Synchrony Financial · NYSE:SYF
Synchrony Financial — Q2 2016 Earnings Presentation
28 slides from Synchrony Financial's earnings presentation, Aug 3, 2016
Slide 1: 2016 Second Quarter Investor Presentation
2016 Second Quarter Investor Presentation August 3, 2016 Exhibit 99.1
Slide 2: Forward-looking statements
2 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 harbor” created by those sections. Forward-looking statements may be
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: Business Overview
Business Overview
Slide 5: Partner-Centric Business with Leading Sales Platforms
5 Partner-Centric Business with Leading Sales Platforms (a) For period 3Q15 through 2Q16, $ in millions. (b) $ in billions, as of June 30, 2016. $10,301 $46.7 $1,828 $14.0 $1,736 $7.6 Payment Solutions Retail Card CareCredit Interest and Fees on Loans(a) Loan Receivables(b) Private label credit card
Slide 6: Customized Products
6 Customized Products Credit Products Retailer only acceptance Accepted at network locations Deposit Products Retailer and private network acceptance Accepted at provider network locations Private Label Dual CardTM Affinity to retailer, provides customized benefits & features Big-ticket focus, offer
Slide 7: Long-Standing Partnerships
7 Long-Standing Partnerships (a) As of June 30, 2016. (b) Excludes certain credit card portfolios that were sold, have not been renewed, or expire in 2016 which represent 1% of our total Retail Card interest and fees on loans for the year ended December 31, 2015. 4% 4% 19% Partners (b) 15% 21% 2019
Slide 8: Expansive Opportunity
8 Expansive Opportunity (a) (a) Source: Nilson. U.S. Credit Card Receivables $48 $52 $57 $61 $68 2011 2012 2013 2014 2015 $ in billions • Majority of growth is organic • Targeted marketing programs, digital capabilities, and value propositions helped drive organic growth Strong Receivables Growth $8
Slide 9: Deep Integration Drives 2-3x Market Growth Rate
9 1.6% 2.3% 3.1% 0.2% 6.7% 3.8% 11.6% 2.5% 8.2% 5.6% 9.8% 11.2% Mass Electronics Healthcare Apparel/Dept. Home Furniture $542 $283 $232 $213 $219 $83 2012-2015 Market Growth Rate 2012-2015 Synchrony Financial Purchase Volume Growth Rate 2015 Market Size ($ in billions) • Over 80 years of retail heri
Slide 10: Attracting New Partners
10 10 Retail Card Payment Solutions 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 management - On-si
Slide 11: Fast-Growing Online Bank
11 $8.0 $9.2 $11.0 $13.0 $15.7 $18.3 $19.7 $21.3 $24.4 $27.6 $29.7 $32.5 $34.1 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Growth Strategy Competitive rates and superior service afforded by low cost structure of online bank Opportunity to further leverage cross-sell opportun
Slide 12: Robust Data, Analytics and Digital Capabilities
Robust Data, Analytics and Digital Capabilities
Slide 13: Proprietary Closed-Loop Network Advantages
13 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 $ 7/2/16 Department Store Partner In- Store DKN
Slide 14: Leverage Data/Analytics to Drive Partner Performance
14 14 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 15: Innovative Digital Capabilities
15 15 eCommerce & Mobile Innovative Digital Capabilities Our innovative digital capabilities drove a 27% increase in online and mobile purchase volume since 2Q15 Mobile Payments Consumer • Investing in enhanced user experience: - Customized offers - Quickscreen - Auto pre-fill • Mobile applications
Slide 16: Financial Performance & Business Highlights
Financial Performance & Business Highlights
Slide 17: 2Q16 Highlights
17 2Q16 Highlights Financial Highlights Business Highlights • $489 million Net earnings, $0.58 diluted EPS • Strong growth across the business: - Purchase volume +9% - Loan receivables +11% - Net Interest Income +10% • Asset quality metrics: - Net charge-offs were 4.49% compared to 4.63% in the prio
Slide 18: Strong Operating Performance
18 $541 $489 4.63% 4.49% Net Earnings $ in millions 2Q15 2Q16 Loan Receivables $ in billions, period-end balances Net Charge-Offs (a) % of average loan receivables Interest and Fees on Loans $ in millions $3,166 $3,494 $61.4 $68.3 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 . (a) Includes loan receivables held fo
Slide 19: Peer comparison: margins, growth and balance sheet
19 (a) Segment data for AXP-U.S Consumer Services and COF-Domestic Card. Other data-total company level. AXP efficiency ratio calculated on an operating basis. (b) SYF yield calculated as loan receivable yield less net charge-off rate. AXP yield calculated as total card member loan yield less net ch
Slide 20: Disciplined Underwriting
20 19% 16% 12% 9% 8% 7% 7% 7% 20% 19% 18% 20% 20% 20% 19% 20% 28% 30% 31% 34% 36% 37% 38% 38% 33% 35% 39% 37% 36% 36% 36% 35% • Synchrony Financial controls underwriting and credit line decisions • Focus on stronger underwriting has led to higher quality portfolio - 73% of loan receivables have FICO
Slide 21: Net Charge-Off Ratio and Risk-Adjusted Yield
21 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 22: Retailer Share Arrangements
22 100% 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 23: Diverse Funding Sources and Strong Liquidity
23 Diverse Funding Sources and Strong Liquidity Deposits Securitized Debt Unsecured Debt 2Q16 Long-term target 11% 71% 18% 15%-20% 60%-70% 15%-20% Diverse Funding Sources % of liabilities excluding non-debt liabilities Strong Liquidity Profile $ in billions $21.0 Highly liquid assets Undrawn capacit
Slide 24: Strong Capital Profile
24 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. 2.6% 2.7% SYF Peer Average
Slide 25: Strategic Priorities
25 Strategic Priorities Grow our business through our three sales platforms Position business for long-term growth Operate with a strong balance sheet and financial profile Leverage strong capital position Expand robust data, analytics and digital capabilities • Grow existing retailer penetration •
Slide 26: Appendix
Appendix
Slide 27: Non-GAAP Reconciliation
27 Non-GAAP Reconciliation The following table sets forth a reconciliation of each component of our capital ratios to the comparable GAAP component at June 30, 2016. COMMON EQUITY MEASURES GAAP Total common equity ......................................................................................
Slide 28: Non-GAAP Reconciliation
28 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