Synchrony Third Quarter 2022 Results

Synchrony’s third quarter results were driven by our differentiated business model and deep understanding of the needs and expectations of our customers and partners. The versatility of our financial ecosystem — which seamlessly connects customers, partners and providers, alike, across channels and through omnichannel experiences — is what positions Synchrony to continue to deliver best-in-class experiences, financing flexibility and unmistakable value.

As we continue to leverage our advanced digital capabilities, expand our reach through new partners and distribution channels, and further diversify our product suite, Synchrony is increasingly at the center of customers’ every day financing needs and the partner of choice for retailers, merchants and providers.

The below is a summary of some of the comments I shared during our 2022 Q3 Earnings Call on Tuesday, October 25, 2022. A full recording can be heard here.

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Synchrony delivered another strong quarter of financial results, highlighted by net earnings of $703 million, or $1.47 per diluted share; a return on average assets of 2.8%; and a return on tangible common equity of 26.6%. 

Our ability to deliver consistent growth and resilient returns is a testament to our well-diversified portfolio, our balanced approach to product, consumer and credit strategies, and the strength of our differentiated business model. Synchrony continues to solidify itself as the partner of choice for retailers, merchants and providers alike. We added or renewed 15 partners in the third quarter and are excited to be partnering again with Bassett and Floor & Decor.

Bassett has chosen to partner with Synchrony again because they value three of Synchrony's core strengths including our superior customer experience; our advanced data analytics and ability to leverage these data insights to drive growth; and the unique marketing opportunities that exist through Synchrony's HOME Network and Marketplace, which will enable them to reach more customers and drive growth. 

Meanwhile, Floor & Decor has selected to partner with Synchrony again because of our ability to power a multi-product offering for both consumers and commercial customers. Floor & Decor is a high growth retailer and believes that Synchrony is best positioned to help them achieve their objectives. So whether they are looking for advanced data analytics and the powerful network effect of our marketplaces and networks, our seamless omnichannel experiences, or our diverse suite of financial products and services, Synchrony is well positioned to deliver strong, targeted outcomes for each of our partners.

We are increasingly anywhere our customer seeks tailored payment and financing solutions — big or small purchases, occurring in-person or digitally. We leverage our industry expertise, broad distribution channels, and dynamic financial ecosystem to connect our partners with customers, whenever and however they want to be met, with a broad range of products and services, attractive value propositions and seamless experiences that meet their needs in any given moment.

As a result, Synchrony continued to reach and serve more customers in the third quarter. On a core basis, excluding the impact of recent portfolio sales on prior year periods, we added 5.8 million new accounts and increased core average active accounts by 8% year over year. Purchase volume grew 6% to $44.6 billion, or 16% on a core basis, reflecting both the increase in accounts as well as higher engagement across those accounts — with 8% higher spend per account versus last year. This continued strength in purchase volume was broad-based across our portfolio and a testament to the breadth and depth of our five sales platforms, the compelling value propositions we offer and a healthy consumer.

Platform Success

At the platform level, Synchrony achieved double-digit growth in our Diversified & Value, Health & Wellness, Digital and Home & Auto platforms, and single digit growth in our Lifestyle platform.

More specifically, Home & Auto purchase volume was 11% higher, driven by strength in Home, Furniture and Auto-related spend, as well as the impact of inflationary conditions on inventory, gasoline and automotive parts. In Diversified & Value, purchase volume increased 20%, driven by higher out-of-partner spend, partner penetration growth, and strong retailer performance. Lifestyle purchase volume grew 6%, reflecting an industry-specific rebound within Luxury and higher out-of-partner spend more broadly. The 18% year-over-year increase in Digital purchase volume generally reflected growth across the platform: we experienced greater customer engagement, including higher active accounts and spend per account, among our more established programs and continued momentum in our new program launches. The 16% increase in Health & Wellness purchase volume was driven by broad-based growth in active accounts and higher spend per active account in our Dental and Pet categories.

We are particularly excited about the opportunities we see in our Health & Wellness platform to reach more patients and provide them with greater access to flexible financing. Today, Synchrony's Health & Wellness platform encompasses more than 260,000 provider locations, 17 health systems and approximately 75% of the country's dental and veterinarian practices through which we are expanding access to patient financing. We are a leader in patient care financing for the last 35 years, yet we know there is still more we can do to expand accessibility to Synchrony's patient financing product suite.

Synchrony is deeply passionate about empowering Americans to have greater access to responsible and flexible financing options, whenever and however they need it. As we continue to add and renew existing leaders in the Health & Wellness space — including our partnerships with Aspen, Heartland Dental, Sono Bello, and American Society of Plastic Surgeons — and expand our distribution channels with practice management software like Epic and Sycle, Synchrony is increasingly the financial ecosystem at the center of patients' daily lives, empowering them with choice and best-in-class value propositions that truly make a difference.

Dual and Co-Branded Programs

Turning now to Synchrony's Dual and Co-Branded cards, where we also continue to demonstrate momentum. Purchase volume on these products grew 28% versus last year and represented about 39% of our total purchase volume for the quarter.

When tracking Average Transaction Value and Frequency trends across the major "out of partner" spend categories of these products, we continue to see robust consumer demand across both discretionary and non-discretionary categories.

The more recent pullback in gas prices appears to have contributed to a slight acceleration in broader discretionary and non-discretionary spend, with categories like clothing, home furnishing and repair, bill pay and auto-related spending experiencing higher transaction value at similar frequency.

Consumer Strength

Putting this all together, the daily and monthly touchpoints that Synchrony has with our customers across a broad range of purchases tells us that consumer health remains strong and supportive of demand..

Importantly, Synchrony's customer insights also inform many other strategies across our business. We utilize this data to deliver optimized financing solutions and experiences for our customers, greater outcomes for our partners, and more predictive insights for Synchrony as we manage our portfolio to deliver appropriate risk-adjusted returns through cycles.

Our sophisticated underwriting and diverse product suite allow us to respond quickly to changing consumer behaviors and market conditions. Synchrony combines our scale, more than 100 million open accounts, billions of transactions with external data — including utility and telecom information; device identification and usage; cash flow and income data — and also with partner data — like frequency and value of historical purchases...all to dimensionalize our customer and their transactions. This enables us to more effectively engage and service our customers, make better credit and fraud decisions, and drive prudent, profitable growth.

Once our customers begin utilizing our credit products, Synchrony leverages real-time indicators to monitor any shifts in our borrowers' financial well-being. From transaction and payment behavior characteristics to credit bureau alerts, we are closely in-tune with our customers and can make both account- and portfolio-level adjustments quickly. And, of course, Synchrony's responsive digital capabilities are complemented by our fully scaled, highly experienced servicing teams to ensure that our customers have appropriate support when they need it.

In Sum

Synchrony's third quarter financial performance highlighted the benefits of our highly diversified business. Our ability to efficiently and dynamically leverage real-time data and deliver optimized financing solutions and experiences for our customers and partners — even as needs evolve and market conditions shift — is what enables Synchrony to consistently deliver for those we serve.