Rising Credit and Funding Costs Are a Headwind to Synchrony’s Otherwise Solid Q4 Results

No-moat-rated Synchrony Financial reported decent fourth-quarter earnings that were largely in line with our expectations, as impressive loan growth was offset by rising credit losses and funding costs. The bank’s net interest income increased 7.2% from last year and 4.5% sequentially to $4.1 billion. Earnings per share fell 14.8% from last year to $1.26, which translates to a return on equity of 17.5%. The drop in earnings was primarily due to higher credit loss provisioning, with Synchrony building $425 million in reserves versus $72 million last year. As we incorporate these results, we are maintaining our $41 fair value estimate.