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Synchrony Financial SYF

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High Credit Card Repayment Rates Lead to Mixed Results for Synchrony Financial

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

No-moat-rated Synchrony Financial reported mixed second-quarter results as high repayment rates on its credit cards led to strong credit results but weak net interest income. The company comfortably beat the FactSet consensus EPS estimate of $1.39 with reported second-quarter EPS of $2.12. This equates to a return on tangible common equity of 46.3%. These results were driven by impressive credit results, with the net charge-off ratio reported as 3.57% for the quarter, well below the firm’s historical average. This led the company to record a $194 million provisioning benefit as it released $878 million in reserves. On the other hand, Synchrony’s top line missed the FactSet consensus estimate, with revenue of $2,395 million coming in below the expected $2,608 million as high repayment rates on the bank’s credit cards kept loan receivables and net interest margins low. Net interest income fell 2.5% from the year-ago period and 3.7% sequentially, pressuring revenue. The decrease was driven by repayment rates that were 2.8% higher than normal during the quarter.

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Company Profile

Business Description

Synchrony Financial, originally a spin-off of GE Capital's retail financing business, is the largest provider of private-label credit cards in the United States by both outstanding receivables and purchasing volume. Synchrony partners with other firms to market its credit products in their physical stores as well as on their websites and mobile applications. Synchrony operates through three segments: retail card (private-label and co-branded general-purpose credit cards), payment solutions (promotional financing for large ticket purchases), and CareCredit (financing for elective healthcare procedures).

777 Long Ridge Road
Stamford, CT, 06902
T +1 203 585-2400
Sector Financial Services
Industry Credit Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 16,500


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