Yahoo Finance Synchrony Financial (SYF) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics ...
Net Earnings: Reported $1.3 billion or $3.14 per diluted share; adjusted net earnings were $491 million or $1.18 per diluted share.
Loan Receivables: Ending loan receivables grew 12% to $102 billion.
Net Revenue: Increased $1.6 billion or 50%, driven by the Pets Best gain on sale; excluding this, net revenue increased $530 million or 17%.
Net Interest Income: Increased 9% to $4.4 billion.
Provision for Credit Losses: Increased to $1.9 billion, reflecting higher net charge-offs and a $299 million reserve build.
Net Charge-Off Rate: Was 6.31% in the first quarter compared to 4.49% in the prior year.
Delinquency Rates: 30-plus delinquency rate was 4.74%; 90-plus delinquency rate was 2.42%.
Capital Ratios: CET1 ratio ended the quarter at 12.6%.
Shareholder Returns: Returned $402 million to shareholders through share repurchases and dividends.
New Accounts: Opened 4.8 million new accounts, with a 3% growth in average active accounts.
Purchase Volume: Reached $42 billion, a 2% increase from the previous year.
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: So it seems like charge-offs are coming in a little bit higher than expected, but we've now seen delinquencies potentially inflect and starting to follow seasonal patterns. So can you maybe talk about what this means for the full year loss rate? And where do you see losses in the allowance settling out over the intermediate time frame if your forward view proves accurate? A: Brian J. Wenzel, Synchrony Financial - Executive VP & CFO: Yes. Thanks for the question, Ryan. So again, I think we have been somewhat clear that we believe charge-offs when you look at the delinquency trend as we entered into 2024 that charge-offs will peak in the first half of the year and decline. I think you see that, well, certainly in the end in the first quarter. I think when you see the results in April when we put out our 8-K, you will see delinquencies down on both a 30-plus and 90-plus basis relative to what we just reported here today. So I think when you start looking at that, you look at the seasoning of the credit actions that we took really in the second and third quarter of last year. We feel good that the charge-off rate will decline in the back half of the year.
Q: I guess my first question is on purchase volume. Obviously, that continues to remain weak. Could we just talk about sort of how we get it back to a baseline that accelerates? I know inflation is sort of weighing in on the consumer. But maybe just talk about what's driving that and how and when we get it back to a baseline that's higher. A: Brian D. Doubles, Synchrony Financial - President, CEO & Director: Yes, Sanjay, maybe I'll start on this and then pass it to Brian. I mean, look, I think generally, we're pretty pleased with the growth that we're seeing in the business. I think the consumer is still in good shape. Obviously, the job market is very strong, that's helping. But you are seeing a lot of that spend being driven by the higher end consumer -- the higher income consumer. And that's actually not a bad thing. I think they're benefiting obviously job market, house prices are up, stock prices are up. On the lower end, that's where you're seeing some of the slowdown. And from a credit perspective, that's not the worst thing. I think we see people being prudent. I think they're managing to a budget, they're managing to their cash flows. They're not overextending. So I think there's a positive read-through from a credit perspective on that. I don't know, Brian, if you want to add anything.
Q: Just wanted to -- two big picture questions. Maybe to start first just on the competitive situation. And really more -- not so much necessarily on the new programs, but just in terms of the financing offers that are already out there for consumers. How is the purchase volume being impacted at all by consumers just having more choices today? Like are there any market share or penetration rate statistically been shared in terms of how often consumers are turning to Synchrony versus others? As a percent of your retail partner sales or anything like that? I'm sure you track it. A: Brian D. Doubles, Synchrony Financial - President, CEO & Director: Yes, we do. We track it by partner. We look at the penetration rate, sales on our card versus other products. I'll tell you, generally, we're very pleased that inside of the majority of our partner programs that we're gaining share. I think one of the things that helps us do that as we think about a multiproduct strategy, we see our partners engaging more on being able to offer a revolving product, maybe a secured card, buy now pay later. And I think that's helping us gain share. If you stick to a one product strategy, I think over time, that's a losing strategy and I think you will lose share, which is why we think the multiproduct strategy over time is a winning one. So we feel really good about our ability to continue to take share inside of our partner programs, but also just more generally and even some of the smaller to midsized space.
Q: And then, Brian, just last question. In terms of your -- in the prepared remarks, I think in the press release today, you highlighted the partnership with small- and medium-sized businesses as well as health providers. I think the emphasis -- there is a little bit of a new emphasis on the small- and medium-sized businesses relative to the old one. So I was just curious, is the growth focus that Synchrony switching a little bit to smaller or maybe the more proprietary programs versus maybe a historical focus on just being the partner of choice for large retailers? A: Brian D. Doubles, Synchrony Financial - President, CEO & Director: Well, I definitely think that's an underappreciated part of our business model. I think people tend to focus on the large partner programs, but we do -- we serve hundreds of thousands of providers and small- to medium-sized businesses. And sometimes that gets lost a little bit. So we're definitely leaning in more there. I'd say the -- we've shifted investment dollars into the health and wellness space, you see that paying off when you look at the health and wellness numbers, I think receivables were up 20%, like we're really reaping the benefits of those investments. So that's a very attractive space for us. The large partner space is still very attractive as well, but I think that part of the business always gets a lot of attention. We're trying to make sure that we talk enough about all the small- to medium-sized businesses and the hundreds of thousands of dentists and pet care specialists across the country that we serve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
