Synchrony Beats Q1 Earnings Estimates, Unveils 20% Dividend Hike

Core Viewpoint - Synchrony Financial reported a decline in adjusted earnings per share (EPS) for Q1 2025, despite exceeding consensus estimates, indicating challenges in loan receivables and consumer spending [1][4]. Financial Performance - Adjusted EPS for Q1 2025 was $1.89, surpassing the Zacks Consensus Estimate by 16%, but down 39.8% year over year [1]. - Net interest income reached $4.5 billion, a slight increase of 1.3% year over year, but fell short of consensus by 1.8% [1][5]. - Total loan receivables decreased by 2% year over year to $99.6 billion, missing estimates [3][4]. - Total deposits slightly declined by 0.1% year over year to $83.4 billion, also below estimates [4]. - Provision for credit losses was $1.5 billion, down 20.9% year over year, which was lower than estimates [4]. Business Segments - Retailer share arrangements increased by 17% year over year to $895 million [3]. - Purchase volume fell by 4% year over year to $40.7 billion, attributed to selective consumer spending [4]. - Interest and fees on loans totaled $5.3 billion, remaining flat year over year but missing estimates [5]. Operational Metrics - Average active accounts decreased by 3% year over year to 69.3 million, missing consensus estimates [6]. - Total other expenses rose by 3% year over year to $1.24 billion, exceeding estimates [6]. - The efficiency ratio improved to 33.4%, up 830 basis points year over year, surpassing consensus [6]. Financial Position - As of March 31, 2025, cash and equivalents were $21.6 billion, a 47% increase from the end of 2024 [11]. - Total assets grew by 2.1% year over year to $122 billion [11]. - Total borrowings increased by 10% to $17 billion [11]. - Return on assets decreased to 2.5%, while return on equity fell to 18.4% [12]. Capital Deployment - Synchrony returned $600 million through share buybacks and paid $97 million in dividends during Q1 2025 [13]. - A new share repurchase program of $2.5 billion was approved, alongside a 20% increase in the quarterly cash dividend to $0.30 per share [13]. Guidance - The company anticipates low single-digit growth in period-end loan receivables and expects purchase volume growth to reflect credit actions and consumer behavior [14]. - Net revenues are projected between $15.2 billion and $15.7 billion, indicating a 4% decline from 2024 [14]. - Management expects net charge-offs to be between 5.8% and 6% for the year [15].