Synchrony Earnings: Strong Results Despite Rising Credit Card Net Charge-Offs

No-moat-rated Synchrony reported decent first-quarter earnings as strong loan growth and good cost management were offset by higher credit costs and lower net interest margins. Synchrony’s net interest income rose 7% from last year to $4.05 billion, while earnings per share fell 24% year over year but rose 6% sequentially to $1.35. The drop in earnings was primarily due to higher credit loss provisioning, with Synchrony setting aside $1.29 billion versus $521 million last year. It is worth noting that Synchrony benefited from historic lows in credit costs last year, which led the bank to generate substantial windfall profits, leading to difficult comparisons for its results this year. As we incorporate these results, we are maintaining our $39 fair value estimate.