Synchrony Financial Q3 2024 Earnings Call Summary

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

Question: Ryan Nash - Goldman Sachs - Analyst : Hey, good morning everyone. Brian, maybe you could unpack the NII guy for us a little bit. I understand 4Q is seasonally lower from reversals as you highlighted. But how did the PPPCs fit in along with your liability sensitive position? Which I don't think you're highlighting your comments. And then I guess just given forward curve expectations outside of seasonality. Do you expect the NIM to have a continued upward bias over the next several quarters? Thanks.

Question: Ryan Nash - Goldman Sachs - Analyst : Got it. And then as my follow up question. Your outlook for credit calls for delinquencies to follow seasonality, I guess. First, do you expect losses to do the same? And then in terms of delinquencies following seasonality? Like, what does that mean for the trajectory of losses into '25? And if they do follow seasonality can losses move back below 6% into next year. Thank you.

Question: Ryan Nash - Goldman Sachs - Analyst : Thanks, Brian.

Question: Terry Ma - Barclays - Analyst : Hey, thank you. Good morning. So you called out a 30 basis points year-over-year increase in loan yields from PPPC lower payment rates and all set by interest reversals. Any way you can kind of quantify each of those components and maybe just help us think about how that PPPC component kind of grows into next year.

Question: Terry Ma - Barclays - Analyst : Got it. That's helpful. And then just to follow up on credit, it seems, credit performance is more or less performing in line with your expectations. But as I look at the charge off rate for this year, it's running somewhat north of 6%. I don't want to tie it to your initial guide that maybe just talk about how credit performance has evolved relative to kind of what you expected coming into this year?

Question: Terry Ma - Barclays - Analyst : Great. Thank you.

Question: Don Fandetti - Wells Fargo Securities, LLC - Analyst : Hi, good morning. Brian, you mentioned some improvement over the last few months in late stage collections. I was wondering if you could talk a little bit about that if that just kind of make catch up. And generally speaking, is it harder to execute on collections today versus prior?

Question: Don Fandetti - Wells Fargo Securities, LLC - Analyst : Got it. My follow up just, I know there's a lot of concern around the low end. It seems like, , your customers on the loan are kind of managing changing behavior -- continue to change behavior, but it doesn't seem like it's sort of accelerating in terms of a pressure point. Is that fair?

Question: Don Fandetti - Wells Fargo Securities, LLC - Analyst : Thanks.

Question: Moshe Orenbuch - TD Cowen - Analyst : Great. So Brian, I was wondering if you could talk a little bit about the slowdown in spending volume and sort of separate it between the impacts of kind of your own tightening, consumer preferences and then perhaps also the policy changes. One of the questions we've gotten is, do you think I know you said that attrition wasn't affected by that? But what about spending volumes? So those three factors. Thanks.

Question: Moshe Orenbuch - TD Cowen - Analyst : Maybe to kind of at a high level for either Brian, as you think about the underlying economic environment, we've been in a period where wage growth has exceeded inflation, although the consumer still feels kind of pressured and is still in that process as you pointed out of trading down. When you think about the sort of things that you are looking for to try and jump start or reverse some of those tightening, what are the things that you'd be looking for kind of from a macro standpoint and maybe talk a little bit about that? Thank you.

Question: Moshe Orenbuch - TD Cowen - Analyst : Thanks very much.

Question: Sanjay Sakhrani - Keefe, Bruyette & Woods North America - Analyst : Thanks. Good morning. Maybe it's to close the loop on credit. Brian, maybe just talk about the reserve rate trend line, maybe how we should think about the direction into next year. I know you're not giving guidance for next year. I don't know if you're giving guidance by your end, but like just to think about when we migrate back to some normalized levels of reserve rate.

Question: Sanjay Sakhrani - Keefe, Bruyette & Woods North America - Analyst : Okay, great. And maybe on the [CSPB lazy] rules, I guess you, Brian, we talked a lot about sort of the behavior of the consumer, but has anything changed in terms of when you expect to fully mitigate the impact to the extent it goes in sometime next year and then, and maybe if it doesn't happen, like, what's, how should we think about the game plan if it doesn't go into effect? Do you claw back some of the changes that you've made or, or do you do other things? And I'm just trying to think through the implications there. Thanks.

Question: Sanjay Sakhrani - Keefe, Bruyette & Woods North America - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 12:00PM, SYF.N - Q3 2024 Synchrony Financial Earnings Call

Question: Mihir Bhatia - BofA Global Research - Analyst : Hi. Thank you for taking my question. Maybe to start, I just wanted to turn to net interest margins for a little bit. How do you expect them to perform in a declining rate environment? Can I ask because your portfolio is a little different than some of your large peers with a little bit more fixed rate in it. So just maybe if you could walk through the moving pieces there and also any deposit data assumptions you'd be willing to share?

Question: Mihir Bhatia - BofA Global Research - Analyst : No, that's very helpful. Thank you. And then maybe switching back to purchase volume and just following up, I think it is Moshe's questions. Just wanted to make sure I understand what gives you confidence that purchase volume declined, I guess for purchase are stabilized here at this down low single purchase level? And relatedly are there certain platforms which you look at which are leading indicators of where purchase volumes are going or consumer financial help? Thanks.

Question: Mihir Bhatia - BofA Global Research - Analyst : Thank you for taking my questions.

Question: Mark DeVries - Deutsche Bank - Analyst : Yeah, thanks. You mentioned earlier that you started to see others implement changes. Just interesting your thoughts on kind of what you've learned from that, whether you've decided you need to recalibrate to remain competitive. It doesn't really sound like it just given the low attritions or alternatively, whether you kind of miss an opportunity to change terms with some borrowers, that you viewed as more marginal.

Question: Mark DeVries - Deutsche Bank - Analyst : Okay, got it. Thanks. And then on the guidance for reserve coverage at the end of the year, it implies a bigger kind of step down seasonally than we saw in the last couple of years. Could you just talk about what's driving that?

Question: Mark DeVries - Deutsche Bank - Analyst : Okay. Thank you.

Question: John Hecht - Jefferies - Analyst : Good morning guys. Thanks very much for taking my questions. Most have been asked and answered. I'm wondering, the health and wellness segments have always been a good contributor to growth and I'm just wondering, are you seeing similar kind of spend trends from a discretionary, non-discretionary perspective in that category and is there anything else to call out there that might be different from the kind of the rest of the portfolio?

Question: John Hecht - Jefferies - Analyst : Okay, great, thanks. And then I know you guys are preparing for a variety of outcomes with the late fee backdrop, I'm wondering -- but can you give us a sort of an update on where it stands on litigation? Is there anything on the docket or on the calendar that we should be looking to that might represent, an event that could give us a little bit more color about what's going to happen there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 12:00PM, SYF.N - Q3 2024 Synchrony Financial Earnings Call

Question: John Hecht - Jefferies - Analyst : Great. I appreciate that guys. Thanks very much.

Question: Jeff Adelson - Morgan Stanley - Analyst : Hey, good morning. Thanks for taking my questions. I just wanted to circle back on the loan growth outlook and some of the credit actions you've taken. It sounds like if I'm hearing it right, you maybe have slowed the intensity of these credit actions you took earlier in the 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. OCTOBER 16, 2024 / 12:00PM, SYF.N - Q3 2024 Synchrony Financial Earnings Call So just assume you keep that stance in place today, does that mean the slowing trend you're looking for exiting the year kind of at a low single digit growth rate, maybe can reverse itself in the next year or what would it take for that to re accelerate? And how should we think eventually about the timeline to getting back to that high single digit kind of long term growth rate you look for?

Question: Jeff Adelson - Morgan Stanley - Analyst : And as my follow up, I know you're not buying the PCC drivers in the lines. But could you maybe talk about how you feel you're tracking versus that initial $650 million to $700 million you were talking about earlier in the year. And just maybe remind us of any of the PPC changes you're holding off on at this point until the late two rule comes through or if it comes through rather.

Question: Jeff Adelson - Morgan Stanley - Analyst : Great. Thank you.

Question: Rick Shane - JPMorgan - Analyst : Hey, guys, thanks for taking my question. I was afraid Jeff is going to run out the clock on me. Look, I realized that Cecil reserve is a thought exercise and I realized that guidance on your reserve rate is a thought exercise on the thought exercise. I'm curious though, if we look at the third quarter reserve rate, it's basically at a cyclical high and you're guiding for the fourth quarter back to '23 levels, you basically have 16 days of incremental information and it feels like you've gone from a very cautious outlook to a more or less cautious outlook what's changed or what mechanically is driving the sort of decline that Mark Devries had pointed out as well?

Question: Rick Shane - JPMorgan - Analyst : Got it. Okay. Thank you very much guys.