Today’s American Banker reports on Synchrony’s 2Q results; the big takeaway is the firm successfully finessed the loss of Walmart and maintained a solid front on credit losses.
- Credit performance at Synchrony Financial remained steady in the second quarter, reflecting the enduring strength of the U.S. consumer economy.
- The percentage of the credit card issuer’s loans that were charged off rose by less than 1% versus the same period a year earlier, but that comparison was complicated by the addition of a PayPalloan portfolio late last year as well as the impending sale of a Walmart loan portfolio.
- Excluding both of those loan books, Synchrony’s net charge-off rate declined by nearly 1% compared with the second quarter of 2018.
- The company’s net charge-off rate, which is calculated by dividing the value of loans that get written off by total average loan receivables, had previously been on the rise. The ratio increased from 4.49% in the second quarter of 2016 to 5.97% in the same period two years later.
More detail than the Banker offers can be found in Synchrony quarterly review where key indicators for each of Synchrony’s business lines saw increases in purchase volume, account growth, and interest and fee revenue. In Retail Cards, the largest group, purchase volume increased 14%, with 11% account growth, and 16% in interest and fee revenue. Payment Solutions grew 4%, 3%, and 6% respectively; Care Credit grew by 7%, 5%, and 7% respectively.
Numbers we like to see is how the digital play is integrating into Synchrony’s large business. The quarterly review indicates:
- Digital Applications affected 34% of online sales
- Mobile channel application growth increase 47%
- Digital Applications increased 50%
- $2 billion in payments processed through SyPI
Best of all, diluted earnings per share increased to $1.24 over 2Q18’s $0.92, and net earnings up 23% to $853 million.
Life after Walmart is not too shabby, with special thanks to PayPal.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group