Synchrony Financial Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Nash - Goldman Sachs - Analyst : So obviously, lots of concerns in the market on credit. You guys are able to take down the top end of the guide. Can you maybe just talk about what you're seeing, what gave you the confidence to bring down the upper end of the range? And second, the allowance was up with seasonality, but if you can maybe just remind us what's assumed for unemployment, particularly when you overlay your qualitative reserves?

Question: Ryan Nash - Goldman Sachs - Analyst : Got it. I appreciate the color. And then Brian, the guidance says no changes to PPPC is already implemented and you know, you mentioned starting to think about next steps. I guess, one, do we have enough clarity that the rule may not come back at a later date? And then how should we think about the timing and process as to whether you hold on to what's already been implemented or inevitably, they will be reversed? Thank you.

Question: Terry Ma - Barclays - Analyst : I'm just curious about your growth outlook. It's good to see that you reaffirmed your year-end receivables guide in the face of an uncertain macro. But purchase volumes, loan growth, and account growth are all lower year by year. So what's the driver of the return to positive growth by year end? And is there anything you can do to help drive that?

Question: Terry Ma - Barclays - Analyst : Got it. That's helpful. I guess to the extent that loan growth doesn't come in as expected in the low-single digits. How does that impact the phase in of your PPPCs, particularly the APR piece? Any way to kind of quantify or contextualize that? Thank you.

Question: Moshe Orenbuch - TD Cowen - Analyst : I was intrigued by your comment about you know using the benefits from the mitigants or PPPCs to kind of add value and add growth either by adding value to specific consumer you know, propositions or by underwriting a little deeper. Maybe could you just flesh that out a little bit and you know, talk about maybe not specific merchants, but are there categories of merchants where that's going to where each of those could work better and maybe talk about how that factors into your growth plan for 2025.

Question: Moshe Orenbuch - TD Cowen - Analyst : Great. Thanks. And maybe as a follow up, I know probably gave you a little bit of a hard time last year about not using the share repurchase as aggressively, and your comment about waiting for some market volatility certainly have seen that. Given that you're now past the full implementation of CECL, and at the moment, loans are not growing, you're expecting them to come back a little bit but still be obviously, you know, you'll be generating a lot of excess capital. If you talk about in the current environment, given all the factors that we know, positive and negative, how you think about the use of that new share repurchase authorization.

Question: Mahir Bhatia - Bank of America - Analyst : Maybe I just want to take a step back first to just amplify the macro commentary a little bit. I just want to like talk a little bit about what you're seeing in your data hearing from retail partners. How are they prepping for the potential of tariffs? What are you -- is there anything you guys are involved with that process with or just like even thinking through of what it looks like when spending when the tariffs come in place? And then just on the weekly data, if you could just talk a little bit, it's been pretty stable clearly, and you saw this in April too. Do you think there's a little bit of a pull forward or Easter impact in there that's maybe propping the first two weeks of April up? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:00PM, SYF.N - Q1 2025 Synchrony Financial Earnings Call

Question: Mahir Bhatia - Bank of America - Analyst : Got it. That was tremendously helpful. Thank you. Maybe just switching gears a little bit to partners and competitive intensity for retail programs. Can you just talk about your appetite for onboarding, a larger portfolio in this environment? And just relatedly, I did want to ask about the renewals because I think your 10-K, the percentage of revenue that's under contract 24 months out was a little lighter this year compared to the last few years. So anything to call out there? Thank you.

Question: Rob Wildhack - Autonomous Research - Analyst : I think last quarter you had mentioned running with higher levels of liquidity this or at least for the early part of this year to pre-funded growth. Does that stance change at all with respect to the current macroenvironment and the uncertainty out there today? Is it possible that you would run with liquidity even higher now?

Question: Rob Wildhack - Autonomous Research - Analyst : And then I just wanted to dig in a little bit and ask about dual card and co-brands. The volume and loan growth there was better than the than the portfolio overall and accelerated sequentially. Last quarter, you had mentioned that as kind of being a waypoint for a reversal of some of your tightening. Maybe this is just normal ebbs and flows, Q4 -- Q1, but could you just unpack that dynamic and then talk about how you're thinking about things with respect to private label growth versus dual card or co-brand growth going forward? Thanks.

Question: Sanjay Sakhrani - KBW - Analyst : I guess I wanted to follow up on credit quality. I know we've talked extensively about it, but when I look at the path of the delinquency rate over the last several months and then the charge off rates actually come down year over year in March and it seems like there's a good glide path, all else equal for credit to improve quite decently. I'm just trying to think about you know, where we would expect all of equal the charge off to migrate, can we go below average given you've tightened so much? Maybe you can just talk a little bit about that.

Question: Sanjay Sakhrani - KBW - Analyst : Okay, great. And then Brian Doubles, I think here was also alluding to some of the larger RFPs out there for sizable portfolios. Could you just -- I'm not sure if I heard the answer to that, but can you just talk about how you guys feel about sort of the opportunity to secure larger portfolios?

Question: Sanjay Sakhrani - KBW - Analyst : Is there a sense of timing on any of this, whether you know or not?

Question: Rick Shane - JP Morgan - Analyst : Look, I'd like to delve in a little bit more to the dual card. There was talk about the growth there, but I am curious, when you think about the credit profile, is it different both from a FICO score perspective, but maybe even more importantly from a utility perspective? Should we in a slowdown expect different performance for private label versus the dual cars? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:00PM, SYF.N - Q1 2025 Synchrony Financial Earnings Call

Question: Rick Shane - JP Morgan - Analyst : Got it. And can you speak a little bit to the impact of utility for the consumer being able to use the card in one place as opposed to having it be their primary card and how that impacts payment behaviors?

Question: John Pancari - Evercore ISI - Analyst : On the macro assumptions, Brian, thanks for the color regarding the baseline assumptions and why they don't dial in the recessionary backdrop. But if you did dial in a weaker macro and recessionary dynamics into the baseline assumptions, I hear you that revenue and NII may benefit from a higher revolver rate. What would it mean for your charge off expectation? I know maybe it's not a '25 thing, but it's more of 2026. I guess what I'm asking, what does a stressed charge off level look like for Synchrony given your current business mix, your credit tightening as of today? How would that charge off range compared to this 5.8% to 6% level that you're looking at for this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:00PM, SYF.N - Q1 2025 Synchrony Financial Earnings Call

Question: John Pancari - Evercore ISI - Analyst : And care to comment on what a '26 number would look like under a recessionary scenario given your business mix and the mix in the balance sheet?

Question: John Pancari - Evercore ISI - Analyst : No, I understand. And then separately, I guess just in terms of the credit actions, I know you indicated that you're evaluating actions to accelerate growth, and, when you talked about some of the partnerships and everything, does that include a widening of the credit box from here just given how your credit has performed? I mean, are you evaluating, unwinding some of the tightening actions that you put in place in '23 and '24 to drive some acceleration and growth?

Question: Mark DeVries - Deutsche Bank - Analyst : I had a follow up question on just capital levels and returns. You're sitting here with CET1, 13.2%, well above kind of the historic target range of 10% to 11%. I guess the question is that still the right target for you to manage down to? And any thoughts on kind of pace at which we should expect you to kind of manage down to those levels?

Question: Mark DeVries - Deutsche Bank - Analyst : Okay, and just to follow up on that, when you set this latest authorization, was it kind of size to give you plenty of flexibility to outperform on the growth perspective? Because I just think about like what consensus earnings are and what the implied payout if you use 100% of the repurchase with the new dividend, you'd be kind of neutral to CET1 at the end of the year, am I thinking about that right? And so, either you outperform on a growth perspective, or it is likely you come back and essentially look to buy back more stock or expand the authorization?

Question: Don Fandetti - Wells Fargo - Analyst : Brian, can you talk a little bit about the sort of runway for CareCredit? It's been a good growth story. Competitively, are you still seeing that as a fragmented market? And then also, how has the credit performance been versus your expectations?