Synchrony Financial Q2 Highlights: EPS Beats Consensus, Revenue In-Line, 2023 Outlook Revised

Synchrony Financial SYF reported Q2 sales of $4.12 billion, in line with the consensus. 

Net interest income rose 8% Y/Y to $4.1 billion, led by higher interest and fees on loans, partly offset by higher interest expense from higher benchmark rates and increased funding liabilities. 

Net interest margin declined 66 basis points to 14.94% on the contraction of 215 basis points of interest-bearing liabilities cost partly offset by a 124 basis points increase in loan receivables yield.

Loan receivables rose 15% to $94.8 billion in the quarter.

Interest and fees on loans increased 19% Y/Y to $4.8 billion, led by higher average loan receivables and higher benchmark rates. 

Purchase volume stood at $47.3 billion, increasing about 6% on a core basis. 

Provision for credit losses came in at $1.4 billion, up 91% Y/Y, on increased net charge-offs and a higher reserve build in the quarter.

Net earnings declined to $569 million from $804 million a year ago.

The company reported Q2 EPS of $1.32, beating the consensus of $1.24.

SYF's return on assets decreased 130 basis points to 2.1%, while the efficiency ratio declined 220 basis points to 35.5%.

The company repurchased shares worth $300 million in the quarter and had remaining share repurchase authorization of $1 billion as of June 30, 2023.

2023 Outlook Revised: SYF now expects loan receivable growth of +10% (vs. +8% to +10% guided earlier) and a net interest margin of 15.00% – 15.15% (vs. 15.00% – 15.25% previously). 

"Synchrony continues to demonstrate strong growth and financial performance as consumer behavior reverts to pre-pandemic norms - and as our products and value propositions resonate strongly across our diversified set of platforms and partners....As we monitor the health of our customers, we are also advancing our key strategic priorities, including the expansion of our multi-product strategy. We have now launched our installment solution suite with over 700 partners, providers and merchants, and are seeing the benefits of deeper relationships with our customers," said Brian Doubles, President and CEO.

Also Read: Analyst Downgrades Synchrony Financial Despite Raising EPS Estimate: Here's Why

Price Action: SYF shares are trading higher by 1.30% at $35.97 premarket on the last check Tuesday.