Synchrony Financial Q2 FY2025 earnings call

• Synchrony delivered strong financial performance with net earnings of $967 million or $2.50 per diluted share, return on average assets of 3.2%, and return on tangible common equity of 28.3%.
• Diversified portfolio, industry-leading value propositions, and expansive distribution channels enabled connection with ~70 million Americans. Credit discipline led to better delinquency and net charge-off performance.
• Added or renewed over 15 partners, including partnership with Walmart OnePay for a new credit card program launching fall 2025, and renewed relationship with Amazon with launch of Synchrony Pay Later at Amazon.
• Rolling out physical PayPal credit card, allowing broader use of PayPal Credit. Invested in technology, including Synchrony GPT for efficiency and customer service, and GenAI capabilities in marketplace to drive sales for partners.

In the second quarter of 2025, Synchrony generated $46 billion of purchase volume. Dual and co-branded cards accounted for 45% of that purchase volume, increasing 5% versus the prior year. Ending loan receivables decreased 2% to $100 billion due to lower purchase volume and higher payment rate. Net revenue decreased 2% to $3.6 billion, net interest income increased 3% to $4.5 billion, and net interest margin increased 32 basis points to 14.78%. Provision for credit losses decreased $545 million to $1.1 billion. Allowance for credit losses as a percent of loan receivables was 10.59%, decreasing from 10.87% in the first quarter.

• Baseline outlook includes minor modifications to PPPC, launch of Walmart OnePay program in fall, excluding impact of deteriorating macroeconomic environment. Ending loan receivables expected to be flat vs last year. Loss rate expected between 5.6-5.8%. Net interest margin expected to increase to average 15.6% in second half of 2025. Efficiency ratio expected between 32-33%. Other expenses expected to increase ~3% on dollar basis for full year.
• Net interest margin expansion, lower net charge-offs, and performance alignment to RSA expected to drive higher risk-adjusted return and return on average assets exceeding long-term target of 2.5%.

• Uncertain macroeconomic backdrop poses risk. Potential impact of tariffs or retaliatory actions remains unknown and could affect results. Credit actions and consumer spend behavior can have short-term impact on growth metrics.

Q: Ryan Nash asked about encouraging signs in the portfolio and selectively unwinding credit actions, and path back to mid- to high single-digit growth.

A: Brian Doubles said consumer is in good shape, co-brand growth is encouraging, starting to open up selectively in health and wellness, optimistic about growth into 2026 with new partnerships and opening credit box.

Q: Ryan Nash followed up on modifications to PPPC with partners.

A: Brian Doubles said rollbacks are partner-by-partner, small net revenue impact, normal course pricing discussions with partners.

Q: Terry Ma asked about NIM guide in second half and能否 get back to pre-pandemic 16% NIM.

A: Brian Wenzel said drivers include increase in loan receivables as percent of interest-earning assets, PPPC impact, CD book repricing, and有望 get back to pre-pandemic NIM as interest rate environment normalizes and credit mix shifts.

Q: Sanjay Sakhrani asked about loan growth, Walmart contribution, and impact of tariffs.

A: Brian Doubles said started loosening credit in second quarter, Walmart impact in back half, tariffs are moving target but partners have digested impacts so far.

Q: Moshe Orenbuch asked about new products with largest customers and contribution to growth.

A: Brian Doubles said Pay Later at Amazon and PayPal Credit card rollout will bleed in through 2026, with some benefit in 2025 but not fully in guidance.

Q: Richard Shane asked about balancing higher ROA riskier borrowers and lower ROA higher-quality borrowers, and stickiness of PPPC.

A: Brian Wenzel said prime segment has potential for greater impact on ROA, Brian Doubles said balancing done with focus on long-term NCO guidance and manageable loss rate.

Q: John Hecht asked about health and wellness update.

A: Brian Doubles said health and wellness is strong platform with growth opportunities across verticals, starting to open back up after dialing back credit.

Q: Jeffrey Adelson asked about expenses related to Walmart launch and impact of Pay Later launch.

A: Brian Wenzel said Walmart launch expenses split between 3Q and 4Q, Pay Later is meaningful part of business with good partner adoption and multiproduct strategy benefits.

Q: L. Erika Penala asked about growth cadence beyond 2025 and impact of higher APRs.

A: Brian Wenzel said lapped credit actions, will see comps come through in 2026 with Walmart and credit actions, and loan yield will continue to increase through seasonal trends.

Q: Mihir Bhatia asked about Walmart program differences and ramp.

A: Brian Doubles said Walmart program is different with embedded digital experience, both general purpose and private label cards, and strong product offering with good alignment and placement potential to ramp well.