Synchrony Financial Reports First Quarter Net Earnings of $582 Million or $0.70 Per Diluted Share

STAMFORD, Conn.--(BUSINESS WIRE)-- Synchrony Financial (NYSE:SYF) today announced first quarter 2016 net earnings of $582 million, or $0.70 per diluted share. Highlights for the quarter included:

  • Total platform revenue increased 13% from the first quarter of 2015 to $2.9 billion
  • Loan receivables grew $8 billion, or 13%, from the first quarter of 2015 to $66 billion
  • Purchase volume increased 17% from the first quarter of 2015
  • Strong deposit growth continued, up $10 billion, or 29%, over the first quarter of 2015
  • Renewed key programs – Stein Mart and La-Z-Boy
  • Signed partnership with Marvel to offer Marvel MasterCard and co-promote Synchrony Bank deposit products
  • Launched the Citgo card program
  • Introduced a new value proposition at Walmart – 3-2-1 Save cash-back program

“Our strong operational momentum and solid financial results continued in the first quarter. Each of our business platforms delivered strong performance resulting in double-digit growth in overall purchase volume, platform revenue and loan receivables. To support this growth, we have significantly expanded our deposit base, growing deposits $10 billion over last year. Our innovative payments, analytics, loyalty and financing solutions are delivering value to our partners and cardholders and continue to build the foundation for future growth,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.

Business and Financial Highlights for the First Quarter of 2016

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

Earnings

  • Net interest income increased $334 million, or 12%, to $3.2 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 15%.
  • Total platform revenue increased $339 million, or 13%.
  • Provision for loan losses increased $216 million to $903 million due to loan receivables growth and lower loan loss reserve build in the first quarter of 2015.
  • Other income decreased $9 million to $92 million, driven primarily by an increase in loyalty programs, partially offset by higher interchange income.
  • Other expense increased $54 million to $800 million, primarily driven by growth.
  • Net earnings totaled $582 million for the quarter compared to $552 million in the first quarter of 2015.

Balance Sheet

  • Period-end loan receivables growth remained strong at 13%, primarily driven by purchase volume growth of 17% and average active account growth of 7%, and included the acquisition of the BP portfolio in the second quarter of 2015.
  • Deposits grew to $45 billion, up $10 billion, or 29%, and comprised 69% of funding compared to 59% last year.
  • Fully paid off Bank Term Loan on April 5, 2016.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) of $22 billion, or 27% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 18.1% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.5%.

Key Financial Metrics

  • Return on assets was 2.8% and return on equity was 18.1%.
  • Net interest margin was relatively stable, declining 3 basis points to 15.76%.
  • Efficiency ratio was 30.4% for the first quarter of 2016, a 180 basis point improvement from the first quarter of 2015 mainly due to strong revenue growth.

Credit Quality

  • Credit quality performance was relatively stable and in-line with expectations.
    • Loans 30+ days past due as a percentage of period-end loan receivables were 3.85% compared to 3.79% last year.
    • Net charge-offs as a percentage of total average loan receivables were 4.70% compared to 4.53% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 5.50% compared to 5.59% last year.

Sales Platforms

  • Retail Card platform revenue increased 15%, driven primarily by purchase volume growth of 17% and period-end loan receivables growth of 14%, which included the acquisition of the BP portfolio in the second quarter of 2015. Average active account growth was 7%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions platform revenue increased 14%, driven primarily by purchase volume growth of 15% and period-end loan receivables growth of 13%. Average active account growth was 12%. Loan receivables growth was led by the home furnishings and automotive product categories.
  • CareCredit platform revenue increased 6%, driven primarily by purchase volume growth of 14% and period-end loan receivables growth of 9%. Average active account growth was 7%. 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 in the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended March 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, April 22, 2016, 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 Synchrony Financial’s 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 12016#, and can be accessed beginning approximately two hours after the event through May 6, 2016.

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 (formerly GE Capital Retail Finance) 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 and twitter.com/SYFNews.

*Source: The Nilson Report (April, 2015, Issue # 1062) - based on 2014 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 platform 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 “platform revenue,” “platform revenue excluding retailer share arrangements” and “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 Three Months Ended

 

Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

 

1Q'16 vs. 1Q'15

Mar 31,

2016

Mar 31,

2015

 

YTD'16 vs. YTD'15

EARNINGS

Net interest income $3,209 $3,208 $3,103 $2,907 $2,875 $334 11.6% $3,209 $2,875 $334 11.6%
Retailer share arrangements (670) (734) (723) (621) (660) (10) 1.5% (670) (660) (10) 1.5%
Net interest income, after retailer share arrangements 2,539 2,474 2,380 2,286 2,215 324 14.6% 2,539 2,215 324 14.6%
Provision for loan losses 903 823 702 740 687 216 31.4% 903 687 216 31.4%
Net interest income, after retailer share arrangements and provision for loan losses 1,636 1,651 1,678 1,546 1,528 108 7.1% 1,636 1,528 108 7.1%
Other income 92 87 84 120 101 (9) (8.9)% 92 101 (9) (8.9)%
Other expense 800 870 843 805 746 54 7.2% 800 746 54 7.2%
Earnings before provision for income taxes 928 868 919 861 883 45 5.1% 928 883 45 5.1%
Provision for income taxes 346 321 345 320 331 15 4.5% 346 331 15 4.5%
Net earnings $582 $547 $574 $541 $552 $30 5.4% $582 $552 $30 5.4%
Net earnings attributable to common stockholders $582 $547 $574 $541 $552 $30 5.4% $582 $552 $30 5.4%
 

COMMON SHARE STATISTICS

Basic EPS $0.70 $0.66 $0.69 $0.65 $0.66 $0.04 6.1% $0.70 $0.66 $0.04 6.1%
Diluted EPS $0.70 $0.65 $0.69 $0.65 $0.66 $0.04 6.1% $0.70 $0.66 $0.04 6.1%
Common stock price $28.66 $30.41 $31.30 $32.93 $30.35 $(1.69) (5.6)% $28.66 $30.35 $(1.69) (5.6)%
Book value per share $15.84 $15.12 $14.58 $13.89 $13.24 $2.60 19.6% $15.84 $13.24 $2.60 19.6%
Tangible common equity per share(1) $13.86 $13.14 $12.67 $12.06 $11.43 $2.43 21.3% $13.86 $11.43 $2.43 21.3%
 
Beginning common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 833.8 - - %
Issuance of common shares - - - - - - - % - - - - %
Shares repurchased - - - - - - - % - - - - %
Ending common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 833.8 - - %
 
Weighted average common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 833.8 - - %
Weighted average common shares outstanding (fully diluted) 835.5 835.8 835.8 835.4 835.0 0.5 0.1% 835.5 835.0 0.5 0.1%
                                                         
(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 Three Months Ended
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

 

1Q'16 vs. 1Q'15

Mar 31,

2016

Mar 31,

2015

 

YTD'16 vs. YTD'15

PERFORMANCE METRICS

Return on assets(2) 2.8% 2.7% 2.9% 2.9% 3.0% (0.2)% 2.8% 3.0% (0.2)%
Return on equity(3) 18.1% 17.5% 19.2% 19.2% 20.8% (2.7)% 18.1% 20.8% (2.7)%
Return on tangible common equity(4) 20.8% 20.1% 22.0% 22.2% 24.1% (3.3)% 20.8% 24.1% (3.3)%
Net interest margin(5) 15.76% 15.73% 15.97% 15.77% 15.79% (0.03)% 15.76% 15.79% (0.03)%
Efficiency ratio(6) 30.4% 34.0% 34.2% 33.5% 32.2% (1.8)% 30.4% 32.2% (1.8)%
Other expense as a % of average loan receivables, including held for sale 4.82% 5.28% 5.35% 5.37% 5.06% (0.24)% 4.82% 5.06% (0.24)%
Effective income tax rate 37.3% 37.0% 37.5% 37.2% 37.5% (0.2)% 37.3% 37.5% (0.2)%
 

CREDIT QUALITY METRICS

Net charge-offs as a % of average loan receivables, including held for sale 4.70% 4.23% 4.02% 4.63% 4.53% 0.17% 4.70% 4.53% 0.17%
30+ days past due as a % of period-end loan receivables(7) 3.85% 4.06% 4.02% 3.53% 3.79% 0.06% 3.85% 3.79% 0.06%
90+ days past due as a % of period-end loan receivables(7) 1.84% 1.86% 1.73% 1.52% 1.81% 0.03% 1.84% 1.81% 0.03%
Net charge-offs $780 $697 $633 $693 $668 $112 16.8% $780 $668 $112 16.8%
Loan receivables delinquent over 30 days(7) $2,538 $2,772 $2,553 $2,171 $2,209 $329 14.9% $2,538 $2,209 $329 14.9%
Loan receivables delinquent over 90 days(7) $1,212 $1,273 $1,102 $933 $1,056 $156 14.8% $1,212 $1,056 $156 14.8%
 
Allowance for loan losses (period-end) $3,620 $3,497 $3,371 $3,302 $3,255 $365 11.2% $3,620 $3,255 $365 11.2%
Allowance coverage ratio(8) 5.50% 5.12% 5.31% 5.38% 5.59% (0.09)% 5.50% 5.59% (0.09)%
 

BUSINESS METRICS

Purchase volume(9) $26,977 $32,460 $29,206 $28,810 $23,139 $3,838 16.6% $26,977 $23,139 $3,838 16.6%
Period-end loan receivables $65,849 $68,290 $63,520 $61,431 $58,248 $7,601 13.0% $65,849 $58,248 $7,601 13.0%
Credit cards $63,309 $65,773 $60,920 $58,827 $55,866 $7,443 13.3% $63,309 $55,866 $7,443 13.3%
Consumer installment loans $1,184 $1,154 $1,171 $1,138 $1,062 $122 11.5% $1,184 $1,062 $122 11.5%
Commercial credit products $1,318 $1,323 $1,380 $1,410 $1,295 $23 1.8% $1,318 $1,295 $23 1.8%
Other $38 $40 $49 $56 $25 $13 52.0% $38 $25 $13 52.0%
Average loan receivables, including held for sale $66,705 $65,406 $62,504 $60,094 $59,775 $6,930 11.6% $66,705 $59,775 $6,930 11.6%
Period-end active accounts (in thousands)(10) 64,689 68,314 62,831 61,718 59,761 4,928 8.2% 64,689 59,761 4,928 8.2%
Average active accounts (in thousands)(10) 66,134 64,892 62,247 60,923 61,604 4,530 7.4% 66,134 61,604 4,530 7.4%
 

LIQUIDITY

Liquid assets
Cash and equivalents $12,500 $12,325 $12,271 $10,621 $11,218 $1,282 11.4% $12,500 $11,218 $1,282 11.4%
Total liquid assets $14,915 $14,836 $15,305 $13,660 $13,813 $1,102 8.0% $14,915 $13,813 $1,102 8.0%
Undrawn credit facilities
Undrawn committed securitization financings $7,325 $6,075 $6,550 $6,125 $6,600 $725 11.0% $7,325 $6,600 $725 11.0%
Total liquid assets and undrawn credit facilities $22,240 $20,911 $21,855 $19,785 $20,413 $1,827 9.0% $22,240 $20,413 $1,827 9.0%
Liquid assets % of total assets 18.27% 17.66% 19.30% 18.07% 19.04% (0.77)% 18.27% 19.04% (0.77)%
Liquid assets including undrawn committed securitization financings % of total assets 27.24% 24.90% 27.56% 26.17% 28.13% (0.89)% 27.24% 28.13% (0.89)%
                                                         
(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 Three Months Ended
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

 

1Q'16 vs. 1Q'15

Mar 31,

2016

Mar 31,

2015

 

YTD'16 vs. YTD'15

Interest income:
Interest and fees on loans $3,498 $3,494 $3,379 $3,166 $3,140 $358 11.4% $3,498 $3,140 $358 11.4%
Interest on investment securities 22 15 13 11 10 12 120.0% 22 10 12 120.0%
Total interest income 3,520 3,509 3,392 3,177 3,150 370 11.7% 3,520 3,150 370 11.7%
 
Interest expense:
Interest on deposits 172 165 159 146 137 35 25.5% 172 137 35 25.5%
Interest on borrowings of consolidated securitization entities 58 56 54 53 52 6 11.5% 58 52 6 11.5%
Interest on third-party debt 81 80 76 71 82 (1) (1.2)% 81 82 (1) (1.2)%
Interest on related party debt - - - - 4 (4) (100.0)% - 4 (4) (100.0)%
Total interest expense 311 301 289 270 275 36 13.1% 311 275 36 13.1%
                     
Net interest income 3,209 3,208 3,103 2,907 2,875 334 11.6% 3,209 2,875 334 11.6%
 
Retailer share arrangements (670) (734) (723) (621) (660) (10) 1.5% (670) (660) (10) 1.5%
Net interest income, after retailer share arrangements 2,539 2,474 2,380 2,286 2,215 324 14.6% 2,539 2,215 324 14.6%
 
Provision for loan losses 903 823 702 740 687 216 31.4% 903 687 216 31.4%
Net interest income, after retailer share arrangements and provision for loan losses 1,636 1,651 1,678 1,546 1,528 108 7.1% 1,636 1,528 108 7.1%
 
Other income:
Interchange revenue 130 147 135 123 100 30 30.0% 130 100 30 30.0%
Debt cancellation fees 64 62 61 61 65 (1) (1.5)% 64 65 (1) (1.5)%
Loyalty programs (110) (125) (122) (94) (78) (32) 41.0% (110) (78) (32) 41.0%
Other 8 3 10 30 14 (6) (42.9)% 8 14 (6) (42.9)%
Total other income 92 87 84 120 101 (9) (8.9)% 92 101 (9) (8.9)%
 
Other expense:
Employee costs 280 285 268 250 239 41 17.2% 280 239 41 17.2%
Professional fees 146 165 162 156 162 (16) (9.9)% 146 162 (16) (9.9)%
Marketing and business development 94 128 115 108 82 12 14.6% 94 82 12 14.6%
Information processing 82 83 77 74 63 19 30.2% 82 63 19 30.2%
Other 198 209 221 217 200 (2) (1.0)% 198 200 (2) (1.0)%
Total other expense 800 870 843 805 746 54 7.2% 800 746 54 7.2%
                     
Earnings before provision for income taxes 928 868 919 861 883 45 5.1% 928 883 45 5.1%
Provision for income taxes 346 321 345 320 331 15 4.5% 346 331 15 4.5%
Net earnings attributable to common shareholders $582 $547 $574 $541 $552 $30 5.4% $582 $552 $30 5.4%
                                                         
                 
SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION(1)
(unaudited, $ in millions)
Quarter Ended
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Mar 31, 2016 vs.

Mar 31, 2015

Assets
Cash and equivalents $12,500 $12,325 $12,271 $10,621 $11,218 $1,282 11.4%
Investment securities 2,949 3,142 3,596 3,682 3,121 (172) (5.5)%
Loan receivables:
Unsecuritized loans held for investment 41,730 42,826 38,325 36,019 33,424 8,306 24.9%
Restricted loans of consolidated securitization entities 24,119 25,464 25,195 25,412 24,824 (705) (2.8)%
Total loan receivables 65,849 68,290 63,520 61,431 58,248 7,601 13.0%
Less: Allowance for loan losses (3,620) (3,497) (3,371) (3,302) (3,255) (365) 11.2%
Loan receivables, net 62,229 64,793 60,149 58,129 54,993 7,236 13.2%
Loan receivables held for sale - - - - 359 (359) (100.0)%
Goodwill 949 949 949 949 949 - - %
Intangible assets, net 702 701 646 575 557 145 26.0%
Other assets 2,327 2,080 1,679 1,640 1,362 965 70.9%
Total assets $81,656 $83,990 $79,290 $75,596 $72,559 $9,097 12.5%
 
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts $44,721 $43,215 $40,323 $37,539 $34,695 $10,026 28.9%
Non-interest-bearing deposit accounts 256 152 140 143 162 94 58.0%
Total deposits 44,977 43,367 40,463 37,682 34,857 10,120 29.0%
Borrowings:
Borrowings of consolidated securitization entities 12,423 13,589 13,624 13,933 13,802 (1,379) (10.0)%
Bank term loan 1,494 4,133 4,630 5,126 5,622 (4,128) (73.4)%
Senior unsecured notes 6,559 6,557 5,560 4,569 4,567 1,992 43.6%
Related party debt - - - - - - - %
Total borrowings 20,476 24,279 23,814 23,628 23,991 (3,515) (14.7)%
Accrued expenses and other liabilities 2,999 3,740 2,855 2,708 2,675 324 12.1%
Total liabilities 68,452 71,386 67,132 64,018 61,523 6,929 11.3%
Equity:
Common stock 1 1 1 1 1 - - %
Additional paid-in capital 9,359 9,351 9,431 9,422 9,418 (59) (0.6)%
Retained earnings 3,875 3,293 2,746 2,172 1,631 2,244 137.6%
Accumulated other comprehensive income: (31) (41) (20) (17) (14) (17) 121.4%
Total equity 13,204 12,604 12,158 11,578 11,036 2,168 19.6%
Total liabilities and equity $81,656 $83,990 $79,290 $75,596 $72,559 $9,097 12.5%
                                           
(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
Mar 31, 2016 Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015
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 $12,185 $16 0.53% $12,070 $9 0.30% $11,059 $7 0.25% $10,728 $6 0.22% $11,331 $6 0.21%
Securities available for sale 2,995 6 0.81% 3,445 6 0.69% 3,534 6 0.67% 3,107 5 0.65% 2,725 4 0.60%
 
Loan receivables:
Credit cards, including held for sale 64,194 3,436 21.53% 62,834 3,432 21.67% 59,890 3,315 21.96% 57,588 3,106 21.63% 57,390 3,079 21.76%
Consumer installment loans 1,159 27 9.37% 1,163 26 8.87% 1,160 27 9.23% 1,101 26 9.47% 1,057 25 9.59%
Commercial credit products 1,313 35 10.72% 1,361 36 10.49% 1,400 36 10.20% 1,372 34 9.94% 1,305 36 11.19%
Other 39 - - % 48 - - % 54 1 NM 33 - - % 23 - - %
Total loan receivables, including held for sale 66,705 3,498 21.09% 65,406 3,494 21.19% 62,504 3,379 21.45% 60,094 3,166 21.13% 59,775 3,140 21.30%
Total interest-earning assets 81,885 3,520 17.29% 80,921 3,509 17.20% 77,097 3,392 17.46% 73,929 3,177 17.24% 73,831 3,150 17.30%
 
Non-interest-earning assets:
Cash and due from banks 1,277 1,268 1,216 583 497
Allowance for loan losses (3,583) (3,440) (3,341) (3,285) (3,272)
Other assets 3,256 3,133 2,869 2,758 2,639
Total non-interest-earning assets 950 961 744 56 (136)
         
Total assets $82,835 $81,882 $77,841 $73,985 $73,695
 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $44,101 $172 1.57% $42,079 $165 1.56% $39,048 $159 1.62% $35,816 $146 1.64% $34,887 $137 1.59%
Borrowings of consolidated securitization entities 12,950 58 1.80% 13,550 56 1.64% 13,715 54 1.56% 14,011 53 1.52% 14,087 52 1.50%
Bank term loan(2) 2,565 24 3.76% 4,507 28 2.46% 4,878 29 2.36% 5,374 32 2.39% 6,498 47 2.93%
Senior unsecured notes 6,558 57 3.50% 5,810 52 3.55% 5,312 47 3.51% 4,568 39 3.42% 4,071 35 3.49%
Related party debt - - - % - - - % - - - % - - - % 407 4 3.99%
Total interest-bearing liabilities 66,174 311 1.89% 65,946 301 1.81% 62,953 289 1.82% 59,769 270 1.81% 59,950 275 1.86%
 
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 226 147 149 166 142
Other liabilities 3,534 3,396 2,859 2,750 2,854
Total non-interest-bearing liabilities 3,760 3,543 3,008 2,916 2,996
         
Total liabilities 69,934 69,489 65,961 62,685 62,946
 
Equity
Total equity 12,901 12,393 11,880 11,300 10,749
         
Total liabilities and equity $82,835 $81,882 $77,841 $73,985 $73,695
Net interest income $3,209 $3,208 $3,103 $2,907 $2,875
 
Interest rate spread(3) 15.40% 15.39% 15.64% 15.43% 15.44%
Net interest margin(4) 15.76% 15.73% 15.97% 15.77% 15.79%
                                                                                       
(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 March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, and March 31, 2015 were 2.47%, 2.26%, 2.23%, 2.21%, and 2.21%, 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
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Mar 31, 2016 vs.

Mar 31, 2015

BALANCE SHEET STATISTICS

Total common equity $13,204 $12,604 $12,158 $11,578 $11,036 $2,168 19.6%
Total common equity as a % of total assets 16.17% 15.01% 15.33% 15.32% 15.21% 0.96%
 
Tangible assets $80,005 $82,340 $77,695 $74,072 $71,053 $8,952 12.6%
Tangible common equity(2) $11,553 $10,954 $10,563 $10,054 $9,530 $2,023 21.2%
Tangible common equity as a % of tangible assets(2) 14.44% 13.30% 13.60% 13.57% 13.41% 1.03%
Tangible common equity per share(2) $13.86 $13.14 $12.67 $12.06 $11.43 $2.43 21.3%
 

REGULATORY CAPITAL RATIOS(3)

Basel III Transition Basel I  
Total risk-based capital ratio(4)(9) 19.4% 18.1% 18.8% 18.6% 18.2%
Tier 1 risk-based capital ratio(5)(9) 18.1% 16.8% 17.5% 17.3% 16.9%
Tier 1 common ratio(6)(9) n/a n/a n/a n/a 16.9%
Tier 1 leverage ratio(7)(9) 14.8% 14.4% 14.6% 14.6% 13.7%
Common equity Tier 1 capital ratio(8)(9) 18.1% 16.8% 17.5% 17.3% n/a
 
Basel III Fully Phased-in
Common equity Tier 1 capital ratio(8) 17.5% 15.9% 16.7% 16.5% 16.4%
                                           
(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 March 31, 2016 are preliminary and therefore subject to change. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these ratios are non-GAAP measures. See Reconciliation of Non-GAAP Measures and Calculation of Regulatory Measures for components of capital ratio calculations.
(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 common ratio is the ratio of common equity Tier 1 capital divided by risk-weighted assets.
(7) Tier 1 leverage ratio reported under Basel III transition rules is calculated based on Tier 1 capital divided by total average assets, after certain adjustments. Total assets, after certain adjustments is used as the denominator for prior periods calculated under Basel I rules.
(8) 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.
(9) Beginning June 30, 2015, regulatory capital ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I rules for period ending March 31, 2015.
                       
SYNCHRONY FINANCIAL
PLATFORM RESULTS AND RECONCILIATION OF NON-GAAP MEASURES
(unaudited, $ in millions)
Quarter Ended Three Months Ended
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

 

1Q'16 vs. 1Q'15

Mar 31,

2016

Mar 31,

2015

 

YTD'16 vs. YTD'15

RETAIL CARD

Purchase volume(1)(2) $21,550 $26,768 $23,560 $23,452 $18,410 $3,140 17.1% $21,550 $18,410 $3,140 17.1%
Period-end loan receivables $45,113 $47,412 $43,432 $42,315 $39,685 $5,428 13.7% $45,113 $39,685 $5,428 13.7%
Average loan receivables, including held for sale $45,900 $44,958 $42,933 $41,303 $40,986 $4,914 12.0% $45,900 $40,986 $4,914 12.0%
Average active accounts (in thousands)(2)(3) 52,969 52,038 49,953 48,981 49,617 3,352 6.8% 52,969 49,617 3,352 6.8%
 
Interest and fees on loans(2) $2,614 $2,594 $2,508 $2,335 $2,337 $277 11.9% $2,614 $2,337 $277 11.9%
Other income(2) 79   76   70   107   86   (7) (8.1)% 79 86 (7) (8.1)%
Platform revenue, excluding retailer share arrangements(2) 2,693 2,670 2,578 2,442 2,423 270 11.1% 2,693 2,423 270 11.1%
Retailer share arrangements(2) (661) (723) (708) (606) (651) (10) 1.5% (661) (651) (10) 1.5%
Platform revenue(2) $2,032 $1,947 $1,870 $1,836 $1,772 $260 14.7% $2,032 $1,772 $260 14.7%
 

PAYMENT SOLUTIONS

Purchase volume(1) $3,392 $3,714 $3,635 $3,371 $2,948 $444 15.1% $3,392 $2,948 $444 15.1%
Period-end loan receivables $13,420 $13,543 $12,933 $12,194 $11,833 $1,587 13.4% $13,420 $11,833 $1,587 13.4%
Average loan receivables $13,482 $13,192 $12,523 $11,971 $11,970 $1,512 12.6% $13,482 $11,970 $1,512 12.6%
Average active accounts (in thousands)(3) 8,134 7,896 7,468 7,231 7,271 863 11.9% 8,134 7,271 863 11.9%
 
Interest and fees on loans $457 $462 $442 $412 $403 $54 13.4% $457 $403 $54 13.4%
Other income 4   3   5   4   5   (1) (20.0)% 4 5 (1) (20.0)%
Platform revenue, excluding retailer share arrangements 461 465 447 416 408 53 13.0% 461 408 53 13.0%
Retailer share arrangements (7) (10) (13) (14) (8) 1 (12.5)% (7) (8) 1 (12.5)%
Platform revenue $454 $455 $434 $402 $400 $54 13.5% $454 $400 $54 13.5%
 

CARECREDIT

Purchase volume(1) $2,035 $1,978 $2,011 $1,987 $1,781 $254 14.3% $2,035 $1,781 $254 14.3%
Period-end loan receivables $7,316 $7,335 $7,155 $6,922 $6,730 $586 8.7% $7,316 $6,730 $586 8.7%
Average loan receivables $7,323 $7,256 $7,048 $6,820 $6,819 $504 7.4% $7,323 $6,819 $504 7.4%
Average active accounts (in thousands)(3) 5,031 4,958 4,826 4,711 4,716 315 6.7% 5,031 4,716 315 6.7%
 
Interest and fees on loans $427 $438 $429 $419 $400 $27 6.8% $427 $400 $27 6.8%
Other income 9   8   9   9   10   (1) (10.0)% 9 10 (1) (10.0)%
Platform revenue, excluding retailer share arrangements 436 446 438 428 410 26 6.3% 436 410 26 6.3%
Retailer share arrangements (2) (1) (2) (1) (1) (1) 100.0% (2) (1) (1) 100.0%
Platform revenue $434 $445 $436 $427 $409 $25 6.1% $434 $409 $25 6.1%
 

TOTAL SYF

Purchase volume(1)(2) $26,977 $32,460 $29,206 $28,810 $23,139 $3,838 16.6% $26,977 $23,139 $3,838 16.6%
Period-end loan receivables $65,849 $68,290 $63,520 $61,431 $58,248 $7,601 13.0% $65,849 $58,248 $7,601 13.0%
Average loan receivables, including held for sale $66,705 $65,406 $62,504 $60,094 $59,775 $6,930 11.6% $66,705 $59,775 $6,930 11.6%
Average active accounts (in thousands)(2)(3) 66,134 64,892 62,247 60,923 61,604 4,530 7.4% 66,134 61,604 4,530 7.4%
 
Interest and fees on loans(2) $3,498 $3,494 $3,379 $3,166 $3,140 $358 11.4% $3,498 $3,140 $358 11.4%
Other income(2) 92   87   84   120   101   (9) (8.9)% 92 101 (9) (8.9)%
Platform revenue, excluding retailer share arrangements(2) 3,590 3,581 3,463 3,286 3,241 349 10.8% 3,590 3,241 349 10.8%
Retailer share arrangements(2) (670) (734) (723) (621) (660) (10) 1.5% (670) (660) (10) 1.5%
Platform revenue(2) $2,920 $2,847 $2,740 $2,665 $2,581 $339 13.1% $2,920 $2,581 $339 13.1%
                                                             
(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
Mar 31,

2016

Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

COMMON EQUITY MEASURES

GAAP Total common equity $13,204 $12,604 $12,158 $11,578 $11,036
Less: Goodwill (949) (949) (949) (949) (949)
Less: Intangible assets, net (702) (701) (646) (575) (557)
Tangible common equity $11,553 $10,954 $10,563 $10,054 $9,530

Adjustments for certain other intangible assets, deferred tax liabilities
and certain items in accumulated comprehensive income (loss)

293
Basel I - Common Equity Tier 1 $9,823
Adjustments for certain other intangible assets and deferred tax liabilities (12)
 
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) 281 280 291 293  
Basel III - Common equity Tier 1 (fully phased-in) $11,834 $11,234 $10,854 $10,347 $9,811
Adjustment related to capital components during transition 265 399 375 331
Basel III - Common equity Tier I (transition) $12,099 $11,633 $11,229 $10,678
 

RISK-BASED CAPITAL

Common equity Tier 1(3) $12,099 $11,633 $11,229 $10,678 $9,823
Add: Allowance for loan losses includible in risk-based capital 869 898 833 804 757
Risk-based capital(3) $12,968 $12,531 $12,062 $11,482 $10,580
 

ASSET MEASURES

Total assets(4) $82,835 $81,882 $77,841 $73,985 $72,559
Adjustments for:

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

(1,117) (991) (931) (903) (1,213)
Other - - 104 60 136
Total assets for leverage purposes(3) $81,718 $80,891 $77,014 $73,142 $71,482
 
Risk-weighted assets - Basel I n/a n/a n/a n/a $58,020
Risk-weighted assets - Basel III (fully phased-in)(5) $67,701 $70,493 $65,125 $62,814 $59,762
Risk-weighted assets - Basel III (transition)(5) $66,693 $69,224 $64,090 $61,829 n/a
 

TANGIBLE COMMON EQUITY PER SHARE

GAAP book value per share $15.84 $15.12 $14.58 $13.89 $13.24
Less: Goodwill (1.14) (1.14) (1.14) (1.14) (1.14)
Less: Intangible assets, net (0.84) (0.84) (0.77) (0.69) (0.67)
Tangible common equity per share $13.86 $13.14 $12.67 $12.06 $11.43
                                   
(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 March 31, 2016 are presented on an estimated basis.
(3) Beginning June 30, 2015, regulatory capital amounts are calculated under Basel III rules subject to transition provisions. The company reported under Basel I rules for period ending March 31, 2015.
(4) Represents total average assets beginning June 30, 2015 and total assets for period ending March 31, 2015.
(5) 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.

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

Source: Synchrony Financial