Synchrony Financial · NYSE:SYF
Synchrony Financial — Q3 2015 Earnings Presentation
37 slides from Synchrony Financial's earnings presentation, Nov 20, 2015
Slide 1: 2015 Third Quarter Investor Presentation
2015 Third Quarter Investor Presentation November 20, 2015 Exhibit 99.1
Slide 2: Forward-looking statements
2 This presentation contains certain forward-looking statements. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words ar
Slide 3: Synchrony Financial Overview
3 Synchrony Financial Overview Strong Value Proposition for Partners and Consumers • Advanced data analytics and targeted marketing capabilities • Dedicated team members support partners to help maximize program effectiveness • Enhanced sales growth and additional economic benefits for partners • Ac
Slide 4: Accomplishments since IPO
4 • Added several new partners and renewed existing relationships • Announced participation in Apple Pay and Samsung Pay • Online sales increased 21% year-over- year outpacing U.S. online sales growth(d) • Federal Reserve Board approval to be stand-alone SLHC Built out stand-alone infrastructure w
Slide 5: Business Overview
Business Overview
Slide 6: Partner-Centric Business with Leading Sales Platforms
6 Partner-Centric Business with Leading Sales Platforms (a) Platform revenue for period 4Q14 through 3Q15, $ in millions. Platform revenue is the sum of “interest and fees on loans,” plus “other income,” less “retailer share arrangements”. See non-GAAP reconciliation in appendix. (b) As of September
Slide 7: Customized Products
7 Customized Products Credit Products Retailer only acceptance Accepted at network locations Deposit Products Retailer only acceptance Accepted at provider network locations Private Label Dual CardTM Affinity to retailer, provides customized benefits & features Big-ticket focus, offering promotional
Slide 8: Long-Standing Partnerships
8 2014 Platform Revenue 26% 74% 200,000 next largest programs Majority auto-renew No ongoing program exceeds 0.1% Long-Standing Partnerships $10,126 Largest 40 programs(c) Typically under long-term exclusive contracts (a) As of September 30, 2015. (b) Platform revenue is the sum of “interest a
Slide 9: Largest PLCC Provider in U.S.
9 Largest PLCC Provider in U.S. Source: Nilson Report, % of 2008 market. 80% 85% 90% 95% 100% 105% Private Label Credit Cards are 6% above pre-crisis levels at $108 billion General Purpose Credit Cards are down 11% from peak at $765 billion 2008 2009 2010 2011 2012 2013 Source: Nilson Report, PLCC y
Slide 10: Differentiated Value Proposition for Partners & Customers
Differentiated Value Proposition for Partners & Customers
Slide 11: Partner Value Proposition
11 Gray = non-cardholder Blue = cardholder We deliver significant savings and earnings to our partners Economic Benefits Engagement throughout customer lifecycle leads to loyalty and retention Customer Loyalty 1,000+ FTEs dedicated to drive partner sales Enhanced Marketing Cardholders spend substant
Slide 12: Proprietary Closed-Loop Network Advantages
12 Proprietary Closed-Loop Network Advantages Customer Merchant Acquirer Network Issuer General Purpose Card and Co-Branded Cards Synchrony Financial Closed Loop Network for PLCC and Dual CardTM Citi Capital One Chase Date Merch. Channel Brand Cat./SKU $ 10/2/15 Belk In- Store DKNY Women’s Shoes 468
Slide 13: Leverage Data/Analytics to Drive Partner Performance
13 13 SKU/Category Data Leverage Data/Analytics to Drive Partner Performance Through the data we collect over our network, we bring more insight to our partners DUAL CARDTM World spend Analyzing spend outside the retailer delivers insights to drive customers back in-store Combine shopper insights wi
Slide 14: eCommerce & Mobile Innovative Digital Capabilities
14 14 eCommerce & Mobile Innovative Digital Capabilities Our innovative digital capabilities drove a 69% increase in online and mobile purchase volume since 3Q12 Mobile Payments Consumer • Investing in enhanced user experience: - Customized offers - Quickscreen - Auto pre-fill • Mobile applications
Slide 15: Availability of credit differentiates partners and helps customers
15 15 Online and mobile purchase volume(c) Availability of credit differentiates partners & helps customers Significant acquisition & lifecycle benefits vs General Purpose Cards Convenient credit & acquisition offer is a compelling proposition Millions approved every year Rewards tailored to each cu
Slide 16: Growth Strategy
Growth Strategy
Slide 17: Growth Initiatives
17 $48 $53 $57 $64 3Q12 3Q13 3Q14 3Q15 In it iati v e s Continue to drive organic growth and increase penetration through strong value propositions 3Q'13 3Q'14 3Q'15 +73% CAGR Leverage digital, mobile, loyalty and analytics capabilities to strengthen relationships and drive increased sales Attract n
Slide 18: Expansive Opportunity
18 Expansive Opportunity (a) (a) Source: Nilson. $873 Billion of U.S. Credit Card Receivables SYF comprises ~7% of credit card receivables $48 $52 $57 $61 2011 2012 2013 2014 $ in billions • Majority of growth is organic • Targeted marketing programs, digital capabilities, and value propositions hel
Slide 19: Deep Integration Drives 2-3x Market Growth Rate
19 1.5% 2.6% 2.7% 0.6% 7.6% 1.6% 9.2% 2.9% 7.5% 9.4% 10.1% 9.8% Mass Electronics Healthcare Apparel/Dept. Home Furniture $531 $278 $223 $213 $213 $77 2012-2014 Market Growth Rate 2012-2014 Synchrony Financial Purchase Volume Growth Rate 2014 Market Size ($ in billions) • Over 80 years of retail heri
Slide 20: Attracting New Partners
20 20 Retail Card Payment Solutions CareCredit We attract partners who value our: • Experience & partnership—long history of improving sales, customer loyalty, and retention • Differentiated capabilities: - Marketing and analytics - Innovation - Mobile and online - Underwriting and lifecycle managem
Slide 21: Fast-Growing Online Bank
21 $7.4 $8.0 $9.2 $11.0 $13.0 $15.7 $18.3 $19.7 $21.3 $24.4 $27.6 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Growth Strategy Competitive rates and superior service afforded by low cost structure of online bank Opportunity to further leverage cross-sell opportunities with cardholder b
Slide 22: Future Growth Opportunities
22 Expand network: Expand network capability and increase utility of cards • CareCredit • CarCareOne • Rite Aid • Evaluate targeted co- brand opportunities (e.g. Travel and Entertainment) • Lowe’s Pro Services • Amazon Corporate Credit Line • Sam’s Club Business Credit Account • Geographic expansi
Slide 23: Financial Performance
Financial Performance
Slide 24: Strong Operating Performance
24 $1,578 $1,667 4.57% 4.37% Net Earnings $ in millions 3Q14 YTD 3Q15 YTD Loan Receivables (a) $ in billions + 12% Net Charge-Offs (c) % of average loan receivables Platform Revenue (b) $ in millions $7,410 $7,986 + 8% Improved 20 bps $56.8 $63.5 3Q14 3Q15 3Q14 YTD 3Q15 YTD 3Q14 YTD 3Q15 YTD (a) Per
Slide 25: Peer comparison: margins, growth, balance sheet
25 (a) Segment data for AXP-U.S Card Services and COF-Domestic Credit Card. Other data-total company level. (b) SYF yield calculated as loan receivable yield less net charge-off rate. Peer information calculated as credit card yield less net charge-off rate on credit cards. (c) CET1 ratios are on an
Slide 26: Focus on Higher Quality Asset Base
26 19% 7% 20% 20% 61% 73% • Synchrony Financial controls underwriting and credit line decisions • Focus on stronger underwriting has led to higher quality portfolio - 73% of loan receivables have FICO > 660 Stronger Portfolio U.S. consumer FICO (a) Delinquency Performance 30+ days past due as a % of
Slide 27: Net Charge-Off Ratio and Risk-Adjusted Yield
27 Net Charge-Off Ratio Risk-Adjusted Yield (a) Peers include: AXP US Card Services, BAC US Credit Card, C Citi- Branded Cards North America, COF Domestic Card, DFS Credit Card, JPM Credit Card, and WFC Consumer Credit Card. SYF – total company level. (b) Peers include: AXP US Card Services, BAC US
Slide 28: Retailer Share Arrangements
28 100% 50% 50% 1.5% 2.5% Total Program Return Shared Components Illustrative Examples Program Revenue • Interest Income • Fee Income • Interchange Fees Program Expenses • Interest Expense • Provision for Loan Losses • Loyalty Expense • Operating Expenses SYF Share of Return Retailer Share of Return
Slide 29: Diverse Funding Sources and Strong Liquidity
29 Diverse Funding Sources and Strong Liquidity Deposits Securitized Debt Unsecured Debt 3Q15 Long-term target 16% 63% 21% 15%-20% 60%-70% 15%-20% Diverse Funding Sources % of liabilities excluding non-debt liabilities Strong Liquidity Profile $ in billions $21.9 Highly liquid assets Undrawn capacit
Slide 30: Strong Position Relative to Peers
30 Strong Position Relative to Peers Strong Capital Profile Peers include AXP, DFS, and COF. (a) CET1 ratios are on an estimated, fully phased-in basis. See non-GAAP reconciliation in appendix. (b) Subject to board and regulatory approval. Sources: Company filings and SNL. 3.0% 2.6% SYF Peer Average
Slide 31: Performance Exceeding 2015 Outlook
31 Performance Exceeding 2015 Outlook Loan Receivables Growth 6% - 8% 12% Strategies delivering stronger organic growth Net Interest Margin 15.0% - 15.5% 15.8% Excess liquidity utilization Net Charge-Off Rate Stable (20) bps Improved credit profile Efficiency Ratio < 34% 33.3% Reflects stand-alone c
Slide 32: Strategic Priorities
32 Strategic Priorities Grow our business through our three sales platforms • Grow existing retailer penetration • Add new partners and programs that meet our return and risk thresholds • Evaluate growth opportunities Position business for long-term growth • Build Synchrony Bank into a leading full-
Slide 33: Appendix
Appendix
Slide 34: Summary of Recent Financial Information
34 Summary of Recent Financial Information(a) (a) Unaudited financial information. (b) Average loan receivables includes held for sale. Growth metrics 1Q15 2Q15 3Q15 3Q15 YTD VPYTD% Loan receivables $58,248 $61,431 $63,520 $63,520 11.9% Purchase volume $23,139 $28,810 $29,206 $81,155 11.1% Statement
Slide 35: Platform Revenue Reconciliation
35 ($ in millions) Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Sep 30, Sep 30, Dec 31, Sep 30, 2014 2014 2014 2014 2015 2015 2015 3Q’14 3Q’15 2014 2015 Platform Revenue Total: Interest and fees on loans $2,928 $2,920 $3,116 $3,252 $3,140 $3,166 $3,379 $8,964 $9,685 $12,216 $12,937 Other
Slide 36: Non-GAAP Reconciliation
36 Non-GAAP Reconciliation The following table sets forth a reconciliation of each component of our capital ratios to the comparable GAAP component. COMMON EQUITY MEASURES GAAP Total common equity .................................................................................................... Le
Slide 37: Non-GAAP Reconciliation
37 Non-GAAP Reconciliation The following table sets forth a reconciliation between GAAP results and non-GAAP managed-basis results for 2009. Net charge-offs as a % of average loan receivables, including held for sale: GAAP 11.3% Securitization adjustments (0.6)% Managed-basis 10.7% Interest and fees