Synchrony Financial · NYSE:SYF
Synchrony Financial — Investor Presentation (February 2023)
31 slides from Synchrony Financial's investor presentation, Feb 27, 2023
Slide 1: Investor Presentation February 2023
1 Investor Presentation February 2023 Exhibit 99.1
Slide 2: Disclaimers: Cautionary Statement Regarding Forward-Looking Statements
2 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 “saf
Slide 3: Differentiated Business Model
3 Differentiated Business Model… $1.2T Purchase Volume since IPO $92B Loan Receivables 70M+ Active Accounts 46 U.S. Patents 200+ Agile Build Teams Transactions per Month2 235K+ 100Ms Customer Visits across our CareCredit, Home, Car Care and MySynchrony Networks1 N O N -D IS C R E T IO N A R Y OUT OF
Slide 4: Driving Strong Financial Results
4 … Driving Strong Financial Results TIER 1 CAPITAL + CREDIT LOSS RESERVE RATIO* TANGIBLE BOOK VALUE PER SHARE (+46% vs 2Q20**) CET1 RATIO (vs ~11% target) 22%80%+ $22.2412.8% DEPOSIT FUNDED BALANCED GROWTH SINCE YEAR OF IPO 1 AT STRONG RISK-ADJUSTED RETURNS AVERAGE RISK-ADJUSTED RETURN2 ANNUAL GROW
Slide 5: Diverse Suite of Digital Products and Experiences
5 Diverse Suite of Digital Products and Experiences… Customer Choice Purchasing Power Frictionless, Digital CX Value Prop Experience & Trust Seamless Customer Journey APPLY USE SERVICEENGAGE Multi-product Suite Digital Bank Installment Growth Adjacencies PLCC DUAL CARD CO-BRAND SECURED NETWORK SYNCH
Slide 6: Addresses Broad Range of Consumers' Financing Needs
6 … Addresses Broad Range of Consumers’ Financing Needs ILLUSTRATIVE PRODUCT JOURNEY • Pay-over-time flexibility • Closed-end, one-time loan PLCC • Revolving credit line • Partner rewards • Pay-over-time options • Brand affinity DUAL CARD • Revolving credit line with broad utility • Expanded rewards
Slide 7: Efficient Partner Model Builds Broad Cardholder Base
7 28.2% 40.6% 31.3% Efficient Partner Model Builds Broad Cardholder Base … BROAD, MASS-MARKET REACH #1 in total cardholders1 1.7 cards per cardholder 79% 73% 21% 27% 2019 Today PRODUCTS WITH WIDE APPEAL Millennials and Gen Z Baby Boomers and Gen X LOW COST, HIGH VALUE ~$1,200 ~6.5 ~$220 average mont
Slide 8: Across Deep and Diversified Industry Platforms
8 … Across Deep and Diversified Industry Platforms DIGITAL HEALTH & WELLNESS HOME & AUTO LIFESTYLEDIVERSIFIED & VALUE * Sample partners as of December 31, 2022.
Slide 9: Drive Value by Deepening Customer Relationships
9 Drive Value by Deepening Customer Relationships PRODUCT UPGRADES (12) (9) (6) (3) 0 3 6 9 12 15 18 21 UPGRADED CONTROL 98% increase in sales1 increase in balances1 78% Moving Customer from PLCC to Dual Card Higher Risk- Adjusted Returns per account/per month ADDITIONAL PRODUCTS2 Months (Pre)/Post-
Slide 10: Proprietary Data and Multidimensional Underwriting
10 Proprietary Data and Multidimensional Underwriting Enable Greater Predictive Precision for a Similar Level of Risk Credit Bureau Trended Data • Payment/Delinquency History • Inquiries/Time on File • Revolving Balances/Lines Alternative Data • Utility and Telecom Data • Income Assets/Cash Flow • P
Slide 11: Constantly Innovating To Make Better Decisions
11 Constantly Innovating To Make Better Decisions and Enhance the Customer Experience Synchrony develops a new proprietary acquisition model that outperforms a previous third-party solution, separating risk better. Synchrony has three options to deploy the new model: 1 Increase approval rate 75bps a
Slide 12: Utilize Many Levers to Manage Risk and Optimize Outcomes
12 P O R T F O L I O C O M P O S I T I O N Utilize Many Levers to Manage Risk and Optimize Outcomes P O R T F O L I O M A N A G E M E N T Credit Levers Available to Manage Exposure • Proactive acquisition offers (prescreen and quick-screen) • PLCC marginal cutoffs • Line assignment • Product mix bet
Slide 13: Deliver Consistent Loss Performance Over Time
13 Deliver Consistent Loss Performance Over Time ✓ Less volatility through cycles ✓ PRISM tools enable approval of more borrowers for similar level of risk ✓ Underwrite to Risk-Adjusted Margins at a partnership level ✓ Aggregated portfolio delivers a 5.5%–6.0% net loss rate in a steady environment -
Slide 14: Digital Bank Serves as Funding Foundation
14 Digital Bank Serves as Funding Foundation STRONG RELATIONSHIPS STABLE FUNDING OVER TIME OPPORTUNITY FOR GROWTH ~$60k average balance per account Award-winning online franchise Diversifying with younger, mass- market depositors through partnerships ~40% 5+ years average relationship >$50b Stable D
Slide 15: Optimize Balance Sheet for Resilient Funding through Cycles
15 $84 $106 $100 82% 83% 85% 50% 60% 70% 80% 90% 100% 110% - 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 2016 2019 2022 Average Interest-Earning Assets ($B) Loans as % of Interest-Earning Assets STABLE ASSET MIX Optimize Balance Sheet for Resilient Funding through Cycles 72% 77% 84
Slide 16: Maintain Prudent Capital Position While Driving Value for Shareholders
16 CET1 CAPITAL JOURNEY 18.0% 2Q’16 (Post-IPO Peak) 2019 14.1% 12.8% Returned ~$17.9B of capital to shareholders since 2016 Maintain Prudent Capital Position While Driving Value for Shareholders 2022 GROWING TBV ** PER SHARE 15% 14% 12% 5% 13% 10% 20% 27% 2014 2020 Tier 1 Capital Reserves for Credit
Slide 17: Execute a Disciplined Capital Allocation Strategy
17 Maintain and expand partner, merchant and provider relationships Strategic investments to deliver best-in-class customer experience Deliver consistent dividends over time and through economic cycles Common stock dividends of $3.2 billion since 2016 Organic Growth Dividends Share Repurchases Inorg
Slide 18: Well Positioned to Deliver Sustainable Growth
18 Well Positioned to Deliver Sustainable Growth … PURCHASE VOLUME EOP RECEIVABLES NET INTEREST INCOME 7% CAGR 5% CAGR 4% CAGR $180B $103B $92B $61B $16B $11B 2014 2022 2014 2022 2014 2022
Slide 19: Resilient Risk-Adjusted Returns through Evolving Environments
19 RSA/Purchase Volume2 Prime and Super Prime/EOP1,2 ~2.5+% ROA ~28+% ROTCE LONG-TERM TARGETS: … and Resilient Risk-Adjusted Returns through Evolving Environments * Risk-adjusted return (RAR) defined as net interest income minus retailer share agreements (RSA) and net charge offs (NCOs), divided by
Slide 20: Powered by Our Differentiated Business Model
20 Sustainable Receivable Growth Operate Efficiently Resilient Risk- Adjusted Margin Retailer Share Agreements … Powered by Our Differentiated Business Model 7–10% NIM ~16% NCO ~5.5–6.0% ~4.0–4.5% ~32–33% Long-Term Financial Framework Should Deliver Double-Digit EPS Growth in a Normalized Operating
Slide 21: Appendix
|! synchrony APPENDIX
Slide 22: Home & Auto Market Overview
22 WELL-POSITIONED WITH AMPLE MARKET PENETRATION OPPORTUNITY Market Overview ~$2.3T Home & Auto ~$0.8T Home ~$1.5T Auto DEEP DOMAIN ENTERPRISE DRIVES VALUE ~60% REPEAT SALES reflecting strong value and customer loyalty ~2M NETWORK LOCATIONS participating locations for home and car care networks 30+
Slide 23: Health & Wellness Market Overview
23 Market Overview LEADING HEALTHCARE AND PET CARE FINANCING PROVIDER WITH SCALE AND EXPERTISE ~$430B Health OOP Expenditures ~$100B Pet Expenditures ~$200B Wellness Expenditures PROVIDER LOCATIONS ~75% penetration in the Dentistry, Vet and Ophthalmology markets CORE DIFFERENTIATORS ARE HARD TO REPL
Slide 24: Diversified & Value Market Overview
24 >$900B D&V Market ~$125B Current Partner Sales1 DELIVER OMNICHANNEL EXPERIENCES AND EVERYDAY VALUE ACROSS SCALED RETAIL PARTNERS 9+ year CARDHOLDER TENURE on average across Diversified & Value POWER COMPELLING OUTCOMES FOR OUR PARTNERS AND CUSTOMERS 20+ year RELATIONSHIPS average length of relati
Slide 25: Lifestyle Market Overview
25 ~$400B Lifestyle Verticals Consumer Spending STRONG FOUNDATION, POSITIONED FOR GROWTH BROAD PARTNER SPECTRUM ACROSS A DIVERSE SET OF INDUSTRIES 5+ MAJOR CATEGORIES from apparel to powersports ~$15K / 65MO AVERAGE ORIGINATION for secured installment loans ~20,000 PARTNER/DEALER LOCATIONS2 >2k adde
Slide 26: Digital Market Overview
26 >$700B Total Partner Opportunity ~21% E-Comm CAGR 2017–20211 HIGHLY ENGAGED CUSTOMERS, DEEPLY INTEGRATED PRODUCTS AND PARTNERSHIPS DRIVING SEAMLESS ENGAGEMENT WITH DIGITAL-FIRST BRANDS PRODUCTS & VAL PROPS SEAMLESSLY INTEGRATED ON PARTNER PLATFORMS Extended Promotions & Partner-Based Rewards Virt
Slide 27: Footnotes
27 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 refle
Slide 28: Footnotes
28 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 per
Slide 29: Non-GAAP Reconciliation
29 Non-GAAP Reconciliation The following table sets forth the components of our Tangible common equity and tangible common equity per share At December 31, Total 2016 2019 2022 GAAP total equity $14,196 $15,088 $12,873 Less: Preferred Stock - (734) (734) Less: Goodwill (949) (1,078) (1,105) Less: In
Slide 30: Non-GAAP Reconciliation Continued
30 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) Tie
Slide 31: Non-GAAP Reconciliation Continued
31 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 ad
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