Synchrony Financial Reports Higher Q2 Net Interest Income And Shareholder Returns, Drives Positive Outlook

Synchrony Financial SYF reported second-quarter fiscal 2024 net interest income of $4.405 billion, beating the consensus of $4.287 billion.

Net interest income increased 7% YoY, driven by higher interest and fees on loans, partially offset by an increase in interest expense from higher benchmark rates and higher interest-bearing liabilities.

Net revenue rose 12.7% to $3.712 billion. Net interest margin declined 48 basis points to 14.46%.

Loan receivables rose 8% to $102.3 billion, and purchase volume declined 1% to $46.8 billion.

Interest and fees on loans increased 10% year over year to $5.3 billion, led by increased average loan receivables.

Synchrony’s average active accounts rose 2%, and deposits grew 10% Y/Y to $83.1 billion in the quarter.

SYF returned $400 million in capital to shareholders, including $300 million in share repurchases and $100 million in common stock dividends.

Provision for credit losses came in at $1.70 billion, an increase of $308 million, due to higher net charge-offs.

Net earnings increased 13% year over year to $643 million. The company reported EPS of $1.55, above the consensus of $1.36.

Synchrony’s return on assets increased 10 bps to 2.2%, while the efficiency ratio declined 380 basis points to 31.7%.

The estimated Common Equity Tier 1 ratio was 12.6% compared to 12.8%, and the estimated Tier 1 Capital ratio was 13.8% compared to 13.6% in the prior year.

FY24 Outlook: Synchrony expects EPS of $7.60 – $7.80 versus $7.25 consensus; this includes the late fee rule implementation date of October 1, 2024, the impact of PPPC primarily in 3Q’24 and 4Q’24, and $1.96 Pets Best gain on sale in 1Q’24.

Price Action: SYF shares are trading lower by 1.82% at $50.77 premarket at the last check Wednesday.