Synchrony Financial (SYF)

Gregory Ketron SVP & MD, IR
Margaret Keane CEO & Director
Brian Wenzel EVP & CFO
Brian Doubles President
Ryan Cary Bank of America Merrill Lynch
Moshe Orenbuch Crédit Suisse
Sanjay Sakhrani KBW
Donald Fandetti Wells Fargo Securities
Ryan Nash Goldman Sachs Group
Betsy Graseck Morgan Stanley
Richard Shane JPMorgan Chase & Co.
Bill Carcache Nomura Securities
John Hecht Jefferies
Call transcript
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Welcome to the Synchrony Financial Fourth Quarter 2019 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded.

I will now turn the call over to Mr. Investor of Director Ketron, Relations. Greg begin. Greg, you may

Gregory Ketron

to Thanks, Conference Earnings welcome us. operator. morning, everyone, Good our Call. quarterly and Thanks joining for

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

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

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

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

of guarantee only teleconference are Financial parties. does The on accuracy authorized and is not provided third transcripts website. our the for Finally, located Synchrony responsible by edit our webcast not nor earnings

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

Margaret Keane

Thanks, transformation our XXXX while grew We signing Synchrony. new enhanced substantially digital of morning, year deposit marked significantly all us significant direct-to-consumer XX Greg. networks. joining renewed today. another everyone, our and the thanks We of and business and more expanded deals. we auto sales Good partnerships, our platforms, for Across than for for platform. also home XX our existing and CareCredit card network experience cardholders

company our user and our innovative investments years that company, partners the development for in technology, of and cardholders. experiences made forward and five have enabled public significant a as enhanced our and our and During has for capabilities propelled the offerings people we

million totaled million the in reserve Slide Walmart million per in quarter, as or the The $XXX reduction of aftertax and sale in $X.XX In share, to the EPS included reduction $XX benefit related October. were the outlined consumer to or diluted portfolio $X.XX presentation. the remaining provided an which quarter, the earnings the fourth of X $XX of

receivables X%. Loan down were

excludes quarter, However, Yamaha were sale fourth was receivables and loan we Walmart On up and on the fees. for moved basis, X% core and accounts X%. increased in X%. core volume loans growth to that X% loan Purchase the held receivable in growth basis, a portfolio which up average active drove interest the a

a quarter, the which cost and grew XX growth restructuring The employee direct or grew last efficiency as $XX $X.X this has costs, billion the much of which a charge million company. XX%. including continue efficiency had ratio to we ratio deposits, deposits on We year, through come X% impact over point was for for drive XX.X%, of this basis efficiency

we an important new platform and attract growth, deposit retain Our source remains to direct for and deposits invest bank funding continue in our customers. our help to existing

markets. have but to While growth organic new existing programs new partners fast-growing also the we only continues with not launch our opportunity grow for our and demonstrated ability us, programs, in largest to present

Retail Verizon's be the launching platform, we Card we credit sales issuer where announced the designed first Verizon, with a will card our Together, are co-branded In Verizon's we specifically partnership card. credit of for consumer exclusive new customers.

BuyMax renewed and new Rooms year. Industries payment this launch Alliance, with is We continue To with key Leisure as Continental We Furniture CFMOTO Less, established first half to a innovation Verizon, card Verizon diversify thrilled us, solution our expected of for is Go, Mor customers, The and new we relationships growth to Travis with their are and be Grand Home bring for the to credit continue during to they Furnishings, to opportunity as Pro; working portfolio. great Tires. this and relationships

and a network our Permanente, our on fourth to now create systems growing and that network. to CareCredit Permanente. utility addition new front in quarter, we network, systems recent established In We of many acceptance remain the relationship successes CareCredit our with and Kaiser health broader have with on cards, the had for we on adding have We've five focused Kaiser under CareCredit our been contract. health focused

also key we hearing quarter, the During a CareCredit renewed leader Demant, relationship with market health. in a global

programs focused which analytics data accelerating continue frictionless are our We success experiences, key to of on our new to highly Driving to is key partnerships. digital customer success. and sales creating our remain innovation, and capabilities winning the penetration digital

quarter. In Retail Card, digital sales XX% in fourth the penetration was

which a to have the new happy reached applications, that of year, The over quarter. same are Walmart. mobile to channel our in the grew compared digital high last XX% quarter fourth on We excluding were XX% report we alone applications total

Our shareholders. growth to capital capital strong at attractive returns, a maintaining the allocation risk-adjusted ability drives while strong and sheet balance to return strategy

we During quarter, million the dividends. Synchrony common repurchased stock of $XXX $X.X in Financial and paid billion

in advances generate and winning will company. significant made key value the partnerships that having for long-term XXXX capabilities concluded our We

X% We call, will XXXX. in need the we Doubles Other have X. there. move platform I with by take highlight will solid Walmart outline for a and we down, the portfolio. Brian to our our Later by vision the metrics driven strategic of a on loans sale our partners. our future get were were into do clear moment on driven digital Retail down a what results core as Slide XX%, to Card, growth, increased to In priorities but basis,

this partnership the about our XXXX, launching year. to in announced we new Verizon, We in and are excited new to addition partnerships look forward other with these programs

core by that number strength growth loan furnishings particular X%. fees programs loans and receivables average a on partnerships X%, strong and signed up active accounts renewed growth. new key X% was X%, quarter increased Purchase receivables and driven and a specialty, primarily increased We a across the resulted Interest quarter. of of the and loan this volume Payment growth X% basis. or Solutions on home home in in sales platform, broad-based with delivered

card our gas, and and driving continued have organically as growth. with We for stands Solutions other partnerships and networks, Payment at helped of purchase to future along volume, These such XX% which initiatives card solid reuse, position platform drive results approximately to oil drive excluding now growth higher the networks. through

another on also and average quarter. delivered veterinary specialties. increased Receivables volume Interest X%, and primarily X%. growth. was loans was fees and by of by growth increased loan dental led X% Purchase up strong our XX%, CareCredit receivables active accounts driven the

our across strong and rate fourth year, the Kaiser in utility quarter. expand to the our with the to card, recently purchase partnership continued which network most helped volume Permanente, through and to billion We Throughout reuse exciting drive networks partnerships, our the of $XX new our programs, and over new XX% signed growth our increased we drove network to We platform platforms. receivables. Payment the utility extended expanded our launched to sales billion of in CareCredit $XX and grew relationships, Solutions over of our cards and

future. achievements foundation for the a provide efforts Our strong and

With that, outlook I'll the Wenzel XXXX. to quarter to performance turn year financial Brian and call review our our the for over and for

Brian Wenzel

good Walmart share. related reduction morning, start reported to fourth presentation. I'll of the of everyone. diluted Margaret, the million consumer the on in of $X.XX included the X Slide quarter per the remaining This or $XXX This reserve Thanks, in and October. earnings sale portfolio morning, we

provided $XX million reduction totaled the benefit earlier, $XX and As Margaret the aftertax million quarter. or EPS an of noted to $X.XX

areas, Slide X. in growth year-over-year noted solid generated on as several We

X% year, which sale Yamaha a the X% Interest held in a growth On the portfolio, driven Excluding risk-adjusted across receivables the the quarter, on accounts up we're were was this fourth increased basis, volume on last in receivables. pleased and by core X%, growth and on Overall, moved as purchase returns on growth. a receivables last basis were business well underlying loan over with Walmart to core we basis. also the over was year. average fees as for growth loans up active and core the loan X% generated

year. percent last below million addition the loan the driving due of receivables increase. drove increased the impacted sale impact, Walmart which RSAs. or company quarter. growth a The to RSA in included X.X% RSA resulting reserves the increase the $XX the performance of as the RSAs for average to of percent and primarily portfolio, Yamaha. RSAs factors the an million operated by The in the $XXX release for of receivables RSA to Improved program reclassification XX% held the also increase from percent for average, was was sale from

XX% to $XX core was result $XX provision in over million last program as costs, basically due $XX conversion. included were expenses included a decreased or a of last $XXX was the The increased The by restructuring the year loyalty from million for year. employee fourth costs. year, but net million and to last of lower driven charge-offs. the Other income Walmart flat charge loan reserve core a reduction mainly Other build for quarter reserve build million. mainly reduction losses lower in The

company continued generate to the the fourth solid in quarter. overall, results So

to income fees the net in receivables of XX and proceeds of provide the receivables X.XX%, on mix portfolio. I'll liquidity move Net by the year, excess of rates. $X loan the main the last primarily the including net billion X% mix Later a sales declined XX.X%, yield sale of performance of a The XX.XX%. loan portfolio; the percent to the insight by interest-bearing XX XX.XX%, interest the of to interest impact for a fees interest to income decrease from and portfolio. driven of margin last Walmart our net driven decreased XX.X% and loan X% to On cost Slide on primarily primarily core from the of due interest receivables increase due call, a to margin X the to receivables decrease total Walmart direction basis cover from trends. interest the margin earning point from sale factors basis interest loan were: the XXXX, more resulting decline sale higher on the margin in portfolio; basis, The holding in I'll Walmart liabilities as driving to approximately Walmart in a of margin and X%. in year's was assets, the the point by increased driven total compared XX.XX% benchmark a

our on X. Slide cover Next, I'll trends key credit

our dynamics compared compared quarter, year. was was specific X.XX% delinquency I'll start to and with of XX-plus the rate delinquency last X.XX% trends. X.XX% delinquency The to terms last X.XX% rate in In XX-plus the year,

delinquency the the and credit stable exclude trends. rate XX-plus Credit the If program delinquency and year, XX-plus were portfolio, compared you rate the continued flat last reflecting impact the to of the Walmart PayPal

compared program. PayPal X.XX% last impact Focusing by was offset the improving the rate in XXXX charge-off by credit on was net The accounting purchase Walmart related trends. rate reduction the to The This driven net Credit was primarily charge-off partially to net in trends. charge-off year. X.XX% and

of XX last rate charge-off lower year. impact net PayPal portfolio, the approximately the Walmart and than was the points the Excluding Credit program basis

X.XX%. million; a to was $XX in core I for final in the receivables The the percent had Walmart portfolio, reserve RSA the $XX of to of on to allowance $XX Yamaha million The no impact the the discussed as loan Yamaha of excluding reserve for due loan net related was the was in which losses a portfolio, of million, earnings earlier. release sale fourth which The fourth quarter impact quarter. for reserves build the the was held release and offset, reclassified reduction the

have the summary, trends credit than slightly leveled off better In and our are expectations. core

We we move trends stable to as show core economic forward, stability expect the conditions. assuming

for to year, I including provide of adopting on for the Later, credit impact CECL. expectations risk-adjusted continue the returns. see will growth opportunities outlook at good an We attractive

came for expenses last in in Slide $XX fourth quarter. compared to our includes Moving charge the cover in the at a of expenses restructuring $X.X This flat quarter. to employee billion, included million, I'll cost year. Overall basically X,

by an will cost driven was and in to Walmart. charge. expense the Walmart, did including restructuring increased in expenses for reductions increase primarily for at see driven was also ratio by We and the cost quarter reductions fourth increase goal offset run which The the impact operated company higher the efficiency the for average; by Yamaha included cost a XXXX. ratio efficiency The growth, reductions we lower than portfolio; RSAS, the Walmart, from XX.X%. rate achieved While from those our be this

Moving to Slide XX.

$X.X This X%. at or Over grown year, of our the our deposits to compared deposits XX% XX% year. funding last billion last we've puts

half deposits lower-cost to of in a anticipation While the the we slowed of continue direct pace fourth second in overall the proceeds sale, did in deposit the Walmart XXXX strong at grow we XX% quarter. from growth

and Basel The was and under capital at stock significantly X.XXX%. III In on demand at the strong a increase we year. XX.X% over issuance, quarter million We fixed of CETX slight totaling had issuance fully liquidity. November, phased-in Focusing a our ended last the oversubscribed. rate first completed preferred $XXX rules,

million have During stock common repurchase of of billion during the per At authorized the We runs announced dividend of the of we and or approximately XX.X on common quarter, fourth we capacity June end continue $X.X billion the $X.X the our stock capital $X a billion to share of plan, repurchased we May. $X.XX XXXX. fourth plan execute paid through in quarter, quarter. board which share remaining XX, shares

of the liquidity, $XX.X up undrawn was Walmart This the including approximate XX.X% equated of the assets. to our last proceeds XX% Total is credit from the from billion, facilities, portfolio. year, holding which liquidity we're excess sale of from total $X billion reflecting

balance strong to Overall, outlined we the capital very on continue execute funding liquidity to a with previously. sources that and levels. we maintaining committed and strong strategy We're sheet, diversified

dividends execution repurchases. capital of and of expect capital in We form continue to share further growth and the our plan deploying through

the XXXX to Strong primary Next, receivables, data growth range with our to the are in results. the performance on ability growth I'll growth as our driver our well analytic our was organic provided Organic January. new recap loan of investments compared value X%. to drive assets effective props core line outlook marketing continued remained outlook strategies, as our of win Slide we capabilities cards, in of X% and digital technology, on enhancing Starting XX, with X% last programs. solid

We to Solutions see X% growth to and sales CareCredit platforms. of in our continue Payment strong X%

from improved impact I expected. the XX% The interest did in the the RSA which margin impact higher line reserves into average our of for Walmart fourth the the XXXX mainly in Yamaha. percent our to and came January. X.X%. and outlook resulting outlook related to the was was continue quarter a percent driven last the higher XXXX, range XX.XX% cover of year, the impact will Net X.X% we were RSAs to credit resulting in the sale of with of XX.XX% than RSA as year see margin portfolio to XXXX our from in We performance program by will RSAs the and compared X.X% receivables in for included release outlook.

XX.X%, trends better charge-off to also in Credit Our expectations. net the for impact the fourth was of outlook charge-off year. our moderately X.X% range slightly on of X.X% Walmart in our had portfolio net below rate quarter, The the X.X% than the due positive improved charge efficiency rate sale program XXXX XXXX, a for to and that ratio will continue and into also our resulted from above recognized quarter. XXXX. expectations. The that restructuring higher the mainly This was and the RSAs during the was year slightly we fourth during improved credit included performance

impact return generated Finally, versus excluding our X.X%. X.X% assets Walmart the in reductions of we approximately a of of the on the reserve, expectations

of XX, Slide effective adopting estimated adoption recap was X. January on On I'll of the CECL. impact The CECL

losses transition CETX creating approximately as $X.X tax million. impact adoption earnings to So on approximately approximately per billion for the On impact basis, XXXX. with points expectations. the from ratio balance, initial period. XX% on year well net the recorded not the no phase-in each billion is On billion retained of capital EPS. the XX% impact our from approximately elected of during adjustment and allowance initial a or the a XX year-end January of reduction to The on by impact loan on in impact basis The is from we deferred this approximate CECL retain at increase in does XXXX or XXXX. line earnings $X to impact X, of a asset regulatory the a The year phase-in was after-tax an earnings to $X.X $XXX per will basis, year as

emphasize versus an continue not that to accounting an view of an the change. is generated our the affect lifetime economic CECL view cash flows want account, the marketing of investments. we IRR does how to by or CECL company, value We the

year where to those we Beginning the to which the prior expectations providing with method the expect the quarter, are align specific provide CECL XXXX. We see with help historical impact the from our the comparability measures visibility similar on how anticipated have outlook, highlighted we comparison And to CECL. XXXX where with was of expect impact provide first to utilized. to includes loss

outlook Slide our on Moving XXXX to XX. on

macro throughout unemployment year. Our and benchmark XXXX key rates the for assumptions stable includes

Our in growth outlook X% range. is X% for the receivables to

have Margaret as launching new such we programs noted, As that'll and Venmo be the year. Verizon, throughout

result, half a we growth in the As expect accelerate to receivables year. second the of

lower retail net interest at run the at to on of XX.XX% proceeds for range and is We the XX.XX% of the $X We liquidity X purchase see the we historical carrying online seasonality lower our from quarter-to-quarter. run will that Xx believe normal margin expect year, we sheet run our than be And volume historically, One mobile in to strong the driving balance Walmart margin for where continue factor our margin has broader billion excess expectation the the to approximately will its will of sales. growth. sale. rate

through excess be progresses. growth, We liquidity expect deployed the year as the will

by estimated XXXX. However, it our will an impact points basis margin in XX

other is not yields the Walmart the contributed. having of portfolio impact The factor the higher

liquidity. the half the we then margin to trend Regarding year run second during net back the the closer interest performance as in expect we closer to half the XX% of the year, it XX.XX% the deploy to first of the year, excess throughout

overall than historical The and at in our our performance the continued more programs. rate increase We the run a outlook to X.X% XXXX. portfolio, which be for RSAs percent sale operated in a line of RSA average is the reflects is expect with driver range that of Walmart lower rate. of single RSA largest of our strong expected The as receivables X.X% outlook percent the will in the

CECL reserves, included offset on in adjustment reserve a will will That which CECL the with second initial there in increase. provide our will then calculations of the in of XXXX ongoing to accordance half fully the offset to program the impact the is muted year, of be offset RSA, While RSA the no be more RSA the the in the and and first half agreements. realized of partial

Walmart the charge-off credit, of net expect X.X% be we The a to terms positive charge-off the In XXXX range in of on has the X.X% for net rate the X.X% XXXX. sale versus rate. will the impact in portfolio

range million million to Regarding due the we loan represents reserve under $XXX factors methodology reserving a will $XXX are portfolio reserve the the for that $XXX expect increase consumer such CECL year continue provisioning be in can the if and impact for builds, million economic in same total these million loan There the XXXX. loss $XXX in reserve the underlying we changes $XXX as million build as to trends, under to approximately implementation versus product mix and the CECL. determining used allowance behavior, assumptions in of ranges, losses. This

approximately of around operate ahead with operating infrastructure to $X.XX investments expect launch. these programs launch necessary from investments Also approximately the programs to total dilution, line new launching related with efficiency broaden the of we ahead have EPS our which reserves the on build ratio and and these launch, includes and the an estimated of We be must of the growth of EPS XXXX will impact costs programs. the programs These actual we to The is ratio the noted. in are XXXX. XX%, new to capabilities business technology make impacting efficiency investments upfront the the people

EPS. mid-February. or we're year EPS will to While reduction paid has preferred excited about beginning million will $X.XX future potential dividends The the be dividends this XXXX, the start provide. in a quarterly a The starting full and effect will they on for up year in $XX dilutive stock in amount these programs

expect generate which related of Finally, impact we consistent to launching the our on XXXX, to excluding in programs. track of a approximately dilution includes the new CECL, return X.X% with assets record, the

earnings part outlook, I provide first to on want As of this the certain key for a view quarter. drivers

to charge-off in the net points, we in first in remain decline to increase interest and in to the I the receivables. seasonal quarter fourth factors The the seasonally quarter the Typically, due similar. the the basis trend XX% margin the compared in expect range higher historically XX the We we see first net been due of rate quarter to the expect noted quarter to near previously. trends first has be

CECL average We to receivables and X.X% impact. expect a of X.X% as will range, that be the RSAs, percent in with without

builds. Regarding reserve

We expect million be and million build excluding CECL. million with $XXX million to the to to CECL $XX $XX impact the $XX of

then expect efficiency trend We XX% be to approximately down ratio the as quarter, the to the for ratio first progresses. year the

that, With that over Brian results. Doubles it strategies future the to help drive turn highlight will to I'll

Brian Doubles

products is grow close a To the recap with be evaluated value through A that Brian. partnerships. will future. add continue seek of our as which relationships, card driving usage the priorities, and of and lens innovative brand and returns we Thanks, to our the diversifying long-term our capabilities cardholders core focused I'll drive priority, always, risk-adjusted will top for produce. deliver while Opportunities they are of strategic and growth to programs creation, strengthen to new continue on to the to value loyalty. the

continue will can the returns. programs, new for where partnership the believe also to at attractive opportunity deliver we growth We risk-adjusted launch

revenue to growth products. targeted We products. through strategies will acceleration of seek new Synchrony-branded help our us the will and base a to programs more and in diverse also through in Payment achieve CareCredit Solutions, This diversify small

with a enhanced expansion and on We an our This product opportunity. innovative Solutions offerings. we an where see on significant announced and point-of-sale through is like broader will to will emphasis of on Permanente. Payment work with the CareCredit, continue area health focus network capabilities systems, further partnership In we growing recently acceptance Kaiser

and continue also and will our products, Synchrony networks to invest the Mastercard. the Synchrony-branded We in auto home

develop new e-gifting sources in and acquisitions recent and revenue our pets. to Lastly, we will leverage grow

this an analytics approach a we to key We increasingly be customer-first data will growth provide believe focus, important experiences. customer and strive as remain Technology best-in-class driver.

deliver analytics, the advanced data experiences. capabilities to frictionless leveraging customer continue develop dynamics of will We customer-level expansion performance further and

and and critical learning advanced existing as securing underwriting We authentication. our to as driving are programs on alternative investments growth are renewals to data focused further These well winning drive Venmo Verizon. programs and and new like in innovation, machine also

to It with and business financial remains a operate profile. balance our key sheet priority a strong

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

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

we programs, launch Finally, products to growth, invest repurchases. and dividends new support position shareholders capital utilize in capabilities will return strong our share continue capital and to and to through

We believe we and for beyond. we growth, look are shareholders partners, long-term XXXX to for positioned driving well our in and and cardholders results forward

I will now turn it over to Greg to begin the Q&A portion of our call.

Gregory Ketron

comments That the on concludes our quarter.

the will Q&A now the We Instructions]. Operator, begin session. Q&A start session. please [Operator


[Operator Instructions].

Our Goldman first comes question Nash from with Ryan Sachs.

Ryan Nash

to a with wanted on interest I question So net off start the margin.

since had it to all XX% deployed XX.XX% went and in public So the, call been your you running it, liquidity. range

Now rest just you think you're of plus need which the the XX.X% pieces, moving means be the about year to XX% to for saying first of quarter, reach the the for the to guide. middle

once but side, I plus think on beyond range? the XX.XX% a get more particularly given moving to this should are the closer impact? funding levers, then have we about margin pieces, hard And to that range, it's out this drive there back second, any other to forecast So all far as very historical could we you normal know liquidity

Brian Wenzel

Yes. Ryan. Thanks,

excess organic yes, front from $X first of in Walmart fourth through really that liquidity quarters deploy the of as the off So fast manage work trending to the are that we half really to through of billion towards of couple funding the in profile as as we're have including the XX% we XXXX. the coming obviously liquidity year, We trying growth, the and possible, work quarter.

back we year half trend the of As towards the XX.X%. guided, should that

excess one The year-over-year, right? X about impacts, So the really when think you there's this burning is off major first it, liquidity.

the portfolio, which the Walmart average at than company portfolios. of a operated second The the margin impact higher is other and

a So fourth was quarter. obviously, the Walmart of part out for

trend that year. when should those events, the towards have in part of So you XX.X% back back we the

Ryan Nash

And on squeeze it. Okay, just maybe in to a got costs. question

just of So growth us the check the cost I I the moving understand just view lower about Margaret, was going you them. heard that accelerating savings beyond of And something and could on in maybe achieved cost this Brian as thought year? you But all making? potentially you this I rate. Doubles Walmart could case? of you you're on talked that investments you the the that strategic get double the expense are growth, some forward. what back wanted some maybe big to can would a know we help pieces And run of year I if to say expand

Brian Wenzel


hand I'll and it part first then over So give the Margaret. to

So cost, the average than XX%, we approximately cost get we you anticipated think what it's fully that Walmart much XX it and just forward. efficiency move the full of they'll XX.X%. as portfolio again, be we're into came for we than basis Walmart-related generated, higher that as is reductions impact which on revenue high rate ran of ratio that the company a a points average. guiding year about Yes, to did baked run the slightly and The the the as ratio, lower is portfolio again, the efficiency off because of out

slight there. tick up the So you'll that's that see

Margaret Keane

it's I Ryan, And things. really of on couple Yes. a think, investments,

we're the to investment Verizon. Venmo really making of So programs these be really Both digitized is are going experiences. in-app and first in fully

a added partners. we've number so those a really really of teams agile And APIs number to develop deliver of to for

We on. have the launch

people need have to we that add. We

CareCredit. on technology of invest in key systems, really adding terms We strategic resources talked are and those More the little bit customer those areas. technology great over We're the initiative continuing we're is which digitization as there, a where area a couple on particularly get about of really go other part I really driving in we're one two I the what enhancements journey. frictionless we'll of And investment perspective, focused is say would say, into a a to health from call just return time. experiences. I'd a journey we programs. a great really So very believe customer big this broadly, we and of would we and broadly, continue

and at buy our meaning terms good done think experience customer. more office, But we've we're I for the in looking your using front and really really end, really out get to the apply digitization using job we do So back on that efficiency how of excel how a mobile capabilities. you of

a So is bit it of investment.

that, I the to be company. And Verizon those think investment we're really, the biggest future and kind we And Venmo of two the in making. make growth. for great investment investments going are for the to is to is add mind, though, really opportunities think for our right the us year that

Ryan Nash

color the Got on it. all thanks And for CECL.


Our next Crédit question comes from Orenbuch Suisse. with Moshe

Moshe Orenbuch

kind fourth this and hate start -- net QX a a interest ask of kind little did of you precise, quarter. Usually, decline that in but growing. question a income then of seasonal I to in you have billion of bit and the hoping was I $X.XX like

you NII it to assets grow do Walmart almost seasonal out the and should the to expect margin and growth of was that impacts from expect normal QX, we entirely reasonable other that is be level? higher Given in to see that than QX

Brian Wenzel

approximately, XX, Moshe. in think XX it, Thanks, Yes. fourth Yes, quarter, as days. Walmart was for about the you call

seasonality, carrying as really, in think excess it's that's you impact, we're there think quarter, the with when that. dilution a sequentially about will it relates quarter-over-quarter. the to be that when along So slight liquidity, then impacting normal that you And

Moshe Orenbuch

material excess dollars way, a But of Right. in income interest liquidity isn't that net right? impacting

Brian Wenzel

dollars. Yes, impact on yes, -- it's also impacting is it

Moshe Orenbuch


Second question, just on the expenses.

what you're can And see little going just that? then to over back say think bit time. how Maybe you maybe you because them efficiency then should to period approach some talked that talk the those on about the -- about you You an a investments. back you're taking -- the How -- that that charge and have paying investments. over we QX of time just in was side, about kind did would of and the improvement

Brian Wenzel


on these here think about in. the there's consumer ready. have as if so right? investments Venmo, and have as -- proposition, teams standing people, we about think highlighted, it, Margaret in et about programs been you the the think you pre-stage research right? certain cetera, up the Verizon investments costs, done launch have So We'll phases that to to pieces value So you and up get that's of We different

both and first half nature Margaret talked opportunities, relative two infrastructure. be full and IT data around sizable the servicing, up to the API. the doing there These Verizon things standing And scale specific opportunities. at the second then lake, are are in we about, launches, how we're about, Venmo talked And digital these given around Margaret need As the in half. as of we're to

So that as right, we year. cost builds up, through move the

So that incremental. the piece is

good We enterprise efficiencies to the core XXXX. all the drive the wanted cost got different and try continuing in the discipline operations We're whether look We multiple at and we'll drive the across in very fairly through expenses, the cost we or move from to it business be we And lenses out in our we run we hopefully, disciplined with, processes, reduction Walmart. side as functions. sits and and a business from manage business. how


Our next question is with from Sanjay KBW. Sakhrani

Sanjay Sakhrani

Appreciate all the CECL commentary.

like -- over wrong, we migrate how migrate the sort when And how over So in next about in question portfolio. maybe, have that growing the more there? and expectations, which set then you guys mid-single higher year. if we of what in will that me core Because have than several saw but is you do seems now a how think seen XXXX it growth the the guess, the it about digits, Can time? would would the merchants we that I'm lower is years have Correct yes, past. portfolio we of be I this loan talk the higher-growth growth

Brian Wenzel

Sanjay. Thanks, Yes.

X% X% think X% as off about projecting coming year. We're this to last So you growth, year. we're

X% If acquisition. XX% you PayPal from to to XX% average about was ex the the X% growth our think range,

Again, in half. in, one the one the that. growing Again, launching launching we're first in half, Verizon come line de in they're programs So with will novo in. second Venmo they'll and phase with

So we're trajectory -- growth providing as not the move we obviously, long-term we'll they guidance provide to obviously relative but into guidance, and that start-up programs, XXXX. are rate,

historical inside we're norms. So

not are growing If have as fast, they we inside I'm you moving concert. also and Yes, as in recognize, have fast-growing we the sure some can that are portfolio, look there some you portfolios, pieces. pockets work but

the new range we with X% trajectory of we're have we're the year. within look then again, this guidance. to launching programs at So this we'll year. that clearly, comfortable the X% And It's

Sanjay Sakhrani

sources? data two around the then Walmart we issuance, if metric this follow-ups. what rate, that, take we the like would do I And point-related preferred just were guess, have have funding what stock The of And in rate year's diversifying to out rate Was Okay. guidance, to that? charge-off the charge-off it drove XXXX, charge-off sort relative that been?

Brian Doubles

Along levels, Yes. line down XX% et in started capital with capital long cetera, question, and we're diversification peers. an long-term this our match strategy now. about our peers. journey, strategy out been CETX, CETX, talked of we've our Part we With to regard to that really with to has first your XX% capital term moving

So was our we it this by the regulators capital plan was included was and earlier always it year. filed in the it approved part Board that with of strategy, our

So part lower it of the equity. cost diversification of really was to efforts overall our

was amount it We retail which of a us rate of investors. preferred, the X.XXX% very it got done. The So was get important to for -- attractive. for significant a and timing market the institutional

and significantly So come to before access oversubscribed. potential the wanted from may events. to that do it wanted market market and any obviously to was the unforeseen disruptions XXXX We it

really that's So it. rationale behind why did we the

So on was question just -- -- second me. your remind and

Sanjay Sakhrani

charge-off rate Walmart off, Yes. equivalent of Like, ex the charge XXXX. we rate? do have for The that

Brian Doubles

we obviously, Walmart. portfolio What's indication this is, Yes. what We're roughly going is it the I'd billion then, the about it, an not to billion at. rate provide that Sanjay, deteriorated months you what was. since sold $X.X happened $XX that ex XX gave from ago to we But has say probably

really place as well put several helped the years ago credit reducing to start we that As that. fact the refinements in that

not we'd this as year months impact was XX the significant, as So indicated ago. what right,


Fandetti Don Wells from with is question Fargo. next Our

Donald Fandetti

a the on about mean, the more Can guess, RSA? Can the and I provision I offset. interplay it touched an little of surface, that? pretty you talk just but earlier. a just about there's talk on you you bit CECL I amount, more sizable know like the increase seems in

Brian Wenzel

Don. Yes. Yes. Thanks,

provisioning full any to of I our the RSAs obviously, in to the RSAs. that not -- with. talking -- the you change participate RSA, are or that will the think of for clear, to that amend amount we've those of just about be as been we So how passing our partners want about for it impacts and months several amount reflected in agreements associated the the those did reduce agreements reserve reserves, be We either CECL RSA. RSA exclude

clear I want that. just So be on to

a there's it about interacts. impact the business, it a primary happens its The the be work, Payment that as that happens ground uses Retail lag the think think as has RSAs you relative needed calculations That through. which provisioning actually The the a promotional CECL platform it Card I move is given how way there, to and actually platform. CECL RSA, As increase things. CareCredit duration important attracts Solutions to lower with platform products the that, and to to impacting longer the given and larger activity you slight passes Also that through. CECL,

in see you'll the forward. in rate that we of again, full run of So the year, move as the half year, particularly the back

Donald Fandetti

sort seeing underwriting the competitors to are making Okay. outlook? given steady state? better changes economic loosen And you of of then just in just a any Or are up now? Are your you any right you on And underwriting. quickly sort

Margaret Keane


in always up. we're say loosened We Obviously, making been is would slight we've I pretty consistent have not underwriting. our What changes.

I past a externally one we're the our data both of that in talked in models the how and about the and we've things we've think done lot creating is, internally. investing of we're using,

more we really performance that's think in and I we're we're see And seeing the helped charge-offs. think, so to good underwriting. in look much delinquencies continue at how us, strategic And I

pretty So being consistent. we're

time, continue very possible, I think and cycle. is as think to consistent we the in the you just about this be you to where want where are


of next our from We America. question Bank have Ryan Cary with

Ryan Cary

from -- of there XXXX Verizon. you? loan be in is bit conversion most the benefit to an resulting this think discussion growth benefit more out to is longer behind there term integration launches of been little around And and acceleration take ramp? like has as from the PayPal new phase? could to discussion longer more program a moving is Venmo now is likely to the likely But -- I about Or any more

Margaret Keane


It's us. a we I is way it think for -- fast-growing portfolio look, the think perform. I performing would PayPal thought

was I really accelerate the June. a in looking growth. we're focused think converted, team the getting really What portfolio is and on was about what fairly PayPal big at sophisticated how now we conversion. last happened talked year with which It we

in different little sense start-up. a Venmo's the think it's that I a

think, are in continuing drive part was digitally. of to want the But growth that And big to these them one It's our really seeing. partners, want kind winning retails pleased that as think, struggling that to see. win, I a we're overall, of is side, growth through the mobile growth seeing you'll say, some digitally our the to it we portfolio. holiday, to think, of point our to I So I will deliver a I partners we're partners, going. driven continue us that'll one take despite And I'd and depend little do to our capability longer with think add more get pretty we a we're little growth as on of to on about -- really maybe we us and into I that went new, of make growth definitely things we're mobile. definitely more, some on play the the

on So I well. something that's continue as think going we're that to focus to

Brian Wenzel

maybe point just just me let one add of clarity. Yes,

you to about the the As book. of think for when primary you coming year, about the growth amount existing think the off is the X%, X%

something, period, movement So be year. not given you're that's going thinking about about a it half growth launching Verizon while we're in as we be the when years, and of this end going that big an second the accelerator. it's think to Venmo, It's during and future in of timing first to half,

that So just growth. to make is the driving existing sure, clear portfolio we're that

Ryan Cary

one to ask just wanted And okay. Okay, the GPR on card.

marketing direct quarter. number the a and how and curious resulting to accelerate the think I'm you expect year? for GPR card you've your of just next uptake to adoption mailings in on guided the compared Do expectations? that I direct about

Brian Wenzel


good seeing of done. look, We're But returns. both So that disciplined retention than we've they're we're good last around good on better trends expectations continue on very the the of to campaigns activation, say we and I really usage, see balances. quarter, profitability card. our nice the as generally said being I'd

it's competitive term, we very being and We're modest So market, Look, a growth profitable then -- we're short very and we've realize target accounts. expectations. to got thoughtful. trying

what the -- we're so disciplined how we So we on far, to going like like seeing space, we're we really be this. we but approach


We have Morgan from question Stanley. with Betsy our next Graseck

Betsy Graseck

to year, how range to sure in gave the beginning the understand. dig make the know to range you a X.X full I wanted for of I bit then X.X, I on RSA lower be about it'll just and beyond little year it'll you the talked but quarterlies the for the then average the identifying? the range year the that within and Or full is year Is and this you're higher. that of be end be range? could

Brian Wenzel

X.X average to X.X to is the for full Betsy. The the Yes. year,

way normalizes the the again, contractual little projections in That year. is gave real we you half. of impact, muted moving then back obviously, piece the calculations a bit first the So here, is some which the The the half more CECL in work.

So full -- but is estimate. year X.X the the to X.X

Betsy Graseck


us, So -- want make right? we see I not to side within quarterlies of Or you're sure. either just really the that? be telling could

Brian Wenzel

the Again, the Yes. X.X relative it it could to the going could credit or be X.X, lower the at average end higher program portfolio. the the going of performance it's vary end. it's to be performance out and to Obviously, to

across But will vary. could back. I full year, it get it again, the So think

Betsy Graseck

then is picked given what what them, partner. set to to that more there, opportunity to bit speak could market separately, you to Verizon, you? little interesting offering products, services on new attractive the them, just Okay. to Verizon a they be out Maybe represents? speak going why then was of bit And you a could think an of Margaret, you and you're And that little kind as

Margaret Keane


some to closely of make going pretty sure doing very state-of-the-art, about we're driven phone Verizon. that their like card. working when XXX them about they is retail be this launch. be communicate to going really to prop value not We're working a It'll excited first, going branded digitally the we're card. We'll with that's So we do a -- connections. on. and things things Look, We're to because the happen we're have co-branded

partnership. big the opportunity and because engaged. making. been excited They're pretty this for us, about investments of So of some I'd is the deal won we we're say we've the highly a

continue the are think on turned these this to that of savvy. my winners question year, investments mark and based of And I we're we on made make. programs the the that we that we're to mind corner won because -- the going we winning think the in think I digitally I we investments we've

So very excited about Verizon.

Betsy Graseck

XXX million talking about? customers, that's what you're

Margaret Keane

-- we phone It's actually connections. lines. No, like phone

Betsy Graseck

it. Got


Margaret Keane

it. calculate Somebody


with is next from Our JPMorgan. Shane Rick question

Richard Shane

portfolio, how in commented are Margaret the am am referenced of are learning you you bifurcation and seeing curious And also amongst that And apply wondering in. investing strategically? and you're your those consumers. that Brian, that data breadth terms strategically both already about insights. to a what the guys consumer analytics given right behavior. you're I you've and started you talk machine of what now of lot seeing There's applying I

Margaret Keane

I'm not by and meaning Or... customers good bad perspective? you bifurcation, sure from customers credit what a mean

Richard Shane

particularly a opportunity, that brackets. more in there's divergence the or no, you lower economically, greater lesser middle and seeing I'm if are economy. the And Well, curious in such income

Margaret Keane

-- card. No, consumer's standards for we are our pay to capability the think I the don't underwriting credit based on

underwrite. we that's how core to So

I think things partners. to that leveraging data from looking the we're our further enhances

upfront. set we how For instance, I'd line in more say a credit

than heavily, shares line we So if higher vary based that this the that data. give particular with normally shops credit consumer we would, on partner a might us

maybe different spaces, and of I you the aspects important away. apply think right of the buy business can card credit than purpose general our one

very to us the And learning where perspective got when line good sharing a we're we partner. size customer really we're and from between we really that's I experience So initial think give disciplined and because line. be some driving the an data

and us. name identity the that, things that and us really like is think other area on true helping are fraud I helping and using

company, only on to better for a as out very And the that customer do identifying that's this have So diligent in customer. really be where example, lines. you we app, of to because helping right as us applying. mobile lot fill that And we've now a we're with do an Payphone to three instance, apply-and-buy an leveraged our at job again, has identifying that's have

Brian Doubles

one Rick, Yes. to add maybe to thing that. just

what income of Those sharing which levels. like are cuts average an think is that seen we far result index, size, levels, number store, things, -- so in call basket spend really the I to engagement it's we've partners visits behavior. our now metrics, payment across what

how spend are how a going powerful perspective finding we're perform, predictor and fraud so but a loss accounts perspective, well. of from that also those to they're to in a behave And be to very going as terms

So a areas. number different it's benefiting in of us

Ryan Cary


Okay. That detail is very helpful.


next Carcache our have we Bill And from Nomura. with question

Bill Carcache

see of Brian your question about receivables it merchants essentially would be their you in Synchrony? Any great. wanted to us you and by interest a I that ask give sales. Is growth Margaret level Synchrony's give given for there back on to, any potential something consider? there, could opportunity Is thought you and potentially that color to to you us can merchant would you Doubles, exposure but a haven't making sense much loans whether

Margaret Keane

would are a Yes. say, that That's I considering. we're -- we not space

to laid things if strategy, the we grow to I think have stick you... think and going on, as Brian know I know we're way. really out I that our focused we don't

Brian Doubles

in a ton we're consumer see And to to going a That's business, we're We're great knitting at. our of existing look, good we mean, there. we I outlined. growth opportunities lender. our which Yes. what stick

not So map right now. on the say strategic I never, never think it's but

I in seeing think three of great We platforms. what growth our ton the we're we've in direct-to-consumer got opportunity like a of all space.

full some the those going core. But now, growth So areas, of in right the a future. at we'll and throttle we're revisit opportunity in lot point in

Bill Carcache


consumer. then again? and opportunity that term growth perhaps is see you Any consumer so And U.S. something at you not look any as with color perhaps on that consider point? helpful well. Is a give in probably level that again, can Or near interest the at would that's international taking some the you sticking the there enough would be

Brian Doubles

the to Board. need the feel don't overseas. we assess see we The current We've go never certain Again, team We've that. to continue say the never. enough talked now to in We'll seen but the Yes. it, business term. Bill, does considered. it the right in think opportunity market leadership that in U.S. but nothing international, with work short look, in markets it's I our and something about we've

Gregory Ketron

question. Vanessa, we have for time more one


Our from comes final Jefferies. question with John Hecht

John Hecht

any final mean, guess, pipeline the with is opportunities. based perspective, forth? here wins competitive the Verizon, to more have is I any technologically dynamics PayPal, from who of environment? you're maybe respect Venmo so recent talk changing about guess, the broad and And a different dynamics been And question I I going like partner there with it there seems after? with is, more changing

Margaret Keane

with start part. the I'll Yes, second

I I think crazy pretty don't -- environment there. competitive anything think doing the consistent. too has is been anyone's pretty out

good we think feel pretty where So we're environment. I the competitive about in placed

we think, I want retail still look, core to win deals.

that of business. you our core lot a of if Solutions we and -- at this business, won So the look was Payment what

portfolios. come a have marketplace. that not I somewhat big existing opportunities, deals along of now, been, that these There's of in have in or think terms of there right into just the I think, out lot retail them unique terms are coming

platforms pipeline. We focused our midsized opportunity, we see would and we're pipeline number continue have of in all smaller to pretty that deals a a on of I three say have very that. good

you'll that road, -- the space. the walking deals. cases, some It's in bit. was So I not us the market think retail more is I and little like opportunity our differentiate in this what down we're us see think you'll away for see a from just to, portfolio

Gregory Ketron

available everyone, any have will you morning. The us questions this be day. we team hope and Thanks, have, answer joining to Okay. for a Relations you may great further Investor

Margaret Keane

you. Thank


for Thank and today's participating. concludes you, This call. conference Thank gentlemen. ladies you

now You disconnect. may