Synchrony Financial at Barclays Global Financial Services Conference Transcript

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

Question: Terry Ma - Barclays Capital Inc. - Analyst : Yes. Thanks for coming. So I think with that, maybe let's just jump right into it. Let's start with late fees. It's probably not top of mind for investors as it was last year, but maybe it's obviously still an important outstanding item that can impact the industry and the company. So maybe just give us the latest update on litigation and the range of potential outcomes you're preparing for?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. So on the topic of mitigants, you mentioned more than 60% of the mitigation efforts have been rolled out last quarter. Can you maybe just talk about where you stand to date and what else is left on the pipeline to roll out?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Okay. And in terms of the amount in mitigants, so you guys had initially guided to $650 million to $700 million mitigants. Do you still feel good about that number? And how should investors think about how much actually comes through this quarter and next quarter?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. This is probably a good time to pause for the first audience response question. Can you just queue that up? So the question is, assuming no late fee cap in 2024, what do you think is the incremental pretax income from the way you see it again for an in 2025? Is it one $550 million to $700, two $700 million to $850 million, three, $850 to $1 billion or over $1 billion? Just queue up. You need the controllers in front of you. So 50% think it's going to be $550 million to $700 million, 34%, $700 million to $850 million. The remainder, above $850 million. Do you have any comments on that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 1:00PM, SYF.N - Synchrony Financial at Barclays Global Financial Services Conference

Question: Terry Ma - Barclays Capital Inc. - Analyst : (laughter) Okay. Fair enough.

Question: Terry Ma - Barclays Capital Inc. - Analyst : Okay, great. Maybe just turning to recent trends. Last quarter, you mentioned you expect a flat to low single-digit year-over-year decline in purchase volume in the second half. How is spending shaping up so far in the third quarter across each of your sales platforms?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. Any noticeable differences in spend behavior between lower income versus higher income?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. Helpful. Maybe just turning to credit. You indicated last quarter you expect delinquencies to be in line or better than normal seasonality in the second half. We're also expecting second half charge-offs to be lower than the first half. July managed data showed so the continuation of maybe the delinquency trends, August as well, you guys file the 8-K. Maybe just talk about how the third quarter shaping up and what gives you confidence in the charge-off guide?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. And you touched on the unemployment trends or the employment rate a little bit. Is that something you're concerned about? And have you seen any early signs of higher unemployment take effect on your portfolio?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. And longer term, you guys have kind of indicated that 5.5% to 6% net charge-offs is kind of the right way to think about where losses drift back. Maybe just talk about the timeline to get there and what gives you confidence that you will get there?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. Maybe just to follow up on that point on the two larger vintages, which I think you're talking about 2021 and 2022. Any color on how 2023 is performing. 2023 vintage relative to '21 and '22 and then also relative to what you saw pre-pandemic?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. That's helpful color. Maybe turning to the reserve ratio. You indicated you expect to end the year with a flat reserve ratio relative to year-end I guess, does the recent unemployment number change that qualitative portion on the reserve? And maybe asked another way, what level of unemployment does your reserve actually contemplated?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. And then the reserve ratio, if you exit the year flat relative to 2023. It's going to be about 40 basis points above CECL day 1. It is a CECL day 1 still the right reference point for investors kind of active to? And what do you need to see to actually have you released reserve ratio back down there?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. Helpful. Switching gears a little bit, just talk about partnerships. Can you maybe just touch on the market for co-brand and private label? What are you seeing with respect to competition? especially from the newer start-ups entering the space. I think a company called End Print recently picked up Brooks Brothers. Any comments on that?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. In terms of renewals, are there any material partnerships coming up from renewal on the horizon, either in your portfolio or maybe out there? Obviously, Walmart is out there. Can you maybe just talk about broadly your approach that's selecting retail partners separately?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. What about sales platforms? Any particular sales platform you have, you're looking to build out or increase exposure to?

Question: Terry Ma - Barclays Capital Inc. - Analyst : That's helpful. Maybe just turning to receivables growth. You've generated double-digit loan growth in 2022 and 2023. Any color you can provide on the drivers there? i.e., how much has come from the rebuilding of balances from existing customers versus the acquisition of new accounts?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. You indicated you were expecting receivables growth to continue to moderate year-over-year. The NEU with 6% to 8% receivables growth. Is that still the case? And then maybe just talk about longer term, what's the right level of growth in this business?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Got it. We just queue up the last audience response question. We have about 10 minutes left. So over the next year, would you expect your position in Synchrony to: one, increase; two, decrease; or three, stay the same? So the majority of 53% stay the same, 29% increase, so relatively bullish. Do you want to comment on this one? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 1:00PM, SYF.N - Synchrony Financial at Barclays Global Financial Services Conference

Question: Terry Ma - Barclays Capital Inc. - Analyst : Good. We have about seven minutes left. So I'll just open it up to the audience for questions. We have one up front over here. Unidentified Participant Talk about the potential kind of regulatory outlook under both Republican and Democratic administration. On the one hand, Democrat, especially the CFPB has been pretty activist in terms of consumer protection. We can argue whether they're actually protecting the consumer. But actually, already, you've been a conservative quarter of overturn the number of regulatory decisions. So how do you see the sort of the variables looking forward?

Question: Terry Ma - Barclays Capital Inc. - Analyst : We have one question up front 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. SEPTEMBER 09, 2024 / 1:00PM, SYF.N - Synchrony Financial at Barclays Global Financial Services Conference Unidentified Participant Why do you think Synchrony has had such long-standing relationships with partners such as Lowe's? And is there ever a concern about concentration risk having such large partners in your portfolio?

Question: Terry Ma - Barclays Capital Inc. - Analyst : Any other questions from the audience. Unidentified Participant Can you just talk about the capital structure a little bit. There's been a remix from CET1 the preferred equity over time. So just maybe let us know if that's kind of steady state, if there is more preferred that you could see in the capital structure and maybe even other types of instruments like Tier 2 in the total capital stock.

Question: Terry Ma - Barclays Capital Inc. - Analyst : I think we have time for one more, if there are any. I think that's we are up.