Synchrony Financial (NYSE:SYF) reported robust third-quarter results, with net earnings of $628 million or $1.48 per diluted share. The company's focus on tech innovation and strategic partnerships, coupled with growth in its diversified product suite, contributed to its strong performance. Synchrony also anticipates approximately 11% growth in ending loan receivables for 2023.
Key takeaways from the call include:
- The company opened 5.7 million new accounts and saw a 6% increase in average active accounts.
- Record purchase volume of $47 billion was achieved, driven by growth in Health & Wellness, Digital, and Diversified Value segments.
- Credit performance remained within expectations, with delinquency rates nearing pre-pandemic levels.
- Synchrony's funding model remains strong, with 84% of total funding coming from direct and broker deposits.
- The company returned $254 million to shareholders via share repurchases and dividends.
Synchrony's recent vintages are performing well, and the company has taken credit actions, including tightening origination criteria, to position for future growth. The allowance for credit losses increased by 6 basis points to 10.40% in Q3. The company completed a $1 billion securitized issuance during the quarter.
Synchrony executives, during the call, discussed the portfolio's growth, particularly in health and wellness. They also addressed the reserve rate, stating that there was no significant shift in underlying assumptions. The company feels comfortable with their current level of losses and believes they can withstand changes in the macro environment.
In terms of mergers and acquisitions (M&A), the company is opportunistic but maintains financial discipline, focusing on transactions that are accretive to earnings per share (EPS). The company also noted that customers with federal student loans have been performing better in terms of payments than those without student loans.
Finally, the company expects its credit performance to stay within its target range of 5.5% to 6% and aims to maintain losses within that range for optimized risk-adjusted margins. Synchrony also discussed its buyback program, stating that they had $850 million remaining under their current authorization.
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