Synchrony Financial

The stable outlook on Synchrony reflects our expectation that the company is well-positioned to absorb any remaining fallout from the pandemic, including higher credit losses, which we don't expect to peak until the end of 2021 or later. We also think the company has the earnings power and financial flexibility to calibrate its reserves, capital, and liquidity to operate adequately through stressed economic conditions, as demonstrated in 2020. We could lower the ratings if Synchrony's asset quality deteriorates substantially or if underwriting standards degrade materially. In addition, we could lower the ratings if regulatory capital ratios decline so that they are lower than card peers. The loss of key merchant partners could also lead to a lower rating, although we

...Synchrony Financial is well-positioned to benefit from the rebounding economy. We believe that Synchrony's private label and other card-based businesses will benefit as the economy fully opens and consumer spending accelerates. Its partnership portfolios have grown more diverse in recent years and it is not as exposed to travel and entertainment as peers. Moreover, the importance of digital retailers to Synchrony's revenue has grown, while the importance of traditional retailers such as department stores has declined. We believe that management's conservative balance sheet management and the residual benefit from government support measures have positioned Synchrony to absorb higher credit losses. Synchrony's recent credit performance has been excellent, mirroring broader industry trends, as consumers have paid down debt and limited borrowings. Nonetheless, we expect losses will increase, particularly given still-elevated unemployment and the wind-down of various government-sponsored income-support...

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