Synchrony Financial (SYF) 25 Oct 222022 Q3 Earnings call transcript

Welcome to the Synchrony Financial Third Quarter 2022 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to your host. President Relations. Vice Senior Miller, of Investor Kathryn

You may begin.

everyone. our quarterly you, and conference to morning, good Thank earnings Welcome call.

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morning the this Brian call Chief Wenzel, Officer. President and Doubles, now Vice Brian Officer; to and the On Brian and Chief Executive will I Financial call President Synchrony's over turn Executive are Doubles.

good return and results, strength business and diluted and credit share, testament of to consumer X.X% balanced return our and our consistent everyone. and highlighted Kathryn, a the well-diversified approach $XXX equity growth of resilient returns common Synchrony's morning, to of strong or tangible financial is model. a ability XX.X%. another deliver a per $X.XX differentiated to product, our strategies Thanks, average by portfolio, Synchrony of quarter of delivered million net earnings on on assets

partners to as has again distribution XX our As itself they excited advanced expand and again with Synchrony and or partner in Decor. reach retailers, are merchants alike. to diversify the we partnering leverage third added To of strengths. through providers Bath and to and value Synchrony's further we for chosen renewed Synchrony be further partner our new core & solidifies end, suite, that with Floor of the choice quarter partners digital X because channels product and our continue capabilities,

commercial offering customer to growth. has analytics leverage of data both and network consumers which insights data and the again help is their experience, partner and & positioned enable & exist to more home believes our and superior Synchrony's Decor Meanwhile, drive will is high-growth marketing that Our growth advanced ability to a for opportunities Synchrony Floor reach Decor and these customers. because best them ability a drive Synchrony objectives. them our to unique achieve power with and Floor customers multiproduct selected to retailer to through that marketplace,

they're advanced the well experiences our whether So of outcomes partners. our for of network effect of is networks, to targeted looking Synchrony diverse our powerful and data marketplaces seamless each and financial omnichannel or analytics and for strong services, products deliver positioned suite our

moment. small their and They're expertise, to our whenever anywhere seamless tailored channels our customers services, with person want broad financial with seeks partners they of at range value increasingly needs be payment any solutions. occurring meet that met dynamic however financing digitally. experiences a our and purchases and products propositions attractive connect given industry to leverage We are and We ecosystem customers distribution in and or broad

our platform. value, in broadly. digital including inflationary We automotive as auto experienced and higher our was broad-based account among per recent the impact was more As core of basis, retailer well increase reach a reflected and engagement result, portfolio performance. growth On serve and purchase inventory, a volume or with across prior per our platforms, continued the This diversified propositions penetration X more the Synchrony health growth grew testament the well The increase broad-based X% spend platform accounts luxury and increase X% furniture basis, strength by in and accounts $XX.X our accounts strength purchase to higher in auto-related impact higher higher strong new in spend higher, increased to higher a per home, core by lifestyle volume purchase and in across offer on At million continued momentum engagement platform. more volume industry-specific year those periods, home level, XX% as wellness active our established in was in excluding our dental spend, generally and on increased our as in year. XX% new X%, programs and grew driven year-over-year and home program added pet year-over-year. higher XX% active on sales and depth value spend launches. and active spend consumer. of in portfolio sales and continued across account quarter. categories. by rebound both third double-digit we accounts and accounts to purchase In single-digit driven of purchase conditions X.X specifically, The partner last versus the Lifestyle account accounts a auto core digital a the XX%, in volume growth within achieved in billion X% as average More XX% breadth customers the driven volume the reflecting healthy active Synchrony and health and wellness and by growth platforms and we volume an spend, diversified parts. compelling volume out-of-partner reflecting and purchase growth and value, out-of-partner gasoline Purchase

excited our We health patients with financing. are more flexible the and we in provide to about see platform reach access greater opportunities to wellness particularly them and

they encompasses for systems the provider platform more choice Health that in and manage we planned through and procedures. and them to as costs and out-of-pocket of rise in practice solutions XX a health consumers need care with of intensified which access XXX,XXX is the the when choice, expenses the growing growth approximately to health how patients. are medical As high health care there empower elective the burden procedures with Today, care continue country's to have deductible plans, clear of XX% and to access well expanding than and veterinarian Wellness unplanned cost as and dental Synchrony's locations, financial

expand financing still financing We a care Synchrony's is in are product to do patient know patient suite. accessibility leader there years, yet we XX the we for to more can last

Now leverage and leadership Healthcare with Buy wellness like like Epic the management the our reach Allegro will to through our partnership, CareCredit about to Credit's to Synchrony Through both it. solutions Synchro need than credit deeply with audiology access St. Later integration More distribution expand recently, manager and and have in We however also continue and broadening financing we clinics. to and they partnerships practice whenever solution. options. innovations. financing and to greater practice Luke's. We're providers and flexible industry responsible is systems deliver industry is card #X hearing Americans X,XXX product more channels more our customers this empowering Including integrations financing comprehensive experience a set health and audiology drive announced Pay serve passionate options of U.S.-based and

provider of channels ecosystem renew to American distribution Plastic Dental, increasingly believe them. to difference. and Heartland software As We daily leaders the Sono between the add Surgeons Aspen, the propositions that center there resources Society truly our and is health and reach the address make to we patients' with choice lives, gap empowering space, customer a management wellness of Bello solutions needs value of and suite the consumer and and and help with expand Epic Americans with in including lender and Synchrony expertise, patient innovative best-in-class them partnerships a our no financial like other existing with financial is continue close practice our at industry

demonstrate see cards, co-branded on quarter. and both Purchase transaction When purchase year we robust volume dual XX% and where of these grew the momentum. value XX% to across Synchrony's and products, out-of-partner major across volume to about to total demand consumer spend now and last also products versus average category discretionary represented categories. these our frequency tracking we of continue trends nondiscretionary for continue the Turning

some and similar auto-related and points this frequency. remains that has customers and have growth few repair, the expenses making refrigerator. health translation, recent line or the categories with gas in taking while spend they're and spend more with categories gas, and with running expect, supportive seasonal higher The us replacing of home spend have a less together, furnishing major a gas show transaction groceries essentials more in broader of continued Synchrony appear there care discretionary medical at bill of like As been everyday nondiscretionary tells to spending acceleration entertainment to monthly months. steady education-related spend. and a experiencing investments relatively like range and slight broad value all across daily contributed new prices pay price consumer mattress that a with strong modest episodic grocery few travel value auto-related the touch our transaction in demand. Otherwise, to clothing, would we buying shifts pullback purchases or and of among favor in gas is spend in and a like more have of last values Putting whether

the seek financing accessing well the and Our they as overall uncertainty for the and navigate responsibly maximizing on pressures of inflation customers markets. are needs their the they managing value

greater Importantly, more our we strategies risk-adjusted our and cycles. We customers, insights optimized of data appropriate through utilize financing our deliver partners predictive experiences returns portfolio outcomes business. for to inform and this Synchrony's across also Synchrony our customer for solutions as insights deliver manage the many for to

Our and credit us engage our telecom partner from than and profitable well-being, to growth. credit in borrowers' make and drive our customer product and including consumer payment Synchrony begin usage, utility characteristics device us data, more products, purchase, This with and all financial and to service prudent bureau billions data transactions. million with fraud scale income to more historical transaction like allow cash open to XXX customers external leverages utilizing any flow changing our to decisions, accounts and their real-time behaviors to and Synchrony data, dimensionalize sophisticated Once shifts and customers, and our conditions. credit respond and diverse quickly our monitor effectively enables suite and market of alerts. indicators behavior better value of frequency also combines our identification transactions information, underwriting and

portfolio in our with and and of actionable into teams We our digital what dynamic of responsive support can by capabilities that ensure we And have is tune data both when make scaled, each a our servicing complemented need the fully customers stakeholders. are insights highly experienced account customers appropriate ability level the for adjustments to are and quickly. can that on technology our all closely Synchrony's they to so pulse powers it. outcomes optimize short, have platform harness customer In Synchrony's finger the course,

yes more quarter and resilient returns is level financial We that, even And conditions same invaluable are our to Brian our call and and to change. for performance provides ultimately the customers, customers greater say more I'll as consistently able partners over to This to of market shareholders. turn continuity discuss with third to detail. risk risk-adjusted in to what the the

core good Brian, Thanks, reflected XX% seamlessly reflected products X% strong the last of Purchase a our $XX.X and of that a results strength everyone. consumer or increase third and for compared in year ecosystem continued Synchrony's on and to billion wide broad-based services volume delivers. morning, basis. range demand quarter

strength higher ending in basis. average on and to some a rate, balances last core coupled in contributed Continued moderation year or account payment X% XX% in versus per receivables XX% spend, the consumer growth with

$X.X of in from interest-bearing XX primarily quarter, of and reflecting decreased reserve in lower $XXX this year, of costs, XX% point impact growth-driven million, million increase year-over-year of yields, average by Dual million basis for loan was impact approximately margin. increase X X% quarter The basis third The interest The compared last the primary basis XX%. release prior receivables, XX our portfolios points. Other the portfolio reflecting year. Other assets to performance. and quarter. million quarter X.XX% the expenses fees sold the core million of marketing income receivables XX% net of points liability other the driven expense billion income $XXX than basis and still sale and the co-branded RSAs by interest recently and XXXX. portfolio year-over-year QX's of driver roughly XX.X%, our margin yield sold of was and the when $XXX which primarily the X% points included XX Total basis a for basis, reflecting basis impact this XX Our in reduced improvements a XX.XX% core and employee points. million historical average. The contributed to fees interest points. points. mix of of portfolio the increased basis of expenses. on second net a reserve quarter X increase was increase points $XXX XX% XXXX prior The approximately costs. XXX impacts higher second proceeds. billion, XX anticipated growth interest net impact improvement decrease points year-over-year primarily and higher On for basis also additional increased of and during increase the reduced $X.X which to a Net by in liquidity year higher the in the the program credit liquidity partially in in $XXX the also were the the interest-earning $X.X yields due cost Stronger while margin sold million of gain a quarter basis average to loyalty margin offset interest by higher accounted was billion, increased reflected $XX These $XX offset contributed XX the loan partially to third quarter other XX% were receivables. build interest was of in in year normalizing cards increased Provision to reinvestment a third year. losses for increased for interest loan by portfolio prior

detailed neutral year and be full year, of sale and that As quarters the XXXX. of the in the gain made the expect EPS reinvestment on in second, this we the appendix presentation, fourth our for third will

year. was compared XX.X% quarter Our to efficiency third ratio for XX.X% the last

approximately Excluding improvement the have share quarter. $XXX would the been effects of of point and million earnings gain efficiency it $X.XX ratio sale Putting generated Synchrony year. XX.X% last diluted for together, versus on or the reinvestment, all per the basis third XXX net

our of These demonstrate a a XX.X%. our We common combined enabled and able broad our assets equity model, while discipline, a with Synchrony and on financial credit is on of X.X% maintaining our sustainably also strong average us financial tangible customers' cost offer efficiency services while returns needs we through compelling return power earnings digitally which generated of allows and products and the meet of delivering returns. ecosystem. to consistently to net range return and of value the grow consistent risk-adjusted

Next, on I'll credit trends Slide cover our X. key

We consistently our of gradual of with borrowers The majority better credit signs spectrum performance. XXXX or of normalization perform see our across vast to continue than portfolio. continue to the

to during have of experienced to X,XXX third The reductions course the seen obligations. to historical customers average. in here conditions, now X,XXX still we levels X-year than proportion summer the that or monitor to $XXX suggests has X,XXX, generally months working borrower at external to closely rebound, X entire borrowers consumers remaining X while remain payments inflationary goods earlier. XX% the begun suggests to elevated The greater since and due We that robust be levels. percentage the X external the slowly compared are increased balance and tracking since services consumer markets bottom of note balance all and who X,XXX. data spent stimulus meeting payment receive combination data top and positioned excess $XXX The continue portion seamless through stimulus When us a that July balances approximately quarter, savings still behavior demand of are our still continue customers XX% of points portfolio responsibly track compared and a This remain financial robust while roughly to support to savings spending saved. few the peak around rates labor to from to indicates well approximately trends of the of tiers, of Meanwhile, by runoff. XX% have customers tiers the amount and for their

portfolio, was was compared X.XX% delinquency XX-plus Synchrony's XX-plus last last compared X.XX% to rate our to our to delinquency year, and X.XX% rate Turning X.XX% year.

charge-off our Our reflected X.XX% XX target underwriting of gradual third year-over-year rate point X% versus of towards increase last generally the portfolio X%. net year. was credit quarter our X.X% to basis progression This losses

Our allowance was for credit the basis receivables XX.XX%, in points losses as a second percent of quarter. down loan the X from XX.XX%

the last to strength, Deposits Synchrony the quarter of $X.X source another funding. third to compared at billion and of liquidity reached increase year. billion, on Moving capital, $XX.X an end of our

maintain XX% efficient billion. and assets, base end. year. Our X% diversified undrawn of We XX%, and or both funding while our deposit XX.X% $X.X debt unsecured Altogether, deposits. of our least XX% was foundation facilities, approach respectively, unsecured and represented securitized prioritize increased to issuances including and represented securitized Total funding our by quarter deposits of with last and consistent unsecured total secured strong $XX.X sources at credit funding at billion, and a a and debt liquidity,

extending expect our and interest funding. be of and base, growth, manage maintain issuances supportive rotation from speaking, an opportunistic to as our are actively our encourage We we secured to grow That continue CDs, sheet continue and grow neutral. Generally a market our approach when deposits our to fund efficient conditions balance to savings deposit deposit rate to to we're to actively we'll duration. we unsecured said,

impact provide through will some on the interest program also delivery rising on continue offsetting slightly note Synchrony's at return support near assets to liability-sensitive a we over through result, of economic minimum rates interest to business. and the to interest RSA level, a term, manage of of the our partner the that As rate alignment It's term to mutual important we expect while be maturities.

we position. that elected benefit issued joint strong to to the the Note, on federal of CECL the capital transition rules agencies. discuss Moving banking take previously by Synchrony's

of in Synchrony metrics. already our XXXX, As CECL CETX has impact sheet. The of decreased a XX.X%. past income result, basis makes in last and January The to Tier quarter our in rules, the points mind, that an phased-in ratio ended ratio basis CECL year. transition under January approximately last at XX.X% starting recognized and the compared XX annual level capital transition a XX.X% under last decreased reserve to this regulatory to lower XX.X% we ending XX.X%. capital been XXXX adjustment Tier the of balance total than With ratio transitional X plus capital XXX was capital And compared year. of X points year's the CECL to on points rules The XXX basis to XX.X% basis XX% fully statement

our capital and of continue stock we million $XXX We track shareholders third robust total, $XXX In the of million record billion in through $X.X quarter. share of to returns dividends. returned common

approximately well Brian now of over for rate turn the Synchrony to XXXX of To needs. well $X.X environment remaining the view of was call guided very as our repurchase back earnings As conclude, his run total positioned environment end, gain Difficulty] our [Technical positioned and our authorization closing impact plans on Synchrony targets our quarter detailed the to normalizes. thoughts. reinvestment the expenses I'll the marking appendix of incorporates which on the to in rate June operating remains return our continue are and considerable Operating billion, our quarterly capital by performance, financial achieve billion. funding ending continue excluding interest their share to as latest remains business long-term to $X.XX shareholders sale should presentation.

our powered ever-growing diversified providers ecosystem. our offerings the categories, third needs by and channels increasingly of highly performance quarter spend through merchants distribution Thanks, partners, Brian. network Across highlighted product Synchrony Synchrony's and Americans' the business. financial are benefits of financial and

what the to and the optimized consistently and even as to for and sales real-time that, many to experiences our sustainable efficiently financing returns I'll Q&A. for market most Our and Kathryn customers, data enables to that shift call stakeholders. matter back to open ability deliver dynamically customers and providers our is deliver evolve solutions With and the and growth Synchrony and Utility value our our turn leverage needs outcomes partners and risk-adjusted partners our and loyalty for shareholders. consistent conditions for

concludes That our prepared remarks.

now please session. Q&A Thank will you. the session. Q&A Instructions]. Operator, begin start [Operator the We

[Operator Instructions].

We have with question Ryan Nash our Goldman Sachs. first from

guide And Can the decent second, in you ramp. what obviously, So a Can mean And fourth credit levels the intermediate net see that? the end bit you'd then a implies maybe term? talk does you Brian, the charge-off about about that the just ramp said that a from you progressing driving by approach of more little what in 'XX, allowance. you had is past of And normal quarter it, here. just expect X.X. maybe for to implies how this call talk

Yes. Thanks, Ryan.

be the expectation, with for better So guide than to portfolio is by better expectation. quarter, and again, of our of at little better out credit we still the the look And than attributes performing XXXX. grade, quarter, the delinquency the our than you, exited third they're a inside honest the we as loss bit when

fourth to due ramp normalization you mean accelerating we we we're had normalization of rise XXXX charge-off target the view about event. when lead credit the to see past what get but anything plus our rate in an mean in at unexpected I I at we on XX-day When going is really credit we we'll not think at And significant macroeconomic back you that projected. concerned quarter, billion, look delinquencies dollars, loss change absent trend. as about that to the that to and from look out relative a exit say not that's a that So $X.X really that and

to levels, in back feel we we good And we distribution XXXX including about So nonprime population. the We the good feel that portfolio have. about credit. see

model. significant books about be absent a right, have for, into that macroeconomic would the when have more have parlay the the we're core overlays we that When conservative say, you in the that higher, then unemployment rate you is right, the again, normalization, And target, macro at event. projected I when reserves think on to environment. credit you reserves, change in So clearly, rate, then now, we look a in we when unemployment

growth-driven that believe should forward, third the than we think seeing here you're again, else, I more anything which So the quarter. be is reserve what going postings in

holding the is the than Got reiterate the liability then you sheet did is margin Brian, given balance better it. up somewhat of hikes, And pace sensitive. rate expected, but

can you deposit rate in is talk about loan your rising So over look do of you cycle, and maybe margin you And the just positioning? in just assumed what terms where see balance then given the if betas? of a remainder the X% sheet scenario out going in betas Fed

Yes.

that and about and depend date, when of money Again, to to as say, high-yield needs XX% well savings rate, competition So look XX-month you funding the partners a think XX%. regard people is you competitive lot I We see when that as to digital about to to think around go the roughly at so if around X. XX-month high-yield little need market CDs see the to that. between remain experienced expect, betas to at with both our CD XX%, a up that swap, funds you around your going and I this think market we've a you what upon with in may tick would if relative I Ryan, it's look XX% savings, bit, have.

manage margin. the the by encouraged franchise. to actually after couple deposits. So to we able of continue be We've a of to deposits been shrinking grow years strong

we'll been with I really of when swung the months see XX how to some XXXX. Fed a the more, CD think funds more for color think of but access quarter, little certificate bit and how little not a going we'll we're the provide with be we wholesale is there. Fed on exit in again, XX locking we're franchise bit and us up the this to both where what think we But when and out be January we've we back to And regard encouraged XXXX savings. from liability we nicely and in more. deposits will in a what sensitive. opportunistic And I next inside anticipates terminal to about market a that So a to We're materially to operate back year. perspective for set We high-yield building and

our have Moshe Orenbuch question next Suisse. Credit with We from

reflects that about Brian, that the unique is could that's as over this and good to kind kind quarter. you and XXXX? would performance bit talk RSA puts your normalizes, course the a RSA last of some think P&L how could about as and of hoping and you the that several you behave that normalization years features we've had takes credit the X of talk about a you of over But O.bviously, how somewhat of expect how little

Moshe, again, acting RSA frustrated a have know said, as people the as I been we've and design. think I with it, is

flow you interest through troughed RSA we've certainly, Most fourth this of gave incorporated us X.X% charge-offs which RSA, peak, the of kind that the but start when outside be into move seeing we're dollars So into I back guide for out nothing of the we as January RSA be a offset back quarter. really higher to loss that X.X%. the Again, by and in charge-off sub-X% mean give fees, now think to see says, at, you the normalized we'll that rising partially that to of rate we look that the quarter. that trajectory. traditional of There's Moshe, towards RSA range going X% kind to

again, and So and going rate charge-off think look But margin interest up. see how works. acting performance generally, Clearly, to go trend charge-offs I perspective, trend at to should the back. it's from RSA you're a to net have think going we're we program as as designed down

there going payment you'll that rate have to also that as have is, fees. add and would some is line means benefit interest I you remember thing top moderate, in only the well Moshe, also and that, to

to your the bit a you the and I dual how in about Synchrony's overall of highlight Maybe a that that Perfect. did Does faster? rates plan grow portfolios. percentage next card co-brand you the And that? years? business the and contributor to just over as whether you plan several do could mean growth of think grow the how follow-up, Is rate? And both -- talk kind little growth the about

Look, Yes. comment. Brian and to start I'll ask

I think, our as look, achieving we disciplined of as try and returns. risk-adjusted we can, all products grow

seen So really good growth on we've Dual I cards. think and co-branded

Some of program that's new launches.

of in props like and or X. year the graduate Some over into value last product. new we've customers It's to launched that that that is really a time. great We product refreshed

a a to cetera, to et in at and obviously them start their for we get behavior, of once a we upgrade them and we card. spend willing brand sense and get know label if comfortable card Dual with into modest than relatively a or them we not look whether creditworthiness they're with So line them outside get we the private and payment

So a we've really from standpoint don't works if had I know, strategy you both that's a as return to? standpoint. want well years. Brian, risk as It a well, for

into and a the highlight, product approach you multiproduct our it's when The I'd nicely partner Verizon, PayPal, Brian, talked retailers, structure very portfolio. competitors. in Venmo, just And having the core we a And fits you whether here do Yes. the only line of the than thing about other TJX, look our customers. that right some Walgreens, it different and our product quite for bit bases, at

portfolio us allows and the the it in to optimize risk So balance. control really the

customers And customers. -- very really long-term, the who brand of best, that. bring are our customers into value frankly, those our rewards Those outside of brand, they engaged back most valued really some and partners are points the earn

next KBW. Sakhrani our from Sanjay question have We with

think from Vanessa, Mihir Actually, I Bhatia

proceed, Please Mihir.

understand at I just Have the the just -- that? tightened underwriting this I'm standards in driving you mean about be lower I'm ask to account looking what quarter, new just could to trying driving wanted I

Yes.

sold the the when second lower new The go So the really is during quarter. portfolio to account we part. latter

and If strips again, generated, those We which standards. and an kind we take of core a entire you were out attributes require measures the million portfolios it in refinements accounts. we X%, making underwriting at Mihir, are up at From underwriting said, and basis, portfolio. standpoint, would on not our look look us which portfolio to X.X always changes seen partners across performance. to new have the That

underwriting really most take done years credit we But don't refinements. what's want we we action. not several upon what the some about back driver attributes a relied where really I taking to small broad-based be have of unique to our to over last also again, So are the to and see growth. we've primary is go we need

changed our standards. haven't we So underwriting

lot of new to and gone credit in order get lines out other like haven't that to use issuers a We accounts.

the in We those says have a at portfolio. change data because together, think because and engage using want propositions they're and And nothing and Investor brand. partners more end most so to we're today that you then see decisions you day we we and hopefully the highlighted to tighten Day. our abilities get having appropriately we And take tools really we the the not our on value and And if to us of of to again, the the people the we're loyal making we coming attributes, we much But to in from manage smarter the partners risk customers attributes PRISM unique combine need because the our which actually that board. at with rolling risk. see we again, across risk have

the minimize ups to and downs well. for try our We as partners

of and are Brian's and take dig deeper back don't have coming to times lot a So out. where that pull when in ourselves a point, we to position good, then advantage way put really we

is obviously and risk own consistency that important, discipline our for but our I just and not returns, for think too. partners, that

the So feeling they're not and downs. ups

consistent So as we try to stay as possible.

on X just Mihir, point. final adding just Brian's And point that, to on

look the a provided because volatile structures our if we chart we're of which of times, it's in this different the in cycles, consistency and back, before, shown and and severity line credit way most you through competitive at go less because we've generally back, go a are the certainly, in of chart underwriting the the kind gives you number can standards If just you a us volatility advantage.

how asking I'm around along just partners sign-ups? maybe Got has with particularly, maybe about conversation competitive kind intensity of add you Just you just can for product." And conversations said, "Hey, then partners those you particularly environment what saying, just competitive back some fintech in partners. coming right are existing products changing even are it. the And for now? grow is to opportunities the in And particular I what and following valuations Brian, there seeing the to going understand like now any maybe with being are guess to that partners, this of partner opportunities in and new started you there's trying just the on side, some pullback if

Yes. Sure.

So competitive pretty look, out I there. would start still by a it's saying environment

environment for multiproduct you've maybe less little offers has Later, partners portfolio. our tell of a on terms of a and to and depending purchased, talking some gets in really they're consumer, cetera. is migrating But bit rising. you pullback the product as other given our the Now things space, of offer on that little to pace there the Buy is and pay rates, what paying happened in a we're to et rising think macroeconomic bit at environment, have a the expensive aggressive the I frankly, where is that in resonating Because being lot on seen of that's the being think an more in Pay fintech that one partners now I right our I'll the what depending depending prospects products seen rates what's out strategy are able that

helps into it of pretty product it a them of road. opportunity revolving look, have those So I what consumer a saying, financing their think do XX-month, and their of for I'm that an is now manage trying look, That's expense equation, "Hey, what for my side go we I they're on pretty and them can say, back it product this powerful. gives out the down too, in rationalize point step powerful for for takes them in and to in they're great partners economy promotional a financing the terms And the what's That's what how to we optionality this margins. of sale because taken X-month the think operating upgrade product, it's cost buying." and with optimize offers

out traction well terms really as both seeing our we're in having as So there existing good of new with the discussions prospects. partners that we're

Sanjay question KBW. Our with Sakhrani next from is

I think about have the question some your on NII. trying Wenzel. But On might being comments to NIM. just Brian guess to Understandably, first you headwinds for liability-sensitive. I'm related

parse yield Could revolve. also going forward? is about your obviously just higher So from through that but benefiting us NII help and rates, think you

Sanjay. Sure,

So the points when to about sequentially you relating in discounts. if up it think think X We I XX NIM, up basis merchant yields. prime for benefits about about looked of the picked quarter, about we benefit

of So for on the cash merchant portfolios XX interest impact of when look position, the picking up investment expense the discount prime you largely the some we at XX, offset increase.

neutral. certainly So

the cards the important when of the part, effect a price We little Sanjay, I to be X.XX%. tend the -- though, out APRs. our prime slower The and change quarter is benefit, for was way look at bill bit

some with merchant we something have XX% to fourth move that room quarter. through that be try we the into the and So of about more increase to deal competition. When measured you to XX% as we partners, we're pricing, and price to discount about think our that that's on

certainly, those kind the from I a fourth of think think we get through tailwinds most should margin again. coming perspective, the that guide in we So in quarter,

on for rates, should savings, as with quarter some here increase it, comprehensive think as resetting interest that rate be next high-yield into the it. the Sanjay. going next little got how up we as we fourth probably at CDs kind But put things that, thoughts sensitive of but to that Again, having in full third will think you January part in I us particular as good those continue benefit move if locking portfolio the a the well be to in and price we move in back believe latter it. like year, positives feel on liability these cycle and bit you the the the is of of Some Again, quarter now, that's about more quarter of to being forward. right we'll the year up a about some

got the go the and a up going lift prime back we rate with through. small reversals. I But is delinquencies, partially again, revolve offset to flowing when rate by So fees

question what asked kind of question a maybe but valuations. this Doubles, among you following asking Then fintech earlier. Brian for Mihir it. I on quarter, mean quarter I just dislocation have last Got a of another was up

You've just had maybe obviously bit come actions you just opportunity for some an Do some for address speaking, if you feel Now Later. potentially guys? -- be might that a you little broadly regulatory CFPB comments Pay I'm sensitive more presenting you that's there mean, Buy curious in the can could on more. moves I with like just

checkup think Sanjay. and a and playing exist want bit where, I in And they about Partners a do to sure, there's Yes, think these is now. this we're off. Look, little I market of design of the for their products sale been thinking the absolutely point future. are And think favors how we the know. That advocate environment, you heavily term. strategy are today. would the also multiproduct And again, we level us. regulated comment just we for regulatory field. I playing over doesn't wins mean on as today, a the certainly long quickly think I'll we

than of positive for So more think periphery regulated a some net and scrutinized us. I the products become extent more these the around that I to think that's

think I kind that so there of our play advantage. to are things few a And some --

maybe a M&A to be are, few time build. faster on than they years, some For in something there opportunities, where is valuations the with would technology attractive some if the side buy to presents first that that

So that's very got something We've at. active M&A always that we're looking a screen.

but continue focused look to also a last run again, we attractive of very was think active on something one very we at, to valuation and very process we're I around disciplined, things the and EPS. was see But valuations. that years that impact over couple of points. that's that on, And didn't very disciplined we'll entry the

So...

Hecht question Our John with next Jefferies. is from

value kind bit information different platforms, the that and of you think get on different of are changes versus Brian, through give I intermediate are into like for customers And that that? environment wondering, kind the the the changing you proposition, of seeing term? cycle, dual-purpose that But that did little talked any aspects us the we're about mean, about Is customers we is different good you the of I'm moving guys the given in new where an to inflationary you thinking kind product. co-brand kind to us. Are this, that talking gave about of of just there all you any versus the were a NPL. you uses -- I think what does of use shifts behavioral you indications in the

Yes.

making very not bit I'm at start, me year. at John, But we're They about little for frequency at and value sending consistently right, more gas, the being very right? Let as seeing the very where transaction may look bit we are world saying, commentary. by look and think little We're T&E. on the consumer add And we a some patterns. then are less much choices, when changed, maybe it behavior consistent. spending seeing credit We Brian platform. a They're average by we okay, consistency much composition throughout grocery spending or look components. grade people

seems everything So to consistent. be

changing or behavior spending the itself patterns. not So their migrating customer is

company They Gen XXX relative points growth than higher basis We Millennial average. continue about to call fastest-growing XXX it, Z. sales. and just to to positive our make XX% cohort at, They're see tremendous our our the of

Again, value propositions attractive. think have the to in that. continue multiproduct to just and model to continue view with we customers, and to distribution the that resonate we is they that we the So think have,

of changing. a from significantly, but spending again, consumer not decisions, the seen not have spend, making level pattern we behavior smarter overall So change really

starting the and think the covered merchant think I what to see on I consumer side, Brian we're well. really

have On adjustment at presented because trying that is and some to merchants the terms stuff X% of in a really the expensive that the pretty your to -- short-dated think of to particularly I interest costs. consumer we'll you environment, all see rate mentioned higher side, to their for they that. get paying see we are gets some I are continue in the are the offers merchant of what see financing customer to you and will started manage to

of partners So we the businesses. working product have offerings inside seen to some rationalize their

very That's Okay. helpful. unrelated then second question. And

And correlation there about year, the is us, is correlation you provisions, charge-offs? maybe there? remind is normalizes, for can to RSA credit about for next differences Brian, the timing us as any or thinking the Just delinquencies, for as think the the -- RSA seasonality

as if as immediately January But the that whole. in XXXX XXXX, the normalizes I to Yes. about see and the provide John, to you're RSA impact into line, right? RSA, RSA. think that So going a you through move that charge-offs we'll benefit think back be will a

the The X to I flow RSA or other otherwise think little components, a about bit of through a think, is postings reserve lag.

expect So it. to that points that so will out on would the revenue as credit impact rightfully Brian see the But normalizes, consistently yield portfolio. we again, increase your and increase

rate don't not they we concert. change, if you're payment the see have going to in work have again, So to that normalization,

are the those think I again, general gives So takes. and

really I be thing how will think rising rate moves through to a the in cost funds other environment. the RSA and of a flows that as benefit

Kevin Barker question Sandler. with Piper next from Our comes

rates strong, industry payment have and as you also the savings but for extremely rates slowed across come guys, down. Growth been has not have only

from get these XXXX. end of seems as aren't quarters It probably through more the extended you these mid-single digits like we rate, would able to savings period we as slow Given the growth be in a to out down next see to macro obviously rate, and in a get maybe this normal through near move considerably of an rates just more expect declining perspective few time. growth the there to for sustained you

where period that have. is the this have you is Kevin, through, one, working consumer it, about excess think I way liquidity The Yes. of number they time

rate. that saves So

cohorts particularly on we'll some of spenders and that credit of the quality through, some the gains are inflation. seeing you're higher wage carry into offsetting XXXX. well you lower In Now

of regard behavior of spend, is office or strong you lack anticipate some that people and have maybe of up tailwinds we day. the some that with the pattern. -- of every as spending the because spending probably going lower see and savings aren't So some utilization you to What in discretionary drives

you're think see you're Spending is go going slow. what you're volumes balances going what see come As payment I up. down see little a to that see is purchase you're rate to to then and probably going And first going But rate bit, slow. begin payment come down. spending tightened to stay there, to

a could short there think there see and the we'll headwinds of term. how tailwinds here a in asset plays elongation probably than for macroeconomics Again, short clearly, growth medium economy have I the the term. more the So But are term. be to in and out

And to on billion, What macro you buy there, -- addressed play it Okay. it's to program. that whether out target I standards do continue or underlying changes some conditions underwriting buying you're trends, of you buyback addressed stock $X.X underwriting to level have back? back maintain then earlier continuing and would no reconsider believe, at standards you trying before to you spending the or start would to see it you type

technology We're Brian start we We Look, what trends consumer of business every to I'll nimbly and now. Well, running ingesting feel in data platform, sources, go. comment. right our the good of for payment day do we ask as tools. thousands on points really and ability look the are is program, doing, very and we for of looking And about what at it behaviors. seeing not to on any that tweaks because you you're day -- is by to geography. by every event. an you day go. our say them take tweaks I kind call We're our kind risk product, some indicators by we as and need make slight invested risk you changes We've and this the off. It's you're our this And It's us, lot that. make data day modifications not of X a

above so And who's all looking are of we say, little look payment time. go payment, make little we little that But late that bit. the how that percent signs turn tells a they as in and making, we're thing first and isn't the at are the for X customers the Those maybe we dial at. okay, there much gone

call about seeing really We're is again, so do normalization. been we I'd And anything a now gradual, feel It's that concerning. that. to it, right good our ability not very

As every and we XX was always we updated fact, move days through it credit prior. than in think thought our I we the year, modestly guidance better quarter,

a in says still the So to go and different and good down really we're are that we what certainly share anything repurchase creating ratchet doing environment. that don't says in We operating see than pretty got nothing side. we we do I got to on think anything

about Brian Let talk covered Yes. bit little me capital. a just

at have we're our we when and our tremendous selling think capacity. we I model, think margin look the -- business generation seeing I capital

have feel markets, And you yield you there. we're capital ultimately, as generate at capital even think anything some that's look target. the feel down we dividend. ability growth alter strong stress the And at we to in repurchase to continue capital good feel capacity. we capital as but But every and business that capital, look good of about in to of activities plans place, long the look preserving think what's those little quarter. when to about our going fully run the to as develop I again, So our margin we we test. moving have do the generate the we have the we our or upon at position together, achieve we look but can would continue do as to and us severe we we about in scenarios quarterly, story And generation run the RWAs, continue bit put good out, capital and really And returns, the slow to the we a think our and that stack do target, we it. reliant we most see don't losses I when then the towards again, the we'll the then

with The question next Rick is JPMorgan. from Shane

bit wanted little to talk allowance I the coverage. just a about

both we outlook are growth, that expect delinquencies, drift higher that to normalize. continue changing. in saw guys Why we And coverage little to will is should Given of economic an We where we a heading move we uptick as the in are, see start into down do XXXX? you credit terms indicating bit? allowance

Rick. Thanks, Yes.

that than migration we we which we we point, reserve which, X.X%. and Moody's the you credit the normalization, back a getting at back of look So in When built an employment So that that. when year implied take right? on model as is the starting models, rate you again, about shows, have look it, cohorts look over we couple X.X% last unemployment rate to our call think X%. baseline as of The our how from forecast, underwriting years, at higher next and macroeconomic right, to put at

We effectively. okay, So to closer if it if you put it effectively, think higher we gives don't that rate. it about is overlay on concern, you unemployment effectively, the today something that's But So a higher like? coverage delinquency there than then, mid-Xs necessarily look basis, probably what scenario would say, that in. an some shows as than profile its sit given us looked the here a does own. at normally just what by expect We

to adequately ran see then a that, driven growth you're today beyond So at and be reserves. that, deterioration If in there's and just we looked our delinquencies going significant we unless don't really out. think moving we encompass models, it in what we're going to CECL, and we below would in is reserved happen quantitative be day think to XXXX So right? X today

feel good we So about it.

pretty it delinquencies most and expect a quarter sight quarter. of what good line first look when to gives at think you in here you for into have that fourth we the I likely XQ, both

you reserved adequately under environment, good can out. about coverage scenarios. macro again, significantly And we're the where So that for we in that pretty various change something feel is absent and plan the

interesting. It's Yes.

a of we're the think connect terms of dots struggling when forward. with same it's I which thing, to at deterioration. look But we that have data empirically, the in we that going hard the concern all is today, sort

running we're same So the issues.

qualitative at I'd point ran really back than and just be this I And X you below But theory I quantitative allowing. those go pushing higher If to it. Yes. models just day overlays think the to you'll that X day in look and have pure is the it's you CECL. model, again,

models it kind up So our moved formation. and delinquency moved our down looked the our of got into qualitatives quarter, as embedded you core if inside quantitative

people but the each get we're know ability appropriately where provide visibility So that's comfort a end different don't those we working models, we of are provisioned in at lot with provide quarter. that again, and I don't they into of concert other. the And all

We have question. for time one more

final comes Graseck with Stanley. from Betsy Our question Morgan

Okay.

funding we talked It's about bit that quite about is And looking earlier had the know to One, year. bit peaks questions. X.XX. hearing pretty it's the to CD interest like net savings mix fourth the you two CDs. you've noticed that I And somewhere robust of in this down margin And migration around I quarter. go the at run from from range XX.XX%, So the here, already. rate a talk XX looks for I'm a you your months exit got offer that

you forward side the day at here that So through to you halt it, the that this which suggesting move think where and are as higher, shift you next CDs look Or in curve as through funding you should trajectory cost the like X.X%, or path your but your is year? continuing lock we that decline gets that relative that migrates the of what Fed X.X%, do yield the to Do depending would can be that the with X.X% year do. on feel slide? you to comes on and

Again, inside you of you that term, about higher in guidance revolve give NIM, Yes. to again, payment reversals. into would The we'll a have rate be partially lot yield better the back short give and Betsy, the by I moving going offset fees, slowing from have January better some you the the in think visibility NIM. to late side, way pieces it, you're

when of changes. We a continued prime effect moving. lag going see prime to XX-day on to You're bill almost this

of that So through portfolio. you're see prime effect to the going move

to pricing. adjust We have merchant the ability

to X rise while be may as of you you into do at I call of you is better certificates or going quarter believe it continue XXXX, in that the, if locking are deposits So to bit is tailwinds move throughout those Again, current going the little this following Fed the it, in NIM. the to rate, give do a pressure think to I year.

depend and what We some clearly other for of So also it's do money market funds going an shift. we're aren't customers but source. to Again, do. what January this in big remain a migrating a The lot were And us, the of is we for we little institutions center to yield, we'll out paying competitive. that we that see see money banks flowing that optimistic a news so money going funding upon gives lot which bit manage more. can us for deposits, and back profile, again, attractive be to detail positive

a help environment. a growth us little bit would into you your help give just And partner result then you follow-up expected with partners' for that next they're activity be slower which box how any growth? is a to their your to that looking or year, that any sales them of ways on as and you changes go of to as a revenue can paced come you Can as credit drive other sense question

don't sure, opening sales, it the Yes, doesn't rely it Betsy. drive said that really credit Look, well. typically on I to earlier, end to try box we think Brian

having for for strong going to are And support around it's that that's we offers, them experience, discipline really hopefully is well our for around is We're with the stay discussions products our good being What th on I do a to partners as where partners new that offering how work focused. as offer there. proposition consistent we're value and their more So holiday products. multiple with we're the very customer. really try and k customer. we able tailored

partners I It's of think entire them. it's a that to with for really model. kind work we our ecosystem proven drive that on sales

a that XXXX. only last hopefully hopefully support strong I the with into to a and think we've and the pretty holiday optimistic investments enhanced going couple and them, we're we've it years, made we're strong of over

further We have questions. no

call. Thank today's for all now That joining. you concludes

call. thank you, thank participation. and you We ladies your And this gentlemen, earnings concludes our for

disconnect. now may You