Synchrony Financial (SYF)

Credit Performance and Reserve Rates
Q: How is credit performance affecting reserve rates and outlook?
A: Management indicated that credit performance is generally tracking expectations, with delinquencies stabilizing and no significant signs of stress among lower-end consumers. - - - They expect the reserve rate at year-end to be generally in line with last year's 10.3% - , and losses are expected to move back towards 5.5% to 6% as underwriting adjustments take effect. - The decrease in reserve rate is driven by the denominator effect as loan balances stabilize. - -

Net Interest Margin Expectations
Q: What are the expectations for net interest margin given rate changes?
A: Management expects net interest margin to have an upward bias over the next several quarters - , driven by benefits from payment rates declining and lower interest expense as CDs reset at lower rates. - - In a declining rate environment, they anticipate tailwinds due to lower funding costs, with retail deposits, particularly CDs, mostly repricing in the first half of next year. - They also foresee interest income benefiting from PPPC actions and lower payment rates. -

Impact of CFPB Late Fee Rules
Q: How will CFPB late fee rules impact the company?
A: Management is operating as if the late fee rule will go into effect, preparing to offset the impact of an $8 late fee. - - Pricing actions have been implemented to mitigate the expected impact, and customer attrition is lower than expected. - - If the rule does not go into effect, they have not planned for rolling back changes but would discuss with partners if necessary. - -

Spending Trends and Loan Growth Outlook
Q: What is the outlook for spending trends and loan growth?
A: There has been a slowdown in spending volume due to consumers trading down and acting rationally amid inflation pressures. - - Purchase volumes have stabilized at low single-digit declines, and management expects stability heading into the holiday season. - Loan growth is expected to remain low single-digit as credit actions continue to impact new accounts but could reverse if macroeconomic conditions improve. -

Collections Performance and Credit Actions
Q: How are late-stage collections performing, and is it harder to collect now?
A: Late-stage collections have shown improvement over the last few months, although still performing worse than pre-pandemic periods. - It is harder to collect today due to tougher customer contact, but investments in digital collections and other channels are helping. - Underwriting actions are designed to bring losses back to 5.5% to 6%, and delinquency trends are tracking expectations. - -

Health and Wellness Segment Performance
Q: How is the health and wellness segment performing?
A: The health and wellness segment continues to be a strong contributor, with loan growth up 10% year-over-year. - While there is some pullback in discretionary procedures, areas like pets are up 4% year-over-year. - The CareCredit card usage rate has increased to 65%, up 500 basis points from last year, indicating strong customer engagement. -

Competition and Pricing Actions
Q: Are competitors' actions influencing your pricing strategies?
A: Management monitors competitors but feels comfortable with their own actions. - They are not an outlier relative to peers and have not seen a need to recalibrate pricing to remain competitive. - The focus remains on maintaining value propositions that resonate with customers and partners. -

PPPC Tracking vs. Guidance
Q: How is PPPC performance tracking versus initial guidance?
A: PPPC actions are generally performing in line with expectations. - Customer attrition is lower than anticipated, impacting the timing but not the point of neutrality for mitigating the impact of policy changes. - The core performance is slightly better than expectations. -

Macroeconomic Outlook
Q: What macro factors are you watching to adjust your strategies?
A: Management is observing the consumer's response to inflation and the labor market. - They look for stabilization in credit trends and reduced uncertainty to drive more normal growth and potentially reverse some tightening actions. - Affordability issues and the impact of excess credit in the system are also considered. - -