Synchrony Financial Reports Fourth Quarter Net Earnings of $783 Million or $1.09 Per Diluted Share

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STAMFORD, Conn., Jan. 23, 2019 /PRNewswire/ -- Synchrony Financial (NYSE: SYF) today announced fourth quarter 2018 net earnings of $783 million, or $1.09 per diluted share. Highlights included:

  • Net interest income increased 11% from the fourth quarter of 2017 to $4.3 billion
  • Loan receivables grew $11 billion, or 14%, from the fourth quarter of 2017 to $93 billion
  • Purchase volume increased 10% from the fourth quarter of 2017 to $40 billion
  • Deposits grew $8 billion, or 13%, from the fourth quarter of 2017 to $64 billion
  • Renewed and extended key Retail Card relationships: Sam's Club and Amazon
  • Extended and expanded relationship with Qurate Retail Group and brands QVC, HSN and zulily
  • Announced new Retail Card partnership with Harbor Freight
  • Renewed and extended key Payment Solutions relationship with Mohawk
  • Announced new Payment Solutions partnership with Fanatics
  • Expanded CareCredit network: Walgreens will begin accepting the CareCredit Card
  • In January, Synchrony reached agreement with Capital One on the sale of the Walmart loan portfolio
  • In January, Walmart agreed to dismiss its lawsuit against Synchrony

(PRNewsfoto/Synchrony)

"Synchrony ended the year with significant momentum heading into 2019—we generated strong results this quarter, renewed and extended a number of key relationships, added new programs, and expanded our network. Our business continues to deliver organic growth through innovative marketing, promotions and value propositions, in addition to leveraging the investments we have been making in data analytics, artificial intelligence, and digital capabilities. And we did this while maintaining a strong balance sheet and returning capital to shareholders through growth, portfolio acquisitions, and the execution of our capital plan," said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. "We continue to be well positioned for the future and look forward to the opportunities ahead in 2019."

Business and Financial Highlights for the Fourth Quarter of 2018
All comparisons below are for the fourth quarter of 2018 compared to the fourth quarter of 2017, unless otherwise noted.

Earnings

  • Net interest income increased $417 million, or 11%, to $4.3 billion, primarily driven by the PayPal Credit program acquisition and loan receivables growth. Net interest income after retailer share arrangements increased 11%.
  • Provision for loan losses increased $98 million, or 7%, to $1.5 billion, driven by the PayPal Credit program reserve build partially offset by moderating credit trends.
  • Other income was up $2 million to $64 million.
  • Other expense increased $108 million, or 11%, to $1.1 billion, primarily driven by the PayPal Credit program acquisition and growth-related expenses.
  • Provision for income taxes was down 53%, primarily due to tax reform.
  • Net earnings totaled $783 million compared to $385 million last year.

Balance Sheet

  • Period-end loan receivables growth was 14%, purchase volume growth was 10% and average active account growth was 8%, primarily driven by the PayPal Credit program acquisition and growth.
  • Deposits grew to $64 billion, up $8 billion, or 13%, and comprised 73% of funding.
  • The Company's balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $19 billion, or 18% of total assets.
  • The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.0%, compared to 15.8%, reflecting the impact of capital deployment through the PayPal Credit program acquisition and continued execution of our capital plan.

Key Financial Metrics

  • Return on assets was 2.9% and return on equity was 21.5%.
  • Net interest margin was 16.06%.
  • Efficiency ratio was 30.4%.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.76% compared to 4.67% last year; excluding the PayPal Credit program, the rate decreased ~15 bps.
  • Net charge-offs as a percentage of total average loan receivables were 5.54% compared to 5.78% last year; excluding the PayPal Credit program, the rate decreased ~10 bps.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.90% compared to 6.80% last year.

Sales Platforms

  • Retail Card period-end loan receivables grew 16%, driven primarily by the PayPal Credit program acquisition. Interest and fees on loans increased 14%, purchase volume growth was 11% and average active accounts increased 9%, all largely driven by the PayPal Credit program acquisition.
  • Payment Solutions period-end loan receivables grew 9%, led by home furnishings and luxury. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 8% and average active accounts increased 7%.
  • CareCredit period-end loan receivables grew 7%, led by dental and veterinary. Interest and fees on loans increased 7%, primarily driven by the loan receivables growth. Purchase volume grew 7% and average active account growth was 4%.

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 the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed February 22, 2018, and the Company's forthcoming Annual Report on Form 10-K for the year ended December 31, 2018.  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 Wednesday, January 23, 2019, 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 42018#, and can be accessed beginning approximately two hours after the event through February 6, 2019.

About Synchrony Financial
Synchrony Financial (NYSE: SYF) is a premier consumer financial services company delivering customized financing programs across key industries including retail, health, auto, travel and home, along with award-winning consumer banking products. With more than $140 billion in sales financed and 80.3 million active accounts, Synchrony Financial brings deep industry expertise, actionable data insights, innovative solutions and differentiated digital experiences to improve the success of every business we serve and the quality of each life we touch. More information can be found at www.synchronyfinancial.com and through Twitter: @Synchrony.

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 "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "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; cyber-attacks or other security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; 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 acquisitions and strategic investments; our ability to realize the benefits of and expected capital available from strategic options; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; 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/or interpretations, 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; 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; 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, 2017, as filed on February 22, 2018. You should not consider any list of such factors to be an exhaustive statement of all 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 financial measures that have been adjusted to exclude certain effects from the Tax Act, 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.

Investor Relations

Media Relations

Greg Ketron

Sue Bishop

(203) 585-6291

(203) 585-2802

 

SYNCHRONY FINANCIAL


















FINANCIAL SUMMARY


















(unaudited, in millions, except per share statistics)



















Quarter Ended



Twelve Months Ended



Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

4Q'18 vs. 4Q'17

Dec 31,
2018

Dec 31,
2017

YTD'18 vs. YTD'17

EARNINGS


















Net interest income

$4,333

$4,206

$3,737

$3,842

$3,916

$417

10.6%

$16,118

$15,016

$1,102

7.3%

Retailer share arrangements

(855)

(871)

(653)

(720)

(779)

(76)

9.8%

(3,099)

(2,937)

(162)

5.5%

Net interest income, after retailer share arrangements

3,478

3,335

3,084

3,122

3,137

341

10.9%

13,019

12,079

940

7.8%

Provision for loan losses

1,452

1,451

1,280

1,362

1,354

98

7.2%

5,545

5,296

249

4.7%

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

2,026

1,884

1,804

1,760

1,783

243

13.6%

7,474

6,783

691

10.2%

Other income

64

63

63

75

62

2

3.2%

265

288

(23)

(8.0)%

Other expense

1,078

1,054

975

988

970

108

11.1%

4,095

3,747

348

9.3%

Earnings before provision for income taxes

1,012

893

892

847

875

137

15.7%

3,644

3,324

320

9.6%

Provision for income taxes

229

222

196

207

490

(261)

(53.3)%

854

1,389

(535)

(38.5)%

Net earnings

$783

$671

$696

$640

$385

$398

103.4%

$2,790

$1,935

$855

44.2%

Net earnings attributable to common stockholders

$783

$671

$696

$640

$385

$398

103.4%

$2,790

$1,935

$855

44.2%




















Adjusted net earnings(1)

$783

$671

$696

$640

$545

$238

43.7%

$2,790

$2,095

$695

33.2%




















COMMON SHARE STATISTICS


















Basic EPS   

$1.09

$0.91

$0.93

$0.84

$0.49

$0.60

122.4%

$3.76

$2.43

$1.33

54.7%

Diluted EPS   

$1.09

$0.91

$0.92

$0.83

$0.49

$0.60

122.4%

$3.74

$2.42

$1.32

54.5%

Adjusted diluted EPS(1)

$1.09

$0.91

$0.92

$0.83

$0.70

$0.39

55.7%

$3.74

$2.62

$1.12

42.7%

Dividend declared per share

$0.21

$0.21

$0.15

$0.15

$0.15

$0.06

40.0%

$0.72

$0.56

$0.16

28.6%

Common stock price

$23.46

$31.08

$33.38

$33.53

$38.61

$(15.15)

(39.2)%

$23.46

$38.61

$(15.15)

(39.2)%

Book value per share   

$20.42

$19.47

$19.37

$18.88

$18.47

$1.95

10.6%

$20.42

$18.47

$1.95

10.6%

Tangible common equity per share(2)

$17.41

$16.51

$16.84

$16.55

$16.22

$1.19

7.3%

$17.41

$16.22

$1.19

7.3%




















Beginning common shares outstanding

718.7

746.6

760.3

770.5

782.6

(63.9)

(8.2)%

770.5

817.4

(46.9)

(5.7)%

Issuance of common shares

-

-

-

-

-

-

- %

-

-

-

- %

Stock-based compensation

0.1

2.4

0.3

0.2

0.1

-

- %

3.0

0.4

2.6

NM

Shares repurchased

-

(30.3)

(14.0)

(10.4)

(12.2)

12.2

(100.0)%

(54.7)

(47.3)

(7.4)

15.6%

Ending common shares outstanding

718.8

718.7

746.6

760.3

770.5

(51.7)

(6.7)%

718.8

770.5

(51.7)

(6.7)%




















Weighted average common shares outstanding 

718.7

734.9

752.2

763.7

778.7

(60.0)

(7.7)%

742.3

795.6

(53.3)

(6.7)%

Weighted average common shares outstanding (fully diluted) 

720.9

738.8

758.3

770.3

784.0

(63.1)

(8.0)%

746.9

799.7

(52.8)

(6.6)%




















(1) Adjusted net earnings and Adjusted diluted EPS are non-GAAP measures. These measures represent the corresponding GAAP measure, adjusted to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Cuts and Jobs

Act of 2017 (the "Tax Act"). The effects primarily relate to additional tax expense arising from the remeasurement of our net deferred tax asset to reflect the reduction in the U.S. corporate tax rate from 35% to 21%. For a corresponding reconciliation to a GAAP financial measure,

see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. 

(2) 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


















(unaudited, $ in millions, except account data)



















Quarter Ended


Twelve Months Ended



Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

4Q'18 vs. 4Q'17

Dec 31,
2018

Dec 31,
2017

YTD'18 vs. YTD'17

PERFORMANCE METRICS


















Return on assets(1)

2.9%

2.7%

2.9%

2.7%

1.6%

1.3%

2.8%

2.1%

0.7%

Return on equity(2)

21.5%

18.5%

19.4%

18.2%

10.5%

11.0%

19.4%

13.4%

6.0%

Return on tangible common equity(3)

25.2%

21.5%

22.1%

20.7%

12.0%

13.2%

22.4%

15.3%

7.1%

Adjusted return on assets(4)

2.9%

2.7%

2.9%

2.7%

2.3%

0.6%

2.8%

2.3%

0.5%

Adjusted return on equity(4)

21.5%

18.5%

19.4%

18.2%

14.9%

6.6%

19.4%

14.5%

4.9%

Adjusted return on tangible common equity(5)

25.2%

21.5%

22.1%

20.7%

17.0%

8.2%

22.4%

16.6%

5.8%

Net interest margin(6)

16.06%

16.41%

15.33%

16.05%

16.24%

(0.18)%

15.97%

16.35%

(0.38)%

Efficiency ratio(7)

30.4%

31.0%

31.0%

30.9%

30.3%

0.1%

30.8%

30.3%

0.5%

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

4.79%

4.82%

5.02%

5.07%

4.91%

(0.12)%

4.92%

4.95%

(0.03)%

Effective income tax rate

22.6%

24.9%

22.0%

24.4%

56.0%

(33.4)%

23.4%

41.8%

(18.4)%




















CREDIT QUALITY METRICS


















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

5.54%

4.97%

5.97%

6.14%

5.78%

(0.24)%

5.63%

5.37%

0.26%

30+ days past due as a % of period-end loan receivables(8)

4.76%

4.59%

4.17%

4.52%

4.67%

0.09%

4.76%

4.67%

0.09%

90+ days past due as a % of period-end loan receivables(8)

2.29%

2.09%

1.98%

2.28%

2.28%

0.01%

2.29%

2.28%

0.01%

Net charge-offs

$1,248

$1,087

$1,159

$1,198

$1,141

$107

9.4%

$4,692

$4,066

$626

15.4%

Loan receivables delinquent over 30 days(8)

$4,430

$4,021

$3,293

$3,521

$3,831

$599

15.6%

$4,430

$3,831

$599

15.6%

Loan receivables delinquent over 90 days(8)

$2,135

$1,833

$1,561

$1,776

$1,869

$266

14.2%

$2,135

$1,869

$266

14.2%




















Allowance for loan losses (period-end)

$6,427

$6,223

$5,859

$5,738

$5,574

$853

15.3%

$6,427

$5,574

$853

15.3%

Allowance coverage ratio(9)

6.90%

7.11%

7.43%

7.37%

6.80%

0.10%

6.90%

6.80%

0.10%




















BUSINESS METRICS


















Purchase volume(10)

$40,320

$36,443

$34,268

$29,626

$36,565

$3,755

10.3%

$140,657

$131,814

$8,843

6.7%

Period-end loan receivables

$93,139

$87,521

$78,879

$77,853

$81,947

$11,192

13.7%

$93,139

$81,947

$11,192

13.7%

Credit cards

$89,994

$84,319

$75,753

$74,952

$79,026

$10,968

13.9%

$89,994

$79,026

$10,968

13.9%

Consumer installment loans

$1,845

$1,789

$1,708

$1,590

$1,578

$267

16.9%

$1,845

$1,578

$267

16.9%

Commercial credit products

$1,260

$1,353

$1,356

$1,275

$1,303

$(43)

(3.3)%

$1,260

$1,303

$(43)

(3.3)%

Other

$40

$60

$62

$36

$40

$-

- %

$40

$40

$-

- %

Average loan receivables, including held for sale

$89,340

$86,783

$77,853

$79,090

$78,369

$10,971

14.0%

$83,304

$75,702

$7,602

10.0%

Period-end active accounts (in thousands)(11)

80,339

75,457

69,767

68,891

74,541

5,798

7.8%

80,339

74,541

5,798

7.8%

Average active accounts (in thousands)(11)

77,382

75,482

69,344

71,323

71,348

6,034

8.5%

73,847

69,968

3,879

5.5%




















LIQUIDITY


















Liquid assets


















Cash and equivalents

$9,396

$12,068

$15,675

$13,044

$11,602

$(2,206)

(19.0)%

$9,396

$11,602

$(2,206)

(19.0)%

Total liquid assets

$14,822

$18,214

$21,491

$18,557

$15,087

$(265)

(1.8)%

$14,822

$15,087

$(265)

(1.8)%

Undrawn credit facilities


















Undrawn credit facilities

$4,375

$5,125

$6,500

$6,000

$6,000

$(1,625)

(27.1)%

$4,375

$6,000

$(1,625)

(27.1)%

Total liquid assets and undrawn credit facilities

$19,197

$23,339

$27,991

$24,557

$21,087

$(1,890)

(9.0)%

$19,197

$21,087

$(1,890)

(9.0)%

Liquid assets % of total assets

13.88%

17.42%

21.68%

19.42%

15.75%

(1.87)%

13.88%

15.75%

(1.87)%

Liquid assets including undrawn credit facilities % of total assets

17.98%

22.32%

28.24%

25.70%

22.01%

(4.03)%

17.98%

22.01%

(4.03)%




















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


















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


















(3) 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.

(4) Adjusted return on assets represents Adjusted net earnings as a percentage of average total assets. Adjusted return on equity represents Adjusted net earnings as a percentage of average total equity.  Adjusted net earnings is a non-GAAP measure. For a corresponding

reconciliation of Adjusted net earnings to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. 

(5) Adjusted return on tangible common equity represents Adjusted net earnings as a percentage of average tangible common equity. Both Adjusted net earnings and tangible common equity are non-GAAP measures. For corresponding reconciliations to a GAAP financial measure,

see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

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

















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












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

















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















(10) 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. 







(11) 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


Twelve Months Ended



Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

4Q'18 vs. 4Q'17

Dec 31,
2018

Dec 31,
2017

YTD'18 vs. YTD'17

Interest income:


















Interest and fees on loans

$4,774

$4,617

$4,081

$4,172

$4,233

$541

12.8%

$17,644

$16,219

$1,425

8.8%

Interest on investment securities

102

77

93

72

58

44

75.9%

344

188

156

83.0%

Total interest income

4,876

4,694

4,174

4,244

4,291

585

13.6%

17,988

16,407

1,581

9.6%




















Interest expense:


















Interest on deposits

350

314

273

249

233

117

50.2%

1,186

848

338

39.9%

Interest on borrowings of consolidated securitization entities

104

86

80

74

70

34

48.6%

344

263

81

30.8%

Interest on third-party debt

89

88

84

79

72

17

23.6%

340

280

60

21.4%

Total interest expense

543

488

437

402

375

168

44.8%

1,870

1,391

479

34.4%




















Net interest income

4,333

4,206

3,737

3,842

3,916

417

10.6%

16,118

15,016

1,102

7.3%




















Retailer share arrangements

(855)

(871)

(653)

(720)

(779)

(76)

9.8%

(3,099)

(2,937)

(162)

5.5%

Net interest income, after retailer share arrangements

3,478

3,335

3,084

3,122

3,137

341

10.9%

13,019

12,079

940

7.8%




















Provision for loan losses

1,452

1,451

1,280

1,362

1,354

98

7.2%

5,545

5,296

249

4.7%

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

2,026

1,884

1,804

1,760

1,783

243

13.6%

7,474

6,783

691

10.2%




















Other income:


















Interchange revenue

193

182

177

158

179

14

7.8%

710

653

57

8.7%

Debt cancellation fees

70

65

66

66

69

1

1.4%

267

272

(5)

(1.8)%

Loyalty programs

(208)

(196)

(192)

(155)

(193)

(15)

7.8%

(751)

(704)

(47)

6.7%

Other

9

12

12

6

7

2

28.6%

39

67

(28)

(41.8)%

Total other income

64

63

63

75

62

2

3.2%

265

288

(23)

(8.0)%




















Other expense:


















Employee costs(1)

353

365

351

358

330

23

7.0%

1,427

1,304

123

9.4%

Professional fees

231

232

177

166

159

72

45.3%

806

629

177

28.1%

Marketing and business development

166

131

110

121

156

10

6.4%

528

498

30

6.0%

Information processing

118

105

99

104

99

19

19.2%

426

373

53

14.2%

Other(1)

210

221

238

239

226

(16)

(7.1)%

908

943

(35)

(3.7)%

Total other expense

1,078

1,054

975

988

970

108

11.1%

4,095

3,747

348

9.3%




















Earnings before provision for income taxes

1,012

893

892

847

875

137

15.7%

3,644

3,324

320

9.6%

Provision for income taxes

229

222

196

207

490

(261)

(53.3)%

854

1,389

(535)

(38.5)%

Net earnings attributable to common stockholders

$783

$671

$696

$640

$385

$398

103.4%

$2,790

$1,935

$855

44.2%




















(1) We have reclassified certain amounts within Employee costs to Other for all periods in 2017 to conform to the current period classifications. 











 

SYNCHRONY FINANCIAL











STATEMENTS OF FINANCIAL POSITION











(unaudited, $ in millions)












Quarter Ended


Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Dec 31, 2018 vs.
Dec 31, 2017

Assets











Cash and equivalents

$9,396

$12,068

$15,675

$13,044

$11,602

$(2,206)

(19.0)%

Debt securities

6,062

7,281

6,779

6,259

4,473

1,589

35.5%

Loan receivables:











Unsecuritized loans held for investment

64,969

59,868

50,884

52,469

55,526

9,443

17.0%

Restricted loans of consolidated securitization entities

28,170

27,653

27,995

25,384

26,421

1,749

6.6%

Total loan receivables

93,139

87,521

78,879

77,853

81,947

11,192

13.7%

Less: Allowance for loan losses

(6,427)

(6,223)

(5,859)

(5,738)

(5,574)

(853)

15.3%

Loan receivables, net

86,712

81,298

73,020

72,115

76,373

10,339

13.5%

Goodwill

1,024

1,024

1,024

991

991

33

3.3%

Intangible assets, net

1,137

1,105

863

780

749

388

51.8%

Other assets

2,461

1,769

1,761

2,370

1,620

841

51.9%

Total assets

$106,792

$104,545

$99,122

$95,559

$95,808

$10,984

11.5%













Liabilities and Equity







-


Deposits:











Interest-bearing deposit accounts

$63,738

$62,030

$58,734

$56,285

$56,276

$7,462

13.3%

Non-interest-bearing deposit accounts

281

287

277

285

212

69

32.5%

Total deposits

64,019

62,317

59,011

56,570

56,488

7,531

13.3%

Borrowings:











Borrowings of consolidated securitization entities

14,439

14,187

12,170

12,214

12,497

1,942

15.5%













Senior unsecured notes

9,557

9,554

9,551

8,801

8,302

1,255

15.1%

Total borrowings

23,996

23,741

21,721

21,015

20,799

3,197

15.4%

Accrued expenses and other liabilities

4,099

4,491

3,932

3,618

4,287

(188)

(4.4)%

Total liabilities

92,114

90,549

84,664

81,203

81,574

10,540

12.9%

Equity:











Common stock

1

1

1

1

1

-

- %

Additional paid-in capital

9,482

9,470

9,486

9,470

9,445

37

0.4%

Retained earnings

8,986

8,355

7,906

7,334

6,809

2,177

32.0%

Accumulated other comprehensive income:

(62)

(99)

(93)

(86)

(64)

2

(3.1)%

Treasury Stock

(3,729)

(3,731)

(2,842)

(2,363)

(1,957)

(1,772)

90.5%

Total equity

14,678

13,996

14,458

14,356

14,234

444

3.1%

Total liabilities and equity

$106,792

$104,545

$99,122

$95,559

$95,808

$10,984

11.5%

 

SYNCHRONY FINANCIAL




























AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

























(unaudited, $ in millions)



























































                  Quarter Ended

Dec 31, 2018

Sep 30, 2018

Jun 30, 2018

Mar 31, 2018

Dec 31, 2017



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

$10,856

$62

2.27%

$7,901

$39

1.96%

$13,097

$59

1.81%

$12,434

$47

1.53%

$13,591

$43

1.26%

Securities available for sale

6,837

40

2.32%

7,022

38

2.15%

6,803

34

2.00%

5,584

25

1.82%

3,725

15

1.60%






























Loan receivables:




























Credit cards, including held for sale

86,131

4,695

21.63%

83,609

4,538

21.53%

74,809

4,010

21.50%

76,181

4,099

21.82%

75,389

4,161

21.90%

Consumer installment loans

1,815

42

9.18%

1,753

41

9.28%

1,648

37

9.01%

1,572

36

9.29%

1,568

36

9.11%

Commercial credit products

1,344

37

10.92%

1,355

37

10.83%

1,346

34

10.13%

1,286

36

11.35%

1,375

35

10.10%

Other

50

-

- %

66

1

NM

50

-

- %

51

1

NM

37

1

NM

Total loan receivables, including held for sale

89,340

4,774

21.20%

86,783

4,617

21.11%

77,853

4,081

21.03%

79,090

4,172

21.39%

78,369

4,233

21.43%

Total interest-earning assets

107,033

4,876

18.07%

101,706

4,694

18.31%

97,753

4,174

17.13%

97,108

4,244

17.72%

95,685

4,291

17.79%






























Non-interest-earning assets:




























Cash and due from banks

1,320




1,217




1,161




1,197




1,037



Allowance for loan losses

(6,259)




(5,956)




(5,768)




(5,608)




(5,443)



Other assets

3,688




3,482




3,068




3,010




3,219



Total non-interest-earning assets

(1,251)




(1,257)




(1,539)




(1,401)




(1,187)

































Total assets

$105,782




$100,449




$96,214




$95,707




$94,498

































Liabilities




























Interest-bearing liabilities:




























Interest-bearing deposit accounts

$62,999

$350

2.20%

$60,123

$314

2.07%

$57,303

$273

1.91%

$56,356

$249

1.79%

$55,690

$233

1.66%

Borrowings of consolidated securitization entities

14,223

104

2.90%

12,306

86

2.77%

11,821

80

2.71%

12,410

74

2.42%

12,425

70

2.24%





- %

-


- %




- %











Senior unsecured notes

9,554

89

3.70%

9,552

88

3.66%

9,114

84

3.70%

8,795

79

3.64%

7,940

72

3.60%

Total interest-bearing liabilities

86,776

543

2.48%

81,981

488

2.36%

78,238

437

2.24%

77,561

402

2.10%

76,055

375

1.96%






























Non-interest-bearing liabilities




























Non-interest-bearing deposit accounts

284




275




270




300




218



Other liabilities

4,283




3,772




3,299




3,570




3,716



Total non-interest-bearing liabilities

4,567




4,047




3,569




3,870




3,934

































Total liabilities

91,343




86,028




81,807




81,431




79,989

































Equity




























Total equity

14,439




14,421




14,407




14,276




14,509

































Total liabilities and equity

$105,782




$100,449




$96,214




$95,707




$94,498



Net interest income

$4,333




$4,206




$3,737




$3,842




$3,916































Interest rate spread(1)



15.59%




15.95%




14.89%




15.62%




15.83%

Net interest margin(2)



16.06%




16.41%




15.33%




16.05%




16.24%






























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



















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

























 

SYNCHRONY FINANCIAL










AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN










(unaudited, $ in millions)























Twelve Months Ended
Dec 31, 2018

Twelve Months Ended
Dec 31, 2017



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

$11,059

$207

1.87%

$11,707

$129

1.10%

Securities available for sale

6,566

137

2.09%

4,449

59

1.33%












Loan receivables:










Credit cards, including held for sale

80,219

17,342

21.62%

72,795

15,941

21.90%

Consumer installment loans

1,698

156

9.19%

1,491

137

9.19%

Commercial credit products

1,333

144

10.80%

1,366

139

10.18%

Other

54

2

3.70%

50

2

4.00%

Total loan receivables, including held for sale

83,304

17,644

21.18%

75,702

16,219

21.42%

Total interest-earning assets

100,929

17,988

17.82%

91,858

16,407

17.86%












Non-interest-earning assets:










Cash and due from banks

1,224




887



Allowance for loan losses

(5,900)




(4,942)



Other assets

3,315




3,304



Total non-interest-earning assets

(1,361)




(751)















Total assets

$99,568




$91,107















Liabilities










Interest-bearing liabilities:










Interest-bearing deposit accounts

$59,216

$1,186

2.00%

$53,173

$848

1.59%

Borrowings of consolidated securitization entities

12,694

344

2.71%

12,179

263

2.16%

Senior unsecured notes

9,257

340

3.67%

7,972

280

3.51%

Total interest-bearing liabilities

81,167

1,870

2.30%

73,324

1,391

1.90%












Non-interest-bearing liabilities










Non-interest-bearing deposit accounts

282




227



Other liabilities

3,733




3,129



Total non-interest-bearing liabilities

4,015




3,356















Total liabilities

85,182




76,680















Equity










Total equity

14,386




14,427















Total liabilities and equity

$99,568




$91,107



Net interest income

$16,118




$15,016













Interest rate spread(1)



15.52%




15.96%

Net interest margin(2)



15.97%




16.35%












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

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







 

SYNCHRONY FINANCIAL











BALANCE SHEET STATISTICS











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

























Quarter Ended


Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Dec 31, 2018 vs.
Dec 31, 2017

BALANCE SHEET STATISTICS











Total common equity

$14,678

$13,996

$14,458

$14,356

$14,234

$444

3.1%

Total common equity as a % of total assets

13.74%

13.39%

14.59%

15.02%

14.86%

(1.12)%













Tangible assets

$104,631

$102,416

$97,235

$93,788

$94,068

$10,563

11.2%

Tangible common equity(1)

$12,517

$11,867

$12,571

$12,585

$12,494

$23

0.2%

Tangible common equity as a % of tangible assets(1)

11.96%

11.59%

12.93%

13.42%

13.28%

(1.32)%

Tangible common equity per share(1)

$17.41

$16.51

$16.84

$16.55

$16.22

$1.19

7.3%













REGULATORY CAPITAL RATIOS(2)












Basel III Fully Phased-in(3)

Basel III

Transition

Total risk-based capital ratio(4)

15.3%

15.5%

18.0%

18.1%

17.3%


Tier 1 risk-based capital ratio(5)

14.0%

14.2%

16.6%

16.8%

16.0%


Tier 1 leverage ratio(6)

12.3%

12.3%

13.6%

13.7%

13.8%


Common equity Tier 1 capital ratio

14.0%

14.2%

16.6%

16.8%

16.0%
















Basel III Fully Phased-in

Common equity Tier 1 capital ratio

14.0%

14.2%

16.6%

16.8%

15.8%
















(1) 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.

(2) Regulatory capital metrics at December 31, 2018 are preliminary and therefore subject to change. 

(3) Amounts presented do not reflect certain modifications to the regulatory capital rules proposed by the federal banking agencies in September 2017, which among other things, may increase the

risk weighting of certain deferred tax assets from 100% to 250% if the proposed rule becomes effective.

(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. Tier 1 leverage ratios are based upon the use of daily averages for all periods

presented.

 

SYNCHRONY FINANCIAL


















PLATFORM RESULTS


















(unaudited, $ in millions)



















Quarter Ended


Twelve Months Ended



Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

4Q'18 vs. 4Q'17

Dec 31,
2018

Dec 31,
2017

YTD'18 vs. YTD'17

RETAIL CARD


















Purchase volume(1)(2)

$33,080

$29,264

$27,340

$23,382

$29,839

$3,241

10.9%

$113,066

$106,239

$6,827

6.4%

Period-end loan receivables

$65,224

$60,564

$52,918

$52,531

$56,230

$8,994

16.0%

$65,224

$56,230

$8,994

16.0%

Average loan receivables, including held for sale

$62,006

$60,389

$52,427

$53,673

$53,256

$8,750

16.4%

$57,155

$51,570

$5,585

10.8%

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

61,275

59,846

54,092

55,927

56,113

5,162

9.2%

58,223

55,142

3,081

5.6%




















Interest and fees on loans(2)

$3,583

$3,465

$2,993

$3,096

$3,133

$450

14.4%

$13,137

$12,023

$1,114

9.3%

Other income(2)

$55

$51

$48

$65

$49

$6

12.2%

$219

$212

$7

3.3%

Retailer share arrangements(2)

$(835)

$(851)

$(644)

$(714)

$(771)

$(64)

8.3%

$(3,044)

$(2,904)

$(140)

4.8%




















PAYMENT SOLUTIONS


















Purchase volume(1)

$4,710

$4,606

$4,288

$3,823

$4,366

$344

7.9%

$17,427

$16,160

$1,267

7.8%

Period-end loan receivables

$18,418

$17,639

$16,875

$16,513

$16,857

$1,561

9.3%

$18,418

$16,857

$1,561

9.3%

Average loan receivables

$17,931

$17,234

$16,562

$16,629

$16,386

$1,545

9.4%

$17,093

$15,752

$1,341

8.5%

Average active accounts (in thousands)(3)

10,037

9,675

9,433

9,545

9,421

616

6.5%

9,692

9,192

500

5.4%




















Interest and fees on loans

$627

$601

$566

$562

$574

$53

9.2%

$2,356

$2,181

$175

8.0%

Other income

$2

$4

$4

$2

$2

$-

- %

$12

$14

$(2)

(14.3)%

Retailer share arrangements

$(15)

$(17)

$(7)

$(4)

$(5)

$(10)

NM

$(43)

$(24)

$(19)

79.2%




















CARECREDIT


















Purchase volume(1)

$2,530

$2,573

$2,640

$2,421

$2,360

$170

7.2%

$10,164

$9,415

$749

8.0%

Period-end loan receivables

$9,497

$9,318

$9,086

$8,809

$8,860

$637

7.2%

$9,497

$8,860

$637

7.2%

Average loan receivables

$9,403

$9,160

$8,864

$8,788

$8,727

$676

7.7%

$9,056

$8,380

$676

8.1%

Average active accounts (in thousands)(3)

6,070

5,961

5,819

5,851

5,814

256

4.4%

5,932

5,634

298

5.3%




















Interest and fees on loans

$564

$551

$522

$514

$526

$38

7.2%

$2,151

$2,015

$136

6.7%

Other income

$7

$8

$11

$8

$11

$(4)

(36.4)%

$34

$62

$(28)

(45.2)%

Retailer share arrangements

$(5)

$(3)

$(2)

$(2)

$(3)

$(2)

66.7%

$(12)

$(9)

$(3)

33.3%




















TOTAL SYF


















Purchase volume(1)(2)

$40,320

$36,443

$34,268

$29,626

$36,565

$3,755

10.3%

$140,657

$131,814

$8,843

6.7%

Period-end loan receivables

$93,139

$87,521

$78,879

$77,853

$81,947

$11,192

13.7%

$93,139

$81,947

$11,192

13.7%

Average loan receivables, including held for sale

$89,340

$86,783

$77,853

$79,090

$78,369

$10,971

14.0%

$83,304

$75,702

$7,602

10.0%

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

77,382

75,482

69,344

71,323

71,348

6,034

8.5%

73,847

69,968

3,879

5.5%




















Interest and fees on loans(2)

$4,774

$4,617

$4,081

$4,172

$4,233

$541

12.8%

$17,644

$16,219

$1,425

8.8%

Other income(2)

$64

$63

$63

$75

$62

$2

3.2%

$265

$288

$(23)

(8.0)%

Retailer share arrangements(2)

$(855)

$(871)

$(653)

$(720)

$(779)

$(76)

9.8%

$(3,099)

$(2,937)

$(162)

5.5%




















(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)







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











Quarter Ended

Twelve Months

Ended

Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Dec 31,
2017

COMMON EQUITY MEASURES










GAAP Total common equity

$14,678

$13,996

$14,458

$14,356

$14,234

     Less: Goodwill

(1,024)

(1,024)

(1,024)

(991)

(991)

     Less: Intangible assets, net

(1,137)

(1,105)

(863)

(780)

(749)

Tangible common equity

$12,517

$11,867

$12,571

$12,585

$12,494

Adjustments for certain deferred tax liabilities and certain items in accumulated

comprehensive income (loss)

284

311

287

278

254

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

$12,801

$12,178

$12,858

$12,863

$12,748

     Adjustment related to capital components during transition







142

Basel III - Common equity Tier 1 (transition)







$12,890













RISK-BASED CAPITAL










Common equity Tier 1

$12,801

$12,178

$12,858

$12,863

$12,890

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

1,211

1,137

1,027

1,015

1,064

Risk-based capital

$14,012

$13,315

$13,885

$13,878

$13,954













ASSET MEASURES










Total average assets

$105,782

$100,449

$96,214

$95,707

$94,498

Adjustments for:










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

(1,845)

(1,836)

(1,670)

(1,560)

(1,392)

Total assets for leverage purposes

$103,937

$98,613

$94,544

$94,147

$93,106













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

$91,725

$85,941

$77,322

$76,509

$80,526

Risk-weighted assets - Basel III (transition)







$80,669













TANGIBLE COMMON EQUITY PER SHARE










GAAP book value per share

$20.42

$19.47

$19.37

$18.88

$18.47

     Less: Goodwill

(1.42)

(1.42)

(1.37)

(1.30)

(1.29)

     Less: Intangible assets, net

(1.59)

(1.54)

(1.16)

(1.03)

(0.96)

Tangible common equity per share

$17.41

$16.51

$16.84

$16.55

$16.22













ADJUSTED NET EARNINGS










GAAP net earnings

$783

$671

$696

$640

$385

$1,935

Adjustment for tax law change(2)

-

-

-

-

160

160

Adjusted net earnings

$783

$671

$696

$640

$545

$2,095












ADJUSTED DILUTED EPS










GAAP diluted EPS   

$1.09

$0.91

$0.92

$0.83

$0.49

$2.42

Adjustment for tax law change(2)

-

-

-

-

0.21

0.20

Adjusted diluted EPS

$1.09

$0.91

$0.92

$0.83

$0.70

$2.62












(1) Regulatory measures at December 31, 2018 are presented on an estimated basis.

(2) Adjustment to exclude the effects to Provision for income taxes in the quarter ended December 31, 2017, resulting from the Tax Act. 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/synchrony-financial-reports-fourth-quarter-net-earnings-of-783-million-or-1-09-per-diluted-share-300782195.html

SOURCE Synchrony

Released January 23, 2019