Synchrony Financial (SYF) 19 Apr 232023 Q1 Earnings call transcript

Good morning, and welcome to the Synchrony Financial First Quarter 2023 Earnings Conference Call. Please refer to the company's Investor Relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. [Operator Instructions]

I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. you. Thank

begin. may You

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

today's we This Investor address the press presentation to on to financial addition In release, the are presentation be the The release, available we website. accessed schedules, call. going and that website, have of topics plan can our Relations to synchronyfinancial.com. section during our press detailed information covers a provided by

today remind we uncertainty, forward-looking our will actual our started, in differ SEC materially comments wanted the that Before cause subject and and that to list factors on could include website. to These risks you filings, are get results statements materially. which statements. We differ available results might our I to actual are

to call, financial company's we discussing the refer the in will performance. measures non-GAAP During

find measures financial You to of call. in our reconciliation can measures for today's these GAAP a materials

for the third earnings not is website. Finally, does edit and Financial only The parties. transcripts guarantee or located teleconference webcasts authorized not on Synchrony are our our of provided responsible accuracy by

Synchrony's this President Chief Doubles, Brian are Officer. Brian Wenzel, Chief and and the call Officer; On Executive Executive morning Vice President Financial and

call Brian over turn Doubles. I now will the to

match business results, earnings a return set Today serve, tangible the on everyone. the of delivered differentiated diversified across of model, health reported Kathryn, good assets with and growth X.X%, and of our equity share, average of common XX.X%. products. again, consumers consistent and Once of per continued Thanks, morning, a Synchrony's of or diluted partners strong the we power including first $X.XX Synchrony million quarter net $XXX return on

and was purchase active and wellness billion higher growth new basis, Health to drove across each core a milestone ever accounts diversified first achieved of account. average X.X in million highest by with active results in reflecting X%, last spend grew year, broad-based platforms, grew and Synchrony's highlighting the a This five we compared strength volume for active accounts quarter. purchase model. the $XX On accounts, our of volume, per opened XX%

purchase purchase transaction diversified in out-of-partner digital customer volume The increased volume strong X%, specialty. home accounts by primarily transaction reflecting due was reflecting in lifestyle, engagement. strength volume outdoor in growth XX% luxury. and and auto, strong value performance, furniture And and driven penetration In In strong retailer values increased growth. growth our broad-based, increased in active products purchase values, in purchase commercial higher to and XX% and and in volume X% higher home spend,

XX% record a volume to and Dual value quarter total co-branded reflecting cards new propositions. continued XX% volume first for of increased purchase on growth is purchase response accounted and core Synchrony's basis, several strong our a as of continued financing inflation navigate impacts solutions, customers testament to of and flexible the the our utility value offer, resilience rates. the the higher we and interest propositions of compelling they

our transaction their and monitor of through needs financial health regularly customers' We data. billions our real-time

both across from Our transaction quarter At insights only and pressure. frequency frequency in level, the transaction average to categories. spend, ongoing and average continued spend across out-of-partner reflecting and in in-store increased continue variations a inflationary impact values minor value show high the

customers backdrop growth evolves. impact budgets early refunds. data slowed the tax possibly More average value their lower that broadly, suggests the macro March, However, as in in of reflecting our the actively transaction are managing

relative shifts We our discretionary within though also partner of essentially unchanged. some and nondiscretionary continue see category mix spend the auto to spend, remains minor seasonal

quarter prime at frequency shop and they platforms grade in segments the has across last more the Lower of levels serve, summer customers continue health, XXXX. rates Meanwhile, of their relative remained half certain the when to toward follows and more often. of payment spectrum borrowers do. trend the we In somewhat the migrated shopping grew in segment, spend this highest which the This pre-pandemic borrowers fourth credit are the frequently sign less year. of second our behaviors since transaction credit super grade credit lasting credit of of relatively during stable

their also saw revolve bands, payment normalizing decline to XX, than savings monitor, their external through age the across we Based accumulated continued payment balances. terms to most In see pace begin we spend cohorts expected is at to and on deposit of to slower which we levels continue savings consumers and rates of behavior, as though March consumer a XXXX. be data credit through

balances deposit consumer this XX% X% declined though quarter, above XXXX. Average they remain

expect drive pace, and continued the delinquency to for risk-adjusted credit revolve to in pre-pandemic to continue in growth normalize. and we metrics savings decline this accumulated trends our This, at return of optimize further better margins loss payment As levels interest-bearing balances, business. our borrower will modest turn, loan

of model business partners particular, since customers than the in and conditions, normalized to a environment Synchrony's changing macro is support start we've seen our designed pandemic. and through operating the more

managing the we continues, progression are business of of state the the the long view term on historical With remain strength watching stable the positive the balance relative the markets this back we labor for consumers' to and As given while consumer levels that trends. today. prudently and sheet,

model from sustainably of our confidence comes experience Our cycles. economic managing This of serves decades experience a stakeholders. through that our delivers all

and of portfolio tools crux deliver which gives us and it to varying our throughout the all products high-quality consistent, partner environments. the product results diversified is At suite,

our our powersports in than these realignment rethink of announced by and we recently We continue how as Synchrony partner to enabling customers. addition launched launch to card, the Serving of build is platform the which partners we was highlighted and deliver partners. for in demand to In more Outdoors how our and the of product on quarter, particular, direct an Synchrony example renewal XX business. response first in as strengths customer

solutions Synchrony equipment. powersports for has long lending provided installment valuable

and by offered lending in garments, However, we that in reach there that installment accessories, by warranties service, initial have which market, not as to significant traditionally projected fuel, purchases served the powersports. this occur billion such model XXXX, are $XXX is were after purchase, parts, the

loyalty combined team platform dealers. for dedicated and customers' to products Our still and identified across opportunity partners this with greater drive meet our demand experience

platform. Synchrony Turning the health solution and extended endorsed patient XX-year associations solution. CareCredit extension this financing Dental Association, choice. announced dental our the with dental and quarter, to partnership the solidifying More with CareCredit a second-largest largest ADA of only specifically, as relationships the American wellness we distinguishing as financing

to members endorsement, dates XXXX, dentist special for offers more XXX,XXX back This their which features and includes and patients. than

unique with patient credit dentists. the remaining benefits These delivers relationship care than that offering integrated our support. also more XX,XXX-member Academy extended of the patients solution both the long-standing partnerships providers of to and XX-year We the for financing academy's continued our General the Dentistry, exclusive the program we value underscore

and us an And finally, as diversify our partners greater value auto utility also enables products, renewals quarter we business. the markets across our customers LoveSac. grow of platform, announced flexibility, while of including enhancing and ability in Havertys with and and win as resiliency to our alike, programs partners home to Synchrony's and and this new well array our partners drive for

with flexibility, seamless evolve, or meet In and proud are summary, Synchrony make and I'm to needs which deliver and continue through Ready to customer more ways more a to priorities industry-leading our purchase, in experiences their looking a of solutions Synchrony deposit, value partners. ready. is as to a payment our locations, the they along wherever many continues

to over I'll the that, Brian. call turn with And

Thanks, performance products. with engagement the the sales our their value consumer strength to Brian, position. the good deepen prudent financial of propositions, first and highlighted platforms, our quarter with power Synchrony's continued diversified everyone. compelling of morning, continue and paired Consumers

spend and was the growth higher per offset receivables interest loan sold volume XXXX. the partially ending basis, fueled to XX% receivables growth billion drove of an This core impact portfolio increased loan as receivable and account. yields a active the by Net purchase stronger the fees. in during in On X% XX% quarter loan with of income increase second higher X% was $X.X by along of XX% interest

a five-year lower the levels. core XX.X%, points basis, year basis of and points sales payment XXX rate On quarter approximately last as Pay our pre-pandemic portfolio historical higher for year adjusting pre-pandemic XX for impact first approximately the than fees when credit increased average. XX% than reflecting trends basis interest was behavior toward last and normalization

primarily X.XX% interest partially net Loan points interest interest more additional were receivables margin. contributed an offset interest and also contributed rates declined XX offset points. than yield cost, liability our points, to trends. yield liquidity costs, points portfolio margin XX Incremental declined interest-bearing basis higher These better points. to XXX yield net quarter funding the margin by XXX basis reduced points XX impact basis gains of higher on which XX.X% of First increased XX and basis by net reflecting by basis basis

average of in anticipated fund the by year The margin points of the of or million higher liquidity first reduced basis partially interest-earning from to sold $XXX growth. the built assets reflected second impact interest And as million by charge-offs, our portfolio $XXX income. RSAs mix higher quarter net quarter loan offset X.XX% XXXX, net approximately receivables. and in interest decline we XX of prior net of the

was function to alignment in important returns. the partners higher funding the greater as designed buffer provide and provided the and net company RSAs by a stability with supporting RSA This our costs. as highlighted buffer a to to financial our and continue of quarter charge-offs first increased in providing results

consideration quarter, see $XXX charge-offs which million build. credit industry losses net for build do for included on we macroeconomic contraction though Provision reserve a impact today. performance impacts for the the consumers, potential our any potential related billion in the and The delinquency was of effects credit $X.X reflected and higher not

higher loyalty income and cancellation investment Other X% technology higher offset by as investments. costs costs, billion, the losses, driven $X.X partially employee driven primarily operational Other well debt from higher by expenses to increased primarily $XX and by as income. decreased million losses, impact gains

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

of or In a quarter on assets share a on tangible equity million diluted total, of and $X.XX X.X% return of $XXX average Synchrony per net XX.X%. generated return common first delivering earnings

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

better rates continue credit XXXX performance pre-pandemic normalization levels to in a continue line or of to XXXX. of credit perform those as better than remain approximately Delinquency at metrics measured We recent continues at see XX% than XXXX with vintages and or performing pace.

credit normalization payment savings where slow to -- higher levels, noted moderation The behavior we tend continued grades, be gradually of balances towards as trend shifted the tapering contributing prepay anemic larger. of to quarter, last accumulating into consumer is of has a

As while and declines XX losses expectation. our quarter line a rate prior in payment with versus of increased basis approximately result, we saw delinquencies points

X.XX% X.XX% first rate year Our compared XX-plus to XXXX. or was quarter X.XX% of delinquency last in the

X.XX% the year, target approximately still delinquency X.XX% XXX increased first prior the quarter XX-plus or to underwriting our charge-off was XXXX. X.XX% points net versus basis And of year last X.X% in rate rate our X.XX% from Our in to X.XX% of X%. below

The a as losses of of loan The receivables reserve previously equity reduction points from guy This XX.XX% receivables. also allowance the rate reflects credit updated XX.XX%, rate discussed has earlier adopted lower approximately announced troubled and reserve quarter. our coverage for allowance was the of percent fourth quarter. reserves the additional sequential in basis debt Our guidance. million for points as XX restructurings the seasonally reduced basis reserve we recorded primarily impact by accounting XX up in through increase a the reflected for $XXX

in of treasuries, vast interest risk. U.S. quarter, cash funding, strength. is Synchrony's liquidity And target generally strategy maturing and duration We minimize the of liquidity neutral levels We to remained equity, a one rate and management portfolio our reserves. short-term liquidity, common and funding the and manage majority in maintain to In under source and year. largely capital, of our of appropriate be set

Bank and as a well deposit reliable as failures bank the for country was across during both of navigate uncertainty customers Synchrony So flows mid-March, and source business. our positioned stability of pronounced several the depositors our

direct-to-consumer Our in is geographic with accounts. or high-balance no insured, stable largely base concentration areas deposit

as years, industry-leading us are of seamless loyalty depositors with our to five and balances nearly customer first three XX% as is banked experience rates. has our our scores, Synchrony deposit The of award-winning than depositor outage competitive foundation platform satisfaction are Our approximately digital well more years and this attracted old. Bank's for

deposit Bank customers sought or to Synchrony advantage banks as fact, remix balances contributed FDIC available net we a and their balance reach limits double-digit $XX.X inflow billion $X.X to of million This of nearly sequentially year growth first during take to the March, of three their insurance account sequentially. last $XXX In versus deposit XX% quarter as weeks either exposure billion. saw last growth to to of generated

growth At Synchrony and direct insured. activity in quarter flows, deposits fully were April trends, accounts deposits. returned new end, to by looking continued Bank And over XX% highlighted Synchrony at more of seasonal has Bank

the business, our represented by for debt, of foundation which and and X% prior strong to XX-year subordinated target XX% develop $X.X increase by capital and the important a as securitized XX% provides included respectively, and representing funding, reach complemented milestone of billion base is we deposit continue and our This debt, increased of versus issuance Our year. stack, capital funding, fully unsecured our levels. an total our our more

credit year and projected undrawn XXX including deposits as or $XX.X total of last assets, liquidity, facilities, Total growth. our our billion up from prefunded basis loan points grew XX.X% receivables we was

to on Moving Synchrony's discuss capital position.

CECL already we its January, income elected until January year annual regulatory metrics capital has benefit our we by points issued previously XXXX. in sheet. the basis approximately recognized and of continue CECL adjustment rules made statement joint As of banking take the The balance of of to the our been each transitional in agencies, will transition Synchrony XX and impact to

plus TDR Tier ratio to the the under points last recognized our earlier adding on XX.X% XXX basis XXX XX to transition capital total compared ratio the compared XX.X%. ended XX%. was year's And the to to level approximately CECL than XX.X% ratio The mentioned to equity CETX rules quarter decreased of fully decreased at capital points of capital X reserve was basis The basis CECL XX.X% net lower We transition last points year. Tier reduction rules, of and Further, ratios. XX.X% a the capital XX.X% phased-in tax first last year. X reserves basis

we record returned of to million million repurchases first In common of through Synchrony million shareholders dividends. $XXX $XXX $XXX the of continued quarter. share capital track total, in returns our and stock robust

well to share capital continue regulatory to return conditions, through also to of and XXXX the our end, market as our to period our structure restrictions, complete plan. to seek repurchase to remains remaining positioned guided ending our additional was subject the preferred opportunities We'll capital quarter performance, of developed As for business authorization issuance by million. capital continue shareholders June $XXX Synchrony fully stock.

to receivables on purchase please deliver first Overall, slightly XX growth ahead our XXXX for detail volume rate expectations, Finally, anticipated, Slide when combined outlook. stronger refer than faster quarter. our for which, normalization with of more payment presentation full-year our came in of quarter the

we result, well receivables year-end, expect to by more by paying a the year we above As although ending pre-pandemic or any grow anticipate XX% levels. now rates

benefit higher interest needs competitive the this of uncertainty. during funding in net expect rates the XX% levels broader market betas first These to balanced growth lead potential of and to impacts trend of deposit industry in impacts well continue We as by higher betas. dynamics the holding XX.XX% quarter, liquidity the could to as payment reflects margin our outlook include of favorable within anticipation that anticipated

our track continues loss in terms line with expectations and trends. delinquency Meanwhile, on our both of credit in normalization

rise a and six will a not approximately levels the dollars reach As levels months will we but reminder, should fully Lost the pre-pandemic XXXX, through charge-offs continue normalization similar to and Net normalized following expect progression rise to follow and delinquencies peak delinquencies. to lagged relative to approach midyear. delinquencies. by but

the for portfolio the As continue X%, expect rate and range X.X% will loss annual to X% underwriting reach net XXXX that XXXX. full an such, of year X.XX% we target not charge-off of our to until to

to committed margin We average X% Given our net $X.XXX target RSA billion of quarter. remains a for the operating loan receivables. per interest and with efficiency approximately X.XX% delivering remain unchanged outlook between year the and in full net unchanged expenses for of charge-offs, operating

to as of and model partners, needs risk-adjusted In our customers, for our shareholders. returns performance sustainable the sum, is at we grow built meet Synchrony's strong our

financial to track we normalize, conditions long-term achieve remain operating targets. As our on

thoughts. for the closing his back turn to over Brian call now I'll

Brian. to of track of partners differentiated Thanks, risk-adjusted cycles sustainable, execution serving through customers economic our generates strategies deliver we reflects the and our consistency prioritize approach at long-term waves that our decades, record Over for and stakeholders. Synchrony's innovation, that attractive and returns. growth our

continue in deliver ahead. and opportunities So, across we see to excited on in ability the as our am look confident for I year to and deliver objectives forward, our adapt I'm the I to environments,

up Kathryn Q&A. open With call that, the and turn to the back I'll

remarks. concludes That prepared our

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

take [Operator Moshe with ahead. Credit first our question go Instructions] from Orenbuch We'll Please Suisse.

Brian Brian. the question like you're to ask their to with this little normalizing. thinking I'd about Great. normalization this the Thanks, -- the both the Can about do that now you're about of outlook that a it. and and given talk how grow to receive? first I thanks profitability growth around going losses through The new as with ability economic and continue guess seeing variability that RSA of they you're is, they're And you in you're bit partners -- current having you process accounts just the to your about your and thinking how discussions have

Moshe. morning, Good

very about seen Well, conversation the ability we to the customers right work drive are very The And and traditionally to to is help to now. multiproduct most what enticing for looking for retail And us normal about the is the the with they the of think profitability, So, to are they partners them continue with when certainly, than funding historically, is I them We back that certainly them have just us competitive we returning higher a and bring to what right think grow is cost to environment difficult them sales. facet now. levels. we placement that. understand products. new

They impact RSA, how That's market last understand an to willing we've cautious their certainly for to you do will for arrangement know, not Brian, at us been that don't do may couple are had none to of participate. going they the credit they're anything or they but and that? them drive outside want point, the supportive back. recognize around and new part, is to volume of customers. the years economic and most over really conversations But some and the for with continue we're want -- sales. the benefited The actions add pushing really looking of are take they've which them to to whether developing, I and to

of would that's in level it right is XX really I never think big now. talked somewhat we're uncertainty, partners what is periods our very see than months. more This Yes. for this of on we the XX, I card behave working doing, just us. small programs we the over the in partners understand higher with a say, would uncertain and and that, period when They right Moshe, us clearly, engagement, now. the They're in is past I and great in has about even been partners engage add, across engaged. trying are consumer next how going they're to to The

step also of they're and And of multiproduct strategy engagement financial of products trying the that's something the plays the back sale. anchored trends, I well, on seeing we offer they and lot on point kind momentum ago, to that think partners taking environment of rationalizing as rethinking the couple great we're their strengths. definitely as to a that years and in across a consumer our kind are figure macroeconomic I out the And it. think business a that And of

I happening, deposit what that like worse either and it get taken would what talked And bit standpoint it a detail Great. seems an margin could from for you in or and it Wenzel, better outlook said things inflows is deposit to maybe industry and here? environment to opposite the from your that talk others that take be from actually seems a about seeing beta just higher guess, you've like you're more the of could little actions considered betas, to lead Brian kind the you that

Thanks, Yes. Moshe.

rise year we last the entered the shift anticipated our from banks. the last were competitive, particularly end in to got as year. So, highly a we of betas There was some year, with regional of

to year, our they you on of CDs. the looked when were at XX% high-yield on roughly So, mid-XXs low at end savings around last and betas

points year. CDs, XXXX, came into XX-point probably right? and probably rise we XXX% and the December betas very to into the market I'd part first came savings performed rational week we beta XX expectation, As we or through the XX- most the basis of of the quarter That's more the for right? or on was our high-yield essentially how data anticipated a in since the say better than third end

XX look CDs. about betas they're you at now, and mid-XXs So, savings probably on if on

NIM going though, because the may haven't we is may outlook, baked get on Moshe, what's banks mid-XXs just original outflows back deposit is have the that and to that outlook. who of other guidance still go into that be those more in CDs high-yield that's on be savings to over you're Our seen the XXX there fact yet, we where aggressive. but seen what's Again, points

give potential us So some hopefully, develop, that doesn't upside. which would

Thanks, so much.

Our Nash next question Goldman Ryan with Sachs. comes from

progression the the guys. you. overshooting morning, what's on just you the the impact you how guess, backdrop? of softening anticipating, about normalization and the risk about versus nice from amount And then think still Thank included But growth delinquencies the remind math macro us charge-offs backdrop charge-offs. the gave accounting of you and a just Good second, being change. Hi. of off maybe given on leveling start I plus given you growth just allowance, do given you're Can Brian, talked us perspective? XX% the below maybe macro and a

Yes.

to Let you morning. Ryan. me unpack this talk Good to question, to try that

first, you chosen we, about account change, TDR treatment. where is this the So retroactive when have others, one think many like

the tax net to on went reserve that So, there reduction a January equity was through X. of

than than things. reserve seasonal reserve quarter, of two we expectations, volume lower into seasonal quarter, was gave lower at to down the our the expect provision. And or came purchase us led pay position asset which greater a end than pay growth-driven the was As -- the expectations. then higher which and down One, our the purchase the is fundamentally

the through X%. from -- all about what's the the reserve unemployment qualitative reserves, through effectively of think when you have When in model you in macroeconomic what standpoint, the way we is the our components baseline a look effectively,

forecastable if reserve not period, below So unemployment reasonable rate-driven stays X%, should we provisions. have isn't this

during we Again, did to effects to given quarter, deal the potential this of and with contraction potential add the banking credit, overlay macroeconomic though, to turmoil the consumer. the flow-through

As I we're that is we thought we next we should in downward trend and that forward, move increases, think as I'd it the mean, be growth-driven post. one that That reserves. to CECL about. end what provision expect line really what said, stepping I generally about and say with year day to still through over time going believe the we year down into out adjusted of reserve

environment Got that capital, it. And just manage just maybe given you're over the obviously intermediate capital capital to asset to XX.X%, puts clearly, just and talk the to robust thinking time base frame? about kind the Thank closer you, but capital noted obviously managing the color. you for well an Maybe being positioned in you're the to maybe getting shareholders, about horizon recession about potential on you're XX% plus of growth, some of think continue on pretty how Can target. Brian, your takes and you this return you approaching how target. at

Ryan, testing unemployment XX%. the your up when convey severe try was and under you try I that -- to run Yes. get idiosyncratic events, is to loss the to models thing stress

you theory, those you in run go So, and through stresses.

to to that. withstand about that the provision even capital at in look we if in recession short theory, some our your you -- form be -- term, able came So, and had buffers our medium would of

say, necessarily repurchases the or back of level we look should repurchases we something at safe. as some curtail that and would stop don't of we sit it or So, on where the

our really the is So, capital event into economic our capital plan. forecast baked and

think we As the priorities, you it about hit right.

growth about the the organic we thing first The think company. is of

inorganic down And share repurchases. whether dividends. have or we to is comes and/or Second not third opportunities

that cadence the there want assets are over of might come about next come to deploy years, available into. of capital that couple some So, the we that

that we necessarily going with prepared continue finish to But my we're do need preferred our return we've what of to capital line in shareholders do highlighted today. have I return towards historically the stack, -- target we to that's to XX%. to doing but down been shareholders in and to not remarks Again, right development now, something again,

Thanks, for color.

Najarian will question with from next Our UBS. come Erika

the the first morning. question I the Good basis normalizing in should was credit of we gave about the XX rest think range that the rest My than the had. at X.X% as what about lower to we think Hi. at lower expect us, of quarter, And is be the Brian? that for year points of RSA, you it consensus year, the on end

Good morning, Erika.

So of again, to again, depend you it's X%. going of the about to we X.XX%, X.XX% really margin think the net the gave when interest you range right, the that business. range is to how cost funding X% Losses out, plays upon in same as

to really the deposit play the to to be really -- it's X% So, play expect rates going and that through how the X.XX%. benchmark flow how it our interest on betas through to in partners, but we

now but 'XX, recession, a XXXX. in and be investors about about earnings and ask trough a to lot hate sensitive are earnings I to thinking of financials credit And it. trough occurring in Got expecting

pre-pandemic the you So, reprice the margin your dynamics net down. we of reaching think your cuts as about for Fed potential levels as supporting in dollars XXXX, potentially deposits charge-off

lower our higher prospective investors in them as easily think How your the okay, about unique is investors function in environment, That's about here's RSA that an I in way step staff. think the should think there that for a to year. and a a to Because RSA net your recessionary step say, right? function charge-offs,

Thanks for question. the Yes.

we When ended quarter, if normalization quarter quarter look And at second. of been ended me points roughly between about a XX%. fourth we've of on XX So credit curve. historical ended delinquency XX%. back we 'XX rates, or you about XX% We trending for the roughly just let talk a first, basis at the the 'XX first and quarter up

way So, which expected normalizing in and stay in credit is on that we trajectory. the to

we target expect underwriting X.X% at back loss X%. into to rate slide our the to 'XX, As you to

see The that -- a believe which you're a going relative unemployment to higher interest normal type play back that more which you're through, you give rate in other payment to or you dynamics fees. come to normalized and should your line, have environment, of rate, right, would tailwind slightly back if you go then

expect But the come of also then we work. kind down. the Those cost all interest-bearing and liabilities prime rate to

tailwinds, net charge-offs, effective that headwind all through two have You RSA. the with goes goes -- back

is should could gave So, pluses X.XX%. a minuses, X% of longer-term you would framework think or which and then in and line that, you, below come we when two, we the back I for quarter about time financial which dip think to period you which with a what in you that there be have X%

you. Thank Helpful.

with comes question Hecht from John next Jefferies. Our

what Thanks guys. taking one dual card. more co-brand use towards for that in kind had morning, what wondering other just activity earlier you about the talked sources of you are are customer there and is just that Real And product of a migration, seeing of Brian, call. expansion you expansion? to my seeing changes noticing worth in noting? is that? migration -- Or are I'm Good that any tied question. good product you've that are given

Yes, to start some then color. add John, ask I'll and Brian

our on dual capabilities. spend ability into that been we've really to it a product leaned the heavily our like about last decade. has that customers migrate world card one best think customers I And over strategy best and we partner's the has what the co-brand is

go And they gives earn reason on typically that to the them into the partner's a card way that store. back

great there, as great for which growth partners in the So, and is card we dual above-average seeing are world us, synergies well. our sales, like for and we

card we as now with then the a one you back, loan starting about installment spectrum, revolving envision of lower PLCC into the pay dual can step and a it shorter-term of at or multiproduct really a think card. ultimately into taking card kind buy a co-brand secured strategy, that later product end the Just migrating is

We about the strategy think us allows a when to winning think our partners' cross-section and is wide customers. terms think cater profile us economically one. that we that to a that We in risk return very of to

with a there. multiproduct And last engaging we've a just partners I years real momentum we've so engagement, the think lot that's as three a strategy us. that two I think or our in time, of strategy, a winning And where the over of change that's been seen lot for on

little in color of a any if add to just Brian, maybe, terms there's the... And changes

Yes.

that particularly they're that of So, are that the the right? the they about that we see they in look want loyal So, our cards consistent always are remember, and with John, out the when most seek dual partners, categories customers as brand, spend our very engaged customers we to brand. back card, through order how value we very rank sticky. And on of the talk

world bill is category pay. span our like So,

they're If in you going earning Those you are are there. back top there, in are benefits like, you in they continuous. everyday that that. grocery And have into things brand events, which to think type and sticky have they're in when about to which a do restaurants five, continue

you goes So, dual when to of values remained card, multiset across this wide that about business broad when which that think point brands and the our may look talked are card of that where at and have in relatively a consistent, transaction back of there frequencies, necessarily -- it's but we partners, other some not we about we goes categories. swath have be some of dual utility digital the we

very gave of on and next we if your color for the That's some then of quarters? prepared you color. the seasonal couple Wenzel, the kept I considerations RSAs, over know this NIM, about -- any instance, And should any there guidance think Okay. of Brian for apologize remarks, I those but helpful is but you course

Yes.

have second as pre-fund We'll be some will on liquidity seasonal into seasonality think into the the there an Obviously, about year again, the first I charge-offs, the charge-offs a profile. you we of trends. from back-end have growth So some quarter quarter basis. interest increase in of generally seasonal the margin

a quarter. may second you and back higher the to bit in come up little and be them So, down charge-offs see

quarter, of think at you and it's fourth they look I XX% the charge-offs, to And when slowed. note delinquency the historical delinquency at pace to important just increases that when have couple at fourth levels. quarter highlighted of the we're you still look acceleration minutes ago that to first But quarter and I of third quarter a

a basis, rate second receivables then it receivables in So down of again, out, of quarter, on back were maybe and the a year. you'll signs and the low dollar you'll grow seasonal the see up, flatten kind half because and see loss

just that part with question. anything And fluctuations as NIM to respect of a then

Yes.

and took thing the anticipate, we potentially see little is they're tailwind be pre-funding a in I mainly come that favorable. So, regard, could the not on more back I downward the comes so apologize, to only that betas that say do And and for tried whether second quarter, or we're assuming back growth way the a pressure bit for you'll that, John. then With back hit I of in the half. in not

up costs could So, much that the a don't tailwind. funding be go as

much, guys. Thanks, very

Sanjay Our next with question from KBW. comes Sakhrani

you previously. good the guys morning. I it different way the underwriting? I'm cycle tax just you assisting of spending the might about from and implications and Moshe's in are to refunds. mentioned, rethinking lower be Maybe dynamics Can affecting it's sort very if the you are how dislocation of the curious in different on Thanks, how previous space sort the talk Brian through those regional know economy working ones. is of and and guys slower about underwriting? banking the just you question Doubles March Obviously, follow-up thinking

I'll start Sanjay. this sure. Yes, one, on

our last what's So, credit the two services talk underwrite really to financial deeper. best this important lot in think the is opportunity a that's because the a that for an is about didn't important important, history really what through really I years, of in and was And partner. lot, consistency we take to environment we us

partners worse we our pull years, when hopes And like get a or last us. to a little that deeper. the really little really to have underwrite is important important to done back times have we don't of the So, bit good that in uncertain that's in we and dramatically. consistency bit don't times, That lot couple things a

significant is this at still next how changes. point underwriting range We we're not today. back we're consumer target normalize like year. The expecting So, anticipating our into to charge-offs underwriting We're healthy.

consumer what is in we're comfortable now of pretty seeing the trends. terms still right So,

anything significant So point. anticipating at not this

still partner very I'm yours and change. looking be such? large for that a like price sounds you are stock one. -- might former the portfolio Thanks. it here here. the on portfolios then take attractive appetite like to follow-up a trade-offs of specific is how obviously, just sort for I'm guys And acquisitions the Okay. And thinking just looking curious your at of through and considering outlook is of

really that specifically that and situation. with program, back I Look, to Sam's that. relationship on We're don't party engagement, great just alignment, that there. would great XX-plus share but going we've Yes. not nothing nothing say momentum a to beyond I want speculate on on years, got Club to speculate to that, obviously. great

on say more always opportunities. portfolio large big would working kind just in of very I market a start-up generally, we're process, We've team for it. got the acquisitions, active

have of you And And interest in to to about like a there though, heading so return. always What's risk we've of as is think the to of good have where of the got that's you alignment, environment I important important, kind an you're us. got talked and past this that's right in really into particularly balance uncertainty. period

we'll disciplined to and return. risk very stay around continue So,

Thank you.

Morgan Stanley. Our with next question Graseck comes from Betsy

on rate what baked this the in in at year want b, on a of the then XQ. want it high to look change to the But what little end to we're is I to expectation and is on from a, bit kind if outlook mix now And going forward was that more materially I your around, going Thanks. did you dig NIM. shift the through of guide? range understand NIM. Hi. just the right NIM into bounce as is get I I it's look understand

Yes. Good Betsy. morning,

to part funds of answer we rate of question, peak X.XX%. the the first have your So, a Fed

small do year. So, any effect for net forward one the on I'd reductions the again margin has, curve full the more have the effective towards latter move some consequential that here. year. But of very We to from following interest part say, a

point regard to where I don't and to if you'll on certainly, a see to think your business, mix I impact wellness of the you this about time, interest is, think regard rapid the issues net grow you year over as health of Most necessarily continues at geography pace. think with extent With second kind mix the think about to margin.

of revenue. And in a a shift that exactly the merchant pricing, be our the promotional issue. the are to financing maybe not it but and you going but out you discount NIM see some shift see way businesses merchant -- comes XXXX through of is may discount the that's Profitability more same, growth, a

looking in box And how playing it's is you're I maybe could industry. XX% at about reserving the lending would got Thanks. in guide little that from plus. loan the raise XX% what's are you potential -- But assume thinking credit you've outlook? how driving Okay. And and that growth you just a your in growth and that to address you're speak same to that mean, Could a standards? loan just for? then as got within time, is increase you've you follow-up, lending lending bit the did growth to tighter spoke you X% the I loan about the into increase the the discussion, standards from but the centers

Yes.

today, and not the again, performance we're channel around returns. of underwriting whether our risk-adjusted So, really always or we're making some hitting partner level refinement

looking broad-based vintage is because on and We're better not performance, see it day. focused either the on of constantly vintages performing the since every team our actions any than at not we're pandemic, and 'XX. that, we they're So, do credit start taking 'XX the level

So, they are performing well.

our about talked underwriting. the consistency Brian Again, of

come So, we do. of didn't off and kind gas the issuers many on other like

is So, pandemic. better stuff the we book look or The put the recently consistent is when at with kind we saw we than at what that it how pre-pandemic. on performing entered pre-pandemic of performing

the at be to but do, what don't lever, broad-based box. are look deterioration for we and flows, we entry I'd like or going box insurers So, rates it's say, you more the some we use actions, don't something taking that broad-based opening it's growth a not when much Again, as us, closing any consistent. see where really really

remainder we regard being two things. higher, to a there's the and for by rate. payment continue about With XXXX. Those half back One, things growth seeing the of how we what the are we of to loan the two our consumers, or of seeing -- are slightly that somewhat favorable are growth greater in was first cards you and utilization -- through expect driving think the quarter,

growth how being think loan I up. that's So about the

Again, rate payment a slow see slow see taper or economy what then the bit. -- little to does volume you if should and down see if what you faster can see you is may you may faster, purchase you

of have you here dollars us. think going I last again, post-Omicron is look you're to year, think which I a Now because for at tougher start the comping all period, comp to

two, think payment I And utilization more of the again, driving adoption is it So underwriting. being about then cards. as our and on growth

Okay, thank you.

with Our Pancari Evercore. next question comes from John

morning. Good

On that. little Is reach And expect it until and still level the unchanged Can vintages earlier, get cohorts? the the income vintages mentioned a more it X%. just stress don't more on you normalized more recent areas little it I seeing you X.XX% specifically? Thanks. to across where I continued product more kept the in know you just clarity us 'XX. granularity to to you and give expansion a expectation, you charge-off that at on are what want believe but and I mounting

wouldn't are use the there. seeing stresses don't I in we I think term Yes. stresses.

pre-pandemic lower the to using on and levels savings, returning levels. prime benefited start to they I And mainly what pandemic the during they they're through. historical super credit pre-pandemic got ability is I'd period, grades performance and what the up were are rate, we're on that to what accumulated of entry into because lower delinquency of as below you return see And the spending, is think That prime back of now payment customers, well performance think seeing rolls spending, whether I say, they spend. and stimulus, some performance they on performance. in is more averages, to

I'd And of these wouldn't That's behaviors. stress. and past not So, necessarily consumers portfolio. across another. set to the just migrating sit see you I that's back one say, there vintages it's or in say

with about think the that. to regard of development kind I credit how that's So

entry to through had seeing to front-end delinquency started collections your collection a and front-end normal expect rise put The yet. seats a weak But don't little the pretty to have little again, see regard that. back-end With delinquency what delinquency, not very you more volume favorable flows through you'd the performance, fairly channels. see to bit, good to into are as back-end bit now as seats maybe we rise you What inter-rates you're deteriorate is collections. rate seeing because the you're right a

our seen in but the remainder yet performance, materialize coming We and into what -- have we over XXXX of expect not that that's to XXXX.

Got it.

you Nash's the a outlook just expectation if question to rate lower again And migration to growth-driven was confirm the would addition below on reserve, Ryan in that and your look expect you getting the then back the just in more as Okay. this correct? quarter rate here? from level, And unemployment Is that driven. that remains X% the as the at reserve ratio at

Yes.

could institutions, overlay addition there the then So, you said, was way is just effect a consumer. an have quarter economy turmoil in macroeconomic which some and will these the listen, banking be to of -- reserve again, the to growth of the clear, driven. of There contraction have for to the the credit be on an the majority that

So, for we that. provided

assets in driven than Again, the the majority of it was came our higher growth expectation. because

reserves and of some have. qualitative provisions we'll growth-driven I those to continue on the offset as the unwind progress think as that long macroeconomic assumptions, we

but rate-driven track there growth-driven. should again, to So assumptions, -- forward be if not just be we to provisioning our going macroeconomic

Dominick Our comes next question from Gabriele with Oppenheimer.

of entire about period cloudy you if think know time reserves a think are I given it's net potential this, reserves reserve release wherever your yet hey, a where on but you question. talked you about releases. taking and Or there We and reserve, Thanks, Thanks. rising for you charge-offs when a I got out charge-offs as follow-up. just still then think timing the and Great. loss release it's much for know can't so the one. time. decide, do are tough about is you've my the you of rate of there. I guess I about the charge-offs, assumption occurs your peak talked you've what pacing rising?

you you for peak is, if which can the reserves byproduct think inside What's of theory, Good reasonable but is interesting Hi. release that's in industry, morning, begin peak period, I what of very to CECL losses your about to theory, tells losses, it prior a your in supportable Dom. uncommon you is see CECL.

So, begin we there you'll even a big down released hit be could gotten forecasting then period. come and not where have though we that because the peak situation to losses in reserves, to

in XXXX the think don't you remainder about We haven't as and plays seen that contemplate yet. we have of We at to to and look we'll how back how that out year. for we delinquency get this XXXX,

kind efficiency so year-over-year. call. you nice some ratio guys much. about ratio you, And then hefty you we obviously, are the just Thank on think pretty seeing haven't wondering about core as gains how that And talked over really today yet I'm Great. efficiency just that of in macro the trend the about longer changed environment you've could some of you kind set see by changes reserves, included has where the of any some term, your the in ratio Thanks. goals, efficiency go up chance?

great comes No, I Yes. it environment ratio. to current is, the long-term XX%, framework changes to efficiency XX% when that to We which don't think question. think, down class in our getting best

and other of I during things that things and in drove in-sourcing us one of that collections did they the Margaret drive our drove think to digital pandemic, productivity. efficiencies Brian the

committed yield. drive investments but to and different and we've made business, happen play people bring that form calling help that's long-term and expenses. are interest into that through to we us again, if delivering than about we'll be and tougher, financial step I digitally where periods, what great back should think gets Again, leverage, a macro with would the efficiencies we very regard the lot back efficiency those environment as get to our would just impacted under with But we entire crisis, operating where control of ratio you leverage the fee can again, I was in our negatively any a across even do collection not framework. the Brian a that and that started activities, as in happened This And operating what bolster the that recession. decline

much. so Thanks,

That with Scharf David JMP will from question question. time last have one Securities. for come We

Great. for here. squeezing me Good morning. in Thanks

of heard timing, month. submitted Doubles, just or there believe last clarification. was I releases a any First status, update that provide status on magnitude? directional don't in help maybe read your plan. kind can on I perhaps and your one, regarding Is anything of you the Brian capital

don't take past stresses plan, quarter Board, actually We David. years. I that developments our some first some Thanks, that went submit included regulators We capital submitted through process. question? into of our same the target did Why to by the it capital and with approved in given on additional it our It plan. we was our

Again, what believe they timing based be anywhere to month go takes into through get their May later and that. upon can non-objection That will come through how to non-objection long from we that. a and that this it provide

their working be and don't it put what anticipate, back given we'll and other we'll plan we we we let as into regulators. So, until that. get capital it, the non-objection through read they're later our in that to our in we anything that the than magnitude of just probably it, really soon as can't know of April kind through With comment to people unfortunately, I from get to May regard process,

right pullback primary of some provide question. can mail Wondering competitors, any who marketing any or by And of your purpose whether sort of typically there's in Understood. color kind as maybe direct of you as been you would sale. point of just a those you view there's if a whether follow-up on competition general assessment just now, sense greater-than-expected

purchase kind higher-quality lines, along transacting larger were And I of guess those credits average your you at noted more sizes. frequently

tells is now of FICO the pullbacks Given various that the discussion the macro ever last share see you the pretty in Or environment market stable there consolidate that to competitors? all by you uncertainty, anything bands? time relative various quarters? to If is is few

Yes.

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

think I it's bifurcated. little a

established players I'll more still space. the competitive are our put side a direct-to-consumer second. think in just for I

pretty think I a as still environment. So, we're seeing competitive it

there's environment of horizon, though encouraging. discipline a factoring The think more I I generally the like And given anytime that's the nobody the credit enter is that's one that competitors. the just is traditional is over in like case the think on we've I you this, couple pretty across last period encouraging experienced years, think good uncertainty thing

pretty good So discipline.

little I think of in out pull a you've discipline. do space, still I direct some some mail, pretty good back it's back will some pretty bit. the do competitive the core direct-to-consumer that but players fintech bit. of think newer seen and with pull But a players generally, of there, our

Thank you, very much.

call. conference earnings Synchrony's today's concludes This

time, may a disconnect your You line day. at and this wonderful have