Analyst Note| Michael Miller |
No-moat-rated Synchrony Financial reported solid first-quarter results as it benefited from accelerating loan growth and low credit costs during the period. Revenue grew 10.2% year over year to $3.9 billion, while diluted earnings per share grew a more modest 2.3% from the year-prior quarter to $1.77. These results equate to a return on equity of 27.5%, well above the bank’s historical average. Along with the results, Synchrony announced an additional $2.8 billion in share repurchases and a 5% increase in its dividend. While these were good results, they do not materially change our thesis for Synchrony, and we will maintain our $43 fair value estimate.