Synchrony Financial Reports Fourth Quarter Net Earnings of $783 Million or $1.09 Per Diluted Share

Synchrony Financial Reports Fourth Quarter Net Earnings of $783 Million or $1.09 Per Diluted Share

PR Newswire

STAMFORD, Conn., Jan. 23, 2019

STAMFORD, Conn., Jan. 23, 2019 /PRNewswire/ -- Synchrony Financial (NYSE: SYF) today announced fourth quarter 2018 net earnings of $783 million, or $1.09 per diluted share. Highlights included:

  • Net interest income increased 11% from the fourth quarter of 2017 to $4.3 billion
  • Loan receivables grew $11 billion, or 14%, from the fourth quarter of 2017 to $93 billion
  • Purchase volume increased 10% from the fourth quarter of 2017 to $40 billion
  • Deposits grew $8 billion, or 13%, from the fourth quarter of 2017 to $64 billion
  • Renewed and extended key Retail Card relationships: Sam's Club and Amazon
  • Extended and expanded relationship with Qurate Retail Group and brands QVC, HSN and zulily
  • Announced new Retail Card partnership with Harbor Freight
  • Renewed and extended key Payment Solutions relationship with Mohawk
  • Announced new Payment Solutions partnership with Fanatics
  • Expanded CareCredit network: Walgreens will begin accepting the CareCredit Card
  • In January, Synchrony reached agreement with Capital One on the sale of the Walmart loan portfolio
  • In January, Walmart agreed to dismiss its lawsuit against Synchrony

(PRNewsfoto/Synchrony)

"Synchrony ended the year with significant momentum heading into 2019—we generated strong results this quarter, renewed and extended a number of key relationships, added new programs, and expanded our network. Our business continues to deliver organic growth through innovative marketing, promotions and value propositions, in addition to leveraging the investments we have been making in data analytics, artificial intelligence, and digital capabilities. And we did this while maintaining a strong balance sheet and returning capital to shareholders through growth, portfolio acquisitions, and the execution of our capital plan," said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. "We continue to be well positioned for the future and look forward to the opportunities ahead in 2019."

Business and Financial Highlights for the Fourth Quarter of 2018
All comparisons below are for the fourth quarter of 2018 compared to the fourth quarter of 2017, unless otherwise noted.

Earnings

  • Net interest income increased $417 million, or 11%, to $4.3 billion, primarily driven by the PayPal Credit program acquisition and loan receivables growth. Net interest income after retailer share arrangements increased 11%.
  • Provision for loan losses increased $98 million, or 7%, to $1.5 billion, driven by the PayPal Credit program reserve build partially offset by moderating credit trends.
  • Other income was up $2 million to $64 million.
  • Other expense increased $108 million, or 11%, to $1.1 billion, primarily driven by the PayPal Credit program acquisition and growth-related expenses.
  • Provision for income taxes was down 53%, primarily due to tax reform.
  • Net earnings totaled $783 million compared to $385 million last year.

Balance Sheet

  • Period-end loan receivables growth was 14%, purchase volume growth was 10% and average active account growth was 8%, primarily driven by the PayPal Credit program acquisition and growth.
  • Deposits grew to $64 billion, up $8 billion, or 13%, and comprised 73% of funding.
  • The Company's balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $19 billion, or 18% of total assets.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.0%, compared to 15.8%, reflecting the impact of capital deployment through the PayPal Credit program acquisition and continued execution of our capital plan.

Key Financial Metrics

  • Return on assets was 2.9% and return on equity was 21.5%.
  • Net interest margin was 16.06%.
  • Efficiency ratio was 30.4%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.76% compared to 4.67% last year; excluding the PayPal Credit program, the rate decreased ~15 bps.
  • Net charge-offs as a percentage of total average loan receivables were 5.54% compared to 5.78% last year; excluding the PayPal Credit program, the rate decreased ~10 bps.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.90% compared to 6.80% last year.

Sales Platforms

  • Retail Card period-end loan receivables grew 16%, driven primarily by the PayPal Credit program acquisition. Interest and fees on loans increased 14%, purchase volume growth was 11% and average active accounts increased 9%, all largely driven by the PayPal Credit program acquisition.
  • Payment Solutions period-end loan receivables grew 9%, led by home furnishings and luxury. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 8% and average active accounts increased 7%.
  • CareCredit period-end loan receivables grew 7%, led by dental and veterinary. Interest and fees on loans increased 7%, primarily driven by the loan receivables growth. Purchase volume grew 7% and average active account growth was 4%.

Corresponding Financial Tables and Information
No representation is made that the information in this news release is complete.  Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed February 22, 2018, and the Company's forthcoming Annual Report on Form 10-K for the year ended December 31, 2018.  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 Wednesday, January 23, 2019, 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 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 42018#, and can be accessed beginning approximately two hours after the event through February 6, 2019.

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

Cautionary Statement Regarding Forward-Looking Statements
This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "estimates," "will," "should," "may" or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; cyber-attacks or other security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; our ability to realize the benefits of and expected capital available from strategic options; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau's regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank's ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed on February 22, 2018. 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 financial measures that have been adjusted to exclude certain effects from the Tax Act, 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.

Investor Relations

Media Relations

Greg Ketron

Sue Bishop

(203) 585-6291

(203) 585-2802

 

SYNCHRONY FINANCIAL




















FINANCIAL SUMMARY




















(unaudited, in millions, except per share statistics)





















Quarter Ended





Twelve Months Ended





Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


4Q'18 vs. 4Q'17


Dec 31,
2018


Dec 31,
2017


YTD'18 vs. YTD'17

EARNINGS




















Net interest income

$4,333


$4,206


$3,737


$3,842


$3,916


$417

10.6%


$16,118


$15,016


$1,102

7.3%

Retailer share arrangements

(855)


(871)


(653)


(720)


(779)


(76)

9.8%


(3,099)


(2,937)


(162)

5.5%

Net interest income, after retailer share arrangements

3,478


3,335


3,084


3,122


3,137


341

10.9%


13,019


12,079


940

7.8%

Provision for loan losses

1,452


1,451


1,280


1,362


1,354


98

7.2%


5,545


5,296


249

4.7%

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

2,026


1,884


1,804


1,760


1,783


243

13.6%


7,474


6,783


691

10.2%

Other income

64


63


63


75


62


2

3.2%


265


288


(23)

(8.0)%

Other expense

1,078


1,054


975


988


970


108

11.1%


4,095


3,747


348

9.3%

Earnings before provision for income taxes

1,012


893


892


847


875


137

15.7%


3,644


3,324


320

9.6%

Provision for income taxes

229


222


196


207


490


(261)

(53.3)%


854


1,389


(535)

(38.5)%

Net earnings

$783


$671


$696


$640


$385


$398

103.4%


$2,790


$1,935


$855

44.2%

Net earnings attributable to common stockholders

$783


$671


$696


$640


$385


$398

103.4%


$2,790


$1,935


$855

44.2%





















Adjusted net earnings(1)

$783


$671


$696


$640


$545


$238

43.7%


$2,790


$2,095


$695

33.2%





















COMMON SHARE STATISTICS




















Basic EPS   

$1.09


$0.91


$0.93


$0.84


$0.49


$0.60

122.4%


$3.76


$2.43


$1.33

54.7%

Diluted EPS   

$1.09


$0.91


$0.92


$0.83


$0.49


$0.60

122.4%


$3.74


$2.42


$1.32

54.5%

Adjusted diluted EPS(1)

$1.09


$0.91


$0.92


$0.83


$0.70


$0.39

55.7%


$3.74


$2.62


$1.12

42.7%

Dividend declared per share

$0.21


$0.21


$0.15


$0.15


$0.15


$0.06

40.0%


$0.72


$0.56


$0.16

28.6%

Common stock price

$23.46


$31.08


$33.38


$33.53


$38.61


$(15.15)

(39.2)%


$23.46


$38.61


$(15.15)

(39.2)%

Book value per share   

$20.42


$19.47


$19.37


$18.88


$18.47


$1.95

10.6%


$20.42


$18.47


$1.95

10.6%

Tangible common equity per share(2)

$17.41


$16.51


$16.84


$16.55


$16.22


$1.19

7.3%


$17.41


$16.22


$1.19

7.3%





















Beginning common shares outstanding

718.7


746.6


760.3


770.5


782.6


(63.9)

(8.2)%


770.5


817.4


(46.9)

(5.7)%

Issuance of common shares

-


-


-


-


-


-

- %


-


-


-

- %

Stock-based compensation

0.1


2.4


0.3


0.2


0.1


-

- %


3.0


0.4


2.6

NM

Shares repurchased

-


(30.3)


(14.0)


(10.4)


(12.2)


12.2

(100.0)%


(54.7)


(47.3)


(7.4)

15.6%

Ending common shares outstanding

718.8


718.7


746.6


760.3


770.5


(51.7)

(6.7)%


718.8


770.5


(51.7)

(6.7)%





















Weighted average common shares outstanding 

718.7


734.9


752.2


763.7


778.7


(60.0)

(7.7)%


742.3


795.6


(53.3)

(6.7)%

Weighted average common shares outstanding (fully diluted) 

720.9


738.8


758.3


770.3


784.0


(63.1)

(8.0)%


746.9


799.7


(52.8)

(6.6)%





















(1) Adjusted net earnings and Adjusted diluted EPS are non-GAAP measures. These measures represent the corresponding GAAP measure, adjusted to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Cuts and Jobs

Act of 2017 (the "Tax Act"). The effects primarily relate to additional tax expense arising from the remeasurement of our net deferred tax asset to reflect the reduction in the U.S. corporate tax rate from 35% to 21%. For a corresponding reconciliation to a GAAP financial measure,

see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. 

(2) 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, except account data)





















Quarter Ended




Twelve Months Ended





Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


4Q'18 vs. 4Q'17


Dec 31,
2018


Dec 31,
2017


YTD'18 vs. YTD'17

PERFORMANCE METRICS




















Return on assets(1)

2.9%


2.7%


2.9%


2.7%


1.6%



1.3%


2.8%


2.1%



0.7%

Return on equity(2)

21.5%


18.5%


19.4%


18.2%


10.5%



11.0%


19.4%


13.4%



6.0%

Return on tangible common equity(3)

25.2%


21.5%


22.1%


20.7%


12.0%



13.2%


22.4%


15.3%



7.1%

Adjusted return on assets(4)

2.9%


2.7%


2.9%


2.7%


2.3%



0.6%


2.8%


2.3%



0.5%

Adjusted return on equity(4)

21.5%


18.5%


19.4%


18.2%


14.9%



6.6%


19.4%


14.5%



4.9%

Adjusted return on tangible common equity(5)

25.2%


21.5%


22.1%


20.7%


17.0%



8.2%


22.4%


16.6%



5.8%

Net interest margin(6)

16.06%


16.41%


15.33%


16.05%


16.24%



(0.18)%


15.97%


16.35%



(0.38)%

Efficiency ratio(7)

30.4%


31.0%


31.0%


30.9%


30.3%



0.1%


30.8%


30.3%



0.5%

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

4.79%


4.82%


5.02%


5.07%


4.91%



(0.12)%


4.92%


4.95%



(0.03)%

Effective income tax rate

22.6%


24.9%


22.0%


24.4%


56.0%



(33.4)%


23.4%


41.8%



(18.4)%





















CREDIT QUALITY METRICS




















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

5.54%


4.97%


5.97%


6.14%


5.78%



(0.24)%


5.63%


5.37%



0.26%

30+ days past due as a % of period-end loan receivables(8)

4.76%


4.59%


4.17%


4.52%


4.67%



0.09%


4.76%


4.67%



0.09%

90+ days past due as a % of period-end loan receivables(8)

2.29%


2.09%


1.98%


2.28%


2.28%



0.01%


2.29%


2.28%



0.01%

Net charge-offs

$1,248


$1,087


$1,159


$1,198


$1,141


$107

9.4%


$4,692


$4,066


$626

15.4%

Loan receivables delinquent over 30 days(8)

$4,430


$4,021


$3,293


$3,521


$3,831


$599

15.6%


$4,430


$3,831


$599

15.6%

Loan receivables delinquent over 90 days(8)

$2,135


$1,833


$1,561


$1,776


$1,869


$266

14.2%


$2,135


$1,869


$266

14.2%





















Allowance for loan losses (period-end)

$6,427


$6,223


$5,859


$5,738


$5,574


$853

15.3%


$6,427


$5,574


$853

15.3%

Allowance coverage ratio(9)

6.90%


7.11%


7.43%


7.37%


6.80%



0.10%


6.90%


6.80%



0.10%





















BUSINESS METRICS




















Purchase volume(10)

$40,320


$36,443


$34,268


$29,626


$36,565


$3,755

10.3%


$140,657


$131,814


$8,843

6.7%

Period-end loan receivables

$93,139


$87,521


$78,879


$77,853


$81,947


$11,192

13.7%


$93,139


$81,947


$11,192

13.7%

Credit cards

$89,994


$84,319


$75,753


$74,952


$79,026


$10,968

13.9%


$89,994


$79,026


$10,968

13.9%

Consumer installment loans

$1,845


$1,789


$1,708


$1,590


$1,578


$267

16.9%


$1,845


$1,578


$267

16.9%

Commercial credit products

$1,260


$1,353


$1,356


$1,275


$1,303


$(43)

(3.3)%


$1,260


$1,303


$(43)

(3.3)%

Other

$40


$60


$62


$36


$40


$-

- %


$40


$40


$-

- %

Average loan receivables, including held for sale

$89,340


$86,783


$77,853


$79,090


$78,369


$10,971

14.0%


$83,304


$75,702


$7,602

10.0%

Period-end active accounts (in thousands)(11)

80,339


75,457


69,767


68,891


74,541


5,798

7.8%


80,339


74,541


5,798

7.8%

Average active accounts (in thousands)(11)

77,382


75,482


69,344


71,323


71,348


6,034

8.5%


73,847


69,968


3,879

5.5%





















LIQUIDITY




















Liquid assets




















Cash and equivalents

$9,396


$12,068


$15,675


$13,044


$11,602


$(2,206)

(19.0)%


$9,396


$11,602


$(2,206)

(19.0)%

Total liquid assets

$14,822


$18,214


$21,491


$18,557


$15,087


$(265)

(1.8)%


$14,822


$15,087


$(265)

(1.8)%

Undrawn credit facilities




















Undrawn credit facilities

$4,375


$5,125


$6,500


$6,000


$6,000


$(1,625)

(27.1)%


$4,375


$6,000


$(1,625)

(27.1)%

Total liquid assets and undrawn credit facilities

$19,197


$23,339


$27,991


$24,557


$21,087


$(1,890)

(9.0)%


$19,197


$21,087


$(1,890)

(9.0)%

Liquid assets % of total assets

13.88%


17.42%


21.68%


19.42%


15.75%



(1.87)%


13.88%


15.75%



(1.87)%

Liquid assets including undrawn credit facilities % of total assets

17.98%


22.32%


28.24%


25.70%


22.01%



(4.03)%


17.98%


22.01%



(4.03)%





















(1) Return on assets represents net earnings as a percentage of average total assets. 




















(2) Return on equity represents net earnings as a percentage of average total equity.




















(3) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP

Measures and Calculations of Regulatory Measures.

(4) Adjusted return on assets represents Adjusted net earnings as a percentage of average total assets. Adjusted return on equity represents Adjusted net earnings as a percentage of average total equity.  Adjusted net earnings is a non-GAAP measure. For a corresponding

reconciliation of Adjusted net earnings to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. 

(5) Adjusted return on tangible common equity represents Adjusted net earnings as a percentage of average tangible common equity. Both Adjusted net earnings and tangible common equity are non-GAAP measures. For corresponding reconciliations to a GAAP financial measure,

see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(6) Net interest margin represents net interest income divided by average interest-earning assets. 



















(7) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.














(8) Based on customer statement-end balances extrapolated to the respective period-end date.



















(9) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.

















(10) 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. 









(11) 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




Twelve Months Ended





Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


4Q'18 vs. 4Q'17



Dec 31,
2018


Dec 31,
2017


YTD'18 vs. YTD'17

Interest income:




















Interest and fees on loans

$4,774


$4,617


$4,081


$4,172


$4,233


$541

12.8%


$17,644


$16,219


$1,425

8.8%

Interest on investment securities

102


77


93


72


58


44

75.9%


344


188


156

83.0%

Total interest income

4,876


4,694


4,174


4,244


4,291


585

13.6%


17,988


16,407


1,581

9.6%





















Interest expense:




















Interest on deposits

350


314


273


249


233


117

50.2%


1,186


848


338

39.9%

Interest on borrowings of consolidated securitization entities

104


86


80


74


70


34

48.6%


344


263


81

30.8%

Interest on third-party debt

89


88


84


79


72


17

23.6%


340


280


60

21.4%

Total interest expense

543


488


437


402


375


168

44.8%


1,870


1,391


479

34.4%





















Net interest income

4,333


4,206


3,737


3,842


3,916


417

10.6%


16,118


15,016


1,102

7.3%





















Retailer share arrangements

(855)


(871)


(653)


(720)


(779)


(76)

9.8%


(3,099)


(2,937)


(162)

5.5%

Net interest income, after retailer share arrangements

3,478


3,335


3,084


3,122


3,137


341

10.9%


13,019


12,079


940

7.8%





















Provision for loan losses

1,452


1,451


1,280


1,362


1,354


98

7.2%


5,545


5,296


249

4.7%

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

2,026


1,884


1,804


1,760


1,783


243

13.6%


7,474


6,783


691

10.2%





















Other income:




















Interchange revenue

193


182


177


158


179


14

7.8%


710


653


57

8.7%

Debt cancellation fees

70


65


66


66


69


1

1.4%


267


272


(5)

(1.8)%

Loyalty programs

(208)


(196)


(192)


(155)


(193)


(15)

7.8%


(751)


(704)


(47)

6.7%

Other

9


12


12


6


7


2

28.6%


39


67


(28)

(41.8)%

Total other income

64


63


63


75


62


2

3.2%


265


288


(23)

(8.0)%





















Other expense:




















Employee costs(1)

353


365


351


358


330


23

7.0%


1,427


1,304


123

9.4%

Professional fees

231


232


177


166


159


72

45.3%


806


629


177

28.1%

Marketing and business development

166


131


110


121


156


10

6.4%


528


498


30

6.0%

Information processing

118


105


99


104


99


19

19.2%


426


373


53

14.2%

Other(1)

210


221


238


239


226


(16)

(7.1)%


908


943


(35)

(3.7)%

Total other expense

1,078


1,054


975


988


970


108

11.1%


4,095


3,747


348

9.3%





















Earnings before provision for income taxes

1,012


893


892


847


875


137

15.7%


3,644


3,324


320

9.6%

Provision for income taxes

229


222


196


207


490


(261)

(53.3)%


854


1,389


(535)

(38.5)%

Net earnings attributable to common stockholders

$783


$671


$696


$640


$385


$398

103.4%


$2,790


$1,935


$855

44.2%





















(1) We have reclassified certain amounts within Employee costs to Other for all periods in 2017 to conform to the current period classifications. 













 

SYNCHRONY FINANCIAL













STATEMENTS OF FINANCIAL POSITION













(unaudited, $ in millions)














Quarter Ended




Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


Dec 31, 2018 vs.
Dec 31, 2017

Assets













Cash and equivalents

$9,396


$12,068


$15,675


$13,044


$11,602


$(2,206)

(19.0)%

Debt securities

6,062


7,281


6,779


6,259


4,473


1,589

35.5%

Loan receivables:













Unsecuritized loans held for investment

64,969


59,868


50,884


52,469


55,526


9,443

17.0%

Restricted loans of consolidated securitization entities

28,170


27,653


27,995


25,384


26,421


1,749

6.6%

Total loan receivables

93,139


87,521


78,879


77,853


81,947


11,192

13.7%

Less: Allowance for loan losses

(6,427)


(6,223)


(5,859)


(5,738)


(5,574)


(853)

15.3%

Loan receivables, net

86,712


81,298


73,020


72,115


76,373


10,339

13.5%

Goodwill

1,024


1,024


1,024


991


991


33

3.3%

Intangible assets, net

1,137


1,105


863


780


749


388

51.8%

Other assets

2,461


1,769


1,761


2,370


1,620


841

51.9%

Total assets

$106,792


$104,545


$99,122


$95,559


$95,808


$10,984

11.5%














Liabilities and Equity









-




Deposits:













Interest-bearing deposit accounts

$63,738


$62,030


$58,734


$56,285


$56,276


$7,462

13.3%

Non-interest-bearing deposit accounts

281


287


277


285


212


69

32.5%

Total deposits

64,019


62,317


59,011


56,570


56,488


7,531

13.3%

Borrowings:













Borrowings of consolidated securitization entities

14,439


14,187


12,170


12,214


12,497


1,942

15.5%














Senior unsecured notes

9,557


9,554


9,551


8,801


8,302


1,255

15.1%

Total borrowings

23,996


23,741


21,721


21,015


20,799


3,197

15.4%

Accrued expenses and other liabilities

4,099


4,491


3,932


3,618


4,287


(188)

(4.4)%

Total liabilities

92,114


90,549


84,664


81,203


81,574


10,540

12.9%

Equity:













Common stock

1


1


1


1


1


-

- %

Additional paid-in capital

9,482


9,470


9,486


9,470


9,445


37

0.4%

Retained earnings

8,986


8,355


7,906


7,334


6,809


2,177

32.0%

Accumulated other comprehensive income:

(62)


(99)


(93)


(86)


(64)


2

(3.1)%

Treasury Stock

(3,729)


(3,731)


(2,842)


(2,363)


(1,957)


(1,772)

90.5%

Total equity

14,678


13,996


14,458


14,356


14,234


444

3.1%

Total liabilities and equity

$106,792


$104,545


$99,122


$95,559


$95,808


$10,984

11.5%

 

SYNCHRONY FINANCIAL






























AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN



























(unaudited, $ in millions)





























































                  Quarter Ended


Dec 31, 2018


Sep 30, 2018


Jun 30, 2018


Mar 31, 2018


Dec 31, 2017




Interest


Average




Interest


Average




Interest


Average




Interest


Average




Interest


Average


Average


Income/


Yield/


Average


Income/


Yield/


Average


Income/


Yield/


Average


Income/


Yield/


Average


Income/


Yield/


Balance


Expense


Rate


Balance


Expense


Rate


Balance


Expense


Rate


Balance


Expense


Rate


Balance


Expense


Rate

Assets






























Interest-earning assets:






























Interest-earning cash and equivalents

$10,856


$62


2.27%


$7,901


$39


1.96%


$13,097


$59


1.81%


$12,434


$47


1.53%


$13,591


$43


1.26%

Securities available for sale

6,837


40


2.32%


7,022


38


2.15%


6,803


34


2.00%


5,584


25


1.82%


3,725


15


1.60%































Loan receivables:






























Credit cards, including held for sale

86,131


4,695


21.63%


83,609


4,538


21.53%


74,809


4,010


21.50%


76,181


4,099


21.82%


75,389


4,161


21.90%

Consumer installment loans

1,815


42


9.18%


1,753


41


9.28%


1,648


37


9.01%


1,572


36


9.29%


1,568


36


9.11%

Commercial credit products

1,344


37


10.92%


1,355


37


10.83%


1,346


34


10.13%


1,286


36


11.35%


1,375


35


10.10%

Other

50


-


- %


66


1


NM


50


-


- %


51


1


NM


37


1


NM

Total loan receivables, including held for sale

89,340


4,774


21.20%


86,783


4,617


21.11%


77,853


4,081


21.03%


79,090


4,172


21.39%


78,369


4,233


21.43%

Total interest-earning assets

107,033


4,876


18.07%


101,706


4,694


18.31%


97,753


4,174


17.13%


97,108


4,244


17.72%


95,685


4,291


17.79%































Non-interest-earning assets:






























Cash and due from banks

1,320






1,217






1,161






1,197






1,037





Allowance for loan losses

(6,259)






(5,956)






(5,768)






(5,608)






(5,443)





Other assets

3,688






3,482






3,068






3,010






3,219





Total non-interest-earning assets

(1,251)






(1,257)






(1,539)






(1,401)






(1,187)



































Total assets

$105,782






$100,449






$96,214






$95,707






$94,498



































Liabilities






























Interest-bearing liabilities:






























Interest-bearing deposit accounts

$62,999


$350


2.20%


$60,123


$314


2.07%


$57,303


$273


1.91%


$56,356


$249


1.79%


$55,690


$233


1.66%

Borrowings of consolidated securitization entities

14,223


104


2.90%


12,306


86


2.77%


11,821


80


2.71%


12,410


74


2.42%


12,425


70


2.24%






- %


-




- %






- %













Senior unsecured notes

9,554


89


3.70%


9,552


88


3.66%


9,114


84


3.70%


8,795


79


3.64%


7,940


72


3.60%

Total interest-bearing liabilities

86,776


543


2.48%


81,981


488


2.36%


78,238


437


2.24%


77,561


402


2.10%


76,055


375


1.96%































Non-interest-bearing liabilities






























Non-interest-bearing deposit accounts

284






275






270






300






218





Other liabilities

4,283






3,772






3,299






3,570






3,716





Total non-interest-bearing liabilities

4,567






4,047






3,569






3,870






3,934



































Total liabilities

91,343






86,028






81,807






81,431






79,989



































Equity






























Total equity

14,439






14,421






14,407






14,276






14,509



































Total liabilities and equity

$105,782






$100,449






$96,214






$95,707






$94,498





Net interest income



$4,333






$4,206






$3,737






$3,842






$3,916

































Interest rate spread(1)





15.59%






15.95%






14.89%






15.62%






15.83%

Net interest margin(2)





16.06%






16.41%






15.33%






16.05%






16.24%































(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities. 





















(2) Net interest margin represents net interest income divided by average interest-earning assets. 



























 

SYNCHRONY FINANCIAL












AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN












(unaudited, $ in millions)

























Twelve Months Ended
Dec 31, 2018


Twelve Months Ended
Dec 31, 2017




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

$11,059


$207


1.87%


$11,707


$129


1.10%

Securities available for sale

6,566


137


2.09%


4,449


59


1.33%













Loan receivables:












Credit cards, including held for sale

80,219


17,342


21.62%


72,795


15,941


21.90%

Consumer installment loans

1,698


156


9.19%


1,491


137


9.19%

Commercial credit products

1,333


144


10.80%


1,366


139


10.18%

Other

54


2


3.70%


50


2


4.00%

Total loan receivables, including held for sale

83,304


17,644


21.18%


75,702


16,219


21.42%

Total interest-earning assets

100,929


17,988


17.82%


91,858


16,407


17.86%













Non-interest-earning assets:












Cash and due from banks

1,224






887





Allowance for loan losses

(5,900)






(4,942)





Other assets

3,315






3,304





Total non-interest-earning assets

(1,361)






(751)

















Total assets

$99,568






$91,107

















Liabilities












Interest-bearing liabilities:












Interest-bearing deposit accounts

$59,216


$1,186


2.00%


$53,173


$848


1.59%

Borrowings of consolidated securitization entities

12,694


344


2.71%


12,179


263


2.16%

Senior unsecured notes

9,257


340


3.67%


7,972


280


3.51%

Total interest-bearing liabilities

81,167


1,870


2.30%


73,324


1,391


1.90%













Non-interest-bearing liabilities












Non-interest-bearing deposit accounts

282






227





Other liabilities

3,733






3,129





Total non-interest-bearing liabilities

4,015






3,356

















Total liabilities

85,182






76,680

















Equity












Total equity

14,386






14,427

















Total liabilities and equity

$99,568






$91,107





Net interest income



$16,118






$15,016















Interest rate spread(1)





15.52%






15.96%

Net interest margin(2)





15.97%






16.35%













(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




Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


Dec 31, 2018 vs.
Dec 31, 2017

BALANCE SHEET STATISTICS













Total common equity

$14,678


$13,996


$14,458


$14,356


$14,234


$444

3.1%

Total common equity as a % of total assets

13.74%


13.39%


14.59%


15.02%


14.86%



(1.12)%














Tangible assets

$104,631


$102,416


$97,235


$93,788


$94,068


$10,563

11.2%

Tangible common equity(1)

$12,517


$11,867


$12,571


$12,585


$12,494


$23

0.2%

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

11.96%


11.59%


12.93%


13.42%


13.28%



(1.32)%

Tangible common equity per share(1)

$17.41


$16.51


$16.84


$16.55


$16.22


$1.19

7.3%














REGULATORY CAPITAL RATIOS(2)














Basel III Fully Phased-in(3)


Basel III

Transition



Total risk-based capital ratio(4)

15.3%


15.5%


18.0%


18.1%


17.3%




Tier 1 risk-based capital ratio(5)

14.0%


14.2%


16.6%


16.8%


16.0%




Tier 1 leverage ratio(6)

12.3%


12.3%


13.6%


13.7%


13.8%




Common equity Tier 1 capital ratio

14.0%


14.2%


16.6%


16.8%


16.0%


















Basel III Fully Phased-in



Common equity Tier 1 capital ratio

14.0%


14.2%


16.6%


16.8%


15.8%


















(1) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation

of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(2) Regulatory capital metrics at December 31, 2018 are preliminary and therefore subject to change. 

(3) Amounts presented do not reflect certain modifications to the regulatory capital rules proposed by the federal banking agencies in September 2017, which among other things, may increase the

risk weighting of certain deferred tax assets from 100% to 250% if the proposed rule becomes effective.

(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




Twelve Months Ended





Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


4Q'18 vs. 4Q'17


Dec 31,
2018


Dec 31,
2017


YTD'18 vs. YTD'17

RETAIL CARD




















Purchase volume(1)(2)

$33,080


$29,264


$27,340


$23,382


$29,839


$3,241

10.9%


$113,066


$106,239


$6,827

6.4%

Period-end loan receivables

$65,224


$60,564


$52,918


$52,531


$56,230


$8,994

16.0%


$65,224


$56,230


$8,994

16.0%

Average loan receivables, including held for sale

$62,006


$60,389


$52,427


$53,673


$53,256


$8,750

16.4%


$57,155


$51,570


$5,585

10.8%

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

61,275


59,846


54,092


55,927


56,113


5,162

9.2%


58,223


55,142


3,081

5.6%





















Interest and fees on loans(2)

$3,583


$3,465


$2,993


$3,096


$3,133


$450

14.4%


$13,137


$12,023


$1,114

9.3%

Other income(2)

$55


$51


$48


$65


$49


$6

12.2%


$219


$212


$7

3.3%

Retailer share arrangements(2)

$(835)


$(851)


$(644)


$(714)


$(771)


$(64)

8.3%


$(3,044)


$(2,904)


$(140)

4.8%





















PAYMENT SOLUTIONS




















Purchase volume(1)

$4,710


$4,606


$4,288


$3,823


$4,366


$344

7.9%


$17,427


$16,160


$1,267

7.8%

Period-end loan receivables

$18,418


$17,639


$16,875


$16,513


$16,857


$1,561

9.3%


$18,418


$16,857


$1,561

9.3%

Average loan receivables

$17,931


$17,234


$16,562


$16,629


$16,386


$1,545

9.4%


$17,093


$15,752


$1,341

8.5%

Average active accounts (in thousands)(3)

10,037


9,675


9,433


9,545


9,421


616

6.5%


9,692


9,192


500

5.4%





















Interest and fees on loans

$627


$601


$566


$562


$574


$53

9.2%


$2,356


$2,181


$175

8.0%

Other income

$2


$4


$4


$2


$2


$-

- %


$12


$14


$(2)

(14.3)%

Retailer share arrangements

$(15)


$(17)


$(7)


$(4)


$(5)


$(10)

NM


$(43)


$(24)


$(19)

79.2%





















CARECREDIT




















Purchase volume(1)

$2,530


$2,573


$2,640


$2,421


$2,360


$170

7.2%


$10,164


$9,415


$749

8.0%

Period-end loan receivables

$9,497


$9,318


$9,086


$8,809


$8,860


$637

7.2%


$9,497


$8,860


$637

7.2%

Average loan receivables

$9,403


$9,160


$8,864


$8,788


$8,727


$676

7.7%


$9,056


$8,380


$676

8.1%

Average active accounts (in thousands)(3)

6,070


5,961


5,819


5,851


5,814


256

4.4%


5,932


5,634


298

5.3%





















Interest and fees on loans

$564


$551


$522


$514


$526


$38

7.2%


$2,151


$2,015


$136

6.7%

Other income

$7


$8


$11


$8


$11


$(4)

(36.4)%


$34


$62


$(28)

(45.2)%

Retailer share arrangements

$(5)


$(3)


$(2)


$(2)


$(3)


$(2)

66.7%


$(12)


$(9)


$(3)

33.3%





















TOTAL SYF




















Purchase volume(1)(2)

$40,320


$36,443


$34,268


$29,626


$36,565


$3,755

10.3%


$140,657


$131,814


$8,843

6.7%

Period-end loan receivables

$93,139


$87,521


$78,879


$77,853


$81,947


$11,192

13.7%


$93,139


$81,947


$11,192

13.7%

Average loan receivables, including held for sale

$89,340


$86,783


$77,853


$79,090


$78,369


$10,971

14.0%


$83,304


$75,702


$7,602

10.0%

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

77,382


75,482


69,344


71,323


71,348


6,034

8.5%


73,847


69,968


3,879

5.5%





















Interest and fees on loans(2)

$4,774


$4,617


$4,081


$4,172


$4,233


$541

12.8%


$17,644


$16,219


$1,425

8.8%

Other income(2)

$64


$63


$63


$75


$62


$2

3.2%


$265


$288


$(23)

(8.0)%

Retailer share arrangements(2)

$(855)


$(871)


$(653)


$(720)


$(779)


$(76)

9.8%


$(3,099)


$(2,937)


$(162)

5.5%





















(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


Twelve Months

Ended


Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


Dec 31,
2017

COMMON EQUITY MEASURES












GAAP Total common equity

$14,678


$13,996


$14,458


$14,356


$14,234



     Less: Goodwill

(1,024)


(1,024)


(1,024)


(991)


(991)



     Less: Intangible assets, net

(1,137)


(1,105)


(863)


(780)


(749)



Tangible common equity

$12,517


$11,867


$12,571


$12,585


$12,494



Adjustments for certain deferred tax liabilities and certain items in accumulated

comprehensive income (loss)

284


311


287


278


254



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

$12,801


$12,178


$12,858


$12,863


$12,748



     Adjustment related to capital components during transition









142



Basel III - Common equity Tier 1 (transition)









$12,890















RISK-BASED CAPITAL












Common equity Tier 1

$12,801


$12,178


$12,858


$12,863


$12,890



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

1,211


1,137


1,027


1,015


1,064



Risk-based capital

$14,012


$13,315


$13,885


$13,878


$13,954















ASSET MEASURES












Total average assets

$105,782


$100,449


$96,214


$95,707


$94,498



Adjustments for:












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

(1,845)


(1,836)


(1,670)


(1,560)


(1,392)



Total assets for leverage purposes

$103,937


$98,613


$94,544


$94,147


$93,106















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

$91,725


$85,941


$77,322


$76,509


$80,526



Risk-weighted assets - Basel III (transition)









$80,669















TANGIBLE COMMON EQUITY PER SHARE












GAAP book value per share

$20.42


$19.47


$19.37


$18.88


$18.47



     Less: Goodwill

(1.42)


(1.42)


(1.37)


(1.30)


(1.29)



     Less: Intangible assets, net

(1.59)


(1.54)


(1.16)


(1.03)


(0.96)



Tangible common equity per share

$17.41


$16.51


$16.84


$16.55


$16.22















ADJUSTED NET EARNINGS












GAAP net earnings

$783


$671


$696


$640


$385


$1,935

Adjustment for tax law change(2)

-


-


-


-


160


160

Adjusted net earnings

$783


$671


$696


$640


$545


$2,095













ADJUSTED DILUTED EPS












GAAP diluted EPS   

$1.09


$0.91


$0.92


$0.83


$0.49


$2.42

Adjustment for tax law change(2)

-


-


-


-


0.21


0.20

Adjusted diluted EPS

$1.09


$0.91


$0.92


$0.83


$0.70


$2.62













(1) Regulatory measures at December 31, 2018 are presented on an estimated basis.

(2) Adjustment to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Act. 

 

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SOURCE Synchrony

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