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Synchrony Financial reported second-quarter GAAP EPS of $0.58, mostly in line with Bank of America's $0.57 estimate and nicely above the $0.55 consensus. The company's second quarter saw strong loan growth, lower RSAs and better-than-expected OpEx offset by the higher provision.
Synchrony Financial also witnessed high-single-digit year-over-year purchase volume and average active accounts growth. Management is confident that it can continue to deliver very healthy growth given new partnerships and better engagement.
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"Credit metrics appear to be trending in line with SYF's updated guidance, though the $274 million reserve build is somewhat curious as the coverage ratio moved to ~14 months," analyst Kenneth Bruce wrote in a note.
Meanwhile, credit performance is trending in line with the company's 2016 loss guidance of about 4.5 percent. The company also reaffirmed '17 guidance at 20–30bp higher.
Further, NCOs and delinquencies were modestly lower sequentially, suggesting credit trends remain healthy, despite the higher-expected-losses for 2017.
"We think SYF's growth profile and relative EPS stability justify the premium. That said, we think SYF's premium limits the potential upside and we reiterate our Neutral rating," Bruce noted.
Bruce also increased 2016E and 2017E EPS estimates to $2.58 and $2.95 from $2.53 and $2.92, respectively.
At time of writing, shares of Synchrony Financial had dropped 1.27 percent on the day to $28.02.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.