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Synchrony Financial (SYF)

Participants
Greg Ketron Director, IR
Margaret Keane President and CEO
Brian Doubles EVP and CFO
John Hecht Jefferies
Moshe Orenbuch Credit Suisse
Sanjay Sakhrani KBW
Ryan Nash Goldman Sachs
Donald Fandetti Wells Fargo
Mark DeVries Barclays
David Scharf JMP Securities
Rick Shane JPMorgan
Kenneth Bruce Bank of America
Eric Wasserstrom UBS
Matthew O'Neill Autonomous Research
Bill Carcache Nomura
Call transcript
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Operator

Welcome to the Synchrony Financial Second 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. the to turn of Ketron, now Relations. Investor will call Greg over Director I begin. may you Sir,

Greg Ketron

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

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

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

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

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

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

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

Margaret Keane

generated and interest million the that in we the grew Walmart transaction range our morning Today growth and for we the on details us begin spend like not obviously this closing solid greatest we call. will or joining everyone that full the interest topics receivables share. of my of renewing the I'd time morning; agreement. Good provide quarterly thanks good be earnings X%. per income Loan results program our PayPal to a will X% later addressing had are Overall, Thanks quarter net expected of of slide $X.XX Greg. three. and today. I'll within with on $XXX Brian

First, with I'll PayPal. start

two very PayPal offerings significant about now partnership into PayPal PayPal's consolidated customers. U.S. credit expanding and July XX. us, providing are We are PayPal, relationship excited the opportunity for which occurred one

In the we of cobranded credit program our issuer program the XX now online extending are to consumer in with PayPal exclusive years consumer PayPal for U.S. addition recently the financing card

part interest As the held transaction PayPal's investors well U.S. receivables totaling as of $X.X as we other credit acquired by have billion. portfolio consumer

a PayPal This growing and superior two mobile rapidly unique for between products allows for needs; management, expertise, Moving strengths expanded two balance customers different the program in and successful their rapidly as customer both payment companies' programs in and financing relationship capabilities organizational key seamless forward consumers in become have This of a one our within and reach in can holistically merchants space a the also The in digital a digital migrating innovations payments consumers. an the to on areas digital could and for change. channel. enhanced our our platform U.S. of built with payments continued trusted natural both growing sheet the to exclusive require for XX-year consumers PayPal Together expands providing provide combining our should which having customer digital issuer relationship PayPal's environment the extension with credit experience PayPal relationship. we manage synergies supports in given payments we is partner collaboration credit, and and thousands PayPal for for merchant leverages opportunities for merchants address as merchants. products programs and and needs and create and leader they provide for focus credit that help brand capabilities co-brand offerings rewards

meet to space programs, relationship digital this in allow loyalty expanding our record important dedicated our us all with reputation We analytics, played compete services capabilities data strong including partners. providing our to capabilities role primarily a built proven in scale, significant needs. have an teams, our this These capabilities will experience, evolving and We consumer and on PayPal. of program value-added

to We our are opportunities this will we expanded obviously the year meaningfully call. in the new extremely the the financial significant have for happy Brian to have will detail the leverage as relationship expand the program. later transaction on impact outlook

as our and program. program role the will about we is in not sell critical the EPS that impact stay skills, began growth program. began be servicing with It development, resulting played new program. all the program and cardholders to over us portfolio is Last not product can third to that the program the of portion year we the the a likely scenarios and renewing issuer renewing be a a program, play quarter not brought The we potential the as card. expertise the scenario will credit program; With we not will and we financial the the In of let existing that me later. which proud with of with of to digital XX set also the convert we Walmart one the our which of to years both our important in renewing to the value Brian created note we relationship. the either a announced end agreement renewing replace program that the marketing, for Walmart of and two expect the the will options are by We managed a or regard to cover for will renewing relative out we we begin propositions, the general-purpose either we and implications and outset Walmart XXXX. accretive portfolio success value believe startup we of EPS discussions portfolio technology, to at Walmart nonrenewal renewing qualifying to saying from the result

with our we shareholders. our will unable Instead program, other returns our were the economic have time. This the where over we for to is renew business approach growth company long-term. reach for sense and risk of would attractive to we managing at opportunities that significant aggressively in our focus business competed we terms consistent adjusted Although for to areas disciplined our on potential see more made

U.S. would that In optimal case our makes best long-standing are providers and believe resulted for program. that in analytics managing capabilities we class elements best were play of the profile credit in this was these our one program in continued digital in supporting in Our with an have scale in economic expertise investments that the and the programs data capital and the coupled other sub us

across long-term value with capabilities, relationships and propositions partners based cardholders building adjusted is attractive by offering Our on generating our returns. all superior while platforms risk strategy service, and

we our growth backdrop a think the times, payment As I of have of opportunities significant industry that has change. noted period broader a about against through been many going

the us being in-store is strategic These of behavior of our that convergence great of a the a with the growth digital New these example consumer strength up technologies and opportunities opening trends of opportunities new are PayPal opportunities. credit and of relationship the driving with expansion business. number present commerce play to the

were we and We of and does PayPal to attempted sense clearly to turn to transaction going over feel as has that provide highlights discuss Walmart, and for financial the Walmart our bring to and right move details a relationship not the cardholders able will portfolio, reach the we we with but economics space. outcome economic impacts. and expertise and Instead the we made value on through think some us outlook us. servicing, shareholders. in options and their help agreement the we on to this unfortunately Brian, and outcome our will who terms at been term returns Walmart agree opportunities terms impact options walk to the can time partners, these in forward. is digital innovation these good to to the the continue ability on a generate quarter, I'm renewing potential relationships the marketing, call We propositions related you drive capabilities, present and now our products, for and the invest greater Not programs. us that programs sizable required long similar it to the our about our grow over

Brian Doubles

start PayPal of and the of going to so of briefly six highlights impacts. quarter on time slide nonrenewal diluted I'm $XXX more $X.XX touch the on I'll share. morning the translates on the quarter spend Walmart which Margaret. we earnings presentation. that second Thanks to This per I can reported million

interest with The refinements the growth receivables recent loan in up we X% receivables fees growth up last We year. X% on underwriting deliver previously. reflects quarters over in loan and continue noted slower have good to

expect loan strategic would Toys quarters. moderating Us RSAs versus XX as these second was program. and Both or move X% our as year was percentage strategic average for credit the to provision had quarter last items was credit. trends in XX.X% was range in investments lower reserve rate X% and upfront build million quarter last receivables from costs compared of ratio related in forward their from driven moderate build the and in year. year as by we growth, the year. normalizations credit The the to build. due run timing X% million lower or driven growth "R" by $XX PayPal expenses the we primarily losses to investments, $XX from As The underwriting $XXX on-boarding X.X% The a RSAs than XX% prior are lower build to by well impact The quarter the the and receivables on-boarding with increased related expected X.X% to the of growth line the Other from PayPal expenses loan due slight as driven increase the the impact compared in $XXX year reserve refinements. the $XXX million primarily for last future substantially expectations. included we of efficiency impact the last year last for million as well decreased last to bankruptcy. the to million than year our or decreased quarter million in reserve lower slightly in the reflect

did continue quarter in PayPal second portfolio ahead XX. on our the July closing pre-funding the the we credit Lastly of of

was the year's Net X% loan metrics our largely primarily of as margin expected in net such income margin impacted up receivables interest margin cover slide line driven second last will by on XX.XX% next I net seven. compared was growth interest margin The quarter XX.X%. with As which this to the was in and interest expectations.

As largest the of portfolio the margin on impact pre-funding expected acquisition. PayPal impact performance the was

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

reflecting the in from highlights $XXX X.XX% of delinquency for million. loan lower-than-expected X.XX% and build delinquency In as below refinements. the trends rate X.XX% continue XX+ charge-off and in quarter underwriting impact delinquencies the our for year. impact third quarter, XX+ terms percent were was The year, The compared in receivables year-over-year the now reserve build last and dynamics year are our a the trends compared first allowance and the from a normalization the the of rate modest slightly quarter was million. improving prior X.XX% expectations. key with to the The the delinquencies row of XX+ line in was more net to specific losses a reserve the of X.XX% rates last improve to and $XXX with

underwriting underwriting to XXXX the see noted changes. and $XXX continue earlier, second trends as The with to line with curve to than in we receivables slower to expectations. impact the and in vintage. The volume we the started impact purchase somewhat to from our make expected XXXX was of range to lower line vintages our data due and performing as those the credit positive the in I growth continued refinements our of surprisingly vintage than Not FICO these We XXXX underwriting improving is trend suggests XXXX our reserve our most well impact by that vintage recent continue As score. better build mix refinements. the more the million half refinements

a at XXX look which you by over we accounts greater last grow than the volume stratification increased FICO's and If strong year. score continue with pace fairly X% a same FICO quarter purchase at to

reflecting XX% help purchase the XXXX been beyond. expectations actually actions These our taking. volume trends Our and below of FICO we've in loss declined for XXX score range inform view the

to Overall the slide quarter. nine, cover at last expenses driven PayPal expenses million by I'll over investments to well continue for the Moving strategic credit and in $XXX X% Expenses as the came expansion briefly up for of primarily our program. as year. be preparing growth

reflecting III rules. plan X deployment capital in reduction through CET basis a XX XX fully phased in impact Moving a XX.X% compares of our to at we phased last the on This point quarter to fully under slide ended Basel and growth. the the year basis XX.X% capital

May common announce we the authorized plan we last X.XX to repurchased June share billion XXXX. the per capital During of stock XXX May share the XX. We pleased our XX, completed and quarter plans and board common of announced of dividend in million year. capital new were through we June $X.XX stock On through paid a XX, repurchase our fulfilling

second program addition a XXX XXX the total quarter an in a new repurchasing board billion. stock for of share complete in to quarter. to million increase commencing up the $X.XX X.X during our the plan third quarter Our of We quarterly approved in execute to per dividend in XXX began million the the May of common the share repurchase and prior to repurchases to program in

we that portfolio, is PayPal current the for which credit view the our wanted on have I XX. year on-boarded recap Now slide to

know, you portfolio, $X billion XXXX current consistent growth PayPal in the into to Starting expect the be in still we the our the with growth PayPal range. XX% we nearly is will taking XX% including As rate account the for provided year-over-year our January. of view addition fairly with to receivables outlook portfolio back

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

the XX% remainder be is two back for year. from we the the portfolio next the liquidity of XX% the For as in quarters around to to pre-funding margin the fund expect the to restoring the deployed the range margin

Toys"R"Us expect to trends receivables lower impact trending in closer reduction have recent previous delinquency quarters the down X.X% the RSAs for in to the year, growth a from and X.X% X% yield RSAs slower the the We to given average of modest the range run of outlook. improving in been bankruptcy. reflecting

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

third moderate. to We important normalization remember charge-off credit the to lower to a expect quarter. that net results also seasonality typically continue It in is in rate

builds loan PayPal build Regarding core reserve would to expect reserve loss quarter. build dynamics be thought next going reserve helpful and break we it out forward we

and the to higher the this accounting quarter. or our this reserve continue to $XXX be will build million reserve move third to $XXX in transition the requirements million around similar expect driven portfolio core the second existing XXXX Regarding half credit range we to on of be portfolio, to will in the the as quarter build acquisitions. growth we much result builds more of through year The the in in on-boarding PayPal the of due portfolio to rest

million next the in to related to million to quarter of million expect portfolio $XXX build third for $XXX to in a the be reserve reserve $XXX total We $XXX range quarter. PayPal the build the

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

for XXXX. be return generate growth with continue around attractive X.X% good our In long-term will business continues on to also returns. summary, to assets We expect the

and XXXX. the going combined to our consumer will year consistent of continued forward, from continuing the EPS the business growth continue and growth actions which continue generate that health builds is in help to the expectation core economic of conditions with reserve impact through moderate are the Assuming us capital will this

both on program. transfer that to the two XXXX. we in take portfolio The result we purchased or can would portfolio impact portfolio a by believe with regarding we'll to it Walmart which you it impacts. branded portrayed is direction is are year. next relative the Walmart EPS cases Moving to complete likely the the quarter the There not were The direction the we is and in both and of process Synchrony XXXX. valuation walk on is renewing program new This the new to or to and the and will accretive issuer. by portfolio of price the sell evaluation the expect valuation XX. for the will issuer options slide issuer the have through that a first end sold the months. and headed to future strategic will be over XX, place unfold the we slide that will replace Not beginning of the process quarter I at quarter be I renewing In options EPS a we will scenario the issuer next have of If the contractually the the to the options the renewing process to retain first will in the with will options we and potential have to clarity timing the the portfolio process. expect program purchase portfolio MasterCard portfolio new the two of the the once determined we portfolio several the was the was defined start that third new option convert

For this level up about proxy portfolio. CET the X PayPal as near using The that the a post will way us XX% of think is to capital. free a addition

Given the as also size Walmart capital of portfolio would portfolio as is the $X.X around billion billion the gain be freed releasing portfolio. reserve approximately the this the up. on the There against held $XX well potential of of

as being to to alternatives. We estimate know buy specifics this at While retained. we made potentially the billion is portfolio the we shares approximately sold could higher is whether utilize back would the on soon starting point, quickly be this capital determination don't $X.X or deploy available or expect returning as

be expense deployed savings that ongoing to and $XXX enough and combined $XXX alternatives believe would to enough of be other expected with expense buybacks there will million our savings had renewing capital share improve to impact accretive the portfolio such the EPS We We was not sold. after have will also identified be available portfolio of program. renewed be and operating the metrics company the impact and the offset we of to quality. as profile credit The also not the sale program to the of certain would EPS million return

XX charge-off by As to example, would improve points. approximately alone the XX an net ratio basis

benefits This scenario, the have general-purpose There to clarity "R" of the several in we portfolio to the Us begin the filed successful doing once used we second the the this. Moving we on portion converting on for whether card. Toys would portfolio a qualifying formal bankruptcy. retain we strategy portfolio, they are after builds

the all an portfolio longer to retain from we returned share First, RSA. no economics we program the as the generated

gain level our mix of we have time diversification out begin offerings potential that significant this of Under to portfolio. to early will would tied at defined the cardholders a cards quality the returns as risk-adjusted as we as building platform. renewal a we the program have in Second a potential portfolio a in of increasing our of strategies also and the flexibility full-scale conjunction the as gain significantly to the higher with XXXX. we deposit contractually existing overall without the we term enhance general-purpose through scenario accounts first a such the and qualifying return of of profile over conversion overall improve And portfolio quarter credit of acceptable would prospective

at receive are converted three card, royalties for initially Walmart the next period. those usage continue that card their use cards we cardholders can accounts and a Walmart will years not this over to from For general-purpose over to

interchange more costs card will be as attractive by that our Walmart very as previously the with prop associated the fees shared funded marketing economics usage. offering card, well with on these than now earn well card the being costs loyalty as of a value the general-purpose Regarding the we we as brand were retain on

opportunity per accretive scenario, also supporting we will if and will we will program could back earnings either an from whether it. with to have had the it earned sell it renewed Margaret. the to We the Overall by the retain And relative I'll what turn cost generated structure we be being over program that, replace the or share portfolio. we have optimize portfolio the to believe

Margaret Keane

the for I'll call Thanks Brian. and up a we'll provide open quick Q&A. wrap then

PayPal strategic continue by expanding We investments in this as driving marketplace. key as to growth improve well programs programs position launching results such and solid evolving and renewing our ever making as to important generate organically,

had We other are business, also perform such credit expected. seeing we our continue to elements of important as as quality

significant contributes to share All were return of pleased shareholders the announce to ability our and and repurchase this we increases in to May. dividend to program our capital in

program. as capability the with if value remain we Greg we our program ability on call Both such the to the deploying back through operating improve focused I'll program acquisitions as resulted that and the and not We we freed help would portfolio replace enhancing the returns pursuing e-commerce. business PayPal on risk other while leveraging provide our was potentially are renewing strategies capital EPS from focused for optimizing profitably as to to have or program the that capital are and renewing the growth adjusted well us partners, either retaining to us portfolio. also shareholders. turn And on open up focused organic otherwise We metrics grow deliver and benefits that and the Walmart, sold investments now as the up the from such disappointed Q&A. the are cardholders,

Greg Ketron

That Thanks quarter. concludes the comments Margaret. our on

the begin Q&A now will session. We

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

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

Operator

[Operator you. our we Hecht Jefferies. Instructions] with Thank And from first John question have

John Hecht

and Good questions. details thanks PayPal taking for and for the Walmart guys morning around thanks and very much all my

The loss specifically to the first be is change any any the metric savings, wondering change absence the there just carved you in expense would on RSA guys the of in there Walmart? and Walmart, - out patterns

Brian Doubles

as see XX you'd that business And And so a profile Walmart XX the just the point of slightly. offsets profitability come It key doesn't of sold that yield. down overall see the there. return to the then obviously terms return for just it on is you'd if partial the in detail little the is move so change in improvement why excluding on improvement back impact then to company would all walk you in see little get then terms you would And a metrics, a I to biggest similar RSAs business. what in expect net more of the really higher charge-offs, basis So, portfolio through of don't you noted. we the The portfolio.

So again, biggest the and I in think is are the to neutral return. you change see metrics will it credit the going to be improvement the

John Hecht

Okay, imbedded And pertaining you then guys also there. haven't going PayPal thanks Brian. perception of but I given kind the see to portfolio lot of the XXXX, a you guidance Brian, have portfolio portfolio will on you been then we're any separately? normalized can the way And to give you the know year, once system? the your the has rate PayPal of be guys I but - lapping in you think next growth in tightening an growth have tightening in guys fully what's update

Brian Doubles

has the of been growing been growth business, lot see growth of ton no faster move change even we've at that so view. opportunity growth in XXXX historically, a a the the so above program of we've to more - Obviously rate. what incremental would core historical of of we'll probably give beyond, what lap we starting or obviously rate impact but clear terms that of PayPal the We and guidance PayPal don't and those growing for quarter are there. norm the is second in back opportunity been terms Yes, credit much to pretty XXXX sure we John. actions first taking expect to start

pretty feel good. we So

than not give when As going growth credit we core we're with you PayPal, bringing once good be think a start our point. other do at rate growth outlook. real of really to color we pretty We'll actions feel this strong more program on specific combined a XXXX, January in lap a about about some we these that but high combination to like you

John Hecht

Great, very much thanks the for color.

Brian Doubles

Sure

Operator

you. thank And

next Moshe Orenbuch Our is Suisse. question with from Credit

Moshe Orenbuch

that on words you you you the program bit used, that the the to Great, terms expand what the about your kind the I of made of would about a that out sort on the have in just maybe had kind was way know of meant earn you in being the comment of of returns forgetting that little Walmart forward? could go exact your to kind have expand but retained ability in hoping results continues business to desire some and generate capital relate of some does expansion there you of that that as for maybe discussions on result Pay we been Walmart’s shift and the

Brian Doubles

we Moshe. start that discussions were old we able be Look, to was one. and challenge risk question That the terms return we clear sure to for earning an Why in weren't were from talk the that economic can acceptable going was renewal I this standpoint. the unique Yes, in it for acceptable to on that And return that the agreement the case that line for In Under return level a with risk. the credit us portfolio. on latter Margaret risk became of then we somewhat maintain a the became the more program don’t weren't in financial just of this able profile. an earn taking.

risk So renewal slide through that with clear risk was it we've just, to in challenging went for as credit the I'll accretive very the became either that profile the that the Margaret. would And we look portrayed process us. combined portfolio, for became option And program, the on of have us. this what sharing that a earned

Margaret Keane

can to it’s I is we're to to whole we we note leverage to and have since already our in in continue I support so program, Pay this going year we’re to way you have wouldn't Walmart Moshe Pay and cards it. think another and so every know Walmart critical as Yes, important in will say Walmart continue are with the

go So we did, no ahead.

Moshe Orenbuch

on mean at method a I is up, – Walmart.com just also payment as It's a right? follow PayPal available

Margaret Keane

has the us our one That's be accepting. program is with of customer so cards the if or correct, will it wherever PayPal used

believe that our So are our us a off kind thought leading this maybe with they're as to of best data our more seeing I to and digital. versus strongly this capabilities know really One. we're going think more capabilities placing capabilities digital you having particularly on of to in for and we I this our higher investments in class partners transformation are believe Capital us continued and value and don't capabilities much and and paying you're our But is

our delivered So transformation. like perspective, we in wanted have from Walmart could terms digital of felt we the what

we on a get there with As program could together drive we the a fact them, economics. of put thought we matter pretty to incredible continue couldn't Brian but as said we that obviously

Moshe Orenbuch

Got it.

get I'll queue. in back the thanks Okay,

Margaret Keane

Thank you, Moshe.

Operator

you. Thank

Our next Sakhrani with question comes from KBW. Sanjay

Sanjay Sakhrani

Thanks, good morning.

secondary Just questions, follow you talk believe I with with have appetite could this this is handled a your and differently those was? given there large that than another that one on to bid you guess any that be Walmart. reason experience just by a deal process RFP entity owned for relationship to therefore up obviously your will to about

Margaret Keane

XX actually servicing, to Club for as Sam's our and I Look is startup. a utmost for in now are do being how saying with terms market more related. I'll the different separate a job then been separate off a relationship think to there Sam Well, two Sam's well. years. Sam's customer two by That start agreements. just to contracts Walmart. consumer We've Look, programs we've had little and terms of related also with right go was of The in they are program capabilities long the business continue delivering with

I think relationship having critical. is another point this year really us at that for of

important well. we're and a to in in One be stores. with to to And we for to we're is the continue to customers for I our make think as going Walmart sure can do best Clubs We're going really then and service and the know it's have the that it's both committed things Sam's our Sam's. continue company to of my doing these to important Walmart to team, we do really to We're ability treat be you possible Sam's best delivering deliver and of that. really continue we innovate teams

not back from we're going So step that.

important and point relationship and you here going to I in again renew is we'll we would bad a that don't Walmart. the we to Sam's have be hope So know we're think with be process, aggressive

Sam’s. worked really together well Our with team and Walmart has

to going road and we're here do really we the can and sure leverage that to make take So we're the going for we high to best and the that programs. leverage continue possibly

Sanjay Sakhrani

that want just the on just the do question continue you just than economics your in the to happen of, are at to I terms the other just up to wasn't were to also other this deal Moshe, I Walmart maybe guess were to did? just And costs you And willing able deals were if answer way then that how offsetting on go long for separately lower go the to issuers follow last terms to else? deal, specific of can anything saying in and

Margaret Keane

could We you that deliver what not out Cap confident can we economic a what on single So Walmart we final we situation. I'd our coming look all partners for terms on. are our our say would look, in comment and valuing and renewals believe we're program. negotiations other that for capabilities. say was tell get unique we're fronts when have between I wanted there that And can't could really delivering them very is delivered Walmart expectation have to our partners One. same like believe the this of us if of that just What that our at in every We the the not on we We day. you other hearts, heart was better

in our and to in here stations and that partners pipeline. capabilities continue renew have confidence the those be looking we will We to relationships that come able have at in are we're our the Chicago delivering innovation we in offices all

Sanjay Sakhrani

Thanks.

Operator

thank you. And

Ryan with is Goldman question Sachs. next Nash from Our

Ryan Nash

Hey, guys. good morning

Brian Doubles

morning. Good

Margaret Keane

Ryan. morning, Good

Ryan Nash

follow few was you a partners any the with lost renewal can wondering said similar know biggest schedule the we mature what cobranded a the question, just four partner specific saw as I that? to about or on you're big Sanjay’s are efforts up Margaret, working the there's I to years? set after talk three in of renewal, past who Maybe your towards next I another to effort accelerate do accelerate renewal the but wondering in if company you've always to space was next

Margaret Keane

terms transform looking we're perspective, having would do what tell to we're but they're they're in of very always wouldn't for say accelerating, how value proposition and for and digital from I partners with you I Ryan, can looking their renew our I conversations what would looking necessarily them. say we're footprint good we a to

continue a positive feel have that show our very and I to as we've we'll So renew can good track record that done historically we deals.

Ryan Nash

change and diversified it billion you and think taking diversified particular of being or return differ on company? to those your and repurchase and on second, maybe returning such $X.X other follow questions. Thanks all ups, two reliant a partners you make the Walmart maybe small options, more in include my company share individual then strategic for about what you're M&A? other options strategy if as would capital direction the in first causes a more it for thresholds just as expand of Got less be it then some loss And deploying the the higher would that just does

Margaret Keane

to answer Sure, give the the Brian. I and part part will second first

to business we been So actually we've are doing looking diversify that. the and

to look really with I as business the us really looking we those opportunities our of CareCredit we're that to ways continue leverage as opportunity think and PayPal both really in particular, to have and build we fact our We entities, if And both CareCredit opportunity platform company. our of help to we're platforms. those do you XXXX platforms. lots are and to a out at growing in accelerate of diversify matter see at fast tremendous which planning diversify going

Brian Doubles

that our And we're going we're to disciplined would then around very where just a do return in to obviously way add profile. that, I

diversify continue program a and today we Walmart diversify another solutions, to I on out So strategy General attractive at have nice we would very is of it started out what purpose that's to diversification, goes, more? very ways do returns. Toys"R"Us. portfolio Ryan, on build that sorry have then large are we one as And way we bit how Depending path, attractive about the did potentially a doing think down that concentrations little payment think Obviously diversify. we you card at the at time CareCredit, with returns. that great to to way same

Ryan Nash

on follow on just expand high would about talked hoping repurchase you maybe or $X.X and billion have other was up just what in it a could I were you I options those include Yes returning share options, M&A?

Brian Doubles

Yes, as CareCredit harder at will so primarily But that's PayPal, M&A look lastly T.J.Maxx, of take bigger investments programs, Amazon, I really well a we growing some as payment solutions. investments fast opportunities. our in think obviously in

process always that. process disciplined though valuation. sense around active a and active very We've had very a have price We around very in that We're that. around

for maintain So we're I that, see but points will and you and attractive entry look for think going us a returns look our at to discipline harder shareholders. take good

Ryan Nash

Thanks the color. for

Brian Doubles

Thanks.

Operator

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

Donald Fandetti

year-over-year, follow clearly PayPal to then delinquencies a delinquencies your how around credit, that on in while talked can percentage you bit the up just they're is the why portfolio? on about talk kind know think questions little but will past, about I in want of later was also And And sort the of much clarify XX+ PayPal, the that? what of of how and of to Brian, I couple could as QX the mark on of sort a done in that reserve out? see trending stage didn't it core then get the remainder that? portfolio down you it but like credit, a play thoughts you've bill looks a improvement

Brian Doubles

sure Don. Yes,

that with start see the last second because me some expecting reserves your on the to leads into think of kind half. we're what of in question I Let

encouraged better the trends the So didn't expectations, terms across change so our can came delinquency you for of outlook look, by seeing our full tell inline we're portfolio. that I But in credit second we or overall slightly quarter than in the year. very we're

the just between last X year-over you XX+ and points. XX at basis we our over running basis year down come points and up are delinquencies the now points trends year-over-year XX quarters, up to look basis anywhere four saw If we down

really the seeing on good So we feel portfolio. we're about what

around through reserve You was obviously million. million compared a $XXX our of $XXX saw expectation build that that flow to and

We're XXX So FICO. the things seeing good, look really sales. good the in trending sales on above vintages terms are of accounts a direction, seeing right in mix still good growth we're on

So things line a little anything in expectation. bit than feel trending we quarter if came and better our second in

XX+ pretty see then see to and In first have net the had, question you'll you're the in we've that always obviously been a terms to you clear for offs. you're XX+ last it at XX+ of charge year they going then going in see

that's are come to after you We XX+. net second clearly going quarter well just offs when it quarter obviously quarter, generally. in the saw we what through which line is this level ago much very credit start then would XX+ next So some expect half said as tightening, of year charge a in those we the and started to with in modest so off

we come the me let any and nine the in comes on will bit, over fair terms a that will value, months. to the of think to zero, have PayPal you first remember take on so from first fourth, in know the you're that that will bulk basically reserves. in portfolio we reserve we amounts. half the So like XXXX, continue you switch which And quarter. And of see you comes at what the to for build smaller in but third to PayPal, next to a more give then have of reserves third occurs down looks into on the reserve so quarter, without then to of sense that going at It Obviously it that build XX quarter. the

within of a take built bit you a majority more of So reserve year. upfront. of scale, it is sliding that it's the little first The

Donald Fandetti

there the was mark for sort modest pretty I there guess, was of on And a [indiscernible]. was portfolio

Brian Doubles

Oh modest it yes, sorry a was last pretty mark. that the question, was yes

can that the PayPal without with guidance to to XX at back rate was January, go charge see you net you unchanged If put out and we our XX. in off

year mark So NCO slight on PayPal while us is of doesn't our off move there it a guidance. full

Donald Fandetti

Thanks.

Brian Doubles

Thank you.

Operator

you. Thank

Our question next with from is Barclays. Mark DeVries

Mark DeVries

thanks. Yes,

through us we've walk expenses identified hearing you expense you could you've million investors where see the So options, to sales sales million coming of just kind some skepticism $XXX been in from? of strategic your from about those $XXX

Brian Doubles

really easiest with The sure. associated about expenses those the are this think program. the Yes, way is are to that

a of will for So related we portfolio attributable the portfolio portion the of combination a the and size that leaving. as fixed program business you've come directly the you've costs then costs and got got to right out

and So it's fairly at actually, business we look lot we mean I on it's this. we a of straightforward. the have, work haven't time but had when to actually

sizing at detailed By costs know portfolio right fairly plan. we where business moving. look when and a come have out the we the function We the for

Mark DeVries

dilution that accretive I Okay, clarify to I'm terms. by renewal hoping to XXXX suffered would what's being have options also have was could for then relative but meant means that had you can the to might or renew, you would whether consensus to accretive under economics assuming what this comment relative EPS the you got you to it. numbers know you be to is both And accept XXXX? on

Brian Doubles

stopped Does kind the know what sense? that two but and options tell we Well, I that, are EPS these we obviously these on two consensus, can negotiating can't I relative where make at comment process is the to you alternatives we accretive. look in of when

Mark DeVries

am to my to what it's to would - renew? correct accept just have would saying under in Yes, I it's okay accretive you're forma been reading had pro the EPS terms but you that that have

Brian Doubles

that believe renew, replace put to though I EPS of it taken point of the We have the aside, program. these if you importantly think would options either

was program cost would we and EPS neutral the have what what believe renewal So to earning us. accretive to a

Mark DeVries

Understood.

thank you. Okay,

Brian Doubles

Yep.

Operator

Thank you.

Scharf Our next David comes from question JMP Securities. with

David Scharf

better noted morning. the taking the has own in retailers yours card is One light us programs, not your understand question. non-cobrand the specifically. Good three-part for pure thirdly that that then of the public competitors dual programs, there us balances? a And for in of you of these it's And programs? between pure stickiness in I Secondly, store maybe data skew not data, mine renewal well. guess as do any retain mix about on you data, A maybe understanding for card that's past the for transaction process to and for your data? helping own level question My the store Thanks just one is two all programs the remind of card all is retailer. they that the focusing

Margaret Keane

say owns the it’s And third the own card card out store, the on do dual question I was? is data. and because little We not data. of so there would data store that we your So programs. different of on out retailer get do in-store the

David Scharf

store Oh I’m card pro mix sorry, of balances just I pure guess dual an maybe update a maybe program terminating with between Walmart a forma card? versus

Margaret Keane

I'll let Brian, answer that.

Brian Doubles

data owned the, important what the just or own We retailer all We so of So data the one owned program. we other point the the while data, analytics. by is models. the capabilities all program, the on we all the consider of data own on data

capabilities the moves us. and but obviously with power analytics horse the all remain So of the data

David Scharf

terms… in just then And

Brian Doubles

Does that make sense?

David Scharf

no, Yes, very that's Yes. helpful. no, no,

Brian Doubles

asking is specifically Yes, then look dual private you’re about card the you dual of it's at the if if split know Walmart. actually split label I XX-XX Walmart, and don’t but XX% on roughly card Walmart specifically, spend mix on outside the spend is of

David Scharf

the kind actually the rest of leaving and on portfolio. mix curious possible the Yes was pro I if forma Walmart of more

Brian Doubles

It change significantly mix wouldn’t it the mix company that the wouldn’t all. dramatically. of change at

David Scharf

much. very thanks Okay,

Brian Doubles

Yep

Operator

And thank you.

Our next from Morgan. Shane Rick with question comes J.P.

Rick Shane

that proportionately that proportionally take morning. you for thanks NCOs numbers going about what are about Hey portfolio out are I'm purchase how we this was proportionately my so walked volume high, low. taking growth, question when forward? guys curious to you high, can Brian, think Hey and the Walmart through RSAs proportionally yields show are

Brian Doubles

absent would think core we can changes don't historical back still about our it think Walmart growth more growth from do we're rate. to on that I I what a our standpoint. Yes, view

for So think receivables accounts or changes purchase the volume, in of either don't mix I it rate that terms active growth company.

Rick Shane

the growth? A And there's our to loss on in can Walmart relationship in portfolio, unique mean the Walmart between purchase Brian other more brought a very PayPal bit infer from of Doubles that a indicated does to portfolio high not. nature we've loan if growth And I scenario dramatic. in on little There's which just some portfolio. but have we be remember you what is things you that out I volume wouldn't it related - or a nothing importantly revolving than what that think to comes and it

lots too years, PayPal of is as the well. So growth, kind of very factor you in conjunction. got One think forward, know to you've last what the programs. so been sized certainly to about are in disclosed because similarly that couple rate high They opportunity going you over of it's have is those growth on

Rick Shane

Thank got very Okay, it. much. you

Operator

from comes And Bank our of next Ken Bruce America. with question

Kenneth Bruce

for you're you for good portfolio, you you a have or you, necessarily which be you other? of that to have you not may the for and/or the one morning. two do options Walmart a I do are the out handed outcome agnostic Of Thank understand pointed preference and that it, but one control in preference why?

Brian Doubles

through we pretty to options point good going move whether attractive look The work portfolio or we will feel this renewal looks we us. about to it. more and in to Yes, a we impact. is EPS execute accretive ability and can our determine both retain are we situation scenario options replace option the and whether either the We'll as at believe to the either process obviously to know

it's We potential the will the sold. also if get more gain around visibility

good either say of our but pretty about will we feel of in kind that what So all here, execute to can factor option. I those things is ability

Kenneth Bruce

guess the concentration away business leg I that well the into diversify to if second part seem option retain so other to such case building one you you've the other? a you're asking ask you it that hear way may Okay, in just from you interested a the got your general nice I so a kind that, purpose export I’m and of obviously preference trying that is reason of degree those I and or better a a card in alternative, just have some one partnership that like customers you're

Brian Doubles

right. exactly That's

execute both first we either can option we EPS think we option, we it And diversification that way result. can think the option it the like. a do And positive in nice generates more that second in a to I is to again straightforward frankly. cases has angle

Kenneth Bruce

some of the terms then capabilities, of that talked of discussion technology I tends in and that be the on night Okay think at being kind announced last the focused to deal the was of least side understand how a pre commentary of the of I it around lot that's kind about.

partnerships of terms remain that to in credit this it comments in kind willingness capabilities order able kind go the order programs. of is to or willing box file what in of Do a you be other essentially to deep remain expand have any Synchrony is aspects around competitive is of there situations? to these these of of thoughts One in your into in to credit how, credit some

Margaret Keane

You these really the it before, think said on said us Brian overall and of to look the return overall know, of program the that contracts return and we take. get reward risk could for Walmart willing return think it's for not what each portfolio and were to this partnerships of we I before, around I at the programs whole this And unique in it was base. and we that mean thought a that case we was I've would

deliver on really it's overall really about don't and I the a it's ability the So about partner. credit think the return box, program to our for

Brian Doubles

business, Yes, but I guidelines we by the have customize we underwriting also past by general we program said the in mean our like apply that across entire underwriting we platform. as

we're different been to rates based a and the the becomes in return size the know one never then overall for not customized programs you're at manage some loss getting it's achieve taking the on our risk, as Margret So trying you're return that programs using all credit can approach. you do But to our underwriting. unattractive. that that point We fits said, we if

Kenneth Bruce

Walmart Right, decision? so the around of that program box you and the to that kind lead tighten didn't might have

Brian Doubles

actions we applied the desired business. No, the pretty mean the past result that that. while across frankly entire were a I modest took would I much and year not were they they're and credit assume half fairly the having over

Kenneth Bruce

you. thank Okay,

Operator

you. thank And

Wasserstrom Eric from is with question next UBS. Our

Eric Wasserstrom

to debt question they've Walmart to if the funding moved or start it in public right you do is changes outlook market, Brian, and talk like concerns Thanks July spreads, basis XX with near has the creates can a guess environment any be that spread out about since when much. or now points widening for looks things funding over you term? your I about the for your medium very just my discussed to XX cost

Brian Doubles

us. Yes, a of it really concern doesn't create for much

got That's seeing I think funding really strong basis as We're focused XX very they our growth that out. wider franchise growth. deposits. source. maybe deposit are you on good we know still continue to most though We there very by a We're build on points. attractive

So I think like we in higher the any fixed pressure spreads we see income and can in or the unsecured deposit with markets, we think secured offset growth. that

So a about overall net big how we going margins forward. that's interest impact think think to don't to

Eric Wasserstrom

much. thanks Okay, very

Operator

thank you. And

with question next Matthew Autonomous Our O'Neill comes Research. from

Matthew O'Neill

additional around I question. and update thanks cycle high bucket, Brian, you'd taking hi given don't of some kind low by spend I to willing that? cycle commentary Yes, for you’ve of be the bucket two if last think know in give growth parsed my on us an calls sort

Brian Doubles

Yes, sure.

we volume this range. that So FICO really growth if with stratification quarter in see to at quarters, FICO very you continue good prior plus purchase look by consistent XXX

again quarter to expect those on - And declined periods. prior on term to up still then a short XX%, phenomenon. similar purchase versus accounts sales that's X% XXX a below FICO this So we be so very volume was that accounts year the and relatively prior

that start in for way. the and I see lap influence XXXX our first think of positive overall the half growth to in we'll company a you'll rate that

Matthew O'Neill

Got it thanks. and

direction I about were think further kind Synchrony focused bit purpose into to more wondering strategic hoping about that sort and up if weighted you was dynamic also around and purpose Toys"R"Us about little that a into card and that retailers the start a you your it follow advantage be retailers purpose versus partner issuance, potentially sorry sense Walmart of general maybe bit card that and general aren’t probably you competitive being a some certain comments around the going retain direction obviously the of the turning of you'd a card guys on could portfolio earlier just the makes it you what As talk general portfolio getting portfolio more forward? in with card, own just

Brian Doubles

Yes, sure.

we're think pursuing adjacency. returns. attractive I diversification at do as pretty a we look look today, close what opportunities And can always So we this if we is in adjacencies interested it at to do

risk. execution you So know we think minimal there's

We're value what on so there, here. think we particularly works Toys"R"Us can we returns trends it's pretty the for confident an that we of seeing think early niche there don't the competitive we're ourselves out proposition in As of that for given some out but the I that the you pretty develop would that's higher attractive can population. very where said, segment play, profitable a end, carve we a and

to today. for careful and around seeing activation thought that strategy on seeing better we're than so we portfolio it. good So option continue cautious going fairly and general have know we you be on in that think then we do going to We're think longer those purpose that We're we we would. we us that term. to And convert a significant test usage card. to about you number customers of think that a accounts can Walmart, second a the this for We're scenario that is as

about And card, Walmart. if earlier, purpose the about of acting of like so those they're at XX% card general it's XX% Walmart said is I spend the look cards As of a on already. today kind portfolio you a dual outside

convert population would comfort to can So card very value a us that is that we attractive branded with there that and Synchrony receptive there some proposition. a be very gives a

Margaret Keane

the confident from and that. people plenty the we're to really of have bad we average of in teams, experience so debt our execute on And on of industry that our have capability we team

Matthew O'Neill

for thanks time. Understood, the

Greg Ketron

Hey we more Vanessa, for have time one question.

Operator

Thank you, Sir.

last Our with Bill Nomura. question is Carcache from

Bill Carcache

spending Thank question well? of used $X.X roughly alternatives, that make in earlier delay the billion the lost return of of response returning get be any the billion the portion alternatives out you as sale the you ability would every that call freed focus to other it of would have just the the on on about way to other morning. Walmart $X or you, XXXX capital excess to replacement by good under a whether the effort that you by option in billion Does any up your And other could could confirm EPS? some that, $X.X delay for not

Brian Doubles

That's right.

viewing billion plan. the otherwise a incremental what as asked have of for gone to would capital and $X.X were part as So we

process be of on it. discussions around, back good formal board and we XXXX. our have it a in our preliminary XXXX. that order there So may that from the regulators regulators, in it. will it had to about half capital expect approval our in as Obviously in will portion approval do be execute a the execute this pretty We think We we feel do go include plan but while to incremental. of formal we to point at it get with are board second our we a to done viewing and We've ability

Bill Carcache

summarily of then fully that follow portfolios there anything were offset via you Walmart unique be they extent its able guys buyback loss the is and loss portfolio to a and Okay happen? the other to you would to up, allows if offset to what to as

Brian Doubles

these offset at strategies or Toys"R"Us, the think we EPS whether of specific, getting similar I to it substantial of all it's mitigate the have at portion in options our a we've disposal Walmart or least that cases outlined Without whether impact Walmart. too here strategies through it's for

we look, give nice comfortable have So feel what's they EPS and options. is I We options available. can think them offset. a with execute those important We us

Bill Carcache

happen loss portfolio it put like mitigate rule? is any in of your able speaking agreements reasonable position contractually a conclude to they should that general the broadly is So you just to the be to

Brian Doubles

in convert branded and what this strategy to new run and in moves the cards to of would portfolio I here Most program proposing would that know it or to retain we potentially our you the a Synchrony contracts play one out the similar similar issuer should company. either to we're we or say a a another product

a would depend the on outcome contract, but financial the be very bit does similar. it So little

Bill Carcache

taking thank my Got questions. very you it, for much

Brian Doubles

Bill. Thanks

Greg Ketron

for on Financial. and everyone your answer interest you the questions have. to thanks in team further us relations joining any available this investor call The morning Okay, will Synchrony may be

Operator

And for concludes this Ladies and gentlemen, We you thank you. conference. participating. thank today's

You may now disconnect.