Synchrony Financial Q4 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.

Question: Ryan Nash - Goldman Sachs - Analyst : So, maybe to start off on the on the net revenue guide. Brian, you talked about growth in both fees and I can, we maybe just dig in on some of the moving pieces on net interest income and, I guess, first, how do we think about the impact from rates. I know you're targeting four and a quarter. In terms of FED funds, the balance sheet should benefit as rates come down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call And then second, how is the impact of the PPPCs coming through on your guide? How much of the full benefit are you anticipating is already incorporated into the run rate for this year? And then I have a follow up.

Question: Ryan Nash - Goldman Sachs - Analyst : Got it. And maybe as a follow up on capital. So, you're sitting over 200 bps above the target, especially in a seasonally low quarter. And I think you brought back $100 billion of stock. Can you maybe just talk about the plan for capital return, particularly why it was a little bit depressed in the quarter and maybe just toddle between, are you seeing more opportunities to deploy it inorganically or, I know you mentioned twice in the, in your last remarks, Brian about the re acceleration of growth. Are you holding back a little bit in terms of anticipating the return of loan growth? Just trying to understand the thought process on the lower near term buyback and what it means for deploying capital over the next few quarters?

Question: Ryan Nash - Goldman Sachs - Analyst : Thanks for the color.

Question: Sanjay Sakhrani - KBW - Analyst : Thank you. Good morning. Brian Wenzell. Maybe just to drill into that PPPC impact a little bit more. Is it fair to assume that by the end of this year you'd still sort of have that full run rate of what you anticipated putting in as mitigation in the numbers. Then I guess like, how should we think about if late fee regulation doesn't happen, how it impacts the ROA? I'm just trying to think about, sort of normalize your long-term ROA and when you anticipate getting there, and I would have thought that mitigation takes that higher and sort of when we might get there. Thank you.

Question: Sanjay Sakhrani - KBW - Analyst : Okay. And then as far as like ROA any thoughts 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. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: Sanjay Sakhrani - KBW - Analyst : Okay. Just one follow-up for Brian Doubles. Maybe if you could just talk about the deal environment. I know there's a couple of RFPs out there. There's a lot of chatter around those. Maybe you can just talk about how it's looking for you. And then the loan growth still remains weak. The purchase volume remains weak. I mean, anything that can help drive that? Are you guys being conservative there? Thanks.

Question: Sanjay Sakhrani - KBW - 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. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: Mahir Bhatia - Bank of America - Analyst : Thank you for taking my questions. I actually wanted to go back to the question around just the net revenue and some of the components that, maybe just talk about some of the assumptions embedded in there in terms of just how much of your portfolio is resized heading into 2025? What do you expect heading out of 2025? Does that imply like even more upside on net revenue in 2026? Thank you.

Question: Mahir Bhatia - Bank of America - Analyst : Got it. Thank you. And then maybe just like you mentioned credit, so let's turn to that. Your outlook does adjust meaningful improvement, and we see that in the delinquencies. But I was curious about how you would, but your purchase volumes are still pressured. I understand some of it is driven by your own actions and pulling back on tightening underwriting. So I guess a couple of questions there. Just are you done with tightening underwriting for now? How do you feel about the environment currently? What are you seeing from the consumer? Some others have mentioned an increase in people paying minimum balances, some type, some commentary around how many people are at full, at their full credit limits. What are you seeing in your book? How do you feel about the consumer? And where are you from an underwriting posture standpoint? Thank you.

Question: Mahir Bhatia - Bank of America - Analyst : Thank you.

Question: Terry Ma - Barclays - Analyst : Hey, thank you. Good morning. Maybe as a follow-up to credit, your delinquency rate was down 4 basis points year-over-year. Do you have any sense for how much additional room there could be for improvement on a year-over-year basis as we progress through the rest of the year?

Question: Terry Ma - Barclays - Analyst : Got it. That's helpful. And then maybe as a follow-up on the allowance ratio. If you put all that together, what does that mean for the allowance ratio as we kind of progress through the rest of this year? I think this quarter ended up a little bit higher than what you had kind of guided to earlier in the year. So maybe any color on the delta between the guide versus the realized and then how we should think about the allowance ratio?

Question: Moshe Orenbuch - TD Cowen - Analyst : Great, thanks. Brian Doubles, you mentioned that part of the JCPenney renewal was the addition of the Synchrony Pay Later. Could you talk about the other, any other sort of new aspects to the renewals for those two large programs? And just talk a little bit about how we should think about the economics of those renewals? Thank you.

Question: Moshe Orenbuch - TD Cowen - Analyst : Got it. Thanks. And maybe just as a follow-up, you talked a little bit about the potential for some degree of reversal of some of the tightenings perhaps by the second half of the year. Just talk a little bit more granularly about whether there are certain types of, maybe not names of partners, but types of partners that you'd likely see that first or any other kind of signs that we should be looking forward to see that, that's going on?

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

Question: Jeff Adelson - Morgan Stanley - Analyst : Hey, good morning. Thanks for taking my questions.

Question: Jeff Adelson - Morgan Stanley - Analyst : Just given the broader slowing growth of purchase volumes and account growth you've seen for a few years now and the credit actions you've taken, can you maybe share some of the feedback and conversations you're having with your key retail partners around that? I understand that Synchrony controls the underwriting, but are you hearing more of a desire from some of these partners to maybe lean back in a little bit here? And how is that talking point of slower growth narrative maybe feeding into the competitive dynamic as you look to really renew and win new partnerships from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay. Great. And as my follow-up, just maybe circle back on Sanjay's question. If the late fee regulation doesn't come out and let's just say the CFPB sends the rule, can you just talk about the plans from there? And have any of your retail partners talked about maybe a desire to pull back on some of the PPPC you put through?

Question: John Hecht - Jefferies - Analyst : Good morning guys. Thanks for taking my questions. First one, I guess, is just another, I guess, aspect of credit, Brian Wenzel. I know '24 is early, but is there any kind of early reads from some of the aspects of the '24, vintage that leads you to believe that it might, that vintage itself might be performing within the long-term goals?

Question: John Hecht - Jefferies - Analyst : Okay. And then Brian Doubles. Maybe can you talk about just the mix of digital commerce versus in-store commerce. And has that trajectory changed at all over the, I guess, kind of in the wake of COVID?

Question: John Hecht - Jefferies - Analyst : Great, thanks for the color, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: John Pancari - Evercore ISI - Analyst : Good morning. On the liquidity front, I know you mentioned you're running at higher levels of liquidity at around 17%, partly to prefund growth. I mean, could you give maybe a little bit more color around this decision? And what could change this view? And

Question: John Pancari - Evercore ISI - Analyst : Got it. All right. Thanks, Brian. And then my follow-up is a quick one, just back to the late fee rule. I heard you acknowledge the positive comments coming from Judge Pitman. But what are you actually hearing from your folks in DC. post the election in terms of potential CFPB action as there's changes at the administration, I mean, could the rule be allowed the sorted out in the courts still or actually killed on the line? 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. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: John Pancari - Evercore ISI - Analyst : Okay, understand. Thank you.

Question: Bill Carcache - Wolfe Research - Analyst : Thank you. Good morning First, can you discuss the potential for PPPC to drive your normalized return profile of 28% sustainably higher?

Question: Bill Carcache - Wolfe Research - Analyst : Understood. Maybe following up on your efficiency guidance. Sorry if I missed this, but can you give us some color around the factors that would drive efficiency ratio towards the lower versus the higher end of the range?

Question: Bill Carcache - Wolfe Research - Analyst : Thank you.

Question: Rob Wildhack - Autonomous Research - Analyst : Good morning guys. Question on the outlook for loan growth. Just wanted to get your thoughts on how that might progress through the year because I think in the past, you've talked about a scenario where you could open up a bit in the second half. So is that still the base case and included in the outlook now? And then what are some of the waypoints we should watch to see if that remains on track? Is it just as simple as net charge-offs normalizing? Thanks.

Question: Rob Wildhack - Autonomous Research - Analyst : Thanks And then a quick clarification on deposits in betas. 60% beta for this year. I think this time last year, you were talking about an 80% or 90% beta on the way up and an expectation for something similar on the way down through the entire cutting cycle. So how you think about the 60% this year in the context of the 80%, 90% that you experienced on the way up? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: Rob Wildhack - Autonomous Research - Analyst : Very helpful. Thank you.

Question: Brian Crowley - Robert W Baird - Analyst : Hey, good morning guys. Thanks for taking my question. I think most of my stuff has already been answered, but just you guys have mentioned a bit about the dual cards and the care credit, dual card driving new card growth. I'm just wondering if you guys could provide a little more color on your strategy here and what channels you're expecting to drive meaningful growth from?

Question: Brian Crowley - Robert W Baird - Analyst : Great. Thanks guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 1:00PM, SYF.N - Q4 2024 Synchrony Financial Earnings Call

Question: Erica Najarian - UBS - Analyst : Yes, hi. Just one last question and just pulling up back to growth. I think the primary conversation that I was having with your investors really around the time you presented at a conference in December was on the growth trajectory and I just wanted to make sure we were really unpacking all of the messages that you gave us today. So one is very clear, a lot of the slowdown in growth is from your from credit actions that you were proactive on. So I think that's pretty clear. You've mentioned that the consumer is in good shape, but the consumer is also not confident. So we kind of wanted to unpack what your cohort is really like in terms of how we're thinking about spending because the data we've gotten across different cohorts so far this earnings season has been pretty strong and the forward look has been pretty strong. And the third is I'm actually going to ask the other question the PPPCs and that if we don't get late fees, I mean, who, in a way does it really matter if it's ROE accretive, if it's going to be disincentivizing to growth, right? Like a purchase APR of 32% might be disincentivizing to growth. So, those are just three things that I think investors are really considering as we think about, what are the, what does the growth look like for synchrony specifically in your cohort as we think about a consumer? That's probably a little bit healthier than we thought they were going to be in '25?

Question: Erica Najarian - UBS - Analyst : Thanks. I think that was really helpful color for investors in terms of the control group anecdote. So I appreciate that. Thanks.