01—Abstract
Summary
Summary of the 8-K filed January 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Synchrony Financial (NYSE: SYF) reported fourth quarter 2023 net earnings of $440 milliona, or $1.03 per diluted share, compared to $577 million, or $1.26 per diluted share in the fourth quarter of 2022.
Purchase volume increased 3% to $49.3 billionb and loan receivables increased 11% to $103.0 billion. Net charge-offs rose to 5.58% of average loan receivables from 3.48% a year earlier, which the company describes as normalizing within its expectations and in line with its 5.5-6.0% underwriting target. The provision for credit losses increased $603 million to $1.8 billion, driven by higher net charge-offs, and other expense rose 14% to $1.3 billion, including $73 million of restructuring and other notable expenses.
Capital and funding remained robust, with deposits of $81.2 billionc comprising 84% of funding and a estimated Common Equity Tier 1 ratio of 12.2%, down from 13.3%. The company returned $353 million to shareholders, including $250 million of share repurchases, and had $600 million of remaining repurchase authorization as of December 31, 2023. Return on assets fell to 1.5% and return on equity to 12.4%.
The release also highlights announced transactions: the sale of Pets Best insurance to Independence Pet Holdings and the acquisition of Ally Lending's point-of-sale financing business, along with a new J.Crew program launching in the first half of 2024. The accompanying presentation provides a 2024 outlook calling for loan receivables growth of 6-8%, net interest income of $17.5d-$18.5 billion, net charge-offs of 5.75-6.00%, and an efficiency ratio of 32.5-33.5%.
02—Key points
Key Highlights
- Q4 2023 net earnings of $440 million, or $1.03 per diluted share, versus $577 million, or $1.26 per diluted share, in Q4 2022
- Loan receivables rose 11% to $103.0 billion; purchase volume rose 3% to $49.3 billion, described as a record
- Net charge-offs were 5.58% of average loan receivables versus 3.48% a year earlier, within the company's 5.5-6.0% underwriting target
- Provision for credit losses increased $603 million to $1.8 billion; other expense increased 14% to $1.3 billion, including $73 million of notable items
- Returned $353 million to shareholders, including $250 million of share repurchases; $600 million repurchase authorization remaining at December 31, 2023
- Estimated CET1 ratio was 12.2% versus 13.3% a year earlier; deposits of $81.2 billion represented 84% of funding
- 2024 outlook: loan receivables growth of 6-8%, net interest income of $17.5-$18.5 billion, net charge-offs of 5.75-6.00%, efficiency ratio of 32.5-33.5%
03—Questions
Frequently Asked Questions
Why did Synchrony's net earnings decline in the fourth quarter of 2023?
Net earnings fell to $440 million from $577 million. Net interest income rose $360 million, or 9%, but the provision for credit losses increased $603 million to $1.8 billion on higher net charge-offs, and other expense rose $165 million, or 14%, to $1.3 billion.
How did credit quality change?
Loans 30+ days past due were 4.74% of period-end loan receivables versus 3.65% a year earlier. Net charge-offs were 5.58% of average loan receivables versus 3.48%, which the company said is normalizing within its expectations and in line with its 5.5-6.0% underwriting target.
What capital return and capital position did the company report?
The company returned $353 million to shareholders, including $250 million of share repurchases and $103 million of common stock dividends. The estimated CET1 ratio was 12.2%, compared to 13.3% a year earlier, and total remaining repurchase authorization was $600 million as of December 31, 2023.
What strategic transactions and program changes were announced?
Synchrony announced the sale of Pets Best insurance to Independence Pet Holdings and the acquisition of Ally Lending's point-of-sale financing business. It also announced a new J.Crew program, including its first-ever co-branded card, launching in the first half of 2024. The company stated that the Pets Best sale and Ally Lending purchase were expected to close in the first quarter of 2024.
What outlook did the company provide for 2024?
The presentation's 2024 outlook projects loan receivables growth of 6-8%, net interest income of $17.5-$18.5 billion, net charge-offs of 5.75-6.00% (expected to peak in the first half), RSA as a percentage of average loan receivables of 3.50-3.75%, and an efficiency ratio of 32.5-33.5%.
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