Synchrony Financial Reports Fourth Quarter Net Earnings of $576 Million or $0.70 Per Diluted Share

Friday, January 20, 2017 6:30 am EST

Dateline:

STAMFORD, Conn.

Public Company Information:

NYSE:
SYF
"As we look to 2017, we believe our strategic focus and partner-centric business model position us well for future opportunities and continued growth."

STAMFORD, Conn.--(BUSINESS WIRE)--Synchrony Financial (NYSE:SYF) today announced fourth quarter 2016 net earnings of $576 million, or $0.70 per diluted share.

  • Net interest income increased 13% from the fourth quarter of 2015 to $3.6 billion
  • Loan receivables grew $8 billion, or 12%, from the fourth quarter of 2015 to $76 billion
  • Purchase volume increased 9% from the fourth quarter of 2015
  • Strong deposit growth continued, up $9 billion, or 20%, over the fourth quarter of 2015
  • Launched Fareportal program
  • Announced a new multi-year agreement with Henry Schein Financial Services, LLC
  • Quarterly common stock dividend payment of $0.13 per share and repurchased $238 million of Synchrony Financial common stock

“We are pleased with the significant progress we made in 2016. We generated strong organic growth across our sales platforms which resulted in significant revenue growth, substantial operating leverage, and attractive returns. We also signed and renewed several key relationships, expanded our network, continued to drive digital innovations and analytics capabilities, and supported our business with robust growth in our direct deposit platform. We did this while maintaining a strong balance sheet and returning capital to shareholders through growth and the execution of our initial capital plan which included dividends and share repurchases,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “As we look to 2017, we believe our strategic focus and partner-centric business model position us well for future opportunities and continued growth.”

Business and Financial Highlights for the Fourth Quarter of 2016

All comparisons below are for the fourth quarter of 2016 compared to the fourth quarter of 2015, unless otherwise noted.

Earnings

  • Net interest income increased $420 million, or 13%, to $3.6 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 14%.
  • Provision for loan losses increased $253 million to $1.076 billion due to higher loan loss reserve build and loan receivables growth.
  • Other income decreased $2 million to $85 million primarily due to higher loyalty program expense, partially offset by higher interchange revenue.
  • Other expense increased $48 million to $918 million, primarily driven by business growth.
  • Net earnings totaled $576 million compared to $547 million in the fourth quarter of 2015.

Balance Sheet

  • Period-end loan receivables growth remained strong at 12%, primarily driven by purchase volume growth of 9% and average active account growth of 6%.
  • Deposits grew to $52 billion, up $9 billion, or 20%, and comprised 72% of funding compared to 64% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $20 billion, or 23% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 17.2% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.0%.

Key Financial Metrics

  • Return on assets was 2.6% and return on equity was 16.3%.
  • Net interest margin increased 49 basis points to 16.22%.
  • Efficiency ratio was 31.6%, compared to 34.0% in the fourth quarter of 2015, driven by positive operating leverage arising from strong revenue growth that exceeded expense growth.

Credit Quality

  • Loans 30+ days past due as a percentage of total period-end loan receivables were 4.32% compared to 4.06% last year.
  • Net charge-offs as a percentage of total average loan receivables were 4.62% compared to 4.23% last year.
  • The allowance for loan losses as a percentage of total period-end loan receivables was 5.69% compared to 5.12% last year.

Sales Platforms

  • Retail Card interest and fees on loans increased 12%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 11%. Average active account growth was 5%. Loan receivables growth was broad-based across partner programs.
  • Payment Solutions interest and fees on loans increased 13%, driven primarily by purchase volume growth of 13% and period-end loan receivables growth of 15%. Average active account growth was 12%. Loan receivables growth was led by the home furnishings, automotive, and power product categories.
  • CareCredit interest and fees on loans increased 11%, driven primarily by purchase volume growth of 10% and period-end loan receivables growth of 10%. Average active account growth was 8%. Loan receivables growth was led by the dental and veterinary specialties.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed February 25, 2016, and the Company’s forthcoming Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.

Conference Call and Webcast Information

On Friday, January 20, 2017, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on the Synchrony Financial corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 42016#, and can be accessed beginning approximately two hours after the event through February 3, 2017.

About Synchrony Financial

Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 350,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial offers private label and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.comfacebook.com/SynchronyFinancial, www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

*Source: The Nilson Report (May 2016, Issue # 1087) - based on 2015 data.

Cautionary Statement Regarding Forward-Looking Statements

This news release 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 identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; our transition to a replacement third-party vendor to manage the technology platform for our online retail deposits; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; obligations associated with being an independent public company; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed on February 25, 2016. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.

                   
SYNCHRONY FINANCIAL
FINANCIAL SUMMARY
(unaudited, in millions, except per share statistics)

Quarter Ended

Twelve Months Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

4Q'16 vs. 4Q'15 Dec 31,

2016

Dec 31,

2015

YTD'16 vs. YTD'15

EARNINGS

Net interest income $3,628 $3,481 $3,212 $3,209 $3,208 $420 13.1% $13,530 $12,093 $1,437 11.9%
Retailer share arrangements (811 ) (757 ) (664 ) (670 ) (734 ) (77 ) 10.5% (2,902 ) (2,738 ) (164 ) 6.0%
Net interest income, after retailer share arrangements 2,817 2,724 2,548 2,539 2,474 343 13.9% 10,628 9,355 1,273 13.6%
Provision for loan losses 1,076   986   1,021 903 823   253   30.7% 3,986   2,952   1,034   35.0%
Net interest income, after retailer share arrangements and provision for loan losses 1,741 1,738 1,527 1,636 1,651 90 5.5% 6,642 6,403 239 3.7%
Other income 85 84 83 92 87 (2 ) (2.3)% 344 392 (48 ) (12.2)%
Other expense 918   859   839 800 870   48   5.5% 3,416   3,264   152   4.7%
Earnings before provision for income taxes 908 963 771 928 868 40 4.6% 3,570 3,531 39 1.1%
Provision for income taxes 332   359   282 346 321   11   3.4% 1,319   1,317   2   0.2%
Net earnings $576   $604   $489 $582 $547   $29   5.3% $2,251   $2,214   $37   1.7%
Net earnings attributable to common stockholders $576   $604   $489 $582 $547   $29   5.3% $2,251   $2,214   $37   1.7%
 

COMMON SHARE STATISTICS

Basic EPS $0.70 $0.73 $0.59 $0.70 $0.66 $0.04 6.1% $2.71 $2.66 $0.05 1.9%
Diluted EPS $0.70 $0.73 $0.58 $0.70 $0.65 $0.05 7.7% $2.71 $2.65 $0.06 2.3%
Dividend declared per share $0.13 $0.13 - - - $0.13 NM $0.26 - $0.26 NM
Common stock price $36.27 $28.00 $25.28 $28.66 $30.41 $5.86 19.3% $36.27 $30.41 $5.86 19.3%
Book value per share $17.37 $16.94 $16.45 $15.84 $15.12 $2.25 14.9% $17.37 $15.12 $2.25 14.9%
Tangible common equity per share(1) $15.34 $14.90 $14.46 $13.86 $13.14 $2.20 16.7% $15.34 $13.14 $2.20 16.7%
 
Beginning common shares outstanding 825.5 833.9 833.8 833.8 833.8 (8.3 ) (1.0)% 833.8 833.8 - -%
Issuance of common shares - - - - - - -% - - - -%
Stock-based compensation - 0.1 0.1 - - - -% 0.2 - 0.2 NM
Shares repurchased (8.1 ) (8.5 ) - - -   (8.1 ) NM (16.6 ) -   (16.6 ) NM
Ending common shares outstanding 817.4 825.5 833.9 833.8 833.8 (16.4 ) (2.0)% 817.4 833.8 (16.4 ) (2.0)%
 
Weighted average common shares outstanding 820.5 828.4 833.9 833.8 833.8 (13.3 ) (1.6)% 829.2 833.8 (4.6 ) (0.6)%
Weighted average common shares outstanding (fully diluted) 823.8 830.6 836.2 835.5 835.8 (12.0 ) (1.4)% 831.5 835.5 (4.0 ) (0.5)%
                                           
(1) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
                   
SYNCHRONY FINANCIAL
SELECTED METRICS (1)
(unaudited, $ in millions, except account data)
Quarter Ended Twelve Months Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

4Q'16 vs. 4Q'15 Dec 31,

2016

Dec 31,

2015

YTD'16 vs. YTD'15

PERFORMANCE METRICS

Return on assets(2) 2.6% 2.8% 2.4% 2.8% 2.7% (0.1)% 2.7% 2.9% (0.2)%
Return on equity(3) 16.3% 17.4% 14.6% 18.1% 17.5% (1.2)% 16.6% 19.1% (2.5)%
Return on tangible common equity(4) 18.5% 19.8% 16.6% 20.8% 20.1% (1.6)% 18.9% 22.0% (3.1)%
Net interest margin(5) 16.22% 16.27% 15.86% 15.76% 15.73% 0.49% 16.01% 15.77% 0.24%
Efficiency ratio(6) 31.6% 30.6% 31.9% 30.4% 34.0% (2.4)% 31.1% 33.5% (2.4)%
Other expense as a % of average loan receivables, including held for sale 5.00% 4.92% 5.04% 4.82% 5.28% (0.28)% 4.93% 5.25% (0.32)%
Effective income tax rate 36.6% 37.3% 36.6% 37.3% 37.0% (0.4)% 36.9% 37.3% (0.4)%
 

CREDIT QUALITY METRICS

Net charge-offs as a % of average loan receivables, including held for sale 4.62% 4.38% 4.49% 4.70% 4.23% 0.39% 4.53% 4.33% 0.20%
30+ days past due as a % of period-end loan receivables(7) 4.32% 4.26% 3.79% 3.85% 4.06% 0.26% 4.32% 4.06% 0.26%
90+ days past due as a % of period-end loan receivables(7) 2.03% 1.89% 1.67% 1.84% 1.86% 0.17% 2.03% 1.86% 0.17%
Net charge-offs $847 $765 $747 $780 $697 $150 21.5% $3,139 $2,691 $448 16.6%
Loan receivables delinquent over 30 days(7) $3,295 $3,008 $2,585 $2,538 $2,772 $523 18.9% $3,295 $2,772 $523 18.9%
Loan receivables delinquent over 90 days(7) $1,546 $1,334 $1,143 $1,212 $1,273 $273 21.4% $1,546 $1,273 $273 21.4%
 
Allowance for loan losses (period-end) $4,344 $4,115 $3,894 $3,620 $3,497 $847 24.2% $4,344 $3,497 $847 24.2%
Allowance coverage ratio(8) 5.69% 5.82% 5.70% 5.50% 5.12% 0.57% 5.69% 5.12% 0.57%
 

BUSINESS METRICS

Purchase volume(9) $35,369 $31,615 $31,507 $26,977 $32,460 $2,909 9.0% $125,468 $113,615 $11,853 10.4%
Period-end loan receivables $76,337 $70,644 $68,282 $65,849 $68,290 $8,047 11.8% $76,337 $68,290 $8,047 11.8%
Credit cards $73,580 $67,858 $65,511 $63,309 $65,773 $7,807 11.9% $73,580 $65,773 $7,807 11.9%
Consumer installment loans $1,384 $1,361 $1,293 $1,184 $1,154 $230 19.9% $1,384 $1,154 $230 19.9%
Commercial credit products $1,333 $1,385 $1,389 $1,318 $1,323 $10 0.8% $1,333 $1,323 $10 0.8%
Other $40 $40 $89 $38 $40 $- -% $40 $40 $- -%
Average loan receivables, including held for sale $72,987 $69,525 $66,943 $66,705 $65,406 $7,581 11.6% $69,220 $62,120 $7,100 11.4%
Period-end active accounts (in thousands)(10) 71,890 66,781 66,491 64,689 68,314 3,576 5.2% 71,890 68,314 3,576 5.2%
Average active accounts (in thousands)(10) 68,701 66,639 65,531 66,134 64,892 3,809 5.9% 66,928 62,643 4,285 6.8%
 

LIQUIDITY

Liquid assets
Cash and equivalents $9,321 $13,588 $11,787 $12,500 $12,325 $(3,004 ) (24.4)% $9,321 $12,325 $(3,004 ) (24.4)%
Total liquid assets $13,612 $16,362 $13,956 $14,915 $14,836 $(1,224 ) (8.3)% $13,612 $14,836 $(1,224 ) (8.3)%
Undrawn credit facilities
Undrawn credit facilities $6,700 $7,150 $7,025 $7,325 $6,075 $625 10.3% $6,700 $6,075 $625 10.3%
Total liquid assets and undrawn credit facilities $20,312 $23,512 $20,981 $22,240 $20,911 $(599 ) (2.9)% $20,312 $20,911 $(599 ) (2.9)%
Liquid assets % of total assets 15.09% 18.77% 16.94% 18.27% 17.66% (2.57)% 15.09% 17.66% (2.57)%
Liquid assets including undrawn credit facilities % of total assets 22.52% 26.98% 25.47% 27.24% 24.90% (2.38)% 22.52% 24.90% (2.38)%
                                           
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Return on assets represents net earnings as a percentage of average total assets.
(3) Return on equity represents net earnings as a percentage of average total equity.
(4) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
(6) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.
(7) Based on customer statement-end balances extrapolated to the respective period-end date.
(8) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.
(9) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(10) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
                   
SYNCHRONY FINANCIAL
STATEMENTS OF EARNINGS
(unaudited, $ in millions)
Quarter Ended Twelve Months Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

4Q'16 vs. 4Q'15 Dec 31,

2016

Dec 31,

2015

YTD'16 vs. YTD'15
Interest income:
Interest and fees on loans $3,919 $3,771 $3,494 $3,498 $3,494 $425 12.2% $14,682 $13,179 $1,503 11.4%
Interest on investment securities 28   25   21   22   15   13   86.7% 96   49   47   95.9%
Total interest income 3,947 3,796 3,515 3,520 3,509 438 12.5% 14,778 13,228 1,550 11.7%
 
Interest expense:
Interest on deposits 188 188 179 172 165 23 13.9% 727 607 120 19.8%
Interest on borrowings of consolidated securitization entities 64 63 59 58 56 8 14.3% 244 215 29 13.5%
Interest on third-party debt 67 64 65 81 80 (13 ) (16.3)% 277 309 (32 ) (10.4)%
Interest on related party debt -   -   -   -   -   -   -% -   4   (4 ) (100.0)%
Total interest expense 319 315 303 311 301 18 6.0% 1,248 1,135 113 10.0%
                     
Net interest income 3,628 3,481 3,212 3,209 3,208 420 13.1% 13,530 12,093 1,437 11.9%
 
Retailer share arrangements (811 ) (757 ) (664 ) (670 ) (734 ) (77 ) 10.5% (2,902 ) (2,738 ) (164 ) 6.0%
Net interest income, after retailer share arrangements 2,817 2,724 2,548 2,539 2,474 343 13.9% 10,628 9,355 1,273 13.6%
 
Provision for loan losses 1,076   986   1,021   903   823   253   30.7% 3,986   2,952   1,034   35.0%
Net interest income, after retailer share arrangements and provision for loan losses 1,741 1,738 1,527 1,636 1,651 90 5.5% 6,642 6,403 239 3.7%
 
Other income:
Interchange revenue 167 154 151 130 147 20 13.6% 602 505 97 19.2%
Debt cancellation fees 68 67 63 64 62 6 9.7% 262 249 13 5.2%
Loyalty programs (157 ) (145 ) (135 ) (110 ) (125 ) (32 ) 25.6% (547 ) (419 ) (128 ) 30.5%
Other 7   8   4   8   3   4   133.3% 27   57   (30 ) (52.6)%
Total other income 85   84   83   92   87   (2 ) (2.3)% 344   392   (48 ) (12.2)%
 
Other expense:
Employee costs 315 311 301 280 285 30 10.5% 1,207 1,042 165 15.8%
Professional fees 164 174 154 146 165 (1 ) (0.6)% 638 645 (7 ) (1.1)%
Marketing and business development 130 92 107 94 128 2 1.6% 423 433 (10 ) (2.3)%
Information processing 88 87 81 82 83 5 6.0% 338 297 41 13.8%
Other 221   195   196   198   209   12   5.7% 810   847   (37 ) (4.4)%
Total other expense 918 859 839 800 870 48 5.5% 3,416 3,264 152 4.7%
                     
Earnings before provision for income taxes 908 963 771 928 868 40 4.6% 3,570 3,531 39 1.1%
Provision for income taxes 332   359   282   346   321   11   3.4% 1,319   1,317   2   0.2%
Net earnings attributable to common stockholders $576   $604   $489   $582   $547   $29   5.3% $2,251   $2,214   $37   1.7%
                                           
             
SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION (1)
(unaudited, $ in millions)
Quarter Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Dec 31, 2016 vs.

Dec 31, 2015

Assets
Cash and equivalents $9,321 $13,588 $11,787 $12,500 $12,325 $(3,004 ) (24.4)%
Investment securities 5,110 3,356 2,723 2,949 3,142 1,968 62.6%
Loan receivables:
Unsecuritized loans held for investment 52,332 47,517 44,854 41,730 42,826 9,506 22.2%
Restricted loans of consolidated securitization entities 24,005   23,127   23,428   24,119   25,464   (1,459 ) (5.7)%
Total loan receivables 76,337 70,644 68,282 65,849 68,290 8,047 11.8%
Less: Allowance for loan losses (4,344 ) (4,115 ) (3,894 ) (3,620 ) (3,497 ) (847 ) 24.2%
Loan receivables, net 71,993 66,529 64,388 62,229 64,793 7,200 11.1%
Goodwill 949 949 949 949 949 - -%
Intangible assets, net 712 733 704 702 701 11 1.6%
Other assets 2,122   2,004   1,833   2,327   2,080   42   2.0%
Total assets $90,207   $87,159   $82,384   $81,656   $83,990   $6,217   7.4%
 
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts $51,896 $49,611 $46,220 $44,721 $43,215 $8,681 20.1%
Non-interest-bearing deposit accounts 159   204   207   256   152   7   4.6%
Total deposits 52,055 49,815 46,427 44,977 43,367 8,688 20.0%
Borrowings:
Borrowings of consolidated securitization entities 12,388 12,411 12,236 12,423 13,589 (1,201 ) (8.8)%
Bank term loan - - - 1,494 4,133 (4,133 ) (100.0)%
Senior unsecured notes 7,759 7,756 7,059 6,559 6,557 1,202 18.3%
Related party debt -   -   -   -   -   -   -%
Total borrowings 20,147 20,167 19,295 20,476 24,279 (4,132 ) (17.0)%
Accrued expenses and other liabilities 3,809   3,196   2,947   2,999   3,740   69   1.8%
Total liabilities 76,011 73,178 68,669 68,452 71,386 4,625 6.5%
Equity:
Common stock 1 1 1 1 1 - -%
Additional paid-in capital 9,393 9,381 9,370 9,359 9,351 42 0.4%
Retained earnings 5,330 4,861 4,364 3,875 3,293 2,037 61.9%
Accumulated other comprehensive income: (53 ) (24 ) (20 ) (31 ) (41 ) (12 ) 29.3%
Treasury Stock (475 ) (238 ) -   -   -   (475 ) NM
Total equity 14,196   13,981   13,715   13,204   12,604   1,592   12.6%
Total liabilities and equity $90,207   $87,159   $82,384   $81,656   $83,990   $6,217   7.4%
                                         
(1) In January 2016, we adopted ASU 2015-03, Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of deferred issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability. Accordingly, we have reclassified issuance costs associated with our borrowings and certain brokered deposits, from other assets, and reflected as a reduction of borrowings and interest-bearing deposit accounts, as applicable, for each period presented to conform to the current period presentation. Related selected financial metrics included within this Financial Data Supplement have also been updated where applicable to reflect this reclassification.
                             
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN (1)
(unaudited, $ in millions)
 
Quarter Ended
Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016 Dec 31, 2015
Interest Average Interest Average Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Interest-earning cash and equivalents $11,723 $17 0.58% $12,574 $16 0.51% $11,692 $14 0.48% $12,185 $16 0.53% $12,070 $9 0.30%
Securities available for sale 4,253 11 1.03% 3,018 9 1.19% 2,805 7 1.00% 2,995 6 0.81% 3,445 6 0.69%
 
Loan receivables:
Credit cards, including held for sale 70,195 3,851 21.83% 66,746 3,705 22.08% 64,269 3,432 21.48% 64,194 3,436 21.53% 62,834 3,432 21.67%
Consumer installment loans 1,374 31 8.98% 1,331 31 9.27% 1,235 28 9.12% 1,159 27 9.37% 1,163 26 8.87%
Commercial credit products 1,367 36 10.48% 1,390 35 10.02% 1,373 33 9.67% 1,313 35 10.72% 1,361 36 10.49%
Other 51   1 NM 58   - -% 66   1 NM 39   - -% 48   - -%
Total loan receivables, including held for sale 72,987   3,919 21.36% 69,525   3,771 21.58% 66,943   3,494 20.99% 66,705   3,498 21.09% 65,406   3,494 21.19%
Total interest-earning assets 88,963   3,947 17.65% 85,117   3,796 17.74% 81,440   3,515 17.36% 81,885   3,520 17.29% 80,921   3,509 17.20%
 
Non-interest-earning assets:
Cash and due from banks 691 641 774 1,277 1,268
Allowance for loan losses (4,226 ) (3,977 ) (3,729 ) (3,583 ) (3,440 )
Other assets 3,394   3,240   3,209   3,256   3,133  
Total non-interest-earning assets (141 ) (96 ) 254   950   961  
         
Total assets $88,822   $85,021   $81,694   $82,835   $81,882  
 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $50,901 $188 1.47% $47,926 $188 1.56% $45,490 $179 1.58% $44,101 $172 1.57% $42,079 $165 1.56%
Borrowings of consolidated securitization entities 12,387 64 2.06% 12,369 63 2.03% 12,291 59 1.93% 12,950 58 1.80% 13,550 56 1.64%
Bank term loan(2) - - -% - - -% 374 7 7.53% 2,565 24 3.76% 4,507 28 2.46%
Senior unsecured notes 7,758 67 3.44% 7,408 64 3.44% 6,809 58 3.43% 6,558 57 3.50% 5,810 52 3.55%
Related party debt -   - -% -   - -% -   - -% -   - -% -   - -%
Total interest-bearing liabilities 71,046   319 1.79% 67,703   315 1.85% 64,964   303 1.88% 66,174   311 1.89% 65,946   301 1.81%
 
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 180 203 217 226 147
Other liabilities 3,563   3,314   3,046   3,534   3,396  
Total non-interest-bearing liabilities 3,743   3,517   3,263   3,760   3,543  
         
Total liabilities 74,789   71,220   68,227   69,934   69,489  
 
Equity
Total equity 14,033 13,801 13,467 12,901 12,393
         
Total liabilities and equity $88,822   $85,021   $81,694   $82,835   $81,882  
Net interest income $3,628 $3,481 $3,212 $3,209 $3,208
 
Interest rate spread (3) 15.86% 15.89% 15.48% 15.40% 15.39%
Net interest margin (4) 16.22% 16.27% 15.86% 15.76% 15.73%
                                                             
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended June 30, 2016, March 31, 2016, and December 31, 2015 were 2.51%, 2.47%, and 2.26% respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.
(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
             
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN (1)
(unaudited, $ in millions)
 
Twelve Months Ended

Dec 31, 2016

Twelve Months Ended

Dec 31, 2015

Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Interest-earning cash and equivalents $11,943 $63 0.53% $11,406 $28 0.25%
Securities available for sale 3,327 33 0.99% $3,142 21 0.67%
 
Loan receivables:
Credit cards, including held for sale 66,533 14,424 21.68% 59,603 12,932 21.70%
Consumer installment loans 1,274 117 9.18% 1,119 104 9.29%
Commercial credit products 1,360 139 10.22% 1,359 142 10.45%
Other 53   2 3.77% 39   1 2.56%
Total loan receivables, including held for sale 69,220   14,682 21.21% 62,120   13,179 21.22%
Total interest-earning assets 84,490   14,778 17.49% 76,668   13,228 17.25%
 
Non-interest-earning assets:
Cash and due from banks 890 904
Allowance for loan losses (3,879 ) (3,340 )
Other assets 3,290   2,857  
Total non-interest-earning assets 301   421  
   
Total assets $84,791   $77,089  
 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $47,163 $727 1.54% $38,060 $607 1.59%
Borrowings of consolidated securitization entities 12,532 244 1.95% 13,853 215 1.55%
Bank term loan(2) 789 31 3.93% 5,357 136 2.54%
Senior unsecured notes 7,135 246 3.45% 4,949 173 3.50%
Related party debt -   - -% 125   4 3.20%
Total interest-bearing liabilities 67,619   1,248 1.85% 62,344   1,135 1.82%
 
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 203 152
Other liabilities 3,437   3,015  
Total non-interest-bearing liabilities 3,640   3,167  
   
Total liabilities 71,259   65,511  
 
Equity
Total equity 13,532 11,578
   
Total liabilities and equity $84,791   $77,089  
Net interest income $13,530 $12,093
 
Interest rate spread (3) 15.64% 15.43%
Net interest margin (4) 16.01% 15.77%
                           
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the 12 months ended December 31, 2016 and December 31, 2015 were 2.48% and 2.23%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.
(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
             
SYNCHRONY FINANCIAL
BALANCE SHEET STATISTICS (1)
(unaudited, $ in millions, except per share statistics)
 
Quarter Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

Dec 31, 2016 vs.

Dec 31, 2015

BALANCE SHEET STATISTICS

Total common equity $14,196 $13,981 $13,715 $13,204 $12,604 $1,592 12.6%
Total common equity as a % of total assets 15.74% 16.04% 16.65% 16.17% 15.01% 0.73%
 
Tangible assets $88,546 $85,477 $80,731 $80,005 $82,340 $6,206 7.5%
Tangible common equity(2) $12,535 $12,299 $12,062 $11,553 $10,954 $1,581 14.4%
Tangible common equity as a % of tangible assets(2) 14.16% 14.39% 14.94% 14.44% 13.30% 0.86%
Tangible common equity per share(2) $15.34 $14.90 $14.46 $13.86 $13.14 $2.20 16.7%
 

REGULATORY CAPITAL RATIOS (3)

Basel III Transition
Total risk-based capital ratio(4) 18.5% 19.5% 19.8% 19.4% 18.1%
Tier 1 risk-based capital ratio(5) 17.2% 18.2% 18.5% 18.1% 16.8%
Tier 1 leverage ratio(6) 15.0% 15.3% 15.6% 14.8% 14.4%
Common equity Tier 1 capital ratio(7) 17.2% 18.2% 18.5% 18.1% 16.8%
 
Basel III Fully Phased-in
Common equity Tier 1 capital ratio(7) 17.0% 17.9% 18.0% 17.5% 15.9%
                             
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
(3) Regulatory capital metrics at December 31, 2016 are preliminary and therefore subject to change.
(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.
(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.
(6) Tier 1 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments.
(7) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.
                   
SYNCHRONY FINANCIAL
PLATFORM RESULTS
(unaudited, $ in millions)

Quarter Ended

Twelve Months Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

4Q'16 vs. 4Q'15 Dec 31,

2016

Dec 31,

2015

YTD'16 vs. YTD'15

RETAIL CARD

Purchase volume(1)(2) $28,996 $25,285 $25,411 $21,550 $26,768 $2,228 8.3% $101,242 $92,190 $9,052 9.8%
Period-end loan receivables $52,701 $48,010 $46,705 $45,113 $47,412 $5,289 11.2% $52,701 $47,412 $5,289 11.2%
Average loan receivables, including held for sale $49,897 $47,420 $45,861 $45,900 $44,958 $4,939 11.0% $47,421 $42,687 $4,734 11.1%
Average active accounts (in thousands)(2)(3) 54,489 52,959 52,314 52,969 52,038 2,451 4.7% 53,344 50,358 2,986 5.9%
 
Interest and fees on loans(2) $2,909 $2,790 $2,585 $2,614 $2,594 $315 12.1% $10,898 $9,774 $1,124 11.5%
Other income(2) $70 $70 $69 $79 $76 $(6 ) (7.9)% $288 $339 $(51 ) (15.0)%
Retailer share arrangements(2) $(801 ) $(752 ) $(656 ) $(661 ) $(723 ) $(78 ) 10.8% $(2,870 ) $(2,688 ) $(182 ) 6.8%
 

PAYMENT SOLUTIONS

Purchase volume(1) $4,194 $4,152 $3,903 $3,392 $3,714 $480 12.9% $15,641 $13,668 $1,973 14.4%
Period-end loan receivables $15,567 $14,798 $13,997 $13,420 $13,543 $2,024 14.9% $15,567 $13,543 $2,024 14.9%
Average loan receivables $15,146 $14,391 $13,644 $13,482 $13,192 $1,954 14.8% $14,188 $12,436 $1,752 14.1%
Average active accounts (in thousands)(3) 8,844 8,461 8,153 8,134 7,896 948 12.0% 8,410 7,478 932 12.5%
 
Interest and fees on loans $523 $505 $467 $457 $462 $61 13.2% $1,952 $1,719 $233 13.6%
Other income $3 $3 $3 $4 $3 $- -% $13 $17 $(4 ) (23.5)%
Retailer share arrangements $(9 ) $(3 ) $(7 ) $(7 ) $(10 ) $1 (10.0)% $(26 ) $(45 ) $19 (42.2)%
 

CARECREDIT

Purchase volume(1) $2,179 $2,178 $2,193 $2,035 $1,978 $201 10.2% $8,585 $7,757 $828 10.7%
Period-end loan receivables $8,069 $7,836 $7,580 $7,316 $7,335 $734 10.0% $8,069 $7,335 $734 10.0%
Average loan receivables $7,944 $7,714 $7,438 $7,323 $7,256 $688 9.5% $7,611 $6,997 $614 8.8%
Average active accounts (in thousands)(3) 5,368 5,219 5,064 5,031 4,958 410 8.3% 5,174 4,807 367 7.6%
 
Interest and fees on loans $487 $476 $442 $427 $438 $49 11.2% $1,832 $1,686 $146 8.7%
Other income $12 $11 $11 $9 $8 $4 50.0% $43 $36 $7 19.4%
Retailer share arrangements $(1 ) $(2 ) $(1 ) $(2 ) $(1 ) $- -% $(6 ) $(5 ) $(1 ) 20.0%
 

TOTAL SYF

Purchase volume(1)(2) $35,369 $31,615 $31,507 $26,977 $32,460 $2,909 9.0% $125,468 $113,615 $11,853 10.4%
Period-end loan receivables $76,337 $70,644 $68,282 $65,849 $68,290 $8,047 11.8% $76,337 $68,290 $8,047 11.8%
Average loan receivables, including held for sale $72,987 $69,525 $66,943 $66,705 $65,406 $7,581 11.6% $69,220 $62,120 $7,100 11.4%
Average active accounts (in thousands)(2)(3) 68,701 66,639 65,531 66,134 64,892 3,809 5.9% 66,928 62,643 4,285 6.8%
 
Interest and fees on loans(2) $3,919 $3,771 $3,494 $3,498 $3,494 $425 12.2% $14,682 $13,179 $1,503 11.4%
Other income(2) $85 $84 $83 $92 $87 $(2 ) (2.3)% $344 $392 $(48 ) (12.2)%
Retailer share arrangements(2) $(811 ) $(757 ) $(664 ) $(670 ) $(734 ) $(77 ) 10.5% $(2,902 ) $(2,738 ) $(164 ) 6.0%
                                           
(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(2) Includes activity and balances associated with loan receivables held for sale.
(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
           
SYNCHRONY FINANCIAL
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES (1)(2)
(unaudited, $ in millions, except per share statistics)
Quarter Ended
Dec 31,

2016

Sep 30,

2016

Jun 30,

2016

Mar 31,

2016

Dec 31,

2015

COMMON EQUITY MEASURES

GAAP Total common equity $14,196 $13,981 $13,715 $13,204 $12,604
Less: Goodwill (949 ) (949 ) (949 ) (949 ) (949 )
Less: Intangible assets, net (712 ) (733 ) (704 ) (702 ) (701 )
Tangible common equity $12,535 $12,299 $12,062 $11,553 $10,954

Adjustments for certain deferred tax liabilities and certain items in
accumulated comprehensive income (loss)

337   299   282   281   280  
Basel III - Common equity Tier 1 (fully phased-in) $12,872   $12,598   $12,344   $11,834   $11,234  
Adjustment related to capital components during transition 263   273   266   265   399  
Basel III - Common equity Tier 1 (transition) $13,135   $12,871   $12,610   $12,099   $11,633  
 

RISK-BASED CAPITAL

Common equity Tier 1 $13,135 $12,871 $12,610 $12,099 $11,633
Add: Allowance for loan losses includible in risk-based capital 994   923   890   869   898  
Risk-based capital $14,129   $13,794   $13,500   $12,968   $12,531  
 

ASSET MEASURES

Total average assets $88,822 $85,021 $81,694 $82,835 $81,882
Adjustments for:

Disallowed goodwill and other disallowed intangible assets

(net of related deferred tax liabilities) and other

(1,059 ) (1,117 ) (1,113 ) (1,117 ) (991 )
Total assets for leverage purposes $87,763   $83,904   $80,581   $81,718   $80,891  
 
Risk-weighted assets - Basel III (fully phased-in) (3) $75,941 $70,448 $68,462 $67,697 $70,493
Risk-weighted assets - Basel III (transition) (3) $76,179 $70,660 $68,188 $66,689 $69,224
 

TANGIBLE COMMON EQUITY PER SHARE

GAAP book value per share $17.37 $16.94 $16.45 $15.84 $15.12
Less: Goodwill (1.16 ) (1.14 ) (1.14 ) (1.14 ) (1.14 )
Less: Intangible assets, net (0.87 ) (0.90 ) (0.85 ) (0.84 ) (0.84 )
Tangible common equity per share $15.34   $14.90   $14.46   $13.86   $13.14  
                                 
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position.
(2) Regulatory measures at December 31, 2016 are presented on an estimated basis.
(3) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets.

Contact:

Synchrony Financial
Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Samuel Wang, 203-585-2933

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