The paragraph introduces the Synchrony Financial Fourth Quarter and Full-Year 2024 Earnings Conference Call, noting that it is being recorded and is currently in listen-only mode. Kathryn Miller, the Senior Vice President of Investor Relations, begins the call by welcoming participants and mentioning that relevant earnings materials, including a press release, financial schedules, and a presentation, are available on the company's Investor Relations website. She reminds listeners that the discussion will include forward-looking statements subject to risks and uncertainties, and that non-GAAP financial measures will be referenced with reconciliations available in their materials. The authorized webcast of the call can be accessed on the company's website. Joining the call are Brian Doubles, President and CEO, and Brian Wenzel, Executive VP and CFO.

Brian Doubles addresses the impact of the California wildfires on Synchrony's stakeholders and explains that while they do not foresee a major financial impact, they are offering support. He then highlights Synchrony's fourth-quarter achievements, including the addition of 5 million new accounts, $48 billion in purchase volume, and a 2% growth in loan receivables. The company also improved on delinquency trends while maintaining financial discipline, resulting in strong earnings and significant returns. Throughout 2024, Synchrony acquired nearly 20 million new accounts and financed over $182 billion in purchases, demonstrating the continued appeal of their financing solutions. Despite market challenges like inflation, Synchrony leveraged its resources and expertise to adapt effectively.

In 2024, Synchrony achieved $3.5 billion in net earnings, with significant financial performance metrics including a 2.9% return on average assets and a 27.5% return on tangible common equity. Despite facing various non-recurring events, such as business acquisitions and sales, and preparing for potential regulatory changes, the company executed its strategic priorities effectively. Synchrony expanded its partnerships by adding over 45 new partners, including brands like Virgin and Gibson, thereby diversifying its financing solutions. It also renewed over 45 existing programs, notably with Verizon, Generac, Sam's Club, and JCPenney, strengthening its long-standing relationships and digital offerings.

The paragraph discusses Synchrony's expansion and diversification of its financial services and partnerships. The company introduces "Synchrony Pay Later," a buy now, pay later solution, following its acquisition of Ally's lending business and transitioning merchants to the new service. Synchrony also sold Pets Best to Independence Pet Holdings, gaining equity interest and launching "Better Together" with CareCredit, streamlining pet insurance claims. Additionally, Synchrony expanded CareCredit into wellness markets, boosting purchase volume, and improved private label credit card utility through broader acceptance and distribution, enhancing its financial ecosystem with merchant partners.

The paragraph discusses the expansion of Synchrony's payment and financing products, highlighting the use of the Amazon store card at Whole Foods and CareCredit at various retailers. It emphasizes the success and growth of Synchrony's offerings, with a focus on enhancing digital engagement and cross-marketing efforts. Synchrony aims to meet customer needs through innovative payment solutions across digital platforms, resulting in increased customer interaction, new accounts, sales, and reduced acquisition costs.

The paragraph discusses Synchrony Bank's success in expanding its digital ecosystem, particularly through its website and marketplace, which have significantly increased account acquisitions and customer interaction with minimal cost. The bank's advanced technology and analytics provide personalized experiences, resulting in impressive customer engagement metrics and application growth. Additionally, the digital wallet strategy has significantly grown active user engagement and sales, improving penetration rates for dual and co-brand cards. Synchrony Bank plans to continue investing in digital strategies to boost engagement and penetration further in 2025.

The paragraph discusses Synchrony's recent enhancements, including offering eligible Synchrony MasterCard holders more payment flexibility with Apple Pay, allowing them to choose standard credit card terms or fixed monthly payments. Synchrony plans to further integrate with Apple Pay to enable users to view and redeem rewards. The company is focused on innovation, expanding its capabilities, and leveraging core strengths to maintain leadership. Synchrony's approach to customer lifetime value and diverse product portfolio is strengthening connections with millions of customers and partners. Its distribution channels and underwriting approach contribute to portfolio stability. Synchrony's efforts and work culture earned it high rankings as a top workplace. Looking ahead, Synchrony aims to continue operating from a position of strength.

The paragraph discusses Synchrony's strong fourth-quarter performance, which benefited from its diversified product portfolio and balanced credit management. Despite an inflationary environment and recent credit actions, the company added 5 million new accounts, maintained about 70 million active accounts, and achieved $48 billion in purchase volume. Receivables grew by 2% to $105 billion, even as payment rates slightly declined. These results reflect consumer behavior focused on essential and holiday-related spending.

The paragraph discusses a financial report detailing changes in purchase volume, receivables, and revenue. Platform purchase volume declined by 1% to 6% year-over-year due to reduced customer spending, credit actions by Synchrony, and specific spending categories. Receivable growth was stable or slightly higher, influenced by slower purchase volume growth and payment moderation. Dual and co-branded cards made up 44% of purchase volume, showing slight growth. Net revenue increased by 4% to $3.8 billion, driven by higher interest, fees, and other income, despite higher costs. Net interest income rose by 3% due to increased interest and fees on loans. Pricing and policy changes slightly improved loan receivable yield, countered by various financial reversals. Total interest-bearing liabilities cost grew by 3 basis points. RSAs increased by $41 million to $919 million, reflecting program performance enhancements. Other income rose by $128 million, influenced by fees from pricing and policy changes, despite a negative impact from the sale of Pets Best.

The paragraph discusses financial metrics for Synchrony's fourth quarter, highlighting a decrease in provision for credit losses to $1.6 billion, driven by a $100 million reserve lease and partially offset by higher net charge-offs. Other expenses dropped 4% to $1.3 billion due to lower restructuring costs and operational losses, although costs from the Ally lending acquisition and technology investments partially offset these decreases. The efficiency ratio improved to 33.3%, indicating better cost management and revenue growth. Synchrony posted net earnings of $774 million, with strong returns on assets and equity and increased tangible book value per share. The paragraph also covers credit trends, noting a slight decline in the 30-plus delinquency rate, increases in the 90-plus delinquency and net charge-off rates, and a decrease in the allowance for credit losses as a percentage of loan receivables.

The paragraph reports on Synchrony's recent financial performance and capital management. Key actions taken since mid-2023 have led to improved delinquency rates, supporting their long-term financial targets. By the end of the fourth quarter, the company successfully increased direct deposits while reducing broker deposits, with deposits comprising 84% of total funding. Total liquid assets and undrawn credit facilities stood at $19.8 billion, making up 16.6% of total assets. They utilized CECL transition rules, ending the fourth quarter with improved capital ratios: CET1 at 13.3%, Tier 1 at 14.5%, total capital at 16.5%, and Tier 1 capital plus reserves at 24.3%. In 2024, $197 million was returned to shareholders through share repurchases and dividends, totaling $1.4 billion for the year.

At year-end, Synchrony has $600 million left in share purchase authorization until mid-2025 and is set to return capital to shareholders, depending on market and regulatory factors. For 2025, the company anticipates a stable economy, with 2.2% GDP growth, a 4.1% employment rate, and a 4.25% fed funds rate. The outlook includes no impact from potential changes to late fee regulations but accounts for PPPCs. The company expects low-single-digit growth in loan receivables, flat payment rates, and net revenue between $15.2 and $15.7 billion for 2025, with growth in interest and other income despite some offsets from lower rates and fees.

The paragraph discusses Synchrony's financial strategy and expectations. It highlights the benefit of lower benchmark rates on funding costs, influenced by deposit beta trends. The company plans to maintain high liquidity levels to support customer relationships and future growth. It anticipates an RSA ratio of 3.60%-3.85% due to improved program performance and lower net charge-offs, aiming for a full-year net charge-off rate between 5.8%-6.1%. The efficiency ratio is expected to be 31.5%-32.5%. Synchrony believes it is well-positioned for growth through strategic investments and credit actions, demonstrated by strong post-pandemic performance and superior credit trends.

In the article paragraph, Synchrony discusses its focus on maintaining a stable macro environment, improving consumer spending behavior, and enhancing delinquency performance to gradually ease credit restrictions. The company highlights its strong capital position, which supports growth and increased capital returns to shareholders in the future. As a result of effective execution in 2024, Synchrony is well-positioned for success in 2025 and beyond. The Q&A session begins, where Ryan Nash from Goldman Sachs asks Brian Doubles about net revenue guidance, specifically the growth in fees and net interest income (NII) and the impact of interest rates and payment protection plans (PPPCs) on these aspects. Brian Doubles responds to provide more details.

The paragraph discusses the dynamics affecting net revenue and net interest income (NII). A significant increase in net revenue is expected due to PPP fees and growth in the revolver rate, but this is offset by reductions in RSAs, lower net charge-off rates, and decreased late fee revenue. Although NII growth will be more pronounced as it excludes the RSA impact, factors like the prime rate decline and timing of CD maturities will slightly negatively affect full-year net funding. The company is experiencing stronger retention and yield on interest, but lower paper statement fees due to increased E-Bill adoption. Ryan Nash notes that their capital is 200 basis points above target in a seasonally low quarter, and they have repurchased $100 billion of stock.

In the paragraph, Brian Doubles discusses the company's strategic decision to reduce capital return during a recent quarter. The lower buyback activity was not due to anticipation of growth opportunities but rather a cautious stance in response to potential market volatility surrounding the presidential election. Despite this, the company remains committed to completing its $600 million buyback authorization and is in the process of finalizing its 2025 capital plan. Doubles emphasizes that the decision was influenced by market conditions, not an intentional withholding of capital for future growth.

In the paragraph, Sanjay Sakhrani from KBW asks Brian Wenzel about the anticipated financial impact of PPPCs by the end of the year and how potential regulatory changes regarding late fees might affect the return on assets (ROA). Wenzel responds by explaining that some financial components, like interest charges and paper statements, will not fully stabilize until 2025 or 2026. He mentions that expenses related to paper statements could be influenced by customer preferences for e-bills. Additionally, he notes that promotional fees are expected to increase throughout 2025 as promotional activities, which began later in 2024, gain momentum.

The paragraph discusses the financial outlook and current operating environment from the perspective of the speakers, Sanjay Sakhrani, Brian Wenzel, and Brian Doubles. Brian Wenzel suggests that opportunities for growth exist in interest income and fees, despite adjustments for one-time gains from Pets Best and Visa B. On return on assets (ROA), there's potential for incremental increase without late fee offsets. Brian Doubles addresses the deal environment, noting optimism about growth opportunities and the consumer's strong financial position. Loan and purchase volume growth remain weak, but strategic credit actions have been effective, leading to an encouraging setup for the following year. Despite market competition, there is sustained discipline and a robust pipeline of opportunities.

The paragraph is a discussion about the company's strategic approach and financial performance amid uncertain economic conditions, such as inflation and the election. The speaker emphasizes their disciplined pricing for new opportunities and alignment with partners, citing successful renewals with Sam's and JCPenney as evidence of their effective competition. Brian Wenzel highlights that recent growth in the purchase line was driven by credit actions aimed at aligning with long-term targets for 2025 and setting a faster trajectory than competitors. The focus is on credit positioning and deliberate account management. The conversation concludes with a transition to a question from Mihir Bhatia about net revenue and portfolio assumptions.

The paragraph involves a conversation between Mihir Bhatia and Brian Doubles regarding financial expectations and credit outlook. Mihir asks about expected net revenue growth in 2026 and current business conditions, mentioning credit delinquencies and purchase volumes. Brian Wenzel notes that there hasn't been much change in their financial guidance, with adjustments related to changes in APRs and the influence of prime rates anticipated in early 2025 due to changes in late 2024. Brian Doubles then discusses the credit climate, indicating that their company has been slower in reaching credit normalization compared to others. He mentions that their 30-plus day delinquencies have recently turned positive, suggesting a trend improvement compared to previous quarters and years. Doubles also highlights the company's conservative approach by tightening underwriting in response to market conditions.

The paragraph discusses the company's recent credit actions and their positive performance, resulting in a more compressed trajectory and optimism for 2025. The company has been refining its approach by evaluating partners and channels to assess risk and return. It reports outperforming seasonality for several months, aiming for a credit range of 5.8% to 6.10%. Consumer behavior shows no significant change in line utilization or payment patterns across credit grades. Increases in minimum payments are observed, especially among higher credit grades compared to 2019, attributed to structural changes like more installment lending and promotional financing.

The paragraph discusses the state of consumer credit, noting that there are no significant concerns with current consumer behavior, such as payment and line utilization patterns. The speaker believes that previous industry issues were due to excessive credit being extended to certain groups, and they are evaluating when to lift existing credit restrictions. They express the possibility of easing some restrictions later in the year if current measures prove effective. Brian Doubles responds to Terry Ma's question about delinquency rates, stating they don't publicly forecast specific delinquency metrics but share that there are favorable credit trends influencing charge-off rates and reserves, partly due to pre-collection actions.

The paragraph discusses improvements in late-stage collections and confidence in reducing the charge-off rate to meet target underwriting zones. Despite typically experiencing a seasonal lift of around 50 basis points in the first quarter, this is not expected in the first quarter of 2025 due to improvements in late-stage delinquencies and the timing of recovery actions aligning with 2024 expectations. Terry Ma inquires about the allowance ratio for the year, noting it's higher than earlier guidance. Brian Doubles explains that the ending point in 2024 is influenced by two factors: a slightly higher rate resulting from the denominator, which caused the allowance ratio to be higher than anticipated, yet still aligned with 2023's exit point.

The paragraph discusses the factors affecting credit models as they approach 2025, emphasizing the importance of net charge-off rates and macroeconomic clarity. A lower charge-off rate and an improved economic environment could lead to a downward bias in reserve rates. Additional seasonal variations may affect this trend. Following this, the operator opens the floor for questions, and Moshe Orenbuch from TD Cowen asks Brian Doubles about new aspects and economic implications of renewing partnerships with JCPenney and Sam's Club, noting Synchrony Pay Later's inclusion in the JCPenney renewal. Brian Doubles expresses enthusiasm about renewing both partnerships.

The paragraph discusses the renewal of long-term partnerships with Lowe's and JCPenney, highlighting the launch of a "pay later" option with JCPenney. The speaker emphasizes the success of their multi-product ecosystem in attracting and retaining partners, noting that current market dynamics have shifted from simply driving sales to developing products that gradually engage customers. While some initial "buy now, pay later" products may not meet immediate return expectations, they are beneficial in enhancing long-term customer value. The speaker expresses satisfaction with the economic terms of the renewals, stressing the importance of aligned interests for successful long-term agreements. In a follow-up, Moshe Orenbuch queries about potential easing of recent economic tightness later in the year.

In the paragraph, Brian Doubles discusses potential trends and strategies in the credit industry, particularly regarding dual card offerings and credit line adjustments. He suggests an increase in dual card upgrades from private label products and anticipates more activity in credit line increases and decreases, primarily on larger balance platforms. Doubles also mentions expected improvements in approval rates for new accounts and purchase financing activities. He emphasizes the importance of consumer confidence, noting that increased confidence could lead to more discretionary spending in areas like health and wellness, home, and auto sectors, which would create positive growth opportunities.

In the paragraph, Brian Doubles addresses a question from Jeff Adelson regarding Synchrony's response to slowing purchase volumes and account growth, and how this impacts their relationships with retail partners. Doubles explains that Synchrony and its partners share a strong alignment on program strategies. He highlights that Synchrony took proactive credit tightening measures in response to the industry's credit extension trends from 2021 to 2023. These actions were taken transparently and collaboratively with partners, as Synchrony controls the underwriting process. Doubles emphasizes that these decisions are based on data analysis and are made in alignment with partner interests to ensure program performance.

The paragraph discusses the performance and strategy of a company, focusing on its recent credit actions, asset growth, and purchase volumes. Brian emphasizes that despite coming off a record purchase volume year, the company's credit actions have been intentional, aiming to manage long-term credit targets prudently. He notes that the company was slower to experience losses relative to historical averages and quicker to recover, which he attributes to their credit strategies. Jeff asks about plans regarding late fee regulations and whether retail partners have shown concerns over adjustments to their Purchase Price Predictive Credits (PPPC). Brian responds by mentioning positive developments in litigation and the maintenance of an injunction.

The paragraph involves a discussion about a legal case and its potential implications for the industry, focusing on uncertainty and the need to evaluate various factors before making pricing decisions. Jeff suggests a collaborative approach with partners and careful consideration of industry trends and competition, as they did with a previous late fee proposal. John Hecht from Jefferies asks about the performance of credit vintages for 2024, and Brian Wenzel responds, stating that the 2023 and 2024 vintages are performing well and better than industry expectations.

The paragraph discusses the performance of certain vintages compared to 2018, noting slight declines but no significant concerns. The speaker expresses optimism about future vintages and financial targets. The conversation shifts to the growth of digital commerce over in-store commerce, accelerated by COVID-19. Investments in digital wallets and technologies like Apple Pay are highlighted, with confidence in the company's sophisticated platforms. The discussion ends with a note on the liquidity strategy, maintaining higher levels to support growth.

In the paragraph, Brian Wenzel discusses the strategy around digital banking deposits. He highlights the decision to maintain deposit growth without shrinking it in the short term, despite potential impacts on net interest margins. The approach aims to ensure positive economic and earnings per share (EPS) trades by acquiring high-yield savings deposits. Wenzel emphasizes the importance of being rate sensitive in the short term to avoid higher acquisition costs later. He expresses confidence in their competitive position in the digital banking space and expects growth to reaccelerate eventually. Additionally, John Pancari asks about feedback regarding the late fee rule, referencing positive comments from Judge Pittman, and seeks input from D.C. contacts.

The paragraph involves a discussion about the uncertainty surrounding potential legal actions following an election, particularly in relation to the Consumer Financial Protection Bureau (CFPB). Brian Wenzel, responding to a question, notes the difficulty in predicting outcomes due to various possible scenarios and ongoing litigation, with an appeal window open until February. He refrains from speculating further while emphasizing communication with partners. The conversation then shifts to a question from Bill Carcache regarding the potential impact of PPPC on the company's long-term return profile and efficiency guidance. Wenzel indicates that they have not changed their long-term outlook and explains that efficiency depends on the effective management and growth of existing accounts, which could provide operating leverage.

The paragraph discusses a company's strategy for managing its workforce and operational efficiency, particularly during seasonal variations and in response to the net revenue decline experienced during the pandemic. The aim is to regain operating leverage by 2025, positioning the company as an efficient credit card operator. The conversation then shifts to Rob Wildhack's question about the outlook for loan growth. Brian Wenzel explains that loan growth comparisons year-over-year will be challenging, especially in the first quarter. He notes a deceleration in loan growth due to consumer behavior and credit actions, but anticipates an acceleration in growth from the second to fourth quarters.

The paragraph discusses the potential lifting of credit restrictions, which is not part of the current plan but may be considered later in the year. Any changes will depend on the development of charge-offs and the ability to meet charge-off guidance. The company's focus is on ensuring the rate risk adjusted margin before lifting restrictions. Additionally, there is a discussion on deposit betas, with a current expectation of a 60% beta for the year, in contrast to last year's 80-90% on the way up. The explanation for this difference is attributed to a lag in digital banks and the timing of rate decreases, with only one rate decrease expected in the latter half of the year.

The paragraph is a transcript from a conference call discussing business strategies and growth. It involves a dialogue between Brian Doubles and Brennan Crowley, with a focus on the CareCredit dual card strategy aimed at enhancing customer growth in the health and wellness sector. Brian Doubles explains the strategy, emphasizing the loyalty to the CareCredit product and its use in various health and wellness expenditures. The discussion also notes that they are collaborating with partners to expand the acceptance of the CareCredit card, highlighting its exciting growth potential. The session ends with a final question from Erika Najarian about the growth trajectory discussed in a previous conference, seeking clarification on the company's communicated growth messages.

The paragraph discusses the current state of consumer spending and credit management as observed by Synchrony, particularly in relation to their different consumer cohorts. It highlights that while growth has slowed partly due to proactive credit measures, the overall consumer financial health is good. There's a noted pullback in spending from lower-income groups due to inflation, while higher-income groups remain relatively stable. The discussion includes investor concerns about growth and the impact of factors like high purchase APR and late fees. Brian Doubles emphasizes that consumers are managing their spending and credit responsibly, aligning with long-term expectations.

The paragraph discusses a financial analysis of consumer behaviors, focusing on higher-end and lower non-prime segments. It mentions that the higher-end consumer market was stable, while the lower segment faced more credit challenges. The text also evaluates the impact of a program called PPPC on sales, concluding that sales declines aren't necessarily caused by PPPC. It highlights the consistent behavior observed in control and test groups and notes specific holdouts experiencing general declines. Lastly, it emphasizes the higher value proposition of certain credit cards with benefits like discounts, which could justify their pricing.

The paragraph discusses the importance of evaluating the pricing and value proposition of a product, specifically in the context of credit card annual fees, which can be high if deemed valuable. Brian Doubles explains that Synchrony analyzes potential outcomes of adjusting APRs with their partners, who are interested due to the impact on growth and aligned interests through the RSA. Erika Najarian finds the discussion insightful for investors, and the conference call ends with closing remarks.

This summary was generated with AI and may contain some inaccuracies.