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Synchrony posts better-than-expected 4Q18 results

30 January 2019

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by Anchor

Financial services provider, Synchrony Financial reported 4Q18 results on Wednesday (23 January), which showed that diluted EPS stood at $1.09 ($0.18 above consensus expectations) vs $0.70 recorded in 4Q17, while revenue of $3.54bn (+10.6% YoY) beat expectations by $110mn. Loan receivables rose by 14% YoY to $93bn in the quarter under review and interest and fees on loan receivables were up 13% YoY, reflecting the addition of the PayPal Credit program acquisition in 3Q18. Deposits stood at $64bn – up 13% YoY. 

By sales platform, the Retail Card segment saw interest and fees on loans grow by 14% YoY, while loan receivables grew 16% YoY and average active accounts climbed 9%, driven by the firm’s buyout of the PayPal Credit programme. In Payment Solutions, interest and fees on loans rose 9% YoY on the back of period-end loan receivables growth. Loan receivables grew 9% YoY, led by home furnishings and luxury. Purchase volume expanded 8% YoY, while average active accounts rose 7% YoY. In CareCredit, interest and fees on loans increased 7% YoY, attributable to loan receivables growth of 7% YoY (enhanced by dental and veterinary). While purchase volume registered 7% YoY growth, the average active account reported a 4% YoY rise.

Total assets as of 31 December 2018 stood at $106.7bn (+11.4% YoY), while total borrowings were c. $24bn (+14.9% YoY).

The company’s balance sheet remained strong during the quarter with total liquidity of $19bn (c. 18% of total assets). Return on assets (RoA) was 2.9%, while return on equity (RoE) was 21.5%. The efficiency ratio was 30.4% vs 30.3% in 4Q17. 

Synchrony also said it will continue to manage Walmart’s Sam’s Club credit-card portfolio.

The company’s share price climbed more than 10% after it released the better-than-expected earnings. 

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