Synchrony Financial Q2 2025 Earnings Call Transcript

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

Question: Ryan Nash - Goldman Sachs - Analyst : So Brian, you noted that you're seeing some encouraging signs in the portfolio and you talked about selectively unwinding some of the credit actions. Maybe just talk about what some of those encouraging signs are and actions that you've taken to lose some credit to drive growth. And then I guess, second, we're clearly running below where you've historically targeted that 7%-plus level. Maybe just talk about with Walmart coming on board, renewing Amazon and stabilizing consumer, maybe just talk about do you see a path back towards that mid- to high single-digit growth level.

Question: Ryan Nash - Goldman Sachs - Analyst : Great. Maybe a follow-up for Brian Wenzel. On the outlook, you highlighted minor modifications to the PPPC. Brian, maybe can you just touch upon like how the discussions have gone with partners? Are you done with the conversations and the modifications you're making? And maybe just give us some examples of what type of modifications that you guys have made? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 22, 2025 / 12:00PM, SYF.N - Q2 2025 Synchrony Financial Earnings Call

Question: Terry Ma - Barclays Services Corp - Analyst : I wanted to ask about the NIM guide in the second half of 15.6%. That's a material step up from your first half NIM. Can you maybe just expand on the drivers that get you there? And maybe talk about your level of confidence in achieving that second half NIM? And then as we kind of look forward, you guys kind of averaged 16% NIM kind of pre-pandemic. Can you still get back there?

Question: Terry Ma - Barclays Services Corp - Analyst : Got it. And then, I guess, in the pre-pandemic NIM, the average of 16%. Do you believe you can kind of get back there longer term?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : I wanted to go back to Ryan's first question on loan growth. Brian Doubles, I know you're bullish on loan growth. Is it fair to assume that you guys haven't necessarily baked in some of the growth expansion coming from the loosening of credit standards? And I guess, like, how does the guidance factor in Walmart? Is there a contribution this year? And just one final related matter question, sorry. Just you talked about tariffs, and that's obviously a moving target. But you and your partners have had time to sort of digest their impacts for the year? Like how would that play out if there were higher tariffs for the year?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Great color. Just a follow-up, capital management. Obviously, you guys are solidly capitalized at this point. I'm just trying to think through uses of that excess capital as we look forward in the second half into next year. Maybe you can also address the pipeline of any acquisitions, so if there are any?

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : I was hoping that you could talk a little bit about the comments that you made on new products with your existing largest customers and maybe talk about how those can contribute to growth. It would seem that you probably have a shorter start-up period for things like that. Maybe just a little more detail about the plans and how much that could contribute to growth, whether it's in '25 or '26.

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Okay. And to follow up kind of on Sanjay's questions about capital return. I guess, in the quarter, you had 28% return on tangible equity and commented that you expected loan growth to actually slow. So you're generating more capital and kind of needing it a little bit less than you would have thought perhaps three months ago. I guess, what other signs do you need to see to actually step up that repurchase? It seems like almost as if you would want to be doing that to just demonstrate that, yes, we've got a little lower loan growth, but capital position is still very, very strong. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 22, 2025 / 12:00PM, SYF.N - Q2 2025 Synchrony Financial Earnings Call

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Look, portfolio construction is about sort of dynamically balancing higher ROA and higher volatility riskier borrowers against lower ROA and lower vol -- higher-quality borrowers. I'm kind of curious, does the stickiness of PPPC enhance the ROA of time borrowers in a way that they become even more attractive for you going forward? And does that change the model a little bit?

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Got it. Okay. Look, obviously, the pushback on the quarter is going to be the debate between the credit quality and the loan growth. To me, handing out money is the easy part, getting it back is the hard part. As you think about the second half and widening the aperture, how do you balance that? I mean do you see your borrowers behaving in a more disciplined way? Do you respect that? Or do you give them a little bit more room?

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Got it. It's very helpful. And the last part is something I hadn't actually thought about before, so thank you.

Question: John Hecht - Jefferies LLC - Analyst : You mentioned health and wellness. I know that's been a, relative to the overall business, has had higher growth historically. Maybe can you just give us an update on health and wellness, what the kind of product categories are and where you're seeing the opportunities there?

Question: John Hecht - Jefferies LLC - Analyst : Okay. That's helpful. But maybe just touching on credit. I know it's a little early to be getting, I guess, a definitive look at '24, but what are the early looks at the '24 vintage and how that compares to maybe pre-pandemic? And if those trends continue, what do we think about the [ALL] level over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 22, 2025 / 12:00PM, SYF.N - Q2 2025 Synchrony Financial Earnings Call

Question: Donald Fandetti - Wells Fargo Securities LLC - Analyst : On the July purchase volume improvement, can you talk a little bit more about if that's broad-based, low and high end across verticals? If I layer that in with your average ticket comment on the improvement in the low end, it sounds like pretty constructive, almost like a mini acceleration type environment.

Question: Donald Fandetti - Wells Fargo Securities LLC - Analyst : Got it. Okay. And then can you just give us an update on your technology investment, whether it's AI and other initiatives? Clearly, you're doing well relative to peers on digital engagement.

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Just wanted to ask again about expenses. You talked about how the OnePay launch did drive up expenses this quarter. You had a little bit more variable comp expense this quarter. Are we largely past those at this point? Or is there anything else left to be aware for the rest of the year or going forward? And just as we think about, you may be opening up the credit box a little bit here, is there an opportunity for you to maybe lean a little bit more in on the marketing side, which I think has seen a little bit more moderate growth in the past year?

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Okay. Great. And just a quick follow-up on the Pay Later launch. And I know you've been rolling that out at different returns. I guess how meaningful do you think that can be for you over time? And is there any sort of shift in economics we need to be aware of there? I mean, I know some of the terms you highlighted on Amazon are still a 20% APR there, but just sort of curious if there's any sort of shift in the economics we need to be aware of as we think about that going forward.

Question: Erika Najarian - UBS AG - Analyst : I just wanted to follow up on a couple of line items just to make sure that we're taking away the right message from the call. So you often talked about how the impact of your previous credit action sort of had a long tail, and we're seeing that in the growth. As we think about I think, Brian, you mentioned stepping out quarter by quarter. Is the message really here is that sort of we're now fully lapping the impact of those previous credit actions on growth? And as we think about 2026, and I think Brian Doubles mentioned first half of the year you're going to start seeing growth. As we start thinking about 2026, you can have the impact of the credit actions in reverse and also Walmart? Just wanted to make sure that we're taking away from this call what the expected cadence of growth is beyond this year.

Question: Erika Najarian - UBS AG - Analyst : And then lastly, is it possible at all to unpack the impact of the higher APRs for the second half margin? So I try to isolate that from seasonality. I guess I'm just thinking about, other than rate actions by the Fed, what the launch point is that is maybe more permanent. And perhaps as sort of a second follow-up, are these PPPCs that are flowing through APR a little bit more permanent and not considered for modification?

Question: Mihir Bhatia - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Maybe the first question I wanted to ask was just about the Walmart program. Can you just talk a little bit about what's different this time? How OnePays involvement changes things? Any metrics or guidepost you can discuss that can help investors understand how that program will ramp?

Question: Mihir Bhatia - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And then (multiple speakers) I guess.

Question: Mihir Bhatia - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. That's helpful, especially the point on losses. I think my final question, maybe just to put a ribbon on the call a little bit. [Has] loan growth troughed, right? I mean you highlighted quite a few levers that you have to pull. I understand macro is a bit of a wildcard, but are you willing to say loan growth has troughed here?