Synchrony Financial (NYSE:SYF) today announced third quarter
2016 net earnings of $604 million, or $0.73 per diluted share.
Highlights for the quarter included:
- Net interest income increased 12% from
the third quarter of 2015 to $3.5 billion
- Loan receivables grew $7 billion, or
11%, from the third quarter of 2015 to $71 billion
- Purchase volume increased 8% from the
third quarter of 2015
- Strong deposit growth continued, up $9
billion, or 23%, over the third quarter of 2015
- Renewed key relationships – TJX
Companies, hhgregg, Nationwide Marketing Group and American Dental
Association
- Signed new partnerships with Nissan and
At Home
- Launched The Container Store and Google
Store programs
- Commenced quarterly common stock
dividend payment of $0.13 per share and repurchased $238 million of
Synchrony Financial common stock
“Broad-based growth across our sales platforms generated
double-digit loan receivables and net interest income growth and
strong purchase volume growth this quarter. Organic growth is an
important business driver for us and we are pleased to have
recently renewed several key relationships. We also signed new
partnerships and launched new programs. Strong deposit growth
continued this quarter as we remain focused on this important
source of funding to support our business,” said Margaret Keane,
President and Chief Executive Officer of Synchrony Financial. “We
are pleased to have initiated our quarterly dividend and share
repurchase program during the quarter. We are focusing resources on
driving strong organic growth and pursuing new profitable
partnership opportunities, while also returning capital to
shareholders through dividends and share repurchases—a testament to
the strength of our business model and strategic focus.”
Business and Financial Highlights for
the Third Quarter of 2016
All comparisons below are for the third quarter of 2016 compared
to the third quarter of 2015, unless otherwise noted.
Earnings
- Net interest income increased $378
million, or 12%, to $3.5 billion, primarily driven by strong loan
receivables growth. Net interest income after retailer share
arrangements increased 14%.
- Provision for loan losses increased
$284 million to $986 million due to higher loan loss reserve build
and loan receivables growth.
- Other income was unchanged at $84
million primarily due to higher interchange income offset by higher
loyalty program expense.
- Other expense increased $16 million to
$859 million, primarily driven by business growth.
- Net earnings totaled $604 million
compared to $574 million in the third quarter of 2015.
Balance Sheet
- Period-end loan receivables growth
remained strong at 11%, primarily driven by purchase volume growth
of 8% and average active account growth of 7%.
- Deposits grew to $50 billion, up $9
billion, or 23%, and comprised 71% of funding compared to 63% last
year.
- The Company’s balance sheet remained
strong with total liquidity (liquid assets and undrawn credit
facilities) of $24 billion, or 27% of total assets.
- The estimated Common Equity Tier 1
ratio under Basel III subject to transition provisions was 18.2%
and the estimated fully phased-in Common Equity Tier 1 ratio under
Basel III was 17.9%.
Key Financial Metrics
- Return on assets was 2.8% and return on
equity was 17.4%.
- Net interest margin increased 30 basis
points to 16.27%.
- Efficiency ratio was 30.6%, a 362 basis
point improvement from the third quarter of 2015, driven by
positive operating leverage arising from strong revenue growth that
exceeded expense growth.
Credit Quality
- Loans 30+ days past due as a percentage
of total period-end loan receivables were 4.26% compared to 4.02%
last year.
- Net charge-offs as a percentage of
total average loan receivables were 4.38% compared to 4.02% last
year.
- The allowance for loan losses as a
percentage of total period-end loan receivables was 5.82% compared
to 5.31% last year.
Sales Platforms
- Retail Card interest and fees on loans
increased 11%, driven primarily by purchase volume growth of 7% and
period-end loan receivables growth of 11%. Average active account
growth was 6%. Loan receivables growth was broad-based across
partner programs.
- Payment Solutions interest and fees on
loans increased 14%, driven primarily by purchase volume growth of
14% and period-end loan receivables growth of 14%. Average active
account growth was 13%. Loan receivables growth was led by the home
furnishings, automotive, and power product categories.
- CareCredit interest and fees on loans
increased 11%, driven primarily by purchase volume growth of 8% and
period-end loan receivables growth of 10%. Average active account
growth was 8%. Loan receivables growth was led by the dental and
veterinary specialties.
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 in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2015, as
filed February 25, 2016, and the Company’s forthcoming Quarterly
Report on Form 10-Q for the quarter ended September 30, 2016. 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, October 21, 2016, at 8:30 a.m. Eastern Time, Margaret
Keane, President and Chief Executive Officer, and Brian Doubles,
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 Synchrony
Financial’s corporate website,
www.investors.synchronyfinancial.com, under Events and
Presentations. A replay will be available on the website or by
dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042
(international), passcode 32016#, and can be accessed beginning
approximately two hours after the event through November 4,
2016.
About Synchrony
Financial
Synchrony Financial (NYSE:SYF) is one of the nation’s premier
consumer financial services companies. Our roots in consumer
finance trace back to 1932, and today we are the largest provider
of private label credit cards in the United States based on
purchase volume and receivables.* We provide a range of credit
products through programs we have established with a diverse group
of national and regional retailers, local merchants, manufacturers,
buying groups, industry associations and healthcare service
providers to help generate growth for our partners and offer
financial flexibility to our customers. Through our partners’ over
350,000 locations across the United States and Canada, and their
websites and mobile applications, we offer our customers a variety
of credit products to finance the purchase of goods and services.
Synchrony Financial offers private label and co-branded Dual
Card™ credit cards, promotional financing and installment
lending, loyalty programs and FDIC-insured savings products through
Synchrony Bank. More information can be found
at www.synchronyfinancial.com, facebook.com/SynchronyFinancial,www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.
*Source: The Nilson Report (May 2016, Issue # 1087) - based on
2015 data.
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
“outlook,” “expects,” “intends,” “anticipates,” “plans,”
“believes,” “seeks,” “targets,” “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; retaining
existing partners and attracting new partners, concentration of our
revenue in a small number of Retail Card partners, promotion and
support of our products by our partners, and financial performance
of our partners; higher borrowing costs and adverse financial
market conditions impacting our funding and liquidity, and any
reduction in our credit ratings; our ability to securitize our
loans, occurrence of an early amortization of our securitization
facilities, loss of the right to service or subservice our
securitized loans, and lower payment rates on our securitized
loans; our ability to grow our deposits in the future; 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, the sufficiency of our allowance
for loan losses and the accuracy of the assumptions or estimates
used in preparing our financial statements; 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 strategic investments; reductions in
interchange fees; fraudulent activity; cyber-attacks or other
security breaches; failure of third parties to provide various
services that are important to our operations; our transition to a
replacement third-party vendor to manage the technology platform
for our online retail deposits; disruptions in the operations of
our computer systems and data centers; 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; damage to
our reputation; our ability to attract, retain and motivate key
officers and employees; tax legislation initiatives or challenges
to our tax positions 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; obligations associated with being an
independent public company; 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 the impact of the Consumer Financial Protection Bureau’s
regulation of our business; changes to our methods of offering our
CareCredit products; 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
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, 2015, as filed on
February 25, 2016. You should not consider any list of such factors
to be an exhaustive statement of all of 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 capital ratios, 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
Nine Months Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
3Q'16 vs. 3Q'15 Sep 30,
2016
Sep 30,
2015
YTD'16 vs. YTD'15
EARNINGS
Net interest income $3,481 $3,212 $3,209 $3,208 $3,103 $378
12.2% $9,902 $8,885 $1,017 11.4% Retailer share arrangements (757)
(664) (670) (734) (723) (34) 4.7% (2,091) (2,004) (87) 4.3%
Net
interest income, after retailer share arrangements 2,724 2,548
2,539 2,474 2,380 344 14.5% 7,811 6,881 930 13.5% Provision for
loan losses 986 1,021 903 823 702 284 40.5% 2,910 2,129 781 36.7%
Net interest income, after retailer share arrangements and
provision for loan losses 1,738 1,527 1,636 1,651 1,678 60 3.6%
4,901 4,752 149 3.1% Other income 84 83 92 87 84 - - % 259 305 (46)
(15.1)% Other expense 859 839 800 870 843 16 1.9% 2,498 2,394 104
4.3%
Earnings before provision for income taxes 963 771 928
868 919 44 4.8% 2,662 2,663 (1) 0.0% Provision for income taxes 359
282 346 321 345 14 4.1% 987 996 (9) (0.9)%
Net earnings $604
$489 $582 $547 $574 $30 5.2% $1,675 $1,667 $8 0.5%
Net earnings
attributable to common stockholders $604 $489 $582 $547 $574
$30 5.2% $1,675 $1,667 $8 0.5%
COMMON SHARE
STATISTICS
Basic EPS $0.73 $0.59 $0.70 $0.66 $0.69 $0.04 5.8% $2.01 $2.00
$0.01 0.5% Diluted EPS $0.73 $0.58 $0.70 $0.65 $0.69 $0.04 5.8%
$2.01 $2.00 $0.01 0.5% Dividend declared per share $0.13 - - - -
$0.13 NM $0.13 - $0.13 NM Common stock price $28.00 $25.28 $28.66
$30.41 $31.30 $(3.30) (10.5)% $28.00 $31.30 $(3.30) (10.5)% Book
value per share $16.94 $16.45 $15.84 $15.12 $14.58 $2.36 16.2%
$16.94 $14.58 $2.36 16.2% Tangible common equity per share(1)
$14.90 $14.46 $13.86 $13.14 $12.67 $2.23 17.6% $14.90 $12.67 $2.23
17.6% Beginning common shares outstanding 833.9 833.8 833.8
833.8 833.8 0.1 0.0% 833.8 833.8 - - % Issuance of common shares -
- - - - - - % - - - - % Stock-based compensation 0.1 0.1 - - - 0.1
NM 0.2 - 0.2 NM Shares repurchased (8.5) - - - - (8.5) NM (8.5) -
(8.5) NM Ending common shares outstanding 825.5 833.9 833.8 833.8
833.8 (8.3) (1.0)% 825.5 833.8 (8.3) (1.0)% Weighted average
common shares outstanding 828.4 833.9 833.8 833.8 833.8 (5.4)
(0.6)% 832.1 833.8 (1.7) (0.2)% Weighted average common shares
outstanding (fully diluted) 830.6 836.2 835.5 835.8 835.8 (5.2)
(0.6)% 834.1 835.4 (1.3) (0.2)%
(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(1) (unaudited, $ in millions, except account
data) Quarter Ended Nine Months Ended Sep
30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
3Q'16 vs. 3Q'15 Sep 30,
2016
Sep 30,
2015
YTD'16 vs. YTD'15
PERFORMANCE
METRICS
Return on assets(2) 2.8% 2.4% 2.8% 2.7% 2.9% (0.1)% 2.7% 3.0%
(0.3)% Return on equity(3) 17.4% 14.6% 18.1% 17.5% 19.2% (1.8)%
16.7% 19.7% (3.0)% Return on tangible common equity(4) 19.8% 16.6%
20.8% 20.1% 22.0% (2.2)% 19.1% 22.7% (3.6)% Net interest margin(5)
16.27% 15.86% 15.76% 15.73% 15.97% 0.30% 15.94% 15.81% 0.13%
Efficiency ratio(6) 30.6% 31.9% 30.4% 34.0% 34.2% (3.6)% 31.0%
33.3% (2.3)% Other expense as a % of average loan receivables,
including held for sale 4.92% 5.04% 4.82% 5.28% 5.35% (0.43)% 4.92%
5.25% (0.33)% Effective income tax rate 37.3% 36.6% 37.3% 37.0%
37.5% (0.2)% 37.1% 37.4% (0.3)%
CREDIT QUALITY
METRICS
Net charge-offs as a % of average loan receivables, including held
for sale 4.38% 4.49% 4.70% 4.23% 4.02% 0.36% 4.51% 4.37% 0.14% 30+
days past due as a % of period-end loan receivables(7) 4.26% 3.79%
3.85% 4.06% 4.02% 0.24% 4.26% 4.02% 0.24% 90+ days past due as a %
of period-end loan receivables(7) 1.89% 1.67% 1.84% 1.86% 1.73%
0.16% 1.89% 1.73% 0.16% Net charge-offs $765 $747 $780 $697 $633
$132 20.9% $2,292 $1,994 $298 14.9% Loan receivables delinquent
over 30 days(7) $3,008 $2,585 $2,538 $2,772 $2,553 $455 17.8%
$3,008 $2,553 $455 17.8% Loan receivables delinquent over 90
days(7) $1,334 $1,143 $1,212 $1,273 $1,102 $232 21.1% $1,334 $1,102
$232 21.1% Allowance for loan losses (period-end) $4,115
$3,894 $3,620 $3,497 $3,371 $744 22.1% $4,115 $3,371 $744 22.1%
Allowance coverage ratio(8) 5.82% 5.70% 5.50% 5.12% 5.31% 0.51%
5.82% 5.31% 0.51%
BUSINESS
METRICS
Purchase volume(9) $31,615 $31,507 $26,977 $32,460 $29,206 $2,409
8.2% $90,099 $81,155 $8,944 11.0% Period-end loan receivables
$70,644 $68,282 $65,849 $68,290 $63,520 $7,124 11.2% $70,644
$63,520 $7,124 11.2% Credit cards $67,858 $65,511 $63,309 $65,773
$60,920 $6,938 11.4% $67,858 $60,920 $6,938 11.4% Consumer
installment loans $1,361 $1,293 $1,184 $1,154 $1,171 $190 16.2%
$1,361 $1,171 $190 16.2% Commercial credit products $1,385 $1,389
$1,318 $1,323 $1,380 $5 0.4% $1,385 $1,380 $5 0.4% Other $40 $89
$38 $40 $49 $(9) (18.4)% $40 $49 $(9) (18.4)% Average loan
receivables, including held for sale $69,525 $66,943 $66,705
$65,406 $62,504 $7,021 11.2% $67,856 $60,946 $6,910 11.3%
Period-end active accounts (in thousands)(10) 66,781 66,491 64,689
68,314 62,831 3,950 6.3% 66,781 62,831 3,950 6.3% Average active
accounts (in thousands)(10) 66,639 65,531 66,134 64,892 62,247
4,392 7.1% 66,204 61,762 4,442 7.2%
LIQUIDITY
Liquid assets Cash and equivalents $13,588 $11,787 $12,500
$12,325 $12,271 $1,317 10.7% $13,588 $12,271 $1,317 10.7% Total
liquid assets $16,362 $13,956 $14,915 $14,836 $15,305 $1,057 6.9%
$16,362 $15,305 $1,057 6.9%
Undrawn credit facilities
Undrawn credit facilities $7,150 $7,025 $7,325 $6,075 $6,550 $600
9.2% $7,150 $6,550 $600 9.2%
Total liquid assets and undrawn
facilities $23,512 $20,981 $22,240 $20,911 $21,855 $1,657 7.6%
$23,512 $21,855 $1,657 7.6% Liquid assets % of total assets 18.77%
16.94% 18.27% 17.66% 19.30% (0.53)% 18.77% 19.30% (0.53)% Liquid
assets including undrawn facilities % of total assets 26.98% 25.47%
27.24% 24.90% 27.56% (0.58)% 26.98% 27.56% (0.58)%
(1)
Certain balance sheet amounts and related metrics have been updated
to reflect the adoption of ASU 2015-03. More detail on this update
is in footnote (1) on the Statements of Financial Position. (2)
Return on assets represents net earnings as a percentage of average
total assets. (3) Return on equity represents net earnings as a
percentage of average total equity. (4) Return on tangible common
equity represents net earnings 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. (5) Net interest margin
represents net interest income divided by average interest-earning
assets. (6) Efficiency ratio represents (i) other expense, divided
by (ii) net interest income, after retailer share arrangements,
plus other income. (7) Based on customer statement-end balances
extrapolated to the respective period-end date. (8) Allowance
coverage ratio represents allowance for loan losses divided by
total period-end loan receivables. (9) 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. (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 Nine Months
Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
3Q'16 vs. 3Q'15 Sep 30,
2016
Sep 30,
2015
YTD'16 vs. YTD'15 Interest income: Interest and fees
on loans $3,771 $3,494 $3,498 $3,494 $3,379 $392 11.6% $10,763
$9,685 $1,078 11.1% Interest on investment securities 25 21 22 15
13 12 92.3% 68 34 34 100.0% Total interest income 3,796 3,515 3,520
3,509 3,392 404 11.9% 10,831 9,719 1,112 11.4%
Interest
expense: Interest on deposits 188 179 172 165 159 29 18.2% 539
442 97 21.9% Interest on borrowings of consolidated securitization
entities 63 59 58 56 54 9 16.7% 180 159 21 13.2% Interest on
third-party debt 64 65 81 80 76 (12) (15.8)% 210 229 (19) (8.3)%
Interest on related party debt - - - - - - - % - 4 (4) (100.0)%
Total interest expense 315 303 311 301 289 26 9.0% 929 834 95 11.4%
Net interest income 3,481 3,212 3,209 3,208 3,103 378
12.2% 9,902 8,885 1,017 11.4% Retailer share arrangements
(757) (664) (670) (734) (723) (34) 4.7% (2,091) (2,004) (87) 4.3%
Net interest income, after retailer share arrangements 2,724 2,548
2,539 2,474 2,380 344 14.5% 7,811 6,881 930 13.5% Provision
for loan losses 986 1,021 903 823 702 284 40.5% 2,910 2,129 781
36.7% Net interest income, after retailer share arrangements and
provision for loan losses 1,738 1,527 1,636 1,651 1,678 60 3.6%
4,901 4,752 149 3.1%
Other income: Interchange
revenue 154 151 130 147 135 19 14.1% 435 358 77 21.5% Debt
cancellation fees 67 63 64 62 61 6 9.8% 194 187 7 3.7% Loyalty
programs (145) (135) (110) (125) (122) (23) 18.9% (390) (294) (96)
32.7% Other 8 4 8 3 10 (2) (20.0)% 20 54 (34) (63.0)% Total other
income 84 83 92 87 84 - - % 259 305 (46) (15.1)%
Other
expense: Employee costs 311 301 280 285 268 43 16.0% 892 757
135 17.8% Professional fees 174 154 146 165 162 12 7.4% 474 480 (6)
(1.3)% Marketing and business development 92 107 94 128 115 (23)
(20.0)% 293 305 (12) (3.9)% Information processing 87 81 82 83 77
10 13.0% 250 214 36 16.8% Other 195 196 198 209 221 (26) (11.8)%
589 638 (49) (7.7)% Total other expense 859 839 800 870 843 16 1.9%
2,498 2,394 104 4.3%
Earnings before provision for
income taxes 963 771 928 868 919 44 4.8% 2,662 2,663 (1) 0.0%
Provision for income taxes 359 282 346 321 345 14 4.1% 987 996 (9)
(0.9)%
Net earnings attributable to common stockholders $604
$489 $582 $547 $574 $30 5.2% $1,675 $1,667 $8 0.5%
SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION(1) (unaudited, $
in millions) Quarter Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Sep 30, 2016 vs.
Sep 30, 2015
Assets Cash and equivalents $13,588 $11,787 $12,500 $12,325
$12,271 $1,317 10.7% Investment securities 3,356 2,723 2,949 3,142
3,596 (240) (6.7)% Loan receivables: Unsecuritized loans held for
investment 47,517 44,854 41,730 42,826 38,325 9,192 24.0%
Restricted loans of consolidated securitization entities 23,127
23,428 24,119 25,464 25,195 (2,068) (8.2)% Total loan receivables
70,644 68,282 65,849 68,290 63,520 7,124 11.2% Less: Allowance for
loan losses (4,115) (3,894) (3,620) (3,497) (3,371) (744) 22.1%
Loan receivables, net 66,529 64,388 62,229 64,793 60,149 6,380
10.6% Goodwill 949 949 949 949 949 - - % Intangible assets,
net 733 704 702 701 646 87 13.5% Other assets 2,004 1,833 2,327
2,080 1,679 325 19.4% Total assets $87,159 $82,384 $81,656 $83,990
$79,290 $7,869 9.9%
Liabilities and Equity Deposits:
Interest-bearing deposit accounts $49,611 $46,220 $44,721 $43,215
$40,323 $9,288 23.0% Non-interest-bearing deposit accounts 204 207
256 152 140 64 45.7% Total deposits 49,815 46,427 44,977 43,367
40,463 9,352 23.1% Borrowings: Borrowings of consolidated
securitization entities 12,411 12,236 12,423 13,589 13,624 (1,213)
(8.9)% Bank term loan - - 1,494 4,133 4,630 (4,630) (100.0)% Senior
unsecured notes 7,756 7,059 6,559 6,557 5,560 2,196 39.5% Related
party debt - - - - - - - % Total borrowings 20,167 19,295 20,476
24,279 23,814 (3,647) (15.3)% Accrued expenses and other
liabilities 3,196 2,947 2,999 3,740 2,855 341 11.9% Total
liabilities 73,178 68,669 68,452 71,386 67,132 6,046 9.0% Equity:
Common stock 1 1 1 1 1 - - % Additional paid-in capital 9,381 9,370
9,359 9,351 9,431 (50) (0.5)% Retained earnings 4,861 4,364 3,875
3,293 2,746 2,115 77.0% Accumulated other comprehensive income:
(24) (20) (31) (41) (20) (4) 20.0% Treasury Stock (238) - - - -
(238) NM Total equity 13,981 13,715 13,204 12,604 12,158 1,823
15.0% Total liabilities and equity $87,159 $82,384 $81,656 $83,990
$79,290 $7,869 9.9%
(1) In January 2016, we adopted ASU 2015-03,
Interest–Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs, which requires the
presentation of deferred issuance costs related to a recognized
debt liability as a direct deduction from the carrying amount of
the debt liability. Accordingly, we have reclassified issuance
costs associated with our borrowings and certain brokered deposits,
from other assets, and reflected as a reduction of borrowings and
interest-bearing deposit accounts, as applicable, for each period
presented to conform to the current period presentation. Related
selected financial metrics included within this Financial Data
Supplement have also been updated where applicable to reflect this
reclassification.
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST
MARGIN(1) (unaudited, $ in millions)
Quarter Ended Sep 30, 2016 Jun 30, 2016 Mar
31, 2016 Dec 31, 2015 Sep 30, 2015
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 $12,574 $16 0.51% $11,692 $14
0.48% $12,185 $16 0.53% $12,070 $9 0.30% $11,059 $7 0.25%
Securities available for sale 3,018 9 1.19% 2,805 7 1.00% 2,995 6
0.81% 3,445 6 0.69% 3,534 6 0.67%
Loan receivables:
Credit cards, including held for sale 66,746 3,705 22.08% 64,269
3,432 21.48% 64,194 3,436 21.53% 62,834 3,432 21.67% 59,890 3,315
21.96% Consumer installment loans 1,331 31 9.27% 1,235 28 9.12%
1,159 27 9.37% 1,163 26 8.87% 1,160 27 9.23% Commercial credit
products 1,390 35 10.02% 1,373 33 9.67% 1,313 35 10.72% 1,361 36
10.49% 1,400 36 10.20% Other 58 - - % 66 1 NM 39 - - % 48 - - % 54
1 NM
Total loan receivables, including held for sale 69,525
3,771 21.58% 66,943 3,494 20.99% 66,705 3,498 21.09% 65,406 3,494
21.19% 62,504 3,379 21.45%
Total interest-earning assets
85,117 3,796 17.74% 81,440 3,515 17.36% 81,885 3,520 17.29% 80,921
3,509 17.20% 77,097 3,392 17.46%
Non-interest-earning
assets: Cash and due from banks 641 774 1,277 1,268 1,216
Allowance for loan losses (3,977) (3,729) (3,583) (3,440) (3,341)
Other assets 3,240 3,209 3,256 3,133 2,869
Total
non-interest-earning assets (96) 254 950 961 744
Total assets $85,021 $81,694 $82,835
$81,882 $77,841
Liabilities Interest-bearing
liabilities: Interest-bearing deposit accounts $47,926 $188
1.56% $45,490 $179 1.58% $44,101 $172 1.57% $42,079 $165 1.56%
$39,048 $159 1.62% Borrowings of consolidated securitization
entities 12,369 63 2.03% 12,291 59 1.93% 12,950 58 1.80% 13,550 56
1.64% 13,715 54 1.56% Bank term loan(2) - - - % 374 7 7.53% 2,565
24 3.76% 4,507 28 2.46% 4,878 29 2.36% Senior unsecured notes 7,408
64 3.44% 6,809 58 3.43% 6,558 57 3.50% 5,810 52 3.55% 5,312 47
3.51% Related party debt - - - % - - - % - - - % - - - % - - - %
Total interest-bearing liabilities 67,703 315 1.85% 64,964
303 1.88% 66,174 311 1.89% 65,946 301 1.81% 62,953 289 1.82%
Non-interest-bearing liabilities Non-interest-bearing
deposit accounts 203 217 226 147 149 Other liabilities 3,314 3,046
3,534 3,396 2,859
Total non-interest-bearing liabilities
3,517 3,263 3,760 3,543 3,008
Total liabilities 71,220 68,227 69,934 69,489 65,961
Equity Total equity 13,801 13,467 12,901 12,393
11,880
Total liabilities and
equity $85,021 $81,694 $82,835 $81,882 $77,841
Net interest
income $3,481 $3,212 $3,209 $3,208 $3,103
Interest
rate spread(3) 15.89% 15.48% 15.40% 15.39% 15.64%
Net
interest margin(4) 16.27% 15.86% 15.76% 15.73% 15.97%
(1) Certain balance sheet amounts and related
metrics have been updated to reflect the adoption of ASU 2015-03.
More detail on this update is in footnote (1) on the Statements of
Financial Position. (2) Average interest rate on liabilities
calculated above utilizes monthly average balances. The effective
interest rates for the Bank term loan for the quarters ended June
30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015
were 2.51%, 2.47%, 2.26%, and 2.23% respectively. The Bank term
loan effective rate excludes the impact of charges incurred in
connection with prepayments of the loan. (3) Interest rate spread
represents the difference between the yield on total
interest-earning assets and the rate on total interest-bearing
liabilities. (4) Net interest margin represents net interest income
divided by average interest-earning assets.
SYNCHRONY
FINANCIAL AVERAGE
BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN(1)
(unaudited, $ in millions) Nine Months Ended
Sep 30, 2016
Nine Months Ended
Sep 30, 2015
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 $12,172 $46 0.50% $11,144 $19 0.23% Securities
available for sale 2,960 22 0.99% $3,066 15 0.65%
Loan
receivables: Credit cards, including held for sale 65,201
10,573 21.66% 58,442 9,500 21.73% Consumer installment loans 1,242
86 9.25% 1,107 78 9.42% Commercial credit products 1,360 103 10.12%
1,361 106 10.41% Other 53 1 NM 36 1 NM
Total loan receivables,
including held for sale 67,856 10,763 21.19% 60,946 9,685
21.25%
Total interest-earning assets 82,988 10,831 17.43%
75,156 9,719 17.29%
Non-interest-earning assets: Cash
and due from banks 942 782 Allowance for loan losses (3,764)
(3,304) Other assets 3,250 2,759
Total non-interest-earning
assets 428 237
Total assets $83,416
$75,393
Liabilities Interest-bearing
liabilities: Interest-bearing deposit accounts $45,913 $539
1.57% $36,677 $442 1.61% Borrowings of consolidated securitization
entities 12,578 180 1.91% 13,952 159 1.52% Bank term loan(2) 1,026
31 4.04% 5,625 108 2.57% Senior unsecured notes 6,948 179 3.44%
4,667 121 3.47% Related party debt - - - % 163 4 3.28%
Total
interest-bearing liabilities 66,465 929 1.87% 61,084 834 1.83%
Non-interest-bearing liabilities Non-interest-bearing
deposit accounts 212 153 Other liabilities 3,363 2,846
Total
non-interest-bearing liabilities 3,575 2,999
Total liabilities 70,040 64,083
Equity
Total equity 13,376 11,310
Total
liabilities and equity $83,416 $75,393
Net interest
income $9,902 $8,885
Interest rate
spread(3) 15.56% 15.46%
Net interest
margin(4) 15.94% 15.81%
(1) Certain
balance sheet amounts and related metrics have been updated to
reflect the adoption of ASU 2015-03. More detail on this update is
in footnote (1) on the Statements of Financial Position. (2)
Average interest rate on liabilities calculated above utilizes
monthly average balances. The effective interest rates for the Bank
term loan for the 9 months ended September 30, 2016 and September
30, 2015 were 2.48% and 2.22%, respectively. The Bank term loan
effective rate excludes the impact of charges incurred in
connection with prepayments of the loan. (3) Interest rate spread
represents the difference between the yield on total
interest-earning assets and the rate on total interest-bearing
liabilities. (4) Net interest margin represents net interest income
divided by average interest-earning assets.
SYNCHRONY
FINANCIAL BALANCE SHEET
STATISTICS(1) (unaudited, $ in millions, except per
share statistics) Quarter Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Sep 30, 2016 vs.
Sep 30, 2015
BALANCE SHEET
STATISTICS
Total common equity $13,981 $13,715 $13,204 $12,604 $12,158 $1,823
15.0% Total common equity as a % of total assets 16.04% 16.65%
16.17% 15.01% 15.33% 0.71% Tangible assets $85,477 $80,731
$80,005 $82,340 $77,695 $7,782 10.0% Tangible common equity(2)
$12,299 $12,062 $11,553 $10,954 $10,563 $1,736 16.4% Tangible
common equity as a % of tangible assets(2) 14.39% 14.94% 14.44%
13.30% 13.60% 0.79% Tangible common equity per share(2) $14.90
$14.46 $13.86 $13.14 $12.67 $2.23 17.6%
REGULATORY
CAPITAL RATIOS(3)
Basel III Transition Total risk-based capital
ratio(4) 19.5% 19.8% 19.4% 18.1% 18.8% Tier 1 risk-based capital
ratio(5) 18.2% 18.5% 18.1% 16.8% 17.5% Tier 1 leverage ratio(6)
15.3% 15.6% 14.8% 14.4% 14.6% Common equity Tier 1 capital ratio(7)
18.2% 18.5% 18.1% 16.8% 17.5%
Basel III Fully
Phased-in Common equity Tier 1 capital ratio(7) 17.9% 18.0%
17.5% 15.9% 16.7%
(1) Certain balance sheet
amounts and related metrics have been updated to reflect the
adoption of ASU 2015-03. More detail on this update is in footnote
(1) on the Statements of Financial Position. (2) 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. (3) Regulatory capital metrics
at September 30, 2016 are preliminary and therefore subject to
change. As a new savings and loan holding company, the Company
historically has not been required by regulators to disclose
capital ratios prior to December 31, 2015, and therefore these
ratios are non-GAAP measures. See Reconciliation of Non-GAAP
Measures and Calculation of Regulatory Measures for components of
capital ratio calculations. (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. (7) Common equity Tier 1 capital ratio
is the ratio of common equity Tier 1 capital to total risk-weighted
assets, each as calculated under Basel III rules. Common equity
Tier 1 capital ratio (fully phased-in) is a preliminary estimate
reflecting management’s interpretation of the final Basel III rules
adopted in July 2013 by the Federal Reserve Board, which have not
been fully implemented, and our estimate and interpretations are
subject to, among other things, ongoing regulatory review and
implementation guidance.
SYNCHRONY FINANCIAL
PLATFORM
RESULTS (unaudited, $ in millions) Quarter Ended
Nine Months Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
3Q'16 vs. 3Q'15 Sep 30,
2016
Sep 30,
2015
YTD'16 vs. YTD'15
RETAIL
CARD
Purchase volume(1)(2) $25,285 $25,411 $21,550 $26,768 $23,560
$1,725 7.3% $72,246 $65,422 $6,824 10.4% Period-end loan
receivables $48,010 $46,705 $45,113 $47,412 $43,432 $4,578 10.5%
$48,010 $43,432 $4,578 10.5% Average loan receivables, including
held for sale $47,420 $45,861 $45,900 $44,958 $42,933 $4,487 10.5%
$46,491 $41,853 $4,638 11.1% Average active accounts (in
thousands)(2)(3) 52,959 52,314 52,969 52,038 49,953 3,006 6.0%
52,834 49,671 3,163 6.4% Interest and fees on loans(2)
$2,790 $2,585 $2,614 $2,594 $2,508 $282 11.2% $7,989 $7,180 $809
11.3% Other income(2) $70 $69 $79 $76 $70 $- - % $218 $263 $(45)
(17.1)% Retailer share arrangements(2) $(752) $(656) $(661) $(723)
$(708) $(44) 6.2% $(2,069) $(1,965) $(104) 5.3%
PAYMENT
SOLUTIONS
Purchase volume(1) $4,152 $3,903 $3,392 $3,714 $3,635 $517 14.2%
$11,447 $9,954 $1,493 15.0% Period-end loan receivables $14,798
$13,997 $13,420 $13,543 $12,933 $1,865 14.4% $14,798 $12,933 $1,865
14.4% Average loan receivables $14,391 $13,644 $13,482 $13,192
$12,523 $1,868 14.9% $13,865 $12,183 $1,682 13.8% Average active
accounts (in thousands)(3) 8,461 8,153 8,134 7,896 7,468 993 13.3%
8,261 7,335 926 12.6% Interest and fees on loans $505 $467
$457 $462 $442 $63 14.3% $1,429 $1,257 $172 13.7% Other income $3
$3 $4 $3 $5 $(2) (40.0)% $10 $14 $(4) (28.6)% Retailer share
arrangements $(3) $(7) $(7) $(10) $(13) $10 (76.9)% $(17) $(35) $18
(51.4)%
CARECREDIT
Purchase volume(1) $2,178 $2,193 $2,035 $1,978 $2,011 $167 8.3%
$6,406 $5,779 $627 10.8% Period-end loan receivables $7,836 $7,580
$7,316 $7,335 $7,155 $681 9.5% $7,836 $7,155 $681 9.5% Average loan
receivables $7,714 $7,438 $7,323 $7,256 $7,048 $666 9.4% $7,500
$6,910 $590 8.5% Average active accounts (in thousands)(3) 5,219
5,064 5,031 4,958 4,826 393 8.1% 5,109 4,756 353 7.4%
Interest and fees on loans $476 $442 $427 $438 $429 $47 11.0%
$1,345 $1,248 $97 7.8% Other income $11 $11 $9 $8 $9 $2 22.2% $31
$28 $3 10.7% Retailer share arrangements $(2) $(1) $(2) $(1) $(2)
$- - % $(5) $(4) $(1) 25.0%
TOTAL
SYF
Purchase volume(1)(2) $31,615 $31,507 $26,977 $32,460 $29,206
$2,409 8.2% $90,099 $81,155 $8,944 11.0% Period-end loan
receivables $70,644 $68,282 $65,849 $68,290 $63,520 $7,124 11.2%
$70,644 $63,520 $7,124 11.2% Average loan receivables, including
held for sale $69,525 $66,943 $66,705 $65,406 $62,504 $7,021 11.2%
$67,856 $60,946 $6,910 11.3% Average active accounts (in
thousands)(2)(3) 66,639 65,531 66,134 64,892 62,247 4,392 7.1%
66,204 61,762 4,442 7.2% Interest and fees on loans(2)
$3,771 $3,494 $3,498 $3,494 $3,379 $392 11.6% $10,763 $9,685 $1,078
11.1% Other income(2) $84 $83 $92 $87 $84 $- - % $259 $305 $(46)
(15.1)% Retailer share arrangements(2) $(757) $(664) $(670) $(734)
$(723) $(34) 4.7% $(2,091) $(2,004) $(87) 4.3%
(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)(2) (unaudited,
$ in millions, except per share statistics) Quarter
Ended Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
COMMON EQUITY
MEASURES
GAAP Total common equity $13,981 $13,715 $13,204 $12,604 $12,158
Less: Goodwill (949) (949) (949) (949) (949) Less: Intangible
assets, net (733) (704) (702) (701) (646)
Tangible common
equity $12,299 $12,062 $11,553 $10,954 $10,563 Adjustments for
certain deferred tax liabilities and certain items in accumulated
comprehensive income (loss) 299 282 281 280 291
Basel III -
Common equity Tier 1 (fully phased-in) $12,598 $12,344 $11,834
$11,234 $10,854 Adjustment related to capital components during
transition 273 266 265 399 375
Basel III - Common equity Tier 1
(transition) $12,871 $12,610 $12,099 $11,633 $11,229
RISK-BASED
CAPITAL
Common equity Tier 1 $12,871 $12,610 $12,099 $11,633 $11,229 Add:
Allowance for loan losses includible in risk-based capital 923 890
869 898 833
Risk-based capital $13,794 $13,500 $12,968
$12,531 $12,062
ASSET
MEASURES
Total average assets $85,021 $81,694 $82,835 $81,882 $77,841
Adjustments for: Disallowed goodwill and other disallowed
intangible assets, net of
related deferred tax liabilities
(1,117) (1,113) (1,117) (991) (931) Other - - - - 104
Total
assets for leverage purposes $83,904 $80,581 $81,718 $80,891
$77,014
Risk-weighted assets - Basel III (fully
phased-in)(3) $70,448 $68,462 $67,697 $70,493 $65,125
Risk-weighted assets - Basel III (transition)(3) $70,660
$68,188 $66,689 $69,224 $64,090
TANGIBLE COMMON
EQUITY PER SHARE
GAAP book value per share $16.94 $16.45 $15.84 $15.12 $14.58 Less:
Goodwill (1.14) (1.14) (1.14) (1.14) (1.14) Less: Intangible
assets, net (0.90) (0.85) (0.84) (0.84) (0.77) Tangible common
equity per share $14.90 $14.46 $13.86 $13.14 $12.67
(1) Certain
balance sheet amounts and related metrics have been updated to
reflect the adoption of ASU 2015-03. More detail on this update is
in footnote (1) on the Statements of Financial Position. (2)
Regulatory measures at September 30, 2016 are presented on an
estimated basis. (3) Key differences between Basel III transitional
rules and fully phased-in Basel III rules in the calculation of
risk-weighted assets include, but not limited to, risk weighting of
deferred tax assets and adjustments for certain intangible assets.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161021005172/en/
Investor RelationsGreg Ketron, 203-585-6291orMedia
RelationsSamuel Wang, 203-585-2933
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