Synchrony Financial · NYSE:SYF
Synchrony Financial — Q2 2017 Earnings Presentation
29 slides from Synchrony Financial's earnings presentation, Aug 8, 2017
Slide 1: 2017 Second Quarter Investor Presentation
2017 Second Quarter Investor Presentation August 8, 2017 Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
2 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 harbor” cr
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 3Q16 through 2Q17, $ in millions. (b) $ in billions, as of June 30, 2017. $11,487 $51 $2,076 $16 $1,931 $8 Payment SolutionsRetail Card CareCredit Interest and Fees on Loans(a) Loan Receivables(b) Private label credit cards, Dual Cards™
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) Existing partners as of June 30, 2017. (b) Excludes certain credit card portfolios that were sold, have not been renewed, or expire in 2017, which represent less than 1% of our total Retail Card interest and fees on loans for the year ended December 31, 2016. 20% Par
Slide 8: Deep Integration Drives 2-3x Market Growth Rate
8 1.0% 2.2% 3.9% 0.0% 7.0% 2.0% 11.7% 2.5% 8.8% 6.1% 9.2% 13.2% Mass Electronics Healthcare Apparel/Dept. Home Furniture $538 $288 $246 $209 $236 $88 2012-2016 Market Growth Rate 2012-2016 Synchrony Financial Purchase Volume Growth Rate 2016 Market Size ($ in billions) • Over 80 years of retail heri
Slide 9: Attracting New Partners
9 9 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-site
Slide 10: Fast-Growing Online Bank
10 $15.7 $24.4 $34.1 $40.4 2Q14 2Q15 2Q16 2Q17 • Competitive rates and superior service afforded by low cost structure of online bank • Opportunity to further leverage synergies with cardholder base • Evaluating new product offerings - checking, debit, bill payment, small business deposit accounts •
Slide 11: Robust Data, Analytics and Digital Capabilities
Robust Data, Analytics and Digital Capabilities
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 $ 7/2/17 Department Store Partner In- Store DKN
Slide 13: Analytics at Synchrony Financial
13 Prior After Launch Analytics at Synchrony Financial • Generic Offers • Mass Marketing • Portfolio Level Analytics SKU/Category Level Coverage Evolution of Analytics <50% Present and Future Past >70% 2014 2016 • Provides the ability to analyze significantly more data than general purpose credit ca
Slide 14: Innovative Digital Capabilities
14 Innovative Digital Capabilities Expanding Online and Mobile Capabilities Expanding Digital Capabilities • Investing in enhanced user experience • Mobile applications deliver customized features including rewards, retail offers and alerts • Developed SyPi, a mobile platform that can be rapidly int
Slide 15: Performance & Strategic Priorities
Performance & Strategic Priorities
Slide 16: 2Q17 Highlights
16 2Q17 Highlights • $496 million Net Earnings, $0.61 diluted EPS • Strong growth metrics ‒ Loan Receivables up 11% ‒ Net Interest Income up 13% ‒ Purchase Volume up 6% Digital growth of 18%, digital penetration of 23% ‒ Average Active Accounts up 5% • Net Charge-Offs 5.42% compared to 4.51% in th
Slide 17: Operating Performance
17 4.51% 5.42% Loan Receivables $ in billions, period-end balances Net Charge-Offs % of average loan receivables including held for sale Interest and Fees on Loans $ in millions $3,494 $3,927 $68.3 $75.5 2Q16 2Q17 2Q16 2Q172Q16 2Q17 Operating Performance $0.58 $0.61 Diluted EPS 2Q16 2Q17 Efficiency
Slide 18: Peer Comparison: Margins, Growth and Balance Sheet
18 (a) Segment data for AXP-U.S Consumer Services and COF-Domestic Card. Other data-total company level. (b) SYF yield calculated as loan receivable yield less net charge-off rate. AXP yield calculated as total card member loan yield less net charge-off rate on card member loans (ex-HFS). Other peer
Slide 19: Disciplined Underwriting and Stronger Portfolio
19 1% 22% 38% 39% 19% 12% 9% 8% 7% 7% 7% 8% 20% 18% 20% 20% 20% 19% 20% 19% 28% 31% 34% 36% 37% 38% 38% 38% 33% 39% 37% 36% 36% 36% 35% 35% • Synchrony Financial controls underwriting and credit line decisions • Focus on stronger underwriting has led to higher quality portfolio - 73% of loan receiva
Slide 20: Net Charge-Off Ratio and Risk-Adjusted Yield vs Peers
20 Net Charge-Off Ratio Risk-Adjusted Yield (a) Peers include: AXP U.S. Card Services prior to 2014 and AXP U.S. Consumer Services starting in 2014, BAC U.S. Credit Card, C Citi- Branded Cards North America, COF Domestic Card, DFS Credit Card, JPM Credit Card, and WFC Consumer Credit Card. SYF – tot
Slide 21: Retailer Share Arrangements
21 100% 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 22: Diverse Funding Sources and Strong Liquidity
22 Diverse Funding Sources and Strong Liquidity Deposits Securitized Debt Unsecured Debt 2Q17 Long-term target 11% 72% 17% 10%-15% 70%-75% 15%-20% Diverse Funding Sources % of liabilities excluding non-debt liabilities Strong Liquidity Profile $ in billions $21.9 Liquid assets Undrawn Credit Facilit
Slide 23: Strong Position Relative to Peers
23 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. 2.2% 2.2% SYF Peer Average
Slide 24: Capital Deployment
24 20% 22% 25% 43% 75% 84% 0% 20% 40% 60% 80% 100% 120% 2016 SYF Capital Plan 2017 SYF Capital Plan Peer Capital Plan Average Dividends Buybacks Capital Deployment (a) 2016 SYF Capital Plan is for illustrative purposes only. It incorporates the 7/7/16 capital plan announcement of $0.13/share quarter
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 We present certain capital ratios. Our Basel III Tier 1 common ratio, calculated on a fully phased-in basis, is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal Reserve Board, which have
Slide 28: Non-GAAP Reconciliation
28 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, 2017. COMMON EQUITY MEASURES GAAP Total common equity ......................................................................................
Slide 29: Non-GAAP Reconciliation
29 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