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Synchrony Financial (SYF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $1.89 vs SPGI consensus $1.65, driven by lower interest-bearing liabilities cost, PPPC-driven loan yield, and a $97M reserve release; net revenue $3.718B essentially in line with SPGI revenue consensus $3.711B; EPS beat is significant given continued purchase volume softness from prior credit tightening *.
  • Baseline FY 2025 guidance tightened positively: net charge-offs range improved to 5.8–6.0% (from 5.8–6.1%), and RSA range raised to 3.70–3.85% (from 3.60–3.85%); net revenue $15.2–$15.7B and efficiency ratio 31.5–32.5% maintained .
  • Capital return catalyst: new $2.5B buyback through 6/30/2026 and 20% dividend increase to $0.30 beginning Q2 2025; company returned $697M in Q1 (repurchases $600M, dividends $97M); CET1 13.2% and Fitch LT IDR upgraded to ‘BBB’ (Stable) .
  • Operating KPIs reflect resilient credit: NIM +19 bps to 14.74%, 30+ DQ down 22 bps YoY, NCOs 6.38% (+7 bps YoY), payment rate flat vs prior year; purchase volume -4% and period-end receivables -2% reflect intentional credit actions and selective customer spend .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 14.74% (+19 bps YoY) as PPPCs increased loan yields and funding costs declined with lower benchmark rates; net interest income rose +1% YoY .
  • Credit formation improved: 30+ days delinquency fell to 4.52% (−22 bps YoY) and a reserve release of $97M vs prior-year reserve build supported lower provision; CFO cited “outperforming seasonality” and vintages trending better than 2019 .
  • Management confidence and capital plan: “Synchrony delivered a strong first quarter 2025 performance” (CEO), and a new $2.5B buyback plus dividend hike signal balance sheet strength and ROE discipline .

What Went Wrong

  • Purchase volume decreased 4% to $40.7B and average active accounts fell 3% to 69.3M, reflecting prior credit tightening and selective consumer spend; net revenue -23% YoY due to non-repeat of 1Q’24 Pets Best gain .
  • RSA increased 17% to $895M (3.59% of ALR), pressuring net revenue as programs improved with PPPC effects; Other expense +3% from tech investments and notable items (charitable and restructuring charges) .
  • Efficiency ratio increased to 33.4% from 25.1% (adjusted prior-year 32.3%); Other income -87% from lapping Pets Best gain, despite PPPC-related fees .

Financial Results

Core Financials vs Prior Quarters and Estimates

MetricQ3 2024Q4 2024Q1 2025Q1 2025 SPGI Consensus
Net Revenue ($USD Millions)$3,814 $3,801 $3,718 $3,711.6*
Diluted EPS ($)$1.94 $1.91 $1.89 $1.65*
Net Interest Margin (%)15.04% 15.01% 14.74% —
Efficiency Ratio (%)31.2% 33.3% 33.4% —
Net Charge-offs (% of avg LR)6.06% 6.45% 6.38% —
RSA ($USD Millions)$914 $919 $895 —

Note: *Values retrieved from S&P Global. EPS and revenue consensus and actuals reflect SPGI’s definitions; company “Net revenue” may differ from SPGI “Revenue” methodology.

Platform (Segment) Breakdown – Q1 2025 vs Q1 2024

PlatformLoan Receivables ($B) Q1’25Q1’24Purchase Volume ($B) Q1’25Q1’24Interest & Fees ($B) Q1’25Q1’24
Home & Auto$30.5 $32.6 $9.6 $10.5 $1.4 $1.4
Digital$27.8 $27.7 $12.5 $12.6 $1.5 $1.6
Diversified & Value$19.4 $19.6 $13.7 $14.0 $1.2 $1.2
Health & Wellness$15.2 $15.1 $3.8 $4.0 $0.9 $0.9
Lifestyle$6.6 $6.6 $1.2 $1.2 $0.3 $0.3

KPIs and Balance Sheet

KPIQ3 2024Q4 2024Q1 2025
Purchase Volume ($B)$45.0 $48.0 $40.7
Period-end Loan Receivables ($B)$102.2 $104.7 $99.6
Average Active Accounts (mm)70.4 70.3 69.3
Payment Rate (%)—15.8% 15.8%
CET1 Ratio (%)13.1 13.3 13.2
Liquid Assets (% total assets)16.53% 14.36% 19.52%
Capital Returned ($MM)$399 $197 $697
NIM (%)15.04 15.01 14.74
Efficiency Ratio (%)31.2 33.3 33.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($B)FY 2025$15.2–$15.7 $15.2–$15.7 Maintained
RSA (% of avg LR)FY 20253.60–3.85% 3.70–3.85% Raised lower bound
Net Charge-offs (%)FY 20255.8–6.1% 5.8–6.0% Improved
Efficiency Ratio (%)FY 202531.5–32.5 31.5–32.5 Maintained
Liquid Assets (% total assets)FY 2025 avg~17% ~17% Maintained
Period-end LR GrowthFY 2025Low single-digit Low single-digit Maintained
Common Dividend ($/share)Q2 2025+$0.25 (prior) $0.30 Raised
Share RepurchasesThrough 6/30/2026$0.6B remaining auth as of 12/31/24 New $2.5B authorization New program

Earnings Call Themes & Trends

TopicQ3 2024 (Previous Mentions)Q4 2024 (Previous Mentions)Q1 2025 (Current Period)Trend
Credit actions & trajectoryTightening drove slowed purchase volume; delinquency normalization underway Actions largely completed; delinquency formation decelerating; guide to NCOs 5.8–6.1% 30+/90+ DQ down YoY; NCOs guided 5.8–6.0%; vintages outperform; potential easing later in year methodically Improving, cautious easing
PPPCs and late fee rulePPPCs boosted yields; uncertainty around CFPB rule timing PPPCs in guidance; outlook excluded late fee rule given litigation uncertainty Rule vacated; management not planning immediate rollbacks; will engage partner-by-partner Stable pricing, strategic flexibility
Liquidity & fundingLiquid assets ~18.8% of assets; deposits 84% Running higher liquidity (~17%) to prefund growth; deposits 84% Liquid assets 19.5%; prefunding, balanced CD repricing lowers funding costs Elevated near-term liquidity
Dual/co-brand & CareCreditDual/co-brand utility and penetration gains; CareCredit expansion CareCredit dual card traction; broader acceptance; wallet penetration +200 bps Dual/co-brand 45% PV; CareCredit preferred at TX A&M; veterinary acceptance at all 29 public hospitals Expanding ecosystems
Capital return$300M buybacks in Q3 $197M in Q4, $600M auth remaining $697M returned; $2.5B new buyback; dividend increased; Fitch upgrade Acceleration

Management Commentary

  • CEO (prepared): “Synchrony delivered a strong first quarter 2025 performance… leveraging our proprietary data, sophisticated credit underwriting… to empower our approximately 70 million customers… while also delivering loyalty and sales to… partners” .
  • CFO (prepared): “Ongoing effects of our previous credit actions continued to impact purchase volume… net charge-off results outperformed historical seasonality… RSA maintained alignment… we remained disciplined to drive efficiency” .
  • CFO (call): “Customers remain stable… delinquency outperformed seasonality for ~6 months… we guided NCOs back inside our long-term 5.5–6% target” .

Q&A Highlights

  • Late fee rule vacated: “We don’t expect it to come back in similar form… no current plans to roll back changes; will engage partners transparently on options” (CEO) .
  • Reserve and macro overlay: Qualitative reserves increased >$200M with unemployment assumption ~5.3% embedded; net reserve release ~$100M overall (CFO) .
  • Growth outlook: Purchase volumes expected to accelerate later in 2025 as comps ease; potential targeted easing (lines, approvals) first for existing customers at attractive returns (CFO/CEO) .
  • Liquidity stance: Running higher liquidity to prefund growth and manage CD repricing; positive economic trade despite NIM drag (CFO) .
  • Capital priorities: Dividend raised; $2.5B authorization sized for flexibility; potential for incremental authorization if growth lighter (CFO) .

Estimates Context

Q1 2025SPGI ConsensusActual ReportedSurprise
EPS ($)1.65* [estimates]1.89 +$0.24 (≈ +14.5%)*
Revenue ($MM)3,711.6* [estimates]Net revenue: 3,718 +$6.4 (≈ +0.2%)*
# of EPS Estimates16*——
# of Revenue Estimates12*——

Note: *Values retrieved from S&P Global. SPGI “Revenue” may not align with company “Net revenue” presentation for consumer finance.

Key Takeaways for Investors

  • EPS beat with improved credit outlook: NCO guidance tightened to 5.8–6.0% and delinquency formation improving; supports higher RSA and margin resilience into 2H’25 .
  • Capital return acceleration: $2.5B buyback and dividend to $0.30 signal confidence and potential EPS accretion; CET1 13.2% and Fitch upgrade de-risk funding .
  • Growth path: Near-term spend/selective behavior and prior tightening weigh on volumes, but comps ease later in year; methodical easing could reaccelerate receivables while staying within 5.5–6% NCO target .
  • PPPCs remain intact post-rule vacatur: Management prefers adding card value/promotions or marginal approvals vs simple APR rollback; expect partner-by-partner decisions over time .
  • Liquidity prefunding: Elevated liquid assets (~19.5%) and deposit mix (83%) provide flexibility to lower funding costs as CDs reprice while supporting growth .
  • Segment dynamics: Health & Wellness and Digital show relative resilience; CareCredit expansion (veterinary acceptance and dual card) is a structural growth lever .
  • Short-term trading: Buyback/dividend and credit improvement are positive catalysts; watch Q2/Q3 cadence of RSA, NIM vs rate path, and any signs of selective easing in approvals/lines (management indicated later-year consideration) .

Additional Q1 2025 Press Releases and Partnerships

  • Extended partnership with American Eagle (Real Rewards program) .
  • New Belle Tire private-label card in Synchrony Car Care network .
  • CareCredit now preferred at TX A&M; acceptance at all 29 public veterinary university hospitals nationwide .
  • Integration with Adobe Commerce expanding financing options for SMBs online .
All company results, metrics, and quotes are sourced from SYF’s Q1 2025 8-K exhibits, press releases, and earnings call transcript as cited. SPGI consensus values marked with * and accompanied by disclaimer above.