Synchrony Earnings: Better-Than-Expected Credit Costs Seen, but Credit Metrics Are Still Deteriorating

No-moat-rated Synchrony Financial reported decent third-quarter earnings as it benefited from good loan growth and resilient credit quality. The bank reported an 11% year-over-year increase in net interest income to $4.36 billion, while Synchrony's net income fell 10.7% to $628 million, primarily due to higher provisioning expenses. This translates to a return on tangible equity of 22.9%. As we incorporate these results, we do not expect to materially alter our $42 per share fair value estimate. We see the shares as undervalued.