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Synchrony Financial Reports Second Quarter Net Earnings of $496 Million or

STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE: SYF) today announced second quarter 2017 net earnings of $496 million, or $0.61 per diluted share. Highlights for the quarter included:

  • Net interest income increased 13% from the second quarter of 2016 to $3.6 billion
  • Loan receivables grew $7 billion, or 11%, from the second quarter of 2016 to $75 billion
  • Purchase volume increased 6% from the second quarter of 2016
  • Strong deposit growth continued, up $6 billion, or 14%, over the second quarter of 2016
  • Signed a new partnership with zulily
  • Launched new programs with Nissan and Infiniti
  • Renewed relationships: MEGA Group USA, City Furniture, and National Veterinary Associates
  • Announced new capital plan increasing quarterly common stock dividend to $0.15 per share and share repurchases of up to $1.64 billion of Synchrony Financial common stock

“Strong execution of our strategies yielded solid performance across our three sales platforms. Organic growth remains an important business driver and contributed meaningfully to this quarter’s results. Our focus on the application and development of digital innovations is yielding results as we continue to drive strong online sales volume growth and penetration. A primary funding objective for us is growing deposits, and we continued to execute on this, achieving double-digit growth again this quarter,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We were pleased to announce a meaningful increase in our capital return to shareholders through dividends and share repurchases--this is a key priority, along with continued growth of the business while maintaining solid returns and a strong balance sheet.”

Business and Financial Highlights for the Second Quarter of 2017

All comparisons below are for the second quarter of 2017 compared to the second quarter of 2016, unless otherwise noted.

Earnings

  • Net interest income increased $425 million, or 13%, to $3.6 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 16%.
  • Provision for loan losses increased $305 million to $1,326 million driven by credit normalization and loan receivables growth.
  • Other income was down $26 million to $57 million, largely driven by an increase in loyalty programs expense.
  • Other expense increased $72 million to $911 million, primarily driven by business growth.
  • Net earnings totaled $496 million compared to $489 million in the second quarter of 2016.

Balance Sheet

  • Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 6% and average active account growth of 5%.
  • Deposits grew to $53 billion, up $6 billion, or 14%, and comprised 72% of funding compared to 71% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $22 billion, or 24% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 17.4% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.2%.

Key Financial Metrics

  • Return on assets was 2.2% and return on equity was 13.8%.
  • Net interest margin increased 26 basis points to 16.20%.
  • Efficiency ratio was 30.1%, compared to 31.9% in the second quarter of 2016, driven by strong positive operating leverage.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.25% compared to 3.79% last year.
  • Net charge-offs as a percentage of total average loan receivables were 5.42% compared to 4.51% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 6.63% compared to 5.70% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 12%, driven primarily by period-end loan receivables growth of 10%. Purchase volume growth was 7% and average active account growth was 3%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 14%, driven primarily by period-end loan receivables growth of 11%. Purchase volume growth was 6%, adjusted to exclude the impact from the hhgregg bankruptcy, and average active account growth was 11%. Loan receivables growth was led by home furnishings and automotive.
  • CareCredit interest and fees on loans increased 12%, driven primarily by period-end loan receivables growth of 11%. Purchase volume growth was 11% and average active account growth was 10%. Loan receivables growth was led by dental and veterinary.

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, 2016, as filed February 23, 2017, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. 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, July 21, 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 22017#, and can be accessed beginning approximately two hours after the event through August 4, 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 365,000 locations...


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