Synchrony Financial · NYSE:SYF
Synchrony Financial — Q4 2016 Earnings Presentation
30 slides from Synchrony Financial's earnings presentation, Jan 30, 2017
Slide 1: 2016 Fourth Quarter Investor Presentation
2016 Fourth Quarter Investor Presentation January 30, 2017 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) 2016, $ in millions. (b) $ in billions, as of December 31, 2016. $10,898 $52.6 $1,952 $15.6 $1,832 $8.1 Payment SolutionsRetail Card CareCredit Interest and Fees on Loans(a) Loan Receivables(b) Private label credit cards, Dual Cards™ & smal
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 December 31, 2016 and also reflects the renewal of the Belk program in January 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 in
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 $11.0 $19.7 $29.7 $37.9 4Q13 4Q14 4Q15 4Q16 • 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 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 $ 1/2/17 Department Store Partner In- Store DKN
Slide 14: Evolution of Analytics at Synchrony Financial
14 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 15: Using Data and Analytics to Develop Effective Value Propositions
15 Using Data and Analytics to Develop Effective Value Propositions • Joint team from Partner A and Synchrony generated multiple new value proposition ideas for Dual CardTM • Analytics played a key role in providing facts to substantiate new ideas and established foundational insights on: - Customer
Slide 16: Innovative Digital Capabilities
16 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 17: Performance & Strategic Priorities
Performance & Strategic Priorities
Slide 18: 2016 Performance and Accomplishments
18 Loan Receivables Growth 7% - 9% 12% Net Interest Margin ~ 15.5% 16.0% Net Charge-off Rate 4.3% - 4.5% 4.5% Efficiency Ratio < 34.0% 31.1% ROA 2.5% - 3.0% 2.7% • Added new partners, renewed existing relationships, and launched new programs and value propositions • Expanded digital capabilities; on
Slide 19: Strong Operating Performance
19 4.33% 4.53% Loan Receivables $ in billions, period-end balances Net Charge-Offs (a) % of average loan receivables including held for sale Interest and Fees on Loans $ in millions $13,179 $14,682 $68.3 $76.3 2015 2016 2015 20162015 2016 (a) Includes loan receivables held for sale. Strong Operating
Slide 20: Peer Comparison
20 (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 21: Focus on Higher Quality Asset Base
21 1% 22% 38% 39% 19% 13% 11% 9% 8% 7% 7% 7% 20% 19% 18% 20% 20% 20% 20% 20% 28% 31% 32% 35% 36% 37% 37% 38% 33% 37% 39% 36% 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 receiv
Slide 22: Net Charge-Off Ratio and Risk-Adjusted Yield vs Peers
22 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 23: Retailer Share Arrangements
23 100% 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 24: Diverse Funding Sources and Strong Liquidity
24 Diverse Funding Sources and Strong Liquidity Deposits Securitized Debt Unsecured Debt 4Q16 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 $20.3 Liquid assets Undrawn Credit Facilit
Slide 25: Strong Capital Profile Relative to Peers
25 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. CET1 at December 31, 2016 for SYF under Basel III subject to transition provisions was 17.2%. See non-GAAP reconciliation in appendix for further d
Slide 26: Strategic Priorities
26 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 27: Appendix
Appendix
Slide 28: Non-GAAP Reconciliation
28 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 29: Non-GAAP Reconciliation
29 Non-GAAP Reconciliation The following table sets forth a reconciliation of each component of our capital ratios to the comparable GAAP component at December 31, 2016. COMMON EQUITY MEASURES GAAP Total common equity ..................................................................................
Slide 30: Non-GAAP Reconciliation
30 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