Synchrony Financial (SYF) — Q1 2025 Earnings Call Transcript

Thank you and good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the Investor Relations' section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainties, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for, and does not edit or guarantee, the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Kathryn, and good morning, everyone. Synchrony delivered a strong financial performance in the first quarter of 2025 that included net earnings of $757 million or $1.89 per diluted share, a return on average assets of 2.5%, and a return on tangible common equity of 22.4%. These results were driven by Synchrony's ability to leverage our core strengths in order to empower our customers with prudent financial flexibility and enduring value when they need it most, while also delivering loyalty and sales to the many partners, providers, and small businesses that form the foundation of our economy. During the first quarter, Synchrony engaged with approximately 70 million customers and generated $41 billion of purchase volume. Year-over-year trends in both active accounts and purchase volume continued to be impacted by the credit actions that Synchrony previously implemented, as well as continued moderation in customer spend as they navigated the challenges of affordability and economic uncertainty in their day-to-day lives. Dual and co-branded cards accounted for 45% of total purchase volume for the quarter and increased 2%, generally reflecting the growth from our CareCredit dual card launch, which began last year and has been contributing to partner spend ever since. Purchase volume at the platform level ranged from down 1% to down 9% year-over-year as customers generally remain selective in their discretionary spend and bigger ticket purchases, particularly in categories like furniture, jewelry, outdoor, dental, and cosmetics. Slide 3 of our earnings presentation provides a closer look at our weekly purchase volume during the first quarter, as well as the first two weeks of April. Our week-to-week sales were generally consistent throughout the quarter, as was the weekly variance to prior year, including in March when news of government layoffs and tariffs began to intensify. As you can see by the generational mix of weekly sales, we saw consistent engagement across the customer base throughout the quarter with no discernible shift between generational cohorts. These portfolio spend trends, in combination with our credit actions contributed to the 2% year-over-year decline in ending receivables. From a payment behavior perspective, the payment rate remained flat compared to last year but increased sequentially by 10 basis points, generally in line with pre-pandemic seasonality. This sequential increase in payment behavior occurred across all credit grades as the proportion of above minimum payments increased while the minimum payments decreased. In aggregate, the proportion of lesser minimum payments on our portfolio remained below the 2017 to 2019 average across all credit segments. Synchrony monitors our customers' behavior very closely across our portfolio through a comprehensive set of real-time indicators and data points, which range from cash usage and utility payment data to credit bureau and auto changes. When viewed in combination with the spend and payment behaviors we've observed, we believe that customers are continuing to manage their spending needs and payment obligations amidst the challenges of a persistent inflationary environment and an uncertain economic backdrop. Our customers, partners, and small and mid-sized businesses rely on Synchrony for access to financial products and flexibility with attractive value propositions and utility for wherever life may take them. Our track record of leveraging our proprietary data, sophisticated underwriting and analytics, diverse product suite, and channel distribution to drive sales and enhanced loyalty has reinforced Synchrony's position as the partner of choice, and we are proud of the consistently strong partner pipeline that has resulted from this execution. During the first quarter, Synchrony added or renewed more than 10 partners, including some country, Texas A&M Veterinary Hospital, Ashley, Discount Tire, and American Eagle. Synchrony is always seeking opportunities to expand access to flexible financing across the wide range of spend categories we serve, particularly those where customers seek to maximize value. Our new co-brand program with Sun Country Airlines, a Minnesota-based hybrid low-cost air carrier, is a great opportunity to deliver compelling utility and rewards for flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean. We have also continued to expand our CareCredit acceptance across the veterinary space and are excited to announce that CareCredit has been named a preferred financing partner for the Texas A&M University Veterinary Medical Teaching Hospital. This new partnership reflects a significant milestone in solidifying CareCredit's acceptance at all 29 public veterinary university hospitals in the country as well as Synchrony's commitment to supporting the veterinary community and ensuring pet parents have access to care for their beloved pets. In addition, our program renewal with Ashley, the number one furniture selling brand in the U.S.A. and one of the world's largest furniture manufacturers, extends our nearly 15-year partnership. We are excited about the opportunity we see to help drive retail growth and enable customers to access flexible financing solutions to purchase quality furnishings that fit their lifestyle and budget. Meanwhile, our program renewal at Discount Tire will provide their 1 million cardholders with access to expanded utility at over 1 million U.S. locations through the Synchrony Car Care network for automotive services and repairs, as well as for purchases like insurance, gas, oil changes, and more. Finally, we're proud to build on our nearly 30-year partnership with American Eagle Outfitters through a multi-year extension that will continue to deliver exceptional value, enhance the customer experience, and deepen customer relationships. The Real Rewards by American Eagle and Aerie loyalty program was recognized as one of America's best loyalty programs by Newsweek for the fifth consecutive year, and the Real Rewards Credit Card was named my Best Retail Credit Card in-store rewards for 2025. These awards reflect our collective commitment to delivering value to loyal customers and driving growth, and we look forward to expanding access to these industry-leading financial solutions. So, as we look to the remainder of 2025 and beyond, Synchrony remains in a position of strength. We are focused on executing across our strategic priorities and maintaining our differentiated approach to serving our customers and partners. Synchrony's ability to optimize the outcomes for our many stakeholders has been made possible by the incredible people here at Synchrony who deeply understand their evolving needs and expectations. Our team approaches each opportunity to deliver best-in-class experiences with a passion and commitment to excellence that is inspiring. That's why I'm so proud to share that Synchrony was named as the Number 2 Best Company to Work for in the U.S. by Fortune Magazine and Great Places to Work. This recognition is a testament to our unique culture, our company values that our employees embody every day, and our unwavering dedication to keeping our people at the heart of all that we do. As our team continues to drive innovation, expand access to flexible financing, and deliver compelling results for all those we serve, we also remain focused on building our leadership position and driving significant long-term value for our stakeholders. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Thanks, Brian, and good morning, everyone. Synchrony's first quarter performance continued to demonstrate the strength of our differentiated business model, which has been built to deliver resilient risk-adjusted returns through evolving market conditions. We generated $41 billion of purchase volume during the first quarter, which was down 4% year-over-year when compared to a record first quarter last year, including the effects of the credit actions we took between mid-2023 and early 2024, continued selectivity in customer spend behavior, and one less day in the quarter, which had approximately 1% point impact. Ending loan receivables decreased 2% to $100 billion in the first quarter due to lower purchase volume. Our portfolio payment rate remained flat versus last year at 15.8% and was approximately 60 basis points above the pre-pandemic first quarter average. Net revenue decreased 23% to $3.7 billion, primarily reflecting the impact of the Pets Best gain on sale in the prior year. Excluding this impact, net revenue was essentially flat as lower interest expense and higher other income were offset by higher RSA. Net interest income increased 1% to $4.5 billion as a 7% decrease in interest expense was partially offset by a modest decline in interest income. Our first quarter net interest margin was 14.74% and increased 19 basis points compared to last year. The increase was driven in part by lower interest-bearing liabilities costs, which decreased 26 basis points versus last year and contributed approximately 25 basis points to our net interest margin. Our loan receivable yield grew 24 basis points, primarily driven by the impact of our product, pricing, and policy changes or PPPCs, and partially offset by lower benchmark rates and lower assessed late fees. This contributed approximately 20 basis points to our net interest margin. Our liquidity portfolio yield declined 88 basis points, generally reflecting the impact of lower benchmark rates and reduced our net interest margin by 15 basis points. The mix of our interest-earning assets decreased by 62 basis points and reduced our net interest margin by approximately 11 basis points. RSA is of $895 million or 3.59% of average loan receivables in the first quarter and increased $131 million versus the prior year, primarily reflecting the program performance, which included the impact of our PPPCs. Other income decreased 87% year-over-year to $149 million due to the impact of the Pets Best gain on sale in the prior year. Excluding that impact, other income increased 69%, primarily driven by the impact of our PPPC related fees. Provision for credit losses decreased to $1.5 billion, driven by a $97 million reserve release in the first quarter compared to the prior year's reserve build of $299 million, which included $190 million reserve build related to our Ally Lending acquisition. Other expense increased 3% to $1.2 billion, generally due to the costs associated with the technology investments and included a $15 million charitable contribution and a $12 million restructuring charge related to the Ally Lending business and the expected completion of its integration in the second quarter. Excluding the charitable contribution and restructuring charges, other expense would have been up 1% versus last year. The first quarter efficiency ratio was 33.4%, approximately 110 basis points higher than last year when excluding the impact of the Pets Best gain on sale. Taken together, Synchrony generated net earnings of $757 million or $1.89 per diluted share and delivered an average return on assets of 2.5%, a return on tangible common equity of 22.4%, and a 15% increase in tangible book value per share. Next, I'll cover our key credit trends on slide 8, which highlights the efficacy of our credit actions that Synchrony took from mid-2023 through early 2024; it gives us confidence in our portfolio trajectory towards our long-term net charge-off target of 5.5% to 6%. At quarter end, our 30-plus delinquency was 4.52%, a decline of 22 basis points from 4.74% in the prior year and four basis points below our historical average for the first quarter of 2017 to 2019. Our 90-plus delinquency rate was 2.29%, a decrease of 13 basis points from 2.42% in the prior year and one basis point above our historical average for the first quarter of 2017 to 2019. Our net charge-off rate was 6.38% in the first quarter, an increase of 7 basis points from 6.31% in the prior year and 54 basis points above our historical average in the first quarter of 2017 to 2019. Net charge-off dollars were down 4% sequentially. This compares favorably to the 2017 to 2019 average sequential increase of 9%. Our allowance for credit losses as a percent of loan receivables was 10.87%, which increased approximately 43 basis points from the 10.44% in the fourth quarter. Turning to Slide 9. Synchrony's funding, capital, and liquidity continues to provide a strong foundation for our business. During the first quarter, Synchrony grew our direct deposits by approximately $1.7 billion and reduced our broker deposits by $338 million. In addition, we executed both secured and unsecured deals at attractive credit spreads when compared to historical deals. In the secured market, we issued $750 million of three-year bonds with a coupon of 4.78%. In the unsecured market, we issued $800 million of six-year non-call five-year notes at a coupon of 5.45%. We also achieved a credit rating upgrade from Fitch, holding our long-term issuer default rating up to BBB with a stable outlook. We are proud of this rating action as it reflects Synchrony's strong balance sheet, the resiliency of our business model, and strong execution as a public company over a decade since our IPO. At quarter end, deposits represented 83% of our total funding while secured and unsecured debt represented 9% and 8%, respectively. Total liquid assets increased 9% to $23.8 million and represented 19.5% of total assets, 142 basis points higher than last year. Moving to our capital ratios. As a reminder, Synchrony elected to take the benefit of the CECL transition rules issued by the joint federal banking agencies. We made our final transitional adjustment of approximately 50 basis points to our regulatory capital metrics in January 2025. Our capital metrics now fully reflect the phasing effects of CECL. The impact of CECL has already been recognized in our income statement and balance sheet. We ended the first quarter with a CET1 ratio of 13.2%, 60 basis points higher than last year's 12.6%. Our Tier 1 capital ratio was 14.4%, 60 basis points above last year. Our total capital ratio increased 70 basis points to 16.5%. Our Tier 1 plus reserves ratio on a fully phased-in basis increased to 25.1% compared to 23.8% last year. During the first quarter, Synchrony completed our existing share repurchase authorization for the period ending June 30th, 2025, and returned $697 million to shareholders, consisting of $600 million in share repurchases and $97 million in common stock dividends. Given our strong capital position, we announced today that as part of our capital plan, our Board approved a new share repurchase authorization of $2.5 billion for the period ending June 30th, 2026, and increased our regular quarterly dividend by 20% to $0.30 per common share beginning in the second quarter of 2025. Synchrony remains well-positioned to return capital to shareholders as guided by our business performance, market conditions, regulatory restrictions, and subject to our capital plan. Turning to our baseline outlook for 2025 on Slide 10. Given the court order entered last week in the litigation and ultimately vacated the existing rule, Synchrony will begin the process of assessing next steps and engaging with the partners regarding the performance of our implemented PPPCs to determine if any adjustments are warranted. Our baseline assumptions exclude any potential impact from the changes to the PPPCs as well as any potential impact from a deteriorating macroeconomic environment or from the implementation of tariffs and retaliatory tariffs as they are unknown at this point. Turning to our outlook in more detail. We continue to expect purchase volume growth to be impacted by our previous credit actions and selective customer spend behavior, with the payment rate remaining generally in line with 2024 levels. As a result, we are maintaining our full-year expectation of low single-digit growth in ending loan receivables. We continue to expect net revenue between $15.2 million and $15.7 billion for the full year. Net interest income is expected to follow seasonal trends associated with growth, credit performance, and liquidity, and will ultimately be determined by a number of factors, including year-over-year growth in both interest income and other income as the impact of our PPPCs builds, partially offset by the fall-through effect of lower average benchmark rates on our variable-rate receivables. Lower assessed late fees as delinquency performance improves, a lower-yielding investment portfolio due to lower benchmark rates, and finance charges and late reversals associated with the seasonality of our credit performance. Lower average benchmark rates should also continue to contribute to lower funding costs as our CDE maturities reprice, although this will be influenced by competitive deposit beta trends in response to any additional rate cuts that may occur. In addition, we continue to expect higher levels of liquidity in the second quarter given our desire to prioritize our deposit customer relationships and pre-fund future growth. We anticipate reducing our excess liquidity portfolio gradually as growth begins to build in the back half of the year. As a result, our liquid assets as a percent of total assets will average approximately 17% for the full year, which is higher than our historical average over the prior three years. We now expect RSA as a percent of average loan receivables to be between 3.70% and 3.85%, driven by improving program performance. Our net charge-off outlook has improved to be between 5.8% and 6.0%. Our revised net charge-off range expectation for the full year is now inside our long-term financial framework of 5.5% to 6%, driven by our prior credit actions and differentiated approach to underwriting and credit management. Lastly, we are maintaining our expectation of an efficiency ratio of between 31.5% to 32.5%. Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion. First, our customers have remained stable. They've been consistently making choices that align with their day-to-day needs and seeing value and flexibility to prudently manage their financial situations amid an inflationary and highly fluid environment. Second, Synchrony's credit trends continue to outperform relative to the industry, which is underscored by our current year outlook. Our sophisticated underwriting and credit management strategy have enabled a lower relative net charge-off peak than most of our peers and swifter expected return to our long-term target range. And while our credit actions create a near-term impact on growth, our portfolio's credit position should provide greater long-term resilience as market conditions continue to evolve. And third, Synchrony's robust capital remains a clear strength. Our new capital plan reflects the confidence of our board and our company that Synchrony is well-positioned to continue to drive progress towards our long-term financial targets and deliver significant long-term value for our stakeholders. With that, I'll turn the call back over to Kathryn to open to Q&A.

That concludes our prepared remarks. We will now begin the Q&A session. To accommodate as many of you as possible, I'd like to ask the participants to please limit yourself to one primary and one follow-up question. If you have additional questions, the Investor Relations team will be available after the call. Operator, please start the Q&A session.

Hey, good morning, guys.

Hey Ryan.

Morning Ryan.

There are clearly many concerns in the market regarding credit. You have managed to reduce the top end of your guidance. Can you share what you are observing that gave you the confidence to adjust the upper end of the range? Additionally, the allowance increased due to seasonality, but could you remind us of the assumptions regarding front employment, especially in relation to your qualitative reserves?

Yes. So, Ryan, why don't I start on that, and then Brian can talk in more detail on the reserve assumption. Look, I think we feel pretty constructive around the consumer and the trends that we're seeing right now. I think our credit team did a fantastic job navigating the last two years. I think the investments that we made in our PRISM proprietary underwriting system are certainly paying off. It was great to see turn the corner on delinquencies. 30-plus was down 22 basis points, 90-plus is down 13 basis points. I think both a little better than our expectations. With that said, we didn't adjust the guidance all that much. But we did feel comfortable given the trends that we're seeing, just tweaking it a little bit. I think what's particularly important is we're doing that with receivables, maybe just a touch softer than we expected. So, you've got the denominator impact, which isn't exactly helping. So, credit is trending better than we expected. So, we feel pretty good overall in terms of how we started the year on credit.

Yes, Ryan, let me provide some insights on credit and then move on to reserves. Looking at the formation at the end of the first quarter, we're down 18 basis points compared to last year, which is better than our 2017 and 2019 seasonal performance by 4 basis points, and the 90-plus category aligns closely with that pre-pandemic period. We're observing strong entry rates, and as we examine what's entering delinquency, there's been some improved performance in the more advanced stages of delinquency. This consistency in delinquency trends gives us reassurance. For about six months now, we've been outperforming seasonal expectations regarding 30-plus and 90-plus metrics. The credit actions we've implemented in the middle of 2023 and for 2024 have significantly impacted our results; the vintages we're seeing in 2024 are outperforming 2019, although it's still early, and also surpassing 2023. We're confident in the formation and our current underwriting approaches. Being three months into the year, the delinquency trends provide a solid indication for the next six months, and we feel positive about being back within our long-term target of 5.5% to 6% for this year.

I understand. Thank you for the clarification. Brian, the guidance indicates that no changes to PPPCs have already been implemented. You mentioned starting to consider next steps. Do we have sufficient clarity that the rule may not return later? Additionally, how should we approach the timing and process regarding whether to retain what has already been implemented or if there will eventually be a reversal? Thank you.

Yeah, Ryan. So I think we feel pretty comfortable that the rule has been vacated, and we don't expect it to come back in a similar form in the near future. So with that said, we don't currently have plans to roll anything back in terms of the changes that we made. Obviously, now that we have some certainty the rule isn't going to go into effect, we're going to go out and talk to our partners, just like we did when we rolled out those actions. We'll be transparent like we are with any major decisions that we make related to the program. We'll look at a number of different factors. Frankly, every partner we have is going to look at this differently. We'll look at the behavioral changes that we saw when we rolled out the pricing actions. Frankly, they haven't been material. We didn't see a big reduction in accounts or spend related to the actions. We did a lot of test and control around that. Our partners will certainly look at where other merchants and providers are pricing their programs. They always look at their competitive set. Keep in mind that the prime rate has come down. So our variable rate cars, consumers have gotten the benefit of that. Lastly, we'll go through the financial impact of what it would mean if we were going to do some rollback. They look at the RSA and they look at maybe a growth trade-off to that extent that there is one. The other thing I just want to highlight, I think this is important. Any kind of change that we're going to make could come in a variety of forms. That could be adding value to the card and getting value back to the consumer through promotions and offers, and stuff like that. It doesn't have to just be a price rollback necessarily. We could also approve more customers at the margins where we have the opportunity to do that at attractive returns. It's going to take some time. We're going partner-by-partner, just like it took quite a bit of time to roll out the PPPCs. It's going to take a lot of time to get through those discussions. It's complex. Every partner is going to look at it differently. Our partners are focused on other stuff at the moment just given the uncertainty in the environment.

I appreciate all the color, Brian.

Thanks, Ryan.

Hi, thank you. Good morning. I'm just curious about your growth outlook. It's good to see that you reaffirmed your year-end receivables guide in the face of an uncertain macro. But purchase volumes, loan growth, and account growth were all lower year-over-year. So, what's the driver of the return to positive growth by year-end? Is there anything you can do to help drive that?

Yes. Thank you for the question, Terry. Looking at the purchase line, we experienced a decline of 4%, which improves to 3% when accounting for a leap year. We're comparing against the highest purchase volume we’ve seen in a single quarter, which occurred last year in the first quarter, making the comparison quite challenging. Last year, we observed a decline in purchase volume that began in June and continued through the end of the year, so the comparisons should ease a bit. Our data indicates that overall, the consumer is pulling back, but we haven't experienced that impact directly; our sales have remained steady on a weekly basis, even into mid-April. We haven't noted any significant changes among consumers, as we illustrate in our charts. The consumer remains resilient during this period. Regarding other metrics, such as active accounts, we've faced some headwinds from our credit strategies affecting new accounts. However, we are optimistic that, as consumers regain stability amid hopefully lower core inflation rates, their spending will strengthen. We anticipate an increase in volume that should pick up throughout the year, especially in the latter half, aligning with usual seasonal trends. We're pleased with the first quarter results, which reflect our expectations. We mentioned that the early part of the year would resemble the latter part of last year. After that, we believe achieving low single-digit growth in receivables is possible. This consideration does not include any potential adjustments to credit; if the current environment persists, we might introduce strategies for existing customers with whom we have established relationships that could expedite growth. This possibility is not included in our current outlook, but we will monitor the macroeconomic situation closely.

Got it. That's helpful. I guess to the extent that loan growth doesn't come in as expected in the low single digits. How does that impact the phase-in of your PPPCs, particularly the APR piece, any way to quantify or contextualize that? Thank you.

Listen, I think you have a core book today, right, that's going to continue to build and value as the APR continues to increase. If you have lower purchase volume, that means that the phase-in approach and the projected balance will be impacted. PPPCs become effective will actually accelerate throughout the year. So, a lower volume actually does help the PPPCs from an interest perspective. Certainly having lower active accounts will provide a little bit of a headwind from an other income perspective when you think about pay for severances.

Thanks, Terry.

Thanks very much. Brian Doubles, I was intrigued by your comment about using the benefits from the mitigants or PPPCs to add value and add growth either by adding value to specific consumer propositions or by underwriting a little deeper. Maybe could you just flesh that out a little bit and talk about maybe not specific merchants, but are there categories of merchants where that's going to where each of those could work better and maybe talk about how that factors into your growth plan for 2025?

Yeah. It's interesting, Moshe. We've been discussing this. I think the investment community has been talking about this as just a simple rollback of what we've done. Given the work has already been completed to roll out the pricing changes, any changes from here on out will be similar to the changes that we're always looking at with our partners. They're typically looking at doing one or two things, incidenting the consumer to spend more to drive growth for themselves, for the program, provide more value on the cards. Particularly in times that are uncertain like this, our partners lean even more heavily on the card programs. We're in there discussing some of the additional revenue; can we improve the value prop a little bit? Can we do more promotions, more marketing different placements to drive growth? Those are the kinds of discussions that we're having. The other interesting thing that we're talking to them about is now with maybe an increase in APR, can we approve more customers on the margin? Obviously, we would do that at very strong risk-adjusted returns. We would likely do it in our highest returning portfolios. There are a number of different things that we're looking at, and I wouldn't say it's unique to any one platform or industry. It really is across the board, but those are the types of things that our teams are out there working on.

Great. Thanks. And maybe as a follow-up, I know I probably gave you a little bit of a hard time last year about not using the share repurchase as aggressively. Your comment about waiting for some market volatility, we've certainly seen that. Given that you're now past the full implementation of CECL and at the moment, loans are not growing, you're expecting them to come back a little bit, but still be generating a lot of excess capital. Can you talk about in the current environment, given all the factors that we know positive and negative, how you think about the use of that new share repurchase authorization?

Yes. Thanks for the question, Moshe. We're starting from a place where we have a lot of excess capital. We know that this year, hopefully things play out, that we will generate like other years significant capital for utilization. Our number one priority is always going to be organic RWA growth. Again, we have a growing low single-digit target, which is below our historic norm. Obviously, we would be pleased if it exceeded that. Our second is a dividend. You noted this morning we increased our dividend 20% to $0.30 per share on a quarterly basis. The last component is share repurchases or inorganic opportunities. We'll be very disciplined when it comes to inorganic opportunities to add things to the portfolio or our capabilities at attractive financial returns, IR or ROIC, or returns that are accretive to the baseline ROA of the company as we move forward. That being said, $2.5 billion is probably one of our larger historical share repurchases. That doesn't preclude us from the extent that growth doesn't necessarily come through from going back to the board and increasing that if we deem that to be the best use of capital. There's a lot of flexibility as a company and gives the board a lot of flexibility in how we can execute against our long-term strategy.

I just want to reiterate and emphasize that over the last 10 years we have bought back half of the shares, so we are laser-focused on returning capital to shareholders in the event that we don't need it for RWA growth.

Thanks very much.

Thanks very much, Moshe.

Hi, good morning. Maybe I just want to step back to amplify the macro commentary a little bit. I just want to talk a little bit about what you're seeing in your data and hearing from retail partners. How are they prepping for the potential of tariffs? Is there anything you guys are involved with in that process just thinking through what it looks like when spending with tariffs come in place? On the weekly data, if you could just talk a little bit, it's been pretty stable, clearly, and you saw this in April 2. Do you think there's a little bit of a pull-forward or Easter impact in there that's maybe propping the first two weeks of April? Thanks.

Yeah. Let me start on that. Look, I think it's important just to differentiate between all of the uncertainty in the market and the macroeconomic features and what people are predicting and what we're seeing right now in terms of the health of the consumer. The uncertainty is clearly out there. It's impacting consumer confidence. But at this point, it's not impacting what consumers are actually doing. Spend levels are still pretty strong. Credit is performing in line to better than we expected. The consumer is still in pretty good shape, and I think the labor market is strong. With that said, they're being selective around how they spend. They're navigating inflation as they have been for quite some time. If you look inside the portfolio, you've got the lower-income consumer; they started tapering their spend about a year ago, largely driven by inflation. You saw a rotation out of discretionary and bigger ticket items, but you're seeing still pretty good spend levels for the higher-income consumer. Our client segment grew sales 1%. Average tickets were down a little bit, but frequency was up. What can't get lost in all this is that, that moderation in spending patterns is actually a positive in terms of credit. We're encouraged by that pullback because consumers are not overextending; they're being disciplined. Overall, we're very pleased with the trends that we're seeing. I think it's responsible. It's in line with or better than our expectations when you look at credit. I think we feel like the setup is pretty good. Now, on tariffs, we're obviously spending a lot of time with our partners. That's creating a lot of the uncertainty. I think our partners, some are more impacted than others. They're rethinking strategies around inventory management, supply chain, pricing actions. You're seeing some marketing to pull forward sales. I would tell you, we haven't seen that yet. We haven't seen that materialize. We may. It's still very early, but we're not seeing it in the data. The weekly data is still relatively consistent, relatively flat. We stay close to our partners. We do everything we can to serve them. During times like these, our partners lean on the credit program even more heavily.

Let me provide some additional details on the outlook and then address your second question about pull forward. Regarding the outlook, there is no sign of macroeconomic decline or the effects of tariffs affecting us at this time. In a typical recession, we'd expect to see a slowdown in payment rates. Initially, this may lead to higher interest income and late fees before net charge-offs occur, excluding reserves for now. If we were to enter a recession, we are beginning to observe a shift in consumer behavior that could generate additional revenue, countered by the RSA and charge-offs driven by rising unemployment. As people lose jobs, they may receive severance and unemployment benefits, but ultimately face financial struggles leading to delinquencies. Charge-offs would likely become more pronounced in 2026 under such circumstances. It's essential to evaluate whether our reserve outlook considers the potential peak unemployment rates in 2025, which has not been fully addressed yet. In a standard recession, some aspects could lean positively against the base case. Regarding consumer behavior related to tariffs, there are two key points: one, sales volume may face challenges as consumers allocate more funds to necessary goods and possibly reduce discretionary spending; and two, payment rates might decrease, resulting in higher revolving balances. So, those are metrics we will monitor. So far, we have not seen any significant changes in unemployment or consumer behavior due to tariffs. On your question about pull-forward, if we analyze the weekly sales data from April, particularly between weeks 12 and 13 compared to week 15, we noticed three platforms influenced by various factors. One platform showed a typical seasonal increase tied to home sales we generally experience in spring. Another platform conducted a significant promotional campaign through our partner, which led to more new accounts and activity, aligning with expectations. The third platform experienced changes associated with Easter. Despite some promotional efforts by partners, there has been no clear indication or data suggesting we have experienced any pull-forward effects from tariffs.

Got it. That was tremendously helpful. Thank you. Maybe just switching gears a little bit to partners and competitive intensity for retail programs. Can you just talk about your appetite for onboarding a larger portfolio in this environment? And just relatedly, I did want to ask about deal renewals because I think in your 10-K, the percentage of revenue that's under contract 24 months out was a little lighter this year compared to the last few years. So, anything to call out there? Thank you.

I think the competitive environment is pretty consistent with where it's been the last couple of years. We haven't been in a very stable, predictable environment. I think when you have some uncertainty out there, you see issuers demonstrate a little more discipline in terms of how they're pricing programs and looking at the risk/return equation. We believe we have that discipline through cycles more so than maybe anybody else. It's felt like a pretty good competitive environment. We're always looking to bring on new programs. We signed some of this. This quarter, we had some great renewals big and small. We cater to such a diversified set of partners, tons of small to medium-sized businesses, and we've got really large partners that are very attractive as well. If you think about just the past year, we renewed Sam's Club, JCPenney; we're always in those types of discussions with our partners looking to early renew when we can outside of an RFP. Typically, there's something inside of the program that as you get into these 10-year agreements, sometimes we want to fix something they want to change, maybe it's a refreshed value prop. We typically get together with our partners and say, okay, we're both willing to make this investment, let's add some years to the back end of the contract.

To answer the second part of your question, our 10-K disclosure, obviously, the year shifted between 2020 and 2024, so we split out to 2027 and beyond from a disclosure standpoint. I think back in December when we finalized the year and produced the K in February, we're in range relative to revenue that was beyond 2027. That's now in the high 80s. We continue to make progress, and we have some renewals to go here in the next couple of years. As Brian always tells us, we earn renewals every day and we'll continue to work on those over the course of the next year or so. Delivering for our partners, particularly in an uncertain environment, is the best way to have renewals.

Thank you.

Thanks, Mihir. Have a good day.

Morning, guys. I think last quarter, you had mentioned running with higher levels of liquidity at least for the early part of this year to prefund growth. Does that stance change at all with respect to the current macro environment and the uncertainty out there today? Is it possible that you would run with liquidity even higher now?

First of all, thanks for the question, Rob and good morning. I think our liquidity position, as we thought about as we entered the year was two-fold. Number one, albeit a slower growth environment than historical norms, we realize we're going to return to growth. Coming on and off in China, starting the engine of growth on your digital bank and deposits didn't make a lot of sense given the rate environment. If I have excess liquidity while it's a drain on NIM. If I'm borrowing at 4%, I'm getting 4.5% at the Fed, it's a positive economic trade. So we weren't troubled by having necessarily excess liquidity, number one. The view hasn't really changed relative to the asset growth. We will use it at some point as we move forward. The second benefit of having excess liquidity, we're into some significant maturity towers on CDEs that are up for renewal. It gives us a little bit of pricing flexibility as we think about that to lower our interest-bearing liabilities cost without the fear that we're going to have to raise rates somewhere else to maintain liquidity. We expect higher liquidity most certainly in the first half of the year. As we talked about growth should accelerate in the back half of the year so we'll begin to use that liquidity both in the back half of this year and into next year. The simple answer is no, it hasn't changed our view since December.

Okay, thanks. And then I just wanted to dig in a little bit and ask about dual card and co-brands. The volume and loan growth there were better than the portfolio overall and accelerated sequentially. Last quarter, you had mentioned that as kind of being a way point for a reversal of some of your tightening. Maybe this is just normal ebbs and flows, Q1, but could you unpack that dynamic and then talk about how you're thinking about things with respect to private label growth versus dual card co-brand growth going forward? Thanks.

Thank you for the question, Rob. Regarding the growth of our dual card offerings, one focus area for our company has been health and wellness. The dual card we provide through our CareCredit business gives customers flexibility in using it at various veterinary and dental practices, as well as across the 40 specialties we cover. This flexibility has appealed to customers looking to manage their expenses. This aspect has been one of our growth drivers over the past year and continues to contribute to our growth this year. As we consider our core partners, our dual card private label offering particularly benefits from the through-door population. As this population grows stronger, we can issue more dual cards, and our customers appreciate the connection to the brands they are loyal to, which motivates them to seek credit from us. This reflects the strong brand presence of our partners. In terms of our strategy for dual cards, we maintain a focus on lower line styles in traditional general-purpose cards, which helps us sustain an attractive risk-adjusted margin and keep the company's charge-off profile stable.

This is why the multiproduct strategy is so important. We can start somebody off in a secured card in set pay product, private label, and then migrate them over time as they demonstrate the ability to pay creditworthiness. We get to know that customer, how they spend, and what types of purchases they make. That's really the power of the multiproduct strategy. That's really resonating with our partners. We talked about new wins, renewals. That's been a key component part of big renewals where we've added a product or two to those programs.

Very helpful. Thank you.

Thank you, Rob.

Thank you. I guess I wanted to follow up on credit quality. I know we've talked extensively about it. When I look at sort of the path of the delinquency rate over the last several months and then the charge-off rates actually came down year-over-year in March, it seems like there's a good glide path all else equal for credit to improve quite decently. I'm just trying to think about where we would expect all else equal the charge-off to migrate. Can we go below average given you've tightened so much? Maybe you could just talk a little bit about that.

Yes. Let me start at a high level, Sanjay. Look, I think we feel very pleased with the credit trends that we're seeing. The actions that we took starting in mid-2023 are clearly having the desired impact; we're trending a little bit better than we expected. We talked about 30 and 90, now showing down year-over-year. If you look at our performance relative to the industry, and you benchmark that against 2019, we perform better. I think that's a lot of the investments that we've made, the investments we made in PRISM. The credit team has done a fantastic job navigating this. As Brian talked about earlier, I think there may be an opportunity where we can open up a little in the back half of the year. If we do that, it will be methodical. We'll do that starting with our existing customers, giving them a little more spending power in some of our higher returning segments. We might have the opportunity to make some slight adjustments on approval rates. Generally, we feel like it's a pretty good setup for the back half of the year, and I'll turn it to Brian to talk a little more about the charge-offs guidance.

I provided some context earlier about net charge-offs. As we analyze the situation further, we see several key factors. First, the credit measures we've implemented regarding the origination and authorization of transactions on existing accounts have positioned us well within our long-term guidance. Additionally, we've made several changes in recent years to our collection strategies, both in pre-delinquency and within delinquency, allowing us to approach these situations more effectively than we did previously. We believe these changes are enhancing entry rates and inflows. I'm also enthusiastic about our recovery operations, which we have internalized from a third party, yielding significant benefits. Unlike our competitors, we did not experience a decline in recoveries. All these elements contribute to managing our net charge-off rate, and we feel confident that we can achieve our target as we approach mid-April.

Okay, great. Brian Doubles seemed to mention some larger RFPs for significant portfolios. Can you share your thoughts on the potential to secure these larger portfolios?

Yeah, we are very interested in securing larger portfolios. We always have been. We have a lot of discipline around how we evaluate those opportunities. You've got to have alignment with the partner, good deal structure that is fair and equitable with both parties. Good alignment in terms of how you want to grow, because if you're going to sign a large program, it's going to go over 10 years; you have to have that alignment because you're going to have to make changes to the program, whether it's underwriting, marketing strategies, placement. Those things need to benefit both parties. We do an enormous amount of financial due diligence on a lot of models. We stress those bigger opportunities significantly to make sure that as we look at a 10-year deal, we look at it every year and say, okay, are we going to like this deal in that year under these circumstances? Is the partner still going to like this deal? We've got a ton of rigor around that process. At the end of the day, we have other uses for our capital, and it has to compete with share repurchases and other things. It's got to be in line with the overall return for the business or accretive. These are very attractive opportunities when you look at larger programs and bringing on an earning portfolio but it's got to meet a lot of hurdles and have a really attractive risk-adjusted return and good alignment between the parties.

Is there a sense of timing on any of this?

It sounds like you're talking about a specific opportunity that I'm obviously not going to get into. I'm sorry, Sanjay.

It's all right. All good. Thank you.

Thanks, Sanjay.

Thanks, Sanjay.

Hey guys, thanks for taking my question. I'd like to delve in a little bit more to the dual card. There was talk about the growth there. But I am curious when you think about credit profile, is it different from a FICO score perspective, but maybe even more importantly, from a utility perspective? Should we in a slowdown expect different performance for private label versus the dual cards?

Good morning, Rick. Thanks for the question. When it comes to dual cards, we consider several factors, including credit quality, which is one aspect. We utilize our own proprietary scoring system and data from our partners to assess whether someone is eligible for a dual card or a private label card. Occasionally, credit scores may be a bit lower, but we might still approve a dual card if their performance indicates they could handle a higher credit limit. Generally, the credit quality associated with dual cards tends to be higher, and they typically exhibit better spending and payment rates compared to private label cards. In the event of an economic downturn, we would implement usual credit measures to avoid overextending. We monitor account transactions and authorizations closely. Dual cards may have higher overall balance severity but a lower charge-off incidence, while private label cards generally present a higher incidence due to their lower credit profile but with lower severity because of average balance and line limits.

Got it. And can you speak a little bit to the impact of utility for the consumer being able to use the card in one place as opposed to having to be their primary card and how that impacts payment behaviors?

Yes. I think every individual makes a payment IRP decision relative to what cards. In a lot of places, they'll make decisions and look at cards based upon the brand they are connected with, not solely utility. It's not just a piece of plastic or a digital card. They want to say, listen, I like to go shop at retailer X or Y, and they want to continue to use that card, and they use it there. That being said, we also have cards that are private label that have broad-based utility. If you think about a PayPal card, an Amazon card, you think about cards that we're now able to load into Apple Pay that deliver wide utility. So, utility does matter, and there are lots of places where utilities are broad-based. If you think about our home segment, we have home cards, car care cards that go across multiple retailers care critical across multiple specialties. While dual card is one, we have broad-based utility, which meets the card important to the consumer. The connection with the brand really is going.

Brian, that's really helpful and something I can fully appreciate. Thank you.

Thanks, Rick. Have a good day.

Good morning.

Morning, John.

Morning.

On the macro assumptions, Brian, thanks for the color regarding the baseline assumptions and why they don't dial in the recessionary backdrop. But if you did dial in a weaker macro and recessionary dynamics into the baseline assumptions, I hear you about revenue and NII may benefit from a higher revolve rate. What would it mean for your charge-off expectation? I know maybe it's kind of a 2025 thing, but it's more of 2026. I guess what I'm asking, what does a stressed charge-off level look like for Synchrony given your current business mix, your credit tightening as of today? How would that charge-off range compare to this 5.8% to 6% level that you're looking at for this year?

I actually do not care to comment. We're not calling it yet or a hypothetical for inflationary or, I'm sorry, a recessionary environment. But thanks for the question.

I understand. And then separately, I guess, just in terms of the credit actions is, I know you indicated that you're evaluating actions to accelerate growth when you talked about some of the partnerships and everything. Does that include a widening of the credit box from here, just given how your credit has performed? I mean, are you evaluating unwinding some of the tightening actions that you put in place in 2023 and 2024 to drive some acceleration in growth?

Yeah. I mean, I alluded to that earlier. I think it's something we're evaluating. We'll be very methodical about how we'll do it. We would tend to start with our existing customers. We know them well. We know how they spend. They've built a credit history with us. So we would give them a little more spending power potentially where we have higher returning segments in the portfolio. There may be an opportunity to widen the box a little bit. But everything will be done in the context of that long-term net charge-off rate. So 5.5%, 6% we're not looking to do anything outside of that. We don't want to run well below that because we're leaving growth on the table, and we certainly don't want to run above that. You've seen us manage it back into that long-term charge-off guidance.

Great. Very helpful, Brian. Appreciate it.

Thanks.

Thanks. Have a good day.

Yes. Thanks. I had a follow-up question on just capital levels and returns. You're sitting here with CET1, 13.2%, well above kind of the start target range of 10% to 11%. The question is, is that still the right target for you to manage down to? And any thoughts on kind of pace at which we should expect you to manage down to those levels?

Yes. Thanks for the question, Mark and good morning. Our target level, which we've shared is 11%. So that's the goal which we go through. Obviously, there's some buffer around that at different points, given seasonality. But we're on a consistent pace to do that. Remember, Mark, we started out where our capital peaked at 18% CET1 in this company. Brian highlighted earlier on the call, we've taken out over half the shares since 2016 to kind of get here now. We understand the importance of having an efficient balance sheet. We kind of built out our Tier 2. We have a little bit more on Tier 1, and we're on a pace in which we share with our board and our regulators over the course of several years on how our capital trajectory goes. The $2.5 billion today, we think is a good position relative to the earnings power there and the capital we're going to generate this year, given the RWA expenditure, the increase in the dividend. Does it preclude us from coming back later in the year and discuss with the board whether or not that needs to be adjusted upwards? We're very pleased with the capital plan that has a $0.30 dividend, up 20% from our existing dividend, and this $2.5 billion authorization, especially today, given our market capitalization, which is unfortunately lower than its true value.

Okay. And just a follow-up on that. When you set this latest authorization, was it kind of size to give you plenty of flexibility to outperform on the growth perspective? Because I just think about what consensus earnings are and what implied payout if you use 100% of the repurchase with the new dividend you'd be kind of neutral to CET1 at end of the year. Am I thinking about that right? So either you outperform on a growth perspective or it is likely you come back and potentially look to buy back more stock or expand the authorization.

Yes. I think whenever we do a capital plan, what we bring to the board is a number of different scenarios. We have baseline scenarios and obviously, you have distressed scenarios. There are outlays in there. We have a full range that shows the type of resiliency the capital stack has under different scenarios. We didn't go to the Board and say we're going to be back later this year. That's the option to discuss with the Board whether it's warranted. I think right now, the $2.5 billion authorization is a good place to start. We'll execute throughout the year and see how growth develops; see what the opportunities are. If changes are warranted, we'll bring it to the Board and have that discussion. We're very pleased with the capital plan that has a $0.30 dividend, up 20% from our existing dividend and $2.5 billion authorization, especially today, given our market capitalization, unfortunately lower than its true value.

Yeah, it makes sense. Thank you.

Thanks, Mark.

Thanks, Mark.

Hi, good morning. Brian, can you talk a little bit about the runway for CareCredit. It's been a good growth story competitively. Are you still seeing that as a fragmented market? And then also, how has the credit performance been versus your expectations?

Yeah. Look, I think we still feel great about the health and wellness platform. That is certainly if I had to pick a platform that we're really investing in and trying to grow, it is that one. It's a huge market. We've got a leadership position. We've been in the business for almost 40 years. Our NPS scores in that platform are off the charts. We had a really good reputation in terms of the providers that we serve across dental and vet. It's a growing market as well. Brian Wenzel talks a little bit about the CareCredit Dual Card; we're employing a number of strategies to continue to grow there. It's obviously bigger ticket. You've seen maybe just a little bit of softness here recently, but we are extremely optimistic about our ability to grow CareCredit over the long-term. I'd say on the credit performance side, generally in line with the rest of the business, although given some of the margins, we are able to underwrite a little bit a touch deeper there at very attractive risk-adjusted returns.

Okay. Thank you.

Thanks, Don.

Thanks, Don.