Synchrony Reports Fourth Quarter Net Earnings of $738 Million or $1.24 Per Diluted Share

Rhea-AI Summary

Synchrony Financial (NYSE: SYF) reported fourth quarter 2020 net earnings of $738 million, or $1.24 per diluted share. Key metrics showed a 6% decrease in loan receivables to $81.9 billion and an 11% decrease in interest and fees on loans to $4.0 billion. Average active accounts dropped 10% to 66.3 million. The company returned $128 million in capital via dividends and approved a $1.6 billion share repurchase program. Credit quality improved with loans 30+ days past due at 3.07% compared to 4.44% last year.

Positive

• Net earnings increased by 1% to $738 million.
• Board approved a $1.6 billion share repurchase program.
• Return on equity improved to 23.6%.

Negative

• Loan receivables decreased by 6% to $81.9 billion.
• Average active accounts decreased by 10% to 66.3 million.
• Interest and fees on loans decreased by 11% to $4.0 billion.

STAMFORD, Conn., Jan. 29, 2021 /PRNewswire/ -- Synchrony Financial (NYSE: SYF) today announced fourth quarter 2020 earnings results amid the continuing Coronavirus (COVID-19) pandemic. Synchrony reported fourth quarter 2020 net earnings of $738 million, or $1.24 per diluted share.

Key Highlights*.

• Loan receivables decreased 6% to $81.9 billion
• Interest and fees on loans decreased 11% to $4.0 billion
• Purchase volume decreased 1% to $39.9 billion
• Average active accounts decreased 10% to 66.3 million
• Deposits decreased $2.3 billion, or 4%, to $62.8 billion
• Renewed Payment Solutions programs with Mattress Firm and Kawasaki, and added a new program with Doosan Bobcat
• Added new CareCredit programs with Walgreens and the Community Veterinary Partners, renewed program with Aspen Dental, and acquired Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services
• Returned $128 million in capital through common stock dividends
• The Board of Directors approved a share repurchase program of up to $1.6 billion, commencing in the first quarter of 2021, subject to capital plan and any regulatory restrictions

"Last year brought challenges the likes of which we have never before experienced, and I am proud of how we came together as an organization to help our employees, partners, customers, and communities. We never lost sight of the necessity to build for the future, one in which the acceleration of digital adoption is profound. We quickly deployed digital assets to help our partners navigate this new environment and we continue to make investments for the future.  In 2020, we renewed 41 key relationships, won 25 new deals, and launched promising new programs with Verizon and Venmo. We also took a deep look at our organization to decisively reduce costs to appropriately align the expenses of our business while maintaining investments in our long-term strategy," said Margaret Keane, Chief Executive Officer, Synchrony Financial. "With Synchrony in a position of strength, now is the right time to implement the leadership transition announced earlier this month.  Effective April 1, I will transition to the role of Executive Chair of our Board of Directors, and Brian Doubles will become President and CEO, allowing him to continue the incredible progress that has been made and drive the next stage of Synchrony's exciting growth journey."

Business and Financial Results for the Fourth Quarter of 2020*

Earnings

• Net interest income decreased $370 million, or 9%, to $3.7 billion, mainly due to the impact of COVID-19.
• Retailer share arrangements increased $18 million, or 2%, to $1.0 billion, reflecting the improvement in net charge-offs.
• Provision for credit losses decreased $354 million, or 32%, to $750 million, mainly driven by lower net charge-offs, partially offset by a $119 million reserve increase.
• Other income decreased $22 million, or 21%, to $82 million, largely driven by higher loyalty program costs.
• Other expense decreased $79 million, or 7%, to $1.0 billion, mainly driven by lower purchase volume and accounts, lower employee costs, and lower operational losses.
• Net earnings increased $7 million, or 1%, to $738 million .

Balance Sheet

• Period-end loan receivables decreased 6%; purchase volume decreased 1%; and average active accounts decreased 10%.
• Deposits decreased $2.3 billion, or 4%, to $62.8 billion and comprised 80% of funding.
• The Company's balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $23.7 billion, or 24.7% of total assets.
• The Company has elected to defer the regulatory capital effects of CECL for two years; the estimated Common Equity Tier 1 ratio was 15.9% compared to 14.1%, and the estimated Tier 1 Capital ratio was 16.8% compared to 15.0%, reflecting the Company's strong capital generation capabilities.
• The Board of Directors approved a share repurchase program of up to $1.6 billion, commencing in the first quarter of 2021 and expiring December 31, 2021.

Key Financial Metrics

• Return on assets was 3.1% and return on equity was 23.6%.
• Net interest margin was 14.64%.
• Efficiency ratio was 37.1%.

Credit Quality

• Loans 30+ days past due as a percentage of total period-end loan receivables were 3.07% compared to 4.44% last year.
• Net charge-offs as a percentage of total average loan receivables were 3.16% compared to 5.15% last year.
• The allowance for credit losses as a percentage of total period-end loan receivables was 12.54%.

Sales Platforms

• Retail Card period-end loan receivables decreased 8%, driven primarily by the impact from COVID-19, partially offset by growth in digital partners. Interest and fees on loans decreased 13%, driven primarily by COVID-19 and the decline in loan receivables. Purchase volume increased 1% and average active accounts decreased 10%.
• Payment Solutions period-end loan receivables decreased 2%, primarily due to the impact from COVID-19, partially offset by growth in Power Sports and Home Specialty. Interest and fees on loans decreased 9%, driven primarily by lower yield on loan receivables. Purchase volume decreased 7% and average active accounts decreased 9%.
• CareCredit period-end loan receivables decreased 7%, driven primarily by the impact from COVID-19. Interest and fees on loans decreased 4%, driven primarily by lower merchant discount as a result of the decline in purchase volume, which decreased 6%. Average active accounts decreased 10%.

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

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete.  Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed February 13, 2020, and the Company's forthcoming Annual Report on Form 10-K for the year ended December 31, 2020.  The detailed financial tables and other information are also available on the Investor Relations page of the Company's website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.

Conference Call and Webcast Information

On Friday, January 29, 2021, at 8:30 a.m. Eastern Time, Margaret Keane, Chief Executive Officer, Brian Doubles, President, and Brian Wenzel Sr., 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 also be available on the website.

About Synchrony Financial

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

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

For more information, visit www.synchrony.com and Twitter: @Synchrony.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "estimates," "will," "should," "may" or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated, including the future impacts of the novel coronavirus disease ("COVID-19") outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the Tax Sharing and Separation Agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau's regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit the Synchrony Bank's ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed on February 13, 2020, and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, as filed on October 22, 2020. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as "tangible common equity", and certain "CECL fully phased-in" capital measures, 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													Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		4Q'20 vs. 4Q'19			Dec 31, 2020		Dec 31, 2019		YTD'20 vs. YTD'19
EARNINGS
Net interest income	$3,659		$3,457		$3,396		$3,890		$4,029		$(370)	(9.2)%		$14,402		$16,799		$(2,397)	(14.3)%
Retailer share arrangements	(1,047)		(899)		(773)		(926)		(1,029)		(18)	1.7%		(3,645)		(3,858)		213	(5.5)%
Provision for credit losses	750		1,210		1,673		1,677		1,104		(354)	(32.1)%		5,310		4,180		1,130	27.0%
Net interest income, after retailer share arrangements and provision for credit losses	1,862		1,348		950		1,287		1,896		(34)	(1.8)%		5,447		8,761		(3,314)	(37.8)%
Other income	82		131		95		97		104		(22)	(21.2)%		405		371		34	9.2%
Other expense	1,000		1,067		986		1,002		1,079		(79)	(7.3)%		4,055		4,245		(190)	(4.5)%
Earnings before provision for income taxes	944		412		59		382		921		23	2.5%		1,797		4,887		(3,090)	(63.2)%
Provision for income taxes	206		99		11		96		190		16	8.4%		412		1,140		(728)	(63.9)%
Net earnings	$738		$313		$48		$286		$731		$7	1.0%		$1,385		$3,747		$(2,362)	(63.0)%
Net earnings available to common stockholders	$728		$303		$37		$275		$731		$(3)	(0.4)%		$1,343		$3,747		$(2,404)	(64.2)%
COMMON SHARE STATISTICS
Basic EPS	$1.25		$0.52		$0.06		$0.45		$1.15		$0.10	8.7%		$2.28		$5.59		$(3.31)	(59.2)%
Diluted EPS	$1.24		$0.52		$0.06		$0.45		$1.15		$0.09	7.8%		$2.27		$5.56		$(3.29)	(59.2)%
Dividend declared per share	$0.22		$0.22		$0.22		$0.22		$0.22		$-	- %		$0.88		$0.86		$0.02	2.3%
Common stock price	$34.71		$26.17		$22.16		$16.09		$36.01		$(1.30)	(3.6)%		$34.71		$36.01		$(1.30)	(3.6)%
Book value per share	$20.49		$19.47		$19.13		$19.27		$23.31		$(2.82)	(12.1)%		$20.49		$23.31		$(2.82)	(12.1)%
Tangible common equity per share(1)	$16.72		$15.75		$15.28		$15.35		$19.50		$(2.78)	(14.3)%		$16.72		$19.50		$(2.78)	(14.3)%
Beginning common shares outstanding	583.8		583.7		583.2		615.9		653.7		(69.9)	(10.7)%		615.9		718.8		(102.9)	(14.3)%
Issuance of common shares	-		-		-		-		-		-	- %		-		-		-	- %
Stock-based compensation	0.2		0.1		0.5		0.9		0.6		(0.4)	(66.7)%		1.7		3.1		(1.4)	(45.2)%
Shares repurchased	-		-		-		(33.6)		(38.4)		38.4	(100.0)%		(33.6)		(106.0)		72.4	(68.3)%
Ending common shares outstanding	584.0		583.8		583.7		583.2		615.9		(31.9)	(5.2)%		584.0		615.9		(31.9)	(5.2)%
Weighted average common shares outstanding	583.9		583.8		583.7		604.9		633.7		(49.8)	(7.9)%		589.0		670.2		(81.2)	(12.1)%
Weighted average common shares outstanding (fully diluted)	586.6		584.8		584.4		607.4		637.7		(51.1)	(8.0)%		590.8		673.5		(82.7)	(12.3)%
(1) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

 

SYNCHRONY FINANCIAL
SELECTED METRICS
(unaudited, $ in millions)
	Quarter Ended													Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		4Q'20 vs. 4Q'19			Dec 31, 2020		Dec 31, 2019		YTD'20 vs. YTD'19
PERFORMANCE METRICS
Return on assets(1)	3.1%		1.3%		0.2%		1.1%		2.7%			0.4%		1.4%		3.5%			(2.1)%
Return on equity(2)	23.6%		10.3%		1.6%		9.1%		19.0%			4.6%		11.2%		25.1%			(13.9)%
Return on tangible common equity(3)	30.4%		13.1%		1.6%		11.6%		23.0%			7.4%		14.4%		29.9%			(15.5)%
Net interest margin(4)	14.64%		13.80%		13.53%		15.15%		15.01%			(0.37)%		14.29%		15.78%			(1.49)%
Efficiency ratio(5)	37.1%		39.7%		36.3%		32.7%		34.8%			2.3%		36.3%		31.9%			4.4%
Other expense as a % of average loan receivables, including held for sale	5.01%		5.44%		5.04%		4.77%		5.01%			0.00%		5.06%		4.79%			0.27%
Effective income tax rate	21.8%		24.0%		18.6%		25.1%		20.6%			1.2%		22.9%		23.3%			(0.4)%
CREDIT QUALITY METRICS
Net charge-offs as a % of average loan receivables, including held for sale	3.16%		4.42%		5.35%		5.36%		5.15%			(1.99)%		4.58%		5.65%			(1.07)%
30+ days past due as a % of period-end loan receivables(6)	3.07%		2.67%		3.13%		4.24%		4.44%			(1.37)%		3.07%		4.44%			(1.37)%
90+ days past due as a % of period-end loan receivables(6)	1.40%		1.24%		1.77%		2.10%		2.15%			(0.75)%		1.40%		2.15%			(0.75)%
Net charge-offs	$631		$866		$1,046		$1,125		$1,109		$(478)	(43.1)%		$3,668		$5,005		$(1,337)	(26.7)%
Loan receivables delinquent over 30 days(6)	$2,514		$2,100		$2,453		$3,500		$3,874		$(1,360)	(35.1)%		$2,514		$3,874		$(1,360)	(35.1)%
Loan receivables delinquent over 90 days(6)	$1,143		$973		$1,384		$1,735		$1,877		$(734)	(39.1)%		$1,143		$1,877		$(734)	(39.1)%
Allowance for credit losses (period-end)	$10,265		$10,146		$9,802		$9,175		$5,602		$4,663	83.2%		$10,265		$5,602		$4,663	83.2%
Allowance coverage ratio(7)	12.54%		12.92%		12.52%		11.13%		6.42%			6.12%		12.54%		6.42%			6.12%
BUSINESS METRICS
Purchase volume(8)(9)	$39,874		$36,013		$31,155		$32,042		$40,212		$(338)	(0.8)%		$139,084		$149,411		$(10,327)	(6.9)%
Period-end loan receivables	$81,867		$78,521		$78,313		$82,469		$87,215		$(5,348)	(6.1)%		$81,867		$87,215		$(5,348)	(6.1)%
Credit cards	$78,455		$75,204		$75,353		$79,832		$84,606		$(6,151)	(7.3)%		$78,455		$84,606		$(6,151)	(7.3)%
Consumer installment loans	$2,125		$1,987		$1,779		$1,390		$1,347		$778	57.8%		$2,125		$1,347		$778	57.8%
Commercial credit products	$1,250		$1,270		$1,140		$1,203		$1,223		$27	2.2%		$1,250		$1,223		$27	2.2%
Other	$37		$60		$41		$44		$39		$(2)	(5.1)%		$37		$39		$(2)	(5.1)%
Average loan receivables, including held for sale	$79,452		$78,005		$78,697		$84,428		$85,376		$(5,924)	(6.9)%		$80,138		$88,649		$(8,511)	(9.6)%
Period-end active accounts (in thousands)(9)(10)	68,540		64,800		63,430		68,849		75,471		(6,931)	(9.2)%		68,540		75,471		(6,931)	(9.2)%
Average active accounts (in thousands)(9)(10)	66,261		64,270		64,836		72,078		73,734		(7,473)	(10.1)%		67,131		75,721		(8,590)	(11.3)%
LIQUIDITY
Liquid assets
Cash and equivalents	$11,524		$13,552		$16,344		$13,704		$12,147		$(623)	(5.1)%		$11,524		$12,147		$(623)	(5.1)%
Total liquid assets	$18,321		$21,402		$22,352		$19,225		$17,322		$999	5.8%		$18,321		$17,322		$999	5.8%
Undrawn credit facilities
Undrawn credit facilities	$5,400		$5,400		$5,650		$5,600		$6,050		$(650)	(10.7)%		$5,400		$6,050		$(650)	(10.7)%
Total liquid assets and undrawn credit facilities	$23,721		$26,802		$28,002		$24,825		$23,372		$349	1.5%		$23,721		$23,372		$349	1.5%
Liquid assets % of total assets	19.09%		22.37%		23.15%		19.61%		16.52%			2.57%		19.09%		16.52%			2.57%
Liquid assets including undrawn credit facilities % of total assets	24.72%		28.02%		29.00%		25.32%		22.30%			2.42%		24.72%		22.30%			2.42%
(1) Return on assets represents net earnings as a percentage of average total assets.
(2) Return on equity represents net earnings as a percentage of average total equity.
(3) Return on tangible common equity represents net earnings available to common stockholders as a percentage of average tangible common equity. Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
(5) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, plus other income, less retailer share arrangements.
(6) Based on customer statement-end balances extrapolated to the respective period-end date.
(7) Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.
(8) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(9) Includes activity and accounts associated with loan receivables held for sale.
(10) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

 

SYNCHRONY FINANCIAL
STATEMENTS OF EARNINGS
(unaudited, $ in millions)
	Quarter Ended													Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		4Q'20 vs. 4Q'19			Dec 31, 2020		Dec 31, 2019		YTD'20 vs. YTD'19
Interest income:
Interest and fees on loans	$3,981		$3,821		$3,808		$4,340		$4,492		$(511)	(11.4)%		$15,950		$18,705		$(2,755)	(14.7)%
Interest on cash and debt securities	12		16		22		67		93		(81)	(87.1)%		117		385		(268)	(69.6)%
Total interest income	3,993		3,837		3,830		4,407		4,585		(592)	(12.9)%		16,067		19,090		(3,023)	(15.8)%
Interest expense:
Interest on deposits	200		245		293		356		383		(183)	(47.8)%		1,094		1,566		(472)	(30.1)%
Interest on borrowings of consolidated securitization entities	52		53		59		73		80		(28)	(35.0)%		237		358		(121)	(33.8)%
Interest on senior unsecured notes	82		82		82		88		93		(11)	(11.8)%		334		367		(33)	(9.0)%
Total interest expense	334		380		434		517		556		(222)	(39.9)%		1,665		2,291		(626)	(27.3)%
Net interest income	3,659		3,457		3,396		3,890		4,029		(370)	(9.2)%		14,402		16,799		(2,397)	(14.3)%
Retailer share arrangements	(1,047)		(899)		(773)		(926)		(1,029)		(18)	1.7%		(3,645)		(3,858)		213	(5.5)%
Provision for credit losses	750		1,210		1,673		1,677		1,104		(354)	(32.1)%		5,310		4,180		1,130	27.0%
Net interest income, after retailer share arrangements and provision for credit losses	1,862		1,348		950		1,287		1,896		(34)	(1.8)%		5,447		8,761		(3,314)	(37.8)%
Other income:
Interchange revenue	185		172		134		161		192		(7)	(3.6)%		652		748		(96)	(12.8)%
Debt cancellation fees	72		68		69		69		64		8	12.5%		278		265		13	4.9%
Loyalty programs	(202)		(155)		(134)		(158)		(181)		(21)	11.6%		(649)		(743)		94	(12.7)%
Other	27		46		26		25		29		(2)	(6.9)%		124		101		23	22.8%
Total other income	82		131		95		97		104		(22)	(21.2)%		405		371		34	9.2%
Other expense:
Employee costs	347		382		327		324		385		(38)	(9.9)%		1,380		1,455		(75)	(5.2)%
Professional fees	186		187		189		197		199		(13)	(6.5)%		759		867		(108)	(12.5)%
Marketing and business development	139		107		91		111		152		(13)	(8.6)%		448		549		(101)	(18.4)%
Information processing	128		125		116		123		122		6	4.9%		492		485		7	1.4%
Other	200		266		263		247		221		(21)	(9.5)%		976		889		87	9.8%
Total other expense	1,000		1,067		986		1,002		1,079		(79)	(7.3)%		4,055		4,245		(190)	(4.5)%
Earnings before provision for income taxes	944		412		59		382		921		23	2.5%		1,797		4,887		(3,090)	(63.2)%
Provision for income taxes	206		99		11		96		190		16	8.4%		412		1,140		(728)	(63.9)%
Net earnings	$738		$313		$48		$286		$731		$7	1.0%		$1,385		$3,747		$(2,362)	(63.0)%
Net earnings available to common stockholders	$728		$303		$37		$275		$731		$(3)	(0.4)%		$1,343		$3,747		$(2,404)	(64.2)%

 

SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION
(unaudited, $ in millions)
	Quarter Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020 vs. Dec 31, 2019
Assets
Cash and equivalents	$11,524		$13,552		$16,344		$13,704		$12,147		$(623)	(5.1)%
Debt securities	7,469		8,432		6,623		6,146		5,911		1,558	26.4%
Loan receivables:
Unsecuritized loans held for investment	56,472		52,613		52,629		54,765		58,398		(1,926)	(3.3)%
Restricted loans of consolidated securitization entities	25,395		25,908		25,684		27,704		28,817		(3,422)	(11.9)%
Total loan receivables	81,867		78,521		78,313		82,469		87,215		(5,348)	(6.1)%
Less: Allowance for credit losses(1)	(10,265)		(10,146)		(9,802)		(9,175)		(5,602)		(4,663)	83.2%
Loan receivables, net	71,602		68,375		68,511		73,294		81,613		(10,011)	(12.3)%
Loan receivables held for sale	5		4		4		5		725		(720)	(99.3)%
Goodwill	1,078		1,078		1,078		1,078		1,078		-	- %
Intangible assets, net	1,125		1,091		1,166		1,208		1,265		(140)	(11.1)%
Other assets	3,145		3,126		2,818		2,603		2,087		1,058	50.7%
Total assets	$95,948		$95,658		$96,544		$98,038		$104,826		$(8,878)	(8.5)%
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts	$62,469		$63,195		$63,857		$64,302		$64,877		$(2,408)	(3.7)%
Non-interest-bearing deposit accounts	313		298		291		313		277		36	13.0%
Total deposits	62,782		63,493		64,148		64,615		65,154		(2,372)	(3.6)%
Borrowings:
Borrowings of consolidated securitization entities	7,810		7,809		8,109		9,291		10,412		(2,602)	(25.0)%
Senior unsecured notes	7,965		7,962		7,960		7,957		9,454		(1,489)	(15.7)%
Total borrowings	15,775		15,771		16,069		17,248		19,866		(4,091)	(20.6)%
Accrued expenses and other liabilities	4,690		4,295		4,428		4,205		4,718		(28)	(0.6)%
Total liabilities	83,247		83,559		84,645		86,068		89,738		(6,491)	(7.2)%
Equity:
Preferred stock	734		734		734		734		734		-	- %
Common stock	1		1		1		1		1		-	- %
Additional paid-in capital	9,570		9,552		9,532		9,523		9,537		33	0.3%
Retained earnings	10,621		10,024		9,852		9,960		12,117		(1,496)	(12.3)%
Accumulated other comprehensive income (loss)	(51)		(31)		(37)		(49)		(58)		7	(12.1)%
Treasury stock	(8,174)		(8,181)		(8,183)		(8,199)		(7,243)		(931)	12.9%
Total equity	12,701		12,099		11,899		11,970		15,088		(2,387)	(15.8)%
Total liabilities and equity	$95,948		$95,658		$96,544		$98,038		$104,826		$(8,878)	(8.5)%
(1) Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses ("CECL") that measures the allowance for credit losses based on management's best estimate of expected credit losses for the life of our loan receivables. Prior periods presented reflect measurement of the allowance based on management's estimate of probable incurred credit losses in accordance with the previous accounting guidance effective for those periods.

 

SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
(unaudited, $ in millions)
	Quarter Ended
	Dec 31, 2020						Sep 30, 2020						Jun 30, 2020						Mar 31, 2020						Dec 31, 2019
			Interest		Average				Interest		Average				Interest		Average				Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate
Assets
Interest-earning assets:
Interest-earning cash and equivalents	$11,244		$4		0.14%		$13,664		$4		0.12%		$15,413		$3		0.08%		$12,902		$42		1.31%		$16,269		$68		1.66%
Securities available for sale	8,706		8		0.37%		7,984		12		0.60%		6,804		19		1.12%		5,954		25		1.69%		4,828		25		2.05%
Loan receivables, including held for sale:
Credit cards	76,039		3,908		20.45%		74,798		3,752		19.96%		75,942		3,740		19.81%		81,716		4,272		21.03%		81,960		4,409		21.34%
Consumer installment loans	2,057		50		9.67%		1,892		46		9.67%		1,546		37		9.63%		1,432		35		9.83%		2,058		48		9.25%
Commercial credit products	1,293		23		7.08%		1,238		22		7.07%		1,150		30		10.49%		1,243		33		10.68%		1,311		34		10.29%
Other	63		-		- %		77		1		NM		59		1		NM		37		-		- %		47		1		NM
Total loan receivables, including held for sale	79,452		3,981		19.93%		78,005		3,821		19.49%		78,697		3,808		19.46%		84,428		4,340		20.67%		85,376		4,492		20.87%
Total interest-earning assets	99,402		3,993		15.98%		99,653		3,837		15.32%		100,914		3,830		15.26%		103,284		4,407		17.16%		106,473		4,585		17.08%
Non-interest-earning assets:
Cash and due from banks	1,525						1,489						1,486						1,450						1,326
Allowance for credit losses	(10,190)						(9,823)						(9,221)						(8,708)						(5,593)
Other assets	5,228						5,021						4,779						4,696						3,872
Total non-interest-earning assets	(3,437)						(3,313)						(2,956)						(2,562)						(395)
Total assets	$95,965						$96,340						$97,958						$100,722						$106,078
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$62,800		$200		1.27%		$63,569		$245		1.53%		$64,298		$293		1.83%		$64,366		$356		2.22%		$65,380		$383		2.32%
Borrowings of consolidated securitization entities	7,809		52		2.65%		8,057		53		2.62%		8,863		59		2.68%		9,986		73		2.94%		10,831		80		2.93%
Senior unsecured notes	7,963		82		4.10%		7,960		82		4.10%		7,958		82		4.14%		8,807		88		4.02%		9,452		93		3.90%
Total interest-bearing liabilities	78,572		334		1.69%		79,586		380		1.90%		81,119		434		2.15%		83,159		517		2.50%		85,663		556		2.58%
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts	308						307						309						299						281
Other liabilities	4,663						4,308						4,349						4,672						4,906
Total non-interest-bearing liabilities	4,971						4,615						4,658						4,971						5,187
Total liabilities	83,543						84,201						85,777						88,130						90,850
Equity
Total equity	12,422						12,139						12,181						12,592						15,228
Total liabilities and equity	$95,965						$96,340						$97,958						$100,722						$106,078
Net interest income			$3,659						$3,457						$3,396						$3,890						$4,029
Interest rate spread(1)					14.29%						13.42%						13.11%						14.66%						14.50%
Net interest margin(2)					14.64%						13.80%						13.53%						15.15%						15.01%
(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, 2020						Twelve Months Ended Dec 31, 2019
			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	$13,301		$53		0.40%		$12,320		$258		2.09%
Securities available for sale	7,367		64		0.87%		5,464		127		2.32%
Loan receivables, including held for sale:
Credit cards	77,115		15,672		20.32%		85,334		18,384		21.54%
Consumer installment loans	1,733		168		9.69%		1,963		182		9.27%
Commercial credit products	1,231		108		8.77%		1,306		137		10.49%
Other	59		2		3.39%		46		2		4.35%
Total loan receivables, including held for sale	80,138		15,950		19.90%		88,649		18,705		21.10%
Total interest-earning assets	100,806		16,067		15.94%		106,433		19,090		17.94%
Non-interest-earning assets:
Cash and due from banks	1,488						1,327
Allowance for credit losses	(9,488)						(5,902)
Other assets	4,932						3,819
Total non-interest-earning assets	(3,068)						(756)
Total assets	$97,738						$105,677
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$63,755		$1,094		1.72%		$64,756		$1,566		2.42%
Borrowings of consolidated securitization entities	8,675		237		2.73%		11,941		358		3.00%
			-
Senior unsecured notes	8,171		334		4.09%		9,310		367		3.94%
Total interest-bearing liabilities	80,601		1,665		2.07%		86,007		2,291		2.66%
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts	306						280
Other liabilities	4,498						4,473
Total non-interest-bearing liabilities	4,804						4,753
Total liabilities	85,405						90,760
Equity
Total equity	12,333						14,917
Total liabilities and equity	$97,738						$105,677
Net interest income			$14,402						$16,799
Interest rate spread(1)					13.87%						15.28%
Net interest margin(2)					14.29%						15.78%
(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, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020 vs. Dec 31, 2019
BALANCE SHEET STATISTICS
Total common equity	$11,967		$11,365		$11,165		$11,236		$14,354		$(2,387)	(16.6)%
Total common equity as a % of total assets	12.47%		11.88%		11.56%		11.46%		13.69%			(1.22)%
Tangible assets	$93,745		$93,489		$94,300		$95,752		$102,483		$(8,738)	(8.5)%
Tangible common equity(1)	$9,764		$9,196		$8,921		$8,950		$12,011		$(2,247)	(18.7)%
Tangible common equity as a % of tangible assets(1)	10.42%		9.84%		9.46%		9.35%		11.72%			(1.30)%
Tangible common equity per share(1)	$16.72		$15.75		$15.28		$15.35		$19.50		$(2.78)	(14.3)%
REGULATORY CAPITAL RATIOS(2)(3)
	Basel III - CECL Transition								Basel III
Total risk-based capital ratio(4)	18.1%		18.1%		17.6%		16.5%		16.3%
Tier 1 risk-based capital ratio(5)	16.8%		16.7%		16.3%		15.2%		15.0%
Tier 1 leverage ratio(6)	14.0%		13.3%		12.7%		12.3%		12.6%
Common equity Tier 1 capital ratio	15.9%		15.8%		15.3%		14.3%		14.1%
(1) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
(2) Regulatory capital ratios at December 31, 2020 are preliminary and therefore subject to change.
(3) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL's effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.
(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.
(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.
(6) Tier 1 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments. Tier 1 leverage ratios are based upon the use of daily averages for all periods presented.

 

SYNCHRONY FINANCIAL
PLATFORM RESULTS
(unaudited, $ in millions)
	Quarter Ended													Twelve Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		4Q'20 vs. 4Q'19			Dec 31, 2020		Dec 31, 2019		YTD'20 vs. YTD'19
RETAIL CARD
Purchase volume(1)(2)	$31,256		$27,374		$24,380		$24,008		$30,968		$288	0.9%		$107,018		$114,440		$(7,422)	(6.5)%
Period-end loan receivables	$52,130		$49,595		$49,967		$52,390		$56,387		$(4,257)	(7.5)%		$52,130		$56,387		$(4,257)	(7.5)%
Average loan receivables, including held for sale	$50,235		$49,503		$50,238		$53,820		$54,505		$(4,270)	(7.8)%		$50,943		$58,984		$(8,041)	(13.6)%
Average active accounts (in thousands)(2)(3)	49,001		47,065		46,970		53,018		54,662		(5,661)	(10.4)%		49,258		57,073		(7,815)	(13.7)%
Interest and fees on loans	$2,719		$2,619		$2,640		$3,037		$3,143		$(424)	(13.5)%		$11,015		$13,557		$(2,542)	(18.8)%
Other income	$50		$84		$56		$59		$77		$(27)	(35.1)%		$249		$277		$(28)	(10.1)%
Retailer share arrangements	$(1,026)		$(877)		$(752)		$(904)		$(988)		$(38)	3.8%		$(3,559)		$(3,762)		$203	(5.4)%
PAYMENT SOLUTIONS
Purchase volume(1)(2)	$5,942		$5,901		$4,823		$5,375		$6,402		$(460)	(7.2)%		$22,041		$23,880		$(1,839)	(7.7)%
Period-end loan receivables	$20,153		$19,550		$19,119		$19,973		$20,528		$(375)	(1.8)%		$20,153		$20,528		$(375)	(1.8)%
Average loan receivables, including held for sale	$19,734		$19,247		$19,065		$20,344		$20,701		$(967)	(4.7)%		$19,597		$19,918		$(321)	(1.6)%
Average active accounts (in thousands)(2)(3)	11,536		11,497		11,900		12,681		12,713		(1,177)	(9.3)%		11,921		12,451		(530)	(4.3)%
Interest and fees on loans	$673		$650		$632		$706		$737		$(64)	(8.7)%		$2,661		$2,829		$(168)	(5.9)%
Other income	$4		$13		$14		$13		$4		$-	- %		$44		$15		$29	193.3%
Retailer share arrangements	$(17)		$(20)		$(18)		$(18)		$(37)		$20	(54.1)%		$(73)		$(85)		$12	(14.1)%
CARECREDIT
Purchase volume(1)	$2,676		$2,738		$1,952		$2,659		$2,842		$(166)	(5.8)%		$10,025		$11,091		$(1,066)	(9.6)%
Period-end loan receivables	$9,584		$9,376		$9,227		$10,106		$10,300		$(716)	(7.0)%		$9,584		$10,300		$(716)	(7.0)%
Average loan receivables, including held for sale	$9,483		$9,255		$9,394		$10,264		$10,170		$(687)	(6.8)%		$9,598		$9,747		$(149)	(1.5)%
Average active accounts (in thousands)(3)	5,724		5,708		5,966		6,379		6,359		(635)	(10.0)%		5,952		6,197		(245)	(4.0)%
Interest and fees on loans	$589		$552		$536		$597		$612		$(23)	(3.8)%		$2,274		$2,319		$(45)	(1.9)%
Other income	$28		$34		$25		$25		$23		$5	21.7%		$112		$79		$33	41.8%
Retailer share arrangements	$(4)		$(2)		$(3)		$(4)		$(4)		$-	- %		$(13)		$(11)		$(2)	18.2%
TOTAL SYF
Purchase volume(1)(2)	$39,874		$36,013		$31,155		$32,042		$40,212		$(338)	(0.8)%		$139,084		$149,411		$(10,327)	(6.9)%
Period-end loan receivables	$81,867		$78,521		$78,313		$82,469		$87,215		$(5,348)	(6.1)%		$81,867		$87,215		$(5,348)	(6.1)%
Average loan receivables, including held for sale	$79,452		$78,005		$78,697		$84,428		$85,376		$(5,924)	(6.9)%		$80,138		$88,649		$(8,511)	(9.6)%
Average active accounts (in thousands)(2)(3)	66,261		64,270		64,836		72,078		73,734		(7,473)	(10.1)%		67,131		75,721		(8,590)	(11.3)%
Interest and fees on loans	$3,981		$3,821		$3,808		$4,340		$4,492		$(511)	(11.4)%		$15,950		$18,705		$(2,755)	(14.7)%
Other income	$82		$131		$95		$97		$104		$(22)	(21.2)%		$405		$371		$34	9.2%
Retailer share arrangements	$(1,047)		$(899)		$(773)		$(926)		$(1,029)		$(18)	1.7%		$(3,645)		$(3,858)		$213	(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
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019
COMMON EQUITY AND REGULATORY CAPITAL MEASURES(2)
GAAP Total equity	$12,701		$12,099		$11,899		$11,970		$15,088
Less: Preferred stock	(734)		(734)		(734)		(734)		(734)
Less: Goodwill	(1,078)		(1,078)		(1,078)		(1,078)		(1,078)
Less: Intangible assets, net	(1,125)		(1,091)		(1,166)		(1,208)		(1,265)
Tangible common equity	$9,764		$9,196		$8,921		$8,950		$12,011
Add: CECL transition amount	2,686		2,656		2,570		2,417		-
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)	341		305		302		304		319
Common equity Tier 1	$12,791		$12,157		$11,793		$11,671		$12,330
Preferred  stock	734		734		734		734		734
Tier 1 capital	$13,525		$12,891		$12,527		$12,405		$13,064
Add: Allowance for credit losses includible in risk-based capital	1,079		1,034		1,031		1,082		1,147
Total Risk-based capital	$14,604		$13,925		$13,558		$13,487		$14,211
ASSET MEASURES(2)
Total average assets	$95,965		$96,340		$97,958		$100,722		$106,078
Adjustments for:
Add: CECL transition amount	2,686		2,656		2,570		2,417		-
Disallowed goodwill and other disallowed intangible assets (net of related deferred tax liabilities) and other	(1,924)		(1,906)		(1,980)		(2,010)		(2,059)
Total assets for leverage purposes	$96,727		$97,090		$98,548		$101,129		$104,019
Risk-weighted assets	$80,561		$76,990		$77,048		$81,639		$87,302
CECL FULLY PHASED-IN CAPITAL MEASURES
Tier 1 capital	$13,525		$12,891		$12,527		$12,405		$13,064
Less: CECL transition adjustment	(2,686)		(2,656)		(2,570)		(2,417)		-
Tier 1 capital (CECL fully phased-in)	$10,839		$10,235		$9,957		$9,988		$13,064
Add: Allowance for credit losses	10,265		10,146		9,802		9,175		5,602
Tier 1 capital (CECL fully phased-in) + Reserves for credit losses	$21,104		$20,381		$19,759		$19,163		$18,666
Risk-weighted assets	$80,561		$76,990		$77,048		$81,639		$87,302
Less: CECL transition adjustment	(2,477)		(2,447)		(2,361)		(2,204)		-
Risk-weighted assets (CECL fully phased-in)	$78,084		$74,543		$74,687		$79,435		$87,302
TANGIBLE COMMON EQUITY PER SHARE
GAAP book value per share	$20.49		$19.47		$19.13		$19.27		$23.31
Less: Goodwill	(1.85)		(1.85)		(1.85)		(1.85)		(1.75)
Less: Intangible assets, net	(1.92)		(1.87)		(2.00)		(2.07)		(2.06)
Tangible common equity per share	$16.72		$15.75		$15.28		$15.35		$19.50
(1) Regulatory measures at December 31, 2020 are presented on an estimated basis.
(2) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL's effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020

 

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SOURCE Synchrony

FAQ

What were Synchrony Financial's fourth quarter 2020 earnings results?

Synchrony Financial reported net earnings of $738 million, or $1.24 per diluted share for Q4 2020.

How did COVID-19 impact Synchrony Financial's loan receivables?

Loan receivables decreased by 6% to $81.9 billion due to the impact of COVID-19.

What is the new share repurchase program announced by Synchrony Financial?

The Board of Directors approved a share repurchase program of up to $1.6 billion, starting in Q1 2021.

What was the status of credit quality for Synchrony Financial in Q4 2020?

Loans 30+ days past due were 3.07%, down from 4.44% the previous year, indicating improved credit quality.

What changes in leadership were announced by Synchrony Financial?

Margaret Keane will transition to Executive Chair, while Brian Doubles will become President and CEO effective April 1, 2021.