Synchrony(US:SYF)2025-07-23 20:11PART I - FINANCIAL INFORMATION This section provides a comprehensive overview of Synchrony Financial's financial performance, condition, liquidity, and capital for the reporting period Management's Discussion and Analysis of Financial Condition and Results of Operations Synchrony Financial's Q2 2025 net earnings increased to $967 million due to lower credit loss provisions, alongside improved credit quality and key partnership extensions Q2 & Six-Month 2025 vs 2024 Performance Highlights | Metric | Q2 2025 | Q2 2024 | Change | 6M 2025 | 6M 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $967M | $643M | +50.4% | $1.7B | $1.9B | -10.5% | | Loan Receivables (Period-End) | $99.8B | $102.3B | -2.5% | $99.8B | $102.3B | -2.5% | | Net Interest Income | $4.5B | $4.4B | +2.6% | $9.0B | $8.8B | +2.0% | | Provision for Credit Losses | $1,146M | $1,691M | -32.2% | $2,637M | $3,575M | -26.2% | | Net Charge-off Rate | 5.70% | 6.42% | -72 bps | 6.04% | 6.37% | -33 bps | | 30+ Day Delinquency Rate | 4.18% | 4.47% | -29 bps | 4.18% | 4.47% | -29 bps | Introduction and Business Overview Synchrony is a consumer financial services company managing $99.8 billion in loan receivables across five sales platforms, with credit cards comprising 92.2% of its portfolio - The company operates through five sales platforms: Home & Auto, Digital, Diversified & Value, Health & Wellness, and Lifestyle21 Credit Product Mix as of June 30, 2025 | Credit Product | Standard Terms Only | Deferred Interest | Other Promotional | Total | | :--- | :--- | :--- | :--- | :--- | | Credit cards | 61.4% | 18.0% | 12.8% | 92.2% | | Commercial credit products | 2.0% | — | — | 2.0% | | Consumer installment loans | — | 0.2% | 5.5% | 5.7% | | Other | 0.1% | — | — | 0.1% | | Total | 63.5% | 18.2% | 18.3% | 100.0% | Business Trends and Conditions The vacating of the CFPB's late fee rule and the extension of the Amazon program agreement enhance regulatory clarity and long-term partnership stability for Synchrony - The CFPB's final rule on credit card late fees, which would have lowered the safe harbor amount to $8, was vacated by a court on April 15, 2025363738 - The company extended its program agreement with Amazon in July 2025, with agreements for its five largest partners now expiring between 2030 and 203539 Results of Operations Q2 2025 net earnings increased 50.4% to $967 million due to lower credit loss provisions, while six-month net earnings decreased 10.5% to $1.7 billion, impacted by a prior-year gain Summary Earnings (in millions) | | Three months ended June 30, | Six months ended June 30, | | :--- | :--- | :--- | :--- | :--- | | ($ in millions) | 2025 | 2024 | 2025 | 2024 | | Net interest income | $4,521 | $4,405 | $8,985 | $8,810 | | Retailer share arrangements | $(992) | $(810) | $(1,887) | $(1,574) | | Provision for credit losses | $1,146 | $1,691 | $2,637 | $3,575 | | Other income | $118 | $117 | $267 | $1,274 | | Other expense | $1,245 | $1,177 | $2,488 | $2,383 | | Net earnings | $967 | $643 | $1,724 | $1,936 | - Provision for credit losses decreased significantly, driven by reserve releases of $265 million in Q2 2025 compared to a reserve build of $70 million in Q2 2024, as well as lower net charge-offs72 - Retailer share arrangements increased by 22.5% in Q2 2025, reflecting lower net charge-offs and the impact of product, pricing, and policy changes71 Platform Analysis Q2 2025 platform performance showed varied results, with Digital platform interest and fees growing 2.1% to $1.6 billion, while Home & Auto interest and fees decreased 1.0% to $1.4 billion Purchase Volume by Platform (Q2 2025 vs Q2 2024, in millions) | Platform | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Home & Auto | $11,459 | $12,350 | -7.2% | | Digital | $13,647 | $13,403 | +1.8% | | Diversified & Value | $15,393 | $15,333 | +0.4% | | Health & Wellness | $4,007 | $4,089 | -2.0% | | Lifestyle | $1,432 | $1,525 | -6.1% | Interest and Fees on Loans by Platform (Q2 2025 vs Q2 2024, in millions) | Platform | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Home & Auto | $1,395 | $1,409 | -1.0% | | Digital | $1,576 | $1,544 | +2.1% | | Diversified & Value | $1,159 | $1,165 | -0.5% | | Health & Wellness | $923 | $911 | +1.3% | | Lifestyle | $261 | $258 | +1.2% | Financial Condition, Liquidity and Capital Synchrony's financial condition remains strong with $99.8 billion in loan receivables, improved credit quality, robust liquidity of $21.8 billion, and a CET1 ratio of 13.6% - Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 4.18% at June 30, 2025, from 4.47% at June 30, 2024104 - The company maintains a strong liquidity portfolio of $21.8 billion in liquid assets as of June 30, 2025, up from $17.2 billion at year-end 2024138 Regulatory Capital Ratios (Synchrony Financial) | Ratio | At June 30, 2025 | At December 31, 2024 | | :--- | :--- | :--- | | Common equity Tier 1 capital | 13.6% | 13.3% | | Tier 1 risk-based capital | 14.8% | 14.5% | | Total risk-based capital | 16.9% | 16.5% | | Tier 1 leverage | 12.7% | 12.9% | Critical Accounting Estimates Synchrony updated its Allowance for Credit Losses methodology in Q1 2025 to a statistical, account-level model, enhancing loss estimation without material impact, maintaining a 12-month forecast period - In Q1 2025, the company changed its methodology for the Allowance for Credit Losses to a statistical, account-level model analyzing probability of default and exposure at default, replacing the prior enhanced migration analysis162 - The reasonable and supportable forecast period for estimating expected credit losses remains at 12 months, after which the company reverts to historical loss information over a 6-month period on a straight-line basis168 Financial Statements This section provides unaudited condensed consolidated financial statements for Q2 and six months ended June 30, 2025, including core statements and detailed notes on accounting policies, credit losses, and regulatory capital Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements show Q2 2025 net income of $967 million, total assets of $120.5 billion, and $4.8 billion cash from operations for the first six months - The report includes the following unaudited statements: Condensed Consolidated Statements of Earnings, Comprehensive Income, Financial Position, Changes in Equity, and Cash Flows180 Notes to Condensed Consolidated Financial Statements Notes to financial statements detail a decrease in allowance for credit losses to $10.6 billion, $16.0 billion in total borrowings, and confirm strong regulatory capital ratios, with no material adverse legal matters Allowance for Credit Losses Roll-Forward (Six Months Ended June 30, 2025, in millions) | | Credit cards | Consumer installment loans | Commercial credit products | Total | | :--- | :--- | :--- | :--- | :--- | | Balance at Jan 1, 2025 | $10,259 | $542 | $127 | $10,929 | | Provision charged to operations | $2,413 | $173 | $48 | $2,634 | | Gross charge-offs | $(3,496) | $(202) | $(68) | $(3,766) | | Recoveries | $730 | $32 | $5 | $767 | | Balance at June 30, 2025 | $9,906 | $545 | $112 | $10,564 | - As of June 30, 2025, total borrowings were $16.0 billion, consisting of $8.3 billion from consolidated securitization entities and $7.7 billion in senior and subordinated unsecured notes277 - Synchrony Bank's CET1 ratio was 14.3% at June 30, 2025, well above the 6.5% minimum required to be considered well-capitalized302 Quantitative and Qualitative Disclosures About Market Risk Synchrony's primary market risk is interest rate risk, with a 100 basis point rate increase projected to boost net interest income by $73 million, while a decrease would reduce it by $164 million Net Interest Income Sensitivity (Next 12 Months) | Basis Point Change | Impact at June 30, 2025 (in millions) | | :--- | :--- | | -100 basis points | $(164) | | +100 basis points | $73 | Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025327 PART II - OTHER INFORMATION This section details legal proceedings, risk factors, equity security sales, and other required disclosures Legal Proceedings Synchrony is involved in routine legal and regulatory matters, none of which are expected to have a material adverse effect on its financial condition or liquidity - The company does not believe it is a party to any pending legal or regulatory matters that would have a material adverse effect on its condensed consolidated financial condition or liquidity320 Risk Factors No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K were reported - No material changes to the risk factors from the 2024 Form 10-K were reported331 Unregistered Sales of Equity Securities and Use of Proceeds Synchrony repurchased 8.8 million shares for $500 million in Q2 2025 and approved a new $2.5 billion share repurchase program through June 2026, with $2.0 billion remaining Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Dollar Value (in millions) | | :--- | :--- | :--- | :--- | | April 1 - 30, 2025 | 1,963,034 | $51.70 | ~$98.7 | | May 1 - 31, 2025 | 5,260,066 | $56.98 | ~$299.7 | | June 1 - 30, 2025 | 1,654,690 | $61.48 | ~$101.7 | | Total Q2 2025 | 8,877,790 | $56.32 | $500.0 | - In April 2025, the Board approved a new share repurchase program of up to $2.5 billion through June 30, 2026, with $2.0 billion remaining authorized for repurchase at the end of Q2 2025334148 Other Part II Items This section confirms no defaults on senior securities, no applicable mine safety disclosures, and no Rule 10b5-1 trading plan changes by directors or officers - Item 3: No defaults upon senior securities335 - Item 5: No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter338