Synchrony Financial (NYSE: SYF) today announced fourth quarter
2017 net earnings of $385 million, or $0.49 per diluted share
including the impact from the Tax Cuts and Jobs Act (“Tax Act”) of
2017, and $545 million, or $0.70 per diluted share excluding $160
million of additional tax expense related to the impact from the
Tax Act. Highlights for the quarter included:
- Net interest income increased 8% from
the fourth quarter of 2016 to $3.9 billion
- Loan receivables grew $6 billion, or
7%, from the fourth quarter of 2016 to $82 billion
- Purchase volume increased 3% from the
fourth quarter of 2016 to $37 billion
- Deposits grew over $4 billion, or 9%,
from the fourth quarter of 2016 to $56 billion
- Announced agreement to significantly
expand strategic consumer credit relationship with PayPal,
acquiring PayPal’s U.S. consumer credit receivables portfolio and
becoming the exclusive issuer of the PayPal Credit online consumer
financing program; expected to close in the third quarter of
2018
- Renewed relationships: Men’s Wearhouse,
Home Furnishings Association, Husqvarna Viking, Sweetwater, Bosley,
and Sono Bello
- Quarterly common stock dividend payment
of $0.15 per share and repurchased $430 million of Synchrony
Financial common stock
- The Tax Act resulted in $160 million of
additional tax expense primarily due to the Tax Act’s reduction in
the corporate tax rate that resulted in a remeasurement of our net
deferred tax asset
“Substantial progress was made on our strategic priorities not
only in the fourth quarter, but throughout 2017. Our business
continues to deliver organic growth, leveraging innovative
marketing, promotions, and value propositions. We are making
investments in our robust data, analytics and digital capabilities,
further enhancing the experience of our partners and cardholders.
And we are supporting our business with continued growth in our
direct deposit platform. We accomplished all of this while
maintaining a strong balance sheet and returning capital to
shareholders through growth and the execution of our capital plan,”
said Margaret Keane, President and Chief Executive Officer of
Synchrony Financial. “Synchrony Financial continues to be well
positioned for long-term growth and we look forward to driving
further value for our partners, cardholders, and shareholders in
2018.”
Business and Financial Highlights for
the Fourth Quarter of 2017
All comparisons below are for the fourth quarter of 2017
compared to the fourth quarter of 2016, unless otherwise noted.
Earnings
- Net interest income increased $288
million, or 8%, to $3.9 billion, primarily driven by strong loan
receivables growth. Net interest income after retailer share
arrangements increased 11%.
- Provision for loan losses increased
$278 million to $1.4 billion primarily driven by credit
normalization.
- Other income was down $23 million to
$62 million, primarily due to higher loyalty program expense,
partially offset by higher interchange revenue.
- Other expense increased $52 million, or
6%, to $970 million, primarily driven by growth and marketing.
- Net earnings totaled $385 million
including the impact from the Tax Act that resulted in $160 million
of additional tax expense primarily due to the Tax Act’s reduction
in the corporate tax rate that resulted in a remeasurement of our
net deferred tax asset; excluding this impact of the Tax Act, net
earnings totaled $545 million compared to $576 million in the
fourth quarter of 2016.
Balance Sheet
- Period-end loan receivables growth
remained strong at 7%, primarily driven by purchase volume growth
of 3% and average active account growth of 4%.
- Deposits grew to $56 billion, up $4
billion, or 9%, and comprised 73% of funding compared to 72% last
year.
- The Company’s balance sheet remained
strong with total liquidity (liquid assets and undrawn credit
facilities) of $21 billion, or 22% of total assets.
- The estimated Common Equity Tier 1
ratio under Basel III subject to transition provisions was 16.0%
and the estimated fully phased-in Common Equity Tier 1 ratio under
Basel III was 15.8%.
Key Financial Metrics
- Return on assets was 1.6% and return on
equity was 10.5%, including the impact from the Tax Act; excluding
the impact of the Tax Act, return on assets was 2.3% and return on
equity was 14.9%.
- Net interest margin was 16.24% compared
to 16.26% in the fourth quarter of 2016.
- Efficiency ratio was 30.3%, compared to
31.6% in the fourth quarter of 2016. The efficiency ratio for 2017
was 30.3%, compared to 31.1% in 2016. The improvement in both the
fourth quarter and full-year efficiency ratio reflected the strong
operating leverage generated by the business.
Credit Quality
- Loans 30+ days past due as a percentage
of total period-end loan receivables were 4.67% compared to 4.32%
last year.
- Net charge-offs as a percentage of
total average loan receivables were 5.78% compared to 4.65% last
year.
- The allowance for loan losses as a
percentage of total period-end loan receivables was 6.80% compared
to 5.69% last year.
Sales Platforms
- Retail Card interest and fees on loans
increased 8%, driven primarily by period-end loan receivables
growth of 7%. Purchase volume and average active account growth was
3%. Loan receivables growth was broad-based across partner
programs.
- Payment Solutions interest and fees on
loans increased 10%, driven primarily by period-end loan
receivables growth of 8%. Purchase volume growth was 9%, adjusted
to exclude the impact from the hhgregg bankruptcy, and average
active account growth was 7%. Loan receivables growth was led by
home furnishing and automotive.
- CareCredit interest and fees on loans
increased 8%, driven primarily by period-end loan receivables
growth of 10%. Purchase volume and average active account growth
was 8%. Loan receivables growth was led by dental and
veterinary.
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, 2016, as filed
February 23, 2017, and the Company’s forthcoming Annual Report on
Form 10-K for the year ended December 31, 2017. 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 19, 2018, 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 the
Synchrony Financial 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 42017#, and can be accessed beginning
approximately two hours after the event through February 2,
2018.
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
365,000 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 credit cards, Dual
Card™ and general purpose co-branded 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 (June 2017, Issue # 1112) - based on
2016 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
“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; 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; cyber-attacks or other security breaches; 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; failure of third parties to provide various services that
are important to our operations; 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; 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; 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, 2016, as filed on
February 23, 2017. 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,” certain capital ratios, and certain
financial measures that have been adjusted to exclude the effects
from the Tax Act, 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,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
4Q'17 vs. 4Q'16 Dec 31,
2017
Dec 31,
2016
YTD'17 vs. YTD'16
EARNINGS
Net interest income $3,916 $3,876 $3,637
$3,587 $3,628 $288 7.9% $15,016 $13,530 $1,486 11.0% Retailer share
arrangements (779) (805) (669) (684) (811) 32 (3.9)% (2,937)
(2,902) (35) 1.2%
Net interest income, after retailer share
arrangements 3,137 3,071 2,968 2,903 2,817 320 11.4% 12,079
10,628 1,451 13.7% Provision for loan losses 1,354 1,310 1,326
1,306 1,076 278 25.8% 5,296 3,986 1,310 32.9%
Net interest
income, after retailer share arrangements and provision for loan
losses 1,783 1,761 1,642 1,597 1,741 42 2.4% 6,783 6,642 141
2.1% Other income 62 76 57 93 85 (23) (27.1)% 288 344 (56) (16.3)%
Other expense 970 958 911 908 918 52 5.7% 3,747 3,416 331 9.7%
Earnings before provision for income taxes 875 879 788 782
908 (33) (3.6)% 3,324 3,570 (246) (6.9)% Provision for income taxes
490 324 292 283 332 158 47.6% 1,389 1,319 70 5.3%
Net
earnings $385 $555 $496 $499 $576 $(191) (33.2)% $1,935 $2,251
$(316) (14.0)%
Net earnings attributable to common
stockholders $385 $555 $496 $499 $576 $(191) (33.2)% $1,935
$2,251 $(316) (14.0)%
Adjusted net
earnings(1) $545 $555 $496 $499 $576 $(31) (5.4)% $2,095
$2,251 $(156) (6.9)%
COMMON SHARE
STATISTICS
Basic EPS $0.49 $0.70 $0.62 $0.61 $0.70 $(0.21) (30.0)% $2.43 $2.71
$(0.28) (10.3)% Diluted EPS $0.49 $0.70 $0.61 $0.61 $0.70 $(0.21)
(30.0)% $2.42 $2.71 $(0.29) (10.7)% Adjusted diluted EPS(1) $0.70
$0.70 $0.61 $0.61 $0.70 $- - % $2.62 $2.71 $(0.09) (3.3)% Dividend
declared per share $0.15 $0.15 $0.13 $0.13 $0.13 $0.02 15.4% $0.56
$0.26 $0.30 115.4% Common stock price $38.61 $31.05 $29.82 $34.30
$36.27 $2.34 6.5% $38.61 $36.27 $2.34 6.5% Book value per share
$18.47 $18.40 $18.02 $17.71 $17.37 $1.10 6.3% $18.47 $17.37 $1.10
6.3% Tangible common equity per share(2) $16.22 $16.15 $15.79
$15.47 $15.34 $0.88 5.7% $16.22 $15.34 $0.88 5.7% Beginning
common shares outstanding 782.6 795.3 810.8 817.4 825.5 (42.9)
(5.2)% 817.4 833.8 (16.4) (2.0)% Issuance of common shares - - - -
- - - % - - - - % Stock-based compensation 0.1 0.1 0.2 - - 0.1 NM
0.4 0.2 0.2 100.0% Shares repurchased (12.2) (12.8) (15.7) (6.6)
(8.1) (4.1) 50.6% (47.3) (16.6) (30.7) 184.9% Ending common shares
outstanding 770.5 782.6 795.3 810.8 817.4 (46.9) (5.7)% 770.5 817.4
(46.9) (5.7)% Weighted average common shares outstanding
778.7 787.3 804.0 813.1 820.5 (41.8) (5.1)% 795.6 829.2 (33.6)
(4.1)% Weighted average common shares outstanding (fully diluted)
784.0 790.9 807.4 817.1 823.8 (39.8) (4.8)% 799.7 831.5 (31.8)
(3.8)%
(1) Adjusted net earnings and Adjusted
diluted EPS are non-GAAP measures. These measures represent the
corresponding GAAP measure, adjusted to exclude the effects to
Provision for income taxes in the quarter ended December 31, 2017,
resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).
The effects primarily relate to additional tax expense arising from
the remeasurement of our net deferred tax asset to reflect the
reduction in the U.S. corporate tax rate from 35% to 21%. For a
corresponding reconciliation to a GAAP financial measure, see
Reconciliation of Non-GAAP Measures and Calculations of Regulatory
Measures.
(2) 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,
except account data) Quarter Ended Twelve Months
Ended Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
4Q'17 vs. 4Q'16 Dec 31,
2017
Dec 31,
2016
YTD'17 vs. YTD'16
PERFORMANCE
METRICS
Return on assets(1) 1.6% 2.4% 2.2% 2.3% 2.6% (1.0)% 2.1% 2.7%
(0.6)% Return on equity(2) 10.5% 15.3% 13.8% 14.1% 16.2% (5.7)%
13.4% 16.5% (3.1)% Return on tangible common equity(3) 12.0% 17.4%
15.7% 16.1% 18.4% (6.4)% 15.3% 18.8% (3.5)% Adjusted return on
assets(4) 2.3% 2.4% 2.2% 2.3% 2.6% (0.3)% 2.3% 2.7% (0.4)% Adjusted
return on equity(4) 14.9% 15.3% 13.8% 14.1% 16.2% (1.3)% 14.5%
16.5% (2.0)% Adjusted return on tangible common equity(5) 17.0%
17.4% 15.7% 16.1% 18.4% (1.4)% 16.6% 18.8% (2.2)% Net interest
margin(6) 16.24% 16.74% 16.20% 16.18% 16.26% (0.02)% 16.35% 16.10%
0.25% Efficiency ratio(7) 30.3% 30.4% 30.1% 30.3% 31.6% (1.3)%
30.3% 31.1% (0.8)% Other expense as a % of average loan
receivables, including held for sale 4.91% 4.99% 4.93% 4.97% 5.04%
(0.13)% 4.95% 4.98% (0.03)% Effective income tax rate 56.0% 36.9%
37.1% 36.2% 36.6% 19.4% 41.8% 36.9% 4.9%
CREDIT QUALITY
METRICS
Net charge-offs as a % of average loan receivables, including held
for sale 5.78% 4.95% 5.42% 5.33% 4.65% 1.13% 5.37% 4.57% 0.80% 30+
days past due as a % of period-end loan receivables(8) 4.67% 4.80%
4.25% 4.25% 4.32% 0.35% 4.67% 4.32% 0.35% 90+ days past due as a %
of period-end loan receivables(8) 2.28% 2.22% 1.90% 2.06% 2.03%
0.25% 2.28% 2.03% 0.25% Net charge-offs $1,141 $950 $1,001 $974
$847 $294 34.7% $4,066 $3,139 $927 29.5% Loan receivables
delinquent over 30 days(8) $3,831 $3,694 $3,208 $3,120 $3,295 $536
16.3% $3,831 $3,295 $536 16.3% Loan receivables delinquent over 90
days(8) $1,869 $1,707 $1,435 $1,508 $1,546 $323 20.9% $1,869 $1,546
$323 20.9% Allowance for loan losses (period-end) $5,574
$5,361 $5,001 $4,676 $4,344 $1,230 28.3% $5,574 $4,344 $1,230 28.3%
Allowance coverage ratio(9) 6.80% 6.97% 6.63% 6.37% 5.69% 1.11%
6.80% 5.69% 1.11%
BUSINESS
METRICS
Purchase volume(10) $36,565 $32,893 $33,476 $28,880 $35,369 $1,196
3.4% $131,814 $125,468 $6,346 5.1% Period-end loan receivables
$81,947 $76,928 $75,458 $73,350 $76,337 $5,610 7.3% $81,947 $76,337
$5,610 7.3% Credit cards $79,026 $73,946 $72,492 $70,587 $73,580
$5,446 7.4% $79,026 $73,580 $5,446 7.4% Consumer installment loans
$1,578 $1,561 $1,514 $1,411 $1,384 $194 14.0% $1,578 $1,384 $194
14.0% Commercial credit products $1,303 $1,384 $1,386 $1,311 $1,333
$(30) (2.3)% $1,303 $1,333 $(30) (2.3)% Other $40 $37 $66 $41 $40
$- - % $40 $40 $- - % Average loan receivables, including held for
sale $78,369 $76,165 $74,090 $74,132 $72,476 $5,893 8.1% $75,702
$68,649 $7,053 10.3% Period-end active accounts (in thousands)(11)
74,541 69,008 69,277 67,905 71,890 2,651 3.7% 74,541 71,890 2,651
3.7% Average active accounts (in thousands)(11) 71,348 69,331
68,635 69,629 68,701 2,647 3.9% 69,968 66,928 3,040 4.5%
LIQUIDITY
Liquid assets Cash and equivalents $11,602 $13,915 $12,020
$11,392 $9,321 $2,281 24.5% $11,602 $9,321 $2,281 24.5% Total
liquid assets $15,087 $16,391 $15,274 $16,158 $13,612 $1,475 10.8%
$15,087 $13,612 $1,475 10.8%
Undrawn credit facilities
Undrawn credit facilities $6,000 $5,650 $6,650 $5,600 $6,700 $(700)
(10.4)% $6,000 $6,700 $(700) (10.4)%
Total liquid assets and
undrawn credit facilities $21,087 $22,041 $21,924 $21,758
$20,312 $775 3.8% $21,087 $20,312 $775 3.8% Liquid assets % of
total assets 15.75% 17.71% 16.76% 18.14% 15.09% 0.66% 15.75% 15.09%
0.66% Liquid assets including undrawn credit facilities % of total
assets 22.01% 23.82% 24.06% 24.43% 22.52% (0.51)% 22.01% 22.52%
(0.51)%
(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 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) Adjusted return on assets
represents Adjusted net earnings as a percentage of average total
assets. Adjusted return on equity represents Adjusted net earnings
as a percentage of average total equity. Adjusted net earnings is a
non-GAAP measure. For a corresponding reconciliation of Adjusted
net earnings to a GAAP financial measure, see Reconciliation of
Non-GAAP Measures and Calculations of Regulatory Measures. (5)
Adjusted return on tangible common equity represents Adjusted net
earnings as a percentage of average tangible common equity. Both
Adjusted net earnings and tangible common equity are non-GAAP
measures. For corresponding reconciliations to a GAAP financial
measure, see Reconciliation of Non-GAAP Measures and Calculations
of Regulatory Measures. (6) Net interest margin represents net
interest income divided by average interest-earning assets. (7)
Efficiency ratio represents (i) other expense, divided by (ii) net
interest income, after retailer share arrangements, plus other
income. (8) Based on customer statement-end balances extrapolated
to the respective period-end date. (9) Allowance coverage ratio
represents allowance for loan losses divided by total period-end
loan receivables. (10) 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.
(11) 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,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
4Q'17 vs. 4Q'16 Dec 31,
2017
Dec 31,
2016
YTD'17 vs. YTD'16 Interest income: Interest and fees
on loans $4,233 $4,182 $3,927 $3,877 $3,919 $314 8.0% $16,219
$14,682 $1,537 10.5% Interest on investment securities 58 51 43 36
28 30 107.1% 188 96 92 95.8% Total interest income 4,291 4,233
3,970 3,913 3,947 344 8.7% 16,407 14,778 1,629 11.0%
Interest expense: Interest on deposits 233 219 202 194 188
45 23.9% 848 727 121 16.6% Interest on borrowings of consolidated
securitization entities 70 65 63 65 64 6 9.4% 263 244 19 7.8%
Interest on third-party debt 72 73 68 67 67 5 7.5% 280 277 3 1.1%
Total interest expense 375 357 333 326 319 56 17.6% 1,391 1,248 143
11.5%
Net interest income 3,916 3,876 3,637 3,587
3,628 288 7.9% 15,016 13,530 1,486 11.0% Retailer share
arrangements (779) (805) (669) (684) (811) 32 (3.9)% (2,937)
(2,902) (35) 1.2% Net interest income, after retailer share
arrangements 3,137 3,071 2,968 2,903 2,817 320 11.4% 12,079 10,628
1,451 13.7% Provision for loan losses 1,354 1,310 1,326
1,306 1,076 278 25.8% 5,296 3,986 1,310 32.9% Net interest income,
after retailer share arrangements and provision for loan losses
1,783 1,761 1,642 1,597 1,741 42 2.4% 6,783 6,642 141 2.1%
Other income: Interchange revenue 179 164 165 145 167 12
7.2% 653 602 51 8.5% Debt cancellation fees 69 67 68 68 68 1 1.5%
272 262 10 3.8% Loyalty programs (193) (168) (206) (137) (157) (36)
22.9% (704) (547) (157) 28.7% Other 7 13 30 17 7 - - % 67 27 40
148.1% Total other income 62 76 57 93 85 (23) (27.1)% 288 344 (56)
(16.3)%
Other expense: Employee costs 333 335 321 325
315 18 5.7% 1,314 1,207 107 8.9% Professional fees 159 161 158 151
164 (5) (3.0)% 629 638 (9) (1.4)% Marketing and business
development 156 124 124 94 130 26 20.0% 498 423 75 17.7%
Information processing 99 96 88 90 88 11 12.5% 373 338 35 10.4%
Other 223 242 220 248 221 2 0.9% 933 810 123 15.2% Total other
expense 970 958 911 908 918 52 5.7% 3,747 3,416 331 9.7%
Earnings before provision for income taxes 875 879
788 782 908 (33) (3.6)% 3,324 3,570 (246) (6.9)% Provision for
income taxes 490 324 292 283 332 158 47.6% 1,389 1,319 70 5.3%
Net earnings attributable to common stockholders $385 $555
$496 $499 $576 $(191) (33.2)% $1,935 $2,251 $(316) (14.0)%
SYNCHRONY
FINANCIAL STATEMENTS OF FINANCIAL POSITION
(unaudited, $ in millions) Quarter Ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31, 2017 vs.
Dec 31, 2016
Assets Cash and equivalents $11,602 $13,915 $12,020 $11,392
$9,321 $2,281 24.5% Investment securities 4,488 3,317 3,997 5,328
5,110 (622) (12.2)% Loan receivables: Unsecuritized loans held for
investment 55,526 53,997 52,550 50,398 52,332 3,194 6.1% Restricted
loans of consolidated securitization entities 26,421 22,931 22,908
22,952 24,005 2,416 10.1% Total loan receivables 81,947 76,928
75,458 73,350 76,337 5,610 7.3% Less: Allowance for loan losses
(5,574) (5,361) (5,001) (4,676) (4,344) (1,230) 28.3% Loan
receivables, net 76,373 71,567 70,457 68,674 71,993 4,380 6.1%
Goodwill 991 991 991 992 949 42 4.4% Intangible assets, net 749 772
787 826 712 37 5.2% Other assets 1,605 1,986 2,888 1,838 2,122
(517) (24.4)% Total assets $95,808 $92,548 $91,140 $89,050 $90,207
$5,601 6.2%
Liabilities and Equity Deposits:
Interest-bearing deposit accounts $56,276 $54,232 $52,659 $51,359
$51,896 $4,380 8.4% Non-interest-bearing deposit accounts 212 222
226 246 159 53 33.3% Total deposits 56,488 54,454 52,885 51,605
52,055 4,433 8.5% Borrowings: Borrowings of consolidated
securitization entities 12,497 11,891 12,204 12,433 12,388 109 0.9%
Bank term loan - - - - - - - % Senior unsecured notes 8,302 8,008
8,505 7,761 7,759 543 7.0% Total borrowings 20,799 19,899 20,709
20,194 20,147 652 3.2% Accrued expenses and other liabilities 4,287
3,793 3,214 2,888 3,809 478 12.5% Total liabilities 81,574 78,146
76,808 74,687 76,011 5,563 7.3% Equity: Common stock 1 1 1 1 1 - -
% Additional paid-in capital 9,445 9,429 9,415 9,405 9,393 52 0.6%
Retained earnings 6,809 6,543 6,109 5,724 5,330 1,479 27.7%
Accumulated other comprehensive income (64) (40) (49) (55) (53)
(11) 20.8% Treasury Stock (1,957) (1,531) (1,144) (712) (475)
(1,482) NM Total equity 14,234 14,402 14,332 14,363 14,196 38 0.3%
Total liabilities and equity $95,808 $92,548 $91,140 $89,050
$90,207 $5,601 6.2%
SYNCHRONY FINANCIAL AVERAGE
BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
(unaudited, $ in millions) Quarter Ended
Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar
31, 2017 Dec 31, 2016 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 $13,591 $43 1.26%
$11,895 $37 1.23% $10,758 $28 1.04% $10,552 $21 0.81% $12,210 $17
0.55% Securities available for sale 3,725 15 1.60% 3,792 14 1.46%
5,195 15 1.16% 5,213 15 1.17% 4,076 11 1.07%
Loan
receivables: Credit cards, including held for sale 75,389 4,161
21.90% 73,172 4,111 22.29% 71,206 3,858 21.73% 71,365 3,811 21.66%
69,660 3,851 21.99% Consumer installment loans 1,568 36 9.11% 1,543
35 9.00% 1,461 34 9.33% 1,389 32 9.34% 1,373 31 8.98% Commercial
credit products 1,375 35 10.10% 1,392 36 10.26% 1,378 34 9.90%
1,317 34 10.47% 1,386 36 10.33% Other 37 1 NM 58 - - % 45 1 NM 61 -
- % 57 1 NM
Total loan receivables, including held for sale
78,369 4,233 21.43% 76,165 4,182 21.78% 74,090 3,927 21.26% 74,132
3,877 21.21% 72,476 3,919 21.51%
Total interest-earning
assets 95,685 4,291 17.79% 91,852 4,233 18.28% 90,043 3,970
17.68% 89,897 3,913 17.65% 88,762 3,947 17.69%
Non-interest-earning assets: Cash and due from banks 1,037
877 829 802 739 Allowance for loan losses (5,443) (5,125) (4,781)
(4,408) (4,228) Other assets 3,219 3,517 3,303 3,177 3,479
Total
non-interest-earning assets (1,187) (731) (649) (429) (10)
Total assets $94,498
$91,121 $89,394 $89,468 $88,752
Liabilities
Interest-bearing liabilities: Interest-bearing deposit
accounts $55,690 $233 1.66% $53,294 $219 1.63% $51,836 $202 1.56%
$51,829 $194 1.52% $51,006 $188 1.47% Borrowings of consolidated
securitization entities 12,425 70 2.24% 11,759 65 2.19% 12,213 63
2.07% 12,321 65 2.14% 12,389 64 2.06% Bank term loan - - - % - - -
% - - - % - - - % - - - % Senior unsecured notes 7,940 72 3.60%
8,251 73 3.51% 7,933 68 3.44% 7,760 67 3.50% 7,757 67 3.44%
Total interest-bearing liabilities 76,055 375 1.96% 73,304
357 1.93% 71,982 333 1.86% 71,910 326 1.84% 71,152 319 1.78%
Non-interest-bearing liabilities Non-interest-bearing
deposit accounts 218 232 218 240 176 Other liabilities 3,716 3,154
2,752 2,995 3,321
Total non-interest-bearing liabilities
3,934 3,386 2,970 3,235 3,497
Total liabilities 79,989 76,690 74,952 75,145 74,649
Equity Total equity 14,509 14,431 14,442 14,323
14,103
Total liabilities and
equity $94,498 $91,121 $89,394 $89,468 $88,752
Net interest
income $3,916 $3,876 $3,637 $3,587 $3,628
Interest
rate spread(1) 15.83% 16.35% 15.82% 15.81% 15.91%
Net
interest margin(2) 16.24% 16.74% 16.20% 16.18% 16.26%
(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, 2017
Twelve Months Ended
Dec 31, 2016
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 $11,707 $129 1.10% $12,152 $63 0.52%
Securities available for sale
4,449 59 1.33% 3,220 33 1.02%
Loan receivables:
Credit cards, including held for sale 72,795 15,941 21.90% 65,947
14,424 21.87% Consumer installment loans 1,491 137 9.19% 1,274 117
9.18% Commercial credit products 1,366 139 10.18% 1,372 139 10.13%
Other 50 2 4.00% 56 2 3.57%
Total loan receivables, including
held for sale 75,702 16,219 21.42% 68,649 14,682 21.39%
Total interest-earning assets 91,858 16,407 17.86% 84,021
14,778 17.59%
Non-interest-earning assets: Cash and
due from banks 887 965 Allowance for loan losses (4,942) (3,872)
Other assets 3,304 3,286
Total non-interest-earning assets
(751) 379
Total assets $91,107 $84,400
Liabilities Interest-bearing liabilities:
Interest-bearing deposit accounts $53,173 $848 1.59% $47,194 $727
1.54% Borrowings of consolidated securitization entities 12,179 263
2.16% 12,428 244 1.96% Bank term loan(1) - - - % 556 31 5.58%
Senior unsecured notes 7,972 280 3.51% 7,158 246 3.44%
Total
interest-bearing liabilities 73,324 1,391 1.90% 67,336 1,248
1.85%
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 227 205 Other liabilities
3,129 3,239
Total non-interest-bearing liabilities 3,356
3,444
Total liabilities 76,680 70,780
Equity Total equity 14,427 13,620
Total liabilities and equity $91,107 $84,400
Net interest
income $15,016 $13,530
Interest rate
spread(2) 15.96% 15.74%
Net interest
margin(3) 16.35% 16.10%
(1) The effective
interest rate for the Bank term loan for the 12 months ended
December 31, 2016 was 2.48%. The Bank term loan effective rate
excludes the impact of charges incurred in connection with
prepayments of the loan. (2) Interest rate spread represents the
difference between the yield on total interest-earning assets and
the rate on total interest-bearing liabilities. (3) 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,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31, 2017 vs.
Dec 31, 2016
BALANCE SHEET
STATISTICS
Total common equity $14,234 $14,402 $14,332 $14,363 $14,196 $38
0.3% Total common equity as a % of total assets 14.86% 15.56%
15.73% 16.13% 15.74% (0.88)% Tangible assets $94,068 $90,785
$89,362 $87,232 $88,546 $5,522 6.2% Tangible common equity(1)
$12,494 $12,639 $12,554 $12,545 $12,535 $(41) (0.3)% Tangible
common equity as a % of tangible assets(1) 13.28% 13.92% 14.05%
14.38% 14.16% (0.88)% Tangible common equity per share(1) $16.22
$16.15 $15.79 $15.47 $15.34 $0.88 5.7%
REGULATORY
CAPITAL RATIOS(2)
Basel III Transition
Total risk-based capital ratio(3) 17.3% 18.7% 18.7% 19.3% 18.5%
Tier 1 risk-based capital ratio(4) 16.0% 17.3% 17.4% 18.0% 17.2%
Tier 1 leverage ratio(5) 13.8% 14.6% 14.8% 14.8% 15.0% Common
equity Tier 1 capital ratio(6) 16.0% 17.3% 17.4% 18.0% 17.2%
Basel III Fully Phased-in Common equity Tier 1 capital
ratio(6) 15.8% 17.2% 17.2% 17.7% 17.0%
(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 metrics at December 31, 2017 are preliminary and therefore
subject to change. (3) Total risk-based capital ratio is the ratio
of total risk-based capital divided by risk-weighted assets. (4)
Tier 1 risk-based capital ratio is the ratio of Tier 1 capital
divided by risk-weighted assets. (5) 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. (6) 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 an
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
Twelve Months Ended Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
4Q'17 vs. 4Q'16 Dec 31,
2017
Dec 31,
2016
YTD'17 vs. YTD'16
RETAIL
CARD
Purchase volume(1)(2) $29,839 $26,347 $27,101 $22,952 $28,996 $843
2.9% $106,239 $101,242 $4,997 4.9% Period-end loan receivables
$56,230 $52,119 $51,437 $49,905 $52,701 $3,529 6.7% $56,230 $52,701
$3,529 6.7% Average loan receivables, including held for sale
$53,256 $51,817 $50,533 $50,644 $49,476 $3,780 7.6% $51,570 $46,963
$4,607 9.8% Average active accounts (in thousands)(2)(3) 56,113
54,471 54,058 55,049 54,489 1,624 3.0% 55,142 53,344 1,798 3.4%
Interest and fees on loans(2) $3,133 $3,102 $2,900 $2,888
$2,909 $224 7.7% $12,023 $10,898 $1,125 10.3% Other income(2) $49
$61 $25 $77 $70 $(21) (30.0)% $212 $288 $(76) (26.4)% Retailer
share arrangements(2) $(771) $(795) $(657) $(681) $(801) $30 (3.7)%
$(2,904) $(2,870) $(34) 1.2%
PAYMENT
SOLUTIONS
Purchase volume(1) $4,366 $4,178 $3,930 $3,686 $4,194 $172 4.1%
$16,160 $15,641 $519 3.3% Period-end loan receivables $16,857
$16,153 $15,595 $15,320 $15,567 $1,290 8.3% $16,857 $15,567 $1,290
8.3% Average loan receivables $16,386 $15,848 $15,338 $15,424
$15,076 $1,310 8.7% $15,752 $14,110 $1,642 11.6% Average active
accounts (in thousands)(3) 9,421 9,183 9,031 9,090 8,844 577 6.5%
9,192 8,410 782 9.3% Interest and fees on loans $574 $559
$533 $515 $523 $51 9.8% $2,181 $1,952 $229 11.7% Other income $2 $2
$6 $4 $3 $(1) (33.3)% $14 $13 $1 7.7% Retailer share arrangements
$(5) $(9) $(9) $(1) $(9) $4 (44.4)% $(24) $(26) $2 (7.7)%
CARECREDIT
Purchase volume(1) $2,360 $2,368 $2,445 $2,242 $2,179 $181 8.3%
$9,415 $8,585 $830 9.7% Period-end loan receivables $8,860 $8,656
$8,426 $8,125 $8,069 $791 9.8% $8,860 $8,069 $791 9.8% Average loan
receivables $8,727 $8,500 $8,219 $8,064 $7,924 $803 10.1% $8,380
$7,576 $804 10.6% Average active accounts (in thousands)(3) 5,814
5,677 5,546 5,490 5,368 446 8.3% 5,634 5,174 460 8.9%
Interest and fees on loans $526 $521 $494 $474 $487 $39 8.0% $2,015
$1,832 $183 10.0% Other income $11 $13 $26 $12 $12 $(1) (8.3)% $62
$43 $19 44.2% Retailer share arrangements $(3) $(1) $(3) $(2) $(1)
$(2) NM $(9) $(6) $(3) 50.0%
TOTAL
SYF
Purchase volume(1)(2) $36,565 $32,893 $33,476 $28,880 $35,369
$1,196 3.4% $131,814 $125,468 $6,346 5.1% Period-end loan
receivables $81,947 $76,928 $75,458 $73,350 $76,337 $5,610 7.3%
$81,947 $76,337 $5,610 7.3% Average loan receivables, including
held for sale $78,369 $76,165 $74,090 $74,132 $72,476 $5,893 8.1%
$75,702 $68,649 $7,053 10.3% Average active accounts (in
thousands)(2)(3) 71,348 69,331 68,635 69,629 68,701 2,647 3.9%
69,968 66,928 3,040 4.5% Interest and fees on loans(2)
$4,233 $4,182 $3,927 $3,877 $3,919 $314 8.0% $16,219 $14,682 $1,537
10.5% Other income(2) $62 $76 $57 $93 $85 $(23) (27.1)% $288 $344
$(56) (16.3)% Retailer share arrangements(2) $(779) $(805) $(669)
$(684) $(811) $32 (3.9)% $(2,937) $(2,902) $(35) 1.2%
(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
Twelve MonthsEnded
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
COMMON EQUITY
MEASURES
GAAP Total common equity $14,234 $14,402 $14,332 $14,363 $14,196
Less: Goodwill (991) (991) (991) (992) (949) Less: Intangible
assets, net (749) (772) (787) (826) (712)
Tangible common
equity $12,494 $12,639 $12,554 $12,545 $12,535
Adjustments for certain deferred tax
liabilities and certain items in accumulatedcomprehensive income
(loss)
254 344 337 340 337
Basel III - Common equity Tier 1 (fully
phased-in) $12,748 $12,983 $12,891 $12,885 $12,872 Adjustment
related to capital components during transition 142 142 146 154 263
Basel III - Common equity Tier 1 (transition) $12,890
$13,125 $13,037 $13,039 $13,135
RISK-BASED
CAPITAL
Common equity Tier 1 $12,890 $13,125 $13,037 $13,039 $13,135 Add:
Allowance for loan losses includible in risk-based capital 1,064
1,001 985 954 994
Risk-based capital $13,954 $14,126 $14,022
$13,993 $14,129
ASSET
MEASURES
Total average assets(2) $94,498 $91,121 $89,394 $89,468 $88,752
Adjustments for:
Disallowed goodwill and other disallowed
intangible assets(net of related deferred tax liabilities) and
other
(1,392) (1,304) (1,325) (1,358) (1,059)
Total assets for
leverage purposes $93,106 $89,817 $88,069 $88,110 $87,693
Risk-weighted assets - Basel III (fully phased-in)(3)
$80,526 $75,614 $74,748 $72,596 $75,941
Risk-weighted assets -
Basel III (transition)(3) $80,669 $75,729 $74,792 $72,627
$76,179
TANGIBLE COMMON
EQUITY PER SHARE
GAAP book value per share $18.47 $18.40 $18.02 $17.71 $17.37 Less:
Goodwill (1.29) (1.27) (1.25) (1.22) (1.16) Less: Intangible
assets, net (0.96) (0.98) (0.98) (1.02) (0.87) Tangible common
equity per share $16.22 $16.15 $15.79 $15.47 $15.34
ADJUSTED NET
EARNINGS
GAAP net earnings $385 $555 $496 $499 $576 $1,935 Adjustment for
tax law change(4) 160 - - - - 160 Adjusted net earnings $545 $555
$496 $499 $576 $2,095
ADJUSTED DILUTED
EPS
GAAP diluted EPS $0.49 $0.70 $0.61 $0.61 $0.70 $2.42 Adjustment for
tax law change(4) 0.21 - - - - 0.20 Adjusted diluted EPS $0.70
$0.70 $0.61 $0.61 $0.70 $2.62
(1) Regulatory
measures at December 31, 2017 are presented on an estimated basis.
(2) Total average assets are presented based upon the use of daily
averages. (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.
(4) Adjustment to exclude the effects to Provision for income taxes
in the quarter ended December 31, 2017, resulting from the Tax Act.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180119005125/en/
Synchrony FinancialInvestor RelationsGreg Ketron,
203-585-6291orMedia RelationsSue Bishop,
203-585-2802susan.bishopmangino@syf.com
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