Synchrony Financial Q1 FY2025 earnings call

• Synchrony engaged with ~70 million customers and generated $41 billion of purchase volume in Q1 2025.
• Dual and co-branded cards contributed 45% of total purchase volume, with growth from the CareCredit dual card launch.
• Portfolio spend trends led to a 2% y-o-y decline in ending receivables.
• Payment rate was flat y-o-y but up 10bps q-o-q, with consistent engagement across generational cohorts.
• Added or renewed over 10 partners, including Sun Country Airlines, Texas A&M Veterinary Hospital, Ashley, Discount Tire, and American Eagle.
• Named #2 Best Company to Work for in the U.S. by Fortune Magazine and Great Places to Work.

Synchrony delivered a strong financial performance in Q1 2025 with net earnings of $757 million or $1.89 per diluted share, ROA of 2.5%, and ROE of 22.4%. Dual and co-branded cards accounted for 45% of total purchase volume, increasing 2% due to the CareCredit dual card launch. Purchase volume at the platform level ranged from down 1% to 9% y-o-y. Ending receivables declined 2% y-o-y. Payment rate was flat y-o-y but up 10bps q-o-q across all credit grades.

• Maintains full-year expectation of low single-digit growth in ending loan receivables.
• Expects net revenue between $15.2 billion and $15.7 billion for the full year.
• Net interest income to follow seasonal trends, with impact from PPPCs and lower benchmark rates.
• RSA expected to be between 3.70% and 3.85% of average loan receivables.
• Efficiency ratio expected to be between 31.5% and 32.5%. Baseline assumptions exclude impact of PPPC changes, macroeconomic downturn, and tariffs.

• Potential impact of tariffs and retaliatory tariffs, which are unknown and could affect partner strategies.
• Macroeconomic deterioration, which could impact customer spend and credit performance.
• Uncertainty around adjustments to PPPCs and their potential impact on growth and revenue.

Q: Good morning guys. Lots of concerns in the market on credit. You guys are able to take down the top end of the guide. Can you maybe just talk about what you're seeing -- what gave you the confidence to bring down the upper end of the range? And second, the allowance was up with seasonality, but can you maybe just remind us what's assumed front employment, particularly when you overlay your qualitative reserves?

A: Brian Doubles and Brian Wenzel responded, discussing credit trends, reserve assumptions, and macroeconomic factors.

Q: Hey guys, obviously, lots of concerns in the market on credit. You guys are able to take down the top end of the guide. Can you maybe just talk about what you're seeing -- what gave you the confidence to bring down the upper end of the range? And second, the allowance was up with seasonality, but can you maybe just remind us what's assumed front employment, particularly when you overlay your qualitative reserves?

A: Brian Doubles and Brian Wenzel responded, discussing credit trends, reserve assumptions, and macroeconomic factors.

Q: Hi, thank you. Good morning. I'm just curious about your growth outlook. It's good to see that you reaffirmed your year-end receivables guide in the face of an uncertain macro. But purchase volumes, loan growth, and account growth were all lower year-over-year. So, what's the driver of the return to positive growth by year-end? And is there anything you can do to help drive that?

A: Brian Wenzel responded, discussing purchase volume comps, consumer resilience, and potential growth acceleration.

Q: Thanks very much. Brian Doubles, I was intrigued by your comment about using the benefits from the mitigants or PPPCs to add value and add growth either by adding value to specific consumer propositions or by underwriting a little deeper. Maybe could you just flesh that out a little bit and talk about maybe not specific merchants, but are there categories of merchants where that's going to where each of those could work better and maybe talk about how that factors into your growth plan for 2025?

A: Brian Doubles responded, discussing discussions with partners to add value, improve value props, and potentially approve more marginal customers.

Q: Hi, good morning. Maybe I just want to get a step back for just to amplify the macro commentary a little bit. I just want to talk a little bit about what you're seeing in your data, you're hearing from retail partners. How are they prepping for the potential of tariffs? What are you -- is there anything you guys are involved with that process with just like even thinking through what it looks like when spending the tariffs come in place, and then just on the weekly data, if you could just talk a little bit, it's been pretty stable, clearly, and you saw this in April 2. Do you think there's a little bit of a pull-forward or Easter impact in there that's maybe propping the first two weeks of April?

A: Brian Doubles and Brian Wenzel responded, discussing consumer behavior, tariff impacts on partners, and weekly sales stability.

Q: Thank you. I guess I wanted to follow up on credit quality. I know we've talked extensively about it. But when I look at sort of the path of the delinquency rate over the last several months and then the charge-off rates actually came down year-over-year in March, it seems like there's a good glide path all else equal, for credit to improve quite decently. I'm just trying to think about where we would expect all of equal the charge-off to migrate. Can we go below average given you've tightened so much? Maybe you could just talk a little bit about that.

A: Brian Doubles and Brian Wenzel responded, discussing credit trends, charge-off guidance, and factors contributing to net charge-off rates.

Q: Hey guys, thanks for taking my question. Look, I'd like to delve in a little bit more to the dual card. There was talk about the growth there. But I am curious when you think about the credit profile, is it different both from a FICO score perspective, but maybe even more importantly, from a utility perspective, should we in a slowdown expect different performance for private label versus the dual cards?

A: Brian Wenzel responded, discussing credit quality, spend/payment rates, and performance in economic downturns for dual vs. private label cards.

Q: Good morning. On the macro assumptions, Brian, thanks for the color regarding the baseline assumptions and why they don't dial in the recessionary backdrop. But if you did dial in a weaker macro and recessionary dynamics into the baseline assumptions, I hear you about revenue and NII may benefit from a higher revolve rate, what would it mean for your charge-off expectation? I know maybe it's kind of a 2025 thing, but it's more of 2026. I guess what I'm asking, what does a stressed charge-off level look like for Synchrony given your current business mix, your credit tightening as of today, how would that charge-off range compared to this 5.8% to 6% level that you're looking at for this year?

A: Brian Wenzel responded, discussing macroeconomic impact on charge-offs and historical lag times.

Q: Yes. Thanks. I had a follow-up question on just capital levels and returns. You're sitting here with CET1, 13.2%, well above kind of the start target range of 10% to 11%. The question is, is that still the right target for you to manage down to? And any thoughts on kind of pace at which we should expect you to kind of manage down to those levels?

A: Brian Wenzel responded, discussing capital target of 11%, pace of managing down to target, and history of capital reduction through share repurchases.

Q: Hi, good morning. Brian, can you talk a little bit about the runway for CareCredit. It's been a good growth story competitively. Are you still seeing that as a fragmented market? And then also, how is the credit performance been versus your expectations?

A: Brian Doubles responded, discussing CareCredit's growth potential, fragmented market status, and credit performance alignment with expectations