Synchrony Financial Reports First Quarter Net Earnings of $286 Million or $0.45 Per Diluted Share

STAMFORD, Conn., April 21, 2020 /PRNewswire/ -- Synchrony Financial SYF today announced first quarter 2020 earnings results amid the global Coronavirus (COVID-19) pandemic. As a company founded in 1932 to help people during the great depression, the company is committed to supporting its employees, partners, customers and communities during the uncertainty of today's health and economic crisis.

"I am encouraged and inspired by the resolve of our society to come together in moments of crisis. To all those working around the clock - especially our healthcare professionals and first responders on the front lines, and those behind the scenes, including our dedicated employees who are working to serve our customers and partners, thank you. Supporting our communities is paramount and Synchrony will continue to do all we can to support those who support us," said Margaret Keane, Chief Executive Officer of Synchrony Financial.

Synchrony reported first quarter 2020 net earnings of $286 million, or $0.45 per diluted share; this includes an increase in the provision for credit losses as a result of CECL implementation in January 2020 of $101 million, or $76 million after-tax, which equates to an EPS reduction of $0.13. Highlights included*:

  • Loan receivables increased 3% to $82.5 billion; loan receivables grew 4% on a Core** basis
  • Interest and fees on loans decreased 7% to $4.3 billion; interest and fees on loans increased 5% on a Core basis
  • Purchase volume decreased 1% to $32.0 billion; purchase volume was up 6% on a Core basis
  • Average active accounts decreased 7% to 72 million; average active accounts grew 4% on a Core basis
  • Deposits grew $0.5 billion, or 1%, to $64.6 billion
  • Significant actions taken in response to COVID-19: taking action to ensure the health and safety of employees and stabilize operations while mitigating the uncertainty and financial pressures faced by consumers and partners
  • Extended and renewed several key relationships and continue to work with both Verizon and Venmo to prepare for launches later this year
  • Paid quarterly common stock dividend of $0.22 per share and repurchased $1.0 billion of Synchrony Financial common stock; suspended remaining authorized share repurchase capacity of $366 million in response to COVID-19

"The underlying strength of our business and balance sheet, combined with our experience, heritage, culture and talented employees will enable us to navigate these uncertain times. Our focus is clear and we have prioritized to deliver on the most critical initiatives to ensure success: we will protect our employees while continuing to deliver for our cardholders, retailers, merchants and providers," said Margaret Keane, Chief Executive Officer of Synchrony Financial.

Business and Financial Highlights for the First Quarter of 2020*

Earnings

  • Net interest income decreased $336 million, or 8%, to $3.9 billion, mainly due to the Walmart consumer portfolio sale.
  • Retailer share arrangements decreased $28 million, or 3%, to $926 million, mainly driven by a higher credit loss reserve build related to COVID-19.
  • Provision for credit losses increased $818 million, or 95%, to $1.7 billion, mainly driven by the Walmart credit loss reserve reduction last year that totaled $522 million and a higher reserve build related to COVID-19 and CECL in the first quarter, partially offset by lower net charge-offs.
  • Other income increased $5 million, or 5%, to $97 million.
  • Other expense decreased $41 million, or 4%, mainly due to the cost reductions from Walmart.
  • Net earnings totaled $286 million compared to $1.1 billion last year.

Balance Sheet

  • Period-end loan receivables increased 3%; on a Core basis, loan receivables increased 4%; purchase volume growth was 6% and average active accounts increased 4%.
  • Deposits grew to $64.6 billion, up $0.5 billion, or 1%, and comprised 79% of funding.
  • The Company's balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $24.8 billion, or 25.3% of total assets.
  • The Company has elected to defer the regulatory capital effects of CECL for two years; the estimated Common Equity Tier 1 ratio was 14.3%, compared to 14.5%, and the estimated Tier 1 Capital ratio was 15.2% compared to 14.5%, reflecting the Company's strong capital generation capabilities while deploying capital through organic growth, program acquisitions, and continued execution of our capital plans. The estimated Tier 1 Capital ratio also reflects the $750 million preferred stock issuance in November 2019.

Key Financial Metrics

  • Return on assets was 1.1% and return on equity was 9.1%.
  • Net interest margin was 15.15%.
  • Efficiency ratio was 32.7%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.24% compared to 4.92% last year; excluding the Walmart consumer portfolio, the rate was down approximately 15 basis points compared to last year.
  • Net charge-offs as a percentage of total average loan receivables were 5.36% compared to 6.06% last year; excluding the Walmart consumer portfolio, the rate decreased approximately 15 basis points compared to last year.
  • The allowance for credit losses as a percentage of total period-end loan receivables was 11.13%, which included a $3.0 billion increase in the allowance upon the adoption of CECL on January 1, 2020.

Sales Platforms

  • Retail Card period-end loan receivables grew 2%; period-end loan receivables increased 3% on a Core basis primarily driven by digital partners. Interest and fees on loans decreased 12%, purchase volume decreased 3%, and average active accounts decreased 10%, primarily driven by the sale of the Walmart consumer portfolio.
  • Payment Solutions period-end loan receivables grew 3%; period-end loan receivables increased 7% on a Core basis led by home furnishings and home specialty. Interest and fees on loans increased 3%, primarily driven by the loan receivables growth. Purchase volume growth was 2% and average active accounts increased 2%.
  • CareCredit period-end loan receivables grew 7%, led by dental and veterinary. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 2% and average active accounts increased 5%.

* All comparisons are for the first quarter of 2020 compared to the first quarter of 2019, unless otherwise noted.

** Financial measures shown above on a Core basis are non-GAAP measures and exclude from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the financial tables.

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, 2019, as filed February 13, 2020, and the Company's forthcoming Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.  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 Tuesday, April 21, 2020, at 8:30 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 12020#, and can be accessed beginning approximately two hours after the event through May 5, 2020.

About Synchrony Financial

Synchrony SYF is a premier consumer financial services company. We deliver a wide range of specialized financing programs, as well as innovative consumer banking products, across key industries including digital, retail, home, auto, travel, health and pet. Synchrony enables our partners to grow sales and loyalty with consumers. We are one of the largest issuers of private label credit cards in the United States; we also offer co-branded products, installment loans and consumer financing products for small- and medium-sized businesses, as well as healthcare providers.

Synchrony is changing what's possible through our digital capabilities, deep industry expertise, actionable data insights, frictionless customer experience and customized financing solutions.

For more information, visit www.synchrony.com and 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, including the future impacts of the novel coronavirus disease ("COVID-19") outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; 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; damage to our reputation; 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; 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; 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; 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 the 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, 2019, as filed on February 13, 2020, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed on April 21, 2020. 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 and Yamaha portfolios, sold in October 2019 and January 2020, respectively, 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









Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



1Q'20 vs. 1Q'19



EARNINGS



























Net interest income

$3,890



$4,029



$4,389



$4,155



$4,226



$(336)

(8.0)%



Retailer share arrangements

(926)



(1,029)



(1,016)



(859)



(954)



28

(2.9)%



Provision for credit losses

1,677



1,104



1,019



1,198



859



818

95.2%



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

1,287



1,896



2,354



2,098



2,413



(1,126)

(46.7)%



Other income

97



104



85



90



92



5

5.4%



Other expense

1,002



1,079



1,064



1,059



1,043



(41)

(3.9)%



Earnings before provision for income taxes

382



921



1,375



1,129



1,462



(1,080)

(73.9)%



Provision for income taxes

96



190



319



276



355



(259)

(73.0)%



Net earnings

$286



$731



$1,056



$853



$1,107



$(821)

(74.2)%



Net earnings available to common stockholders

$275



$731



$1,056



$853



$1,107



$(832)

(75.2)%































COMMON SHARE STATISTICS



























Basic EPS   

$0.45



$1.15



$1.60



$1.25



$1.57



$(1.12)

(71.3)%



Diluted EPS   

$0.45



$1.15



$1.60



$1.24



$1.56



$(1.11)

(71.2)%



Dividend declared per share

$0.22



$0.22



$0.22



$0.21



$0.21



$0.01

4.8%



Common stock price

$16.09



$36.01



$34.09



$34.67



$31.90



$(15.81)

(49.6)%



Book value per share   

$19.27



$23.31



$23.13



$22.03



$21.35



($2.08)

(9.7)%



Tangible common equity per share(1)

$15.35



$19.50



$19.68



$18.60



$17.96



($2.61)

(14.5)%































Beginning common shares outstanding

615.9



653.7



668.9



688.8



718.8



(102.9)

(14.3)%



Issuance of common shares

-



-



-



-



-



-

- %



Stock-based compensation

0.9



0.6



0.4



1.2



0.9



-

- %



Shares repurchased

(33.6)



(38.4)



(15.6)



(21.1)



(30.9)



(2.7)

8.7%



Ending common shares outstanding

583.2



615.9



653.7



668.9



688.8



(105.6)

(15.3)%































Weighted average common shares outstanding 

604.9



633.7



658.3



683.6



706.3



(101.4)

(14.4)%



Weighted average common shares outstanding (fully diluted) 

607.4



637.7



661.7



686.5



708.9



(101.5)

(14.3)%































(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









Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



1Q'20 vs. 1Q'19



PERFORMANCE METRICS



























Return on assets(1)

1.1%



2.7%



3.9%



3.3%



4.3%





(3.2)%



Return on equity(2)

9.1%



19.0%



28.3%



23.1%



30.4%





(21.3)%



Return on tangible common equity(3)

11.6%



23.0%



33.4%



27.4%



35.8%





(24.2)%































Net interest margin(4)

15.15%



15.01%



16.29%



15.75%



16.08%





(0.93)%



Efficiency ratio(5)

32.7%



34.8%



30.8%



31.3%



31.0%





1.7%



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

4.77%



5.01%



4.66%



4.78%



4.71%





0.06%



Effective income tax rate

25.1%



20.6%



23.2%



24.4%



24.3%





0.8%































CREDIT QUALITY METRICS



























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

5.36%



5.15%



5.35%



6.01%



6.06%





(0.70)%



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

4.24%



4.44%



4.47%



4.43%



4.92%





(0.68)%



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

2.10%



2.15%



2.07%



2.16%



2.51%





(0.41)%



Net charge-offs

$1,125



$1,109



$1,221



$1,331



$1,344



$(219)

(16.3)%



Loan receivables delinquent over 30 days(6)

$3,500



$3,874



$3,723



$3,625



$3,957



$(457)

(11.5)%



Loan receivables delinquent over 90 days(6)

$1,735



$1,877



$1,723



$1,768



$2,019



$(284)

(14.1)%



Allowance for credit losses (period-end)

$9,175



$5,602



$5,607



$5,809



$5,942



$3,233

54.4%



Allowance coverage ratio(7)

11.13%



6.42%



6.74%



7.10%



7.39%





3.74%































BUSINESS METRICS



























Purchase volume(8)(9)

$32,042



$40,212



$38,395



$38,291



$32,513



$(471)

(1.4)%



Period-end loan receivables

$82,469



$87,215



$83,207



$81,796



$80,405



$2,064

2.6%



Credit cards

$79,832



$84,606



$79,788



$78,446



$77,251



$2,581

3.3%



Consumer installment loans

$1,390



$1,347



$2,050



$1,983



$1,860



$(470)

(25.3)%



Commercial credit products

$1,203



$1,223



$1,317



$1,328



$1,256



$(53)

(4.2)%



Other

$44



$39



$52



$39



$38



$6

15.8%



Average loan receivables, including held for sale

$84,428



$85,376



$90,556



$88,792



$89,903



$(5,475)

(6.1)%



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

68,849



75,471



77,094



76,065



74,812



(5,963)

(8.0)%



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

72,078



73,734



76,695



75,525



77,132



(5,054)

(6.6)%































LIQUIDITY



























Liquid assets



























Cash and equivalents

$13,704



$12,147



$11,461



$11,755



$12,963



$741

5.7%



Total liquid assets

$19,225



$17,322



$15,201



$16,665



$17,360



$1,865

10.7%



Undrawn credit facilities



























Undrawn credit facilities

$5,600



$6,050



$6,500



$7,050



$6,050



$(450)

(7.4)%



Total liquid assets and undrawn credit facilities

$24,825



$23,372



$21,701



$23,715



$23,410



$1,415

6.0%



Liquid assets % of total assets

19.61%



16.52%



14.35%



15.66%



16.47%





3.14%



Liquid assets including undrawn credit facilities % of total assets

25.32%



22.30%



20.48%



22.29%



22.21%





3.11%































(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 available to common stockholders 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 credit 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







Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



1Q'20 vs. 1Q'19

Interest income:

























Interest and fees on loans

$4,340



$4,492



$4,890



$4,636



$4,687



$(347)

(7.4)%

Interest on cash and debt securities

67



93



91



102



99



(32)

(32.3)%

Total interest income

4,407



4,585



4,981



4,738



4,786



(379)

(7.9)%



























Interest expense:

























Interest on deposits

356



383



411



397



375



(19)

(5.1)%

Interest on borrowings of consolidated securitization entities

73



80



88



90



100



(27)

(27.0)%

Interest on senior unsecured notes

88



93



93



96



85



3

3.5%

Total interest expense

517



556



592



583



560



(43)

(7.7)%



























Net interest income

3,890



4,029



4,389



4,155



4,226



(336)

(8.0)%



























Retailer share arrangements

(926)



(1,029)



(1,016)



(859)



(954)



28

(2.9)%



























Provision for credit losses

1,677



1,104



1,019



1,198



859



818

95.2%

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

1,287



1,896



2,354



2,098



2,413



(1,126)

(46.7)%



























Other income:

























Interchange revenue

161



192



197



194



165



(4)

(2.4)%

Debt cancellation fees

69



64



64



69



68



1

1.5%

Loyalty programs

(158)



(181)



(203)



(192)



(167)



9

(5.4)%

Other

25



29



27



19



26



(1)

(3.8)%

Total other income

97



104



85



90



92



5

5.4%



























Other expense:

























Employee costs

324



385



359



358



353



(29)

(8.2)%

Professional fees

197



199



205



231



232



(35)

(15.1)%

Marketing and business development

111



152



139



135



123



(12)

(9.8)%

Information processing

123



122



127



123



113



10

8.8%

Other

247



221



234



212



222



25

11.3%

Total other expense

1,002



1,079



1,064



1,059



1,043



(41)

(3.9)%



























Earnings before provision for income taxes

382



921



1,375



1,129



1,462



(1,080)

(73.9)%

Provision for income taxes

96



190



319



276



355



(259)

(73.0)%

Net earnings

$286



$731



$1,056



$853



$1,107



$(821)

(74.2)%



























Net earnings available to common stockholders

$275



$731



$1,056



$853



$1,107



$(832)

(75.2)%



























 

SYNCHRONY FINANCIAL

























STATEMENTS OF FINANCIAL POSITION

























(unaudited, $ in millions)



























Quarter Ended







Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



Mar 31, 2020 vs.

Mar 31, 2019

Assets

























Cash and equivalents

$13,704



$12,147



$11,461



$11,755



$12,963



$741

5.7%

Debt securities

6,146



5,911



4,584



6,147



5,506



640

11.6%

Loan receivables:

























Unsecuritized loans held for investment

54,765



58,398



56,220



55,178



54,907



(142)

(0.3)%

Restricted loans of consolidated securitization entities

27,704



28,817



26,987



26,618



25,498



2,206

8.7%

Total loan receivables

82,469



87,215



83,207



81,796



80,405



2,064

2.6%

Less: Allowance for credit losses(1)

(9,175)



(5,602)



(5,607)



(5,809)



(5,942)



(3,233)

54.4%

Loan receivables, net

73,294



81,613



77,600



75,987



74,463



(1,169)

(1.6)%

Loan receivables held for sale

5



725



8,182



8,096



8,052



(8,047)

(99.9)%

Goodwill

1,078



1,078



1,078



1,078



1,076



2

0.2%

Intangible assets, net

1,208



1,265



1,177



1,215



1,259



(51)

(4.1)%

Other assets

2,603



2,087



1,861



2,110



2,065



538

26.1%

Total assets

$98,038



$104,826



$105,943



$106,388



$105,384



$(7,346)

(7.0)%



























Liabilities and Equity

























Deposits:

























Interest-bearing deposit accounts

$64,302



$64,877



$65,677



$65,382



$63,787



$515

0.8%

Non-interest-bearing deposit accounts

313



277



295



263



273



40

14.7%

Total deposits

64,615



65,154



65,972



65,645



64,060



555

0.9%

Borrowings:

























Borrowings of consolidated securitization entities

9,291



10,412



10,912



11,941



12,091



(2,800)

(23.2)%



























Senior unsecured notes

7,957



9,454



9,451



9,303



9,800



(1,843)

(18.8)%



























Total borrowings

17,248



19,866



20,363



21,244



21,891



(4,643)

(21.2)%

Accrued expenses and other liabilities

4,205



4,718



4,488



4,765



4,724



(519)

(11.0)%

Total liabilities

86,068



89,738



90,823



91,654



90,675



(4,607)

(5.1)%

Equity:

























Preferred stock

734



734



-



-



-



734

NM

Common stock

1



1



1



1



1



-

- %

Additional paid-in capital

9,523



9,537



9,520



9,500



9,489



34

0.4%

Retained earnings

9,960



12,117



11,533



10,627



9,939



21

0.2%

Accumulated other comprehensive income:

(49)



(58)



(44)



(43)



(56)



7

(12.5)%

Treasury stock

(8,199)



(7,243)



(5,890)



(5,351)



(4,664)



(3,535)

75.8%

Total equity

11,970



15,088



15,120



14,734



14,709



(2,739)

(18.6)%

Total liabilities and equity

$98,038



$104,826



$105,943



$106,388



$105,384



$(7,346)

(7.0)%



























(1) Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses ("CECL") that measures the allowance for credit losses based on management's best estimate of expected credit losses for the life of our loan receivables. Prior periods presented reflect measurement of the allowance based on management's estimate of probable incurred credit losses in accordance with the previous accounting guidance effective for those periods.

 

SYNCHRONY FINANCIAL



























































AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN























































(unaudited, $ in millions)

























































































































Quarter Ended



Mar 31, 2020



Dec 31, 2019



Sep 30, 2019



Jun 30, 2019



Mar 31, 2019







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

$12,902



$42



1.31%



$16,269



$68



1.66%



$10,947



$59



2.14%



$10,989



$66



2.41%



$11,033



$65



2.39%

Securities available for sale

5,954



25



1.69%



4,828



25



2.05%



5,389



32



2.36%



6,010



36



2.40%



5,640



34



2.44%

Loan receivables, including held for sale:



























































Credit cards

81,716



4,272



21.03%



81,960



4,409



21.34%



87,156



4,807



21.88%



85,488



4,557



21.38%



86,768



4,611



21.55%

Consumer installment loans

1,432



35



9.83%



2,058



48



9.25%



2,022



48



9.42%



1,924



44



9.17%



1,844



42



9.24%

Commercial credit products

1,243



33



10.68%



1,311



34



10.29%



1,329



35



10.45%



1,330



34



10.25%



1,252



34



11.01%

Other

37



-



- %



47



1



NM



49



-



- %



50



1



NM



39



-



- %

Total loan receivables, including held for sale

84,428



4,340



20.67%



85,376



4,492



20.87%



90,556



4,890



21.42%



88,792



4,636



20.94%



89,903



4,687



21.14%

Total interest-earning assets

103,284



4,407



17.16%



106,473



4,585



17.08%



106,892



4,981



18.49%



105,791



4,738



17.96%



106,576



4,786



18.21%





























































Non-interest-earning assets:



























































Cash and due from banks

1,450











1,326











1,374











1,271











1,335









Allowance for credit losses

(8,708)











(5,593)











(5,773)











(5,911)











(6,341)









Other assets

4,696











3,872











3,920











3,752











3,729









Total non-interest-earning assets

(2,562)











(395)











(479)











(888)











(1,277)





































































Total assets

$100,722











$106,078











$106,413











$104,903











$105,299





































































Liabilities



























































Interest-bearing liabilities:



























































Interest-bearing deposit accounts

$64,366



$356



2.22%



$65,380



$383



2.32%



$65,615



$411



2.49%



$64,226



$397



2.48%



$63,776



$375



2.38%

Borrowings of consolidated securitization entities

9,986



73



2.94%



10,831



80



2.93%



11,770



88



2.97%



11,785



90



3.06%



13,407



100



3.02%





























































Senior unsecured notes

8,807



88



4.02%



9,452



93



3.90%



9,347



93



3.95%



9,543



96



4.03%



8,892



85



3.88%





























































Total interest-bearing liabilities

83,159



517



2.50%



85,663



556



2.58%



86,732



592



2.71%



85,554



583



2.73%



86,075



560



2.64%





























































Non-interest-bearing liabilities



























































Non-interest-bearing deposit accounts

299











281











283











271











286









Other liabilities

4,672











4,906











4,570











4,260











4,148









Total non-interest-bearing liabilities

4,971











5,187











4,853











4,531











4,434





































































Total liabilities

88,130











90,850











91,585











90,085











90,509





































































Equity



























































Total equity

12,592











15,228











14,828











14,818











14,790





































































Total liabilities and equity

$100,722











$106,078











$106,413











$104,903











$105,299









Net interest income





$3,890











$4,029











$4,389











$4,155











$4,226

































































Interest rate spread(1)









14.66%











14.50%











15.78%











15.23%











15.57%

Net interest margin(2)









15.15%











15.01%











16.29%











15.75%











16.08%





























































(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







Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



Mar 31, 2020 vs.

Mar 31, 2019

BALANCE SHEET STATISTICS

























Total common equity

$11,236



$14,354



$15,120



$14,734



$14,709



($3,473)

(23.6)%

Total common equity as a % of total assets

11.46%



13.69%



14.27%



13.85%



13.96%





(2.50)%



























Tangible assets

$95,752



$102,483



$103,688



$104,095



$103,049



$(7,297)

(7.1)%

Tangible common equity(1)

$8,950



$12,011



$12,865



$12,441



$12,374



($3,424)

(27.7)%

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

9.35%



11.72%



12.41%



11.95%



12.01%





(2.66)%

Tangible common equity per share(1)

$15.35



$19.50



$19.68



$18.60



$17.96



($2.61)

(14.5)%



























REGULATORY CAPITAL RATIOS(2)(3)



























Basel III -

CECL

Transition



Basel III 





Total risk-based capital ratio(4)

16.5%



16.3%



15.8%



15.6%



15.8%







Tier 1 risk-based capital ratio(5)

15.2%



15.0%



14.5%



14.3%



14.5%







Tier 1 leverage ratio(6)

12.3%



12.6%



12.6%



12.4%



12.3%







Common equity Tier 1 capital ratio

14.3%



14.1%



14.5%



14.3%



14.5%



























































(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 ratios at March 31, 2020 are preliminary and therefore subject to change.

(3) Capital ratios at March 31, 2020 reflect election to delay for two years an estimate of CECL's effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.

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

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

(6) 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









Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019



1Q'20 vs. 1Q'19



RETAIL CARD



























Purchase volume(1)(2)

$24,008



$30,968



$29,282



$29,530



$24,660



$(652)

(2.6)%



Period-end loan receivables

$52,390



$56,387



$52,697



$52,307



$51,572



$818

1.6%



Average loan receivables, including held for sale

$53,820



$54,505



$60,660



$59,861



$60,964



$(7,144)

(11.7)%



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

53,018



54,662



58,082



57,212



58,632



(5,614)

(9.6)%































Interest and fees on loans

$3,037



$3,143



$3,570



$3,390



$3,454



$(417)

(12.1)%



Other income

$59



$77



$65



$59



$76



$(17)

(22.4)%



Retailer share arrangements

$(904)



$(988)



$(998)



$(836)



$(940)



$36

(3.8)%































PAYMENT SOLUTIONS



























Purchase volume(1)(2)

$5,375



$6,402



$6,281



$5,948



$5,249



$126

2.4%



Period-end loan receivables

$19,973



$20,528



$20,478



$19,766



$19,379



$594

3.1%



Average loan receivables, including held for sale

$20,344



$20,701



$20,051



$19,409



$19,497



$847

4.3%



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

12,681



12,713



12,384



12,227



12,406



275

2.2%































Interest and fees on loans

$706



$737



$721



$685



$686



$20

2.9%



Other income

$13



$4



$(1)



$11



$1



$12

NM



Retailer share arrangements

$(18)



$(37)



$(15)



$(21)



$(12)



$(6)

50.0%































CARECREDIT



























Purchase volume(1)

$2,659



$2,842



$2,832



$2,813



$2,604



$55

2.1%



Period-end loan receivables

$10,106



$10,300



$10,032



$9,723



$9,454



$652

6.9%



Average loan receivables, including held for sale

$10,264



$10,170



$9,845



$9,522



$9,442



$822

8.7%



Average active accounts (in thousands)(3)

6,379



6,359



6,229



6,086



6,094



285

4.7%































Interest and fees on loans

$597



$612



$599



$561



$547



$50

9.1%



Other income

$25



$23



$21



$20



$15



$10

66.7%



Retailer share arrangements

$(4)



$(4)



$(3)



$(2)



$(2)



$(2)

100.0%































TOTAL SYF



























Purchase volume(1)(2)

$32,042



$40,212



$38,395



$38,291



$32,513



$(471)

(1.4)%



Period-end loan receivables

$82,469



$87,215



$83,207



$81,796



$80,405



$2,064

2.6%



Average loan receivables, including held for sale

$84,428



$85,376



$90,556



$88,792



$89,903



$(5,475)

(6.1)%



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

72,078



73,734



76,695



75,525



77,132



(5,054)

(6.6)%































Interest and fees on loans

$4,340



$4,492



$4,890



$4,636



$4,687



$(347)

(7.4)%



Other income

$97



$104



$85



$90



$92



$5

5.4%



Retailer share arrangements

$(926)



$(1,029)



$(1,016)



$(859)



$(954)



$28

(2.9)%































(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



Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019

COMMON EQUITY AND REGULATORY CAPITAL MEASURES(2)



















GAAP Total equity

$11,970



$15,088



$15,120



$14,734



$14,709

Less: Preferred stock

(734)



(734)



-



-



-

Less: Goodwill

(1,078)



(1,078)



(1,078)



(1,078)



(1,076)

Less: Intangible assets, net

(1,208)



(1,265)



(1,177)



(1,215)



(1,259)

Tangible common equity

$8,950



$12,011



$12,865



$12,441



$12,374

Add: CECL transition amount

2,417



-



-



-



-

Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive

income (loss)

304



319



290



283



287

Common equity Tier 1 

$11,671



$12,330



$13,155



$12,724



$12,661

Preferred  stock

734



734



-



-



-

Tier 1 capital

$12,405



$13,064



$13,155



$12,724



$12,661





















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

1,082



1,147



1,190



1,169



1,152

Total Risk-based capital

$13,487



$14,211



$14,345



$13,893



$13,813





















ASSET MEASURES(2)



















Total average assets

$100,722



$106,078



$106,413



$104,903



$105,299

Adjustments for:



















Add: CECL transition amount

2,417



-



-



-



-

Disallowed goodwill and other disallowed intangible assets

(net of related deferred tax liabilities) and other

(2,010)



(2,059)



(1,975)



(2,003)



(2,039)

Total assets for leverage purposes

$101,129



$104,019



$104,438



$102,900



$103,260





















Risk-weighted assets

$81,639



$87,302



$90,772



$88,890



$87,331





















CECL FULLY PHASED-IN CAPITAL MEASURES



















Tier 1 capital

$12,405



$13,064



$13,155



$12,724



$12,661

Less: CECL transition adjustment

(2,417)



-



-



-



-

Tier 1 capital (CECL fully phased-in)

$9,988



$13,064



$13,155



$12,724



$12,661

Add: Allowance for credit losses

9,175



5,602



5,607



5,809



5,942

Tier 1 capital (CECL fully phased-in) + Reserves for credit losses

$19,163



$18,666



$18,762



$18,533



$18,603





















Risk-weighted assets

$81,639



$87,302



$90,772



$88,890



$87,331

Less: CECL transition adjustment

(2,204)



-



-



-



-

Risk-weighted assets (CECL fully phased-in)

$79,435



$87,302



$90,772



$88,890



$87,331





















TANGIBLE COMMON EQUITY PER SHARE



















GAAP book value per share

$19.27



$23.31



$23.13



$22.03



$21.35

Less: Goodwill

(1.85)



(1.75)



(1.65)



(1.61)



(1.56)

Less: Intangible assets, net

(2.07)



(2.06)



(1.80)



(1.82)



(1.83)

Tangible common equity per share

$15.35



$19.50



$19.68



$18.60



$17.96





















(1) Regulatory measures at March 31, 2020 are presented on an estimated basis.



















(2) Capital ratios at March 31, 2020 reflect election to delay for two years an estimate of CECL's effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.

 

SYNCHRONY FINANCIAL



















RECONCILIATION OF NON-GAAP MEASURES (Continued)



















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





















Quarter Ended



Mar 31,

2020



Dec 31,

2019



Sep 30,

2019



Jun 30,

2019



Mar 31,

2019

ALLOWANCE FOR LOAN LOSSES(1)



















Allowance for credit losses

$9,175



N/A



N/A



N/A



N/A

Less: Impact from CECL(2)

(3,122)



-



-



-



-

Allowance for loan losses(1)

$6,053



$5,602



$5,607



$5,809



$5,942





















ALLOWANCE FOR LOAN LOSSES AS A % OF PERIOD-END LOAN RECEIVABLES



















Allowance for credit losses as a % of period-end loan receivables

11.13%



N/A



N/A



N/A



N/A

Less: Impact from CECL(2)

(3.79)%



- %



- %



- %



- %

Allowance for loan losses as a % of period-end loan receivables

7.34%



6.42%



6.74%



7.10%



7.39%





















CORE PURCHASE VOLUME



















Purchase Volume

$32,042



$40,212



$38,395



$38,291



$32,513

Less: Walmart and Yamaha Purchase volume

-



(267)



(2,381)



(2,512)



(2,151)

Core Purchase volume

$32,042



$39,945



$36,014



$35,779



$30,362





















CORE LOAN RECEIVABLES



















Loan receivables

$82,469



$87,215



$83,207



$81,796



$80,405

Less: Walmart and Yamaha Loan receivables

-



(3)



(872)



(1,188)



(1,420)

Core Loan receivables

$82,469



$87,212



$82,335



$80,608



$78,985





















Retail Card Loan receivables

$52,390



$56,387



$52,697



$52,307



$51,572

Less: Walmart Loan receivables

-



-



(112)



(431)



(692)

Core Loan receivables

$52,390



$56,387



$52,585



$51,876



$50,880





















Payment Solutions Loan receivables

$19,973



$20,528



$20,478



$19,766



$19,379

Less: Yamaha Loan receivables

-



(3)



(760)



(757)



(728)

Core Loan receivables

$19,973



$20,525



$19,718



$19,009



$18,651





















CORE AVERAGE ACTIVE ACCOUNTS (in thousands)



















Average active accounts (in thousands)

72,078



73,734



76,695



75,525



77,132

Less: Walmart and Yamaha average Active accounts (in thousands)

-



(1,777)



(7,001)



(7,215)



(7,618)

Core Average active accounts (in thousands)

72,078



71,957



69,694



68,310



69,514





















CORE INTEREST AND FEES ON LOANS



















Interest and fees on loans

$4,340



$4,492



$4,890



$4,636



$4,687

Less: Walmart and Yamaha Interest and fees on loans

-



(69)



(531)



(520)



(549)

Core Interest and fees on loans

$4,340



$4,423



$4,359



$4,116



$4,138





















(1) Beginning in 1Q'20, allowance for loan losses is calculated based upon accounting standards no longer effective, and as such is a Non-GAAP measure.

(2) Impact from CECL reflects the additional allowance for credit losses recorded in accordance with ASC 2016-13, as compared to the allowance for credit losses required had the prior accounting guidance been applied. 

Investor Relations                     

Greg Ketron                              

(203) 585-6291                          

Media Relations

Sue Bishop

(203) 585-2802

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/synchrony-financial-reports-first-quarter-net-earnings-of-286-million-or-0-45-per-diluted-share-301043912.html

SOURCE Synchrony Financial

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