Synchrony Financial · NYSE:SYF
Synchrony Financial — Q1 2018 Earnings Presentation
26 slides from Synchrony Financial's earnings presentation, May 11, 2018
Slide 1: 2018 First Quarter Investor Presentation
Exhibit 99.1 2018 First Quarter Investor Presentation May 11, 2018
Slide 2: Disclaimers: Cautionary Statement Regarding Forward-Looking Statements
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: Synchrony Financial Overview
Synchrony Financial Overview Leading Consumer Finance Business Attractive Growth and Ample • Largest Private Label Credit Card (PLCC) Opportunities provider in US(a) • Strong receivables growth • A leader in financing for major consumer • Significant opportunity to leverage purchases and healthcare
Slide 4: Business Overview
Business Overview
Slide 5: Partner-Centric Business with Leading Sales Platforms
Partner-Centric Business with Leading Sales Platforms Retail Card Payment Solutions CareCredit Private label credit cards, Promotional financing for Promotional financing Dual Cards™, general major consumer to consumers for purpose co-branded credit purchases, offering health and personal care cards
Slide 6: Customized Credit Products
Customized Credit Products Payment Retail Card CareCredit Solutions Private Label Dual CardTM Co-Brand Private Label Private Label Dual CardTM Retailer only Accepted at Accepted at Retailer and private Accepted at Accepted at acceptance network locations network locations network acceptance provider
Slide 7: Fast-Growing Online Bank
Fast-Growing Online Bank Synchrony Bank FDIC-Insured Deposit Products Certificates of Deposit Money Market Accounts Savings Accounts IRA Money Market Accounts IRA Certificates of Deposit Competitive rates and Evaluating new product Opportunity to further superior service afforded offerings - checkin
Slide 8: Long-Standing Partnerships
Long-Standing Partnerships Length of Major Partner 39 24 21 20 18 18 13 10 Relationships (Years) (a) Last Renewal 2014 2014 2014 2014 2013 2013 2017 2015 Contractual Expiration (a) % of 2017 Retail Card Interest and Fees on Loans (b) 21% 21% 21% 14% 12% 11% <1% 2018 2019 2020 2021 2022 2023 2024+ Pa
Slide 9: Deep Integration Drives 2-3x Market Growth Rate
Deep Integration Drives 2-3x Market Growth Rate 11.7% 13.2% 8.8% 9.2% 6.1% 7.0% 3.9% 2.2% 2.5% 2.0% 1.0% 0.0% Mass Electronics Healthcare Apparel/Dept. Home Furniture 2016 Market Size ($ in billions) $538 $288 $246 $209 $236 $88 2012-2016 Market Growth Rate 2012-2016 Synchrony Financial Purchase Vol
Slide 10: Attracting New Partners
Attracting New Partners Retail Card Payment Solutions CareCredit We attract partners who value our: We seek deals that: • Experience & partnership—long history of • Have an appropriate risk-reward profile improving sales, customer loyalty, and retention • Enable us to own key program aspects: • Diff
Slide 11: Robust Data, Analytics and Digital Capabilities
Robust Data, Analytics and Digital Capabilities
Slide 12: Proprietary Closed-Loop Network Advantages
Proprietary Closed-Loop Network Advantages Enables Valuable Data Capture and Eliminates Interchange Fees General Purpose Card and Co-Branded Cards Customer Merchant Acquirer Network Issuer • Limited data can be collected by the card issuer when a General Purpose Citi Capital One Credit Card or tradi
Slide 13: Analytics at Synchrony Financial
Analytics at Synchrony Financial Evolution of Analytics Past Present and Future • Generic Offers • Customized Offers • Mass Marketing • 1-on-1 Marketing • Portfolio Level Analytics • Customer/Channel/Store Level Analytics • Customer 360° View • 170+ Dedicated Analytics Professionals • Big Data Platf
Slide 14: Innovative Digital Capabilities
Innovative Digital Capabilities Expanding Online and Mobile Capabilities Expanding Digital Capabilities Consumer • Investing in enhanced user experience • Investing in enhanced user experience • Mobile applications deliver customized features - Customized offers including rewards, retail offers, and
Slide 15: Performance & Strategic Priorities
Performance & Strategic Priorities
Slide 16: 1Q18 Highlights
1Q18 Highlights Financial Highlights Business Highlights • $640 million Net Earnings, $0.83 diluted EPS Added new partnerships • Continued growth across the business ‒ Loan Receivables up 6% ‒ Net Interest Income up 7% ‒ Purchase Volume up 3% ‒ Average Active Accounts up 2% • Net Charge-Offs 6.14% c
Slide 17: Peer Comparison: 1Q18
Peer Comparison: 1Q18 Significant Growth Strong Margins Strong Balance Sheet Purchase Volume Growth(a) Risk-Adjusted Yield(b) CET1 Ratio(c) 18.3% 16.8% 15.3% 11.0% 11.8% 10.4% 10.5% 9.8% 9.5% 9.4% 5.9% 2.6% COF AXP DFS SYF SYF AXP COF DFS SYF DFS COF AXP Loan Receivables Growth(d) Efficiency Ratio(a
Slide 18: Focus on Higher Quality Asset Base
Focus on Higher Quality Asset Base Disciplined Underwriting Stronger Portfolio (a) FICO, consumer accounts opened since Consumer FICO beginning of 2010 721+ 33% 36% 34% 34% 34% 34% 34% 35% 721+ 39% 28% 661-720 34% 36% 37% 38% 38% 38% 38% 661-720 38% 20% 601-660 20% 21% 21% 20% 20% 20% 601-660 22% 19
Slide 19: Historical Net Charge-Offs & Risk-Adjusted Yield
Historical Net Charge-Offs & Risk-Adjusted Yield (a,c) Net Charge-Off Ratio Delivered Strong 12.00% Risk-Adjusted Returns 10.00% • Net charge-off performance was 8.00% generally consistent with general off Ratio - 6.00% purpose card issuers during the SYF financial crisis 4.00% Bank Card Average Net
Slide 20: Retailer Share Arrangements (RSA)
Retailer Share Arrangements (RSA) Provides a countercyclical buffer in stressed environments: 2013-2017 RSAs were 4.3% of average loan receivables(a) 2009 RSAs were 1.6% of average loan receivables(b) Shared Components Illustrative Examples Operating Program SYF Share of Return Total Program Return
Slide 21: Diverse Funding Sources and Strong Liquidity
Diverse Funding Sources and Strong Liquidity Diverse Funding Sources Strong Liquidity Profile % of liabilities excluding non-debt liabilities $ in billions $24.6 $6.0 Undrawn Credit Facilities Liquid $18.6 Deposits 73% 70%-75% assets 1Q18 • Diverse and stable funding sources Securitized Debt 16% 15%
Slide 22: Strong Capital Profile
Strong Capital Profile Strong Position Relative to Peers CET1 Ratio – 1Q18(a) 16.8% • Current level of capital well above peers 10.6% • Generating solid relative earnings power • Significant capital return opportunity over the long-term(b) SYF Peer Average Capital Deployment Priorities ROA – 1Q18 1.
Slide 23: Capital Deployment
Capital Deployment Capital Payout Distribution 120% 109% 100% 97% 80% 63% 84% 60% 75% 40% 43% 20% 20% 22% 25% 0% (a) (b) (c) 2016 SYF Capital Plan 2017 SYF Capital Plan Peer Capital Plan Average Dividends Buybacks • Improved capital payout distribution, with stronger buyback weighting ‒ Assuming loa
Slide 24: Strategic Priorities
Strategic Priorities Grow our business through our three sales platforms • Grow existing retailer penetration • Continue to innovate and provide robust cardholder value propositions • Add new partners and programs with attractive risk and return profiles Invest in ‘Next Generation’ data, analytics a
Slide 25: Appendix
Appendix
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation The following table sets forth a reconciliation between GAAP results and non-GAAP managed-basis results for 2009. Twelve months ended December 31, 2009 Net charge-offs as a % of average loan receivables, including held for sale: GAAP 11.3% Securitization adjustments (0.6)% Ma