SYF - Earnings call transcript Q4 2021

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Operator

Welcome to the Synchrony Financial Fourth Quarter 2021 Earnings Conference Call. My name is Brandon and I will be your operator for today. 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 Miller. now will call Kathryn over I begin. And may Kathryn, you

Kathryn Miller

morning Thank call. conference you everyone. to and good Welcome our quarterly earnings

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

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

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

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

of guarantee only teleconference are Financial parties. does The on accuracy authorized and is not provided third transcripts website. our the for Finally, located Synchrony responsible by edit our webcasts not or earnings

morning the this Brian call Chief Wenzel, Officer. President and Doubles, now Vice Brian Officer to and the On Brian and Chief Executive will I Financial call President Synchrony's over turn Executive are Doubles.

Brian Doubles

good and everyone. Kathryn morning, Thanks

We of strong such results, are and execution team close really level year proud records. out with including of the that to strong our Synchrony company the enabled us several

risk at returns three growth Our founded to objectives. attractive adjusted sustainable core drive strategy primary is on

and existing First programs partner win new grow partners. our

experiences. And deliver customer products markets. and Second programs, third, diversify our best-in-class

to innovative of changing both prospects the serve new We're XX financing excited XXXX, and experiences another needs the power, renewed and pipeline portfolio existing added XX. customers. we During partner our our in partners and ever about

a of of This of the the are year, we customers consumer expansion to to products suite leading audiology will products. continue ongoing reaching foothold distribution the much of and with empowering end, we and Credit driven in more that constantly expanded and extend point an health at space, channels. beginning know, us sale Allegro services. allowed and and acquired our diversification that you by seeking acquisition financing of and the our wellness To provider them leadership be of to deepen providers position our opportunities As

We also Clover, announced which enable more merchants and with customers. to our our to innovative will strategic deliver partnership experiences us and products

management our payments credit services, will small and label reminder, a businesses access private Clover and integration As to via with card Clover Synchrony financing platform. accept and business the enable point-of-sale products

networks our a partners to now spend foster. to will merchant products the find growth an our accounts. a CareCredit, their deep two networks active average that of that compared In pay is as provide quarter shop main business. marketplaces, were and that marketplaces and easy and relationships account, focused well competitive views consumer-facing metric about that for our sales. provider levels almost partners annual service consumers the submit reach, ability meaningful are of our continue $XXX testament across repeat utility across driving as and these and providers carecredit.com mysynchrony.com buy applications one-stop continued XX% drove fourth been addition, networks, million and products the important to to Synchrony's additional expand visits as driver sales during received drive home leverage is and are the through networks shop later in our customers This and we customer and driving to a higher our in we to are Repeat and and An Synchrony strong differentiator, we new million high the year. with broad our And see on network These networks Synchrony Combined in sales broad XX sales surpassed XXXX. carecredit.com. year-end, to the and deep these is by be twice and has through per million marketplace. accessibility at about strong referrals which X repeat networks auto with

meaningfully of diversification element total integrating bringing last expansion the provider seven and utility over customer health reach like Synchrony our CareCredit technology Another the enhancing with extend our Epic, XX. system platforms signed new through which we and systems, of able By systems year initiative, through is health also continued card. while our includes successfully to our to our

and XXX App patients. financing Orchard, with to patient CareCredit of patients options making more non-elective wellness a Epic within more are or needs and and provider spans utility able we we're limited, app needs systems. expenses arising, coverage system choice, care networks user environment of the range from the insurance base million empowering MyChart elective our to needs. available we And expanded with access part financing and is the greater routine flexibility wherever by care example, and health with provide patients across broad is increasingly integrate medical to health as In health network about our where Epic but For providers expand the those an

and clothing, that expand the of our the powersports. a whether million launched optimize have you health customized can XX and Through car the digitally. to average from at merchants. Clover, thousands active and And and locations. collectively, large services, both products financing of So person like through business our reach purchases, XXXX in with needs partners. digital improvement almost was year and million nearly the more outcomes options value And XX purchase their in care takes and our the we can omnichannel Through of hundreds that we with networks, tens and which value the some at XXXX seamless home is health accounts patient With everyday over look which overall, XXX,XXX and our continue power for No experiences in strategic customers the systems and strategy. capacity care of in place and visits. cross-section furniture regardless center for our or to it, The more our services launch consumers. Synchrony with connect providers of propositions products programs both by the demand we how millions products, we matter diverse of becomes, of reaches SetPay diversify new reach to the of accelerated expansion have commerce of CareCredit introduction we We U.S., we so program our Walgreens product. merchants, the partnerships and consumers, partners industry-first jewelry Synchrony Pay-in-X of

the of our Mastercard, the product our growth term. above which to to scalable advance our In important opportunity over long represents Synchrony and strategy an returns continue business growth addition, to we highly within drive average

During the Synchrony and to accelerating our our second reach the speed efforts we of Mastercard acquisition include to year, our expanding half market. new channels, broadened digital

data real-time sophisticated streamlined the the dApply and capture, customer pre-fill experience. decisioning advanced optimized which insights, include with application activity we along and capabilities, With the process our and credit

we active sales grew to the value a the As the accounts XX% in XX% active our second grew thanks to result, same on propositions account compelling the half And basis. of first the offer, year. half per compared

balances, as reach PayPal customers are and their will a a products customers be will customers and continue financial goals. we and initiative that access to key to we partner and in on to savings and partnership enabled across quarter. PayPal to fund to to and financial PayPal we App. as features choices to as in Super provide proud more wallet this innovation of Savings We're surprise with to our unique easily partner set account It limits intensely should the to each experiences open investment them withdrawal excited able able we reach serve continuing comprehensive and successes in Synchrony our Savings broader customers of Existing easy feature no course, the between transformative strive remain of expand share, come to is and services, launch power expanded value. inside set first Through their evolution. more the no consistent has distribution quickly empower and set our with Of partnerships. with goal provide our Synchrony's the a and And product reach to of PayPal this our PayPal functionality, all PayPal, we along instantaneous customer new elevate product and including broaden focused savings movement greater digital

stakeholders. We are simple are the continuously our deliver and for which enhancing we seamless the because in ways of far all stronger experiences, customer outcomes

with to data past which the upgraded customizable during across push XX and example, year, e-mail, and rich close alerts to real-time text platform, our million XX and new partners we messages For delivers transaction notifications. alerts accounts

wallet visitors provisioning e-bill. XXXX XX% availability enhancements features a the in of some platform, out rolled contributed payments including new push several features digital these our in notifications to Collectively, We in SyPI also increase received like growth number XX% SyPI. to we upgrades the in unique of to and and and

of native by by Synchrony cardholders specifically, XX%. for providence wallet, we've for accounts wallet And enabling their that XX% to the channel year-over-year. account and grew digital new With sales fourth quarter provisioning grown their volume enhanced client mobile capabilities via wallet acquisition rollout SyPI our to and more apps, XX% year-over-year wallet increased add

the record These stakeholders. billion record a account $XXX XX% achieved of a advanced In active has when set strong it with and past combined million our other we credit driving results year, no and billion ecosystem on around omnichannel financial leading partners including lending does XX our and of our through assets net spend and tangible and services enabled earnings per purchase outcomes deeply to the all deep and and that capabilities this powered that financing X.X% compelling enabled milestones, that connect product partners management, combination this on results industry discipline resonating share, common for value breadth evolve is expertise, equity. and complete originations to increase full new depth $X.XX almost to our performance $X.X the and Synchrony our offers continued account. and risk-adjusted propositions ability in provider financial full volume record Synchrony Synchrony the unique and of for into XX% So together, Synchrony most you put year, diluted our industry's products, return delivers a for and deliver digitally per experiences today digital is and return There a or customers. returns of customers expense our best-in-class

capital $X.X we billion that, momentum business. Brian the which our return $XXX across with and a call fourth discuss $X.X including able As I'll dividends. And regular of the shareholders, to broad-based repurchases result, million reflected share to billion to were over of of to quarter performance, turn

Brian Wenzel

as Synchrony the value strategic we execute differentiated business and our morning, reflecting financial Brian, everyone. and propositions, another Thanks, possible good customer been delivered which model have results, partner of our strong on and made priorities. quarter strong

Our and returns These customer-end equity our on products through and fourth prior the to accounts accounted net and our the serve. net new receivable our diluted able of across both quarter accounted were were share. almost We co-branded excluding XX% with tangible also we while $XXX quarter including quarter, strong only or increased and value dual enabled the X broad-based year. able up ecosystem. account per million in originated fourth increased the a XX% of clear million seasonal year to last Purchase last and XXXX, discipline year. generated and increase $XX the for the quarter, Average XX% increased for a XX%, XX% for we million cost $X.XX portfolio of of services demonstrate strong to to diverse financial compared digits and XX% a compelling Not strength Purchase of digitally XX% with through loans earnings of purchase fourth cards return XX.X%. demonstrating of purchase Walmart. and volume of X.X% in double the per support to earnings the combined assets new XX% loan common for the volume range we return We than platforms up year power increased cards held our volume four quarter XX sale, Walmart. strong of we year million excluding was and our model, year. basis, Dual range On the and the achieved and the of increased industry to compared XXXX, maintaining of the X% accounts were and totaling new accounts efficiency compared more accounts do average of verticals risk-adjusted from five the last fourth record active offer returns. so an during volume and products, but from compared receivable in diverse the on co-branded prior

in the resulted our in reached portfolio GAAP agreement our to held-for-sale $X.X appropriate held-for-sale approximately may achieving of which discontinuing receivables recall, represented of at billion in $XXX we Continuing portfolio, are sale for returns, we which commitment As our the risk-adjusted an you December. partnership of BPAY, reclassification loan our receivables million to loan of with year-end.

of income. well and strong interest the the the the X% increased payment for period versus lower The fourth billion persistently impact held-for-sale program of our the would reflected receivables. losses purchase growth $X.X offset year in including was increase and largely have as quarter by Excluding improvement the primarily a impact average volume $XXX performance, as loan portfolios, in strong receivables net were elevated prior X.XX% of purchase year-over-year continued growth and million as by rate. RSCs provision receivables credit volume

Focusing on losses credit Included $XX net build in provision of $XX for portfolios of the our quarter's credit performance, of million, reductions a million. million. from held-for-sale $XXX was provision was our reserve this reserve

impact increased context impact half venture the set our gain within first credit $XX which loan reflected of of of portfolios, income growth in driven assumptions million of a loss the of by outlook, Other million, a the million investment. and our unchanged XXXX. macroeconomic the the $XX normalization Excluding peak reserve in includes build $XXX held-for-sale receivable

from investments quarter. that this want later the offset fourth I the in our and by marketing details opportunistic benefit quarter impairments executed will certain the to in was fourth more EPS we While asset discussion, provide gain of majority on highlight unrelated I

and Moving auto, to volume, health diversified our strong growth continue each Slide home demand. results, digital double-digit platforms diversified X experience and our platform in year-over-year wellness and and to reflecting and value, purchase

accumulated were of reflected in across The the growth flat. performance. Digital relatively prior the to by versus seasonally with and or the X active behavior, account to I’ll platform the purchase but last across the digits modest average accounts trends. on discuss elevated customer and lifestyle trends, up reflected active by versus continued as due robust in and stronger to by digital. retailer Auto, rates. The as higher diversified to programs. a prior year volume greater Average impacted offset Home a was value fourth in demand accounts tough year rate as accounts volume. continue payment growth partially rate. active by trends while year's interest generally platforms, year-over-year, Slide faced platform be strength Loan income holiday single in Health move both the Our receivable generally Interest base largely fee by improved low payment more Lifestyle elevation savings combined much & X% as diversified up powersports value X% higher and & payment to experienced increased comparison Wellness also active margin trends net in engagement during transactor grew platform volume purchase consumers, in basis, impacted our growth existing range the quarter. average new

between through levels As to by shift year see statement increased the period, points. the minimum of average. by see XXX last increased balance more approximately moderated and the The somewhat less in basis full More we and full sequentially the decreased than paying trends balance the paying away XXX decreased approximately spend December. payment from payments. saving is third slight the full from specifically, percentage XX we their than but percent we Payment the historical of or a quarter the statement basis XX payment rate balance higher the tracking payment account balance their our account accounts typically with payment points towards than minimum points five-year paying rate approximately above minimum sequentially their for seasonal below period holiday sequentially and accounts basis points. XX of higher payment and minimum their When payments percent by minimum their was points basis and quarter, basis mix fourth from about progress third

to is expires. consumer We payment industry-wide gradually spend robust, declining and as customer expect forbearance continue to the read savings normalize remains rate

the percent reduction This XX X.XX%, XX.X% receivable a held of More specifically, points, yield basis receivables resulted XX receivables accounted by interest liquidity a our average as of loan interest XX benchmark XX.XX%, a net costs. to net savings, basis which loan increase it begun reflecting XX consumer financial and by quarter by believe from point obligations growth due to consumer for Interest-bearing receivable spending, up year, was increased in The interest-bearing year-over-year our year-over-year to year-over-year the lower in basis improvement point liabilities While lead will fees margin driven points lower net point during in of margin. assets improvement and provided points. income The This a year’s compared and XX.XX% impact predict levels of return interest is driven last fees elevated point to expense inflationary we full a by interest well mix Fourth assets favorable moderation accumulated improvement interest from earning This X%, costs rates. in savings average difficult in increase a XX.X%, has to X% basis rate. primarily XX in a of reflecting to reduction period. basis growth. increased last margin. lower pressures basis of as XXX consumers, year-over-year margin net interest total and were approximately interest as liabilities mix to basis quarter. XX.XX%, our payment a loan were the for margin. interest Net the was XXX and the interest-earning lower

to payment improvement XX. credit rates cover continue year-over-year our our delinquency in I’ll drive key on trends Next, metrics. Elevated Slide

of this approximately the year compared points delinquency and rate down approximately held-for-sale XX last quarter on X.XX% and year, XX-plus points rate year, been Our portfolios XX-plus X.XX% our metric XX-plus basis fourth have When our the was of metric be removing delinquency impact basis XX-plus compared for and X.XX% last instead versus delinquency to the XX X.XX% XX. last the would the of measures was to down XX year. will delinquency

XX X.XX% have compared Our improvement in was year-over-year seen strong charge-off continued year, trends last delinquency a we’ve to portfolio to improvement. which point drive our net of rate, strong X.XX% basis

receivables Our basis allowance XX.XX% as losses percent XX a third points XX.XX%, from in the credit was of down for quarter. loan

to move focus expenses certain on Other of $XX of million included impairments and Let’s Slide of asset impact expenses. marketing incremental XX the $X.X million and $XX billion investments. of

increased compared other Excluding the X% expenses year. prior these to impacts,

employee on quarter; last factors: impacted the levels Focusing pandemic. second, quarter $XX as by wage quarter compensation one, negatively year. was wages compensation, fourth and efficiency for the hourly by the ratio fourth during to the key was to raised The higher XX.X% third as higher compared minimum two XXXX incentive impacted were we XX.X%

lower Excluding impacts our adjustments, asset impact XX.X%. investment, the paying due of and revenue, Even incremental lower be on resulted impairments the ratio and these of the the elevated has marketing to efficiency venture with ratio would average efficiency the from our compared which receivables. to investments, higher the our historical average rate gain remains

a continue point This continues approach strategic business. for differentiation disciplined to the be Synchrony. take investments of the in a to of clear management expense while also to We maintaining pace will

dollar of As Day, more balances smaller other to and than originate purpose acquire, general our Symphony operating through accounts our demonstrated service legacy we issuers. leverages efficiently our Investor

the is pandemic, stay remember the customers, broader important steady of is private relatively engaged have the X/X the and contemplated to Our of RSA. a of throughout marketing much industry’s maintained to acquire which we level peers spend our of within of half largely cost with also that to It’s average. label that course

our year As The in our services prioritize tireless of we and Synchrony offer up we that for innovation. some in possible generally omnichannel investment after partners enabled to a most steady focus our new result, in in technological digitally innovation and business a would Similarly, does the and year. sophisticated world marketing investment customers. the without compete products experience order ramp not not expenses and for the power consistently seamless be technology

So primarily continues. operating to ratio while market-leading we confident XX% as by the recovery of loan thus driven are will leverage revenue, to normalization growth ability operating return be efficiency in the the our payment achieve to and approximately of rate of continue our

Now XX Synchrony’s, Slide of another liquidity. discuss capital let’s and move strength our to and core funding,

the XXXX Given deposit the a receivables in our reduction year. base, and during carrying have higher we with loan coupled stickiness level the in liquidity of of early been generally XXXX,

higher we’ve optimize uncertainty, maintain it’s While mitigate level funding profile. excess during to actively a we liquidity periods been and funding believe liquidity to managing prudent our our of profile

last this funding As strategy, a shift year. slight of a compared our result there was in mix to

our $XXX from by sources last and to equated funding declined of was billion. funding $X.X year. with and deposits liquidity, our comprising resulted down XX% year which XX% XX.X% securitized deposits compared our our securitized assets, declined billion, in sources This last being funding year, quarter total $XX.X by at funding Our million XX% X% unsecured of end. and of unsecured credit including XX.X% undrawn comprising to funding from last Total facilities,

details banking by take agencies, the which of on be transition issued our rules we primary joint Before that elected benefits. provide to the federal has the position, it noted benefit capital should two I

incremental the adjustment. current and under With total delayed for CETX of XX of CECL year. and The this transition decreased compared X the second, ratio it phased-in fully the last level on XX% and a basis amortized transition effects we ratio year’s XX.X% XX.X% quarter two an The deferred plus to XX.X% the XX.X% provisioning rules, ratio last with CECL points adjustment lower capital under Tier than the to compared transition with Tier period the X it years; allows of XX.X%. was XX XX.X% for decreased capital basis to capital rules basis to a CECL portion year. last ended First, framework, transition be points the to reserves

approximately CECL will basis the quarter ratio transition we first the CETX During XX of portion recognize by which reduced points. the adjustment, first XXXX, our of

in statement and a sheet. metrics. pertains the of strictly our As already income to recognized regulatory balance has reminder, been adjustment transitional impact CECL our This capital

We $XXX stock continue the by shareholders common share million million in in to execute strong return $X.X in to dividends. our to quarter fourth repurchases returning $XXX of capital on commitment shareholders billion through and

we the $X.X including $X.X and share dividends. billion, common returned million billion in year, For in repurchases $XXX stock

the incremental Given the during Board June in our repurchase an authorization $X of an our XXXX performance strong year, billion. by business approved our through increase share

December for we had As of purchase XX, $X.X billion authorization. remaining in share our

We we’ll normal an have begun planned our our capital once process, actions to provide update planning and capital approved.

strong capital, considerable continued growth our generates our platform drive scalability our business reflecting Our to and the returns risk-adjusted technology and cost attractive of returns, commitment and discipline. consistent

We and to aggressive excess capital shareholders. on sheet subject but to our Accordingly, returns market and prudent business capital continue balance our to by will through plan capital approach to deploy we either our performance, to growth our or returning regulatory any an conditions shareholders, take have considerable guided considerations. to

is outlook, on assumes our Slide let to and macroeconomic a XX improving pandemic. well-controlled on Finally, a me focus presentation, environment which summarized stable our of

year, remain consumer we purchase the upcoming various to supporting demand expect growth markets serve. the industries volume we broad-based across and For robust,

and growth to expect decline moderate consumer payment As to rate purchase savings somewhat. we’d moderates, begins volume

second with should during We half trends those interest margin the the consistent seasonality. follow of expect and historical our reflect XXXX net to

a reduce the creating advance in in as quarters. done quickly. liquidity held-for-sale past, And second we third excess we excess our this both of some modest the to late we’ve NIM portfolios headwind With will and in the work liquidity, QX, to anticipate

rise fee and be moderate loss, offset rates payment delinquency expect As trends normalize reversals. yields through to by and the interest higher we credit and gradual higher

quarter. that delinquency the Our current will peak expectation fourth is in

expect in the charge-offs reductions net XXXX as associated moderate should builds reserve be portfolios. our purchase offset we’d RSA begin our with and growth reflect volume held-for-sale generally to but and of our to by continue the Given partially million rise. program asset-driven at expense performance reserve of final levels $XXX to strength will reserve year-end, approximate

asset generally anticipate certain in our approximately expect expense, we fourth impact nonrecurring conveyance operating we levels, run regard to to quarterly marketing gain the quarter of on million. with of occur $XXX sale And earlier. with we excluding quarter, items and producing to portfolios, of terms In expense second discussed lastly, the a XXXX line held-for-sale the in impairments

expect We to offsetting in investment neutral the our this business, EPS completely incremental redeploy for full the gain through thus year.

risk-adjusted Synchrony’s conditions, together, through it emerging attractive is pandemic we’re So at with market growth differentiated from model considerable returns changing putting powering strong and all the momentum.

As we leverage our strong and and which to of combination enabled provides our resiliency industry digitally continue our product strengths, analytics portfolio, deep diversified which data risk-adjusted growth, the suite, core enables advanced technology expertise, and sustainable customers, engage swift our scalable deliver and efficient Synchrony sustainable as integrations. to will at well as value risk-adjusted servicing lifetime platform, drive partner which powers customer and acquisition growth continue greater more peer-leading returns. returns

the continue his out to achieve continue Day metrics confident call our to laid at the long-term to to for I will operating considerable thoughts. concluding for back value in all remain to over drive stakeholders. we ability conditions our normalize, as turn operating now we So of Investor Brian

Brian Doubles

addition ahead Synchrony through it’s opportunities have connect as customers us. enhance the and customers the and in product ecosystem. that partners financial a this stakeholders. commerce us and very innovations, partners, in to positioned the could we be revolution I not or we team exciting has and partner through evolve with achieved of Whether our in digital strategic our of leader our year of for more integrations, expansion into been the digital new our Brian. proud Thanks, all distribution Synchrony investments offerings, which has ways continued new This channels

our And providing for markets and existing the same set value, the to product time, outperform And best-in-class our term, We power loyalty of products and is that long experience the outcomes we’ll continue our ones. on customer we over choice. customers will and partners Synchrony will it with and we as at our and focus all win new further underpinning partners drives programs, superior laser-like course, and that provide the customers. partners continue of our renew integrated to operate diversify in.

key the with stakeholders. our consistent priorities, strategic at our greater on that, and to unlock deliver returns we attractive I’ll to Q&A. value to turn will back for even the drive As open And continue Kathryn we growth call

Kathryn Miller

our prepared remarks. concludes That

now session will so I’d primary one ask question. follow-up yourself begin please one can and to possible. like limit many to that we Q&A participants the to We of the accommodate you as as

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

Operator

we go ahead. [Operator Sakhrani. you. KBW, have From Thank Instructions] Sanjay Please

Sanjay Sakhrani

Thanks. Good morning.

Brian Doubles

Sanjay. Hi,

Sanjay Sakhrani

both it digits, underlying rates Brian, growth a weighing how's high I sort your sort guess expectations. digits. have targets low double of against are both. question A for know question payment loan loan I going? Hey, of are But for on single long-term growth. the

Some are Maybe if weakness get expectations? not of Thanks. of And do average. or relative you to their there? driving to sort at talk the XXXX long-term their expect about – your peers above could what’s average, your you

Brian Wenzel

Millennials that that compared and you only by if on Z. at you a Millennials up lot the that, Yes. if XX% was Sanjay, look Boomers, look our comment. consumer record And with We maybe of of were to Last one say, a our And is look, really Baby products. I’ll encouraging I ask at is. Sales look purchase is right if driven and that’s volume the year Z that Brian of then generally, where was Gen X%. at start year things the environment demographic, about accounts on by in about would XXXX. operating we good terms and feel really now. really up you Gen good feel to actually

our as definitely to products think that about you demographic. So mix are younger very shift, that attractive

full We also million year. the XX new accounts generated for

bit go add the know, just think in don’t normalize way bit, to about call So to we If But payment could back we I all we thing the just Brian, digits levels. actually rates rate. full the a a bit single feel see need payment to loan the difficult said, XXXX, see here to prospects. you definitely now you’d little good normalize right the don’t that’s growth if in anything they year. for high little pre-pandemic And is the that? growth as they really a I if

Brian Doubles

that is strength volume across all we’re all Sanjay, the the – I purchase look when add, What in across you Yes. our seeing color segments, platforms. I’d

when is lost volume decline I pulling here asset our diversification in as not is our resiliency there’s that year. as the peers, through. to business, others a as or We have others gets of some right? comparison decline last what And much So think do

that. we definitely are being agree. And with more So consistent listen, I

entered we we off As into XXXX, a purchase record volume. came

about we on and that later rates, sure we growth think continues. we’re as I first moderation. quarter, volume the talk are month call – seeing the a And in do payment I’m mid-teens of think in seeing we strong purchase see as some we’ll the

with loan high I get think single can digits you have So to scenario we that do And double says in me that regard digits. you can see scenarios, in certain one growth.

feel we’re model where we and entering about So really XXXX. the good

Brian Wenzel

wellness, XX% grow look XX%. of add, I’ll thing up in was broad-based. Sanjay, in last up XX%. up platforms, [ph] their got to were if and The at the just you that health room pretty fourth ton it’s D&V the Purchase sales a quarter. digital across We volume

again, in So year-over-year receivable turned platforms all and nice positive fourth to growth, of having the corner broad-based growth the with our quarter. have it’s pretty

Sanjay Sakhrani

lot Okay. you of metric. That’s sort wonderful. Brian Maybe a know revenue driver higher fees last there’s reversals. expect over Is of higher think NIM, about for interest the and as the course to yield stuff that we this I year? that offset yield, about by guys bullet we affects all this and Or that other do But improve the Wenzel. And one the I says of another one? see liquidity that talk

Brian Wenzel

never about way see decline, The ultimately reversals right? you’re will that the as that rate but charge-offs, one it’s it. the book, yield key The been. will not on going Yes. would one. on the with has not the for year, see is be up It trail this to and go which behind the reversals, payment from come it driver Sanjay, you it, I the is benefiting impact NIM The think necessarily

one So one. be it won’t it trails and for

Operator

From Credit Moshe Suisse, have Orenbuch. we

Moshe Orenbuch

costs. that by that period normalization back? said lost, be comes the ratio. of you And about how paying talked about efficiency this lot you’d think that is environment, that you guess, how you over driven and the has Can of suppressed. kind about the a time revenue been an large deferred, you talk of In are I expenses investors Wenzel, more Brian attention to Thanks. Great.

Brian Wenzel

Moshe. Great Yes. question,

First of the all, I start want with to expenses.

we We’re employees. execute to and you is our some year-over-year. expenses up to our items if it just quarter, strip right. up upon the in we And discrete – elected X% impairment to increased We based hourly of when that the gains out had that, wage employee-driven, you about are think a start, lot

roles in cetera. about some scientists, technology, to also some relative organization you onetime et adjustments the think We critical data when had

this don’t as said a as stable. in money the we to the remarks, forward drive lot And of see of first we growth. base to into I prepared is So all, going my in order our rate in run pretty have inject

we step will each So of quarters, through the the as be consistent. base, relatively expense

As the ratio, you clearly, efficiency anticipated. the about yield we revenue the and lower than think is

pathway we to now, with normalization active think go between see that, the and But as and the XXXX, the that will step through. see over now XX%, XX%. it’s come of more we’re we mainly XXXX tightly associations dollar accounts right I course volume amount back So Again, back you managing it, call or a the oriented and networks. volume revenue higher to through that hopefully

Moshe Orenbuch

be as what normalization credit to going that cost actually several we I So next just maybe the be fixed clear, your should to the closer expands is be RSA base course of the quarters, volume is over causes revenue guess to thinking? to benefit and

Brian Wenzel

generally I dollar on basis that would a would be true. say

is expense that an the keep to productivity there and will think base drive components to relatively increase that, drive we’ll what I be but flat. in offset we’re the going of variable

and wouldn’t productivity we’re operating get to I say leverage. there’s to fixed. So a drive be shift going It’s

Moshe Orenbuch

Right.

and got yes. fixed it. like acting We’re I fixed,

very Okay. Thanks much.

Brian Wenzel

a Thanks, Moshe. Have day. good

Operator

have Sachs, Please ahead. Ryan Goldman From Nash. go we

Ryan Nash

guys. morning morning, Hey, Good good Kathryn.

Brian Wenzel

Hi, Ryan.

Brian Doubles

Good morning, Ryan.

Ryan Nash

Brian, I guidance, maybe as adjust look question. the million. follow-up If $XX a for to I the Moshe’s at expense

points I X% to about growth. X% it expense think to

to around more is you then you’re view operating reinvesting in in we the will expense to slides the And put that some have maybe leverage? included XXXX, Can the wanted remain rate? revenue a as up? So specifically, that And talk And outlook? to follow-up. parameters onetime it expenses going run relative positive that generate step I million clarify, a just the for about the expectation $XXX the should how to backdrop? about think is from Or gain, the you I

Brian Wenzel

Yes.

thanks for Ryan. the question, So

any Let million me we deal question. with the be not latter and your $XXX part will potential the be will run have onetime. offsets rate. They in of The

with we our a effect. ranging costs on work. should but the decisions, could continuing There when be be of fixed investments in into be those that in additive and the for and again, So not run would and business could That marketing some page. here it deal wide make what rate highlight adjust actually go way we’ll we we programs, some could of the have and to which those, the to

I expense about think generate generally, we model that’s the when up. are positive think and going operating leverage, the you set base, way the to was

So assets to expenses we the that be and as relative would that growth view would this the we think about revenue. greater our year, the have

believe we’re going operating to do So leverage. we get

the positive XXXX. operating leverage We’re we going through to step throughout as manage

Ryan Nash

levels. and charge-offs. increases little losses seen Got can at very are delinquencies credit, obviously low bit I a if ask it. On very, of Thanks. we’ve question. a in And And follow-up

Brian, I CECL, recognize the you low. trends prime seeing is can prime? versus in normalization across then X you’re that XX.XX noticeable relative although seeing XQ XX% portfolio? more Day And I to the Are the just allowance was wondering, any any seasonally talk So you maybe at near second, about to clarify, the

it mentioned being asset You driven.

on Day think give trajectory the is Thank about can maybe X you to CECL over destination? the just the So reserve still eventual you. us some of color time? how And

Brian Wenzel

Yes.

have on not do important where come to we worse specifically answer out. – that and is because to To background. this in credit, you see we Ryan, your nothing it’s So I’ll this seen But anything give question, you going let think that get expectations. performing results, I there’s we probably our discernible explain I’m to than me answer a says our longer

of I that and framework. the there’s want think I credit how give the what about lot means we comes term ranging normalization understand a to fast concern you and damage. a

the in in basis my about, the the exclude talked points basis call, previous XX earlier when remarks, held about delinquency better prepared and for sale. being you XX periods better we First, points than

is lost So the the give first how will great formation year of content in for that shape. half delinquency of the you

better. as it views, each significantly both at took bit XXXX. are XXXX kind When vintages, better We basis little at of we tranche specifically, XXXX some than forward XXXX in vintages than and pre-pandemic think, XXXX believe look refinements. at that’s don’t of XXXX, look in all because XXXX we the vintage significantly worse When a credit you think slightly here better we But a then Ryan, we about than I a factors, we other you of incremental end from from have Ryan, as these performance. but think pre improved. worse at have to again, performances, I risk credit. three the through about cumulative and when have see significantly pandemic. think in, we added vintages no those the XXXX on sit look at coincident look basis XXXX and of six-month you And deterioration both the

multiproduct The and first strategy. is our credit strategy

loan is strategy have credit strategy. we line a Our grow tighter

head strategies, you which management as gives period. account tighter severity lower have us normalization this We into

So loss volatile, think look GFC, demonstrated and ultimately thing be those the pandemic. RSA, increase the then RSA and step offset And you we Investor you in when the sources, can then the we and XXXX. and charge-offs the when ability less both partners that’s we’ll I curves look tools our the through recessions we in back more think on And control the last outlined analytics, been then at surgical, go data Day, at is that. The unique will be we take will right? as credit to the the

kind step you generation, of revenue a give the through. margin resilient with this would that you combine You as risk-adjusted

I So about think how that’s credit.

your what the that timing. goes mean a and think don’t have as what we migrate we’re think really we your rate to is into Day back step not Brian to into CECL. assuming going comfortable the loss some hold, I be a target generally fundamental asset-driven offsets with that’s the that think regard comes through one differing develop we second But will credit that we to view back says ultimately have to and in be there and loss is, It to mix get team There hold don’t view. you rate really will if really that that. back we you portfolio really how provisioning to And – view it’s XXXX that I XXXX. XXXX. question I allowance, leadership and your With view, on are that could the can

apologize your I think how a for think for about framework So but and to I customers. you talk the answer, long

Operator

have ahead. Cyganovich. Please Citi, go Arren we From

Arren Cyganovich

Thank you.

NIM for there wondering more around outlook each increases levels, you increases that year? bit the rate the expect somewhat guidance what some when you a that lower? that the we’re expected to of guess, which with keeping the have on there, of How rate are other the do seeing. And are the I kind two I rise I many at was look On $XX.XX, is, would aspects

Brian Wenzel

Yes.

less But increases, have are you the remember, our than expectations Obviously, rate. than different in portfolio, got regard be of transactors, for receivables I may then in we with upon factor our depending think rate than XX% to three view. our And think, when you variable to current I So day, XX%. rate less the market, is the increases that. it’s

honest a could So highly it points subject the be say, at really XX, the be driver. neutral of to XX we’re And with you, end to NIM. as not to run on not relates a There to be But NIM potentially intend book scenario. we movements. basis our I’d it’s to, rate significant day, going

lot. asset a slightly sensitive, but not We’re

Arren Cyganovich

But contrary fourth then loyalty on from, up item, the it. cost helpful picked what’s your in loyalty outlook kind sales our of the program And of the ahead? had Okay. expense likely revenue I program but quarter, amount a cuts base, there. volume a I the discussion Got guess, decent the you guess,

Brian Doubles

volume. not products Yes. and engaging look with bad That’s Great that our customers a means really question. this. Brian I driving are It at and necessarily our thing.

dual right, one. our you in can is volume. our it And see co-branded So that you’re card number volume-driven, volume,

And factor that there. of some to contributing to are programs proposition rise. obviously, where drive volume new in value changes is, then value Our the we props refresh thing final

is a of element the through where back The RSA. lost XX% sometimes shared approximately expense important is that this this other gets program is

again, loyalty. have the and we are And a model, to So We lot unique don’t lot partners marketing to And think, the back loyalty. to don’t to both the growth. the expenses marketing in have bear our the we going then I drive don’t burden. inject a of inject sharing in

RSA. the So there’s buffer in a natural

So lot a generally that again, of with offset it’s RSA, our engaging in our a and rising customers means products. it’s are thing good

Operator

From Morgan Stanley, we have go Betsy ahead. Graseck. Please

Betsy Graseck

here. much. so of thanks A questions couple Hey,

expenses XXXX, guide or should something of Is you frame? year on tie a targeting Or you’ve would to XX%, up bit. a XXXX XX%. kind First next on be that just year, last know one time over be out the expense I more the expecting that like longer-term two? Day little from we got is Investor that ratio there your

Brian Doubles

Yes.

good metric. all, would Betsy, that related morning, of First consider a not I XXXX

to a in relative year We’re revenue. the transitory

rate expense move We when So less that output I Again, The really control to the at the into and XXXX has actual elevation how dollars. and you a a payment develops. we’re think control given look to going – that. controlled, of rate. revenue that the can bit you that’s little begin payment denominator

Betsy Graseck

spend do to question the then you're expenses with And has other Okay. just making. investment on the

got like quarter investing commentary, that sounds of us? then next from talking to making the the it year. like investments what telling million you're and the about fair that. a You've second, Is be gain you're during read fourth And third those you're going $XXX and

Brian Doubles

Yes.

tried the I to actions. in types the And business. growth be well will combination I business a of actions will depend primarily quarter. effect the in where like Obviously, at as really to fixed That's look the the get the investment of drive leverage had the the cost we'd it. to being incremental and side investments have as that So it would of of think reduce again, there second to it third there both upon of

and hopefully you quarter our call be at review April. update an team and out will to give earnings first that set plans with I the our and Brian So able in

Brian Wenzel

not really to payback investments to that going use have good don't dollars. we're fair a make It's those any really say of a good return or

Betsy Graseck

about as talking programs or more opposed in to investments the you Is that... technology? Are like marketing

Brian Doubles

to It be some business be could combination look potentially have It's in accelerate that, to could that that. in we where refreshes fixed our will programs we'll and cards of relative like capability. digital going It we reissue be of of the things. a continue to of like be – the at and facilities. try certain campaigns the we and be do acceleration may where could technology may It things costs

best combination, a hit So best on go payback the and it's through and to a win. IRs We're will projects Brian going the ultimately it. with but review

Brian Wenzel

drive usually that Both, the look Betsy efficiency business we long-term the and to let's at. to It's two other in is One paybacks. growth, lifts, is drive right? one great have

we disciplined those that We have we'll a really investments, same process obviously evaluate how this run play around and year.

Operator

Please Don From ahead. go have Wells we Fargo, Fandetti.

Don Fandetti

about CFPB and Hi, cards morning. bit is It been the the thoughts portfolios? recently. environment? partners your how new Can like regulatory secondarily, on seems you good provide more the pipeline has for updated a And little talking

Brian Doubles

fees. regulatory information the say environment CFPB's has stable. I'd look, the so been for Don, saw regarding Obviously, fairly Yes. we request

other have really be late we with terms lot in to disclosures say transparent fees than just I'd fees. don't our First, that very consumers. strive a always We our of of

compliant with As CFPB. by on their today. that you and governed fees know, the those We're are late already calculated guidance and completely

but we'll that, report close at to obviously point. this stay So nothing really more to

Brian Wenzel

pipeline. across generally, lot our a platforms, a in out would excited a really I large lot that pipeline of then And new of there the I say, we're of program pretty A some existing but opportunities looking out channels of would say so that distribution locked new there. a lot up, now. five opportunities all lot partner on exciting about, at, there's to the strong pipeline nice opportunities been program have them programs not we're is strong right new of

So we're excited that. about

Don Fandetti

Brian. Thanks

Brian Wenzel

Thanks.

Operator

Kevin Please have we Sandler, ahead. go Piper From Barker.

Kevin Barker

a Thank follow-up just that question. on you and

to amount the have. given of the just compared high relatively are fees accounts late industry you Your

relationships was other model continue the So or generate do to to higher. do it you regulatory similar the with type any just naturally anything CFPB there feel your like be your given trends, adjust merchants? you were to to changes, If revenue would have flexibility

Brian Wenzel

thing and would something the that Well, our I protect And change And there. all we fees, it say, Brian, for revenue so know, just the consistent again, other is, to across don't I anything. look, just said. if regulated disclose we if don't could were of general by first got to on margin. of the accounts aggregate fee late add late we think the I close players the amount stay in as I charge dollar to But very this, amount that our mean, and card CFPB but purpose we price look, on front, I and ways you'd out

Brian Doubles

harbor in we're and being is safe about shouldn't it late The that at any when say way it and the the Yes. CFPB, average look for I think fee real we industry Kevin, difference with I'd us be between participants. incident, it

you worked that. Act, same. to changes I back went think remained We Act partners go if CARD the and when under CARD the essentially historically, revenue went into back we place, our

our return. where work to So may partners the if I revenue the to regard to, how may not the our be and think we've historically, risk-adjusted with had value again, shifts appropriate them their run environment impacted, an to return we'll provide and play the or customers with

Kevin Barker

for question. you my Thank Okay. taking

Brian Doubles

Thanks.

Operator

John have we Jefferies, From Hecht.

John Hecht

morning. much good talking Hey, for very questions. Thanks my

Brian Doubles

John? you are How

John Hecht

the you like basis point? And to basis – the timing for rising parts influenced RSA, RSA, RSA You also, the of program just about are kind those of it kind guys? delinquencies of what's loyalty charge-offs, do about to kind point talked the costs How that? but And trying moving how is there? just then relationship thinking within think or

Brian Doubles

Sure.

delinquency yield with charge-offs. So and higher if you The the generally that think through higher fees should late John, same RSA. about flows immediately delinquency things revolve

have way, same they happen, There's no exact through no of counted. the to it media. in Loyalty delay. the flows when goes it been lag, which period is So

that charge-offs comes give or extent giving through you the depending see marketing interest to provide bias will will bias yield that will upon that either line RSA. program you higher the immediate downward upward fee the expense So the to through, and RSA which flow and through, loyalty also downward then bias

John Hecht

Okay.

same about should that fluctuation? the think period, in So time we

Brian Doubles

be Correct. more The really would only John. works thing on a reserves, fundamentally that lag

John Hecht

second different topic then And Okay. – is. follow-up question on a

go new of Clover developed partners comment You Verizon, partners, you can the products? you maybe last this year, had of play and into those year kind new SetPay, on Venmo, contribution

Brian Doubles

opportunities Yes. front in I for mean growth lot us John. a of exciting XXXX, of really

intended. of And fact both definitely how couldn't what a are value them. wallet that, like you're we performance the we of card, hit which able off of experience say You the extraordinarily quantitatively Verizon I the those. is on I and that a to pleased is The and the feedback on is with be much qualitatively. Verizon prop top bunch save. the card and exactly both would Venmo just well, We acting doing on that charts, of Venmo feedback get the that more get

very it's experience, still integrating And we'll that be of it's a obviously, in-store, online, but et integrated, both good we've early, also a We cetera. we've you launched very I think partners know, but as mobile, year. there, customer Pay-in-X, got got early this pipeline still very really Walgreens, then

opportunities broader product the given just looking The excited that dermatology distribution to it's are ticket think that, We first it. We're also providers individual there, and turning wellness. going in resonate. at health addition will partner In size about really in on be in quarter. integrations, to this the we're in a

definitely this the a So on for is just a execution. of team, year lot to focus

out the there a want. I on now as just distribution we progress think lot made can. product we those set that much we've We channels and getting as products it's got of

our out the to the experience. day, really you service So there, the buy. really on for apply it really you sure they're easy what's to mean and at products, and to enough can't and that I just making we're make and end laser-like of customer easy available that's to consumers, focused invest can winning easy

for but a So XXXX. lot things that's focused, of where we're exciting

Operator

Mark Barclays, have DeVries. Please From go ahead. we

Mark DeVries

With question the what pace A you I say and been a investor on just guidance, of when just of normalization. of you. that expected for kind credit the wanted focus clarify, QX is you of in Thank peak on and magnitude pace that to context, kind lot your magnitude you about normalize. referring if And how are seasonal that's just the of kind your thinking to kind you're normalization of It's for when peak that's of case, XXXX. we'll of assumption see? you the not there's

Brian Wenzel

of peak First we've Mark. all of kind delinquencies, the happen charge-offs about indicated the be really going early will first good that and quarter of morning, in you XXXX. kind of of normalization post peak to talk is maybe When second losses, of quarter, of

would So normalization happen that. on delinquencies – after happens it

expect to We it rise.

with out going Now and where levels. start year to I the think you we at how build, have to start at low we're that's

If XXXX, slower We rate how think delinquencies payment haven't with payment going elevated will longer to closely seen anything, again, step but remains it rise. begin through aligned will be will to begin change. to which, rise period, is rate as we be to we for

to started back back we increased some cohort to notice increased and going So some cohorts thing I in see we unit for a that's that What's outlined payment it's spending on prepared And payment to of cohorts movement another remarks accounts basis, our I accounts behavior see in have we pattern. rate on rate that we has is happening levels. in have our a think little there. that some changed, of – think how I all of the bit And hinge one payments. migration XXXX that is as that

rate payment certain it a slowing of like the on is the basis top And dollar pieces. not house, looks down so for at

clearly our pieces that it portfolio, I delinquency in you'll think, XXXX. migrating for back happens more When is some see portfolio, it. of total to the For move trends, with

Mark DeVries

just pace Okay. normalization. Great. And on of the

– could stable the how If macro normalize? about how think thinking that of you a without economic are macro and of improving kind it assumptions about about delinquencies kind contained made quickly to stress, you you pandemic,

Brian Wenzel

Well, from perspective. months season a typically, to vintages XX take to delinquency begin about

fourth. that being quarter, mainly third you this see first that part year, fourth year, in latter started begin refinements some credit the would this in so quarter again, or the flowing to we of the some So the through of

So to see you'll environment. begin that absent in the any changes macroeconomic

induce with fact our simple to unwinding things begun the call activities upgrade would inside we we've book. Just cards smart to and what that growth some regard of private and label CLIs and our dual

Operator

for question We ahead. Carcache. Research, we go have final one Please from Bill have time Wolfe

Bill Carcache

be a Doubles, that see Can little payment Hi, color I just good on believe you on normalize of levels? bit, looks mean loan Wenzel, growth. that a Could be And scenario said you you XX% bit? growth where that if bit said what could you a little loan high Could XXXX by like? little more you Brian more little morning. a scenario give even digit. expand rates a bit could double single-digit Brian there's

Brian Doubles

Yes.

add us And points I post I say levels high-single-digits anything the a basis but for I look, you slight to know, improvement you Bill, want don't would that? all growth. to year, way if mean. a mean So don't certainly I'm the to modest just give to put would the that going reversion here, full high-single-digit to in not to to Brian, we and loan come pre-pandemic back need rates payment

Brian Wenzel

ran say, had on is I'd how we multiple ran Bill, it evolves. scenarios of process payment degrees that planning our and rate we the this What Yes. we year, varying

down in where it rate quicker. the on growth when slows loan that timing to a scenario, given the that purchase under And So is higher scenario will there scenario of lag payment see comes potentially a rate you line, receivables.

rate entire printing growth the take mid-teens growth, sequential the order XXXX, to is what rate of volume step it of seeing. you type throughout as and we're loan going rate payment the is payment a give in the purchase range But we hinge-off important think the the outcomes. So that I which we're will again, of, to the through when is a of portfolio doing trend on part really that it lot doesn't impact payment

Brian Doubles

developments on the people full. rate of terms hit Brian paying in we in some in of this mean, fewer positive I And seeing earlier. payment terms are

we indication will reversion in the feel you hard across at platforms, be when if some that again, exactly receivables I a It's across volume so the much. there of growth XXXX. some last the And every fourth positive see And out purchase and to quarter, think But there's look mean did platforms call look we to how growth. record platforms had we our in all good, volume. really closing one and have you purchase the as in year year broad-based

So it's to XXXX. a you look pretty good setup as

Bill Carcache

than really payment I normalization earlier on credit, concerned your all in payment that of rates and Could you at there alternatively, and comments risk the rates some an of thinking between on of actually that's interplay seeing faster Yes, on sort the are normalization and side? where opposite in scenario helpful. you're based credit growth about credit? leads credit guess normalizing the what over receivables expanding

Brian Doubles

credit way where move Absolutely seen we to generally more payment and the normalization see not latter be It we've That they're the to and something They're growth have in you not before. could part, have. would rates, say. probably sync. a happens ever do scenario elevated highly unusual normalization. credit able faster going than be likely than we to not, see going loan may We

Operator

today's you Thank ladies and you. joining. Thank for And conference. this gentlemen, concludes

You now disconnect. may

Synchrony Financial (SYF) 28 Jan 222021 Q4 Earnings call transcript