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Synchrony Financial SYF

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Synchrony's Credit Costs Hit New Lows, but Low Loan Growth Remains a Headwind

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

No-moat-rated Synchrony Financial reported another quarter of strong bottom-line results, with recorded EPS of $2.01, though revenue growth was less impressive. Bottom-line results were driven by credit costs, which came in below our already-low expectations, as the bank’s net charge-off rate was 2.18%, a full 2.23% lower than last year. While we continue to expect credit costs to normalize over time, with Synchrony’s 30-day-plus delinquency rate at 2.42%, net charge-offs will likely remain below historical levels until at least the second half of next year. The company also released another $407 billion in reserves. While we believe that much of the reserve releases are behind us, with Synchrony’s allowance for bad loans still at 11.28%, there is some room for additional releases, especially if credit costs remain low. 

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Company Profile

Business Description

Synchrony Financial, originally a spin-off of GE Capital's retail financing business, is the largest provider of private-label credit cards in the United States by both outstanding receivables and purchasing volume. Synchrony partners with other firms to market its credit products in their physical stores as well as on their websites and mobile applications. Synchrony operates through three segments: retail card (private-label and co-branded general-purpose credit cards), payment solutions (promotional financing for large ticket purchases), and CareCredit (financing for elective healthcare procedures).

777 Long Ridge Road
Stamford, CT, 06902
T +1 203 585-2400
Sector Financial Services
Industry Credit Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 16,500