Synchrony Financial at Morgan Stanley Conference: Strategic Moves and Market Outlook

On Tuesday, 10 June 2025, Synchrony Financial (NYSE:SYF) presented its strategic initiatives and market outlook at the Morgan Stanley US Financials, Payments & CRE Conference 2025. The company highlighted its robust digital investments, strategic partnerships, and disciplined credit approach. While Synchrony sees stabilization in consumer spending, it remains cautious with credit restrictions amid economic uncertainties.

Key Takeaways

• Synchrony announced a new partnership with Walmart’s One Pay, expected to enhance engagement and sales.
• The company reported a charge-off rate of 5.2% in May, indicating better-than-expected credit performance.
• Synchrony increased its quarterly dividend by 20% and authorized a $2.5 billion share buyback.
• Plans to lift credit restrictions over the next 18 months, contingent on economic conditions.
• The company’s CET1 ratio stands strong at 13.2%, supporting its capital deployment strategies.

Financial Results

• Loss Target: Synchrony aims to return to its long-term loss target of 5.5% to 6% by 2025, with current performance suggesting a positive trajectory.
• May Performance: The delinquency rate was 4.2%, and the charge-off rate was 5.2%, outperforming seasonal expectations.
• Capital Return: A 20% increase in the quarterly dividend to $0.30 per share was announced, alongside a $2.5 billion share repurchase authorization.
• CET1 Ratio: The company maintains a CET1 ratio of 13.2%, reflecting a solid capital position.

Operational Updates

• Walmart One Pay Partnership: The new partnership is expected to be a significant growth driver, offering a richer value proposition and aligning with Synchrony’s financial targets.
• Consumer Spending: Although discretionary spending saw a pullback since June last year, there are signs of stabilization, particularly in soft goods.
• Credit Actions: Broader credit actions in 2023 and 2024 were taken to mitigate risks, impacting growth but ensuring better credit performance.

Future Outlook

• Growth Plans: Synchrony plans to ease credit restrictions over the next 18 months, which could boost purchase volumes.
• Credit Restrictions: The easing of restrictions was not included in the full-year guidance, indicating potential upside.
• Pricing Changes: Partners are exploring reinvestment of pricing gains into value enhancements to drive growth.

Q&A Highlights

• Walmart One Pay Program Potential: The program could become one of Synchrony’s top five or ten, given Walmart’s scale.
• Tariffs Impact: Consumer behavior remains unchanged by tariffs, suggesting resilience in spending patterns.
• Reserve Ratio: Expectations to trend towards a day one CECL of 9.7% depend on delinquency and charge-off trends.

Synchrony Financial’s comprehensive strategy and strong capital management position it well for future growth. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - Morgan Stanley US Financials, Payments & CRE Conference 2025:

Jeff, Analyst, Morgan Stanley: Alright, everybody. Before we get started, I’m gonna read some quick disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative.

So today, I’m delighted to have with us Synchrony’s chief financial officer, Brian Wenzel. Brian, welcome. Good morning, Jeff. Thanks, thanks for your invitation to be here. Yep.

And you looks like you brought some good news with you today. So maybe before we get into that, let’s talk about the positioning of the business. Lots has happened over the last few years from the regulatory side with the CFPB late fee rule. You’ve had rising consumer delinquencies across the industry, but it looks like we’re finally moving past some of these issues. Given this backdrop, can you just talk a bit about how you see the Synchrony story evolving over the next few years?

What are your top priorities as you manage the business?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. So so thanks for that question, Jeff. You know, I’d like to start off with the fact that, you know, you talk about this environment. You know, we we’ve come through a pandemic, a very unique, you know, credit environment, with really a lot of extension of credit to to individuals. You look at the regulatory environment and how they shifted in the execution, by the entire Synchrony team, we’re incredibly proud of.

So so as we move through this period, that execution really is the foundation as we move forward. I I think as you think about the stories that plays out, you know, number one, we’ve invested heavily in our capabilities over the last large number of years. And so when you look at our digital capabilities, our abilities to embed our products with our partners, you know, the way to to meet the customer where they want it to be, If you look number two at at our multiproduct strategy and the ability to have multiproducts so we can meet customer needs, we can meet our partners’ needs, things like that. You look at the continual advancements that we’ve made in our advanced underwriting platform, that is all positioning us. And we’re gonna continue to invest in those areas.

We have, you know, I’d like to say some productive paranoia about competition. We always wanna stay ahead. So I think those are things we’re gonna continue to invest that have both, you know, only short term benefits, but really for the long term. And the way that manifests itself into the company is, number one, we hope and really believe that that the partnerships that we have, that we’ll be in a good position to extend those partnerships. We have a large number of our top 25 that are that are beyond 27 expiration dates.

So we wanna continue to have a good track record on renewing those ones and showing our our our desire. I think number two, I think when you look at at at new relationships in the market, that we’re gonna win our fair share of those. I mean, we’re always gonna maintain pricing discipline. That’s one of our hallmarks. But but we think we you know, with our capabilities, we may not be the lowest priced provider, but we’re gonna win our fair share of that.

And I think we’re gonna continue to build on what is enviable among a lot of people is incredible on a scale. When you have 70,000,000 unique customers, that is scale that that that most people find attractive, particularly to our partners who are looking for not only to increase sales, but to bring them new customers.

Jeff, Analyst, Morgan Stanley: And speaking of winning your fair share, the other day, you just announced your new Walmart One Pay partnership. What brought you back to the Walmart relationship? How is this gonna differ from the prior offering? Maybe any lessons learned in the prior offering? And, can you speak to how that relationship on the corporate side is maybe different this time around?

And then, you know, maybe dive into any of the preliminary details around economics, value propositions, goals, you know, where do you see the size of that program going over time? Maybe you can give us all that info.

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. It’ll we’ll only have thirty one minutes left, but we’ll try to unpack that question a little bit. So, you know, you know, let’s let’s start at the beginning. So, you know, Walmart is an iconic retailer. It has tremendous scale, breadth, delivers values to or delivers value to millions of Americans.

And so we’re proud to partner with them. We’re excited to partner with them. They have a unique ability to win in this this retail environment. So, we’re gonna build on our our two decade long experiences with them to continue to, you know, to to partner and drive that forward. You know, it is a testament for us with regard to our capabilities.

You know, they obviously left in 2019 with you know, went to another issuer. I I think they had choices to make when you know, in this time around. And they came back to us, really goes back to, again, our our digital capabilities, our advanced underwriting, and our ability really to execute in in the retail environment. So, again, you know, for our team, it it really is, you know, a confirmation of of the things that we’re doing right and investing in the business. We’re also excited to work with One Pay.

I mean, they they have created an app and a customer experience, that we think when we’re putting our product in there with with that, it’s really gonna drive engagement with consumers. And then you look at, you know, the way in which, you know, given given their ownership structure, the way in which they secured placement inside of Walmart that that our product’s gonna be offered to really drive value and drive incremental sales. You you know, as you as you take a step back and, you know, one of the questions you asked about how is this gonna be different than last time, you know, number one, this is a de novo book. Right? So the passbook’s not coming.

So we’re starting from scratch. We’re gonna build from scratch. The value proposition’s gonna look different. The way in which it’s gonna be presented to the consumer, whether it’s, you know, with through the one pay app or or through other channels, will be different. You know?

And, really, that placement inside of of Walmart is gonna be one of the keys. So as you as you step back from that and say, okay. Great. We’re we’re excited about the relationship. What does that really mean to Synchrony as we move forward?

Number one, because it is a de novo book, you’re gonna look at something that has a different loss profile, different loss content than existed prior, number one. I think number two, the value proposition is gonna be richer than it had been before in in order to drive engagement, whether it’s through the dual card in the world or or back through, Walmart’s channels and properties. What that allows to do is it allows us to drive greater engagement, allows to drive incremental sales for for Walmart. And then then what allows us to do is actually charge, you know, and have a pricing structure that that is equivalent to higher value proposition. So when you look at the risk adjusted return, Jeff, we should see a higher risk adjusted return than we had in in the past the past relationship.

And the way that culminates, you know, in a normal program, you know, as as you would expect, you know, there’s there’s a lot of technology costs this year, launch costs, you know, this year that we’re going to incur. The couple of years, you you know, we’re gonna have significant reserve postings for the asset as it kinda comes on. When you get through the reserve postings, right, for the for the these couple early years in the deal, you then look at the return that that that our business case is built upon. That return profile is accretive to our long term financial targets of of two and a half. So, you know, we look through and say, you know, we’re willing to invest here for growth.

We’re excited about that. And at the end of the day, the profile of it’s going to look different than it did back in in in 2019 when, you know, when we we exited the relationship. So we’re excited about it. Again, it’s a testament to our capabilities. We’re looking forward to, to work with One Pay and really excited, to deliver value for the Walmart consumer.

Jeff, Analyst, Morgan Stanley: Okay. Great. So maybe, you know, a little bit of a j curve there as you build it out, but, you know, bigger focus on the underwriting de novo, program. Any sort of thoughts on the timeline to maybe getting the full speed there or where that portfolio can go over time? Is that something that could become a top 10 for you?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. You know, it listen. When when we started twenty years ago, you know, it was a noble program. Right? And and we built that program up to to close to $10,000,000,000 in in receivables.

You know, clearly, Walmart has a scale that if we execute correctly, you know, the the the three of us, there’s you know, there it does have the opportunity to really be a a a top five program or a top 10 program. So that’s not necessarily something we focus on. We focus on trying to sit back and say how do we deliver value to Walmart, How do we deliver value to the to the Walmart consumers? But it has the potential just given the size, and and we’re excited about the product that we’re gonna put out, because we think it will resonate with with those consumers.

Jeff, Analyst, Morgan Stanley: Okay. Great. And and maybe switching gears a bit. Let’s focus on the consumer, and the health of the consumer. So you previously talked about moderating consumer spend, but the absence of lower payment rates at the same time is kind of a positive indicator for me for consumers managing through.

Are you continuing to see that? Has any of the softer weak, this the weaker soft data you’ve seen in confidence and some of these tariff related concerns that have flared up, has any of that shown up in your data yet?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. You you know, a lot of times in our business, when you think about the discretionary aspects of our business, so thinking to inside of the home side of of our home and auto business or some of the things in lifestyle, we tend to see see things, you know, sometimes before they resonate in consumer confidence. So I think the the pullback we saw on discretionary spending, which really started the June through the back half of the year, that preceded the consumer confidence. If you go back to January, Jeff, one of the things we did show, which was weekly sales, because everyone said the consumer is pulling back and, you know, you you heard certain issuers talking about changes in their book. And what you saw with us was relative consistency, and you saw some of the seasonal changes that manifest itself in March.

If you kinda roll that forward, we have not seen any any significant changes from that pattern, you know, as we’ve kinda moved forward. So we’re not seeing the consumer from a spending perspective, you know, really change behavior. To to go a step deeper into that, Jeff, what I what I’d say is when we look at ATF and ATV for a what we’re seeing is is some interesting some of the the declines we’ve seen in average transaction value has slowed. So so it’s it’s actually or improving is is is probably there another way to look at it. It’s improving as we move through the second quarter.

That’s positive. We’re seeing stabilization, and we are seeing some green shoots in in some of some areas of discretionary, mainly around soft goods, not necessarily around hard goods. So so, you know, we’re seeing some signs. I think as we move towards the back half of the year, the comps, you know, do get a little bit easier. You know, we came off a first quarter, which was a record first quarter for our company.

Again, you’re you’re gonna start lapping some of the some of the softness that we see. I think to pull it up to 10,000 feet, I I I think as you look at our business, what you’re gonna see is greater pressure at home and auto and lifestyle. And what you’re gonna see is is, you know, flat to maybe some positivity, you know, really lit you know, driven by health and wellness, digital, and diversified in value.

Jeff, Analyst, Morgan Stanley: Okay. Great. So it sounds like there’s some green shoots in discretionary spend. You haven’t seen a pull forward either from tariffs, like you said, last quarter, or maybe anything else you could sort of talk through quarter to date on spending trends?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. Yeah. The consumer you you know, the consumer’s concerned about tariffs, but but it really has not impacted prices significantly other than other than some some things in the grocery store. I don’t know if people went out and try to buy guacamole, but they’re fairly expensive now. So put a different meaning on Taco Tuesdays.

But but, really, the consumer has not altered behavioral patterns as it relates to tariffs yet. Clearly, we think if tariffs go in, there will be an inflationary aspect to it. But I I think in our conversation with our merchants and and retailers, they are working hard to try to figure out how to minimize the effect of tariffs. Most certainly, the larger partners have greater flexibility as it relates to adjusting their supply chains or or not not taking on that cost where I think I think some of the midsize and smaller sized merchants will have a tougher time if tariffs come into play. But to date, we have not seen anything that’s discernible relative to tariffs.

Jeff, Analyst, Morgan Stanley: Hopefully, you haven’t given up your guacamole yet. But unlike you know, not unlike the rest of the industry on credit. Synchrony has seen higher delinquencies and credit losses in recent years, but you’ve arguably performed better than peers. Your outlook now calls for losses to fall back in the long term guidance range or the long term framework of five and a half to 6%. How have you been able to achieve this?

What’s different about the Synchrony approach? And then maybe you could also layer in the, the main numbers you just put out this morning. Looked pretty solid. I think we saw a a nice number, I believe, of, I think it was for the losses for the quarter I mean, for the month of May, 5.2 versus the guide you know, five eight to six. So maybe square those.

So

Brian Wenzel, Chief Financial Officer, Synchrony: so so let let’s just start at at at the baseline, Jeff. You know, one of the things we’ve invested heavily in in, you know, the last eight years has been our advanced underwriting. So one of the keys for us is the use of data in decision making process. So we’re we’re real time, and we’re taking that data into real time decisions. That differentiates us up.

We’re not on a lag score or a trended score. Yes. We use scores, but we use other forms of data to make informed decisions. A lot of that data comes from our partners in order to assess their capabilities. So so that baseline is key number one.

I I think number two, you know, we have a discipline relative to credit where we have a line strategy that is generally lower than our peers. So what that means is when you have the the the probability of falling, you have those defaults, the loss at default is generally lower. So able to control loss. Our volatility relative to others will always be less, and we’ve shown that chart where it’s in our investor relations day a couple years ago and many times during earnings. We’ve shown it back to the the great financial crisis.

Our volatility is generally lower than peers. So that that’s number two. I think number three, you know, our focus is around risk adjusted margins. And and when we saw losses, getting outside of that and really having a lower risk adjusted margin, it wasn’t very efficient for us from a capital standpoint. So we said, listen.

We’d rather sacrifice growth. We’d rather make sure that we’re efficiently growing here, and we’ve taken, you know, broader credit actions both in ’23 and ’24 in order to curtail what we thought were riskier populations, whether that was through score migration, people who had student loans that potentially had an ability to pay issue, whether there were people who were taking out debt consolidation loans, we were tighter around credit. We thought that’s prudent. Others may not have done that, but we were willing to sacrifice growth in order to accomplish that. And so that’s manifest itself of, you know, we’ve we’ve exceeded our loss target, you know you know, last year.

You know, we’re gonna be back inside that target, we hope, you know, for for ’20, you know, ’25. And and most certainly, the performance through May gives us, you know, an indication that that that has a higher likelihood of of of happening. I think when you look at May, we’re we’re pleased with the performance. Right? Our delinquency is 4.2%.

On a dollar basis, it’s it’s one the lower ones we’ve had. So that sets us up nicely for the back half of the year. I think when you look at the loss, you know, charge off rate of 5.2 for the month of May, I caution people that is on a twenty five day cycle. Right? So but when you look at at it on a cycle adjusted basis, it is performing better core, month on month and better than seasonality.

So so the the loss content itself, you know, is better. And I think when you look at at delinquency and the way delinquency is developing, it’s developing in line to better than seasonality. So so when we take a step back, we’re we’re pleased with that performance, and really what the credit actions we’ve done in order to kinda get back to that appropriate risk adjusted margin have really worked, the way we we hopefully designed. And you just mentioned some

Jeff, Analyst, Morgan Stanley: of this on student, but that’s been a hot topic of late for investors. I know you were taking some action there over the past few years. Can you just remind us of your exposure to students and maybe how those borrowers are performing versus some of the more draconian stats we see out there in the federal lending program, which, may have some issues, unrelated to you, but just maybe comment on that. And and, you know, are you noticing any impact from things like lower credit scores for those consumers that forgot to pay?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. So so we did quite a bit of work when there was forbearance programs in place. And while there wasn’t reporting on delinquency, we worked with the credit bureaus in order to understand, you know, attributes of who had student loans, number one. Number two, we had the ability to understand whether or not the balance was changing. So we didn’t need necessarily delinquency flag.

We said, okay. If your balance was, for example, a $100 and next month it’s a $100, we can arguably say you’re not paying your student loan. So so we had unique data in there to to look at. When you look at the bifurcation of of student loans for the portion that’s in our portfolio, the majority of those people are actually making payments, which is good. There is a a portion that is not making payments.

Overall, when we look at the student loan population, what what you try to do is pull it apart, and we create it against or look at it against similar credit cohorts. When I look at it at against similar credit cohorts by by by that credit grade, what we see in in in behavioral patterns is that the student loan you know, people who have student loans are are performing at or slightly better than, you know you know, credit cohorts that did not have student loans. So we do not necessarily see a negative impact with regard to to student loans. What what I would also say, Jeff, is the the the the noise around student loans. of all, there’s a lot of confusion with people who aren’t paying and saying, listen.

My servicer changed three times. I don’t even know who my servicer is. So so I think the the long period of time and the way servicers have have shifted between prior to the pandemic through the pandemic and now has created confusion in the market. Not everyone is actually reporting accurate information to bureaus or reporting to the bureaus. So I I think people just need to take some pause.

What I’d sit back and say in our portfolio, most certainly, it’s it’s on par with to maybe slightly better from a poor performance perspective.

Jeff, Analyst, Morgan Stanley: Okay. Great. So it sounds like credit trends are going pretty good so far this year. So, you know, given everything we just discussed, how should we be thinking about your reserve ratio from here? You don’t really guide on that, obviously, but you talked about the 5.3% plus triangulated unemployment rate last quarter.

I think, you know, we’ve seen some moody forecasts or industry forecasts out there go a little bit higher on that front. So how how should we be thinking about that over the rest of the years? Will we take it higher or lower?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. You you know, let let let’s just kinda put a bow on credit. So so I think we’re pleased with the performance rates. When you when you’re thinking about reserving miles, it’s it’s what’s your performance. Again, for us, I I’ll just highlight again, Entry rate’s better than pre pandemic.

We are seeing improvement in in delinquency stages. There had been some some you know, we always get the question of, you know, you’re credit restrictive today. Are you going to be, you know, when are you gonna start being less credit restrictive? And, again, we continue to evaluate that, Jeff, and and we focus on it. We will take some actions, you know, end of this quarter into into probably the back half of the year to be, you know, in certain small pockets to maybe be slightly less restrictive.

What that does is, okay, as we look forward, as I think about the quantitative portion of the model, that should be getting better as your loss forecast get better, and and you’re back inside your long term underwriting underwriting targets, which is a downward bias onto the reserve rate, number one. Number two, I think when when we when we stepped it at the end of the quarter in March, you you know, I I think this was right before Liberation Day, right before some of the the questions with regard to the economy. So given some of the uncertainty, you know, we posted a $200,000,000 macroeconomic reserve in in the first quarter really based upon a deteriorated macro that was worse at that point. So go back to the the, you know, that that that February baseline, which informs the reserve, worse than a Moody’s s five, which is a fairly severe, you know, recessionary environment. As we step through, you know, obviously, the baseline’s out for for May.

That baseline’s slightly worse than than the February baseline. So so in theory, the there there could be a minor impact to to the the quantitative reserve, but but most certainly, I think the macro kinda covers it. As you look forward, I think a framework to think about it, Jeff, is if you continue to to perform well on the the the performance of delinquency and the charge off profile, number one. And I think we get some clarity with regard to to tariffs and the impact on the economy. What you’d see is if I have greater certainty, the macroeconomic kinda comes down, the quantitative comes down, and and you begin to get back to, what would be a day one CECL of 9.7%.

So, you know, the bias, know, in in theory, if the macroeconomic environment clears is is to begin that trend. So so we would expect it to move down. Obviously, if the macroeconomic environment deteriorates, then then, you know, you may be in a situation where you have higher, a higher rate for a little bit longer period of time. It’s also important to know, you know, as we’ve said before, our reserve model, if unemployment’s under four and a half, if it moves around a little bit under four and half, it doesn’t really have an impact, you know, significantly on our model. So, you know, it’s almost like a neutral rate of unemployment inside our reserving methodologies at that four and a half percent.

Jeff, Analyst, Morgan Stanley: As you think about the growth outlook for the back half of the year, you mentioned the easier comps, in the back half of the year, and you’ve also talked about how, you know, you you’d consider maybe changing your your profile on the underwriting a little bit if the credit continues to perform. Have delinquency trends improved enough at this point for that to happen to maybe have you start letting off the brakes a little bit, or what else needs to happen there? And then, you know, maybe just broadening that out longer term, what gets you back towards your seven to 10% long term growth target?

Brian Wenzel, Chief Financial Officer, Synchrony: You you you know, it’s important to understand it. I wanna I’ll start where you really ended, which is where are we today and then where we’re heading. Right? So so, you know, let’s just be clear. The the impact today is twofold.

Number one, the restricted credit, actions is a significant portion, the majority portion of the decline in in in purchase volume, and that’s impacted receivables. The is is this this, you know, discerning customer who has pulled back on certain discretionary purchases, whether that’s in the furniture space. We see it in health and wellness when you think about basic or cosmetic and things like that. You see it in lifestyle, you know, which are some of the platforms I I indicated earlier that have some pressure. So so that’s that’s a short term.

I I think, you know, I I talked about we’re gonna make some some, you know, minor adjustments to the credit profile in the back half of the year. That wasn’t really factored into the guide. I I don’t think really has a a material impact, but but most certainly, we’re that. That’s going to be a journey, and we’ve always talked about it. We’re not gonna flip a switch and just go back to, you know, the standards from 2022.

It’s also important to say we never really just like, we don’t accord you in the credit box. So so so I I think that, you know, in the short term, you’re gonna see, you know, some of the, credit restrictions lift over the course of, you know, eighteen months or so. That helps. I I think the important part is the consumer hopefully becomes more confident being willing to make those larger ticket discretionary purchases. That combined with, you know, I’d say, lower comps in the back half of the year, again, you know, driven by those two factors, we should begin to see the ramp up.

You know, when we look at our partner mix, when we look at our penetration, when we look at the opportunities that we have with our partners, you know, we we we feel good about the ability to get back to our long term average and our long term targets of being high high single digits, you know, relative to growth.

Jeff, Analyst, Morgan Stanley: So just to sort of put a pin on that, lifting of the credit action is not factored into the full year guide, but you’re gonna look to do that maybe over the next eighteen months. Is that Yeah.

Brian Wenzel, Chief Financial Officer, Synchrony: I mean, that that’s always the horizon. So the question becomes when do you have the certainty? You know, we like to we like to have certainty. I’m sure a lot of other people like to have certainty around tariffs and the impact on the economy. Tariffs clearly are inflationary.

It’s unclear exactly where the tariff burden will fall inside the economic change. So it it’s sorely to say that, but that’s something that we watch. But once that clears and we continue to see the performance we’re seeing today, that would give us indications that we again, we should consider, lifting those restrictions, and it’s gonna come over time. You know, we’re doing things, you know, our plan this year that was included in the guidance is we’re doing more upgrades than we did last year from private label to dual card. That’s one of the benefits of having a multiproduct portfolio is we can migrate customers who really want a different product and are eligible for a different product.

Those are things that we can do. Again, it it’s not materially driving the estimate, but those are things that we’ll begin to do more in earnest as we get comfortable with the macro.

Jeff, Analyst, Morgan Stanley: And and maybe we could also talk about the PPPC, the pricing changes you put through in advance of the late fee rule, which obviously didn’t go through. How are you and your partners thinking about using these gains you’ve seen so far? Are most of the conversations you’re having centered around maybe reinvesting that into value enhancements? Could those reinvestments maybe provide an uplift to loan growth over the next few years? And are you finding that those pricing changes you took a little bit more proactively?

Are they giving you a bit of a competitive edge in your conversations when it comes to renewals or or new deals?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. So so I I think Brian did a a a very good job of articulating our strategy in April. You know, we we had the, you know, I’d say this, the benefit of all of our CITs had test versus control. So we can go to our partners, and we’re going to our partners with a couple things. One, here’s the landscape that that has changed over the last, you know, two years relative to pricing cards.

Two, here is the impact on test versus control for accounts that received the change in terms and and what that means. And then three, we sit back and say, based upon performance, here is the financial contribution or attributes that you have relative to the program. And so, you know, the discussions we’re gonna gauge in is is how do you think about those? You know, there there’s situations where they’ll they’ll just stay as they are. There’s situations where we may say, listen.

We may take because we have extra, you know, or or more revenue, will we take on a different credit profile to get back to a slightly higher but but acceptable risk adjusted return? Would we put more into the value prop? Right? If you have a higher price, can we we can afford make greater greater value, which would hopefully drive, you know, increased sales? Or or do we just adjust, you know, price, which which most likely does not necessarily lead to to buying?

So we’re starting to have those conversations. It it’s not something that that, you know, we’ve spread that. We’re having those conversations with partners today. I I think the the thing where we’ve had probably the more focus has been around, you know, our promotional financing business, some of the promo fees that we charge that were in the market, but but we we put in place, those are ones that probably will get some adjustment, you know, to to to really conform to market, number one, and and then two, really help to, you know, try to stimulate discretionary purchases. It’s important to know when the those promotional financing fees because what you record, when you when you make the sale gets amortized in over the life of the promo.

It really didn’t have any financial, you know, material financial impact in our results to date. So so if we adjust that going forward, that is going to be, something that’s more of a lost opportunity. But the conversations around the promotional financing fees going to our partners about mix of promos, between different types of promos. And and really when you think about, you know, whether we’re in exclusive relationships or not, you know, how is our product position relative to others. So those are ongoing discussions with partners, but that’s probably the thing.

But but, again, we’re taking a a fairly methodical approach with our partners to engage them the same way we did when when we put the actions in place. With regard to competitive advantage, you know, we obviously believe that the value that we provide on the cards and the price is is fair to consumers. And so, you know, we look at an entire package of what we deliver for them, not only the product, but the experiences in order to deliver that. So so, again, we’ll we’ll continue to work with our partners. We’re engaged in those conversations now.

And, and and, again, we’ll we’ll we’ll get it done fairly expeditiously with what we wanna do going forward.

Jeff, Analyst, Morgan Stanley: And as you’re having those conversations, could you also maybe just touch on broader competitive intensity out there? Have you noticed any shifts there around renewals or RFPs? Are other banks entering the fray? And maybe what are the most topical things that are coming up in those or the pain points that are coming up in those conversations?

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. You know, competition has been it’s interesting. I think it’s been fairly consistent last couple years. We we see certain certain competitors in certain places, but we don’t necessarily see people all the time on in exact same places. So larger relationships, you may see one or one or or two competitors.

We’re consistent in mid sized relationships. So that 500 to a billion, you may not see you may see different competitors there. So, again, you know, it’ll be interesting to see, you know, there’s there’s been some shifting in some of the competitive set. You know, TD has exited in the promotional financing business, so we’ll see how that changes the landscape. You know, there’s been some consolidation, so we’ll see how that changes.

So so I think it’s evolving. I do think what we do see is is, again, some smaller fintech type lenders. So particularly in health and wellness, you see it in in in the home improvement space, etcetera, who kinda coming in in different verticals in order to do it. They don’t have the same same scale as us either in that vertical or as a broader based company. So so, again, you’re seeing them a little bit more.

I think you’re seeing companies that have singular products understand singular products probably are not a way forward. So they’re trying to get to more of a multiproduct multiproduct offering similar to us, but they, again, don’t have the same scale as us. And then you’re seeing some some evolution really at the point of sale, whether it’s technology and and and some of the waterfall capabilities, number one or two. You’re seeing more integration with with software vendors and providers. So so the landscape shifting, it’s it’s it’s moved faster the last five years.

And, we have productive paranoia, and we we we take everything, incredibly seriously, whether it’s a renewal or a new opportunity. And and, again, it’s it’s evolving, but, it it’s fairly it’s not necessarily an aggressive marketplace. I’d say it’s very balanced.

Jeff, Analyst, Morgan Stanley: Okay. Great. And and maybe last one for me. Just on capital return, you recently increased the dividend by 20%. You announced a new buyback authorization of about 2 and a half billion.

You’re still operating with pretty ex robust levels of capital here with the CET one of 13.2%. What’s your thought process on redeploying some of this excess capital from here? Is this the time to maybe take some swings on larger portfolios out there? Or, you know, maybe talk us through your thought process.

Brian Wenzel, Chief Financial Officer, Synchrony: Yeah. So so we’re, you know, obviously pleased with the, the capital plan we put out. Again, you you referenced a 20% increase in the dividend, to 30¢ per share each quarter. That that most certainly is something we want to maintain, as part of our our capital allocation strategy, number one. I think when you look at the share repurchase, we’re we’re double what we did last year at 2 and a half billion dollars this year.

It was 1.2 last year. So so when you look at that, you sit back and say, listen. We we understand we’re in a a real position of strength when it comes to capital and how we return it back to shareholders, how we invest in the business. Our priorities, Jeff, have not shifted. Number one, inner you know, you know, organic growth is number one.

So organic RWA, we just have tremendous opportunities with our partners that we gotta continue to capitalize to drive share inside their franchises. One, two, it’s the dividend and maintaining that dividend for for shareholders. And then three, it comes down to share repurchases or inorganic. And it gives us the opportunity to look at products or capabilities, to be honest with you, that that we constantly look at. So you can can can this accelerate our development of something, or or are we better to build it?

Or we can look at at other relationships. Again, we will maintain discipline when it comes to pricing. We don’t need to do it. And and, you know, if if we don’t have those opportunities, we’ll most certainly, you know, be aggressive but prudent with our return to capital to shareholders via share repurchases. So, you you know, we feel good about our ability to execute that.

We demonstrated by retiring over half the shares since we went public. I I think that’s that’s our commitment to get that capital down. So and the final piece I’d say, Jeff, you know, we we made our final, you know, deposit on CECL and the transition, so that’s behind us. But that was $600,000,000 a year of capital. So that gives us even more capital as we move forward besides the business that generates a ton of capital to to give us really flexibility and be a competitive advantage as we move forward.

Jeff, Analyst, Morgan Stanley: Alright. Great. I think we’re out of time, Brian. It’s it’s been a pleasure as always. Thank you.

Brian Wenzel, Chief Financial Officer, Synchrony: Jeff, thank you. Thank you for your your time today.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.