Press Release

January 20, 2017, 4:25 PM EST

Synchrony Financial Reports Fourth Quarter Net Earnings of $576 Million or $0.70 Per Diluted Share

Dateline:
STAMFORD, Conn.
 
Public Company Information:
NYSE: SYF
 
STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE:SYF) today announced fourth quarter 2016 net earnings of $576 million, or $0.70 per diluted share.
  • Net interest income increased 13% from the fourth quarter of 2015 to $3.6 billion
  • Loan receivables grew $8 billion, or 12%, from the fourth quarter of 2015 to $76 billion
  • Purchase volume increased 9% from the fourth quarter of 2015
  • Strong deposit growth continued, up $9 billion, or 20%, over the fourth quarter of 2015
  • Launched Fareportal program
  • Announced a new multi-year agreement with Henry Schein Financial Services, LLC
  • Quarterly common stock dividend payment of $0.13 per share and repurchased $238 million of Synchrony Financial common stock

“We are pleased with the significant progress we made in 2016. We generated strong organic growth across our sales platforms which resulted in significant revenue growth, substantial operating leverage, and attractive returns. We also signed and renewed several key relationships, expanded our network, continued to drive digital innovations and analytics capabilities, and supported our business with robust growth in our direct deposit platform. We did this while maintaining a strong balance sheet and returning capital to shareholders through growth and the execution of our initial capital plan which included dividends and share repurchases,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “As we look to 2017, we believe our strategic focus and partner-centric business model position us well for future opportunities and continued growth.”

Business and Financial Highlights for the Fourth Quarter of 2016

All comparisons below are for the fourth quarter of 2016 compared to the fourth quarter of 2015, unless otherwise noted.

Earnings

  • Net interest income increased $420 million, or 13%, to $3.6 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 14%.
  • Provision for loan losses increased $253 million to $1.076 billion due to higher loan loss reserve build and loan receivables growth.
  • Other income decreased $2 million to $85 million primarily due to higher loyalty program expense, partially offset by higher interchange revenue.
  • Other expense increased $48 million to $918 million, primarily driven by business growth.
  • Net earnings totaled $576 million compared to $547 million in the fourth quarter of 2015.

Balance Sheet

  • Period-end loan receivables growth remained strong at 12%, primarily driven by purchase volume growth of 9% and average active account growth of 6%.
  • Deposits grew to $52 billion, up $9 billion, or 20%, and comprised 72% of funding compared to 64% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $20 billion, or 23% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 17.2% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.0%.

Key Financial Metrics

  • Return on assets was 2.6% and return on equity was 16.3%.
  • Net interest margin increased 49 basis points to 16.22%.
  • Efficiency ratio was 31.6%, compared to 34.0% in the fourth quarter of 2015, driven by positive operating leverage arising from strong revenue growth that exceeded expense growth.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.32% compared to 4.06% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.62% compared to 4.23% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 5.69% compared to 5.12% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 12%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 11%. Average active account growth was 5%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 13%, driven primarily by purchase volume growth of 13% and period-end loan receivables growth of 15%. Average active account growth was 12%. Loan receivables growth was led by the home furnishings, automotive, and power product categories.
  • CareCredit interest and fees on loans increased 11%, driven primarily by purchase volume growth of 10% and period-end loan receivables growth of 10%. Average active account growth was 8%. Loan receivables growth was led by the dental and veterinary specialties.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed February 25, 2016, and the Company’s forthcoming Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.

Conference Call and Webcast Information

On Friday, January 20, 2017, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on the Synchrony Financial corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 42016#, and can be accessed beginning approximately two hours after the event through February 3, 2017.

About Synchrony Financial

Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 350,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial offers private label and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial, www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

*Source: The Nilson Report (May 2016, Issue # 1087) - based on 2015 data.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; our transition to a replacement third-party vendor to manage the technology platform for our online retail deposits; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; obligations associated with being an independent public company; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed on February 25, 2016. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.

 

SYNCHRONY FINANCIAL

 

FINANCIAL SUMMARY

  

(unaudited, in millions, except per share statistics)

 

 

 

 

 

 

 

Quarter Ended

4Q'16 vs. 4Q'15

Twelve Months Ended

YTD'16 vs. YTD'15

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

 

2016

2016

2016

2016

2015

2016

2015

EARNINGS

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$3,628

$3,481

$3,212

$3,209

$3,208

$420

13.10%

$13,530

$12,093

$1,437

11.90%

Retailer share arrangements

-811

-757

-664

-670

-734

-77

10.50%

-2,902

-2,738

-164

6.00%

Net interest income, after retailer share arrangements

2,817

2,724

2,548

2,539

2,474

343

13.90%

10,628

9,355

1,273

13.60%

Provision for loan losses

1,076

986

1,021

903

823

253

30.70%

3,986

2,952

1,034

35.00%

Net interest income, after retailer share arrangements and provision for loan losses

1,741

1,738

1,527

1,636

1,651

90

5.50%

6,642

6,403

239

3.70%

Other income

85

84

83

92

87

-2

-2.30%

344

392

-48

-12.20%

Other expense

918

859

839

800

870

48

5.50%

3,416

3,264

152

4.70%

Earnings before provision for income taxes

908

963

771

928

868

40

4.60%

3,570

3,531

39

1.10%

Provision for income taxes

332

359

282

346

321

11

3.40%

1,319

1,317

2

0.20%

Net earnings

$576

$604

$489

$582

$547

$29

5.30%

$2,251

$2,214

$37

1.70%

Net earnings attributable to common stockholders

$576

$604

$489

$582

$547

$29

5.30%

$2,251

$2,214

$37

1.70%

COMMON SHARE STATISTICS

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

$0.70

$0.73

$0.59

$0.70

$0.66

$0.04

6.10%

$2.71

$2.66

$0.05

1.90%

Diluted EPS

$0.70

$0.73

$0.58

$0.70

$0.65

$0.05

7.70%

$2.71

$2.65

$0.06

2.30%

Dividend declared per share

$0.13

$0.13

-

-

-

$0.13

NM

$0.26

-

$0.26

NM

Common stock price

$36.27

$28.00

$25.28

$28.66

$30.41

$5.86

19.30%

$36.27

$30.41

$5.86

19.30%

Book value per share

$17.37

$16.94

$16.45

$15.84

$15.12

$2.25

14.90%

$17.37

$15.12

$2.25

14.90%

Tangible common equity per share(1)

$15.34

$14.90

$14.46

$13.86

$13.14

$2.20

16.70%

$15.34

$13.14

$2.20

16.70%

Beginning common shares outstanding

825.5

833.9

833.8

833.8

833.8

-8.3

-1.00%

833.8

833.8

-

-%

Issuance of common shares

-

-

-

-

-

-

-%

-

-

-

-%

Stock-based compensation

-

0.1

0.1

-

-

-

-%

0.2

-

0.2

NM

Shares repurchased

-8.1

-8.5

-

-

-

-8.1

NM

-16.6

-

-16.6

NM

Ending common shares outstanding

817.4

825.5

833.9

833.8

833.8

-16.4

-2.00%

817.4

833.8

-16.4

-2.00%

Weighted average common shares outstanding

820.5

828.4

833.9

833.8

833.8

-13.3

-1.60%

829.2

833.8

-4.6

-0.60%

Weighted average common shares outstanding (fully diluted)

823.8

830.6

836.2

835.5

835.8

-12

-1.40%

831.5

835.5

-4

-0.50%

(1) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

SYNCHRONY FINANCIAL

 

SELECTED METRICS (1)

 

(unaudited, $ in millions, except account data)

 

 

 

 

 

 

 

Quarter Ended

4Q'16 vs. 4Q'15

Twelve Months Ended

YTD'16 vs. YTD'15

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2016

2016

2015

2016

2015

PERFORMANCE METRICS

 

 

 

 

 

 

 

 

 

 

 

Return on assets(2)

2.60%

2.80%

2.40%

2.80%

2.70%

 

-0.10%

2.70%

2.90%

 

-0.20%

Return on equity(3)

16.30%

17.40%

14.60%

18.10%

17.50%

 

-1.20%

16.60%

19.10%

 

-2.50%

Return on tangible common equity(4)

18.50%

19.80%

16.60%

20.80%

20.10%

 

-1.60%

18.90%

22.00%

 

-3.10%

Net interest margin(5)

16.22%

16.27%

15.86%

15.76%

15.73%

 

0.49%

16.01%

15.77%

 

0.24%

Efficiency ratio(6)

31.60%

30.60%

31.90%

30.40%

34.00%

 

-2.40%

31.10%

33.50%

 

-2.40%

Other expense as a % of average loan receivables, including held for sale

5.00%

4.92%

5.04%

4.82%

5.28%

 

-0.28%

4.93%

5.25%

 

-0.32%

Effective income tax rate

36.60%

37.30%

36.60%

37.30%

37.00%

 

-0.40%

36.90%

37.30%

 

-0.40%

CREDIT QUALITY METRICS

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs as a % of average loan receivables, including held for sale

4.62%

4.38%

4.49%

4.70%

4.23%

 

0.39%

4.53%

4.33%

 

0.20%

30+ days past due as a % of period-end loan receivables(7)

4.32%

4.26%

3.79%

3.85%

4.06%

 

0.26%

4.32%

4.06%

 

0.26%

90+ days past due as a % of period-end loan receivables(7)

2.03%

1.89%

1.67%

1.84%

1.86%

 

0.17%

2.03%

1.86%

 

0.17%

Net charge-offs

$847

$765

$747

$780

$697

$150

21.50%

$3,139

$2,691

$448

16.60%

Loan receivables delinquent over 30 days(7)

$3,295

$3,008

$2,585

$2,538

$2,772

$523

18.90%

$3,295

$2,772

$523

18.90%

Loan receivables delinquent over 90 days(7)

$1,546

$1,334

$1,143

$1,212

$1,273

$273

21.40%

$1,546

$1,273

$273

21.40%

Allowance for loan losses (period-end)

$4,344

$4,115

$3,894

$3,620

$3,497

$847

24.20%

$4,344

$3,497

$847

24.20%

Allowance coverage ratio(8)

5.69%

5.82%

5.70%

5.50%

5.12%

 

0.57%

5.69%

5.12%

 

0.57%

BUSINESS METRICS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(9)

$35,369

$31,615

$31,507

$26,977

$32,460

$2,909

9.00%

$125,468

$113,615

$11,853

10.40%

Period-end loan receivables

$76,337

$70,644

$68,282

$65,849

$68,290

$8,047

11.80%

$76,337

$68,290

$8,047

11.80%

Credit cards

$73,580

$67,858

$65,511

$63,309

$65,773

$7,807

11.90%

$73,580

$65,773

$7,807

11.90%

Consumer installment loans

$1,384

$1,361

$1,293

$1,184

$1,154

$230

19.90%

$1,384

$1,154

$230

19.90%

Commercial credit products

$1,333

$1,385

$1,389

$1,318

$1,323

$10

0.80%

$1,333

$1,323

$10

0.80%

Other

$40

$40

$89

$38

$40

$-

-%

$40

$40

$-

-%

Average loan receivables, including held for sale

$72,987

$69,525

$66,943

$66,705

$65,406

$7,581

11.60%

$69,220

$62,120

$7,100

11.40%

Period-end active accounts (in thousands)(10)

71,890

66,781

66,491

64,689

68,314

3,576

5.20%

71,890

68,314

3,576

5.20%

Average active accounts (in thousands)(10)

68,701

66,639

65,531

66,134

64,892

3,809

5.90%

66,928

62,643

4,285

6.80%

LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$9,321

$13,588

$11,787

$12,500

$12,325

($3,004)

-24.40%

$9,321

$12,325

($3,004)

-24.40%

Total liquid assets

$13,612

$16,362

$13,956

$14,915

$14,836

($1,224)

-8.30%

$13,612

$14,836

($1,224)

-8.30%

Undrawn credit facilities

 

 

 

 

 

 

 

 

 

 

 

Undrawn credit facilities

$6,700

$7,150

$7,025

$7,325

$6,075

$625

10.30%

$6,700

$6,075

$625

10.30%

Total liquid assets and undrawn credit facilities

$20,312

$23,512

$20,981

$22,240

$20,911

($599)

-2.90%

$20,312

$20,911

($599)

-2.90%

Liquid assets % of total assets

15.09%

18.77%

16.94%

18.27%

17.66%

 

-2.57%

15.09%

17.66%

 

-2.57%

Liquid assets including undrawn credit facilities % of total assets

22.52%

26.98%

25.47%

27.24%

24.90%

 

-2.38%

22.52%

24.90%

 

-2.38%

(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.

(2) Return on assets represents net earnings as a percentage of average total assets.

(3) Return on equity represents net earnings as a percentage of average total equity.

(4) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(5) Net interest margin represents net interest income divided by average interest-earning assets.

(6) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.

(7) Based on customer statement-end balances extrapolated to the respective period-end date.

(8) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.

(9) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.

(10) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

SYNCHRONY FINANCIAL

 

STATEMENTS OF EARNINGS

  

(unaudited, $ in millions)

  

 

Quarter Ended

4Q'16 vs. 4Q'15

Twelve Months Ended

YTD'16 vs. YTD'15

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

 

2016

2016

2016

2016

2015

2016

2015

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$3,919

$3,771

$3,494

$3,498

$3,494

$425

12.20%

$14,682

$13,179

$1,503

11.40%

Interest on investment securities

28

25

21

22

15

13

86.70%

96

49

47

95.90%

Total interest income

3,947

3,796

3,515

3,520

3,509

438

12.50%

14,778

13,228

1,550

11.70%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

188

188

179

172

165

23

13.90%

727

607

120

19.80%

Interest on borrowings of consolidated securitization entities

64

63

59

58

56

8

14.30%

244

215

29

13.50%

Interest on third-party debt

67

64

65

81

80

-13

-16.30%

277

309

-32

-10.40%

Interest on related party debt

-

-

-

-

-

-

-%

-

4

-4

-100.00%

Total interest expense

319

315

303

311

301

18

6.00%

1,248

1,135

113

10.00%

Net interest income

3,628

3,481

3,212

3,209

3,208

420

13.10%

13,530

12,093

1,437

11.90%

Retailer share arrangements

-811

-757

-664

-670

-734

-77

10.50%

-2,902

-2,738

-164

6.00%

Net interest income, after retailer share arrangements

2,817

2,724

2,548

2,539

2,474

343

13.90%

10,628

9,355

1,273

13.60%

Provision for loan losses

1,076

986

1,021

903

823

253

30.70%

3,986

2,952

1,034

35.00%

Net interest income, after retailer share arrangements and provision for loan losses

1,741

1,738

1,527

1,636

1,651

90

5.50%

6,642

6,403

239

3.70%

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interchange revenue

167

154

151

130

147

20

13.60%

602

505

97

19.20%

Debt cancellation fees

68

67

63

64

62

6

9.70%

262

249

13

5.20%

Loyalty programs

-157

-145

-135

-110

-125

-32

25.60%

-547

-419

-128

30.50%

Other

7

8

4

8

3

4

133.30%

27

57

-30

-52.60%

Total other income

85

84

83

92

87

-2

-2.30%

344

392

-48

-12.20%

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Employee costs

315

311

301

280

285

30

10.50%

1,207

1,042

165

15.80%

Professional fees

164

174

154

146

165

-1

-0.60%

638

645

-7

-1.10%

Marketing and business development

130

92

107

94

128

2

1.60%

423

433

-10

-2.30%

Information processing

88

87

81

82

83

5

6.00%

338

297

41

13.80%

Other

221

195

196

198

209

12

5.70%

810

847

-37

-4.40%

Total other expense

918

859

839

800

870

48

5.50%

3,416

3,264

152

4.70%

Earnings before provision for income taxes

908

963

771

928

868

40

4.60%

3,570

3,531

39

1.10%

Provision for income taxes

332

359

282

346

321

11

3.40%

1,319

1,317

2

0.20%

Net earnings attributable to common stockholders

$576

$604

$489

$582

$547

$29

5.30%

$2,251

$2,214

$37

1.70%

SYNCHRONY FINANCIAL

STATEMENTS OF FINANCIAL POSITION (1)

(unaudited, $ in millions)

 

Quarter Ended

Dec 31, 2016 vs. Dec 31, 2015

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2016

2016

2016

2016

2015

Assets

 

 

 

 

 

 

 

Cash and equivalents

$9,321

$13,588

$11,787

$12,500

$12,325

($3,004)

-24.40%

Investment securities

5,110

3,356

2,723

2,949

3,142

1,968

62.60%

Loan receivables:

 

 

 

 

 

 

 

Unsecuritized loans held for investment

52,332

47,517

44,854

41,730

42,826

9,506

22.20%

Restricted loans of consolidated securitization entities

24,005

23,127

23,428

24,119

25,464

-1,459

-5.70%

Total loan receivables

76,337

70,644

68,282

65,849

68,290

8,047

11.80%

Less: Allowance for loan losses

-4,344

-4,115

-3,894

-3,620

-3,497

-847

24.20%

Loan receivables, net

71,993

66,529

64,388

62,229

64,793

7,200

11.10%

Goodwill

949

949

949

949

949

-

-%

Intangible assets, net

712

733

704

702

701

11

1.60%

Other assets

2,122

2,004

1,833

2,327

2,080

42

2.00%

Total assets

$90,207

$87,159

$82,384

$81,656

$83,990

$6,217

7.40%

Liabilities and Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$51,896

$49,611

$46,220

$44,721

$43,215

$8,681

20.10%

Non-interest-bearing deposit accounts

159

204

207

256

152

7

4.60%

Total deposits

52,055

49,815

46,427

44,977

43,367

8,688

20.00%

Borrowings:

 

 

 

 

 

 

 

Borrowings of consolidated securitization entities

12,388

12,411

12,236

12,423

13,589

-1,201

-8.80%

Bank term loan

-

-

-

1,494

4,133

-4,133

-100.00%

Senior unsecured notes

7,759

7,756

7,059

6,559

6,557

1,202

18.30%

Related party debt

-

-

-

-

-

-

-%

Total borrowings

20,147

20,167

19,295

20,476

24,279

-4,132

-17.00%

Accrued expenses and other liabilities

3,809

3,196

2,947

2,999

3,740

69

1.80%

Total liabilities

76,011

73,178

68,669

68,452

71,386

4,625

6.50%

Equity:

 

 

 

 

 

 

 

Common stock

1

1

1

1

1

-

-%

Additional paid-in capital

9,393

9,381

9,370

9,359

9,351

42

0.40%

Retained earnings

5,330

4,861

4,364

3,875

3,293

2,037

61.90%

Accumulated other comprehensive income:

-53

-24

-20

-31

-41

-12

29.30%

Treasury Stock

-475

-238

-

-

-

-475

NM

Total equity

14,196

13,981

13,715

13,204

12,604

1,592

12.60%

Total liabilities and equity

$90,207

$87,159

$82,384

$81,656

$83,990

$6,217

7.40%

(1) In January 2016, we adopted ASU 2015-03, Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of deferred issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability. Accordingly, we have reclassified issuance costs associated with our borrowings and certain brokered deposits, from other assets, and reflected as a reduction of borrowings and interest-bearing deposit accounts, as applicable, for each period presented to conform to the current period presentation. Related selected financial metrics included within this Financial Data Supplement have also been updated where applicable to reflect this reclassification.

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN (1)

(unaudited, $ in millions)

 

Quarter Ended

 

31-Dec-16

30-Sep-16

30-Jun-16

31-Mar-16

31-Dec-15

 

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Interest

Average

 

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

 

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning cash and equivalents

$11,723

$17

0.58%

$12,574

$16

0.51%

$11,692

$14

0.48%

$12,185

$16

0.53%

$12,070

$9

0.30%

Securities available for sale

4,253

11

1.03%

3,018

9

1.19%

2,805

7

1.00%

2,995

6

0.81%

3,445

6

0.69%

Loan receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards, including held for sale

70,195

3,851

21.83%

66,746

3,705

22.08%

64,269

3,432

21.48%

64,194

3,436

21.53%

62,834

3,432

21.67%

Consumer installment loans

1,374

31

8.98%

1,331

31

9.27%

1,235

28

9.12%

1,159

27

9.37%

1,163

26

8.87%

Commercial credit products

1,367

36

10.48%

1,390

35

10.02%

1,373

33

9.67%

1,313

35

10.72%

1,361

36

10.49%

Other

51

1

NM

58

-

-%

66

1

NM

39

-

-%

48

-

-%

Total loan receivables, including held for sale

72,987

3,919

21.36%

69,525

3,771

21.58%

66,943

3,494

20.99%

66,705

3,498

21.09%

65,406

3,494

21.19%

Total interest-earning assets

88,963

3,947

17.65%

85,117

3,796

17.74%

81,440

3,515

17.36%

81,885

3,520

17.29%

80,921

3,509

17.20%

Non-interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

691

 

 

641

 

 

774

 

 

1,277

 

 

1,268

 

 

Allowance for loan losses

-4,226

 

 

-3,977

 

 

-3,729

 

 

-3,583

 

 

-3,440

 

 

Other assets

3,394

 

 

3,240

 

 

3,209

 

 

3,256

 

 

3,133

 

 

Total non-interest-earning assets

-141

 

 

-96

 

 

254

 

 

950

 

 

961

 

 

Total assets

$88,822

 

 

$85,021

 

 

$81,694

 

 

$82,835

 

 

$81,882

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposit accounts

$50,901

$188

1.47%

$47,926

$188

1.56%

$45,490

$179

1.58%

$44,101

$172

1.57%

$42,079

$165

1.56%

Borrowings of consolidated securitization entities

12,387

64

2.06%

12,369

63

2.03%

12,291

59

1.93%

12,950

58

1.80%

13,550

56

1.64%

Bank term loan(2)

-

-

-%

-

-

-%

374

7

7.53%

2,565

24

3.76%

4,507

28

2.46%

Senior unsecured notes

7,758

67

3.44%

7,408

64

3.44%

6,809

58

3.43%

6,558

57

3.50%

5,810

52

3.55%

Related party debt

-

-

-%

-

-

-%

-

-

-%

-

-

-%

-

-

-%

Total interest-bearing liabilities

71,046

319

1.79%

67,703

315

1.85%

64,964

303

1.88%

66,174

311

1.89%

65,946

301

1.81%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposit accounts

180

 

 

203

 

 

217

 

 

226

 

 

147

 

 

Other liabilities

3,563

 

 

3,314

 

 

3,046

 

 

3,534

 

 

3,396

 

 

Total non-interest-bearing liabilities

3,743

 

 

3,517

 

 

3,263

 

 

3,760

 

 

3,543

 

 

Total liabilities

74,789

 

 

71,220

 

 

68,227

 

 

69,934

 

 

69,489

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

14,033

 

 

13,801

 

 

13,467

 

 

12,901

 

 

12,393

 

 

Total liabilities and equity

$88,822

 

 

$85,021

 

 

$81,694

 

 

$82,835

 

 

$81,882

 

 

Net interest income

 

$3,628

 

 

$3,481

 

 

$3,212

 

 

$3,209

 

 

$3,208

 

Interest rate spread (3)

 

 

15.86%

 

 

15.89%

 

 

15.48%

 

 

15.40%

 

 

15.39%

Net interest margin (4)

 

 

16.22%

 

 

16.27%

 

 

15.86%

 

 

15.76%

 

 

15.73%

(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.

(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended June 30, 2016, March 31, 2016, and December 31, 2015 were 2.51%, 2.47%, and 2.26% respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.

(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average interest-earning assets.

SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN(1)

(unaudited, $ in millions)

 

Twelve Months Ended

Twelve Months Ended

31-Dec-16

31-Dec-15

 

 

Interest

Average

 

Interest

Average

 

Average

Income/

Yield/

Average

Income/

Yield/

 

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-earning cash and equivalents

$11,943

$63

0.53%

$11,406

$28

0.25%

Securities available for sale

3,327

33

0.99%

$3,142

21

0.67%

Loan receivables:

 

 

 

 

 

 

Credit cards, including held for sale

66,533

14,424

21.68%

59,603

12,932

21.70%

Consumer installment loans

1,274

117

9.18%

1,119

104

9.29%

Commercial credit products

1,360

139

10.22%

1,359

142

10.45%

Other

53

2

3.77%

39

1

2.56%

Total loan receivables, including held for sale

69,220

14,682

21.21%

62,120

13,179

21.22%

Total interest-earning assets

84,490

14,778

17.49%

76,668

13,228

17.25%

Non-interest-earning assets:

 

 

 

 

 

 

Cash and due from banks

890

 

 

904

 

 

Allowance for loan losses

-3,879

 

 

-3,340

 

 

Other assets

3,290

 

 

2,857

 

 

Total non-interest-earning assets

301

 

 

421

 

 

Total assets

$84,791

 

 

$77,089

 

 

Liabilities

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Interest-bearing deposit accounts

$47,163

$727

1.54%

$38,060

$607

1.59%

Borrowings of consolidated securitization entities

12,532

244

1.95%

13,853

215

1.55%

Bank term loan(2)

789

31

3.93%

5,357

136

2.54%

Senior unsecured notes

7,135

246

3.45%

4,949

173

3.50%

Related party debt

-

-

-%

125

4

3.20%

Total interest-bearing liabilities

67,619

1,248

1.85%

62,344

1,135

1.82%

Non-interest-bearing liabilities

 

 

 

 

 

 

Non-interest-bearing deposit accounts

203

 

 

152

 

 

Other liabilities

3,437

 

 

3,015

 

 

Total non-interest-bearing liabilities

3,640

 

 

3,167

 

 

Total liabilities

71,259

 

 

65,511

 

 

Equity

 

 

 

 

 

 

Total equity

13,532

 

 

11,578

 

 

Total liabilities and equity

$84,791

 

 

$77,089

 

 

Net interest income

 

$13,530

 

 

$12,093

 

Interest rate spread (3)

 

 

15.64%

 

 

15.43%

Net interest margin (4)

 

 

16.01%

 

 

15.77%

(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.

(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the 12 months ended December 31, 2016 and December 31, 2015 were 2.48% and 2.23%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.

(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average interest-earning assets.

SYNCHRONY FINANCIAL

BALANCE SHEET STATISTICS (1)

(unaudited, $ in millions, except per share statistics)

 

Quarter Ended

Dec 31, 2016 vs. Dec 31, 2015

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2016

2016

2016

2016

2015

BALANCE SHEET STATISTICS

 

 

 

 

 

 

 

Total common equity

$14,196

$13,981

$13,715

$13,204

$12,604

$1,592

12.60%

Total common equity as a % of total assets

15.74%

16.04%

16.65%

16.17%

15.01%

 

0.73%

Tangible assets

$88,546

$85,477

$80,731

$80,005

$82,340

$6,206

7.50%

Tangible common equity(2)

$12,535

$12,299

$12,062

$11,553

$10,954

$1,581

14.40%

Tangible common equity as a % of tangible assets(2)

14.16%

14.39%

14.94%

14.44%

13.30%

 

0.86%

Tangible common equity per share(2)

$15.34

$14.90

$14.46

$13.86

$13.14

$2.20

16.70%

REGULATORY CAPITAL RATIOS(3)

 

 

 

 

 

 

 

Basel III Transition

Total risk-based capital ratio(4)

18.50%

19.50%

19.80%

19.40%

18.10%

 

 

Tier 1 risk-based capital ratio(5)

17.20%

18.20%

18.50%

18.10%

16.80%

 

 

Tier 1 leverage ratio(6)

15.00%

15.30%

15.60%

14.80%

14.40%

 

 

Common equity Tier 1 capital ratio(7)

17.20%

18.20%

18.50%

18.10%

16.80%

 

 

Basel III Fully Phased-in

Common equity Tier 1 capital ratio(7)

17.00%

17.90%

18.00%

17.50%

15.90%

 

 

(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.

(2) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(3) Regulatory capital metrics at December 31, 2016 are preliminary and therefore subject to change.

(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.

(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.

(6) Tier 1 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments.

(7) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.

SYNCHRONY FINANCIAL

PLATFORM RESULTS

(unaudited, $ in millions)

 

Quarter Ended

4Q'16 vs. 4Q'15

Twelve Months Ended

YTD'16 vs. YTD'15

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2016

2016

2015

2016

2015

RETAIL CARD

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$28,996

$25,285

$25,411

$21,550

$26,768

$2,228

8.30%

$101,242

$92,190

$9,052

9.80%

Period-end loan receivables

$52,701

$48,010

$46,705

$45,113

$47,412

$5,289

11.20%

$52,701

$47,412

$5,289

11.20%

Average loan receivables, including held for sale

$49,897

$47,420

$45,861

$45,900

$44,958

$4,939

11.00%

$47,421

$42,687

$4,734

11.10%

Average active accounts (in thousands)(2)(3)

54,489

52,959

52,314

52,969

52,038

2,451

4.70%

53,344

50,358

2,986

5.90%

Interest and fees on loans(2)

$2,909

$2,790

$2,585

$2,614

$2,594

$315

12.10%

$10,898

$9,774

$1,124

11.50%

Other income(2)

$70

$70

$69

$79

$76

($6)

-7.90%

$288

$339

($51)

-15.00%

Retailer share arrangements(2)

($801)

($752)

($656)

($661)

($723)

($78)

10.80%

($2,870)

($2,688)

($182)

6.80%

PAYMENT SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$4,194

$4,152

$3,903

$3,392

$3,714

$480

12.90%

$15,641

$13,668

$1,973

14.40%

Period-end loan receivables

$15,567

$14,798

$13,997

$13,420

$13,543

$2,024

14.90%

$15,567

$13,543

$2,024

14.90%

Average loan receivables

$15,146

$14,391

$13,644

$13,482

$13,192

$1,954

14.80%

$14,188

$12,436

$1,752

14.10%

Average active accounts (in thousands)(3)

8,844

8,461

8,153

8,134

7,896

948

12.00%

8,410

7,478

932

12.50%

Interest and fees on loans

$523

$505

$467

$457

$462

$61

13.20%

$1,952

$1,719

$233

13.60%

Other income

$3

$3

$3

$4

$3

$-

-%

$13

$17

($4)

-23.50%

Retailer share arrangements

($9)

($3)

($7)

($7)

($10)

$1

-10.00%

($26)

($45)

$19

-42.20%

CARECREDIT

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)

$2,179

$2,178

$2,193

$2,035

$1,978

$201

10.20%

$8,585

$7,757

$828

10.70%

Period-end loan receivables

$8,069

$7,836

$7,580

$7,316

$7,335

$734

10.00%

$8,069

$7,335

$734

10.00%

Average loan receivables

$7,944

$7,714

$7,438

$7,323

$7,256

$688

9.50%

$7,611

$6,997

$614

8.80%

Average active accounts (in thousands)(3)

5,368

5,219

5,064

5,031

4,958

410

8.30%

5,174

4,807

367

7.60%

Interest and fees on loans

$487

$476

$442

$427

$438

$49

11.20%

$1,832

$1,686

$146

8.70%

Other income

$12

$11

$11

$9

$8

$4

50.00%

$43

$36

$7

19.40%

Retailer share arrangements

($1)

($2)

($1)

($2)

($1)

$-

-%

($6)

($5)

($1)

20.00%

TOTAL SYF

 

 

 

 

 

 

 

 

 

 

 

Purchase volume(1)(2)

$35,369

$31,615

$31,507

$26,977

$32,460

$2,909

9.00%

$125,468

$113,615

$11,853

10.40%

Period-end loan receivables

$76,337

$70,644

$68,282

$65,849

$68,290

$8,047

11.80%

$76,337

$68,290

$8,047

11.80%

Average loan receivables, including held for sale

$72,987

$69,525

$66,943

$66,705

$65,406

$7,581

11.60%

$69,220

$62,120

$7,100

11.40%

Average active accounts (in thousands)(2)(3)

68,701

66,639

65,531

66,134

64,892

3,809

5.90%

66,928

62,643

4,285

6.80%

Interest and fees on loans(2)

$3,919

$3,771

$3,494

$3,498

$3,494

$425

12.20%

$14,682

$13,179

$1,503

11.40%

Other income(2)

$85

$84

$83

$92

$87

($2)

-2.30%

$344

$392

($48)

-12.20%

Retailer share arrangements(2)

($811)

($757)

($664)

($670)

($734)

($77)

10.50%

($2,902)

($2,738)

($164)

6.00%

(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.

(2) Includes activity and balances associated with loan receivables held for sale.

(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

SYNCHRONY FINANCIAL

RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES (1)(2)

(unaudited, $ in millions, except per share statistics)

 

Quarter Ended

 

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2016

2016

2016

2016

2015

COMMON EQUITY MEASURES

 

 

 

 

 

GAAP Total common equity

$14,196

$13,981

$13,715

$13,204

$12,604

Less: Goodwill

-949

-949

-949

-949

-949

Less: Intangible assets, net

-712

-733

-704

-702

-701

Tangible common equity

$12,535

$12,299

$12,062

$11,553

$10,954

Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)

337

299

282

281

280

Basel III - Common equity Tier 1 (fully phased-in)

$12,872

$12,598

$12,344

$11,834

$11,234

Adjustment related to capital components during transition

263

273

266

265

399

Basel III - Common equity Tier 1 (transition)

$13,135

$12,871

$12,610

$12,099

$11,633

RISK-BASED CAPITAL

 

 

 

 

 

Common equity Tier 1

$13,135

$12,871

$12,610

$12,099

$11,633

Add: Allowance for loan losses includible in risk-based capital

994

923

890

869

898

Risk-based capital

$14,129

$13,794

$13,500

$12,968

$12,531

ASSET MEASURES

 

 

 

 

 

Total average assets

$88,822

$85,021

$81,694

$82,835

$81,882

Adjustments for:

 

 

 

 

 

Disallowed goodwill and other disallowed intangible assets (net of related deferred tax liabilities) and other

-1,059

-1,117

-1,113

-1,117

-991

Total assets for leverage purposes

$87,763

$83,904

$80,581

$81,718

$80,891

Risk-weighted assets - Basel III (fully phased-in) (3)

$75,941

$70,448

$68,462

$67,697

$70,493

Risk-weighted assets - Basel III (transition) (3)

$76,179

$70,660

$68,188

$66,689

$69,224

TANGIBLE COMMON EQUITY PER SHARE

 

 

 

 

 

GAAP book value per share

$17.37

$16.94

$16.45

$15.84

$15.12

Less: Goodwill

-1.16

-1.14

-1.14

-1.14

-1.14

Less: Intangible assets, net

-0.87

-0.9

-0.85

-0.84

-0.84

Tangible common equity per share

$15.34

$14.90

$14.46

$13.86

$13.14

(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.

(2) Regulatory measures at December 31, 2016 are presented on an estimated basis.

(3) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets.
Contact:

Synchrony Financial
Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Samuel Wang, 203-585-2933