Synchrony Financial

The stable outlook on Synchrony reflects our expectation that the company's credit profile will remain resilient and is well positioned to absorb higher credit losses. We also think the company has the earnings power and financial flexibility to calibrate its reserves, capital, and liquidity to operate adequately through a stressed economy. We could lower the ratings if Synchrony's asset quality or underwriting standards deteriorate substantially. Additionally, we could lower the ratings if regulatory capital ratios decline lower than card peers. The loss of key merchant partners could also lead to a lower rating. We could upgrade Synchrony if we view its financial resilience as similar to higher-rated peers and if brokered deposits funding meaningfully decreased as a proportion of total

...We believe that Synchrony Financial's funding profile has remained stable, despite increased market volatility related to the failure of several regional banks. Retail deposits comprise 84% of Synchrony's funding and more than 90% are insured by the Federal Deposit Insurance Corp. (FDIC). Nonetheless, we continue to view the company's reliance on more rate-sensitive online deposits--with 20% raised through broker channels--as a risk factor. We expect credit to normalize. Synchrony's 2021-2022 credit performance was excellent compared to historical trends, mirroring the broader industry. We expect credit will continue to normalize, particularly if economic conditions soften in the latter half of 2023. Rising provisions will drive lower earnings in the next 12-24 months, but Synchrony's high asset yields and efficient operating model should provide enough buffer against the elevated cost of risk....

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