Synchrony(SYF)2025-02-07 21:29Financial Performance - Net earnings increased 56.3% to $3.5 billion for the year ended December 31, 2024, primarily driven by an after-tax gain on sale related to Pets Best of $802 million[149]. - Loan receivables increased 1.7% to $104.7 billion at December 31, 2024, driven by lower customer payment rates and the impact of the Ally Lending acquisition[149]. - Net interest income increased 6.0% to $18.0 billion for the year ended December 31, 2024, with interest and fees on loans increasing 8.5%[149]. - Provision for credit losses increased by $768 million to $6.7 billion for the year ended December 31, 2024, primarily driven by higher net charge-offs[149]. - Other income increased by $1.2 billion to $1.5 billion for the year ended December 31, 2024, primarily driven by a $1.1 billion gain on sale related to the Pets Best disposition[149]. - Total deposits increased 1.1% to $82.1 billion at December 31, 2024, representing 84% of total funding sources[149]. - The net charge-off rate increased 144 basis points to 6.31% for the year ended December 31, 2024[149]. - The allowance coverage ratio increased to 10.44% at December 31, 2024, compared to 10.26% at December 31, 2023[149]. - Interest income increased by $1.9 billion, or 9.3%, for the year ended December 31, 2024, primarily driven by an 8.5% increase in interest and fees on loans[176]. - Average loan receivables increased by 7.3% to $101.7 billion for the year ended December 31, 2024, influenced by lower customer payment rates and the Ally Lending acquisition[177]. Customer Engagement and Digital Capabilities - Approximately 57% of consumer revolving applications in 2024 were processed through a digital channel, showcasing the company's digital capabilities[25]. - The company emphasizes its innovative digital capabilities and omnichannel technology to provide seamless experiences for partners and customers[25]. - Digital sales accounted for $6.3 billion, or 29%, of total interest and fees on loans for the year ended December 31, 2024[33]. - 57% of consumer credit card applications were made via online or mobile channels in 2024[80]. - 75% of consumer credit card accounts with an outstanding balance had activated digital account servicing capabilities[80]. - The Digital sales platform has established new partnerships, including Virgin Red in 2024[35]. - The integration of technology with partners enables customers to "apply and buy" at the point-of-sale, enhancing transaction efficiency[76]. Partnerships and Business Model - The company maintains longstanding relationships with its five largest partners, each lasting over 10 years, with Lowe's being a partner for 45 years[31]. - The company’s business model aligns its interests with those of its partners, providing substantial value and promoting customer loyalty[25]. - The company completed the acquisition of Ally Financial Inc.'s point-of-sale financing business in March 2024, enhancing its presence in the home improvement sector[29]. - The company operates through five sales platforms: Home & Auto, Digital, Diversified & Value, Health & Wellness, and Lifestyle, which are aligned with the types of partners it works with[26]. Credit Products and Risk Management - The company offers a diverse range of credit products, including private label, dual, co-brand, and general purpose credit cards, as well as installment loans and consumer banking products[24]. - The company employs a proprietary Quickscreen acquisition method, significantly outperforming traditional direct-to-consumer channels[70]. - The company has developed proprietary credit tools called Synchrony PRISM to enhance credit risk management and customer insights[115]. - The company manages credit risk across approximately 117 million open accounts as of December 31, 2024, ensuring diversification without significant individual exposures[114]. Employee and Operational Insights - The company has over 20,000 full-time employees, with a workforce that is 61% female and 38% male as of December 31, 2024[129]. - The company plans to increase the minimum wage to $21.50 per hour for all hourly employees in the United States effective March 1, 2025[130]. - The efficiency ratio improved to 30.0% in 2024, down from 34.9% in 2023, indicating better operational efficiency[156]. Market Position and Competition - The company competes with major financial institutions and fintech companies for consumer credit programs, emphasizing technological capabilities and service levels[134]. - The company aims to differentiate its deposit products based on brand, reputation, convenience, customer service, and value[112]. - The company continues to focus on acquiring small to mid-sized commercial customers through private label credit cards and Dual Cards[86]. Asset and Deposit Growth - The company had $82.1 billion in total deposits, with $72.3 billion from direct deposits and $9.8 billion from brokered deposits, representing 84% of total funding sources[108]. - Total assets rose to $119,386 million in 2024, up from $109,819 million in 2023, reflecting an increase of 8.5%[156]. - Deposits grew to $82,656 million in 2024, compared to $75,889 million in 2023, marking an increase of 9.4%[156]. Interest and Fee Trends - Interest and fees on loans increased by 8.5% in 2024, driven by loan receivables growth and product changes[167]. - Home & Auto interest and fees on loans increased by $507 million, or 9.6%, for the year ended December 31, 2024, driven by higher average loan receivables and higher benchmark rates[207]. - Digital interest and fees on loans increased by $392 million, or 6.7%, for the year ended December 31, 2024, driven by higher average loan receivables, lower payment rates, and higher benchmark rates[209]. - Diversified & Value interest and fees on loans increased by $261 million, or 5.8%, for the year ended December 31, 2024, driven by growth in average loan receivables, lower payment rates, and higher benchmark rates[211]. - Health & Wellness interest and fees on loans increased by $440 million, or 13.6%, for the year ended December 31, 2024, primarily driven by higher average loan receivables[213].