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Synchrony Financial (SYF)

Participants
Greg Ketron Director of Investor Relations
Margaret Keane President & Chief Executive Officer
Brian Doubles Executive Vice President & Chief Financial Officer
Moshe Orenbuch Credit Suisse
John Hecht Jefferies
Sanjay Sakhrani KBW
Don Fandetti Wells Fargo
Rick Shane JPMorgan
Betsy Graseck Morgan Stanley
Mark DeVries Barclays
Matthew O'Neill Autonomous Research
Jamie Friedman Susquehanna
Chris Brendler Buckingham
Bill Carcache Nomura
Call transcript
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Operator

Welcome to the Synchrony Financial Fourth 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

which joining the thanks I'll with three. and Greg. on for strong ended us. a XXXX. foundation Good sets everyone, morning, quarter Thanks, XXXX We begin for fourth slide

of have cover to number today. a We significant areas

our as impact including going several the quarter our Capital Capital a looking to we call, help Sam's to and key financial in acquired provide but Walmart renewal a top exciting to on outlook to partnerships retailer's time with Club, call. the this the direction over By Capital my Walmart continue provide I'm months. forward Walmart spend of much five longstanding deliver months and program members Club very significant Sam's our and with sale we as products will the us. Walmart capabilities as across emphasize well clubs. fourth seamless partnership we that detail XXXX, results will very program enhanced are transition for portfolio sale on is to renewal sales. and and Club, also the valued programs, A of last and later have several a to the One report of the financial with which with will more strategic the membership XXX portfolio Sam's year. in agreement the the by as and later are well extensions that continuing and for nearly and are customer innovative we of in Further, details was we this development later Brian the fantastic coming our to in highlights to options for the business will I an Club our potential few the One. we key come committed the partner going happy renewed Sam's service grow Brian One. other be I'm portfolio financing will So extending covering to

on with relationships very relationship and agreement pleased a XX-year renew with them. are Amazon We our building under to long-term extend our

rewards our a the look management manage well enhancing and of capabilities experience check Amazon to forward into recently account native future. look app where continuing We to Amazon We continue voice launched Amazon account account Alexa, card to engagement for you up work as can well level and balances, high with payments. activity holders. a using command with We as the on store

new eBay, a began building signed in with co-brand also relationship on XXXX. We a that program

our with website time the We props made launch through eBay which has eBay. are points accumulating on attractive reward that and with MasterCard, each more purchases value off of they points eBay new use for about excited cardholders the their card

offer are program new partnership add We the believe help largest of significant to one world's marketplaces can this happy we U.S. its and value eBay to in online and with customers.

to financing to store Google this and program. products. look Google. Google Google partnership, relationships to Home work Pixel prospects We with excited this are the our and future products forward for including renew Through hardware we continuing We of with provide

Group, quarter, and we the the in e-commerce one company and the commerce During extended largest also United relationship Retail mobile of Qurate States. with our expanded

provide the of August to part HSN of As this services card private expanded year. in will credit partnership, label we starting

very with obviously, program. We pleased this are,

which We zulily, XXXX have also with our since with relationship and QVC, partnership. extended new and relatively a successful we also

Our space, recent retail our capabilities. online renewals wins demonstrate strength further highlighting and and new our the in program e-commerce digital

Harbor We new leading tool retail XXX In retailer a stores with Payment Freight, floor also partnership a to a a and we discount manufacturer. Mohawk, our Solutions with with business, are global happy equipment card partnership nationwide. renewed add key

fans with added pay merchandise We card. in industry-first Fanatics new favorite their their merchandise. partnership credit long-term way announced license Payment Fanatics, card in a account relationship for a our a strategic credit players with new and The to the branded global sports for a also We to Solutions will team partnership leader business. offer

cardholders experiences FanCash to data our deliver in will loyalty special we addition, Fanatics of expertise leverage shopping Together, In and will personalized part loyalty fans. to experiences enhanced the program. analytics deep offers will receive sports and be for unique

utility accept CareCredit in stores. network X,XXX also we significantly all CareCredit recent with Walgreens' During to agreement the our card and quarter, extended

Association Management more including addition of XXXX over launch of in XX five peer all Club. more and the Association, expected for system CareCredit will and deductibles new successful a for health personal itself platforms, the use the executive cardholders into PayPal, review cards our existing of of this than first health quarter nationwide but able in relationship, Walgreens recent CareCredit program co-pays. generally. rapid very signing their this deals. Sam's will to Management new the the be programs: in extension we ongoing year, pharmacies Financial quarter to than and their XX the at not productive and continued partnership Also, lot all the renewal XX,XXX new Health wellness CareCredit very care Lowe's, has productive various Amazon the accepted prescriptions, business a partnerships, Across of It expansion our a We beauty including with largest by only pharmacy, a us, and further With with but space for feeds, for and specialties at JCPenney, also purchases. new was With be positioned Care in health health, Medical accomplished Group care year. network our renewed CareCredit, of

and acquired Overall, We year technology product it digital also new expanded Commerce, leader for year earlier And into a in we Loop breakout gifting which XX a technology our brought this CareCredit was into services, also technology. in-store specialties. capabilities. and line

and over the the past four innovation years increasingly cloud experiences. credit digital investments and analytics, success. new customer are Our are now and mobile AI, others our service contributing and customer to Data

terms and and continue our ahead, on return financial I risk-adjusted a we to Brian now pursue for results detail threshold. that turn over the to we our strong meet to trajectory Looking outlook economic will will growth our to XXXX. call have partnerships continue

Brian Doubles

XX% portfolio of on I'll up and million slide loan the share. fourth were Margaret. or were on receivables receivables start year, the morning, quarter. of This earnings $X.XX in PayPal interest up quarter diluted Credit Thanks, presentation. XX% reflecting of fees over addition third reported six the we per $XXX Loan the and last

RSAs percentage X%. from The million, The $XX a by was receivables primarily also risk-adjusted average of in positive year. over offset quarter million, increased moderating growth. growth growth. will offset account generated expense receivable losses grew in metrics for Purchase income income continued interest up last up to increased primarily the from loan as by driven million, returns X.X% X% we're growth million on compared was average this growth volume continued to build, in compared well in X.X% in line last to the quality year organic We value cover growth later $XX in everyday The loyalty average reserve by driven our XX%, $X dual our while balance million. trends. and last reserve active out-of-store interchange up by line presentation. with across fee pleased or expectation the I solid card. for RSAs to we and business Other more that year, increased were average $XXX spending last million, $XX or receivables. on The with growth. the as balances, of partially $XX Credit average credit build in with by in provision asset the as continued growth was year X% last deliver account, XX% driven the active million in Overall, by $XXX million by the was per was year. was growth propositions. with the This $XXX driven quarter detail PayPal trends the

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

related the last to to the near PayPal addition of program program expense quarters impacted XX% of expenses continue program Credit the $XXX rate PayPal the comparing year, are will be percent fluctuation. by expect increased some trend with PayPal against loyalty growth on of to We expenses primarily or addition to the quarterly we XXX% by The growth. revenue driven to continue a business and with versus rate. expenses run as interchange Other million until

sales capabilities direct to strategic We back digital investments make investments streamline to will our to continue deposit the and and office. platforms and program, our mobile enhancements our automate in and also

acquisition XX margin loan X.XX% yield deployed reflecting of points loan cover decline interest strong in points PayPal driven higher in Credit I'll of up and So was the PayPal of net was receivables We the income adding Net impacting margin increase and and fourth impact trend. The The liability reserve performance on primarily to growth. basis of seven, to the cost and portfolio with margin interest support the receivables versus to especially XX.XX% The related an a XX mix the our overall, up to slide The PayPal higher receivables company total benefited the from interest yield XX.X%, Also interest build year, portfolio. move a was the excess generated considering line compared margin mainly expectations. liabilities versus income XX%, by loan the receivables interest bearing the mainly the was was growth. to receivables our rates. and to last we average quarter, of bearing decline year's for increase was XX.XX%. year, net the a addition PayPal margin portfolio liquidity portfolio. cost. in liquidity basis to as benchmark adding compared in last due last

our expectations We outlook for will later. the forward margin cover XXXX in going our

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

The In a stable trends trends. dynamics X.XX% rate I'll XX and start terms and specific last XX quarter, rates versus XX in row. to last for plus XX delinquency rate plus year-over-year the with X.XX% X.XX% third year delinquency were of in was the The plus in quarter the both the the relatively plus compared X.XX% delinquency delinquency year. was

by Credit plus improved the approximately improved XX refinements compared a the basis If to underwriting of basis rate and our prior impact by portfolio, points the XX modest the impact of impact year, more points normalization. PayPal delinquency exclude five and the delinquency plus XX approximately rate reflecting the from you

X.XX% on expectations. was line rate to charge-offs. net to The in with compared charge-off last net and our year X.XX% Moving

rate charge-off also the from PayPal of improve. net benefited the portfolio, to credit purchase trends the impact the continued core While accounting Credit addition in the from the portfolio

rate portfolio reserve quarter approximately charge-off third Credit $XXX down X.X% points was build year. by losses impact, the million. and the of percent as a basis last XX PayPal compared Excluding from the for the to loan The allowance was was net receivables

to due These earlier, underwriting noted in to was resulting we our expectations made. volume drive with I refinements FICO by reserve trends, As improving mix purchase refinements line from credit the continued the changes underwriting to score. build the our

volume year. pace X.XX accounts of fairly at purchase the excluding same at score the of FICO Credit strong X% grow a If stratification, portfolio, which increased we over higher, to look impact FICO last PayPal continued the quarter in or a you with by

and off year While purchase reflecting view to we credit scores to we the and summary, helped of volume and continue this for core declined been stable economic accounts show showing core beyond. doing. with conditions. loss our tightening X.XX of modest trends X%, some the of as leveled assuming stability In These for with FICO and the we've inform are expectations below improvement move have expectations trends forward trends in line expect our

continued We credit risk-adjusted continue Later our to expectations attractive see upcoming the good I’ll for growth opportunities provide for outlook returns. at year. on

of cover in Credit efficiency The was the came nine, expenses our versus for for and and PayPal driven the the last by with over up program ratio $X.X acquisition XX% growth. at Overall XX.X% investments. quarter last our was Moving strategic by billion, to the I of expectations. will line year increase and driven in slide the expenses primarily timing quarter. were The year XX.X% primarily

on-boarding the have mix maintained slide portfolio. our strong Moving and funding while liquidity capital to XX, are, levels PayPal key and highlights the we

announced growth our dividends the and May, executing size through June the repurchases we share made We plan through by in increased which progresses capital our capital of of XXXX. also last deploying here and

committed We sheet to liquidity with balance a capital are strong maintaining a and profile. robust

the last we our This at the the at funding, of puts grown Over deposits deposit year. maintaining have our level XX% billion, deposits operating direct we've been through primarily last program. our over year $X.X over

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

and compares acquisition the the quarter the This through capital year, XX% phased-in Credit of ended fully reflecting liquidity, plan. impact and at PayPal portfolio Basel of basis XX.X% the phased-in on we III to fully under to our rule. capital a of capital continued the CETX deployment Turning execution last

June we common May, stock dividend plan quarter, per on stock during continued Walmart paying the announced of a the the After quarter, of quarter, third of fourth X last through the remaining X by the during as did We've and our the in developments repurchases potential capital authorized $X.XX quarters significant of repurchasing nearly the share share. X.X execute out are around not stock Board announced. XXXX. repurchase billion, approximately During we to we market pending common renewals we billion fourth we billion ending XX, number of the

legal the execute deployment This to XX% down factors, liquidity reflecting other of is some repurchase plans Total will and of undrawn subject facilities liquidity market Overall, on from and our that PayPal the required XX% total to equated we and restrictions billion, execute regulatory previously. new was We credit assets. including to strategy approvals. continue share continue to conditions which the including the our year, we outlined acquisition. any $XX support of last portfolio to

plan our very the to in capital execution strong We and diversified maintaining repurchases. expect a are and committed balance strong we to sources dividends and capital further capitals And of share with growth of through liquidity continue sheet funding levels. deploying and form

including XX% solid portfolio. the the to driven PayPal to growth XX% strong marketing compared XXXX continued of outlook receivables, last provided in the range recap outlook with partners loan XX% props strategies January. with our Next our Starting our on slide line growth. delivering our Credit XX, growth I'll to be was our our performance with The cards on organic value quickly and by of we

in end drive and began RSAs outlook expected Our as are the organic payment X.X%. outlook Moderately refinements RSA of the deposit win continued underwriting the benefits analytics was investments ability capabilities in the a of data XX.XX% A than half was January. receivables programs. the percent The improving of the lower from This implement in a X.X% we growth with mobile, tempering year trends. the interest XXXX. the RSAs and enhancing new lower to of the more innovation well some asset higher XX% along came the of from elimination some Toys"R"Us XX.XX% driven of funding lower mix back for range last and impact our data countercyclical of on the major second at we provided optimal growth to than to performance. RSAs. by as Net was in original the our as delinquency X.X% drivers in January. a demonstrates at The versus rate to yield percent modest nature the mainly mix. RSA were in portfolio given average reduction came of margin

for stabilized expected, to line in XXXX X.X% the our range half Net very Our with trends net of and the in favorable X.XX% continue as year. second year. X.X% charge-offs off rate in this of the of to XXXX, charge-off levels and was degree normalize the the outlook

reserve in our We in expected. $X.X efficiency million XX.X% XXXX saw expectations. year to the as with billion builds in also line declined from also for was XXXX, $XXX over ratio near The

operating revenue productivity. We lastly, due And drive margins, generated on we assets factors around noted. just X.X% growth continued the to versus I expectations to return leverage of X.X% to of higher and increased

on outlook slide XXXX our to XX. Moving

Our FET to tighten unemployment macro this and the XXXX rate for stable. assumptions mainly is assume continues the year

I deployment. the have the the other quarter providing expected sale portfolio of some quarter Walmart later are third impacts will reserve XXXX occur We around year. or in impact on in including fourth will this details the the portfolio the also the outlook early provide to capital and sale

continue. account outlook and from receivables to assumes is refinements sale, the X% impact is e-commerce in run strong This underwriting rate. ongoing rate the we the reflected seeing now economic for growth that the Our growth the core The range. into excluding digital and impact in growth, X% are trends portfolio from of also the Walmart takes

X run this range the at growth. strong XX.XX% We see e-commerce volume and digital believe to X for to will continue to XX% the our retail sales year we and sales in with its margin grow seasonality normal to to quarter-to-quarter. expect broader continue We times

benefit benchmark of be short XXXX the a this revolve repeating the higher to largely will Walmart compared sale. XXXX, rate, as impact PayPal While offset excess to margin, rates, period for slightly the a liquidity when not from lower will due in as pre-funding time well by portfolio

Sam's historical in lower sale impact, the is the The good We is closer our at The from strong Walmart and able we're to extend rate. expect here portfolio portfolio average outlook which performance the RSA sale with with as X.X% operates increase ongoing while and for company receivables line single a programs. the RSAs in our receivables than trend renew to for historical driver the at a that our largest line reflects programs, that average returns. Club and more and, X% risk-adjusted The the range of PayPal, beginning expected a rate percentage of to aside RSA as continued with overall of JCPenney, XXXX. is Walmart the will of Amazon outlook RSA attractive percentage of our five the largest of news maintaining average Lowe's, percent in the run

charge-offs the from impacts in Walmart entirely X.X% range the driven In terms XXXX be slight PayPal the a will net increase with the by portfolio. of offset the sale by X.X% we of for credit, portfolio, expect to partially Credit

Excluding the Walmart, to be to PayPal rate net flat expected charge-off and the is effects of XXXX.

higher in we receivables. rate seasonal decline charge-offs, to compared seasonality Looking the see fourth first quarter trend quarter net to in the the due the at in NCO typically

XX end PayPal higher been in may range, portfolio. this the expect point benefit we While of purchase has the given accounting basis to the the range decline from trend towards historically Credit increase XX the it

transition from will expect going reserve Regarding reserve builds less more builds forward, to and loan builds we normalization. to loss continue growth-driven the

reserve will remaining on the impact We build see Credit some to the PayPal also program. due

$XXX get similar in that of be shortly. around the what will is This impact builds quarter fourth the Walmart first reserve of I any we sale to XXXX saw the portfolio will reserve Our the for exclude million. expectation would quarter from which to

for the efficiency to Moving ratio XXXX.

with operate XXXX. to XX% an efficiency ratio of to approximately similar continue We expect business to the

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

will partly we business. the by feel strategic continued to investments However, this on spend important offset are

revenue ratio, being are that sold. efficiency Regarding cost we on Walmart's actions impact of executing from offset portfolio the the the impact will

continues to favorably manage positive to ratio efficiency Our industry, expect operating continue we long this the to to as to we the generate well-positioned term. business the compare going and leverage over feel forward

we Finally, to consistent expect a track assets or of record, with on generate greater XXXX. return X.X% our in

from I impacts wanted provide conclude, on the Walmart to of portfolio additional sale. I some Before information the

first to Given sell for we portfolio moved quarter. loans now the have agreement it be to the an held will sale in

Our reserves to communicated date. limited we have will portfolio the future the the the be and we expected part to of in related first free This to Walmart in on the $XXX the earlier. time portfolio remaining range will the million it approximately losses quarter sale releasing begins up of be that we in capital expected based

later Beyond will the future the and from releases first of freed capital be the year. on up sale quarter, portfolio ultimately this portfolio reserve additional the

to will the expect Margaret. Overall, deployment continue up of replacement The $X deployed in over size alternatives. the returning sale. cost the was We freed with turn the of the be combination share capital EPS of back the time portfolio repurchases of higher it billion program and/or savings approximately and And through we will I'll the to will generating. believe at that be the result capital

Margaret Keane

focus the recap still value three with loyalty partners, building remains room to digital to a and and have close Thanks, platforms, our organically We will capabilities A top shareholders. a Brian. of programs risk-adjusted and priority our continued driving across lot evaluating execute our organic our in with successfully drive our cardholders returns. analytics, but marketing, potential also on appropriate mobile growth, grow focus new priorities, technology. we to that strategic and to of I'll of assets upon

to value drive proposition continue to investments of innovate utility partners and our usage. the card our attractive to with make and will cards expand We create

become technologies increasingly to and offering. Digital and invest data remained analytics in next-generation mobile a as key will popular. these continue We channels technology focus

customer through size. experiences develop the journey further will use and of We a in customer digitized environment frictionless

further advanced also and and underwriting on innovation, data alternative to machine focused authentication. are learning We drive leveraging

as Our drive to products diversify loyalty, such, funding And an to capabilities will source. important increase banking continue we platform broaden and profitability. help remains our funding and

explore We balance It a opportunities sheet expand and priority and business remains operate profile. key with business continue the care finance, health in will to areas diversify business our proprietary to financial to strong networks. like also and a small

do proven our priority ability have to a this it for remain and the We will top in future. us

capital expect to strong We liquidity maintain rating support operation, growth, and to regulatory our credit and targets. business

to cardholders Finally, results position will strong our are support to business We our driving growth, which and to long-term our capabilities. partner’s, look objectives purchases capital in and share believe well-positioned we are continue support M&A in utilize XXXX. we capital investments through that forward and dividends for continued and we and shareholders and growth for

Greg Ketron

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

We will session. the Q&A now begin

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

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

Operator

Thank you.

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

Moshe Orenbuch

additional talk that partnerships to And you've you growth been with Great. your can able partners bunch summarize, and you've that contribution an level the just the impressed of to e-commerce actually think expertise been that over the last Thanks few of you and added. announced. standpoint. whole congratulations means makes Maybe you things that that there's for I've months that And could the renewed rate? because just I been add? about some partners And the on from debate Margaret, what about it a you've

Margaret Keane

Moshe. you, Thank you. Thank Yeah.

XX% you I the space names enhance XX% last can totaled we And know of side of PayPal, also U.S. certainly PayPal and growth win I mobile think we've been both year-over-year been space our XX at and on eBay, over the see continue hard if zulily. We're working about as think fourth our that digital you if with I as winning the Amazon, you to with that digital we've in quarter. partners and look the we're LazMall, overall digital we've well all to some the really growth analytics. been in capabilities, performance, and the think our whether is it’s that XX%. see in winning months, focusing or

online really card about with are sales fourth do the we digitally apps is for retail I'd piece, don't you meet whole XX% PayPal our plug-in Our SyPi is, we've And XX%, in with And the apps, actually add that ending partners through application. is up our was partners occurring -- talked quarter. their the penetration where last actual which really XX%. site

now. application. We there out that that X have hit just payments and brands with credit card billion partners in XX right over in We

capabilities within apps. is to view then a and to we our rewards, getting soup So have a nuts loyalty from applying servicing account your card, buying to to digital your the

and digital customer to as experience capability Probably is enhancing with and capability So our journeys it to that that perspective have frictionless. the we continue enhancement enhance data certainly continue we all capability. make the biggest now each and taking is

Moshe Orenbuch

you of would deploy of you a whether then buyback you talk available reserve about Brian, And bit and question, now about and million having other Thanks. Okay. it's the the $X the talked how $XXX follow-up billion as that perhaps alternatives? Could remaining cadence little or a that is release.

Brian Doubles

Moshe. Yeah, sure,

So, look we'll now sold, free that start to portfolio capital around being we have the that's up clarity allocated portfolio. the to

we As relative renewal. transaction to accretive earlier, said to believe Walmart. EPS our impact we to the allows the offset us It's still

timing, only think take the reserves for period I will year, so retain through we of quarter first portfolio you the that for that held sale holding we’ll in if move terms And the the in assets. we’re indicated that the just I

and around $XXX in see million. million then in second to the third $XXX reserve $XXX So quarter. you'll fairly each you'll should of a range subsequent first And quarter significant the That reserve quarter. the release see releases in quarter, in somewhere million be

we that to the to obviously, and reserve third quarter, releases free And steps expect through quarter. fourth then, late And the early additional allocated assets portfolio. you capital when so that's to there. expect the And that's the what we'll sell up

in of So the a sense capital the cadence of on the release you deployments. that on terms gives timing

how share with on there. board our and of timing to you. on more regulators to We'll, share the have with obviously, discussions go when all in and we it obviously, that about We’re,

Moshe Orenbuch

very Thanks it. Got much.

Brian Doubles

Thanks.

Operator

Thank you.

We Jefferies. from with have our John next question Hecht

John Hecht

clarification, Thanks Real very quick Brian. much. I guess

call in You million then this Walmart. -- the build about portfolio there? the Or $XXX we won't do how mentioned from that sale for at Walmart Are given -- QX, separate held reserve it we portfolio? that point but distinguished you've core got think the a from its from going a -- that, release it basis

Brian Doubles

John. take it in would I two pieces, those Yeah.

for take the reserve to a release would $XXX that. in And the quarter remaining that then approximately Walmart. We still the first We're related quarter. through PayPal. build think you'll quarter, plus I in to core the portfolio So million our million see approximate the build is first build expect $XXX we related in first working the way

those you release million So net have quarter. in first the $XXX

John Hecht

have extended brought of been last Okay, changes thanks. really contracts? several it's through components lot guys like worked largely there out it has years? tell And you us partnerships I'm partnerships. new you been then, the the Margaret, Or the wondering, a the structural can of any is in

Margaret Keane

It's largely same. the

the look business and the see overall you the for plan for our at same. returns if overall return remains the RSA's think, I could XXXX, you

overall actually the we and renewals how we're successfully how renew the So, XX confident. really ended quarter to about XXXX. we're just business for had throughout We want really pleased and -- overall

that win important renew I can feel we from and we're able for where we one going to really our partners things we've description. the renew And been are of think continually that we work to to think us. that engagement we've said our have that everyone that deals fit partners I us And high-level and that is grow. that

John Hecht

guys. Thanks Wonderful. very much

Brian Doubles

Thanks.

Operator

KBW. Our from with Sanjay comes Sakhrani question next

Sanjay Sakhrani

on congrats should that now? any Good has five out extensions and with first I all appreciable these question is Thanks. years renewals, we guess all and assume developments. concentration pushed been these morning,

Brian Doubles

Sanjay, you're talking of about the agreements? the terms

Sanjay Sakhrani

anything five Is four, Yeah. saying renewal might like the we're forward I'm you just concentration? as away terms far going fair significant have years like it as any now from assume significant? to of in

Brian Doubles

fairly partners. And date. think drive extensions case that there, these growth, look, each in last time all all the amount the these think in this gives these you to confidential multi-year in when agreements, multiyear I renewals, some get but cases are us Well, I contractual with obviously, from that for penetration assume, significant indication of agreements, gives are large you drive

So very really in all returns. extensions good profile, good cases, financial attractive

Sanjay Sakhrani

bit? what follow-up differently Margaret. guess Thanks. on you know but I led a a provided versus the you talk value to Club feel Sam's were and just little Walmart? Maybe I'm versus that could then different, you question And did about they different just the great. outcome curious for about think Okay, value I Walmart? a I props mean the product

Margaret Keane

Yeah.

of the is I think program. card it really the importance of credit part

a I the little the different than Sam's we think to it's in Club, percentage had Walmart. penetration

So Club I of from the member part sales. Sam's a a card's think big perspective,

think that's important element. I an So

is, other the teams. think two really separate said I and it's I've all along, this

relationship I decent a our had Club. that think with things always relationship. have We And the to win Sam's capabilities and we're we leveraged building

for membership. easy, for really what's sure the out important us one throughout space. how we really think this of been Sam's talked It's the both about looking with I way this the you made for that's we've it able them holiday, think how continuing and a that's And we partnership good to we in forward think really partner. great their transition? both grow how continue are you here. to sales I through isn't and and really as how and think to is service helping really always their customer the and we deliver things I And delivered we've I our important this Sam mean, to of deliver come win is extend in went this parties Walmart I throughout -- to about process

Sanjay Sakhrani

again. Congrats Right.

Margaret Keane

Thank you.

Brian Doubles

Thanks.

Operator

our with we Wells next Fandetti Fargo. question Don from have And

Don Fandetti

change sale the a you're So of size, there. was Walmart this you're sort was Brian, saying freed portfolio gain sort $X.X of or to there maybe a And or portfolio, the par? just but clarify reiterating what essentially adjusted then, by of I up little essentially no guess, more capital, billion at it is, bit

through if you the that. of could reserve, You kind comment walk on

Brian Doubles

sure. Yes,

the on So, our to highlight specific the on look, a getting will the didn't terms, of hinge too but first I the that gain in can't portfolio. question, terms on be ability EPS I replace

really capital allocated perspective So to coming and from the was from reserves released the that’s capital the portfolio. the our

The walk made the capital, was the we our of reserves. than it terms in the And the announcement, pretty too $XX sale and we you clear can't billion. sale. believe I Other I billion -- at first you that, timing, So now transaction EPS. the on the that gave portfolio approximately us on to closer have the clarity $X portfolio I we specific. is time be still to offset gave allows When of

of things funds now So just bit some then, scaling marketing because between given and think between I now that’s close. of do a expect that attrition But like we little and real. and

Don Fandetti

XX you clarification, other the points looks talk yield thought might was I up. be but mentioned potentially about quarter that to loan down basis it had thought quarter-over-quarter, The Can that? it XX you like you last

Brian Doubles

in The loan just general? yield,

Don Fandetti

in little mean, bit wrong, going I down could that it I better. but was like more. I it a Yes. it have be to came thought seems a little bit

Brian Doubles

Yes.

interest what that, it in for said kind that. would that in in and be with XX% year of So right total of half second came in net line the we the margin range

If compared the at was prior driven basis that XX entirely year. down portfolio. yield, by points you just look that And the was receivable PayPal to the

would exclude if bps compared the So prior up effects have so the yield been of XX to the year, PayPal, consistent. you approximately pretty core

Don Fandetti

Okay.

Brian Doubles

other I probably just quarter-to-quarter normal noise think, Don. any is seasonality,

Don Fandetti

it. got Okay,

Operator

you. Thank

with is question next from JPMorgan. Rick Shane Our

Rick Shane

proceeds Will down questions the will to or you'd that this the you just pay curious in for in deposits like see securities term grow is the taking look build comment that I'm investment Brian, some we my Thanks Hey, funding this until mix what made debt, line redeployed? receivables actually expectation with are will the going guys. year. the a is the long growth. morning.

Brian Doubles

Look Rick. of with the we’ve for largely expect I Yes, last be I over where our think them to couple of XXXX, in funding terms trended consistent years. plans would

ranges be profile XX%, to to to I XX% unsecured secure of be XX% are as changes think a Our material that anything really don't that XX% XXXX about way. the see in for funding, be target to to deposits XX% to I XX%.

The heavier Now, funding pretty overall, on bit those that's think target when And one going I range other only than you'll to portfolio in see sales. we're to the manage careful would the with. I is sources how that little for thing of opportunistic be of of go comfortable a we liquidity But, that we're highlight very around obviously, we're Walmart others. XXXX. most terms in of advance

best can after to that we that we’ll excess through liquidity we'll will carry sources. and we as of look to do but So sale have happens, three minimize funding as that those some all

Rick Shane

Got this lead it. if And guess, is sort call curious, and I'm on how turn again, important look of the funding of easy QX ramp obviously, you part approach it off and then as and up strategy event the I very deposit long-term to going you forward?

Brian Doubles

actually rate fairly bad. that's and good book. easy. the fairly And Yes. It's steel I mean, look sensitive in we're deposit

carry transitions. minimize significantly able if so a we then maturities liquidity a time after Walmart in that the the and helps And the excess we deposit for us the to lack way inflow period of market we'll be manage that portfolio the

think I manageable. So it's pretty

from it's You manageable our focused be perspective. we'll negate entirely, but on certainly and can pretty it's something it

Rick Shane

Thanks, appreciate the color. Really Great. guys.

Brian Doubles

Thanks.

Operator

is question from Morgan our And with Graseck Betsy next Stanley.

Betsy Graseck

morning. Good Hi.

Brian Doubles

morning. Good

Margaret Keane

morning. Good

Betsy Graseck

how the can is XQ, look from and them? well know a I PayPal about the you're us as for some wondered the the you but around, give you gave us thinking how us you as sense some may if relative be give reserving year for expectations that? color full color give portfolio forward as to as a to I could going coming to

Margaret Keane

I'll Sure. out. start

First, our fantastic. partnership is really just

PayPal. have of a such between level high us We and engagement

saw that of just we with kind XX are hours. of like think grow to to to of engagement customers in that And level federal I as you deferred terms the the did in employees is how of program how and in working the service some maybe PayPal their to announcements help get load of government, we fantastic.

The fully overall that. to focused And fully, And to look of for Obviously, kind to aligned. just growth we the portfolio be for it just is I on of have way the areas we're opportunity program our work we're with I together about overall excited couldn't on delivering operating do think we're program about Brian, performing. and very at happy the thought reserves. would. So really growth. we're we really full potential as continue the the you pleased how is on, bring but partnership we

Brian Doubles

Yeah.

build. the similar quarter the that we as both of core So, the first We reserves, terms million think $XXX PayPal reserve range for ended very Betsy, on a looks as the build in well with the build. quarter reserve includes the and

the what of, PayPal that we'll we're step we out but break one So, do anymore out at to through as is not year, forward, a going you get quarter going kind time. for

a quarter. the complete PayPal build we’ll the you So, that's first in we quarter. the think sense based think $XXX third the little give in end we the accounting, in the quarter bit of think for then reserve April; the largely addressed second for on purchase what a million we range second maybe by quarter, But

Betsy Graseck

And for with you? kind there can trying sale, do? the that I'm to it. that forward I you're sale accelerate you book any doing, through, the any feasible Got back you on for that's purchase then the of if think Walmart buybacks, is is think to there opportunity just that

Brian Doubles

Yeah. Look, when of specific deploy be it's capital. regulators relatively our and how terms to other conversions timing in our fresh versus that and around us harder in too board for We things can and agreement. now timing certainty we’re about with we have and

can't of to all the regulators comfortable. capital goal with in up, as and line are more targets it’s our and I board So, specific much that more assuming than other is deploy that be than, it the being freed our

announce more announce, have we it. when So, we'll certainly to

Betsy Graseck

you. Thank

Brian Doubles

Thanks.

Operator

Thank you.

with next comes Mark Our Barclays. question from DeVries

Mark DeVries

Yeah, Walmart about the a going where to manage relatively a we you away? Could you revenues out come the with discuss as should to expect ratio efficiency more expenses thanks. little of flat some

Brian Doubles

Yes.

done. I'd begin to So, look, already that to execute we're very started have say first that going this plans get executing detailed and year we that have to

Some actually of the will in actions the cost moving. advance happen program of

of of as soon program, And very completed part. the the ensure sold. things So, as we of is there will about seamless as Margaret be transition making I the after not tied think on a directly on the are majority cost said the costs actions possible But some are sure we're, obviously, the that the Mark, affecting that not portfolio is performance one our to would program. focused

leverage. XXXX. our operating We And until the of like year we see really place don't impact plan in expect remain actions efficiency benefits will good the those on ratio. any transfers. do impact got That we've those in program. so on But But any there be portfolio a the the lot you'll to offset cost in be cause a first full to of really our feel without place

Mark DeVries

And to it. chase the improve website your through? you changes were or any that that position to the make to for the renewal, agreement on there may better relative acceptance able then advertising Amazon Got like on hold geography in

Margaret Keane

able do the these there look, alignment us renewals, to of what attractive profile. said of move to drive is we've renewals, the achieve drive say on our specifics for of in financial our whenever between individual around can't you case any find you the would the we've look and Yeah, to any in I an as ways we provide And agreements. ways you Mark all further more past, growth. you partner, But economics, typically been

so in the we think about agreement feel and all with renewals. all we we I Amazon, better in under the but what cases, really case did of partner have go-forward alignment the with to good

Mark DeVries

thanks. Okay,

Brian Doubles

Thanks.

Operator

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

Matthew O'Neill

us to or an my contract, taking sort open a potential of push renewal? existing the table terms the Yeah, for the of it to the Understand of wondering maybe you hi, a of thanks directionally book duration going with I more back kind it longer on really to could question. renewable. not that just negotiation confidential give you're provide Sam’s idea, if out specific was was just was

Margaret Keane

all Well, you know, these good negotiations. look, in are cases, these

Sam's. this negotiation to And with good was at end. from a a program We supposed really good an that feel our had as said, when friends we the about agreement, outcome. Brian extension is I think, So multiyear

Walmart is the think I to look where the the thing sitting loss most been head. resolve I for over is positive we've -- renew have going. our able So, book us, Sam's, think not And

really is, And that We're So this the we confident fourth really and think for we did the is quarter help all delivered in them the I serve Sam's we'll very continue where the in grow we partners. do. overall fourth quarter which company. of we results Club for and well to what great ended our

happy about feel with we where the agreement we Sam's landed we're very good and and with So Club. Walmart

Matthew O'Neill

throughout the kind Or the just huge Thanks. was a follow-up generally with XXXX higher to respect discussions it curious, was numbers adjustment partners ROA large renewables, really far impressive were any as these the just From and in changes or that. back motivated a changes to an was there growth the serve kind of on of on And duration share to to as to ROA with and level, maybe outcome of table speaking similar a by obviously, the in other material just guidance maintaining quick of it a to reform? respect renewables the terms come tax and consistent outlook? not was time lot up. and ROA, the part It the X.X as

Brian Doubles

growth, in that so or I there's the some the you're prop you're or unique. funds you in cases, these drive moving funds. of the marketing the benefit would marketing cases, In inside what in want just around one look, is every I Yeah, some has the we cases benefited value moving drive RSA consumer the consumer these say cases work to tweaking are around it I'd mean terms, things very some a around to and achieve. do in to – say and we we’ve moved has growth. of you partner and move dollars way economics, where all agreements frankly we wants what have can the based to so put different historically that many on some

you of the cases, includes XXXX We impact all as these a percentage all run financial with renewals gave have outlook that you are the As percentage in and very attractive Margaret RSA the rate. mentioned ROA in and can historical see line our you the renewals profile. said right

in to for to able a these So But things you move happy. done we're attractive cases, around financial this parties us. both in profile get all with always pretty some get

Matthew O'Neill

guys. Got it. much, Thanks very

Brian Doubles

Thanks.

Margaret Keane

Thanks.

Operator

you. Thank

Our from Jamie next question is Susquehanna. Friedman with

Jamie Friedman

Margaret, you didn't I your you important? in three. about remarks, But Google. there, something wondering if what page was it said just had revisit called sounded just I on prepared could out see you it

Margaret Keane

website. partnership Yes. actually they hardware, Google. on financed We that items sell Pixel renewed our with so We and their their

extension we was as in that quarter. our well fourth an did So

prepared that's in said So remarks. the what I kind of

Jamie Friedman

you those kind repeat to frequently answer technology Okay. you first question, was wondering in your you And gave quick that some share. of then those, metrics I the related you if were could of there? also going

Margaret Keane

sure. Yes,

mobile the XX%, fourth PayPal So totaled in our with XX% year-over-year growth quarter.

we So to really see traction. continue good

additional their consumers or try the that to friction as more I mobile But they're phones we wing capabilities to think their two less. make is, is, continue more in experience wing we how of things. whole build to and other I think terms shopping. One the are on tablets on

was So for move that us. I big a think

sales, for online cards on online actually sales our retail XX%. Our card was

in to So up then, in our the accounts, to acquiring fourth we're now that applications, new apps XX% occurring as of well quarter. of continues grow digitally. terms And

seamlessly partners hit to quarter, card the $X brands. fourth payments you with XX you in that any so of If particular And in And our we retailers, allows card the and you service a capability SyPi it your SyPi PayPal of leave. have there to was last then year. And billion XX%. add integrated we really lastly, in never app into

worked partners. capabilities align with continuing needs at for with the the building particular closely very terms their those And good we're trying out. on we're our digital as partners that looking them we're of to traction very every quarter to So in are see deliver We they and roadmap.

been roadmap, our lot on and again, build. there's excited with able to of opportunity grow digital a the -- So customers. what partnerships And to really about we've lots still

Jamie Friedman

Thank you very much.

Operator

And thank you.

with Buckingham. is from Chris Our Brendler next the question

Chris Brendler

and Thanks, a PayPal question as acquisition. Hi. congratulations well. had on I

yield PayPal this Brain, at to us some PayPal. at And pressure called And ROA or kind the on down sort profile how a sense with the I trending, a see point. of give of quite related yield bit, sure what's exactly not seem to like the also, think NIM you out you Thanks. it's I'm of if little just the think on. return to going how can delinquencies But it's of building point. this the growth transaction doesn’t about It and profile coming hard

Brian Doubles

Yes, sure.

guess, We -- our of in trending the the that XXXX. we program there expectations. with I or in line look, portfolio would is, would knew little what I some noise a is So say the of exactly be in metrics bit

through offset will reserve some program but changes lower that the of by to still than really That impact on a The start that portfolio to priced, our runs book. course portfolio. really indicated, bleed build, over XXXX, what fact fact expect PayPal on upfront the overall at the where at change portfolio, we go on that, the that some we yield you is just just make overall in yield you're itself XXXX it's We will the accretive be work saying We given in As a portfolio. earlier. said did of pricing the driven that no XXXX. into to the lower the reserve to build the yield PayPal runs

on so metrics accounting. And margin seeing the what you're you're seeing the the rest of some credit interest purchase the some through drove in quarter. just that and the working net of is on what And of yield then,

this largely So quarter. done that's

of portfolio upward as rate the part PayPal We outlook. charge-off put in indicated our bias we've net XXXX. As into the past, will some the on highlighted that

if X.X% rate you Walmart. is about it exclude net X.X% offset the think if core to in includes So flat. range net that that for impacts, partial both of And those charge-offs includes the PayPal, charge-off you

is indication we say So, you line pretty the metrics, PayPal of program, right a in to trending with where good our I would expectations. those generally but get try is the portfolio influencing

Chris Brendler

That's helpful. And a Thanks. question. separate

potentially in And the shouldn't sort your too Toys"R"Us, bankruptcies could mentioned, an quarter. have this in Thanks. You earnings-neutral event think that case on worry think too of from having, retail occurred we future? a Is much bankruptcy I back more this that benefit test retailers since to glitch XXXX, case studying this about future. a that Toys"R"Us just suggests portfolio much in we like is in along the retailers sharing

Brian Doubles

that that a earnings of goal gives try it our neutral. good example, you to Toys"R"Us an the indication Look partners. options is happens have, Yeah. always when we and to keep one of our

prop. those into dollars we converted that branded in holders. we the fund to took indicated card. case, as we So account those value paying stopped additional use We Synchrony general-purpose very a RSA, We a and attractive

So certainly help cases. the goal. do And impact to that's options in mitigate have we our those

Chris Brendler

much. Great. Thanks so

Greg Ketron

With that, we have time for question. more one

Operator

Thank you, sir.

Our Nomura. with Bill comes last Carcache question from

Bill Carcache

you. Thank had quick morning. Good I couple of a ones.

and First, on guidance, sure we're point XXXX? or correct growth base guide? what of balance to loans the end loan the the that your for the of at looking the was Walmart period I want at XXXX make

Brian Doubles

when we That's Yeah. I it's indicated it was in specifically. billion I X between. But so be as can get billion, close to we Bill, as it probably give you XX somewhere I you. mean, can't expected to close,

Bill Carcache

or any, the but any Okay. financial, tough if on sales, expect expect impact the expect should you we post impact that results portfolio to have terms the understand your impact? I tail we agreement. we what of of should any? of a And on if give sense Walmart kind are -- then last the under the Can of should whether us just question risk agreement

Brian Doubles

It is portfolio. will post transfer This have sales. of impact on a no complete the our results

There nothing. no This There transaction. We support. no is very no law ongoing a clean are is sharing. risk. standard There retaining is is

closed. it's So, closes, it when

Bill Carcache

Okay.

Capital transactions; in losses So absorbing guys. night for not which last you its a role the reasonable then parties that then Capital that certain it's One's conclude a is that suggest indication amount, losses three playing limited, the Walmart, but yourself, beyond Walmart to to One and essentially are

Brian Doubles

not you comment between can't pretty the is very of We're I market. the on perspective, What clean that retaining is very two agreement any parties. of transfer that our I Look, can other side portfolio, standard from Yeah. the tell this risk.

Bill Carcache

Understood. Congratulations. Thank you very much.

Brian Doubles

you. Thank

Greg Ketron

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

Operator

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

disconnect. now may You