Delivering Growth & Value

At Synchrony’s inaugural Investor Day last week, I had the privilege of discussing the company’s ability to achieve strong, sustainable financial performance and long-term value creation for our stakeholders. We’ve posted the full presentation and replay here.

In short, our success is a combination of a lot of things – ?the company’s diversification across industries, our multi-product strategy, and our compelling value propositions – all of which attract highly engaged customers and ?translates into strong revenue generation per cardholder.

To those differentiators, Synchrony also adds our deep underwriting expertise and technology platform. We’ve been in the business of originating loans for more than 80 years; and we have enhanced our abilities with insights derived from analyzing our own data as well as data from partners. The beauty of our approach: approval rates go up while maintaining similar risk levels. In addition, we’re able to reduce fraud (an additional cost savings), while delivering very attractive risk-adjusted margin.

A unique aspect to our business is the economic arrangements with our partners which are referred to as retailer share arrangements or RSAs. These agreements are designed to align both parties’ interests around growth and profitability. This alignment of interests becomes a powerful tool that helps our success during varying economic cycles.

Finally, operational efficiency. Our cost to acquire are lower than the competition, yielding 15-20X our acquisition cost in lifetime value (per account). This is powered by our partnership model,?allowing us to focus our marketing spend on increasing that lifetime value and engagement with our products. It’s a core strength of our business model.?Driving overall expense discipline allows us to invest in strategic initiatives which will deliver long-term value to our shareholders.

As a result, our success is broad and deep. Among top U.S. consumer credit card issuers, Synchrony has the most cardholders. We have more than 65 million active accounts and partner with merchants who operate in 450,000 locations. We generate approximately 25 million new accounts per year, and the average account is with us for 10 years. Forty percent of our bank customers have more than one product with us.

Dig a little deeper and the numbers are just as impressive. From our IPO in 2014 through the pre-pandemic period, we were able to grow purchase volume and end receivables around 7% per year and convert that 7% into net interest income. In addition, we’ve outperformed our peers on volume and receivables. That’s the power of diversification, a multiproduct strategy and compelling value propositions.

What does the future hold? I say with confidence that Synchrony is a high-growth, high-margin, resilient business that produces 2.5% ROA and is designed to deliver double-digit earnings growth in a normal environment.