Another Decent Quarter From Synchrony, but Loan Provisioning Is a Headwind to Bottom-Line Results

No-moat-rated Synchrony Financial reported solid third-quarter results, though strong loan growth was offset by higher credit costs. The bank’s net revenue grew 5.9% from last year to $3.97 billion, while earnings per share fell 26.5% to $1.47. This translates to a return on tangible equity of 26.6%, still above the firm’s long-term average despite the drop in profitability. As we incorporate these results, we do not plan to materially change our $43 fair value estimate and see the shares as undervalued as consumer credit firms remain out of favor by the market.