Synchrony Completes Acquisition of Ally Lending

Rhea-AI Summary

Synchrony (SYF) strengthens relationships in home improvement and health and wellness financing through the acquisition of Ally Lending, expanding its presence in high-growth specialty areas such as roofing, HVAC, and windows, as well as in cosmetic, audiology, and dentistry. The acquisition is expected to be accretive to full-year 2024 earnings per share for Synchrony.

Insights

Financial Analyst

The acquisition of Ally Lending by Synchrony represents a strategic expansion in the consumer financing sector, particularly in the realms of home improvement and health and wellness. By absorbing a $2.2 billion loan receivable portfolio, Synchrony not only broadens its customer base but also enhances its product offerings. The integration of revolving credit and installment loans at the point-of-sale is a notable diversification move that could potentially increase customer loyalty and spending.

From a financial perspective, the acquisition is expected to be accretive to Synchrony's 2024 earnings per share, indicating a positive impact on profitability post-acquisition. The stated internal rate of return and tangible book value earnback period of three-and-a-half years provide a timeline for investors to gauge the financial success of this transaction. These metrics suggest a favorable risk-return profile for the acquisition, assuming integration and execution proceed as planned.

Market Research Analyst

Entering the high-growth specialty areas such as roofing, HVAC and windows, along with health-related services like cosmetic, audiology and dentistry, positions Synchrony to capitalize on increasing consumer demand in these sectors. By offering both revolving credit and installment loans, Synchrony is poised to cater to a broader range of consumer financing preferences, which can result in a competitive edge in the marketplace.

The multi-product strategy could also enhance the value proposition to merchants and contractors, potentially leading to deeper market penetration and improved merchant loyalty. This move aligns with consumer trends favoring flexible financing solutions and it could stimulate incremental sales for Synchrony's partner merchants by making high-ticket items more accessible to consumers.

Economist

The acquisition's timing may be influenced by the current economic landscape, where consumer spending in home improvement and health and wellness remains robust. By expanding into these sectors, Synchrony is likely aiming to leverage the economic tailwinds associated with these industries. However, it is important to monitor macroeconomic indicators such as interest rates and consumer debt levels, as they could affect the demand for financing and the performance of the loan portfolio.

Furthermore, the emphasis on a multi-product strategy suggests that Synchrony is preparing for various economic scenarios by offering financial products that cater to different consumer behaviors during economic cycles. This strategic diversification can help cushion the company against sector-specific downturns and provide a stable revenue stream.

Strengthens Relationships in Home Improvement and Health and Wellness Financing 

STAMFORD, Conn., March 4, 2024 /PRNewswire/ -- Synchrony (NYSE: SYF) today announced it completed its acquisition of Ally Lending, the point of sale financing business for Ally Financial (NYSE: ALLY) that includes $2.2 billion of loan receivables.* 

Ally's loan portfolio includes relationships with nearly 2,500 merchant locations and supports more than 450,000 active borrowers in home improvement services and healthcare. Through this acquisition, Synchrony deepens its presence and reach in the home improvement and health and wellness sectors including high-growth specialty areas such as roofing, HVAC, and windows, as well as in cosmetic, audiology, and dentistry. 

The closing expands Synchrony's multi-product strategy by extending its core revolving product to Ally's partners and speeds the Company's ability to offer installment products to Synchrony's merchants and contractors. Through this acquisition, Synchrony will create a differentiated solution in the industry -- simultaneously offering both revolving credit and installment loans at the point-of-sale in the home improvement vertical. Further, the Ally Lending health portfolio complements Synchrony's existing Health and Wellness platform and extends Synchrony's reach in cosmetic, audiology, and dentistry.

"We are pleased to welcome the Ally Lending team to our Synchrony family. The combination of their industry knowledge, flexible financing solutions and customer-focused mindset paired with Synchrony's multi-product strategy will provide more choice to our consumers and help our merchants grow," said Curtis Howse, CEO of Home & Auto at Synchrony. "This is a significant and exciting growth opportunity for Synchrony, and we look forward to using our expertise to scale the business."

Synchrony expects this acquisition to be accretive to full year 2024 earnings per share, excluding the impact of the initial reserve build for credit losses at acquisition. The acquisition is expected to realize an attractive internal rate of return for Synchrony with an approximate three-and-a-half-year tangible book value earnback. 

*Amount of loan receivables as of December 31, 2023.

About Synchrony

Synchrony (NYSE: SYF) is a premier consumer financial services company delivering one of the industry's most complete digitally-enabled product suites. Our experience, expertise and scale encompass a broad spectrum of industries including digital, health and wellness, retail, telecommunications, home, auto, outdoor, pet and more. We have an established and diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which we refer to as our "partners." We connect our partners and consumers through our dynamic financial ecosystem and provide them with a diverse set of financing solutions and innovative digital capabilities to address their specific needs and deliver seamless, omnichannel experiences.  We offer the right financing products to the right customers in their channel of choice. For more information, visit www.synchrony.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "will," "expect, " or words of similar meaning. The forward-looking statements convey our expectations, intentions, or forecasts related to the completion of the Ally Lending acquisition, which are based on management's assumptions and estimates, and are subject to inherent uncertainties, risks and changes that are difficult to predict.  As a result, actual results could differ materially from those indicated in these forward-looking statements. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with our public filings, including under the heading "Risk Factors Relating to Our Business" and "Risk Factors Relating to Regulation" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed on February 8, 2024. Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update any forward-looking statement, except as otherwise may be required by law.

Synchrony Communications:
Lisa Lanspery
lisa.lanspery@syf.com

Synchrony Investor Relations:
Kathryn Miller
kathryn.miller@syf.com

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SOURCE Synchrony Financial

FAQ

What did Synchrony (SYF) announce on March 4, 2024?

Synchrony announced the completion of its acquisition of Ally Lending, the point of sale financing business for Ally Financial, including $2.2 billion of loan receivables.

How many merchant locations does Ally's loan portfolio include?

Ally's loan portfolio includes relationships with nearly 2,500 merchant locations.

How many active borrowers does Ally's loan portfolio support?

Ally's loan portfolio supports more than 450,000 active borrowers in home improvement services and healthcare.

What sectors does Synchrony deepen its presence and reach through this acquisition?

Synchrony deepens its presence and reach in the home improvement and health and wellness sectors, including high-growth specialty areas such as roofing, HVAC, and windows, as well as in cosmetic, audiology, and dentistry.

What is the expected impact of the acquisition on Synchrony's earnings per share for 2024?

Synchrony expects the acquisition to be accretive to full year 2024 earnings per share.