Synchrony Financial Efficiency Ratio Falls To 36% In Q4, Fuels Growth Engine For FY24

Synchrony Financial SYF reported fourth-quarter sales of $4.466 billion, in line with the consensus of $4.468 billion.

Net interest income rose 9% Y/Y 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 48 basis points to 15.10%.

Loan receivables rose 11% to $103.0 billion and purchase volume increased 3% to $49.3 billion.

Interest and fees on loans increased 16% Y/Y to $5.3 billion, led by increased average loan receivables, higher benchmark rates, and lower payment rates. 

Synchrony’s average active accounts rose 5%, and deposits grew 13% Y/Y to $81.2 billion in the quarter.

Provision for credit losses came in at $1.80 billion, up 50.2% Y/Y, due to higher net charge-offs.

Net earnings declined to $440 million from $577 million a year ago. The company reported EPS of $1.03, beating the consensus of $0.93.

Synchrony’s return on assets decreased 70 basis points to 1.5%, while the efficiency ratio declined 120 basis points to 36.0%.

The company repurchased shares worth $250 million in the quarter and had a remaining share repurchase authorization of $600 million as of December 31, 2023.

The company says the quarter included $9 million FDIC special assessment and restructuring costs related to site strategy of $9 million.

Brian Doubles, President and Chief Executive Officer, said, “During the year, we grew our existing partner programs and launched new programs, expanded our products and markets, and continued to scale our multi-product strategy across our portfolio – all with a commitment to delivering the power of choice through best-in-class experiences for our customers, partners and providers.” 

FY24 Outlook: Synchrony expects loan receivable growth of 6%-8% and a net interest income of $17.5 billion – $18.5 billion.

The company sees broad-based purchase volume growth and payment rate moderation to continue.

Last week, Synchrony penned a definitive agreement with Ally Financial Inc ALLY to acquire Ally’s point-of-sale financing business, including $2.2 billion of loan receivables. 

Also Read: Credit Concerns Spark Downgrades! American Express, Capital One, Synchrony Financial Hit By Credit Quality Doubts Analyst

Price Action: SYF shares are trading lower by 1.19% at $37.32 on the last check Tuesday.