Synchrony Financial Reports Third Quarter Net Earnings of $604 Million or $0.73 Per Diluted Share

STAMFORD, Conn.--()--Synchrony Financial (NYSE:SYF) today announced third quarter 2016 net earnings of $604 million, or $0.73 per diluted share. Highlights for the quarter included:

  • Net interest income increased 12% from the third quarter of 2015 to $3.5 billion
  • Loan receivables grew $7 billion, or 11%, from the third quarter of 2015 to $71 billion
  • Purchase volume increased 8% from the third quarter of 2015
  • Strong deposit growth continued, up $9 billion, or 23%, over the third quarter of 2015
  • Renewed key relationships – TJX Companies, hhgregg, Nationwide Marketing Group and American Dental Association
  • Signed new partnerships with Nissan and At Home
  • Launched The Container Store and Google Store programs
  • Commenced quarterly common stock dividend payment of $0.13 per share and repurchased $238 million of Synchrony Financial common stock

“Broad-based growth across our sales platforms generated double-digit loan receivables and net interest income growth and strong purchase volume growth this quarter. Organic growth is an important business driver for us and we are pleased to have recently renewed several key relationships. We also signed new partnerships and launched new programs. Strong deposit growth continued this quarter as we remain focused on this important source of funding to support our business,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We are pleased to have initiated our quarterly dividend and share repurchase program during the quarter. We are focusing resources on driving strong organic growth and pursuing new profitable partnership opportunities, while also returning capital to shareholders through dividends and share repurchases—a testament to the strength of our business model and strategic focus.”

Business and Financial Highlights for the Third Quarter of 2016

All comparisons below are for the third quarter of 2016 compared to the third quarter of 2015, unless otherwise noted.

Earnings

  • Net interest income increased $378 million, or 12%, to $3.5 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 14%.
  • Provision for loan losses increased $284 million to $986 million due to higher loan loss reserve build and loan receivables growth.
  • Other income was unchanged at $84 million primarily due to higher interchange income offset by higher loyalty program expense.
  • Other expense increased $16 million to $859 million, primarily driven by business growth.
  • Net earnings totaled $604 million compared to $574 million in the third quarter of 2015.

Balance Sheet

  • Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 8% and average active account growth of 7%.
  • Deposits grew to $50 billion, up $9 billion, or 23%, and comprised 71% of funding compared to 63% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $24 billion, or 27% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 18.2% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.9%.

Key Financial Metrics

  • Return on assets was 2.8% and return on equity was 17.4%.
  • Net interest margin increased 30 basis points to 16.27%.
  • Efficiency ratio was 30.6%, a 362 basis point improvement from the third quarter of 2015, driven by positive operating leverage arising from strong revenue growth that exceeded expense growth.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.26% compared to 4.02% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.38% compared to 4.02% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 5.82% compared to 5.31% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 11%, driven primarily by purchase volume growth of 7% and period-end loan receivables growth of 11%. Average active account growth was 6%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 14%, driven primarily by purchase volume growth of 14% and period-end loan receivables growth of 14%. Average active account growth was 13%. Loan receivables growth was led by the home furnishings, automotive, and power product categories.
  • CareCredit interest and fees on loans increased 11%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 10%. Average active account growth was 8%. Loan receivables growth was led by the dental and veterinary specialties.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed February 25, 2016, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. 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 21, 2016, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on Synchrony Financial’s 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 32016#, and can be accessed beginning approximately two hours after the event through November 4, 2016.

About Synchrony Financial

Synchrony Financial (NYSE:SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 350,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial offers private label and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial,www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

*Source: The Nilson Report (May 2016, Issue # 1087) - based on 2015 data.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “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; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; our transition to a replacement third-party vendor to manage the technology platform for our online retail deposits; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; obligations associated with being an independent public company; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; changes to our methods of offering our CareCredit products; 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, 2015, as filed on February 25, 2016. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.

               
SYNCHRONY FINANCIAL
FINANCIAL SUMMARY
(unaudited, in millions, except per share statistics)
Quarter Ended Nine Months Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

3Q'16 vs. 3Q'15 Sep 30,

2016

Sep 30,

2015

YTD'16 vs. YTD'15

EARNINGS

Net interest income $3,481 $3,212 $3,209 $3,208 $3,103 $378 12.2% $9,902 $8,885 $1,017 11.4%
Retailer share arrangements (757) (664) (670) (734) (723) (34) 4.7% (2,091) (2,004) (87) 4.3%
Net interest income, after retailer share arrangements 2,724 2,548 2,539 2,474 2,380 344 14.5% 7,811 6,881 930 13.5%
Provision for loan losses 986 1,021 903 823 702 284 40.5% 2,910 2,129 781 36.7%
Net interest income, after retailer share arrangements and provision for loan losses 1,738 1,527 1,636 1,651 1,678 60 3.6% 4,901 4,752 149 3.1%
Other income 84 83 92 87 84 - - % 259 305 (46) (15.1)%
Other expense 859 839 800 870 843 16 1.9% 2,498 2,394 104 4.3%
Earnings before provision for income taxes 963 771 928 868 919 44 4.8% 2,662 2,663 (1) 0.0%
Provision for income taxes 359 282 346 321 345 14 4.1% 987 996 (9) (0.9)%
Net earnings $604 $489 $582 $547 $574 $30 5.2% $1,675 $1,667 $8 0.5%
Net earnings attributable to common stockholders $604 $489 $582 $547 $574 $30 5.2% $1,675 $1,667 $8 0.5%
 

COMMON SHARE STATISTICS

Basic EPS $0.73 $0.59 $0.70 $0.66 $0.69 $0.04 5.8% $2.01 $2.00 $0.01 0.5%
Diluted EPS $0.73 $0.58 $0.70 $0.65 $0.69 $0.04 5.8% $2.01 $2.00 $0.01 0.5%
Dividend declared per share $0.13 - - - - $0.13 NM $0.13 - $0.13 NM
Common stock price $28.00 $25.28 $28.66 $30.41 $31.30 $(3.30) (10.5)% $28.00 $31.30 $(3.30) (10.5)%
Book value per share $16.94 $16.45 $15.84 $15.12 $14.58 $2.36 16.2% $16.94 $14.58 $2.36 16.2%
Tangible common equity per share(1) $14.90 $14.46 $13.86 $13.14 $12.67 $2.23 17.6% $14.90 $12.67 $2.23 17.6%
 
Beginning common shares outstanding 833.9 833.8 833.8 833.8 833.8 0.1 0.0% 833.8 833.8 - - %
Issuance of common shares - - - - - - - % - - - - %
Stock-based compensation 0.1 0.1 - - - 0.1 NM 0.2 - 0.2 NM
Shares repurchased (8.5) - - - - (8.5) NM (8.5) - (8.5) NM
Ending common shares outstanding 825.5 833.9 833.8 833.8 833.8 (8.3) (1.0)% 825.5 833.8 (8.3) (1.0)%
 
Weighted average common shares outstanding 828.4 833.9 833.8 833.8 833.8 (5.4) (0.6)% 832.1 833.8 (1.7) (0.2)%
Weighted average common shares outstanding (fully diluted) 830.6 836.2 835.5 835.8 835.8 (5.2) (0.6)% 834.1 835.4 (1.3) (0.2)%
                                       
(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(1)
(unaudited, $ in millions, except account data)
Quarter Ended Nine Months Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

3Q'16 vs. 3Q'15 Sep 30,

2016

Sep 30,

2015

YTD'16 vs. YTD'15

PERFORMANCE METRICS

Return on assets(2) 2.8% 2.4% 2.8% 2.7% 2.9% (0.1)% 2.7% 3.0% (0.3)%
Return on equity(3) 17.4% 14.6% 18.1% 17.5% 19.2% (1.8)% 16.7% 19.7% (3.0)%
Return on tangible common equity(4) 19.8% 16.6% 20.8% 20.1% 22.0% (2.2)% 19.1% 22.7% (3.6)%
Net interest margin(5) 16.27% 15.86% 15.76% 15.73% 15.97% 0.30% 15.94% 15.81% 0.13%
Efficiency ratio(6) 30.6% 31.9% 30.4% 34.0% 34.2% (3.6)% 31.0% 33.3% (2.3)%
Other expense as a % of average loan receivables, including held for sale 4.92% 5.04% 4.82% 5.28% 5.35% (0.43)% 4.92% 5.25% (0.33)%
Effective income tax rate 37.3% 36.6% 37.3% 37.0% 37.5% (0.2)% 37.1% 37.4% (0.3)%
 

CREDIT QUALITY METRICS

Net charge-offs as a % of average loan receivables, including held for sale 4.38% 4.49% 4.70% 4.23% 4.02% 0.36% 4.51% 4.37% 0.14%
30+ days past due as a % of period-end loan receivables(7) 4.26% 3.79% 3.85% 4.06% 4.02% 0.24% 4.26% 4.02% 0.24%
90+ days past due as a % of period-end loan receivables(7) 1.89% 1.67% 1.84% 1.86% 1.73% 0.16% 1.89% 1.73% 0.16%
Net charge-offs $765 $747 $780 $697 $633 $132 20.9% $2,292 $1,994 $298 14.9%
Loan receivables delinquent over 30 days(7) $3,008 $2,585 $2,538 $2,772 $2,553 $455 17.8% $3,008 $2,553 $455 17.8%
Loan receivables delinquent over 90 days(7) $1,334 $1,143 $1,212 $1,273 $1,102 $232 21.1% $1,334 $1,102 $232 21.1%
 
Allowance for loan losses (period-end) $4,115 $3,894 $3,620 $3,497 $3,371 $744 22.1% $4,115 $3,371 $744 22.1%
Allowance coverage ratio(8) 5.82% 5.70% 5.50% 5.12% 5.31% 0.51% 5.82% 5.31% 0.51%
 

BUSINESS METRICS

Purchase volume(9) $31,615 $31,507 $26,977 $32,460 $29,206 $2,409 8.2% $90,099 $81,155 $8,944 11.0%
Period-end loan receivables $70,644 $68,282 $65,849 $68,290 $63,520 $7,124 11.2% $70,644 $63,520 $7,124 11.2%
Credit cards $67,858 $65,511 $63,309 $65,773 $60,920 $6,938 11.4% $67,858 $60,920 $6,938 11.4%
Consumer installment loans $1,361 $1,293 $1,184 $1,154 $1,171 $190 16.2% $1,361 $1,171 $190 16.2%
Commercial credit products $1,385 $1,389 $1,318 $1,323 $1,380 $5 0.4% $1,385 $1,380 $5 0.4%
Other $40 $89 $38 $40 $49 $(9) (18.4)% $40 $49 $(9) (18.4)%
Average loan receivables, including held for sale $69,525 $66,943 $66,705 $65,406 $62,504 $7,021 11.2% $67,856 $60,946 $6,910 11.3%
Period-end active accounts (in thousands)(10) 66,781 66,491 64,689 68,314 62,831 3,950 6.3% 66,781 62,831 3,950 6.3%
Average active accounts (in thousands)(10) 66,639 65,531 66,134 64,892 62,247 4,392 7.1% 66,204 61,762 4,442 7.2%
 

LIQUIDITY

Liquid assets
Cash and equivalents $13,588 $11,787 $12,500 $12,325 $12,271 $1,317 10.7% $13,588 $12,271 $1,317 10.7%
Total liquid assets $16,362 $13,956 $14,915 $14,836 $15,305 $1,057 6.9% $16,362 $15,305 $1,057 6.9%
Undrawn credit facilities
Undrawn credit facilities $7,150 $7,025 $7,325 $6,075 $6,550 $600 9.2% $7,150 $6,550 $600 9.2%
Total liquid assets and undrawn facilities $23,512 $20,981 $22,240 $20,911 $21,855 $1,657 7.6% $23,512 $21,855 $1,657 7.6%
Liquid assets % of total assets 18.77% 16.94% 18.27% 17.66% 19.30% (0.53)% 18.77% 19.30% (0.53)%
Liquid assets including undrawn facilities % of total assets 26.98% 25.47% 27.24% 24.90% 27.56% (0.58)% 26.98% 27.56% (0.58)%
                                       
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Return on assets represents net earnings as a percentage of average total assets.
(3) Return on equity represents net earnings as a percentage of average total equity.
(4) 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.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
(6) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.
(7) Based on customer statement-end balances extrapolated to the respective period-end date.
(8) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.
(9) 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.
(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,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

3Q'16 vs. 3Q'15 Sep 30,

2016

Sep 30,

2015

YTD'16 vs. YTD'15
Interest income:
Interest and fees on loans $3,771 $3,494 $3,498 $3,494 $3,379 $392 11.6% $10,763 $9,685 $1,078 11.1%
Interest on investment securities 25 21 22 15 13 12 92.3% 68 34 34 100.0%
Total interest income 3,796 3,515 3,520 3,509 3,392 404 11.9% 10,831 9,719 1,112 11.4%
 
Interest expense:
Interest on deposits 188 179 172 165 159 29 18.2% 539 442 97 21.9%
Interest on borrowings of consolidated securitization entities 63 59 58 56 54 9 16.7% 180 159 21 13.2%
Interest on third-party debt 64 65 81 80 76 (12) (15.8)% 210 229 (19) (8.3)%
Interest on related party debt - - - - - - - % - 4 (4) (100.0)%
Total interest expense 315 303 311 301 289 26 9.0% 929 834 95 11.4%
                     
Net interest income 3,481 3,212 3,209 3,208 3,103 378 12.2% 9,902 8,885 1,017 11.4%
 
Retailer share arrangements (757) (664) (670) (734) (723) (34) 4.7% (2,091) (2,004) (87) 4.3%
Net interest income, after retailer share arrangements 2,724 2,548 2,539 2,474 2,380 344 14.5% 7,811 6,881 930 13.5%
 
Provision for loan losses 986 1,021 903 823 702 284 40.5% 2,910 2,129 781 36.7%
Net interest income, after retailer share arrangements and provision for loan losses 1,738 1,527 1,636 1,651 1,678 60 3.6% 4,901 4,752 149 3.1%
 
Other income:
Interchange revenue 154 151 130 147 135 19 14.1% 435 358 77 21.5%
Debt cancellation fees 67 63 64 62 61 6 9.8% 194 187 7 3.7%
Loyalty programs (145) (135) (110) (125) (122) (23) 18.9% (390) (294) (96) 32.7%
Other 8 4 8 3 10 (2) (20.0)% 20 54 (34) (63.0)%
Total other income 84 83 92 87 84 - - % 259 305 (46) (15.1)%
 
Other expense:
Employee costs 311 301 280 285 268 43 16.0% 892 757 135 17.8%
Professional fees 174 154 146 165 162 12 7.4% 474 480 (6) (1.3)%
Marketing and business development 92 107 94 128 115 (23) (20.0)% 293 305 (12) (3.9)%
Information processing 87 81 82 83 77 10 13.0% 250 214 36 16.8%
Other 195 196 198 209 221 (26) (11.8)% 589 638 (49) (7.7)%
Total other expense 859 839 800 870 843 16 1.9% 2,498 2,394 104 4.3%
                     
Earnings before provision for income taxes 963 771 928 868 919 44 4.8% 2,662 2,663 (1) 0.0%
Provision for income taxes 359 282 346 321 345 14 4.1% 987 996 (9) (0.9)%
Net earnings attributable to common stockholders $604 $489 $582 $547 $574 $30 5.2% $1,675 $1,667 $8 0.5%
 
SYNCHRONY FINANCIAL          
STATEMENTS OF FINANCIAL POSITION(1)
(unaudited, $ in millions)
Quarter Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Sep 30, 2016 vs.

Sep 30, 2015

Assets
Cash and equivalents $13,588 $11,787 $12,500 $12,325 $12,271 $1,317 10.7%
Investment securities 3,356 2,723 2,949 3,142 3,596 (240) (6.7)%
Loan receivables:
Unsecuritized loans held for investment 47,517 44,854 41,730 42,826 38,325 9,192 24.0%
Restricted loans of consolidated securitization entities 23,127 23,428 24,119 25,464 25,195 (2,068) (8.2)%
Total loan receivables 70,644 68,282 65,849 68,290 63,520 7,124 11.2%
Less: Allowance for loan losses (4,115) (3,894) (3,620) (3,497) (3,371) (744) 22.1%
Loan receivables, net 66,529 64,388 62,229 64,793 60,149 6,380 10.6%
 
Goodwill 949 949 949 949 949 - - %
Intangible assets, net 733 704 702 701 646 87 13.5%
Other assets 2,004 1,833 2,327 2,080 1,679 325 19.4%
Total assets $87,159 $82,384 $81,656 $83,990 $79,290 $7,869 9.9%
 
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts $49,611 $46,220 $44,721 $43,215 $40,323 $9,288 23.0%
Non-interest-bearing deposit accounts 204 207 256 152 140 64 45.7%
Total deposits 49,815 46,427 44,977 43,367 40,463 9,352 23.1%
Borrowings:
Borrowings of consolidated securitization entities 12,411 12,236 12,423 13,589 13,624 (1,213) (8.9)%
Bank term loan - - 1,494 4,133 4,630 (4,630) (100.0)%
Senior unsecured notes 7,756 7,059 6,559 6,557 5,560 2,196 39.5%
Related party debt - - - - - - - %
Total borrowings 20,167 19,295 20,476 24,279 23,814 (3,647) (15.3)%
Accrued expenses and other liabilities 3,196 2,947 2,999 3,740 2,855 341 11.9%
Total liabilities 73,178 68,669 68,452 71,386 67,132 6,046 9.0%
Equity:
Common stock 1 1 1 1 1 - - %
Additional paid-in capital 9,381 9,370 9,359 9,351 9,431 (50) (0.5)%
Retained earnings 4,861 4,364 3,875 3,293 2,746 2,115 77.0%
Accumulated other comprehensive income: (24) (20) (31) (41) (20) (4) 20.0%
Treasury Stock (238) - - - - (238) NM
Total equity 13,981 13,715 13,204 12,604 12,158 1,823 15.0%
Total liabilities and equity $87,159 $82,384 $81,656 $83,990 $79,290 $7,869 9.9%
                                   
(1) In January 2016, we adopted ASU 2015-03, Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of deferred issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability. Accordingly, we have reclassified issuance costs associated with our borrowings and certain brokered deposits, from other assets, and reflected as a reduction of borrowings and interest-bearing deposit accounts, as applicable, for each period presented to conform to the current period presentation. Related selected financial metrics included within this Financial Data Supplement have also been updated where applicable to reflect this reclassification.
 
SYNCHRONY FINANCIAL                        
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN(1)
(unaudited, $ in millions)
 
Quarter Ended
Sep 30, 2016 Jun 30, 2016 Mar 31, 2016 Dec 31, 2015 Sep 30, 2015
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 $12,574 $16 0.51% $11,692 $14 0.48% $12,185 $16 0.53% $12,070 $9 0.30% $11,059 $7 0.25%
Securities available for sale 3,018 9 1.19% 2,805 7 1.00% 2,995 6 0.81% 3,445 6 0.69% 3,534 6 0.67%
 
Loan receivables:
Credit cards, including held for sale 66,746 3,705 22.08% 64,269 3,432 21.48% 64,194 3,436 21.53% 62,834 3,432 21.67% 59,890 3,315 21.96%
Consumer installment loans 1,331 31 9.27% 1,235 28 9.12% 1,159 27 9.37% 1,163 26 8.87% 1,160 27 9.23%
Commercial credit products 1,390 35 10.02% 1,373 33 9.67% 1,313 35 10.72% 1,361 36 10.49% 1,400 36 10.20%
Other 58 - - % 66 1 NM 39 - - % 48 - - % 54 1 NM
Total loan receivables, including held for sale 69,525 3,771 21.58% 66,943 3,494 20.99% 66,705 3,498 21.09% 65,406 3,494 21.19% 62,504 3,379 21.45%
Total interest-earning assets 85,117 3,796 17.74% 81,440 3,515 17.36% 81,885 3,520 17.29% 80,921 3,509 17.20% 77,097 3,392 17.46%
 
Non-interest-earning assets:
Cash and due from banks 641 774 1,277 1,268 1,216
Allowance for loan losses (3,977) (3,729) (3,583) (3,440) (3,341)
Other assets 3,240 3,209 3,256 3,133 2,869
Total non-interest-earning assets (96) 254 950 961 744
         
Total assets $85,021 $81,694 $82,835 $81,882 $77,841
 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $47,926 $188 1.56% $45,490 $179 1.58% $44,101 $172 1.57% $42,079 $165 1.56% $39,048 $159 1.62%
Borrowings of consolidated securitization entities 12,369 63 2.03% 12,291 59 1.93% 12,950 58 1.80% 13,550 56 1.64% 13,715 54 1.56%
Bank term loan(2) - - - % 374 7 7.53% 2,565 24 3.76% 4,507 28 2.46% 4,878 29 2.36%
Senior unsecured notes 7,408 64 3.44% 6,809 58 3.43% 6,558 57 3.50% 5,810 52 3.55% 5,312 47 3.51%
Related party debt - - - % - - - % - - - % - - - % - - - %
Total interest-bearing liabilities 67,703 315 1.85% 64,964 303 1.88% 66,174 311 1.89% 65,946 301 1.81% 62,953 289 1.82%
 
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 203 217 226 147 149
Other liabilities 3,314 3,046 3,534 3,396 2,859
Total non-interest-bearing liabilities 3,517 3,263 3,760 3,543 3,008
         
Total liabilities 71,220 68,227 69,934 69,489 65,961
 
Equity
Total equity 13,801 13,467 12,901 12,393 11,880
         
Total liabilities and equity $85,021 $81,694 $82,835 $81,882 $77,841
Net interest income $3,481 $3,212 $3,209 $3,208 $3,103
 
Interest rate spread(3) 15.89% 15.48% 15.40% 15.39% 15.64%
Net interest margin(4) 16.27% 15.86% 15.76% 15.73% 15.97%
                                                           
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015 were 2.51%, 2.47%, 2.26%, and 2.23% respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.
(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
 
SYNCHRONY FINANCIAL          
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN(1)
(unaudited, $ in millions)
 
Nine Months Ended

Sep 30, 2016

Nine Months Ended

Sep 30, 2015

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 $12,172 $46 0.50% $11,144 $19 0.23%
Securities available for sale 2,960 22 0.99% $3,066 15 0.65%
 
Loan receivables:
Credit cards, including held for sale 65,201 10,573 21.66% 58,442 9,500 21.73%
Consumer installment loans 1,242 86 9.25% 1,107 78 9.42%
Commercial credit products 1,360 103 10.12% 1,361 106 10.41%
Other 53 1 NM 36 1 NM
Total loan receivables, including held for sale 67,856 10,763 21.19% 60,946 9,685 21.25%
Total interest-earning assets 82,988 10,831 17.43% 75,156 9,719 17.29%
 
Non-interest-earning assets:
Cash and due from banks 942 782
Allowance for loan losses (3,764) (3,304)
Other assets 3,250 2,759
Total non-interest-earning assets 428 237
   
Total assets $83,416 $75,393
 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $45,913 $539 1.57% $36,677 $442 1.61%
Borrowings of consolidated securitization entities 12,578 180 1.91% 13,952 159 1.52%
Bank term loan(2) 1,026 31 4.04% 5,625 108 2.57%
Senior unsecured notes 6,948 179 3.44% 4,667 121 3.47%
Related party debt - - - % 163 4 3.28%
Total interest-bearing liabilities 66,465 929 1.87% 61,084 834 1.83%
 
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 212 153
Other liabilities 3,363 2,846
Total non-interest-bearing liabilities 3,575 2,999
   
Total liabilities 70,040 64,083
 
Equity
Total equity 13,376 11,310
   
Total liabilities and equity $83,416 $75,393
Net interest income $9,902 $8,885
 
Interest rate spread(3) 15.56% 15.46%
Net interest margin(4) 15.94% 15.81%
                       
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the 9 months ended September 30, 2016 and September 30, 2015 were 2.48% and 2.22%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.
(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
 
SYNCHRONY FINANCIAL          
BALANCE SHEET STATISTICS(1)
(unaudited, $ in millions, except per share statistics)
 
Quarter Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Sep 30, 2016 vs.

Sep 30, 2015

BALANCE SHEET STATISTICS

Total common equity $13,981 $13,715 $13,204 $12,604 $12,158 $1,823 15.0%
Total common equity as a % of total assets 16.04% 16.65% 16.17% 15.01% 15.33% 0.71%
 
Tangible assets $85,477 $80,731 $80,005 $82,340 $77,695 $7,782 10.0%
Tangible common equity(2) $12,299 $12,062 $11,553 $10,954 $10,563 $1,736 16.4%
Tangible common equity as a % of tangible assets(2) 14.39% 14.94% 14.44% 13.30% 13.60% 0.79%
Tangible common equity per share(2) $14.90 $14.46 $13.86 $13.14 $12.67 $2.23 17.6%
 

REGULATORY CAPITAL RATIOS(3)

Basel III Transition  
Total risk-based capital ratio(4) 19.5% 19.8% 19.4% 18.1% 18.8%
Tier 1 risk-based capital ratio(5) 18.2% 18.5% 18.1% 16.8% 17.5%
Tier 1 leverage ratio(6) 15.3% 15.6% 14.8% 14.4% 14.6%
Common equity Tier 1 capital ratio(7) 18.2% 18.5% 18.1% 16.8% 17.5%
 
Basel III Fully Phased-in
Common equity Tier 1 capital ratio(7) 17.9% 18.0% 17.5% 15.9% 16.7%
                         
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) 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.
(3) Regulatory capital metrics at September 30, 2016 are preliminary and therefore subject to change. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these ratios are non-GAAP measures. See Reconciliation of Non-GAAP Measures and Calculation of Regulatory Measures for components of capital ratio calculations.
(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.
(7) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.
 
SYNCHRONY FINANCIAL                
PLATFORM RESULTS
(unaudited, $ in millions)
Quarter Ended   Nine Months Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

3Q'16 vs. 3Q'15 Sep 30,

2016

Sep 30,

2015

YTD'16 vs. YTD'15

RETAIL CARD

Purchase volume(1)(2) $25,285 $25,411 $21,550 $26,768 $23,560 $1,725 7.3% $72,246 $65,422 $6,824 10.4%
Period-end loan receivables $48,010 $46,705 $45,113 $47,412 $43,432 $4,578 10.5% $48,010 $43,432 $4,578 10.5%
Average loan receivables, including held for sale $47,420 $45,861 $45,900 $44,958 $42,933 $4,487 10.5% $46,491 $41,853 $4,638 11.1%
Average active accounts (in thousands)(2)(3) 52,959 52,314 52,969 52,038 49,953 3,006 6.0% 52,834 49,671 3,163 6.4%
 
Interest and fees on loans(2) $2,790 $2,585 $2,614 $2,594 $2,508 $282 11.2% $7,989 $7,180 $809 11.3%
Other income(2) $70 $69 $79 $76 $70 $- - % $218 $263 $(45) (17.1)%
Retailer share arrangements(2) $(752) $(656) $(661) $(723) $(708) $(44) 6.2% $(2,069) $(1,965) $(104) 5.3%
 

PAYMENT SOLUTIONS

Purchase volume(1) $4,152 $3,903 $3,392 $3,714 $3,635 $517 14.2% $11,447 $9,954 $1,493 15.0%
Period-end loan receivables $14,798 $13,997 $13,420 $13,543 $12,933 $1,865 14.4% $14,798 $12,933 $1,865 14.4%
Average loan receivables $14,391 $13,644 $13,482 $13,192 $12,523 $1,868 14.9% $13,865 $12,183 $1,682 13.8%
Average active accounts (in thousands)(3) 8,461 8,153 8,134 7,896 7,468 993 13.3% 8,261 7,335 926 12.6%
 
Interest and fees on loans $505 $467 $457 $462 $442 $63 14.3% $1,429 $1,257 $172 13.7%
Other income $3 $3 $4 $3 $5 $(2) (40.0)% $10 $14 $(4) (28.6)%
Retailer share arrangements $(3) $(7) $(7) $(10) $(13) $10 (76.9)% $(17) $(35) $18 (51.4)%
 

CARECREDIT

Purchase volume(1) $2,178 $2,193 $2,035 $1,978 $2,011 $167 8.3% $6,406 $5,779 $627 10.8%
Period-end loan receivables $7,836 $7,580 $7,316 $7,335 $7,155 $681 9.5% $7,836 $7,155 $681 9.5%
Average loan receivables $7,714 $7,438 $7,323 $7,256 $7,048 $666 9.4% $7,500 $6,910 $590 8.5%
Average active accounts (in thousands)(3) 5,219 5,064 5,031 4,958 4,826 393 8.1% 5,109 4,756 353 7.4%
 
Interest and fees on loans $476 $442 $427 $438 $429 $47 11.0% $1,345 $1,248 $97 7.8%
Other income $11 $11 $9 $8 $9 $2 22.2% $31 $28 $3 10.7%
Retailer share arrangements $(2) $(1) $(2) $(1) $(2) $- - % $(5) $(4) $(1) 25.0%
 

TOTAL SYF

Purchase volume(1)(2) $31,615 $31,507 $26,977 $32,460 $29,206 $2,409 8.2% $90,099 $81,155 $8,944 11.0%
Period-end loan receivables $70,644 $68,282 $65,849 $68,290 $63,520 $7,124 11.2% $70,644 $63,520 $7,124 11.2%
Average loan receivables, including held for sale $69,525 $66,943 $66,705 $65,406 $62,504 $7,021 11.2% $67,856 $60,946 $6,910 11.3%
Average active accounts (in thousands)(2)(3) 66,639 65,531 66,134 64,892 62,247 4,392 7.1% 66,204 61,762 4,442 7.2%
 
Interest and fees on loans(2) $3,771 $3,494 $3,498 $3,494 $3,379 $392 11.6% $10,763 $9,685 $1,078 11.1%
Other income(2) $84 $83 $92 $87 $84 $- - % $259 $305 $(46) (15.1)%
Retailer share arrangements(2) $(757) $(664) $(670) $(734) $(723) $(34) 4.7% $(2,091) $(2,004) $(87) 4.3%
                                       
(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)(2)
(unaudited, $ in millions, except per share statistics)
Quarter Ended
Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

COMMON EQUITY MEASURES

GAAP Total common equity $13,981 $13,715 $13,204 $12,604 $12,158
Less: Goodwill (949) (949) (949) (949) (949)
Less: Intangible assets, net (733) (704) (702) (701) (646)
Tangible common equity $12,299 $12,062 $11,553 $10,954 $10,563
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) 299 282 281 280 291
Basel III - Common equity Tier 1 (fully phased-in) $12,598 $12,344 $11,834 $11,234 $10,854
Adjustment related to capital components during transition 273 266 265 399 375
Basel III - Common equity Tier 1 (transition) $12,871 $12,610 $12,099 $11,633 $11,229
 

RISK-BASED CAPITAL

Common equity Tier 1 $12,871 $12,610 $12,099 $11,633 $11,229
Add: Allowance for loan losses includible in risk-based capital 923 890 869 898 833
Risk-based capital $13,794 $13,500 $12,968 $12,531 $12,062
 

ASSET MEASURES

Total average assets $85,021 $81,694 $82,835 $81,882 $77,841
Adjustments for:
Disallowed goodwill and other disallowed intangible assets, net of

related deferred tax liabilities

(1,117) (1,113) (1,117) (991) (931)
Other - - - - 104
Total assets for leverage purposes $83,904 $80,581 $81,718 $80,891 $77,014
 
Risk-weighted assets - Basel III (fully phased-in)(3) $70,448 $68,462 $67,697 $70,493 $65,125
Risk-weighted assets - Basel III (transition)(3) $70,660 $68,188 $66,689 $69,224 $64,090
 

TANGIBLE COMMON EQUITY PER SHARE

GAAP book value per share $16.94 $16.45 $15.84 $15.12 $14.58
Less: Goodwill (1.14) (1.14) (1.14) (1.14) (1.14)
Less: Intangible assets, net (0.90) (0.85) (0.84) (0.84) (0.77)
Tangible common equity per share $14.90 $14.46 $13.86 $13.14 $12.67
                   
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Regulatory measures at September 30, 2016 are presented on an estimated basis.
(3) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets.

Contacts

Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Samuel Wang, 203-585-2933

Release Summary

Synchrony Financial Reports Third Quarter Net Earnings of $604 Million or $0.73 Per Diluted Share

Contacts

Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Samuel Wang, 203-585-2933