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Synchrony Financial (SYF)

Participants
Greg Ketron Director, Investor Relations
Margaret Keane President and CEO
Brian Doubles Executive Vice President and CFO
Bill Carcache Nomura
Rick Shane JPMorgan
Mark DeVries Barclays
Don Fandetti Wells Fargo
Ryan Nash Goldman Sachs
Betsy Graseck Morgan Stanley
Sanjay Sakhrani KBW
Moshe Orenbuch Credit Suisse
John Hecht Jefferies
Call transcript
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Operator

Welcome to the Synchrony Financial Third Quarter 2017 Earnings Conference Call. My name is Vanessa, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. the to turn now will call Mr. over I Relations. Ketron, Director Investor of Greg Sir, you may begin.

Greg Ketron

morning, welcome everyone. earnings Good Operator. Thanks, And Thanks joining conference to for us. call. quarterly our

a of accessed plan to This our section during today’s Investor we website. press financial In release, The website, by information address the covers are schedules Relations addition we have synchronyfinancial.com. and our to presentation provided going topics to the presentation the press release, be detailed call. can that on available

Before These materially to factors SEC filings, comments the available differ we in our uncertainty, remind you on today will could started, I differ list get want subject that and that might include statements risks results are We our forward-looking which website. to cause actual statements. actual and materially. our to are results

During in we measures to discussing non-GAAP the the financial will performance. call, refer company’s

GAAP for You measures these can in to measures a materials reconciliation find call. financial our of today’s

President is and are Vice will and and teleconference transcripts responsible Financial Margaret earnings third-party. only The Finally, for by on our edit webcasts our authorized does After nor Executive our the Keane, website. Brian of Chief provided Synchrony and not Officer, open morning. presentation, located Financial we up Executive results this the guarantee we for questions. Doubles, accuracy present complete Chief will President call Officer; the not

pleasure my to turn the it’s to over Now, call Margaret.

Margaret Keane

joining thanks and Greg. for us. Good everyone, morning, Thanks,

on and on financial begin call Brian the results. During I details an three. the will today, our slide then of provide will give overview quarter I’ll

share. per $XXX totaled quarter For million net earnings the $X.XX diluted or third

XX% top income key business. net organic a growth were for Loan helped X%, continue expectations to drive performance quarter, to drive our of priority to with up several interest areas our this of business. generate during consistent receivables We growth helped remains strong which and strong growth the in our

metrics X% quarter. are four slide both the of and also purchase in today’s accounts These on volume average active presentation. third increased Additionally, highlighted

to provide X.XX% increased by XX.X% credit more to charge-offs Moving as we efficiency will quality, The to was provision quarter losses for net credit call. year credit year, driven growth. versus the last this quarter XX.X% the generate normalization Brian ratio and details on continue for compared in later operating loan were last positive X.XX% leverage. XX%

deposit XX% in third quarter. Our of funding, significant a base comprises our portion the

Competitive service As prior over were remain deposits we billion further generate should growth. on that $X up X% the trend generally and such, focused receivables year us to third the with continuing help to in to growth, customer growth deposit our rates nearly and expect $XX billion. drive or line growth. In to quarter, for we deposit

liquidity, $XX XX% and and total end. at capital or our quarter X was assets common billion assets ratio XX.X% equity Regarding totaled liquid Tier of

the we of paid our a During dividend million quarter, share stock. per $X.XX common $XXX and repurchased

at the renewed several this Looking Petcare U.S.A., Evine. BrandsMart Yamaha, Mars partnerships Nautilus, quarter, including business and we highlights,

continue our We new partnerships organic augment seek to strong growth. to

and products programs make they launched retailer also our decor with are purchases. able launch use Zulily, we retailer. the with new now of big-box At cardholders a of an to expanded Zulily, quarter QVC specialty the Home, home cards as utility enjoy e-commerce to their card During Furthermore, QVC Zulily

of to We rollout rewards to accounts and all PayPal Rewards cardholders make and We PayPal in-store redeemed CareCredit use, automatically Card, the new cash the added X% directly announced ability wellness the purchases. for health, new are card card earn are offering and of convenience the personal on being among accepted, members’ cardholders standard XX all care, our recently and balances. cardholder credit points capabilities acceptance. CareCredit our cardholders Wallet MasterCard. is convenient Rewards value million to simple with MasterCard while to base. the at on purchases added general select The plus that cash network Dual to nationwide CareCredit card and offered also to a new as card CareCredit is focused the offers wherever launched the This The promotional an remains purchases, PayPal upgrade combines MasterCard MasterCard of proposition and including back online their CareCredit

our few to Turning spend a five, performance. I’ll slide on moments sales platform

across account X% loans third continued primarily in Card, quarter. growth growth XX%, volume our the to deliver three Purchase platforms receivables year, the and increased we broad-based partner Interest X%. grew programs. growth reflecting was growth. by grew loan receivables In on fees and average across over of We active Retail sales last all our loan X% driven

Card As new value proposition I at of Retail sales noted renewal of of platform partnership, our the Home had programs, rollout our and our in active with and Zulily our the another Evine At quarter the earlier, launch we PayPal.

fees growth growth We the primarily automotive by leverage new and attract loss the home sales loans quarter. were of volume a increased X%, continue from active to due loan X%. on profitable receivables to resulted growth driven impact organic Purchase in strong receivables delivered sales loan and the up products also the Average Solutions HHGregg accounts growth. in of programs. with grew XX%, Card excluding Broad-based across to and the investments interest and our bankruptcy. furnishings Payment platform drive solid strength X%, and make Retail particular foundation

million receivables enhance partnership delivered of the Petcare, loan growth. including and pleased X%. Synchrony have the U.S.A. in Tire volume also purchase key the strong led network. Payment to fees accounts Solutions global Nautilus, and pet utility Mars BrandsMart during Care reuse another quarter, additional and were and Discount increased was renewed to represented both volume with XX% are program, Yamaha, CareCredit care. average renewed of continue growth Care recently nearly recently Receivables a loans leader our quarter. We Car also and Purchase our driven up third the the Solutions XX% specialties. to veterinary adding We in Mavis Synchrony of quarter. primarily Interest dental rates on Car several we addition by programs X%, our Payment by X cardholders active with to

entered We medical of multiyear aligns we convenience care helping market several durable the Card, with for they launched Dual new partnership utility it. mobility And card. recently objective with people new well This pay need companies. the I our earlier, when of equipment with our market further the expanding CareCredit also new outlined and as personal

to CareCredit ways We the will utility seek continue Card. to of expand our

in Our drive reuse, utility third quarter. helped which purchase XX% increased network expansion card of and volume the has represented

providing our partners and deepen solutions continue I’ll on for solid Our to innovative value-added results. sales now and extend results platform while provide delivered and the to cardholders. call to details turn our the develop, relationships, Brian

Brian Doubles

the the Thanks, of second presentation. Margaret. quarter net $XXX which to translates share. million slide start earned of Synchrony I’ll diluted on $X.XX income, In six per

last the and with refinements X% and quarters generated due loan recent few to interest on and over loan year. over from we deliver factors. up growth the the The to during previously, growth The across compared pleased Purchase impact receivables fees continued volume quarter the we’re strong HHGregg up underwriting last XX% growth receivables noted slower hurricanes Overall, bankruptcy. the grew was business. have a to we year. X% We with

in interest The the we the quarter, generated primarily growth, and value our X% increased growth positive promotional balances income had up partly strong to trends growth balance the these higher a and nature, account as year. line year-over-year short-term average for X.X% moderate fee growth of receivables incremental another cards active would in RSAs quarter last on topline positive accounts with quarter, from operating was increased to items continued average and year by driven the which this resonate was offset driven in receivables. expect with active average in the expectations. propositions quarters. we solid share in our of by in impact and down are X% some by the compared percentage consumers. continue We Given last offers was average average to X%, growth that in expense, RSAs The X.X% provision and with future leverage per while strong

items, For growth. recent in will we $X year. more lower million, for forward. reserve those in with X%. areas recovery Other from affected loss largely impact the and Adjusting still and in reserve cover provision quarters loan eight quality included over which $XXX later. in driven than earlier review expectations million the build was was slight line a last quarter the think asset The in the sales year. year prior hurricanes laid run we RSAs The when by the the the going metrics I increased XX% will the build detail was income previous two slide out the by and normalization expected year we near for credit reduction

by by this $XX everyday offset increased up growth Dual expense on value our by was interchange While driven out-of-store million loyalty driven in $XX by continued that propositions. Card, spending million, primarily was

reminder, a of interchange As back a so on through items. run the loyalty the each expense there these is offset partial RSAs, and

of As Other or year. we trend near million fluctuation. a last expenses revenue we loyalty percent some expense $XX interchange noted program with as quarter, quarterly to last XX% XXX% expect increased versus

investments largely continue mobile growth, as We including enhancements as deposit direct and forward sales driven platforms, to expenses to by in capabilities. be program, going our our strategic in digital expect to well our

over cover and XX.X% significant continued last net XX.X%, the last Net for XX basis move the around was was compared a generate slide XX.XX%, to XX over year-to-date leverage. ratio efficiency operating up point degree to margin I’ll points seven income loan income improvement positive year-to-date to XX.X% a is The year. the of XX% receivables last ratio interest interest margin business the Lastly, year. basis was the driven net quarter, growth. trends. year up ratio The and by XX% interest strong our and continues

see a than driven rate, better by quarter performed margin in improvement few expected due generally we performance the to the higher factors. third margin a While revolve

over rates holding to basis year. points costs modest increased rate the interest-bearing as prior XX of increased to received benefited we prime versus support rise up rate X Funding had lower average the betas to higher on our tightening. rates. be XXX tightening, amount a as points this to liquidity year. benefit to basis benefited will rate of slightly of continue attributed slightly were and deployed yield move liquidity the yield the last did we fed keep our outperforming excess to expectations. rate our funding we see the receivables mix receivables the the Since started higher margin revolve strong compared with was and past the leading to have The believe by year due increase year, betas in basis compared our we future compared our we’re on in to can outpaced primarily than we tightening, deposit in a driven deposit increases deposit benchmark deposit receivables last benefit We prior expecting pace to the on cost, the the from market continue liquidity earning rates points optimize have in The if we to from assets and liabilities, higher through first growth. Part and First, of increase more rates increases.

expect basis the We points given This points decline been in much quarter historically. fourth as to holiday normal basis has season. during XX see the XX the as also receivables seasonal in build in to yield

expect XX.XX% original outlook. closer still the above trend to the we our margin fourth net well result, a to interest quarter, As in

key trends eight. will I credit cover Next, on our slide

mid-XXXX calls, previous payment over and mix, credit behaviors. portfolio and consumer to As and began by to factors, seasoning, our and we we number including in of have driven normalization normalize occur account expected channel and have maturation time on this noted

the credit of the builds result, As forward, have trends reserve builds level quarters will the continued normalization assuming and the going current slows, receive continue. this believe during a needed of last lower quarter. the be as as needed increase But we over expected, the we economic to third pace

start XX-plus X.XX% dynamics terms and delinquencies X.XX% delinquencies to I X.X% the the last In X.X%, with the last were of year. specific delinquency quarter, were compared in versus year XX-plus will trends,

was rate NCOs in year. X.XX%, continues contributing on the net increase to The X.XX% the last be factor to charge-offs, normalization. compared Moving charge-off to to net largest

what XXXX, hurricanes. from allowance Given of we fairly expect important continue for a that results seen the as to reserve typically do a was see quarter X.XX% at to the The on higher we’ve fourth in the maybe in that higher and build end levels NCO be the we losses the seasonal from receivables of was quarter. significant $XXX for in impact loan range million. NCOs the depending second so X% the range It’s to the however percent impact note far, low

in I Adjusting earlier, and a reduction items, in two related laid the quarters hurricanes out impact forward. expected line sales previous the was recent noted build this in for affected largely early reserve the As we slight the expectations the those the going areas with included recovery to year. by and

higher economic the trending forward to on we then are based assuming see the the stable, of into last starting somewhat rate to what be off consistent a for with range losses conditions what half level loss half noted continues ‘XX, This and with X% of are Looking the our second portfolio the quarter. expectation first year. XXXX, in is across we in low-to-mid

will build half and our reserve ‘XX. will that be and million Regarding we losses trend loan reserve also the forward, in an expectation off update growth the of build transition I’d level second like loss the with provide in expect expect quarter reserve builds to believe line to begin this builds to We performance, driven, going begin we which the to to given more be on underwriting reflect range. in expectations. the fourth the continues to $XXX vintage in

refinements underwriting positive the the we our of impact of in those to to second As XXXX changes. we started see remember, and you half continue making

XXXX, underwriting have than line performing of make we and changes our stable summary, the that In economic expect will the we better the Additionally, of as the in with ‘XX half from data incremental assuming more continues vintage. continued change suggest impact here, and move second XXXX and vintage moderate XXXX into year credit on the is our conditions. early pace we to normalize to while throughout results

opportunities to attractive We for good risk-adjusted at very see continue growth continued returns.

nine, expenses cover XX% $XXX million, slide at quarter. last to Expenses year. for be growth. in by came to up Overall driven I’ll primarily Moving our expenses continue the over

continuing as was ratio investments. fund continue improvement year, earlier, efficiency around in noted drive a core while operating to the I year-to-date, to our over the strategic XX-basis-point we As XX.X% last leverage business,

Moving to May. announced we cover plan execution as sources, slide funding our XX, position, of liquidity and I capital continued capital well as will the in

Looking at our our strong our the has the base. of continued been funding primary deposit profile first, strategy one growth of drivers of funding

source a attractive of view We the as to continue for this stable funding business.

funding, XX% year. last we’ve grown operating our billion, higher slightly puts Over of we by than deposits were through the nearly year, last our deposits This deposit direct the $X program. primarily level at XX% at our

rates direct We out expect to as continue to continuing great well deposit as to drive growth and program customer service, our by in attractive offer our building digital capabilities.

we to Going retain forward, growth. to deposits grow pleased line are and we in Overall, deposit continue receivables our attract to customers. expect with ability with our

In deposits of our of continue to be forward. securitizations of target our XX%. deposits XX% expect forward, we Funding was to of our will through going plan consistent our XX% direct mix funding to total funding and our with to grow funding, XX% terms going XX%

XX% totals XX% debt third-party our to Our within sources of our target. funding XX%

and diverse set funding access funding our of we mix to our feel of sources. about good So, overall, very a

the CETX a the basis deployment at the XX.X% deployment $XX which compares the through transition rules. of capital last and Turning phased-in capital of This of from liquidity, last assets. equal quarter XX% a This reflecting and is phased-in ended and liquidity XX-basis-point year, our capital III under impact fully fully the plan growth. reduction, total of to liquidity. our our XX.X% CETX we reflecting rules is under year XX.X% to Basel on down was XX% Total over some to billion,

put the be these expect the approach LCR required us to liquidity to and above LCR well We levels subject modified levels.

announced per continue and paid share in dividend quarter. the plan we of execute repurchased third million a during We May. stock common capital $X.XX stock we quarter, on of $XXX the common During to the

June approximately have share billion $X Board through the ending the XX, four potential remaining We in XXXX. authorized of billion our repurchases $X.XX quarters

We continue we required we the approvals. restrictions, will other build repurchase and including market execute regulatory previously. conditions Overall, execute to the new that subject to outlined continue any on and plan and to through strategy We levels, and legal factors, continue share the repurchases. capital very of and share and sheet expect plan liquidity dividends with and our capital deploying further to form balance growth funding strong a we of and strong in diversified sources, capital execution

I wanted year. current Before for to on conclude, the I recap our view

January. margin, the original offsets the business. provided believe in is margin outlook in back does we as fourth we the the seasonal quarter to on one interest The demonstrate above and margin closer net are higher First, see the trend XX.XX% yields, the in performance trending while the in decline natural to expect deposit still we of we betas

yield, a in Some revenue so driving result seeing we on a receivables normalization of line. the the also higher factors same offset credit partial are

We from the factor XXXX. range. full the end be low impact continue year continues and in Normalization may to expect to to the nudge higher X% NCOs hurricanes largest the this to the range the be for the of

loss reserve XXXX. Regarding we in in reserve $XXX in to build to loan expect we build the the more builds the this We builds the reserve begin begin will fourth going believe to be expect driven transition range. growth be and million to the forward, quarter reflect

We are impact with and near also year, continue program which percent as run reserve expenses, receivables X% to shared the the retailers RSA. think somewhat will RSAs higher given of build through the loyalty of a for

Turning to expenses.

the for outlook. the original of generate efficiency to the positive full ratio continue operating than We and slightly our ahead leverage year, lower to expect now be XX%

We core business. expect in drive continue the to to operating leverage

assuming growth be are campaigns continue in consumer the XXXX, well to spending business the that in conditions economic and quarter. moderate increase will that back fourth it on strong business builds summary, increase the the strategic marketing will health offset from will returns, as reserve with partially to Margaret. XXXX. In continues EPS generate the into in substantial in investments, attractive that, of growth However, an I’ll our continued that over as the combined of will program us with going by long-term growth and the consistent impact repurchase share is which our help generate forward, expectation turn With holiday

Margaret Keane

the wrap value develop landscape. then growth, When Brian. focused partners, profitable to necessary working evolving Q&A. up drive our help we’ll our and remain call retail address Thanks, make provide that our daily a programs priorities, win. attract and I’ll quick new deliver we the on organic investments to strategic win, solutions partners our for partners open the innovative to We

this including demonstrate of our to call returns quarter $XXX and sheet cardholders, this a Our results and Q&A. have commitment renewals now partners Greg value business, payout and capital program to this grow our And from dividend we pleased million our doing the increased turn also to and I’ll up they open are are stock. maintaining back derive while to the services. numerous shareholders products launches the key Returning process. repurchase continue common our we the to and to we focus strong remains solid to to a and quarter our in and our as balance

Greg Ketron

comments concludes That Margaret. Thanks, on the quarter. our

session. begin Q&A We now the will

many So you as one can primary I’d follow-up and to accommodate of one yourself that possible, we please as to ask limit like to participants question.

team Operator, have available questions, session. Investor the you the please Q&A additional the after will If start call. be Relations

Operator

have question from Thank our And you. [Operator with Bill Carcache Instructions] Nomura. first we

Bill Carcache

there points increase or commentary given all points. XX accelerate basis for delinquency room from Thank driven been on pretty rates around credit. around morning. basis think dynamics those around flat of on, year-over-year that commentary you. Is all wanted your kind XX it of your ask follow-up a has in growth at since The to your is to Brian, normalization of peak-ish that I question June here? to as reasonable and Good

Brian Doubles

second out at vintage is delinquency think, they point I months seeing hit of you’re Bill, mature. ‘XX right the both the XX really the right related the Yeah. now in half to peak half the ‘XX vintages first of delinquencies. what They’re about where

about way those their made, the that from work the benefits And the starting changes we to so if portfolio. underwriting are think through now just you

six call charge-offs the you’ll months stats of those half to see the leveling we probably advance off, the in in overall so back think net which the first delinquency it of And half start of in happens XXXX in XXXX. about

again, of driven pattern our I’d trending are ‘XX line delinquencies by half of those second with So really first ‘XX, and in the in expectations just half vintages. normal seasoning say

Bill Carcache

bigger Okay. If I I may question Margaret. a picture you, for follow up, had

better who go their of bit seem to operating some a appear perhaps and issuers have their within more on of diminish would more segments arguably that to pricing. of, after partners larger pressure ability to the bank guess, been little your by be I deliver with bit aggressive pricing leading facing Some card a aggressively performance to

competitive that sense of what any are Just in signs renewal that back of get to a seeing. seeing investors context curious, you pressures? Just of in you’re are trying terms some the concerned dialing about risk overall the

Margaret Keane

Yeah.

I’d we say really in competitive landscape. the haven’t change So a seen

discussion. piece you puzzle. becomes The I end then think pricing that once and the things one is pricing first, focus on of process then, obviously, really really that the capabilities get is partners our into

we’re you what So around really need. about ensure the talked investments how to really some our hard things and in we’re see working work innovate to trying to that partners our earlier and we

we’re as trying occurring. to focused large our and down, our partners just really So transformation and for I’d change now no retail on we head say deliver real through right this keeping seeing that we’re that’s go

Bill Carcache

Thank you.

Operator

Thank you.

Rick from JPMorgan. comes question with next Our Shane

Rick Shane

that for guys tighter a to lower am understand contribution about then on my a taking Certainly, rate lower it potentially the think -- the low interchange rate that on little impacts should about economics question your I credit this how we and I of perspective, business? just how model, from from revolve revolve bit underwriting. given the want the we of talk but morning. Thanks implications curious the

Brian Doubles

Yeah.

question. it’s I great Rick, a think,

going the the tighter areas. impact underwriting I a couple of think to see you’re in

a when purchase modest to volume. impact it think I comes seen we’ve

guess, that’s last the we that more quarter, quarter. You Obviously, little trend a this can you -- bit see where that I little a impact, more immediately. saw feel bit

We to of revolve. expect bit fourth and from see little see to less quarter. start benefit longer-term this would expect would in a I a the I little think,

I to of we’re. starting to think margins I That’s drives change. bit, half fourth bit don’t and the we you’ll that good last view as think also a I rate still bit of business a we’ll this the the a what significant got lift see That’s that about I earnings. on But portfolio. our revolve in if I our fundamental really second a wane year, start and to think, of going XXXX. year the probably little that’s start this quarter in think, see more little that in that

Rick Shane

Great. Very helpful. Brian Thanks,

Brian Doubles

Yeah.

Operator

you. Thank

with next question Mark from Our is DeVries Barclays.

Mark DeVries

further Yeah. really been opportunities Thanks. and I’ll use the expense I to way credit -- point question to operating you substantially some grown as lever years offset expenses ratio who able have as peers days impact? -- falling. are to appreciate have well efficiency as do leverage a are completely your improvement to with less a try the showing bank into have two and At here, this you you there are efficiency a to your independent buildout.

Brian Doubles

so Sure, Yeah. XX.X% driven so far the think to very Look, ratio XX% we’ve year last efficiency from year-to-date. focused year-to-date we’re about on far Mark. and down productivity on I points basis XX

leverage So we core in business. are generating the good operating

investments. so helping year, bit. a some the on far spend expectations revenue that’s Certainly, productivity our We’re those increase to trended has margin obviously and us savings using of above strategic this so

funding years. feels generating That amount look, XXXX operating two-year be a we’ve a that fair take like for you in and back two while us to to go all was of and driven efficiency ratio XX.X% leverage in below just you the investments. strategic our of XX% If

and would that that and our ways huge I some tell of of investments two productivity, years, impact showing and always also to years, the cutting years, into we’re savings, five three in our management savings four driving customers, but to business what strategic the don’t the the out back partners directly going So, those focus waste at efficient get taking years looking the you off pay then are road more areas down obviously, team, those that

Mark DeVries

in in should some able of we XXXX what maybe Okay. Are investments? us give you terms sense to strategic of expect

Brian Doubles

It’s lines spending mobile. same going digital, this we the to be the invested as stuff We���re along year. in on

We’re environment been important helping outperform All right us -- were Margaret retail talked spending it’s go through now. a are help has are lot to the things what as this These fairly we really analytics. our that really things, us about, retailers the as weak on transformation. for a

need order to curve had. to be investing of So in sustain that type growth ahead of we’ve kind of the we the

Mark DeVries

Got Thank Okay. it. you.

Brian Doubles

Yeah.

Operator

you. Thank

question next Fandetti Wells Don with Fargo. Our from comes

Don Fandetti

Hi. you Good morning. that a sell on something portfolio last and quick on the Is by where are might be in? mentioned Brian, on question appetite, their they year end. night they that call, portfolio interested acquisition would PayPal that you that

Margaret Keane

So I’m it’s quarter take We going to that -- in this showed we okay. look, deals. interested winning one, if we’re that

I portfolio can’t very obviously in comment a winning We’re in on deals. really interested particular that’s out the marketplace.

our opportunity that business, to However, we’re meet that the us to that grow. hurdles, strategic for attractive allow really return are opportunities open to always our continue

into hard through looking of work and that across to drive pipeline, our and to platforms this going we’re continuing opportunities continue at to next year. we’re our three various So on all year

Don Fandetti

one in that? willing markets your in on if And note, that lend of be interested partners was would same you Margaret international to

Margaret Keane

the to really answer to figure think, funding have interested. how yeah, out the structure complicated outside we perspective is, -- We’d U.S. I We’d you’re more from -- would that. have we a be when It little It’s gets would a a

about. something out. So always work establish strongly to we’d felt our they about to to different to with would talking people figure But, have that partners continue opportunities we and that we’re obviously,

Don Fandetti

Thank you.

Operator

Thank you.

Goldman from Nash question with is Our next Ryan Sachs.

Ryan Nash

Good out what tease of for the charge-offs. related banks you to to Hey. updated to guys. growth of guidance gave Brian, in related million. terms us, big was this morning, for A quarter what was us build the reserve lot were of XQ $XXX and higher reserve build willing specifically

over you build. quarters, reserve couple that color two, And the over next mean So to on start see subside credit starting you to what of I Thanks. RSA we does from as the headwinds XQ time? as could this some related us think was hoping the give about building to maybe reserve the for

Brian Doubles

Sure, Yeah. Ryan.

same, build primary growth. So, components strong normalization and the the receivables the are reserve -- credit

you think and that it then hurricanes two the $XXX more to $XX roughly million was If approximately really was items million of guys, individually split specifically, down between for normalization. spiked recoveries, the and out about you we XX-XX related break growth and balance

So the line two prior the with back in pretty build specific quarters, that the the if much line April. you for two you items, outlook in we adjust gave in also was with

changes we based we’ve made, seeing to moderate start then think, beginning when as I the we think into that and outlook from the just in January call. we’re on you you the quarter So, more complete trends we’ll will as alluded there the our that reserve and to the importantly, of do underwriting more a give fourth Obviously, XXXX. we head trend impact

Ryan Nash

I then, RSA credits made normalize? for as the wasn’t starts to just guess, And

Brian Doubles

Yeah.

trended As we think well below about you the RSA, original our expectation.

we RSA If January, be you X.X%. around the thought in would remember back

seeing now XX somewhere there X% We’re it basis there’s points offset our expectations. range, of so the in original an versus

see higher quarter. You’ll bit start in starting a RSA the fourth to little

trend kind so be That to to range that the year, trending So build will that then level see down in into the a versus we you’ll quarter. that little and all build us where $XXX brings of with the of benefit of the the continue shared expect X% million RSA bit would higher fourth retailers, reserve been obviously back with it’s to lower XXXX.

Ryan Nash

follow last just up, And Brian.

revolve rate expectation see within expect pricing the to pieces a expecting of Thanks. baked decline, you going the terms not hike of end of deposit hike quarter-over-quarter quarter. until the in help the what’s and market’s increase a to though the Obviously, moving costs higher Would to that. NIM half us in, we’re back funding But XX-basis-point the another could On for rate. rate continue just understand of even you there’s lot the until quarter? see obviously

Brian Doubles

Yeah. Yeah.

Let me couple give we about you think as fourth a the quarter. pieces

So, the normal seasonality. most first, is significant mentioned, as just you impact

And it. back in to that and points little We look start So than we’ll I basis quarter. fourth you a anything XX we’ve kind see as when but spend build in in than is from so have year. receivables, it’s typically see a the the of higher all historically move you then, of points latter that you’ll seen a the bit decline half betas basis think, more saw smaller much you probably little yield think of third cycle. I competition quarter in dramatic, see to think couple XX slightly if you as at don’t seasonal That what the get I a impacts. do to big we go third deposit rate the far it’s quarter. of

will I the into think XXXX. into and fourth that continue

be I of to betas, the expectations will that impact So a outperformed there from impacted for bit think comes We back, some that related have when far a that’s also but the that’s just we’ll fourth we’ve well. it in so to relief little small deposit give quarter. pretty forecast of as areas. slight think our the We’ll included hurricane

quarter. fourth way So in through will and I the driver couple other things is think their that you’ve big got a the work you’ve then got seasonality of small

Ryan Nash

Thanks it. for Got my questions. taking

Brian Doubles

Yeah.

Operator

Thank you.

Betsy with Graseck Our comes from Morgan next Stanley. question

Betsy Graseck

Hi. morning. Good

Margaret Keane

Good morning.

Betsy Graseck

up the but does little as that improvement follow a rate hike up NIM to not waned forward you passing yields? in I you’re going of the look related wanted along mentioned the bit, because much funding here, to think, is cost that the Just on or

Brian Doubles

fourth seasonality. you’re talking quarter, specifically if in really is Well, it the just

deposit look bit and little the As hurricanes. bit a I betas relief being of you higher two the start items to from a mentioned, and impact seasonality little either

to we -- little probably dynamics to those rate. So in just underwriting one, contemplate have move kind then a made, changes XXXX, we’ve fourth for the are from response higher we’ll as revolve And benefit specific for the of of quarter. less think, the I the some into

revolve. through back a the all with from substantial will level benefit of year, we pretty in I starting a of ‘XX. wane in year about second think that you this got off half last half higher line if And bit to So little just credit the think

forward linked see two we a those into obviously and So we revolve ‘XX. move little things so as are very expect would less to

Betsy Graseck

Got it.

then, wondering NCOs well that and was as delayed know people And just have you I any was this on done payments for hurricane-related that, forbearance this if wondering Okay. couple of peers quarter? that just was or a in there areas. so activity mentioned if impacted I might quarter I XQ,

Margaret Keane

Yeah.

because have goal the make the So, customers I’d that I in their them, customers, them, of to about caring say, make our them thoughtful retailers, on I’ll we’re in, our we have about to the sure, and we we’re think, the our things to start, because one listening particularly really to that be space impact like always is feel needs. we’re

and number that. talk you Brian the of ensure to the about customer needs we So financial we’re actions just could impact of taken addressing a have

Brian Doubles

Wasn’t resulted a volume, sales with Obviously, I’d our say, that but to Yeah. impacted on obviously see. relative starting the modest to by pretty we Sure, some forecast. purchase areas the Betsy. expected hurricanes impact the that material, something it’s obviously overall, business. in lost

over would people in to term, the expect spend we think certain start rebuild. categories see an I increase as longer to

fees has impact because XX-basis-point terms areas. margins, charges another small. just impact in have been give low the we collecting impacted had We’re in just those waive obviously a additional certain do accounts are quarter. don’t current, pretty delinquent to to on know balances, customers in it’s And time and some the minimum but with. given re-aging move I pay, That We’ll payments back accounts similar so then waiving about a very this of odds topic, on fourth to likely we to the begin typically deeply

policies. on quarter on hurricanes based there net the our due us, to So just a wasn’t really benefit for charge-offs in

Betsy Graseck

Okay.

for So no impact on net charge-offs you?

Brian Doubles

in Not the quarter. No.

Betsy Graseck

Yeah.

Brian Doubles

build obviously, of in quarter. we to We the into recorded do move have reserve bit net as little expect the this in quarter, that was we an fourth -- increase a that charge-offs,

Betsy Graseck

it. Got

you. Thank Okay.

Brian Doubles

Yeah.

Operator

Thank you.

question with comes from Sanjay KBW. Sakhrani Our next

Sanjay Sakhrani

Thanks.

I question. commentary first RSA just that clarify wanted you Here’s Brian to the had.

year, next sort out that migrate look the saying should expect or mean, to we it X%s? you we low back are is to mid-X%s to I the of As the in trendline

Brian Doubles

moderate, we would more fourth quarter think we higher year. if for then a reserve on going what the and Yeah. than at in expect that’s year. bit up we and to is builds XXXX want do It’s to this you point. specific expect come I’d to this the it’s they X% the be the to than were get the But we Sanjay, tell RSAs moderate, reserve builds probably

not to you… give I’m going So

Sanjay Sakhrani

Okay.

Brian Doubles

higher but number than X%. specific …a

Sanjay Sakhrani

in Got just couple a into broader been guys could there? there. But, then, is And sort I maybe large you going other years been gone you have on I maybe the feel And and it. window of Thanks. guys the before? business. to Margaret, the brought XXXX public question, up comfortable mix just of the of expansion have international and nature same discussions pretty it’s and you any in the mean, some of I preliminary opportunities, complexion guess, you since the how three out opportunities I there the ongoing the maybe renewals of have segments of give nicely. quite much is the obviously, then renewals know business mean dialogue of are us about the terms some mean, other that growing were back I

Margaret Keane

Sure.

We making our up. function I So, sure have needs partnering coming on with very confident to this, of every to relationships. We that be those are feel on we’ll renew everyday we renewals right. their think, do and some able renewals, day, we a an retailers basis. meeting renew trying are I’ve really It’s said

dialogues always in opportunities It’s U.S. -- some working able be look two the question. hopefully announce We’re And we the the to happening right the next that second at sure to then we’ll year. outside say things. hard are make things areas and I’d

there’s it where a think -- growth. really it question is becomes -- enough, of enough I growth

have We said. as funding, think about I to

think to our have to more about mix. regulators We

regulatory we So ourselves overstretching from make we’re to a want view. of sure not point

and we’re see out XXXX. example our on for our things I some purchased really is we GPShopper, think now some each perspective, think at our doing That’s an of, tuck-ins And their nice we’re as the call it right what more looking one, opportunities of where an really as into some mobile doing of a us helping from things a of I but platforms building I do in capability mobile out we that you’ll capability. is, I like in think partners really example. go would also build us been what acquisition terms focused more to makes sense,

Sanjay Sakhrani

you. Thank

Operator

Thank you.

next Our Moshe with Credit from question comes Orenbuch Suisse.

Moshe Orenbuch

have you asked about, One been see reserve where is answered, Great. reserve on part for you’re to and -- of of on to I start to or mean, the it Brian, mean, you on my moderating. to follow-up like, -- when expect it it delinquencies ‘XX kind couple need I think providing I you Most about early a about for thinking wanted -- have to that start build. to talked do improve the closer is, back the guess, of when questions level, areas. actually what -- that just just get have it growth, that of have actual delinquencies delinquency to improve? substantially do is kind of charge-offs the to then we

Brian Doubles

when much It’s your then outlook, growth this think is pretty credit challenging. way about build related. in to just it quarter a good XX-month occur reserve the individual obviously, No. Moshe. is But should think Yeah. where is, somewhat your picking going be I to an question, And is easiest exactly flat

Those normalization on Now reserve. always you’re you’ve putting got so seasoning that’s your of always or vintage easier said because vintages than a new component in vintages. done, seasoning, are

what the all better decline why I trend, in to is that’s you you reserve off to for of so And builds that the modest start see of is expectation right. think have a a current

same to million from view kind To the going in then indicates of reserve view around follow along see the quarter So level of build expect to core million stabilize, that losses. improve $XXX of on lines. extent XX-month $XXX you would the some reserve and range continues forward-looking that trend more next improvement the a something in in that to view, that builds outward

what a the you’re on seeing seasoning I that’s what for So what not in -- of seeing forward what know content, the have losses. you’re does combination mean is quarter. XX-month is What view that then a on we all answer delinquency specific which vintage in your and

Moshe Orenbuch

would Sanjay’s to on renew partners major in experience debt follow-up the could the the made be that? a how your to of guess to question your how and XXXX of I some any the RFP to IPO going changes kind around we that of time renewals apply on of announcement not and those bit how What -- perhaps kind talk And and reflected had just you Okay. about you what renewals. could of get -- little early,

Margaret Keane

Right.

some so, So -- made because was went before of our our in renewed portfolio. the right out when out yeah, we we -- I renewal stability our period all the we to that when had we IPO, would came say, IPO so toughest sure and contracts

value important a an think particular I invest and to but dialogue can That’s there’s we put have to something up extension. the opportunity whether new retailers to going say, okay, it for it’s usually looking is, or happens. policy cases the requirement that gives they this part a where them area a prop, something what happens an There is in open us more innovation generally that to as do to need that some we’re XYZ. of RFP. We’ll retailers how are for their new

I very feel just we right to we through now. go relationships have have cases again, in So process. good some that But, like

Our transformation partners need us retail. given occurring that’s probably than more in the now ever

really transformation. process really, well to the I for as important. through the towards leveraging more making to help real-time the go trying that they initiatives think, work that we’re are as really really important Having as customer, we’re are as strategic digital think being us data, investments our seamless really, two partners and I for really

on positive see whether phone, we transaction really of to we to want data really hard happening, wherever an get to that shopping. what can mobile now of experience to it’s get on that a work the can integrate real-time. And try kind one right it’s see to have happen. we the think big is store, right, I and work we lot make ability online really how to point-of-sale a going is customer with that in to And is, the or there’s and

Moshe Orenbuch

Great. Thanks.

Operator

you. Thank

with Hecht Jefferies. John from comes question last Our

John Hecht

good morning. Thanks much and very guys

Brian Doubles

John. Hey,

Margaret Keane

John. Hi,

John Hecht

total guess weak e-commerce rates my most component. talked of the maybe of that could mean, talked some penetration in of environment, on digital have questions you been give asked. us about a think an of guys I your growth factors, update year-over-year I Margaret, maybe flow I just about regard? retail have you or you and volume

Margaret Keane

and XX% where our year-over-year look Card penetration XX%. you were measures, our we Retail have So sales at our up online sales is good if about

what to about to partners make we channel. on trying our the seamless. of much feel we’re phone of really that I process and our in roll do to more that again, capability mobile doing out think, really to And some to So ability servicing is midst your positive enhanced continue applying this, grow we’re some from and

last year heard app that you retails. we of with our many think SyPi, I had do is which plug-in we a

more out rolling as We’re all retailers. effectively our example an across that big

that’s to I think that focused what think, to that’s now. integrate So that to we really and we’re question, right the last what see to we’re opportunity this I said where with the real-time And it as for try a continued I and working similar we’ll really on on have be win get us. information when real you important a data, really really

John Hecht

on going guess, an set us of to partners, I endeavor, guys have the platform you’re year. the rate I give stats continues CareCredit you at quarter. portfolio that you looking know Okay. growth another a shows penetration turning concept pretty opportunity forward? the, and Have a to bought growth that in and a competitor the the from be you update partners strong maybe that, last in what’s -- can terms And the medical what’s the

Margaret Keane

Yeah.

I trying to CareCredit. here is think, really what at look we’re do

penetration that, this things, position we’re is in is seeing health looking verticals of while an verticals opportunity. When that into high is you’re a whether one we’ve and like is to any a we someone’s doing do of want be done very now the the those at think, expanding to costs we’re in growth or partners. But very been in where new things one seeing you’re all really in of of up. types make continue sure, the for surgery in outside, have to we What the we where the areas. go essential right of to never it that we I think, the care want high that if where see not something I we verticals, penetration

an is our promotional of use CareCredit customers take care to to of some to very think our and care opportunity their financing and I offering some needs. needs wellness leverage health important

think, nice how the I’d as card growth driving And we’re Rite that’s and growth. I going well. areas across testing example about these after in verticals we’re excited and some Aid where been really So, an we’ve that then, say as lastly, we’re utility CareCredit seeing other

continuing that will at what you expanding to I So we’re love look product. customers to areas that tell CareCredit. are the continue right in to the

high we’re invest to have platform great us continue recognition. We growth. a for really and to that brand little very going heavily It’s one and drive

John Hecht

Appreciate much. color. very Thanks the

Brian Doubles

Thanks.

Margaret Keane

you. Thank

Greg Ketron

available for in this Synchrony may Relations questions your Investor you to great answer Okay. us have The interest We any day. you Thanks and team morning be everyone further hope will have. joining Financial. a

Operator

and participating. Thank you, concludes for call. gentlemen. today’s This ladies conference you thank We

You now may disconnect.