01—Abstract
Summary
Summary of the 8-K filed October 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Synchrony Financial (NYSE: SYF) reported third quarter 2024 net earnings of $789 milliona, or $1.94 per diluted share, compared to $628 million, or $1.48 per diluted share in the third quarter of 2023.
Loan receivables grew 4% to $102.2 billionb and deposits rose $4.2 billion, or 5%, to $82.3 billion, comprising 84% of funding. Purchase volume decreased 4% to $45.0 billion, new accounts fell 18% to 4.7 million, and average active accounts were flat at 70.4 million. Credit metrics deteriorated year over year.
Net charge-offs were 6.06% of average loan receivables compared to 4.60% in the prior year, and loans 30+ days past due rose to 4.78% from 4.40%. The provision for credit losses increased $109 million to $1.6 billionc. Management described delinquency as trending in line with seasonality.
Net interest margin decreased 32 basis points to 15.04%, while the efficiency ratio improved 200 basis points to 31.2%. Capital position strengthened. The estimated Common Equity Tier 1 ratio was 13.1% compared to 12.8% a year earlier, and the company returned $399 milliond to shareholders, including $300 million of share repurchases and $99 million of common stock dividends.
Book value per share rose 20% to $37.92. The filing furnishes the earnings press release, financial data supplement, results presentation, and non-GAAP explanation as exhibits.
02—Key points
Key Highlights
- Net earnings rose 26% to $789 million ($1.94 diluted EPS) from $628 million ($1.48) in Q3 2023, driven by higher net interest income and other income.
- Loan receivables increased 4% to $102.2 billion, while purchase volume decreased 4% to $45.0 billion and new accounts fell 18% to 4.7 million.
- Net charge-offs rose to 6.06% from 4.60% and 30+ day delinquencies rose to 4.78% from 4.40%; the provision for credit losses increased $109 million to $1.6 billion.
- Net interest margin decreased 32 basis points to 15.04%, while the efficiency ratio improved 200 basis points to 31.2%.
- Deposits increased $4.2 billion, or 5%, to $82.3 billion, comprising 84% of funding; total liquid assets and undrawn credit facilities were $22.4 billion, or 18.8% of total assets.
- Estimated CET1 ratio rose to 13.1% from 12.8%, and the company returned $399 million to shareholders, including $300 million of share repurchases; $700 million of repurchase authorization remained.
- Other income increased $27 million to $119 million, primarily reflecting product, policy and pricing change fees, partially offset by the Pets Best disposition and venture investment gains and losses.
03—Questions
Frequently Asked Questions
How did Synchrony's profitability change in the third quarter of 2024?
Net earnings increased 26% to $789 million, or $1.94 per diluted share, compared to $628 million, or $1.48 per diluted share, in the third quarter of 2023. Net interest income rose $247 million, or 6%, to $4.6 billion, and net revenue increased $339 million to $3.8 billion.
Is credit quality weakening?
Credit metrics were weaker year over year. Net charge-offs were 6.06% of average loan receivables versus 4.60%, and loans 30+ days past due were 4.78% versus 4.40%. The company said delinquency is trending in line with seasonality, and its allowance for credit losses was 10.79% of period-end loan receivables, compared to 10.74% in the second quarter of 2024.
What is the company's funding and capital position?
Deposits totaled $82.3 billion and made up 84% of funding. Total liquid assets and undrawn credit facilities were $22.4 billion, or 18.8% of total assets. The estimated CET1 ratio was 13.1%, up from 12.8%, and the Tier 1 capital ratio was 14.3%, up from 13.6%.
How much capital did Synchrony return to shareholders?
The company returned $399 million to shareholders in the quarter, including $300 million of share repurchases and $99 million of common stock dividends. As of September 30, 2024, $700 million of share repurchase authorization remained.
What is the outlook for the business?
The filing references a presentation slide with a 2024 outlook for earnings per share of $8.45 to $8.55, which assumes no late fee rule implementation in 2024, up from a prior outlook of $7.60 to $7.80 that assumed implementation on October 1, 2024. The presentation also expects a low single-digit percentage decline in fourth-quarter purchase volume and low single-digit percentage growth in loan receivables year over year.
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