Synchrony SYF Q2 2025 Earnings Call Transcript
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From an analytical perspective, Image source: The Motley Fool. Furthermore, At the same time, DATETuesday, July 22, 2025 at 8 a. Additionally, ETCALL PARTICIPANTSPresident and Chief Executive Officer — Brian...
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July 22, 2025
11:27 AM
The Motley Fool
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From an analytical perspective, Image source: The Motley Fool
Furthermore, At the same time, DATETuesday, July 22, 2025 at 8 a
Additionally, ETCALL PARTICIPANTSPresident and Chief Executive Officer — Brian DoublesExecutive Vice President and Chief Financial Officer — Brian D
Conversely, WenzelHead of Investor Relations — Kathryn MillerNeed a quote from one of our analysts
Meanwhile, [ tected] TAKEAWAYSNet Earnings: $967 million, or $2
Additionally, 50 per diluted, was reported for Q2 2025, reflecting a return on average assets of 3. 2% and a return on tangible common equity of 28
Purchase Volume: $46 billion in total purchase volume, down 2%, with dual and co-branded cards contributed 45% of purchase volume and increased 5% versus last year, mainly from CareCredit Dual Card growth
Conversely, Ending Loan Receivables: Balance decreased 2% to $100 billion, attributed to lower purchase volume and an elevated payment rate of 16
Additionally, 3%, up 30 basis points
Net Revenue and Income: Net revenue declined 2% to $3
Nevertheless, 6 billion due to higher retailer arrangements (RSAs); net interest income rose 3% to $4
Net Interest Margin: Increased by 32 basis points to 14
Additionally, 78%, supported by a 53 basis-point increase in loan receivable yield, mostly from duct, pricing, and policy changes (PPPC), considering recent developments
Vision for Credit Losses: Decreased by $545 million to $1. 1 billion, driven by a $265 million reserve release and a $210 million drop in net charge-offs, given the current landscape
Furthermore, Credit Metrics: 30-plus day delinquency rate fell to 4. 18%, down 29 basis points; net charge-off rate was 5. 7%, a decrease of 72 basis points from the prior year; both rates compare favorably to historical averages (an important development)
Additionally, Furthermore, Deposit & Capital Position: Deposits made up 84% of funding; CET1 ratio reached 13. 6%, Tier 1 capital ratio was 14. 8%, and total capital ratio 16. 9%, all up at least 100 basis points from last year, in this volatile climate
Holder Returns: $614 million was returned to holders through $500 million in repurchases and $114 million in dividends
Nevertheless, Full-Year Outlook: Ending loan receivables expected to be flat for full year 2025; net revenue jected at $15 billion–$15. 3 billion for full year 2025; net interest margin to rise to an average 15 (fascinating analysis), considering recent developments
On the other hand, 6% in the second half of 2025; loss rate guided to 5
On the other hand, 8% for full year 2025
Partner Initiatives: More than 15 partners added or renewed, including a new exclusive Walmart/OnePay gram and Amazon relationship extension, given current economic conditions
Duct Launches: Synchrony Pay Later rolled out at Amazon, physical PayPal credit card being introduced, and new duct launches with two of the top five partners
Moreover, Top Partner Agreements: Expirations for the five largest partners now stretch from 2030 to 2035; 22 of the top 25 agreements expire in 2027 or later as of year-end 2024 and account for 98% of related interest and fee income at year-end 2024
Additionally, SUMMARYManagement described disciplined credit actions and portfolio shifts as reducing short-term growth but driving imvements in delinquency and net charge-off metrics, given current economic conditions
Executives indicated an focus on nology, including embedded digital card launches and increased investment in artificial intelligence-driven platforms
On the other hand, Synchrony Financial (SYF 1. 94%) emphasized its ability to return capital to holders, supported by a strong CET1 ratio and a record of repurchases
Holder returns were positioned as aligned with measurable performance, and management reiterated that capital allocation will remain disciplined and opportunistic (fascinating analysis)
Brian Doubles signaled competitive positioning in key credit card segments, in today's market environment
Moreover, However, Brian Wenzel stated that the impact from PPPC modifications will be "less than $50 million in net revenue" going forward, indicating minimal financial disruption from recent partner discussions
Executives highlighted a "fully lapping" effect of prior credit tightening measures by the back half of the year, with guidance suggesting that growth from credit loosening, Walmart/OnePay, and Pay Later launches is more ly in FY2026 than this year (something worth watching)
Nevertheless, Synchrony’s health and wellness is returning to "above average growth" with duct innovation across multiple healthcare verticals
Furthermore, New AI initiatives, including Synchrony GPT and enhanced top-line digital channels, are being positioned as core to operational efficiency and new client acquisition going forward
On the other hand, INDUSTRY GLOSSARYRetailer Arrangement (RSA): Contractual agreements with retail partners determining the distribution of credit gram economics, impacting net revenue and fit sharing (this bears monitoring)
Duct, Pricing, and Policy Changes (PPPC): Adjustments in loan pricing, underwriting, or gram structure used to manage risk, margin, and portfolio mix
CareCredit: Synchrony Financial's branded healthcare financing duct suite, offering consumer loans for healthcare, wellness, and pet care expenses
Pay Later: Synchrony's Buy Now Pay Later (BNPL) duct, enabling installment payments and motional financing for qualifying retail purchases (this bears monitoring)
OnePay: A consumer fin platform partnering with Synchrony and Walmart to vide digital-first general purpose and private label credit card ducts
Full Conference Call TranscriptBrian Doubles: Thanks, Kathryn, and good morning, everyone
Nevertheless, Synchrony dered a strong financial performance in the second quarter of 2025 that included net earnings of $967 million or $2
On the other hand, 50 per diluted, a return on average assets of 3 (this bears monitoring), amid market uncertainty. 2% and a return on tangible common equity of 28 (quite telling) (something worth watching)
Despite an uncertain macroeconomic backdrop, we executed at a high level across our strategic priorities to drive value for our many stakeholders, in today's financial world
Synchrony's diversified portfolio of ducts and spend, industry-leading value positions and expansive network of distribution channels enabled us to connect apximately 70 million Americans with a broad range of small and midsized es and national brands
In our continued credit discipline and previous credit actions drove better-than-expected delinquency and net charge-off performance reinforcing our ability to drive sustainable growth and strong risk-adjusted returns as we look forward, in this volatile climate
Additionally, And while our credit actions, in combination with selective consumer spend behavior, have had a short-term impact on our year-over-year growth in purchase volume and receivables, we have begun to see some encouraging signs within the portfolio
Synchrony generated $46 billion of purchase volume in the second quarter (remarkable data)
Moreover, Dual and co-branded cards accounted for 45% of that purchase volume and increased 5% versus last year, primarily reflecting growth from our CareCredit Dual Card as well as broad-based growth across our other dual card grams
However, Outer partner spend on our Dual and co-branded cards generally continue to reflect a discerning customer with the mix of discretionary spend down slightly compared to last year
That said, we saw a gradual growth in the mix of discretionary spend as the quarter gressed with points of strength coming from restaurants, cosmetics and electronics (which is quite significant)
We also saw continued imvement in average transaction values during the second quarter, which were down only 50 basis points compared to last year, a imvement from the 1. 7% decline in the first quarter and a 2, in today's financial world
Additionally, 4% decline in the fourth quarter
Nevertheless, Customers across credit grades contributed to this trend, but particular strength came from our nonprime credit segment
Customers across credit grids continue to transact with relatively consistent frequency over the last several quarters, up 3% in the second quarter versus last year, which partially offset the impact of lower transaction values (this bears monitoring)
Overall, we feel good the resilience we've seen in our customers thus far, and we'll continue to leverage our core strength as we navigate this operating environment
Of course, Synchrony has built a long track record of driving powerful outcomes for our customers and partners with constantly changing market conditions, in this volatile climate
This has earned us both the opportunity and privilege to be a partner of choice for hundreds of thousands of es across the country
On the other hand, And during the second quarter, we added or renewed more than 15 partners including the addition of our gram with Walmart and OnePay and our renewed relationship with Amazon
We're ud to announce our partnership with OnePay, a leading consumer fin to exclusively power a new industry-leading credit card gram with Walmart, one of the most iconic and largest retailers in the world
Furthermore, Together, we will leverage our respective expertise to launch a general purpose card and a private label card, both featuring a seamless digital experience embedded inside the OnePay app and compelling value positions (this bears monitoring)
We expect the gram to launch this fall and are excited to der even greater innovation and choice to better serve the millions of consumers that seek to maximize our purchasing power
Synchrony's new relationship with Amazon builds on more than 15 years of collaboration and financing innovation, which is why we are also ud to announce our recently launch of Synchrony Pay Later at Amazon
Our Buy Now Pay Later offering is available for all transactions of $50 or more for apved Amazon customers
Synchrony continuously seeks to evolve and enhance the customer experience and the ways in which we drive utility and choice for our customers and loyalty and sales for our partners
Furthermore, And in today's world, that often means viding access to flexible financing anywhere that a customer is seeking to make a purchase, whether that's online or in person, given current economic conditions
Moreover, One of our offerings with PayPal called PayPal Credit has been a choice among consumers for many years and historically has been a digital-only duct
At the same time, Over the last several years, however, we've seen increasing demand for a physical PayPal credit card so that customers could utilize their favorable financing more broadly in their day-to-day s
At the same time, Together, PayPal and Synchrony sought to der a more innovative payment solution that would enable our customers to take PayPal Credit anywhere and still have access to 6-month motional financing on qualifying PayPal purchases
We're currently rolling out the physical PayPal credit card to U
Customers, which can be added to mobile wallets for fast and easy tap to pay and includes a limited time motional offer to pay for qualifying travel purchases flights, hotels, cruises and ride s
Nevertheless, As we look ahead, Synchrony is in a position of strength
We've been consistently executing across our to reinforce our resilience amidst an ever-changing economic backdrop (remarkable data)
We've been in our continued evolution to der the right ducts at the right time and for the right purchases as customer preferences and needs change (something worth watching), given the current landscape
We're also driving customer loyalty, sales and lifetime value for the many small and midsized es, local merchants and viders and major national brands that we serve, in light of current trends
Furthermore, In the last quarter alone, Synchrony launched new ducts with 2 of our top 5 partners and announced a new partnership with a previous top 5 partner
Moreover, We also renewed one of our topline partners
With this renewal, the current exploration date of our gram agreements with our 5 largest partners range from 2030 through 2035
However, In addition, 22 of Synchrony's 25 largest gram agreements have an expiration date in 2027 or beyond, and those 22 grams represent 98% of our interest and fees attributable to the top 25 as of year-end '24
Moreover, Furthermore, Synchrony is ly building upon our long track record of dering truly differentiated outcomes for our many stakeholders and solidifying our position as the partner of choice within the heart of American commerce, given the current landscape
Additionally, With that, I'll turn the call over to Brian to discuss our financial performance in greater detail (something worth watching)
Furthermore, Brian Wenzel: Thanks, Brian, and good morning, everyone
Meanwhile, Synchrony's second quarter performance showcased the strength of our differentiated model, which has been built to der resilient risk-adjusted returns through evolving market conditions
We generated $46 million of purchase volume during the second quarter, which was down 2% year-over-year and include the effects of the credit actions we took between mid-2023 and early 2024 and continued selectivity in consumer spend behavior, given current economic conditions
At the same time, Purchase line at the platform level range between down 7% year-over-year in [indiscernible], reflecting discerning customer spend and [indiscernible] uncertain macroeconomic backdrop and up 2% in digital as growth in both new accounts and spend per active was partially offset by lower average active accounts
Ending room receivables decreased 2% to $100 billion in the second quarter due to the combination of lower purchase volume and higher payment rate
The [indiscernible] rate increased by apximately 30 basis points versus last year to 16
Conversely, 3% and was apximately 100 basis points above the pre-pandemic second quarter average
The higher payment rate primarily reflects the impact of our previous credit actions, which contributed to apximately 1. 5 percentage point sequential increase in our super prime credit card mix and an almost equivalent decrease in the portion of nonprime
Furthermore, Payment rate was also impacted by a reduction in the percentage of motional financing loan receivables, which generally carry a lower payment rate (an important development)
We expect the mix shift to gradually revert to the historical mean over time
Net revenue decreased 2% to $3. 6 billion, primarily reflecting the impact of higher RSAs driven by gram performance
Net interest income increased 3% to $4. 5 million as a 10% decrease in interest expense and a 1% increase in interest and fees on loans was partially offset by lower interest income on investment securities, in today's financial world
On the other hand, Our second quarter net interest margin increased 32 basis points versus last year to 14
On the other hand, The increase was driven in part by a 53 basis point increase in our loan receivable yield which was primarily driven by the impact of our duct, pricing and policy changes or PPPC and partially offset by lower benchmark rates and lower SaaS late fees, in today's financial world
This contributed to apximately 43 basis points of our net interest margin
Furthermore, Total interest-bearing liabilities cost decreased 45 basis points versus last year and contributed apximately 38 basis points to our net interest margin
Our liquidity portfolio yield declined 95 basis points, generally reflecting the impact of lower benchmark rates and reduced our net interest margin by 16 basis points
In our loan receivables mix, as a percentage of interest earning assets decreased by 194 basis points, which reduced our net interest margin by apximately 33 basis points
Moreover, [indiscernible] $992 million were 4. 1% of average loan receivables in the second quarter and increased $182 million versus the prior year, primarily reflecting gram performance which included lower net charge-offs and the impact of our PPPs and other income increased 1% year-over-year to $118 million, driven by the impact of our PPPC related fees and partially offset by the $51 million gain from the DSA B1 exchange in the prior year (something worth watching)
Excluding the impact of this gain, other income would have increased 79% versus last year, in this volatile climate
Nevertheless, Vision for credit losses decreased $545 million to $1. 1 billion, driven by a $265 million reserve release in the second quarter compared to the prior year reserve build of $70 million and a $210 million.
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