01—Abstract
Summary
Summary of the 10-K filed February 7, 2025. Cited figures are marked; the original filing is the authoritative source.
Synchrony Financial reported net earnings of $3.5 billiona for 2024, up from $2.2 billion in 2023, driven primarily by the after-tax gain of $802 million on the sale of Pets Best, higher net interest income and lower retailer share arrangements, partially offset by higher provision for credit losses.
Loan receivables rose to $104.7 billionb at December 31, 2024, reflecting lower customer payment rates and the March 2024 acquisition of Ally Lending for $2.0 billion, partly offset by lower purchase volume of $182.2 billion. Net interest income increased to $18.0 billion, while the net charge-off rate rose 144 basis points to 6.31%, and the provision for credit losses increased to $6.7 billion. Credit trends were mixed: over-30 day delinquencies improved slightly to 4.70%, while over-90 day delinquencies rose to 2.40%.
Management expects net charge-offs to decline in 2025 and interest and fees on loans to increase, but notes that the CFPB's credit card late fee rule, currently enjoined, could materially reduce late fee income if it takes effect. Deposits of $82.1 billionc funded 84% of total funding sources, and the company returned capital through $1.0 billion of share repurchases and $398 million of common dividends.
Key risks highlighted include macroeconomic sensitivity, concentration in a small number of large partners (five largest programs were 54% of interest and fees on loans), the pending late fee rule, and rising regulatory requirements as the company now has over $100 billiond in total assets. The Basel III common equity Tier 1 ratio was 13.3%, and management expects CECL phase-in to reduce it by approximately 50 basis points in 2025.
02—Key points
Key Highlights
- Net earnings rose 56.3% to $3.5 billion in 2024, aided by an $802 million after-tax gain on the Pets Best sale.
- Net interest income increased 6.0% to $18.0 billion; interest expense rose 24.9% as cost of funds reached 4.72%.
- Net charge-off rate increased 144 basis points to 6.31%, and provision for credit losses rose $768 million to $6.7 billion.
- Loan receivables increased 1.7% to $104.7 billion, including the $2.2 billion unpaid principal balance Ally Lending acquisition.
- Over-30 day delinquencies improved to 4.70%, while over-90 day delinquencies increased to 2.40%; management expects net charge-offs to decrease in 2025.
- The CFPB's credit card late fee final rule, currently enjoined, would significantly reduce interest and fee income if implemented.
- Capital returns included $1.0 billion of share repurchases and $398 million of common dividends; $600 million of repurchase authorization remained at year-end.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2024filed February 7, 2025Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Net Income | $3.50B$2.24B | +56.3% |
| EPS (Basic) | $8.64$5.21 | +65.8% |
| EPS (Diluted) | $8.55$5.19 | +64.7% |
| Shares Outstanding (Basic) | 396.50M421.20M | −5.9% |
| Shares Outstanding (Diluted) | 400.60M423.50M | −5.4% |
05—Questions
Frequently Asked Questions
What drove the increase in Synchrony's 2024 net earnings?
Net earnings increased to $3.5 billion from $2.2 billion, primarily due to the $802 million after-tax gain on the sale of Pets Best, higher net interest income and lower retailer share arrangements, partially offset by an increase in the provision for credit losses.
How has credit quality changed in 2024?
The net charge-off rate rose 144 basis points to 6.31%, and over-90 day delinquencies increased to 2.40%. Over-30 day delinquencies decreased slightly to 4.70%, reflecting credit actions taken. The allowance coverage ratio increased to 10.44%.
What is the potential impact of the CFPB late fee rule?
The final rule would lower the safe harbor for credit card late fees from $30 (adjusted to $41) to $8. The rule is currently enjoined by a federal court, and the filing states it would result in a significant reduction in interest and fees on loan receivables if it becomes effective. Management has implemented product, pricing and policy changes to offset the effect, but states it may take time and there is no assurance they will fully offset the impact.
How is Synchrony funded and how strong is its capital position?
Deposits were $82.1 billion, representing 84% of total funding sources. The Basel III common equity Tier 1 ratio was 13.3% at December 31, 2024, and the company stated it was well-capitalized. The CECL regulatory capital transition is expected to reduce this ratio by approximately 50 basis points in 2025 once fully phased in.
How concentrated is Synchrony's partner base?
The five largest programs (Amazon, JCPenney, Lowe's, PayPal and Sam's Club) accounted for 54% of total interest and fees on loans and 51% of loan receivables at December 31, 2024. Programs with Lowe's, PayPal and Sam's Club each accounted for more than 10% of interest and fees on loans.
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