4%

Interest on cash and investment securities

91


102


99


102


77


14

18.2%


292


242


50

20.7%

Total interest income

4,981


4,738


4,786


4,876


4,694


287

6.1%


14,505


13,112


1,393

10.6%

Interest expense:




















Interest on deposits

411


397


375


350


314


97

30.9%


1,183


836


347

41.5%

Interest on borrowings of consolidated securitization entities

88


90


100


104


86


2

2.3%


278


240


38

15.8%

Interest on senior unsecured notes

93


96


85


89


88


5

5.7%


274


251


23

9.2%

Total interest expense

592


583


560


543


488


104

21.3%


1,735


1,327


408

30.7%





















Net interest income

4,389


4,155


4,226


4,333


4,206


183

4.4%


12,770


11,785


985

8.4%





















Retailer share arrangements

(1,016)


(859)


(954)


(855)


(871)


(145)

16.6%


(2,829)


(2,244)


(585)

26.1%

Provision for loan losses

1,019


1,198


859


1,452


1,451


(432)

(29.8)%


3,076


4,093


(1,017)

(24.8)%

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

2,354


2,098


2,413


2,026


1,884


470

24.9%


6,865


5,448


1,417

26.0%





















Other income:




















Interchange revenue

197


194


165


193


182


15

8.2%


556


517


39

7.5%

Debt cancellation fees

64


69


68


70


65


(1)

(1.5)%


201


197


4

2.0%

Loyalty programs

(203)


(192)


(167)


(208)


(196)


(7)

3.6%


(562)


(543)


(19)

3.5%

Other

27


19


26


9


12


15

125.0%


72


30


42

140.0%

Total other income

85


90


92


64


63


22

34.9%


267


201


66

32.8%





















Other expense:




















Employee costs

359


358


353


353


365


(6)

(1.6)%


1,070


1,074


(4)

(0.4)%

Professional fees

205


231


232


231


232


(27)

(11.6)%


668


575


93

16.2%

Marketing and business development

139


135


123


166


131


8

6.1%


397


362


35

9.7%

Information processing

127


123


113


118


105


22

21.0%


363


308


55

17.9%

Other

234


212


222


210


221


13

5.9%


668


698


(30)

(4.3)%

Total other expense

1,064


1,059


1,043


1,078


1,054


10

0.9%


3,166


3,017


149

4.9%





















Earnings before provision for income taxes

1,375


1,129


1,462


1,012


893


482

54.0%


3,966


2,632


1,334

50.7%

Provision for income taxes

319


276


355


229


222


97

43.7%


950


625


325

52.0%

Net earnings attributable to common shareholders

$1,056


$853


$1,107


$783


$671


$385

57.4%


$3,016


$2,007


$1,009

50.3%


 

SYNCHRONY FINANCIAL













STATEMENTS OF FINANCIAL POSITION













(unaudited, $ in millions)














Quarter Ended




Sep 30,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


Sep 30, 2019 vs.
Sep 30, 2018

Assets













Cash and equivalents

$11,461


$11,755


$12,963


$9,396


$12,068


$(607)

(5.0)%

Debt securities

4,584


6,147


5,506


6,062


7,281


(2,697)

(37.0)%

Loan receivables:













Unsecuritized loans held for investment

56,220


55,178


54,907


64,969


59,868


(3,648)

(6.1)%

Restricted loans of consolidated securitization entities

26,987


26,618


25,498


28,170


27,653


(666)

(2.4)%

Total loan receivables

83,207


81,796


80,405


93,139


87,521


(4,314)

(4.9)%

Less: Allowance for loan losses

(5,607)


(5,809)


(5,942)


(6,427)


(6,223)


616

(9.9)%

Loan receivables, net

77,600


75,987


74,463


86,712


81,298


(3,698)

(4.5)%

Loan receivables held for sale

8,182


8,096


8,052


-


-


8,182

NM

Goodwill

1,078


1,078


1,076


1,024


1,024


54

5.3%

Intangible assets, net

1,177


1,215


1,259


1,137


1,105


72

6.5%

Other assets

1,861


2,110


2,065


2,461


1,769


92

5.2%

Total assets

$105,943


$106,388


$105,384


$106,792


$104,545


$1,398

1.3%














Liabilities and Equity













Deposits:













Interest-bearing deposit accounts

$65,677


$65,382


$63,787


$63,738


$62,030


$3,647

5.9%

Non-interest-bearing deposit accounts

295


263


273


281


287


8

2.8%

Total deposits

65,972


65,645


64,060


64,019


62,317


3,655

5.9%

Borrowings:













Borrowings of consolidated securitization entities

10,912


11,941


12,091


14,439


14,187


(3,275)

(23.1)%

Senior unsecured notes

9,451


9,303


9,800


9,557


9,554


(103)

(1.1)%














Total borrowings

20,363


21,244


21,891


23,996


23,741


(3,378)

(14.2)%

Accrued expenses and other liabilities

4,488


4,765


4,724


4,099


4,491


(3)

(0.1)%

Total liabilities

90,823


91,654


90,675


92,114


90,549


274

0.3%

Equity:













Common stock

1


1


1


1


1


-

- %

Additional paid-in capital

9,520


9,500


9,489


9,482


9,470


50

0.5%

Retained earnings

11,533


10,627


9,939


8,986


8,355


3,178

38.0%

Accumulated other comprehensive income:

(44)


(43)


(56)


(62)


(99)


55

(55.6)%

Treasury Stock

(5,890)


(5,351)


(4,664)


(3,729)


(3,731)


(2,159)

57.9%

Total equity

15,120


14,734


14,709


14,678


13,996


1,124

8.0%

Total liabilities and equity

$105,943


$106,388


$105,384


$106,792


$104,545


$1,398

1.3%

 

SYNCHRONY FINANCIAL






























AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN



























(unaudited, $ in millions)





























































Quarter Ended


Sep 30, 2019


Jun 30, 2019


Mar 31, 2019


Dec 31, 2018


Sep 30, 2018




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

$10,947


$59


2.14%


$10,989


$66


2.41%


$11,033


$65


2.39%


$10,856


$62


2.27%


$7,901


$39


1.96%

Securities available for sale

5,389


32


2.36%


6,010


36


2.40%


5,640


34


2.44%


6,837


40


2.32%


7,022


38


2.15%































Loan receivables:






























Credit cards, including held for sale

87,156


4,807


21.88%


85,488


4,557


21.38%


86,768


4,611


21.55%


86,131


4,695


21.63%


83,609


4,538


21.53%

Consumer installment loans

2,022


48


9.42%


1,924


44


9.17%


1,844


42


9.24%


1,815


42


9.18%


1,753


41


9.28%

Commercial credit products

1,329


35


10.45%


1,330


34


10.25%


1,252


34


11.01%


1,344


37


10.92%


1,355


37


10.83%

Other

49


-


- %


50


1


NM


39


-


- %


50


-


- %


66


1


NM

Total loan receivables, including held for sale

90,556


4,890


21.42%


88,792


4,636


20.94%


89,903


4,687


21.14%


89,340


4,774


21.20%


86,783


4,617


21.11%

Total interest-earning assets

106,892


4,981


18.49%


105,791


4,738


17.96%


106,576


4,786


18.21%


107,033


4,876


18.07%


101,706


4,694


18.31%































Non-interest-earning assets:






























Cash and due from banks

1,374






1,271






1,335






1,320






1,217





Allowance for loan losses

(5,773)






(5,911)






(6,341)






(6,259)






(5,956)





Other assets

3,920






3,752






3,729






3,688






3,482





Total non-interest-earning assets

(479)






(888)






(1,277)






(1,251)






(1,257)



































Total assets

$106,413






$104,903






$105,299






$105,782






$100,449



































Liabilities






























Interest-bearing liabilities:






























Interest-bearing deposit accounts

$65,615


$411


2.49%


$64,226


$397


2.48%


$63,776


$375


2.38%


$62,999


$350


2.20%


$60,123


$314


2.07%

Borrowings of consolidated securitization entities

11,770


88


2.97%


11,785


90


3.06%


13,407


100


3.02%


14,223


104


2.90%


12,306


86


2.77%

Senior unsecured notes

9,347


93


3.95%


9,543


96


4.03%


8,892


85


3.88%


9,554


89


3.70%


9,552


88


3.66%

Total interest-bearing liabilities

86,732


592


2.71%


85,554


583


2.73%


86,075


560


2.64%


86,776


543


2.48%


81,981


488


2.36%































Non-interest-bearing liabilities






























Non-interest-bearing deposit accounts

283






271






286






284






275





Other liabilities

4,570






4,260






4,148






4,283






3,772





Total non-interest-bearing liabilities

4,853






4,531






4,434






4,567






4,047



































Total liabilities

91,585






90,085






90,509






91,343






86,028



































Equity






























Total equity

14,828






14,818






14,790






14,439






14,421



































Total liabilities and equity

$106,413






$104,903






$105,299






$105,782






$100,449





Net interest income



$4,389






$4,155






$4,226






$4,333






$4,206

































Interest rate spread(1)





15.78%






15.23%






15.57%






15.59%






15.95%

Net interest margin(2)





16.29%






15.75%






16.08%






16.06%






16.41%































(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, 2019


Nine Months Ended
Sep 30, 2018




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

$10,989


$190


2.31%


$11,128


$145


1.74%

Securities available for sale

5,679


102


2.40%


6,475


97


2.00%













Loan receivables:












Credit cards, including held for sale

86,471


13,975


21.61%


78,227


12,647


21.62%

Consumer installment loans

1,931


134


9.28%


1,658


114


9.19%

Commercial credit products

1,304


103


10.56%


1,329


107


10.76%

Other

46


1


2.91%


56


2


4.77%

Total loan receivables, including held for sale

89,752


14,213


21.17%


81,270


12,870


21.17%

Total interest-earning assets

106,420


14,505


18.22%


98,873


13,112


17.73%













Non-interest-earning assets:












Cash and due from banks

1,327






1,192





Allowance for loan losses

(6,006)






(5,779)





Other assets

3,801






3,188





Total non-interest-earning assets

(878)






(1,399)

















Total assets

$105,542






$97,474

















Liabilities












Interest-bearing liabilities:












Interest-bearing deposit accounts

$64,546


$1,183


2.45%


$57,941


$836


1.93%

Borrowings of consolidated securitization entities

12,315


278


3.02%


12,178


240


2.63%

Senior unsecured notes

9,262


274


3.96%


9,156


251


3.67%













Total interest-bearing liabilities

86,123


1,735


2.69%


79,275


1,327


2.24%













Non-interest-bearing liabilities












Non-interest-bearing deposit accounts

280






282





Other liabilities

4,327






3,548





Total non-interest-bearing liabilities

4,607






3,830

















Total liabilities

90,730






83,105

















Equity












Total equity

14,812






14,369

















Total liabilities and equity

$105,542






$97,474





Net interest income



$12,770






$11,785















Interest rate spread(1)





15.53%






15.49%

Net interest margin(2)





16.04%






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














BALANCE SHEET STATISTICS














(unaudited, $ in millions, except per share statistics)





























Quarter Ended





Sep 30,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


Sep 30, 2019 vs.
Sep 30, 2018


BALANCE SHEET STATISTICS














Total common equity

$15,120


$14,734


$14,709


$14,678


$13,996


$1,124

8.0%


Total common equity as a % of total assets

14.27%


13.85%


13.96%


13.74%


13.39%



0.88%
















Tangible assets

$103,688


$104,095


$103,049


$104,631


$102,416


$1,272

1.2%


Tangible common equity(1)

$12,865


$12,441


$12,374


$12,517


$11,867


$998

8.4%


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

12.41%


11.95%


12.01%


11.96%


11.59%



0.82%


Tangible common equity per share(1)

$19.68


$18.60


$17.96


$17.41


$16.51


$3.17

19.2%
















REGULATORY CAPITAL RATIOS(2)















Basel III Fully Phased-in




Total risk-based capital ratio(3)

15.8%


15.6%


15.8%


15.3%


15.5%





Tier 1 risk-based capital ratio(4)

14.5%


14.3%


14.5%


14.0%


14.2%





Tier 1 leverage ratio(5)

12.6%


12.4%


12.3%


12.3%


12.3%





Common equity Tier 1 capital ratio

14.5%


14.3%


14.5%


14.0%


14.2%



































(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, 2019 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.

 

SYNCHRONY FINANCIAL




















PLATFORM RESULTS




















(unaudited, $ in millions)





















Quarter Ended




Nine Months Ended





Sep 30,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


3Q'19 vs. 3Q'18


Sep 30,
2019


Sep 30,
2018


YTD'19 vs. YTD'18

RETAIL CARD(1)




















Purchase volume(2)(3)

$29,282


$29,530


$24,660


$31,755


$27,863


$1,419

5.1%


$83,472


$75,930


$7,542

9.9%

Period-end loan receivables

$52,697


$52,307


$51,572


$63,827


$59,139


$(6,442)

(10.9)%


$52,697


$59,139


$(6,442)

(10.9)%

Average loan receivables, including held for sale

$60,660


$59,861


$60,964


$60,604


$58,964


$1,696

2.9%


$60,494


$54,101


$6,393

11.8%

Average active accounts (in thousands)(3)(4)

58,082


57,212


58,632


58,962


57,459


623

1.1%


58,156


54,717


3,439

6.3%





















Interest and fees on loans

$3,570


$3,390


$3,454


$3,502


$3,383


$187

5.5%


$10,414


$9,313


$1,101

11.8%

Other income

$65


$59


$76


$59


$57


$8

14.0%


$200


$180


$20

11.1%

Retailer share arrangements

$(998)


$(836)


$(940)


$(825)


$(844)


$(154)

18.2%


$(2,774)


$(2,189)


$(585)

26.7%





















PAYMENT SOLUTIONS(1)




















Purchase volume(2)

$6,281


$5,948


$5,249


$6,035


$6,007


$274

4.6%


$17,478


$16,773


$705

4.2%

Period-end loan receivables

$20,478


$19,766


$19,379


$19,815


$19,064


$1,414

7.4%


$20,478


$19,064


$1,414

7.4%

Average loan receivables, including held for sale

$20,051


$19,409


$19,497


$19,333


$18,659


$1,392

7.5%


$19,654


$18,231


$1,423

7.8%

Average active accounts (in thousands)(4)

12,384


12,227


12,406


12,350


12,062


322

2.7%


12,354


11,992


362

3.0%





















Interest and fees on loans

$721


$685


$686


$708


$683


$38

5.6%


$2,092


$1,970


$122

6.2%

Other income

$(1)


$11


$1


$(2)


$(2)


$1

(50.0)%


$11


$(6)


$17

NM

Retailer share arrangements

$(15)


$(21)


$(12)


$(25)


$(24)


$9

(37.5)%


$(48)


$(48)


$-

- %





















CARECREDIT




















Purchase volume(2)

$2,832


$2,813


$2,604


$2,530


$2,573


$259

10.1%


$8,249


$7,634


$615

8.1%

Period-end loan receivables

$10,032


$9,723


$9,454


$9,497


$9,318


$714

7.7%


$10,032


$9,318


$714

7.7%

Average loan receivables, including held for sale

$9,845


$9,522


$9,442


$9,403


$9,160


$685

7.5%


$9,604


$8,938


$666

7.5%

Average active accounts (in thousands)(4)

6,229


6,086


6,094


6,070


5,961


268

4.5%


6,143


5,885


258

4.4%





















Interest and fees on loans

$599


$561


$547


$564


$551


$48

8.7%


$1,707


$1,587


$120

7.6%

Other income

$21


$20


$15


$7


$8


$13

162.5%


$56


$27


$29

107.4%

Retailer share arrangements

$(3)


$(2)


$(2)


$(5)


$(3)


$-

- %


$(7)


$(7)


$-

- %









































TOTAL SYF




















Purchase volume(2)(3)

$38,395


$38,291


$32,513


$40,320


$36,443


$1,952

5.4%


$109,199


$100,337


$8,862

8.8%

Period-end loan receivables

$83,207


$81,796


$80,405


$93,139


$87,521


$(4,314)

(4.9)%


$83,207


$87,521


$(4,314)

(4.9)%

Average loan receivables, including held for sale

$90,556


$88,792


$89,903


$89,340


$86,783


$3,773

4.3%


$89,752


$81,270


$8,482

10.4%

Average active accounts (in thousands)(3)(4)

76,695


75,525


77,132


77,382


75,482


1,213

1.6%


76,653


72,594


4,059

5.6%





















Interest and fees on loans

$4,890


$4,636


$4,687


$4,774


$4,617


$273

5.9%


$14,213


$12,870


$1,343

10.4%

Other income

$85


$90


$92


$64


$63


$22

34.9%


$267


$201


$66

32.8%

Retailer share arrangements

$(1,016)


$(859)


$(954)


$(855)


$(871)


$(145)

16.6%


$(2,829)


$(2,244)


$(585)

26.1%





















(1) Beginning in 1Q 2019, our Oil and Gas retail credit programs are now included in our Payment Solutions sales platform. Prior period financial and operating metrics for Retail Card and Payment Solutions have been recast to reflect the current period presentation.

(2) 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.

(3) Includes activity and balances associated with loan receivables held for sale.

(4) 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,
2019


Jun 30,
2019


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


COMMON EQUITY MEASURES











GAAP Total common equity

$15,120


$14,734


$14,709


$14,678


$13,996


Less: Goodwill

(1,078)


(1,078)


(1,076)


(1,024)


(1,024)


Less: Intangible assets, net

(1,177)


(1,215)


(1,259)


(1,137)


(1,105)


Tangible common equity

$12,865


$12,441


$12,374


$12,517


$11,867













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

290


283


287


284


311


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

$13,155


$12,724


$12,661


$12,801


$12,178



































RISK-BASED CAPITAL











Common equity Tier 1

$13,155


$12,724


$12,661


$12,801


$12,178


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

1,190


1,169


1,152


1,212


1,137


Risk-based capital

$14,345


$13,893


$13,813


$14,013


$13,315













ASSET MEASURES











Total average assets

$106,413


$104,903


$105,299


$105,782


$100,449


Adjustments for:











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

(1,975)


(2,003)


(2,039)


(1,845)


(1,836)













Total assets for leverage purposes

$104,438


$102,900


$103,260


$103,937


$98,613
























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

$90,772


$88,890


$87,331


$91,742


$85,941













CORE LOAN RECEIVABLES











Loan receivables

$83,207


$81,796


$80,405


$93,139


$87,521


Less: Walmart receivables

(112)


(431)


(692)


(9,519)


(9,217)


Core Loan receivables

$83,095


$81,365


$79,713


$83,620


$78,304













Retail Card Loan receivables(2)

$52,697


$52,307


$51,572


$63,827


$59,139


Less: Walmart receivables

(112)


(431)


(692)


(9,519)


(9,217)


Core Retail Card Loan receivables

$52,585


$51,876


$50,880


$54,308


$49,922













TANGIBLE COMMON EQUITY PER SHARE











GAAP book value per share

$23.13


$22.03


$21.35


$20.42


$19.47


Less: Goodwill

(1.65)


(1.61)


(1.56)


(1.42)


(1.42)


Less: Intangible assets, net

(1.80)


(1.82)


(1.83)


(1.59)


(1.54)


Tangible common equity per share

$19.68


$18.60


$17.96


$17.41


$16.51













(1) Regulatory measures at September 30, 2019 are presented on an estimated basis.

(2) Beginning in 1Q 2019, our Oil and Gas retail credit programs are now included in our Payment Solutions sales platform. Prior period financial and operating metrics for Retail Card and Payment Solutions have been recast to reflect the current period presentation.

Investor Relations
Greg Ketron
(203) 585-6291

Media Relations
Sue Bishop
(203) 585-2802

Cision

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