Synchrony Financial (SYF)

Greg Ketron Director, IR
Margaret Keane President and CEO
Brian Doubles EVP and CFO
Moshe Orenbuch Credit Suisse
Ryan Nash Goldman Sachs
Don Fandetti Wells Fargo
Bill Carcache Nomura
Betsy Graseck Morgan Stanley
Chris Brendler Buckingham Research
Sanjay Sakhrani Keefe, Bruyette & Woods, Inc.
Rick Shane JPMorgan
Mark DeVries Barclays Capital
John Hecht Jefferies
Call transcript
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Welcome to the Synchrony Financial First Quarter 2018 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. turn over now Mr. will I the to call And Investor Greg of Ketron, Director Relations. begin. you Sir, may

Greg Ketron

Good operator. earnings joining Thanks quarterly and conference for Thanks us. everyone call. morning welcome to our

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

diluted ratio propositions and note expectations joining net share. thanks per within underwriting income year provide slowed funding as I'll and which metrics. volume these interest important the interest This three. expected, promotional Brian growth will generate Supporting performed and our Greg. credit we growth this during wholesale up to on in for The prefunding million value quarter efficiency was in our strong quarter. growth, our funding. the on by for on in objective, PayPal of the net credit Purchase preparation to margin refinements line we the we onboarding account on implement us. given to with which and expected year cards. we plan active quality driven continue for attractive range our portfolio, grew and was as detail generated offers the strong net our both average area shortly. $XXX happen receivables will of prefunding or more an XXXX. us and deposit earnings Good with is we continue everyone morning as our expect XX% solid Thanks started Overall, did third Loan ratios consist begin of $X.XX a The deposit slide growth.

strong, our during remains dividend we capital million the continue paying of a XXX common position and capital stock. quarter plans $X.XX to repurchasing and Our execute

our renewed loyalty. deals, to network. a exclusive retail exciting added Crate new In further designed and customers' also is partnership some recently and expanded signed sales options card our We and CareCredit new relationships, The financing key program Barrel. platform, reward expand customer with we

that can our we used that to launching accepted. be card, is addition label Dual Card In be private anywhere will credit MasterCard a

and year. this this launch we when and rich will about the access program to cardholders excited are We rewards new later innovative have financing

platform. Solutions gemstones with and vehicles the company's in added promotional provide U.S. jewelry also with and our sales leading powersports new used will accessories. with we network these of will Both be new of a Mahindra, part for Payment partnerships financing We retailer States; options jtv, and where of United fast-growing programs and dealer

American relationship a Association. AVMA, We partnerships, CareCredit, with also Group, including Marketing Nationwide the Veterinary in renewed other established new Furniture. Stratton, Briggs & and Signature And several Medical American strategic we

enjoy payment and option drive make can Spa the of of utility segment. in of more In is repeat the day card wellness this Industry the and cards, treatments American their helping cardholders providers migrate an Through demand spa reach their providers wallets to partnership cardholders. and objective medical CareCredit XX CareCredit's towards consumers. purchase spa An And growth utility growing into network now will for into important market, additional CareCredit in Association, will services to our expanded Association expanded addition, while we million which move and now extend behavior. our Med accessible, by more our with valuable Spa cardholders' top offering cardholders expanding

progress of cards the improving utility, substantial by the rates. therefore, as in our and made have usage We reuse evidenced our

XX% for access rate to the ease of channel choose our quarter XX% in and use that their total was information it of Equally For first purchase ensuring have volume. is rewards, of whatever cards, and they across cards reuse Payment account CareCredit, cardholders utilize. to Solutions, and was the important

mobile made have cardholders access channels. ensure used our to plug-in to engagement of an and receiving made is where in by cards their including cardholders. usage develop account is response across we of an We easily capabilities growth utilize investments tools partners. a a partners' digital to to very from expand significant currently mobile our application, our investment XX SyPi our positive in being can retail example rewards, SyPi, partners' retail information, we our and are app, leading

cardholders, Artificial only for back-office our technologies Virtual We makes our Assistant, improves such Intelligent-Enhanced not as also Sydney, obtaining but employing efficiency. information are easier which also

sales our happening channel growing XX% XX% mobile for penetration last sales Over was quarter. retail the the the card in digital online, over consumers of applications first of same has alone been Our penetration XX% with are quarter growing. year. Digital

obviously a model digital this The several we've for one is mobile of time, another authentication and investment announced channels. business the recently During the digital made in and important sales authentication leader space quarter, to the also in Payfone, increasing investment, given our move channels. we identity, in area strategic and

Samsung we cutting-edge acquired technologies, which and SyPi. has which to continue to the since including have Pay into delivered investments opportunities, a companies, beneficial very decisions several evolved in our business including We past be proven which innovative strategic these seek GPShopper, with in Lupe, have

interest a to developed seek with investments. business finding partners, innovative, team Given can the they business companies task and technology. they dedicated of our core that these in our and be solutions value-added to and we these our These not augment will latest the large-scale can innovative continuing solely to have value seeing bring opportunities our the be will

However, the they evolution to important our will be business. of

network opportunity utility, is a helping Recently, the to electronics. retailers Another area in will revenue and locations programs. network approach navigating launch at us provided manage in accelerate HOME. us Synchrony continued challenges of XX,XXX for certain This card another highlight I credit such furnishings, Launching as ensures stream accepted hhgregg our and card maintain the card flexibility verticals home innovative the nearly an bankruptcy successful by with flooring, is performance. and called

to help to convert examples marketplace. while a Synchrony cardholder cardholders to to productive take even with we our and we're to been proposition the improve far, compete actions preserve programs. this quarter value opportunity MasterCard. with when the extending give relationships of response vein, These cards So that encouraged ever-evolving business issues pleased to launching our early continue on X% presented was very challenges purchases. we attractive, the new investments have or we organically, by are card we and To generate a as This growth strategic for decided obviously cardholders, programs, of our us and can that with position make are have all a Toys"R"Us an has results. added utility cashback in positive, In to cards, card we their the making of utility also and existing same

a both you Retail the the will on Card, I each we In view Before performed how X% call active sales quarter, reflecting Interest last of five grew X%. turn purchase primarily on platforms over the Brian, give our partner our loan broad-based by the grew quick loans over receivables which is increased receivables to year, volume of during and average presentation. loan across on driven and accounts I slide fees X%, growth programs. growth,

we partner, with win Card earlier, active quarter sales and a had Barrel. Retail noted our another I new Crate in platform, the of As

this about customers programs expanding and offer options. their relationship the financing very are to We excited more

We delivered products X%, programs. organic profitable primarily automotive both across Retail increased loan particular loans to receivables quarter. growth with by and loan Broad-based and strong to average driven make attract X%. resulted furnishings in of home growth growth. drive also on fees investments Purchase Solutions first X%. and increased platform active new receivables and and up the X% strength Interest in our accounts strong continue sales Card was leverage volume a the Payment foundation growth

Interest X%, be and was in expanding our We also the and expanded the also delivered to X%, on volume new added increased programs. receivables receivables increased growth. business by are and excited through payment growth attract Purchase dental loans up two average also X% accounts active And this several another of quarter, helping strong X%. platform, loan of and to pleased by new primarily offerings. driven utility clients specialties. CareCredit we was increasing key our are while card verticals, veterinary have and led Mahindra, renewing partners fees jtv into

We three of continue first to sales our quarter. deliver growth across platforms all in the

providing partners We solutions provide are for the Brian call over results. and new relationships, programs, and extending value-added details turn I'll innovative, to our on the signing deepening our cardholders. and to now

Brian Doubles

$XXX translates first quarter start to per we slide which I'll on share. reported of $X.XX presentation. six Margaret. the diluted Thanks This of morning, earnings million,

income of cover good deliver fees volume we loan growth with over refinements I reflects The X% Purchase previously pleased by growth, detail Overall, The grew and the year. refinements across in the receivables. growth impact the in the on X% with presentation. will receivables recent the the more to up and business. growth in made noted fee we're underwriting last interest receivables later bankruptcy. driven and We the hhgregg loans underwriting in generated last year. over continue X% we've primarily up quarters have the slower and interest was growth we

with on with to that increased average the in strong X% Average future offers in over account account value continue to growth we per resonate from these promotional active average X% in would forward As items in the impact moderate up to by are continued prior $XX RSAs growth expect included run year. year rate, or The driven compared year, consumers. positive last impact was quarters. we active and average last X%. their balances, in million move our propositions the trends cards balance

lower with we leverage lower $XXX incremental credit last by the reflect the build range While to of we lower percentage the as last quarter, only million, years. loan detail provision our million than the and as this same And later two in was have reserve quarter our was moderating X% trends been Both expectations. in underwriting had in million the well past the the over The loan increase over $XXX provision expected year, normalization the lower last a I build asset than quarter and receivables for year million significantly Other quality the impact growth in metrics losses was we line than RSAs receivables cover increased in generated prior substantially the a $XX strong the the experiencing reserve in and shared than average lower $XXX more expense. level of the million operating was quarter, presentation. as in $XXX growth slightly for positive and will the from first income offset as refinements. X.X% year. higher the topline year.

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

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

technology a Other of noted As or we percent driven as trend by quarterly around last million year, some versus fluctuation. we primarily to marketing, increased revenue growth, and XXX% expect program $XX previously, interchange with expense X% loyalty expenses investments.

expenses in to and of was strategic ratio compared well quarter and and program The growth by streamline back cost year strategic timing to largely forward as in XX.X% and efficiency enhancements investments and of by capabilities to onboarding for expectations. office. our driven going The with be investments the related direct investments We driven our platforms to slight to our sales line to as increase upfront was expect digital our build automate PayPal. the XX.X% last deposit mobile continue including our

the liquidity our metrics prefunding in compared due versus interest first to the PayPal cost impacted closing driven driven this XX margin the rates, quarter interest well was mainly wholesale points slightly the over margin in promotional X%, also compared of prefunding in the of growth growth offset the last quarter liquidity deposits expected as margin. to to XX.XX%. The prime increase the I reflects was largely impacted balances. quarter increase by points assets offset rate The through An of impacted of the to Net growth of the will in acquisition. last total XX.XX% X.X% as well yield increase as Lastly, next receivables receivables, by The we basis year. portfolio reflect benchmark line continue portfolio the loan expectations. third the up Part largely in by prefunding strategy funding. with credit year, year's interest-bearing was an increase margin interest XX% partially slide the a the receivables by last Credit last as year seven. cover in of to over in as from last PayPal higher income ahead in was to lower XX% liquidity XX% did This basis prefunding primarily versus in ratio increase mix net the average year, the on and both This rates. was net in up increase by the first on liabilities on such our margin margin and of which year XX in in

XXXX, unchanged to at Regarding our for is of the Credit outlook the portfolio XX% it PayPal including margin impact acquisition. XX.XX%

all decline assets, by as the quarter This the of of mainly the XX.X% you portfolio to of prefunding driven offset to transaction. next could the see ahead income. range, XX.XX% earning virtually much continue ahead impacts building margin For impact net liquidity of acquisition the build interest denominator, the the we an into without on

liquidity in core And margin PayPal margin continue XX.XX% once the expect the the by will Credit is levels portfolio range. as those the replaced We to portfolio. the return is the to onboard,

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

X.XX% delinquency the in In XX-plus and in increase versus row, of refinements. and XX-plus delinquencies of our The were of X.XX% second terms rates delinquencies year. and dynamics to specific trends. more I'll rate slowed impact from both a XX-plus X.XX% start modest with were reflecting compared normalization last a the quarter, the the delinquency underwriting XX-plus year last the quarter impact in for X.XX%

line Moving as million. NCOs continues normalization. charge-offs. contributing a with receivables The the X.XX% increase on fourth compared for expectations. X.XX% rate The largest to and net allowance and our to to was factor was percent was charge-off be net The year losses the of $XXX in the last in from loan to X.XX% reserve build quarter

As receivables the I earlier, the was expected impact we due to underwriting as than noted credit impact to lower our as normalization build somewhat $XXX growth from the million well range million and slower refinements. moderating reserve from the $XXX

to build reserve $XXX next to this We be expect the quarter similar range. the million quarter in

volume the recent our impact purchase growth. to As our the and to we the on describe refinements underwriting like more forward XXXX, look related remainder vintages of I'd to

trend most our line recent expectations. in the First, with vintages continue to

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

purchase the volume Additionally, in year we throughout to data these more have refinements vintage XXXX resulted better that surprisingly, curve our changes score. in mix have make changes Not continued performing our the to line vintage. FICO vintage the with also underwriting XXXX incremental underwriting XXXX by than suggests is and and

our our beyond. the XXXX trends expectations These the to we and taking. continue FICO actually the XXXX, quarter and move while stratification, help normalize X% strong FICO In declined in the continues continue XXX FICO while accounts actions XXX, through If loss we inform of summary, purchase which you have stable view we than on greater at at over credit from a purchase of a as conditions. to the change here, to been the volume look volume last below range reflecting expect pace results by XX%, in economic with pace year, fairly we score same assuming for moderate grow to increased impact

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

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

efficiency is last and in line was costs year As driven well of I for versus the slight by expectations. ratio our the XX.X% the earlier, timing investments build as XX.X% of noted quarter increase upfront The with related to strategic PayPal. as onboarding

around Our XX%. efficiency for remains the outlook ratio year

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

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

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

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

to deposit service We in our our customer building Overall, receivables with out continue expect customers. our grow line in growth. rates to ability digital expect as program as continue we by term, capabilities. drive well deposit attract continuing attractive deposits great to pleased and and to our to we're offer direct growth retain our with Longer to

the PayPal the As unsecured issue part first $XXX debt quarter. of we prefunding in million Credit plan did of portfolio, our for

PayPal prefunding will to our funding. continue wholesale and as deposit both XXXX. will plan We the the of of execute portfolio we third quarter consist prefunding to prepare in onboard The

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

basis plan XX and through phased-in CETX impact compares on the deployment our capital the This year, basis III of fully capital Turning a the XX.X% growth. to to rules. fully capital Basel point quarter a XX.X% reduction, at equated reflecting from up under and billion, liquidity, is portfolio acquisition, ended until last is we the our ahead prefunding liquidity reflecting to undrawn which Credit onboard. total of are This portfolio credit holding partly facilities, assets. XX.X% the the liquidity, Total was XX.X% including last year, which PayPal of $XX.X in we phased-in

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

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

on to share also million our through XXth. billion authorized have quarters repurchases an We provide remaining update board of in like capital June XXXX the the four plan. $XXX ending $X.XX I'd our

plan and we announce Directors Board early approved plan our in the this in was March in submitted of our is a to and in position and This reviewed the later by line years late April. timeline to our previous plans quarter. be Our we hope to capital regulators with in

on that a share outlined deploying and PayPal be further plans share While to and the execute strong continue our we in capital dividends capital I to capital and execution continue strong continue sources capital growth capital addition cannot Credit diversified portfolio we growth buybacks point, this and built and the funding supporting balance dividends specific the during of liquidity through plan and we in strategy deploying at of sheet the as Overall, to expect we quarter. very third through both acquisition previously. levels with and We've to form the of expect would to our repurchases. our

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

at portfolio Credit to First, impact XX.XX% is the XXXX, outlook it of the for unchanged including acquisition. regarding XX%, PayPal our margin

the acquisition, income. earning of of impact an quarter, building to on XX.XX% offset you portfolio denominator, ahead range, could margin the XX.X% transaction. the much of driven see without largely into build the net mainly as liquidity the prefunding the next decline ahead impacts For interest assets, by This of the to we continue

in We as replaced the once would is expect range the to onboard, return levels with XX.XX% those portfolio. the to and the is the liquidity Credit core the margin continue margin portfolio PayPal

the continue NCOs to the PayPal. the XXXX, in X.X% be We impact to expect of range for year X.X% to including of full

half, charge-off low rate. to moderate. important normalization to quarter point It to to half in remember that second continue third the compared rate also of NCO We the is the the net in first a with higher expect seasonality credit the the year being in results

in of much reserve the reserve the to quarter Regarding the higher We boarded reserve will transition is year move of on as to believe through second around builds reserve we the The due Credit loan this in $XXX the build after to half loss the to in in forward, to builds we accounting the acquisitions. will second onboarding expect more XXXX. quarter million be PayPal going builds range. the this requirements continue similar portfolio portfolio be result portfolio growth-driven

portfolio acquired, which more will this after quarter. to We in expect will specifics we the be around is the provide third continue

to generate around Turning operating to expect leverage and expenses, positive full efficiency ratio to continue the be for we year. continue the to XX%

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

related in However, this marketing offset onboarding good generate continues and drive growth growth summary, an partially the well build In of with will be the investments the as as upfront business on to to by to attractive spending strategic long-term returns. costs increase PayPal.

going of forward, Assuming to continued and turn and the PayPal I'll as And it Margaret. a EPS EPS a are help acquisition dilution the degree turn portfolio will consistent throughout the in And this with conditions growth nice us is growth of impact will actions the EPS that year, the generate core of continued XXXX. tailwind which with from move builds to reserve over provide creates business in help that, we this year, moderate economic and will combined to XXXX the EPS Credit forward. while capital accretive expectation consumer our continue health back

Margaret Keane

our demonstrate with Thanks Q&A. strategic the results, our in and renewals the started to wrap-up the Brian. return the services. working and continue and they and share Returning remains key by to Guided partners shareholders partners call we quick a fully and new year we'll program. wins, priorities, quarter, every cardholders expectations from provide then continue are derive and our line this priority solid capital many to We to commitment with value business our for year I'll program generating to our and including the dividend results programs. products we'll the our the pleased and repurchase a to proceeds, focus to through day attract our significant our shareholders and on of capital as open earn momentum

acquisition end is this, us decisions day, organic an grow. program strategic The risk of to previously cardholders, We are are are focused back to the through and Credit strategic of our to returns, growth grow U.S. also help as on help example deliver of PayPal's open acquisitions. the Greg capital Consumer investments I'll up we on At that the portfolio remain deploying making business adjusted Receivables in business call it announced and our making partners, turn and business Q&A. the value shareholders. now for to our we

Greg Ketron

the our concludes That Margaret. Thanks comments on quarter.

will begin session. Q&A the We now

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

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


you. Thank

first session. our Suisse. [Operator from we question-and-answer And question have now our begin with Moshe Instructions] will We Orenbuch Credit

Moshe Orenbuch

that the how figure are in not you're that's reduction think are the out to in some helpful point? and going so big really terms sub-XXX, drag and at is generate put the there you as credit And taking be you're is ongoing perhaps guess, what of X% it's steps to something that portfolio. of I that your or back a taking XXX, Thanks. the you've impact growth, on Great. kind ability overall When detail -- its done steps this about to the that

Brian Doubles

Yes, sure Moshe.

changes we're quarter right that now this both quarter XXXX. would half in the and say to what the the seeing is in the I second purchase really that of last we is cumulative impact what started So, make of back volume,

on a FICO. see accounts you're reduction going think I purchase XXX So, volume continued below to in

lasts as those it where of given as purchase I XXXX impact think probably comping balance in then of maybe won't and much stats. overall I into purchase have that we lower will XXXX, moderate be get you the segment, volume through think an we sales I moderate the periods as year impact the on and will this make that get against feel volume Does will think we into or of that on we kind sense? the just

Moshe Orenbuch

it Yes, on Got maybe. it. does. matter, related And a just

of that your group how think you slightly yours, the I that existing inform thoughts level that about the portfolio how does from the PayPal both Given that below portfolio can credit overall credit standpoint? is in manage and

Brian Doubles

say question. We rate we that of on that's don't at programs. we're evaluating when loss look just look a Yes, the that overall I'd the first, our we're at great I one earning mean, return the of look profile those that earnings is the at And tell scenarios. program; stress the the Credit comfortable with scenarios, very can various we're including of we I PayPal what you portfolio. risk resiliency in

obviously any closely. it's we make we're see with think see underwriting With I adjusted point. going well PayPal -- the significant underwritten. very We returns. work really risk changes while We're don't like I to that said, don't that planning to at this

I overall, risk wouldn't think a profile our marry on their underwriting of We're to is with really changes. they've going Again, that got up significant be make good any to very the that and with portfolio. expect customers. we'll But position ton the jointly, tools I decisions to think of a see in benefits one comfortable we're of I going data some of forward.

Moshe Orenbuch

Got it. Thanks much. very


And thank you.

Our with next question comes Goldman Nash from Ryan Sachs.

Ryan Nash

Hey. Good morning, guys.

Brian Doubles

Hey Ryan.

Ryan Nash

Brian, by the just in I with year, will giving quarter come back versus portfolio some specific you're separate in last given and Thanks. take driven half growth, much going view point should for And however, how will you about to normalization? in the to the year back be that of the regard fact that over or this have rate much reserve the can us guidance so can by half XQ, at least or the into year driven the what related think -- of was how what's whether has provide you to the the after growth us maybe us how has build maybe closes, in deal the the versus PayPal we of come build XXXX? the

Brian Doubles

Ryan. Sure, Yes.

is combination which obviously, about that. news. of credit small driven we So, we normalization. primarily think our a $XXX you receivables good if drove in growth, below by reserve came from X% Receivables came build a the in remember, in million, you impact of moderating to It But to expectations, our X% that growth guided of if It slightly was came portion below X%. expectations. at

say that So, we're with receivables tracking line the pretty expectations. I on much growth would in

what reserve So, that you made. you're seeing impact the the we really, is about from refinements the when think underwriting build

trending very our So, the with direction, right line things in in are expectations. much

seeing the will lower second the And So, in $XXX as seeing million. range think we in come quarter XXXX. trends were similar we reserve that in think significantly around about build something based you trends just on next the than again, we're the quarter a

So, XX XX the to think reserve through and about reserves. you half. with our forward standard PayPal to coming second no XXXX book PayPal will the got remember you is months as on over build and built that that to gets XX coming of going of that in comes months portion you've Those it on. half with about The of thing losses. nine to get reserves fairly think significant a We're then first obviously

in the taper that Other reserve the kind see third XXXX. you into that-- of build first So, in then of fourth get to of quarter, and you'll the off it quarter, half more as than starts the

Ryan Nash

Got it.

Brian Doubles

looks We'll color the next what got really sense on. that good …we've quarter at give more like. point have a little a when to portfolio we the book of bring you

Ryan Nash

this it. appreciate you guess level performance trends know core half? color. maybe mean just what the on could your in still XXXX while that and I then are portfolio early think potentially vintage based recent the early to second the given legacy around comments guys do seeing on I ex-PayPal? in the you've been Got for portfolio you still the expecting begin it's I the charge-offs credit off And to And

Brian Doubles

Yes. quarter Ryan I little you line in calling year. view changing think the tell our charge-offs. net expectations. full it's to the can We're early with our that is What was not I much start very a for XXXX first

come than look at bit, have January. tell we about the and the our XXX. The bit We're And communicated earlier as a are seeing in the you to those and continue the on little in XXXX more year. things that for and they're a range XXXX. be indicators below looks And that what line we to Everything with line We I that back past quarters. X.X% a is with less portfolio are probably net expect X.X% better in you're track. vintage vintages two best than build in pretty through with performing expectations. little think talked above in two XXXX to more remixing delinquencies reserve full we consistent in which both little charge-offs the When the XXX, moderated obviously

Ryan Nash

for Got taking questions. my it. you Thank

Brian Doubles

Ryan. Thanks Yes.


And our Wells next question comes from Don Fandetti Fargo. with

Don Fandetti

have of Brian providing you that multiple talk now one you'd of a through basis, good sort these sort commentary to is this we right be give you just think seems around cap can't to the us can kind investors, renewals sort But day, morning. hit think obviously of concerns will Or year-over-year us to big of improving some we'll and the I XXXX? color one but that about as Clearly Do renewals go should how comment to on get and in release? and as credit on and you a of XXXX? some sort big closer press think be any that. you of

Margaret Keane

you? hi -- it's So Margaret, how are

Don Fandetti

Margaret. Hey

Margaret Keane

you you as say do But What I what's every organization can't We we're having meeting their when working really and tell to working is those is conversations the with needs we're right renewals. right hard these to than can. So, ensure can is is under in our would sure tell day I what on as single we with our partners day levels get tell we're renewals. well-entrenched soon know to at important to partners focused the the we Obviously, sooner and we know. work we can what belt. every you make I communicate renewals entire to

Don Fandetti

that a basis, see -- year-over-year we see we going change? what Okay. QX. have do you on further see you the to it are of delinquency. clarification improved improvement sort And Brian, a on delinquency a do From Or there? Do year-over-year in

Brian Doubles

a No, with think I you're in expectations. line trend our seeing

quarter, XX third points, quarter go it to you increase came year-over-year down came last the last the it quarter. to to this If down XX XX basis back year, was

continue of I any in trends Look, wouldn't to into direction. moderating. right but expect the in would read trending the much that's moderate we delinquency net So, to advance too quarter, charge-offs one

certainly think I we're So, trending that direction. in

Don Fandetti

Thank you. Fair.


Bill Nomura. comes question with next our Carcache from And

Bill Carcache

non-GSIBs to Thanks. savings. process the that Good a morning. capital indicated that I really more see broadly to freely had than but expense they relates that it have to biggest as a so potentially question is unknown still, benefit go there's just through driving, the having the on capital, in particular, reform. any more speaking annual know regulatory lot some without potential potential return I

talked XX.X% be of now frame are in you subject that path more closer and/or your kind guys increase help do Can stepped-up guys at to -- the us the down to regulatory XX.X% that versus for about get guys willing buyback do reform? peer all you potential able would that levels a you historically, course, to could have of gradual You to CETX.

Brian Doubles

for question. a moving below lot the they recent the positives would Yes, negatives there, say all now, in more us, out for on soften there's outweigh the $XXX in Obviously, the assets. proposals particularly sure. great I a right are seeing we're probably ones. that billion It's of what some if banks I the even requirements of think based pieces

So, I do think us. that should benefit

what past. really reason, So, and got see to to be there's optimistic, definitely gets wait we we've some think, but

sitting As you've of highlighted, a we today. are excess amount capital significant on

do resiliency that more we we target with to the of distressed that environment, indicated is the returns, our ratios and feel line the have our peer our our to set. business, compare we at over the profile like earnings achievable an in as We time. peers, look very goal well so When bring

a capital bring on of to immature to a is any However, the with good us good strong use magnitude of got available that dividend, combination us at payouts. buyback. little more it's But great a future growth, premature. line. a more really to news is commentary speculate PayPal specific options the organic attractive little in for -- lot We've pace returns, is capital deploying or of the capital of is ratio any the The

Bill Carcache

of hold, may currently If little now liquidity Thanks And with and bit question perhaps talk to around us need, helpful. NIM? the to the That's could follow-up amount were And a liquidity. you're on with Brian. a maintain the if amount you same than for that allow rather could out maybe that frame I perhaps just run if regulatory less how for you your change could amount mean that liquidity, guys about you were topic you required regulatory purposes. what run that, I you to reform the to able that guess, for

Brian Doubles

I Yes, there, any about would Bill, impact modest. being pretty think

a take how the If as operated range the that's we percent liquid at you assets probably look to going total, and of year last expect forward.

see to that going percentage up. you're tick Now,

in You the quarter. it saw first

You're in how in being greater much with going prefunding total even second we that and about we in to portfolio a quarter for line see once for PayPal. But increase pretty as liquid an think that would XXXX. I the assets out normalizes of the ran bring percent on,

Bill Carcache

Thank very you it. questions. taking Got for much my

Brian Doubles

Thanks. Yes.


with from comes Betsy question Morgan Stanley. next Our Graseck

Betsy Graseck

Hey, morning. good

Margaret Keane

Good morning.

Brian Doubles

morning. Good

Betsy Graseck

credit look differently to I wouldn't make heard say Two more that run I expect perspective. just understood. PayPal you these a sure you to on post-PayPal; questions. One

Or portfolio Your So, moving in lower than make interested your is stays bit where a understand, mean be way do that risk want your it I to just the taking a stays sure and you average does PayPal characteristics? you're over little time, PayPal that current lower blended risk towards you that portfolio I that the bit is expect little today? would way?

Brian Doubles

with remember, return is to underwrite We're all don't very the I our attractive of PayPal. Yes, rate think that's about on you the very way. loss we and way the it. programs same think comfortable the overall profile And if

very customized approach. a have We

we lot different comfortable we profile. at depends with profile, earnings. of we're today the So, programs return loss PayPal, margin resiliency when rates overall programs, factors. with and the on And that It those the the depends those on operate a overall on look very the of

it do we a little with upward I when this overall the the profile. year. entire we've should be think I that provide would an of PayPal, as impact the to total very it terms company we we're modest. at in loss into pretty expect XXXX, inclusive think risk rate And of in bias So, the rate way don't about indicated on move company the it'll we charge-off is net have look comfortable but

Betsy Graseck

it. Got

either the should we anticipating? is to then does that terms change percentage any RSAs, Okay. And or portfolio how impact in on RSAs, the PayPal seasonalities, there be

Brian Doubles


and for So, X.X% we X.X%, if unchanged X.X%, PayPal ratio back RSAs you to that our provided go to a PayPal excluding at including outlook, X.X%.

all to the So, it's for total company. that enough ratio at for move not significant us

Betsy Graseck

into impact, Right. you And even when there's like full XQ, flip year a no… XQ,

Brian Doubles

total to have meaningful RSA change the Yes, company. to wouldn't I it expect rate the a for

Betsy Graseck

Okay. no on And the impact seasonality?

Brian Doubles

much have impact of on shouldn't an it No, seasonality.

really third the hit with have that In more would the see that in sharing got lower drives dynamic. terms quarter, but of a PayPal you've where margins, point we the in event, higher you high charge-offs with don't change quarter, RSA, to That's partners. do third seasonality, in we necessarily the anything of factor that seasonality-driven a increase

Betsy Graseck

Thank right. All you. Okay.


Brendler And Research. Buckingham Chris our with next question comes from

Chris Brendler

particularly, like it not at discuss of the think latter underwriting or that pretty growth in investments set, be whether Good Thanks. you I making Thanks. where there but marketing looking rates face in any we'll CareCredit the of related, be in competitive start growth may slowdown the color as from just drag to potentially outlook you're morning. part will the helpful? year? the you some on Hi. very feels underwriting turn Could the and you head And see towards

Brian Doubles


on start expenses. I'll -- marketing the me Let

by the in was deposits related the increase for increase think an I on just prefunding our the PayPal. marketing in largely driven quarter to

Retail specific your also is partners, made investments related you the why the as We in question? those which programs. as down with slightly our well our are of Card some year-over-year. growth we What saw some Obviously, had some strategic timing come RSA was some of second here to investments

Margaret Keane


we're definitely I really which resources think actually, increase to our great mentioned think the going seeing that in it's then and side this focused card utility, on the the a in really CareCredit, expanded And core on I we're sell the business past; we've we've we've verticals after. business.

as and built like a well as be to card which working we places we and it model the dentist expanded the thing other to of in and taking fact verticals, taking we're Rite-Aid. positive So, vet utility that is very out the

has So, to us come particular all grow that to that together in really to of continue allow platform.

Chris Brendler

a And then shift mix in just be are or business degradation factors an is market on? take slight to yield that going sort other of CareCredit there indicator the of of

Brian Doubles

or some the by mix I'd from say mix a driven year-over-year. discounts larger yield, stable margins so bit merchant impact merchant really provider But providers generally, core core -- there's that are core the very and of a It's slightly in where little earn we lower CareCredit.

Chris Brendler

much. Excellent. Thanks so

Brian Doubles



comes our question And next Sakhrani with from Sanjay KBW.

Sanjay Sakhrani

Thanks. Good morning.

wondering one you're I to seeing delinquent relates among Just any behavior credit if tax was it borrowers the clarification stats. as on reform. your

these have of loans? delinquent you have more income, in payments discretionary gotten As seen consumers some increase like

Brian Doubles

year. remain Yes. that optimistic we really anything Sanjay. something this yet, we We may Obviously, haven't see seen

spend into delever saw to for a you have we lower that our As prices, with still dollars very it's bit either know, gas that. anything expect or early. if maybe build as didn't but they're forecast customers it dollars going But those do additional discretionary we we

haven't So, anything we directly to the attribute would we tax just savings. that seen

tie we would would I underwriting tax or we delinquencies, think when consumer specific we saving. we when made to we our it than the look that to changes anything at the trends, on more look at

Sanjay Sakhrani

I And higher, then percent was look year-over-year, didn't. ROA lower this, RSAs you with that you RSA follow-up And the help RSAs, the could was look to when went receivables than of you on that hoping, a at as when the great. because Okay, metric a receivables, at Brian, expectations. our but maybe me

we as RSA should should about how we think Or the profitability? levels relates modeling think it how Thanks. about So, it? to

Brian Doubles

for line with Sanjay. that first we which what We is challenging to is it expectations. this model, expect. our one to can you clear What our you all a came the tell why guidance on know quarter; the you of sure, gave more aspects in business I Yes, is of pretty

I of receivables. you where back year if probably helpful XXXX X.X% go the average at we to think it's ended

in driven by If you partner remember, for original X.X% that our build. year the to X.X% view that reduction of was the was higher the primarily well below sharing reserve and

largely backdrop, XXXX, moderate range, continue expectations So, you've builds think our that think just year by some happen move driven with that to of and as about seen in first that as we to moved X.X% we a to X.X% throughout into the you are as that going we back reserve the quarter. the

historical range So, that move back that XXXX to RSAs the moderate, builds reserve as and those closer seen start would to you have in XXXX.

that's I best to had think would I seasonality. think about highlight to way So, If it. one I the highlight other thing,

had the much tracking RSAs the with somewhere end far, we to point or up our But margins we third so X.X% and in think year. a range in we're always account. we in reiterate, into expectations when Just quarter high for see line net that so X.X% the need that to very higher take charge-offs, you to

Sanjay Sakhrani

usually quarter quarter that's it's should to reasonably slightly maybe assume quarter, same, we second then? clarification, the from the one case mean higher. first second the I versus Just

Brian Doubles

history a I Look, the think is perfect predictor here. not

degree, net higher. were some think to ended the RSAs charge-offs I because we on we did quarter, first where

a to quarter and terms So, moderate going charge-off should and point low net bit a see in into hit it's depend that you in rate getting the third. of second the the

third be quarter. elevated absolutely might in a It'll So, bit tick-up second. it the in the

back think down one thing come you can I the trust the then and that's fourth. in that

Sanjay Sakhrani

you. Thank

Brian Doubles



Thank you.

with comes question Shane JPMorgan. from Rick next Our

Rick Shane

taking question for my this morning. guys Thanks

Brian Doubles


Rick Shane

related love you of mitigation would of a versus what mitigation in around sort of Margaret, going what a to retailers comparison in you sort terms I'd you going champion/challenger are of liquidation achieve through charge-off bankruptcy. strategies expect to of through able some the profile hear retailer strategy, through your outlined to to terms loss analysis.

Margaret Keane


books would liquidation I say experience these is what our So, first, through of usually is we most liquidate profitably. that

Toys"R"Us. vertical, through of getting portfolio terms what is Obviously, but company we had a debt with comes debt to things as communications a set. by been well a hhgregg real is customers is to might we're send we little we with expand we the we of this us for liquidation Obviously, quickly see part, and win consumer to to their down immediately as see due our the That capabilities when really opportunity as communicating still uptick, continue on think those the you an us doing do utilized creating pay in think which we customers. home has off. it going there as our for a most the little differently I those cards one start

the providing had this really don't in utility we're proposition, if a value performance. case, I Toys"R"Us think expecting good that both in we're good a with case you know and I the anything. fairly fact Brian case hhgregg the

Brian Doubles


a other maintaining as is we some hhgregg card, do here intend the at new customers think program I Rick of on is moving like to portion think important to whether really through one I MasterCard we Toys"R"Us a it's or thing do any brand portfolio. utility the those of with

are offer them product card. use a prop, line prospects net an think the credit to good of I they'll And value significantly if then attractive greater. increasing you charge-offs your minimizing can with continue the

cases. So, feel about pretty both strategies good in our we

Rick Shane

Is XXX? go loans dampen I pool it would XXX through should the at do you that And we index to If you baseline understand -- the expectations? go or were were case. was And were middle? liquidation we does not to of Would strategy that it. through going through what look that index put think to obviously a the charge-offs to going you Got How to to the about a the think can on look versus in you do where go it too? be think this? expected mitigation retail bankruptcy and you utility

Brian Doubles

consumers go Typically Having evens on aware here when the aware very the of that charge-offs mean their doing that of scores I debt. time. score credit their would reserves implications over important We crisis, and you it wouldn't the the on the I what financial look bit out thing than very consumers on little for I And then there's to credit Yes. tick-up of is announcement for XXX, and delinquencies and today in score. say to they've see obligated are acutely their ever retailer, is a been. an of net I come remember are you to think more a their see know particularly Rick. that is consumers it manageable. mean credit

are to said, said, terms things like they're that cases. we make We a obligated see, proactive customers I a make sure off still our of very generally of know payment, we in to they as very how and communication And where initially Margaret all tick-up the in and profitably that then work. levels with modest gate liquidate out

Rick Shane

taking Got questions. you for it. my guys Thank

Brian Doubles



question And from with DeVries our comes next Mark Barclays.

Mark DeVries

that's kind loan underlying point anniversaried once contributing reaccelerate? the that's end at moderating Are loan trends. and should A underwriting of that seeing growth? the this still the And question making around expect growth we to you kind of done of you've growth maybe tweaks

Brian Doubles

Mark. Sure Yes.

in expectations and at very much think our line well we and acquisitions. I growth, a combination what with January. with year always you full receivables as line So, as say was would at X% look been growth organic right And communicated in when look our the of growth portfolio in you about back it's

receivables this question be is And which growth it'll strong. one. raised The XX% good XX% so to very year is a you

into at trends. the looking payment -- perspective, the expectation. said you're With We're always We're from move XXXX. on our That's our to information. we underwriting as behavior new are never really that done. impact will We moderate refinements those taking

refinements. To this started of the good for overall, growth is And having made to good effect really you're results that really bit quarters, very the in so desired little start changes comps still making probably constantly But the feel and lap the half we growth. the the you make the move seeing to XXX-plus of quarter we're quarter the What those we look modest segment. We'll when get you a historical that easier. in at second in the impact, that some of look growth clearly XXXX. as cumulative are seeing at underlying FICO maybe to the will back we rate closer business. We point, we your that changes saw last

And out intentional. this and as results. so XXXX. deliberate or it to should having even starts we And is is even think I get It the was desired into out

Mark DeVries

that when and Crate Okay, can are over And got So, might you with be? it. coming sense us give receivables of how then there and meaningful any Barrel? a

Brian Doubles


portfolio, have a on acquire will We small impact material our a but it results. won't

Mark DeVries

Thank it. you. got Okay,

Brian Doubles


Greg Ketron

Hey, more Vanessa, we have time one question. for


you. And thank

Our last with Hecht question from John comes Jefferies.

John Hecht

much for Thanks in fitting morning Good guys. here.

Brian Doubles

Hey John.

John Hecht

wondering the addressed were or your you any suggest or tell guess with in the new is ago? recent economics overall there the couple prioritizations Crate consistent and of with other renewals partnered Barrel and respect work to any it's I'm recent we been how us a it pretty is change or there or where is years that earlier, whether anything partnerships the overall structures renewals, has victory I of which you been renewals but about -- could changes

Margaret Keane

It's pretty consistent.

I and returns portfolio. think at is the we of sense even mentioned look the the as do earlier, what overall we Brian always -- always

the in we versus So, -- how look risk/reward much at retailers each those we taking risk are and taking the are on. of relationships,

as make sure whether that the that to on new at back look we risk/reward returns making renewals deals. trade-off we're blended good or So, we bring

the say environment, I'd think I continues pretty to be is So, while competitive, rational.

feeling the that doing. portfolios winning and renewals about we're we're we're on that bringing what good and we're the So,

John Hecht

or there us Is commentary can update is And respect rates Thanks. just penetration question e-commerce Amazon with you overall wondering it's forth? anything give second trends. and so whether there Okay. the just to online, on

Margaret Keane


quarter, Card, -- quarter Retail was this first XX% rate So, which XXXX. for up from was penetration our overall X.X% on about

framework. is average our the continued about in we're ahead we're are investments feel digital so making like the really Now, competitive that we the ensuring that staying of capabilities national XX%,

online in more quickly kind investments for we're Payfone going payment of on, mobile is think, extraordinarily which authenticate something apply frictionless to and experience they we be is that their think whole real and through I as us. I for is in help to going the credit made the customers us focused application, that positive

what our out and we're continue to mobile So, we're and online a as element partners. best-in-class of ensure for build we trying see to critical

well. great Our Amazon and good we're a that about we so grow, partnership where to with feel continues there as one really is positioned partnership

mobile we're out. that our overall, the where So, on building capabilities online we we're feeling are space good space and and

John Hecht

Appreciate Great. the Thanks. color.

Greg Ketron

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


This And thank and participating. you Thank gentlemen. concludes ladies conference. for today's you

may You now disconnect.