SYF - Earnings call transcript Q3 2018

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Operator

Welcome to the Synchrony Financial Third Quarter 2018 Earnings Conference Call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. the to turn now will call Mr. over I Relations. Ketron, Director Investor of Greg Sir, you may begin.

Greg Ketron

morning welcome everyone earnings Good operator. Thanks, and Thanks joining conference to for us. call. quarterly our

a of accessed plan to This our section during today's Investor we website. press financial In release, The website, by information address the covers are schedules, Relations addition we have synchronyfinancial.com. and our to presentation provided going topics to the presentation the press release, be detailed call. can that on available

Before These materially to factors SEC filings, comments the available differ we in our uncertainty remind you on today will could started, I differ list get wanted subject that and that might include statements risks results are We our forward-looking which website. to cause actual statements. actual and materially. our to are results

During in we measures to discussing non-GAAP the the financial will performance. call, refer company's

GAAP for You measures these can in to measures a materials reconciliation find call. financial our of today's

President is and are Vice will and and teleconference transcripts responsible Financial Margaret earnings third-parties. only The Finally, for by on our edit webcasts our authorized does After nor Executive our the Keane, website. Brian of Chief provided Synchrony and not Officer open morning. presentation, located Financial we up Executive results this the guarantee we for questions. Doubles, accuracy present complete Chief will President call Officer; the not

pleasure my to turn the it's to over Now, call Margaret.

Margaret Keane

joining thanks today. slide and Greg. begin for us Good everyone morning Thanks, three. I'll on

income active XX% increased share. of business of grew up volume and XX% million broad growth earnings based several receivables were performance $XXX net generated Purchase and Our strong X%. quarter, were per $X.XX helps across drivers average X%. interest we in third accounts key growth the strong or drives Loan

results. program in associated you quarter the some will third that we call. included our Credit PayPal in completed the the impacts acquisition and know, later is in Brian the now discuss our of As of

with and relationships four partnerships. long and Card a also we our extended Retail platform, We added building key sales relationship. In partnership new nearly some renewed recently Lowe, strategic on exciting our decade extended

enhance continue the the grow mobile experience experience. As power continuing part of for closely customer, making applications. technological We as credit both areas this forward and program the focus service and card for we to sales consumer easier help experience commercial A capabilities digital their is programs. extension, by key further enhance consumer them to their Lowe's and tapping and customers' even of the payments for with to to to advancing look such work manage will Lowe's,

very also together We high with partnership further the are analytics has to pleased have very with been leveraged Working two experience. customer to renew customer long partnership JCPenney. we personalizing data successful our uncover new nearly This insights, decade engagement.

The helped payments analytics customers also shopping JCPenney benefit We for experiences we app. have holders. data mobile help better into advance channels collaboration integrate across all between their card already deep will us has to credit even leverage to continue drive to and proven

environment market significant been the In of the partnership JCPenney. program to strategic to power exterior tools. with leading engine manufacturer and of and a leading distributor key systems products backup products a and residential renewed building power Generac, Materials, relationships and prime supplier sales Associated value we power Solutions with have dynamic Payment a look and We to add platform, able forward in continuing our

new added added the with Solutions in new a In quarter. new We chain national a we Eargo manufacturer. a we Myers Fred with a Payment some also hearing CareCredit jewelry programs during signed partnership aid exciting and partnership Jewelers,

network card adding new more Over our specialties the the past of several the XX where quarters we scope broaden accepted. CareCredit is have than valuable

durable and general medical on of and equipment card including deductibles, ambulatory surgery, out the expanding acceptance in used planned credit be care. visits, primary physical other costs. utility medical annual for medical the specialties procedures, urgent to card pocket co-pays, focus wellness CareCredit's and imaging The care Care Our therapy, led can has practice, of

know and our usage has strive objective our top improving as to substantial key to a acceptance towards evidenced wallet, card by end, as the these migrating To repeat the move purchase network progress you reuse have utility more the us for successful of been cards expanding As of cards that we in cardholders' behavior. made rates. in of we the

was have quarter it cards, cardholders whatever Ease is critical. CareCredit For and volume. XX% reuse in choose was they their Solutions total trying rewards cards application the rate account while Payment of in and purchase to access the of XX% of to across for channel our that third and use information use

in an important and retailers currently number partners. in made JCPenney to to over XX can very investment example crossed have apps engagement more, over this payments As Comparing recently bill ensure are our application expand our SyPi we Lowe's in the SyPi cards positive year, make XXX%. and since much purchases their from receiving response developed and is particularly are September total of mobile increasingly to channel. being we tools including channel our of have an to credit increased this customers using capabilities to visitors cardholders of where we and in easily unique their a card GAP, plug-in the our payments retail used of year who and becomes the last mobile mobile utilize popular product's is XXXX. retail partners' visits, our X and apps launched billion

Digital XX% channel alone Overall, this are applications sales overall sales of third same of quarter with the year. retail strong last for a for card XX% quarter. online the Our quarter digital mobile was happening been growing our the XX% over penetration was us. in have consumers penetration growing.

extent of innovations continue programs, new utility focusing cards the organic important We the improve and customer experience. and relationships, to and also generate on while renew to extending growth our adding digital further

growth. platforms quarter, which to will Brian, slide five how of on Retail results continued I receivables last and loans accounts Purchase over average the program organic and driven active and along were of by give year. over strong XX% Card, our performed XX% on Loan a PayPal the our the on XX% XX%. up review volume turn Before call fees presentation. increased In were during grew quick Credit with is I sales increased acquisition, each interest

Lowe's we As quarter I a in very noted with platform Retail JCPenney active sales earlier, expansion had the program. of and and Card renewal our the

and fees are based quarter. power primarily driven and receivables increased in growth by We particular up increased of potential. with X%, X%. relationships average their Solutions the home and Payment accounts growth. active sales on loans generated the Purchase furnishings strong delivered volume products that these strength broad about We platform, excited future loan resulted in loan another was receivables very growth and significant X%. across Interest XX%

on specialties helping the increased by up to X% receivables delivered the programs are X%, drive renew and also pleased have driven new the dental Meyer Receivables primarily increased Associated utility X% Generac. veterinary and strong We CareCredit specialties. to Purchase our active growth added CareCredit increasing Expanding also loans Interests loan our into of card and and X%. accounts thereby with is fees and growth. by was of partnership Materials, quarter. Fred to average performance. another volume Jewelers led was

add We are Eargo. to pleased including partnerships new

app continue potential. are and network to to its support We growth the making also the enhancing investments mobile such as

our platforms are deliver the and and quarter three to extending solid new all continue added growth programs providing relationships, We sales in and third value of our to across partners signing we solutions cardholders.

work that Wal-Mart. comment Though about continue Brian, we the over I a Before will we I to I no have quick make call I'll provide, over we'll on to Brian. to turn turn emphasize updates successful the year. to to call want currently Wal-Mart do to closely support to program. that, the a with And ensure our With next transition program everything end

Brian Doubles

$X.XX six diluted I'll $XXX Margaret. presentation. the third start million, translates reported quarter of Thanks, share. we on which to slide This morning of per earnings

at volume average In active per last the attractive and last also account by risk as addition loan growth returns interest well receivables. as the growth active continued and risk both up on on year. are PayPal was with X% trends income relationships pleased positive Credit balance interest growth. adjusted primarily average to returns. portfolio growth up XX% loan The We're we Overall, deliver across year. and XX% receivables pleased to this Purchase programs. announced X%. the the average over to driven XX% generated the we The to in extension fee year grew Lowe's with able average and growth adjusted were account quarter, we're the fees growth in up business, growth continue both in these receivables this and renew we cases, solid In over the of to have compared last JCPenney adding balances with

in able the provision of $XX the end of in expense. drivers from earnings While attractive our growth going alignment year, some these very improved rate primary were Credit excluding economic modest protections day X.X% for RSAs enhance million very we adjusted profile have, over which of current increased cases, was year. a average the programs. to these with us long-term. percentage on to the risk X% the as growth and PayPal The benefit as for similar returns. lower increase we both or receivables commitments for profile and value us last of the as improve to in the the contractual on are RSAs quarter adding will for and We will propositions the programs. programs, also forward X% the some At these growth changes and some the us run of renewals well our risk made last portfolio, compared be good very impact sharing to the of

build increased quality million, in related The better than by dual as portfolio on driven income we was while loyalty expected. later was to improving card. $XX we quarter by Credit $XXX XX% increased see build, credit The the reserve fourth driven trends. million last quarter. RSA $XXX in quarter, the quarter will was we asset that the offset driven PayPal seasonal in propositions. of offset than expectations or store provision credit the cover was trends, million, expense be expect the by the including was more from continued typically $XXX by was moderating up million primarily Other This and driven will reserve loan portfolio. $XX detail RSAs credit to year, value $XX compared by decline out X% third associated partially performance the be the fourth interchange for by the the The our losses reserve For million the PayPal lower presentation. growth around in core I down metrics had partially adding million, build in with the spending by against offset everyday $XX our million

expense As loyalty reminder, the RSAs. the a interchange and back run to

on So of a items. partial there's each offset these

noted we near we well As primarily program, million to $XX as quarter, to growth. a XXX% interchange PayPal by expenses year, Other some last expenses to program as the fluctuation. expense with trend percent increased expect driven on-boarding related XX% quarterly related last versus Credit as expenses or revenue of loyalty

We PayPal and the to we PayPal the driven largely until expect adding against be going are run by of rate. the with program expenses comparing forward impact quarters

to continue back also deposit and streamline mobile in to the sales direct investments platforms investments will office. to and automate our make enhancements digital program, We our and our strategic capabilities and

performance overall, adding especially quarter, reserve So generated to the build the the related solid considering third the portfolio. PayPal for company

was for net cover driven the receivables on interest impact The year's interest portfolio up Moving income the compared and expectations. the XX.XX%, margin to will to impact XX.XX%. quarter. was addition The our PayPal performance of of of Net by was margin PayPal net in margin X%, last growth. mainly portfolio interest loan and with performance slide The acquisition. the was primarily I income largest line margin margin seven, the

increased the the higher added to the liquidity average resulting of last pre-funding versus year. on benefited as a of compared was XX.XX% from level mix portfolio from As PayPal when July deployed quarter's margin We last on receivables was from expected liquidity Xnd.

to increase we're in last a cost. receivables liquidity of growth. receivables the liquidity increase was holding Also X.XX%, yield liability in the bearing we acquisition to interest due and have the receivables PayPal versus to loan was a The the benchmark was deployed decline of the excess an the PayPal to The portfolio XX optimize margin and As mainly XX of bearing interest continue portfolio. impact liabilities impacting yield amount higher support points points loan XX.XX%, basis costs total adding year, in reflecting basis decline rates. and

receivables during the XX in points the historically. given the build in as yield season. This We expect as XX to been holiday see seasonal much fourth decline normal and quarter basis to has

margin net XX.XX% XX% we line be of result, margins down range for to trend our the to in in half with a quarter, to second expect XX% for into which in the fourth year. the is outlook the the interest the range As

I'll cover credit on key our Next, eight. trends slide

the a plus were refinements plus reflecting now XX below XX XX The with the for prior a specific X.XX% I'll and rates the quarter, stable start X.XX% for The declined quarter with rate impact XX the XX compared and points year, row delinquency of plus the modest X.XX%, the more normalization. both in delinquency underwriting improved delinquency plus improving a in our plus delinquency XX impact to In rate the right second basis terms dynamics to delinquency in trends and year-over-year and year. of trends. year X.XX% the last last to

on last and in our expectations. net X.XX%, with charge-offs. The charge-off net to year Moving rate was to line X.XX% compared

from While losses and charge-off the portfolio the the PayPal rate a credit million. portfolio, was build percent quarter core in as receivables allowance of the to the was benefited reserve $XXX of The trends net Credit the also for from moderate. loan second X.XX% the addition continue

expectations. I to portfolio we the refinements earlier reserve expectations reserve reserve the the was than The was underwriting due on quarter $XXX PayPal made. build below noted build was and build core from the improving in both resulting lower trends million, credit As million acquired our $XX the our the

resulting trends impact to the related continue As two volume quarters, purchase refinements vintages, we key recent we favorable more in recent see our the metrics; underwriting and from have on our to been noting growth.

our First, far in still similar FICO in our volume data is recent vintage. XXXX is These continue vintage early assess to line XXXX. trends, expectations. are refinements with suggest the curve XXXX drive more the line to better the and vintages purchase it most vintage trend so continue mix with vintage our than that performing while The to XXXX by fully underwriting And the to results changes score. XXXX

purchase and XXX at XX% of fairly a grow and by score excluding look volume we of strong stratification acquired you at accounts the to increased last higher, the portfolio, over If with year. a FICO the FICO PayPal continue same impact quarter pace which

declined modest this XX%, our FICO trends year we have help below, volume reflecting loss purchase is of accounts been While for of some score of the and of These form view and XXX for beyond. tightening actually doing. expectations and

in we continue X.X% in forward, net a seasonal typically Looking net see in XXXX. uptick to range expect to charge-offs the X.X% to fourth be and for charge-offs the quarter

million build quarter, or build existing portfolio more growth be quarter. in be expect $XX on to reserve to we Regarding our the transition for will continue the and to reserve million the next fourth to $XXX range core driven

for to result build expect in million the impact change million while the million We range, reserve move an to the moderate acquisitions conditions. $XXX the to total pace results a portfolio the from $XXX in to million In around continues assuming build $XXX reserve Credit will portfolio next on related and PayPal additional expect here, as build credit normalize in due to requirements to accounting of the the economic forward, to our the stable we $XXX we summary, quarter. reserve continue

at good returns. continued We growth see continue opportunities to attractive risk adjusted for

was and Overall, strategic with quarter. year last program expenses nine, efficiency primarily The year of timing for by increase and slide was for $X.X Credit the in came by versus expenses line I'll billion, The acquisition cover the growth. our the quarter investments. XX% and of driven ratio driven the expectations. XX.X% XX% to the over up PayPal last at Moving primarily our in were

expect for ratio to XX% continue to XXXX. range in the be the We efficiency

strong XX, on-boarding are funding while slide key portfolio. our the to capital highlights PayPal mix Moving maintaining the and and liquidity levels,

our through our We by made capital which in also size capital executing we and the dividends to year. share progress next in our of announced plan growth repurchases and plans of deploying May, increased June capital the

to profile. and sheet balance with committed strong a a are robust We capital liquidity maintaining

This last key This through our last year. a of the level have XX% strategy of year billion, deposit PayPal over primarily at deposits for operating been at was the program. the our we puts our the component nearly have funding direct deposits our Over we portfolio. grown maintaining $X funding

deposits in our direct deposit We to great and expect program, are to customers. Overall, retain attract our receivables we rates and digital service continue continuing our to at attractive to ability well growth. continue in with offer to drive as our term expect deposit growth by pleased Longer capabilities. customer with our grow as to we line building

issuance do strong side, during ended out quarter. to newly of On Issuance our X issuing The Card fixed public established pleased we the Trust funding. the demand wholesale rate had three first funding were year billion we issuance up the in Synchrony and

capital the X liquidity, III phased quarter in portfolio XX.X% growth rules. capital PayPal fully XXX the at last CET impact a basis of to reflecting reduction, Turning This the we year, and phased and point the continued ended XX.X% under on through deployment execution the a our compares Credit plan. of fully basis capital in of to acquisition Basel

the During million than stock double have We we of on continued per quarter. we execute a during common share capital shares the announced stock the to in averaging repurchased the of four $XXX dividend repurchase prior and shares May. of been This the quarter million the common paid in during amount represented $X.XX XX.X quarter, plan third we quarters. more

the fourth authorized quarters billion XX, potential June the remaining repurchases Board in share approximately XXXX. ending have $X.X $X of through We billion our

Total and legal equated from our previously. regulatory We the of billion, XX% some other Overall, reflecting is execute on subject year, the to credit that $XX continue which facilities strategy of restrictions including new market and to repurchase we to undrawn including XX% the of deployment plan share liquidity will acquisition. down execute approvals. total to outlined required any liquidity our was factors continue the and PayPal portfolio last assets. This we conditions support to

We sources and And plan we expect repurchases. of are a and capital and with committed to capital dividends deploying levels. sheet, funding execution balance the strong form in our capital to strong diversified and liquidity share of further very growth continue maintaining through

the I I year. our view Before quarter conclude, recap the to for and current wanted fourth

receivables outlook, as given and First, we margin in historically. has yield our points fourth been seasonal much quarter This the to as regarding normal basis build holiday XX to XX see decline the season. expect in during

a expect into for the XX.XX% to in of we half second result, trend this line outlook our fourth XX% year. the range margin XX% interest As in quarter the net the to would in the run range margin with the that

We quarter. RSAs around the fourth to be expect X% in

Regarding charge year for net with X.X% quarter. the range credit, in be to seasonal X.X% charge-offs the the in fourth to expect typical in continue we the net uptick to offs

on existing growth portfolio build next more $XX reserve core quarter. or million be continue expect $XXX driven and We to to range million the our transition be will to the to in

build in portfolio result expect total the in requirements to build reserve additional an to the acquisitions range to $XXX $XXX will million related around portfolio $XXX range, in Credit a the for accounting due million We million the quarter. $XXX the PayPal next reserve build to reserve

of degree it a Credit leverage that, move the generate forward. attractive tailwind in long-term portfolio to over continue turn EPS business we In summary, dilution ratio EPS creates be with provide nice expenses, And growth the as expect of generate returns. EPS positive still Margaret. to we the in I'll to good this, be Turning to continues to and around we accretive help back half to acquisition XX% a XXXX an full And PayPal expected and year. efficiency while with the for to the operating

Margaret Keane

PayPal growth. quick and Brian. relationship continuing our open PayPal call results also We and provide Thanks, renewed quarter, while up with for signed significantly key this to the Q&A. a program, the partnerships the new then strong of I'll drive wrap We organic generated we'll programs. expanding exciting with acquisition Credit

utility, changing digital in invest well marketplace. as capabilities ease network, competitive our use platforms We and on as card position continue in enhancing card rapidly across our the of focusing to

of as in We line are business, important such our seeing quality our also expectations. perform with other elements credit

contributes to share our and to All were to we of repurchases our this to and increase shareholders pleased this ability quarter. dividend return capital

help focused program call Q&A. value. We adjusted returns, grow strategies and on us are the to I'll organic now open business turn aligning deliver profitably risk and to acquisitions. while through the the growth on back We to capital also focus Greg pursuing that

Greg Ketron

Thanks, Margaret. That concludes our comments on quarter. the

session. Q&A the begin now will We

So that one please possible, of many ask follow-up you and like to I'd we accommodate primary to one to limit participants as question. yourself as can

questions, Relations Investor the team additional have the the Q&A after will you Operator, be If call. please session. available start

Operator

you. And thank

from Instructions] now begin with [Operator our Jefferies. first question our We question-and-answer And we will have session. Hecht John

John Hecht

taking Hey, guys. for Thanks very much questions. my

when to working the guys Wal-Mart them options, decision as Margaret, various give have wondering most First, proceed with I'm prior final an the have call how seamless maybe you you refer you can us guess make. In on I talked us with clarification to might those did you on a the give transition. ensure some update to options about and you

Margaret Keane

through Sure. options. We're those not

So have with a expect quarter. working can't by but to we give of through reflection working them what and first on clarity the really we say it valuation one I'd now is which closely is, we're you

focused last I getting keep in a can whether portfolio, think replace transitions we the to on the first EPS, a focused with another the them, working have quarter. to final we believe we that either said we can that is that issuer on place call portfolio the decision what cases in we both option the or whether so

John Hecht

kind do of guess the of one And we year the seasons XXXX? of some And QX ALL Thanks. those about of quarter metrics, into guess, year? calendar ALL I that you've there any other think then of will a build the tied kind Brian, about trajectory, that PayPal, I be then credit build Okay. of NCO integration next on-boarding portfolio? how as details guidance couple expenses there kind were and of given PayPal, this time to any then

Brian Doubles

sure, John. Yes,

upfront one team before say related they're get to place do in that. time spending to portfolio the expenses on, any some I did a it. brought manage So We just we really wouldn't to

in saw which seeing impact by little you But, really that the saw running an is that's of on through that the driven that interim actually full. team more say second the this over other than servicing that, I where really quarter, expenses increase, You fees, you're in some a would our takes until professional quarter.

And so then get see our of first full as kind that XXXX. kind of by come you'll of we expense that we that down be into replaced half the will And side over on the operation as true portfolio. of take employee costs

In terms came was of I mean, line bit the anything, it in if a it ALLL, better. with little right expectations in our

million reserve the that trends the in PayPal, at credit expected. on guidance. very Overall, full year net we we're than was pleased charge-off no so seeing $XXX with So came we're to that change better the

X.X% without you and If without, so we X.X% remember, PayPal, of gave to with the just guidance some and with you accounting PayPal. on due to purchase

significant us it So wasn't And range enough change still that full is for range, to the moved outlook good. around the year. but within the

have more? I'm sorry, do you John, So one

John Hecht

associated process just trends, when Yes, on-boarding overall it, we guess given influence I the see book? charge-off you should the the the and PayPal accounting with

Brian Doubles

Yes, sure.

XXXX, PayPal then you'll this credit some off quick upward to move the net as our rate overall So I given the in and PayPal, think burn book. to into just relative in year, mark remainder you that we the of of see of profile about start would bias kind pretty charge-off

for of when And having not some about on for color modest impact we that it the do we'll then which So give rate our in XXXX. an much year. get more bias XXXX, you outlook charge-off full upward as we net the think through obviously

John Hecht

guys. it Appreciate Okay. much. very Thanks

Operator

Thank you.

Donald is with Wells question next Fandetti from Fargo. Our

Donald Fandetti

with of Margaret, that One specifically, a why to excited that Cap comment getting us there's the unique you to also portfolio. that do you limit can some the question win you you reasons, forward be, you sell data, move things you committed you if the like could deals probably the of want make to would then of can't sizable buy or discussions maybe other ability? besides of but And are help that up do that I deal know nature? a you been part to bit if when feel understand, investor would it of one what historically, is portfolio, your come interest just buybacks, buy buybacks on were was it net and second income, you're portfolio the super the and little acquisition isn't super the

Margaret Keane

so I think do would the comment around first the of is aspect I important want ensure smooth you really the What book probably customer. most is Yes, to a that buying really transition issuer to one another. part on, from

transition going. think of that we when card do something as we the big keeping smooth, is So really that about be book acquisition particularly important would that would because be utility keeping an a for us one the customer

point are important. all those elements extremely and analytics, on data You

things in be So would those an portfolio. the acquisition terms we on would be of a focusing of that

we adjusted I way the that to all we obviously similar deploy one of that's so terms PayPal. along would we But the for have if how right we been of, at want portfolio, could purchase the bottom-line margin did risk don't how add. yes, we return, to of said would drive the you strategies be In obviously, right a capital, would have in our terms know the we company. Brian

Brian Doubles

returning Yes, I only indicate higher and share when plan did would on Don, that quarter, is our thing communicated the repurchases we both last options alternative. we add

TJX, attractive risk it. Payment the making But looking acquisitions PayPal, would obviously, to absolutely with that and the bigger we're if said, look CareCredit include as like of programs right something a Margaret investment portfolio more Solutions. the in take investments So then in would organic business acquisition, along investing growth at in returns portfolio we like came growth high adjusted and at

Donald Fandetti

Thank helpful. that's you. Okay,

Operator

you. thank And

KBW. next Sanjay question Our Sakhrani comes with from

Sanjay Sakhrani

morning. and I Yes, model for then Brian have Thanks, Margaret. related questions for good two one

about Just going there you're the about be run the as a And I year next on the better on allowance and for than reserved build. Is is of what forward into into given we much to year renewals in receivables as the expecting? more secondly a on next have we as by better model to of questions, Brian, way reserved look the a think the needs then just much based year? end how good think rate of think credit, despite RSA PayPal portfolio accounting. for, that how move expected about to percentage the to the you coming want

Brian Doubles

sure, Yes, Sanjay.

we lower was a where And was RSA In payments expected, then program the lower really RSAs is so and in quarter, given we're higher on mix a first improvement better we pay no what drove we the came the have just then big So bit obviously making credit than Toys"R"Us all are better And year. some been trend little RSAs, growth delinquencies. lower growth, did other that the that's programs seeing a on slightly we factor a percentage program. yield the in longer that trends, the driver. the that

And that a lower little revolve cetera. and et so drives interest fees, less

coming in of X% remember which the couple the so that then results So, we quarter see we moving continuing higher improve, the commenting brings third normal drivers we probably driven there, by think really a And about around will just in down. to worth probably the that's back you that you as the fourth RSA level. RSA. Part And the then as to fourth have credit quarter. from quarter, it seasonality that's same drove expect it result the quarter, a what on

into gets that takes you puts that, gets So, range. back of into X% back couple and that you

we seeing that on gave quarter. PayPal up quarter. expected in little in those credit at We in out portfolio for of When we the of you information portfolio back that good disclosed both expect of range. add trends size you there look $XXX then for it rate the that a you And So to the a terms is came pretty bit if there that better what given disclosed we're loss reserves, fourth PayPal again on the indication than that million and what are for go portfolio. of on the just some the the you

what assume XXXX pretty that you that, you XX months to XX good million that order to on a year. gives about That expect we assume complete of indication you XXX done get to in If build. coverage for this

got at the I point, specific I think up a good have pieces the should most think pretty this with down. continue come of that it And to about moving through estimate. come XXXX, to just would nothing you but given it way So, obviously

our you in come got of will quarter more of first through the for guidance prorate bit that kind the So come XXXX. $XXX down, down and fourth will million, saw it a the balance then you quarter

Sanjay Sakhrani

The that more. by in was one And I am impacted PayPal delinquency rate, anyway? sorry,

Brian Doubles

partially little for Yes, so core rate a bit plus XX actually than offset than delinquency better a year-over-year, basis with XX the was better PayPal. the down points we reported,

it up PayPal So basis brought a few points.

Sanjay Sakhrani

about talk on to Okay, you Could on an your acquisitions, might up private something considering like were - create just portfolio, just following portfolio the and great. opportunity Margaret, one buy come of strategic alignment a label And appetite, discussion that relationship. then up? sizable that Thanks. competitors your is if a that realignments smaller

Margaret Keane

Obviously but take what given look. But portfolio us we on would like to look, what part the to a we there was for have yet. that we it's take we'd we comment portfolio that, that obviously to out really overall if be would really evaluate of and did, that's a not in hard obviously

Sanjay Sakhrani

thank Right, you.

Operator

you. thank And

Carcache comes next Nomura. Bill with from Our question

Bill Carcache

Brian, a Good you. question Thank had on portfolio the under morning. a mechanics sale. I

reasonable point reserve at look buybacks releases even date portfolio months goes If those you only that to the of portfolio to and you'd were the would portfolio July hold XXst for the expect incremental end to start the away. four benefits transfer that of before at use the to officially through say allowance sale to is held QX, move of to

Brian Doubles

more that's how less Yes, or it works.

and held start So the at move off of move that you once we you the expect portfolio reserve we it would that the which between point time have balance time confirmation is in or move sale sheet it transition to our for it. going to shorten the transfer to to period

that's So assumption, reasonable Bill. pretty a

Bill Carcache

renewal Okay, risk a Margaret. question I follow-up great. Thank you. for And you, on had

able contracts your saw up questioning that competitors can in you secret were and attractive a pressure believe For This your larger simply there we and of come inside but to adjusted inside of the some partnerships sauce away whether when GE. wasn't and through investors many really very many years the GE, today margins is guys risk when sustain swooped of cycle you RSA were something loss customers take renewal. guys the are

would what could on helpful? it comment that public you risk just is is that or if that a is greater not So that now, makes fundamentally you changed since be went it guys this

Margaret Keane

see We I as great it a as outlier. view an risk. Wal-Mart Sure. don't

have and look think we've so I Lowe's which renewed decades, decades. done we'll renewed what over where this JCPenney, have at we've fact we just way we've four if the for two month by in you the that

we trends think that can our deals. have shown renew I and our experience

So one all outlier. to private know Look, a sitting issuers. there a retail of ton an the saying that as sudden not the of We built of best Wal-Mart competitive our is label I honestly is here out we're a and I'm service shift. how marketplace. big We've view capabilities, view

Brian Doubles

thing just Bill, you we Hey, last were going the if we from of the done round out, with the go those separate that that were to GE. renewals knowledge other I to back would did, point all

third as in of the Wal-Mart wave we an second renewals. said, we're or as So Margaret And about of kind think outlier. really

renewals without record on track Our very with been strong and has GE.

Bill Carcache

That's very helpful, you. thank

Operator

thank And you.

question comes with Shane from JPMorgan. Our next Rick

Rick Shane

factor influence If the performance, one when you think primary obviously to But over will that is I'm there questions. delinquencies credit core score about the think performance utility utility. is the credit credit and product your longer my quality. about private related factors influential guys. FICO and PayPal term. Hey, charge-offs you taking Thanks versus label. of we think is When curious driver the for other

Brian Doubles

I I unique is Rick, to other would say and relative mean products say certainly a factor that PayPal the I we other programs wouldn't that's But have. Yes, broadly across that portfolio.

drive performance. that initially elements you the the think I more talked of

the score use to to it we even FICO underwrite though really we use don't whether So it's the portfolio.

Our performance. terms what of credit proprietary on scores to see are really the overall expect primary in we driver

to unique So I highlight anything wouldn't PayPal. on factor but

Rick Shane

Got it.

portfolio, primary when factor for your you the performance PayPal the So what you versus think is? differentiate do core

Brian Doubles

credit say the how will it's said others. we overall to back profile would and relative I underwrite that go to I I portfolio what

credit. a the if I customer apply it's programs, look the based overall those you performance think of on factors customer terms as door underwrite profile we of all on target set the individual combination the of And underwrite that program. differently of who all we in we've that down through And that the guidelines we little population that mosaic is into us we program our a talked for the credit based bit gives a mix, that at overall about level. past, overall in parameters, for but drill then

Rick Shane

That's Okay, very Thank you. great. helpful.

Operator

And thank you.

question next DeVries is from Barclays. Our with Mark

Mark DeVries

the push on to and where of hearing Yes, in interested to of renew renegotiating economics some Was you. thank competitive in away Lowe's - trade-offs the out you the of potential of you how thought ability kind that may was renewal well relationship? quite to it's some presumably environment that in up an about when advance give have risk and versus

Brian Doubles

in can our outside return all where a and if good a been pretty that. Yes, got renew partners we something around of and way do and we're things incentives do protect and we're or that have to record doing in clear, a I get Mark, prop a think and economics some always competitive the that we we way pretty change acquisition process value good of we our track some growth profile and do that really working big do that's of looking have alignment our we to always or around

I happen there So of unique these part JCPenney in relationships. I - is the Lowe's the naturally renewals, think say as wouldn't the or either anything into these things

Mark DeVries

of the made prepositions renewal there any value Where in out those the around programs? Okay. to cards enhancements

Brian Doubles

and both I specific, to do there this say these at of things and but the but prop What I what going we the incentive. and renew economics value typically you got in terms all cases and takes around of can't puts JCPenney early to when we're that's we're nothing point. change, some announced And cases in some too and some would terms or get of is acquisition nice growth that going really been Lowe's commitments in in

Mark DeVries

Okay, got you. Thank it.

Operator

And you. thank

next Wasserstrom perhaps Our Eric from your on UBS. question end. you're muted comes with Eric

Eric Wasserstrom

I now? sorry, can you Yes, am me hear

Brian Doubles

Yes.

Eric Wasserstrom

sorry that. Yes, about

Wal-Mart. Just Brian, PayPal follow-up question and a on then one on

it quarter. a behaving is it, that guided that about PayPal for one than already quarter, the than little performance perform there the credit portfolio bit On anything about fourth other expectation? to for seen your which have Is now you've differently you

Brian Doubles

pretty performance with very lower maybe with slightly No, credit our very what books expectation. performance than the with I to I'd line say of reserve thought, but being what better it's the we much turn build, the would that's in and performing line touch overall our expectations, thought, different a drove pleased it's point in much we're we

So, we're growth. on pretty excited to focused get

Eric Wasserstrom

But still you I Wal-Mart already each talked about you midst you and is like for sold avenue portfolio And pursuing lot just negotiation. the of that be a have XX-XX assumption will on Thank this a or you're for example? it to probability the follow-up in that. are appreciate and still it then that baseline your on

Margaret Keane

anything XX-XX I it. We're still any put - on discussion, so wouldn't kind on we or of

come closely first smooth ensuring to working a delivering our the is, and the is with in we're decision whatever quarter job think the again, of I really the are conclusion contract. for and we committed transition really through Wal-Mart Wal-Mart end a to to

Eric Wasserstrom

much. very thanks Okay,

Operator

thank And you.

Research. from Our next with Autonomous question comes Matthew O'Neill

Matthew O'Neill

Yes, my questions. hi thanks for taking

I basically Brian. for think two

business? we that's and trend just and below. first XXXX? wondering refinements continue sort the start regarding year The underwriting above competitors that around a seeing a kind regarding should performance earnest the XXX, for if result. I view XXX you high I of around and And of that then And discussed recently XXX on to from And smaller was of the outlook your commented of was in if if beyond follow-up, on you a comment if CCIL. could that I wondering impacts level growth to kind just as your seem expect loan this a maybe minimal one could results any

Brian Doubles

sure. Yes,

at the periods lap first that point I those underwriting the probably of going XXXX. on our is to we're half expectation to some the first end start of So think changes, towards

rate. then some I back consider get So a refinements. I more continues very you to the for a of with core But trend will we're underwriting couple that and those what of overall comes we think down a think more growth results that quarters pleased

has about to we told moderate we trends line in year And to the start ago credit the that. slightly the a second been better than of think if you level-off performance in that to XXXX. half anything I expected and

greater on on very volume the And was and So, XXX XXX seeing very intentional, really what good still accounts FICO below targeted, accounts seeing than indicated. we're very, we're as or And performing I it's it's better across, reserve in build metrics, is thought. desire think look than results. if whether you line everything the the delinquency a slightly having to we we

see issuers result XXXX, of So you it's and the to work I lap to purchase on your increasing do to I some volume just CCIL, question on would a to reserves. of off credit start move in going card second level obviously still some here. there's into of lot a start say as Most level those, think you you impact periods think then bit. And those

majority for model some the still vast issuers I increase. there of that's undecided Just are expecting is think losses, a level at But of point. lifetime going from this lot an incurred loss

allocation of it's methodology You've fairly revolving to is, Frankly, a to apply guidance credit. got get pick, different challenging revolving determine you on payment which answer. this accounting the the Depending to life you product.

this, we're doing to talking lot groups on industry we're issuers. the of participating a work look, other So in all and

internally when you. we'll impact certainly are We modeling to parallel and have the this. hard all months here of run estimate teams in with Our kind of to six work share it of nine at an we got

Matthew O'Neill

much. very you Thank

Operator

you. Thank

John Our from next with Coffey Susquehanna. question is

James Friedman

give if of progress you just And with happy kind one. related my have for upfront, for that so had in e-commerce question. we Jamie, I something you would can that. could mark one periodically, John. your don't my taking maybe It's you was wondering disclosure. you second that equivalent ask But Margaret, to Thanks I'll share case

out talked And to new lot deal enthusiastically there at coming XXXX, your it competitors the has is guys? contribution could been for Thank there? XXXX How about talk So, if pipeline as you. about alluded from qualitatively up opportunities. and you you rather is a one potential least of for does opportunity of look the

Margaret Keane

Sure.

would very focused digital that, continuing assent we're capabilities. So on I say to

we our this for critical know becomes is that an partners. part area a I think

And so growth penetration was Card our year-over-year points. Retail for XX% was our was online mobile XX%, which up and X percentage

James Friedman

you. Thank

Margaret Keane

digitally in XX% about the third quarter. applications occurred of our And

So continue certainly really mobile good and enhancements capabilities and our are impact. things a we having out build to

the the maybe pipeline. I On good were that would the now, out pipeline, there about there's some other rumors than we deal started of feel week. say one right not big this

what make I have to to to again, with that. expanding XXXX, very the going on our of I But as expand card, Retail a on all existing and Card pipeline the into we'd about of about. continue progress at look on we've like, could But platforms be at what's one CareCredit, business. and lot utility partnership very looking in verticals. three successfully think say I feel is But looks to been expansion we're I well we've that. been talked ones new we Payment focused So the programs we going the win Solutions think being And our what we And platforms. winning as into able new and can't good diligent beyond really comment all startups and we across three

So forward. we pipeline for feel, going poised strong a we're

James Friedman

you. appreciate Thank jump the into queue. Okay, color. I'll back the

Operator

thank And you.

next from our question with Chris Buckingham. Brendler have We

Chris Brendler

thanks. Hi, taking my morning, Good for question. and thanks

a want range. to the expected noted margin XX.XX% minute, XX% you're to into Just decline you back focus that for the on to

get actually PayPal color see bit I a our component like around, or any that Thanks. surprised margin. makes accounting Just wanted just actually there looks for it flatter of related XX.X of detail sort loan Is a consumer there look consumer does is you'd the it's being there balance pressuring a little sort look it is loans number from related if sequentially, sort backup average that was the little more question to reconciliation, the the anything more and one so PayPal. build liquidity yield And or actually on portfolio relatively little of portfolio? at of your good the impact thought here I in obviously flat a impact parts,

Brian Doubles

sure. Yes,

the maybe one take first. So I'll second

yield up very core But couple in quarter, that's was off burns what been And you lower as acquisition by decline basis to indicated yield by stable. similar and just just balances related third in look the a if So to do that, I the then driven seasonal it reduction than the fees standard some on in the I that the also interest other core we noise a has the pretty was the move they down trends. given I There purchase promotional then from the the decline had largely to and in just driven fourth over margins accounting And of quarters. you'd the is quarter, a improving slight XX PayPal think the would was say the next to we come yield obviously you PayPal at that yield as with earlier see points delinquency yield. modest in expect that past. of

necessarily fourth put third And that seeing from that as of what them really the so aren't earning is on you lot on. the you balances to you that's a as you're seasonal declines put move holiday

in that the drives so quarter. seasonal And decline that fourth

in we're we for range. margins pretty stable. January be top range for XX.XX% right margins in to of you gave that than other are And on full core the to So XX% that year, the that that back

Chris Brendler

you sequentially. increase feels in little on this worried XX XXXX. comment up pretty points if pretty Probably grew XXXX, should basis about was deposits But sizable The it was Okay. also rapidly trends in could, continue into deposit on was quarter like one like it early to but a these looks you I thing quarter. costs this

So little PayPal hit bit if deposits as the and down help little into that bit go a settle a on increases fund to costs you gas of I'm you maybe wondering in should XXXX. terms

Brian Doubles

point. are nothing line. your on mean, this give But XXXX specific think in comments I to margins I Yes, at

very and deposits prefund on pricing competitive year were we that say would just PayPal. I all to So

transaction. But that into the going few very that XXXX that And for we our expectation unique to as feel prefund a effects quarters. won't have move so PayPal the to we of to is was as you're having to be competitive

Chris Brendler

much. thanks Great, so

Brian Doubles

Yes.

Operator

you. And thank

from Oppenheimer. next Our comes with Dominic question Gabriel

Dominic Gabriel

for wanted some after. to to strategy a have smaller sort? than expand with typically maybe see you taking you thank the different - a question just there where Hi, look ask in retailers Could gone Is focus you've yourself could be much that questions. shift of my partnerships previous renewed way. past there be I there, in could a

Margaret Keane

can Well, at big. business I retailers, number actually gamut Solutions Card, we think Retail retailer, have if depending really smaller a small That's really the we the of our deals particularly we Payment on even smaller in to run in platform. our retailers do but you where the look from

the to if right certainly involved we would the again right it So up with, at opportunity partnership came look was it. get

Dominic Gabriel

to get real just detail wanted quick, more then mentioned tender you the share. And you sales maybe previously? they've was at that there somehow almost Is can you're say kind point now to Okay. so those little businesses much. where two unshackled that you've chance the of those the you Okay, faster at rate great. grow around Thank than now a renewals; a you limited share and something - a on the tender about total some within renewals of

Margaret Keane

to RSAs. grow for the always their to cards the around in a analytics Lowe's they don't partners Because big remember, to the are that the No, share the the will data to around on to really goal grow then sales the is card. JCPenney And card. grow JCPenney the if It's our any more using grow positive always and on on you sales. Lowe's beneficial is customers other pay card

always as So much. high penetration we've by shackled been We we as never can. want grow that possibly how to to

gives So of think what lot as continue us into more out that saying these our we capabilities opportunity a leverage is we I capabilities and with go - were some them, more we just and renewals. partnering to as that here build

Dominic Gabriel

you Great, really I it. much. appreciate so thank

Greg Ketron

more Vanessa, time for one we have question.

Operator

And thank you.

Our from last with Moshe Credit comes Orenbuch Suisse. question

Moshe Orenbuch

your of about was I where a thanks. sale there But Great, you the in Wal-Mart the could you've a talk talk about experience the lot kind little bit of guess of the portfolio. in we worked sold? your about and has own and could think this a how if to it on go after portfolio direction gone partner and that how was that not were portfolios

Margaret Keane

probably think I examples. have two we Yes, current

network, did obviously converted I we was a to The But Hhgregg ways with they we of to kept to we years, credit card. continue went sort, cards mean, would portfolio first whether bankrupt, Toys"R"Us, took the is when the didn't the the we it other be network. bankruptcy a a so that cards, new be portfolio home purpose always convert can a - just utilized. generally example they converted because again to that result general us stays convert created or there good But whenever say at look those those some over we because of call I bankruptcy is and

we even a in the to we case processes to transfer new we make sure So places really or them have in created network. can programs, one

Wal-Mart either add were would feel we you know or pretty else. So stay, I positive we to go, handle we to don't that if if case can anything Brian,

Brian Doubles

just we're has would good good sales, us. that good for I say Synchrony really spending Branded off activation seeing Toys"R"Us I rates, mean, conversion into MasterCard seeing we're really paid No, patterns. the a

far. performed different the things that portfolio, so very and different it's number on mean, still with been testing pretty of I pleased a have so we're we so it's And far performance. but well strategies early

Moshe Orenbuch

the of it profitability? shared, help revenue does absence the And

Brian Doubles

gives is It value about the that certainly typically think helps to prop. profitability. invest we in The the dollars that way you more that

performing Toys"R"Us well. us very prop, with tested it's we X% for back or So, really out rich a that cash we value put

that pool may but with growth not economic do to to forward. gives in You drive a to certainly bigger cases, work it going you need all

Moshe Orenbuch

Got it.

changes the the pricing the on when Just into made those do PayPal that loans? phase portfolio, actually a yield on quick you Credit follow-up, the

Brian Doubles

go XXXX, we have current now move Yes, as to to obviously influences are see you'll that start the balances forward sales. into you so that protected remember only

bleed won't will much see you half, So, in XXXX. first throughout in, the but it start in probably it bleed to will

Moshe Orenbuch

very thanks much. Great,

Brian Doubles

Thank you.

Greg Ketron

team will and have Thanks for be Synchrony Relations great Financial. and interest Investor hope joining may your further answer day. any to us questions you everyone you this in available morning we The have a

Operator

you. today's Ladies and gentlemen, thank And concludes for this call. conference thank We you participating.

may disconnect. You now

Synchrony Financial (SYF) 19 Oct 182018 Q3 Earnings call transcript