Synchrony Financial (SYF) reported Tuesday a second-quarter profit that rose well above expectations, boosted by a reserve release of nearly $900 million, while net interest income fell below forecasts. The consumer financial services company's stock was still inactive in premarket trading. Net income rose to $1.23 billion, or $2.12 a share, from $37 million, or 6 cents a share, in the year-ago period. The FactSet consensus for earnings per share was $1.39. Net interest income (NII) fell 2.5% to $3.31 billion, while the FactSet consensus was for an increase to $3.47 billion, as the 25 basis point increase in net interest margin to 13.78% fell short of expectations of 14.01%. Purchase volume increased 35% to $42.1 billion, loan receivables increased by $100 million to $78.4 billion and average active accounts grew 2% to 65.8 million. Provision for credit losses was down 112%, driven by $878 million reserve release and as net charge-offs as a percent of average loan receivables fell to 3.57% from 5.35%. "Customer payment rates continue to remain elevated, however, due to the impact of government stimulus and industry-wide forbearance measures," said Chief Financial Officer Brian Wenzel. "While this hindered loan receivables growth and yield, it supported continued strength in credit performance and led to lower provision for credit losses." The stock has rallied 29.1% year to date, while the SPDR Financial Select Sector ETF (XLF) has advanced 19.1% and the S&P 500 has gained 13.4%.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
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