Synchrony Financial · NYSE:SYF
Synchrony Financial — Investor Presentation (February 2023)
31 slides from Synchrony Financial's investor presentation, February 2023
Slide 1: Investor Presentation February 2023
Investor Presentation February 2023 1
Slide 2: Disclaimers
Disclaimers Cautionary Statement Regarding Forward-Looking Statements This presentation contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe
Slide 3: Differentiated Business Model…
Differentiated Business Model… DEEP CONSUMER LENDING EXPERTISE BROAD REACH INNOVATION-DRIVEN EVOLUTION $1.2T 460K+ 46 200+ Purchase Volume since IPO $92B Partner Locations 70M+ Active Accounts U.S. Patents Agile Build Teams 9K+ Loan Receivables 100Ms ~60% Consumer Attributes Used for Underwriting an
Slide 4: … Driving Strong Financial Results
… Driving Strong Financial Results BALANCED GROWTH SINCE YEAR OF IPO 1 AT STRONG RISK-ADJUSTED RETURNS 5% ANNUAL GROWTH IN 4% ANNUAL GROWTH IN 10% AVERAGE 10% ANNUAL GROWTH IN LOAN RECEIVABLES NET INTEREST INCOME RISK-ADJUSTED RETURN2 DILUTED EARNINGS PER SHARE ROBUST FUNDING, CAPITAL AND LIQUIDITY
Slide 5: Diverse Suite of Digital Products and Experiences…
Diverse Suite of Digital Products and Experiences… Seamless Customer Journey Experience & Trust ENGAGE APPLY USE SERVICE Digital Bank Customer Choice Multi-product Suite Revolving Installment Commercial Growth Adjacencies Purchasing HIGH YIELD SAVINGS CD Power PAY-IN-4 OR MONTHLY / IRA BNPL BUSINESS
Slide 6: … Addresses Broad Range of Consumers' Financing Needs
… Addresses Broad Range of Consumers’ Financing Needs ILLUSTRATIVE PRODUCT JOURNEY INSTALLMENT PLCC DUAL CARD TRANSACTIONAL EXPANDED UTILITY TOP OF WALLET BUILDING CREDIT ESTABLISHED CREDIT STRONG CREDIT • Pay-over-time flexibility • Revolving credit line • Revolving credit line • Closed-end, one-ti
Slide 7: Efficient Partner Model Builds Broad Cardholder Base …
Efficient Partner Model Builds Broad Cardholder Base … BROAD, MASS-MARKET REACH PRODUCTS WITH WIDE APPEAL LOW COST, HIGH VALUE Loan Mix Shifting as Younger Borrowers Adopt Cards Partner Model Drives Efficient Cost to Acquire #1 in total cardholders1 Millennials and Gen Z 21% 27% >4x 1.7 cards per ca
Slide 8: … Across Deep and Diversified Industry Platforms
… Across Deep and Diversified Industry Platforms DIGITAL HEALTH & WELLNESS HOME & AUTO DIVERSIFIED & VALUE LIFESTYLE * Sample partners as of December 31, 2022. 8
Slide 9: Drive Value by Deepening Customer Relationships
Drive Value by Deepening Customer Relationships PRODUCT UPGRADES ADDITIONAL PRODUCTS 2 Moving Customer from PLCC to Dual Card Per-Card Revenue3 Growth as Cardholders Add Additional Cards Higher Risk- +36% 98% Adjusted Returns per account/per month +24% +29% +33% increase in sales1 +18% % increase pe
Slide 10: Proprietary Data and Multidimensional Underwriting Enable Greater Predictive Precision
Proprietary Data and Multidimensional Underwriting Enable Greater Predictive Precision for a Similar Level of Risk Synchrony Data Partner-Specific Data • 100MM+1 customers and • Customer engagement billions of transactions (e.g., frequency, spend) • SKU and category spend of basket Alternative Data
Slide 11: Constantly Innovating To Make Better Decisions and Enhance the Customer Experience
Constantly Innovating To Make Better Decisions and Enhance the Customer Experience (Illustrative Example) Synchrony Vintage Performance Outperforming the Industry INDUSTRY DATA1 Synchrony develops a new proprietary acquisition model that outperforms a previous third-party solution, separating risk b
Slide 12: Utilize Many Levers to Manage Risk and Optimize Outcomes
Utilize Many Levers to Manage Risk and Optimize Outcomes Credit Levers Available to Manage Exposure PORTFOLIO COMPOSITION PORTFOLIO MANAGEMENT Acquisitions Product Offerings Account Management Collections and Recovery • Proactive acquisition offers • Product mix between Dual • Proactive account upgr
Slide 13: Deliver Consistent Loss Performance Over Time
Deliver Consistent Loss Performance Over Time +30% Delinquency Indexed: Pre-GFC (1Q 2007)=1001 ✓ Less volatility through cycles 175 150 ✓ PRISM tools enable approval of more borrowers for similar level 125 of risk 100 ✓ Underwrite to Risk-Adjusted 75 Margins at a partnership level 50 ✓ Aggregated po
Slide 14: Digital Bank Serves as Funding Foundation
Digital Bank Serves as Funding Foundation STRONG RELATIONSHIPS STABLE FUNDING OVER TIME OPPORTUNITY FOR GROWTH Optimized Deposit Base through Cycles Award-winning online franchise $56 >$50b digital, $54 $60.0 140 % $52 $50 direct US bank $50.0 $49 130% $42 120% $40.0 $37 11 0% ~$60k $30 .0 10 0% ave
Slide 15: Optimize Balance Sheet for Resilient Funding through Cycles
Optimize Balance Sheet for Resilient Funding through Cycles BALANCED FUNDING PROFILE 120,0 00. 00 STABLE ASSET MIX 11 0% $106 Unsecured 11% 11% 9% $100 10 0% 10 0,0 00. 00 7% Average Secured 17% 12% Interest-Earning $84 Assets ($B) 90% 85% 80,0 00. 00 82% 83% Loans as % of Interest-Earning 80% Asset
Slide 16: Maintain Prudent Capital Position While Driving Value for Shareholders
Maintain Prudent Capital Position While Driving Value for Shareholders ** HIGH LOSS CET1 CAPITAL JOURNEY GROWING TBV PER SHARE * ABSORPTION CAPACITY $22.24 $19.50 27% (390) bps 18.0% $15.34 22% 20% 14.1% 13% 12.8% Reserves for Credit 5% 10% Losses 6% CAGR Tier 1 15% 14% Capital 12% 2014 2020 2022 2Q
Slide 17: Execute a Disciplined Capital Allocation Strategy
Execute a Disciplined Capital Allocation Strategy Organic Share Inorganic Dividends Repurchases Growth Growth Maintain and expand Deliver consistent Evaluate capital partner, merchant dividends over time utilization of share and provider and through repurchases vs. relationships economic cycles acqu
Slide 18: Well Positioned to Deliver Sustainable Growth …
Well Positioned to Deliver Sustainable Growth … PURCHASE VOLUME EOP RECEIVABLES NET INTEREST INCOME $92B $180B $16B $61B $11B $103B 2014 2022 2014 2022 2014 2022 7% CAGR 5% CAGR 4% CAGR 18
Slide 19: … and Resilient Risk-Adjusted Returns through Evolving Environments
… and Resilient Risk-Adjusted Returns through Evolving Environments 12% Credit Normalization COVID-19 CARD Act Pandemic Took Effect 10% RAR* 8% Financial Crisis 6% RSA/ALR2 4% NCO/ALR2 2% -% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Prime and Super 63% 72% 72% 74% 74% 72%
Slide 20: Long-Term Financial Framework Should Deliver Double-Digit EPS Growth
Long-Term Financial Framework Should Deliver Double-Digit EPS Growth in a Normalized Operating Environment Sustainable Resilient Risk- Retailer Share Receivable Growth Adjusted Margin Agreements NIM ~16% 7–10% NCO ~5.5–6.0% ~4.0–4.5% … Powered by Our Differentiated Operate Capital Targets Return Pro
Slide 21: Appendix
[synchrony APPENDIX
Slide 22: Home & Auto
Home & Auto WELL-POSITIONED WITH AMPLE MARKET PENETRATION OPPORTUNITY Market DEEP DOMAIN ENTERPRISE DRIVES VALUE Overview ~120,000 ~57% ~60% ~$ 2.3T LOCATIONS across broad OF STORE LOCATIONS of top 100 REPEAT SALES reflecting strong value Home & Auto merchant base furniture retailers1 and customer l
Slide 23: Health & Wellness
Health & Wellness LEADING HEALTHCARE AND PET CARE FINANCING PROVIDER WITH SCALE AND EXPERTISE Market CORE DIFFERENTIATORS ARE HARD TO REPLICATE Overview ~260,000 >50 ~60% ~$430B PROVIDER LOCATIONS ~75% penetration in the SPECIALTIES expanded into 33 new REPEAT SALES compared to Health OOP Expenditur
Slide 24: Diversified & Value
Diversified & Value DELIVER OMNICHANNEL EXPERIENCES AND EVERYDAY VALUE ACROSS SCALED RETAIL PARTNERS Market POWER COMPELLING OUTCOMES FOR OUR PARTNERS AND CUSTOMERS Overview 20+ year 9+ year ~50% >$900B RELATIONSHIPS average length of relationship CARDHOLDER TENURE on average across D&V CUSTOMERS2 h
Slide 25: Lifestyle
Lifestyle STRONG FOUNDATION, POSITIONED FOR GROWTH Market BROAD PARTNER SPECTRUM ACROSS A DIVERSE SET OF INDUSTRIES Overview 5+ ~$15K / 65MO MAJOR CATEGORIES AVERAGE ORIGINATION from apparel to powersports for secured installment loans ~$400B Lifestyle Verticals Consumer Spending 30 ~20,000 ~70% MIN
Slide 26: Digital
Digital HIGHLY ENGAGED CUSTOMERS, DEEPLY INTEGRATED PRODUCTS AND PARTNERSHIPS Market DRIVING SEAMLESS ENGAGEMENT WITH DIGITAL-FIRST BRANDS Overview DIVERSE DIGITAL PRODUCTS & VAL PROPS STRONG ENGAGEMENT COMMERCE BRANDS SEAMLESSLY INTEGRATED ON PARTNER PLATFORMS 58 >$700B >2 PURCHASES per active acco
Slide 27: Footnotes
Footnotes All metrics are as of and for the period ending December 31, 2022 except where noted. Differentiated Business Model 1. As of December 2020. 2. As of June 2021. Driving Strong Financial Results 1. Reflects compound annual growth rates from 2014 to 2022; average risk-adjusted return reflects
Slide 28: Footnotes
Footnotes Digital Bank Serves as Funding Foundation 1. Source: Internal analysis, October 2022. And Resilient Risk-Adjusted Returns through Cycles 1. Classification of Prime & Super Prime refers to VantageScore credit scores of 651 or higher for 2019-2022, and FICO scores of 661 or higher for period
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation The following table sets forth the components of our Tangible common equity and tangible common equity per share $ in millions, except per share statistics At December 31, Total 2016 2019 2022 GAAP total equity $14,196 $15,088 $12,873 Less: Preferred Stock - (734) (734) Less:
Slide 30: Non-GAAP Reconciliation Continued
Non-GAAP Reconciliation Continued The following table sets forth the components of our Tier 1 Capital + Reserves ratio for the periods indicated below. $ in millions At December 31, Total 2014 2020 2022 Tier 1 Capital $9,277 $ 13,525 $ 12,493 Less: CECL transition adjustment - (2,686) (1,719) Tier 1
Slide 31: Non-GAAP Reconciliation Continued
Non-GAAP Reconciliation Continued The following table sets forth a reconciliation between GAAP results and non-GAAP managed-basis results for 2009 $ in millions Year ended December 31, 2009 Net charge-offs as a % of average loan receivables, including held for sale: GAAP 11.26 % Securitization adjus
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