01—Abstract
Summary
Summary of the 10-Q filed October 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Synchrony Financial's third-quarter 2024 Form 10-Q reports net earnings of $789 milliona for the three months ended September 30, 2024, up from $628 million a year earlier, and $2.7 billion for the nine months, up from $1.8 billion.
The nine-month increase was primarily driven by the after-tax gain on the sale of Pets Best of $802 millionb. Net interest income rose 5.7% to $4.6 billion for the quarter, while the net charge-off rate increased 146 basis points to 6.06% and the provision for credit losses rose 7.3% to $1.6 billion for the quarter. Loan receivables were $102.2 billion at September 30, 2024, up 4.4% year over year, driven by lower customer payment rates and the Ally Lending acquisition, which closed in March 2024 for $2.0 billion in cash.
Management notes that purchase volume fell 4.3% in the quarter and expects a low single digit decrease in purchase volume for the full year 2024, with loan receivable growth moderating. Deposits of $82.3 billionc represented 84% of total funding sources. The filing highlights regulatory uncertainty: a CFPB final rule lowering the credit card late fee safe harbor to $8 is blocked by an injunction, so its 2024 effective date and impact remain uncertain.
The company says it is implementing product, policy and pricing changes to offset lost late fee income. Synchrony also repurchased $900 milliond of common stock in the nine months and had $700 million of authorization remaining at quarter end.
02—Key points
Key Highlights
- Net earnings rose to $789 million for Q3 2024 from $628 million, and to $2.7 billion for the nine months from $1.8 billion; the nine-month result includes the $802 million after-tax gain on the Pets Best sale.
- Net charge-off rate increased 146 basis points to 6.06% for the quarter; the provision for credit losses increased $109 million, or 7.3%, to $1.6 billion.
- Loan receivables increased 4.4% to $102.2 billion at September 30, 2024, driven by lower customer payment rates and the completion of the Ally Lending acquisition.
- Purchase volume decreased 4.3% in Q3 2024; the company expects a low single digit decrease in purchase volume for the full year 2024 and a moderation in loan receivable growth.
- The CFPB credit card late fee final rule remains enjoined; the company says its effective date and full financial impact in 2024 remain uncertain, and it is implementing offsetting product, policy and pricing changes.
- Over-30 day delinquencies rose to 4.78% of period-end loan receivables, and the allowance coverage ratio increased to 10.79%.
- Synchrony repurchased $900 million of common stock in the nine months and had $700 million of share repurchase authorization remaining at September 30, 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 23, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Net Income | $789.00M$628.00M | +25.6% |
| EPS (Basic) | $1.96$1.49 | +31.5% |
| EPS (Diluted) | $1.94$1.48 | +31.1% |
| Shares Outstanding (Basic) | 392.30M416.00M | −5.7% |
| Shares Outstanding (Diluted) | 396.50M418.40M | −5.2% |
05—Questions
Frequently Asked Questions
What drove the increase in net earnings this quarter?
Net earnings increased to $789 million from $628 million for the three months ended September 30, 2024, primarily driven by higher net interest income and lower retailer share arrangements, partially offset by a higher provision for credit losses.
How is the CFPB late fee rule affecting Synchrony?
The CFPB final rule would lower the credit card late fee safe harbor to $8, which the filing says would significantly reduce interest and fee income. A court injunction remains in effect, so the timing and outcome are uncertain. The company is implementing product, policy and pricing changes to offset the expected decline in late fee income, though it may take time.
Why did credit losses increase?
The provision for credit losses rose $109 million, or 7.3%, for the quarter and $1.0 billion, or 24.3%, for the nine months, primarily driven by higher net charge-offs, partially offset by lower reserve builds. The net charge-off rate was 6.06% for the quarter, up 146 basis points from a year earlier.
How is Synchrony funding its business and how strong is its liquidity?
Deposits were $82.3 billion at September 30, 2024, representing 84% of total funding sources. The liquidity portfolio held $19.7 billion of liquid assets, and the company had $11.4 billion of available Federal Reserve discount window borrowing capacity, plus $2.7 billion of undrawn securitization capacity and $500 million of undrawn committed revolver capacity.
What is the outlook for loan growth and purchase volume?
Management expects a low single digit decrease in purchase volume for 2024 due to lower consumer spending and credit actions. It still anticipates loan receivables to increase for the rest of 2024, but expects the growth rate to moderate.
06—Continue