Form 8-K Synchrony Financial For: Apr 22
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
April 22, 2016
Date of Report
(Date of earliest event reported)
SYNCHRONY FINANCIAL
(Exact name of registrant as specified in its charter)
Delaware | 001-36560 | 51-0483352 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
777 Long Ridge Road, Stamford, Connecticut | 06902 | |
(Address of principal executive offices) | (Zip Code) | |
(203) 585-2400
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On April 22, 2016, Synchrony Financial (the “Company”) issued a press release setting forth the Company’s first quarter 2016 earnings. A copy of the Company’s press release is being furnished as Exhibit 99.1 and hereby incorporated by reference. The information furnished pursuant to this Item 2.02, including Exhibits, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being furnished as part of this report:
Number | Description | |
99.1 | Press release, dated April 22, 2016, issued by Synchrony Financial | |
99.2 | Financial Data Supplement of the Company for the quarter ended March 31, 2016 | |
99.3 | Financial Results Presentation of the Company for the quarter ended March 31, 2016 | |
99.4 | Explanation of Non-GAAP Measures | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SYNCHRONY FINANCIAL | ||||||
Date: April 22, 2016 | By: | /s/ Jonathan Mothner | ||||
Name: | Jonathan Mothner | |||||
Title: | Executive Vice President, General Counsel and Secretary | |||||
EXHIBIT INDEX
Number | Description | |
99.1 | Press release, dated April 22, 2016, issued by Synchrony Financial | |
99.2 | Financial Data Supplement of the Company for the quarter ended March 31, 2016 | |
99.3 | Financial Results Presentation of the Company for the quarter ended March 31, 2016 | |
99.4 | Explanation of Non-GAAP Measures | |
Exhibit 99.1
Contact:
Investor Relations Media Relations
Greg Ketron Samuel Wang
(203) 585-6291 (203) 585-2933
For Immediate Release: April 22, 2016
Synchrony Financial Reports First Quarter Net Earnings of $582 Million or $0.70 Per Diluted Share
STAMFORD, Conn. – Synchrony Financial (NYSE: SYF) today announced first quarter 2016 net earnings of $582 million, or $0.70 per diluted share. Highlights for the quarter included:
• | Total platform revenue increased 13% from the first quarter of 2015 to $2.9 billion |
• | Loan receivables grew $8 billion, or 13%, from the first quarter of 2015 to $66 billion |
• | Purchase volume increased 17% from the first quarter of 2015 |
• | Strong deposit growth continued, up $10 billion, or 29%, over the first quarter of 2015 |
• | Renewed key programs – Stein Mart and La-Z-Boy |
• | Signed partnership with Marvel to offer Marvel MasterCard and co-promote Synchrony Bank deposit products |
• | Launched the Citgo card program |
• | Introduced a new value proposition at Walmart – 3-2-1 Save cash-back program |
“Our strong operational momentum and solid financial results continued in the first quarter. Each of our business platforms delivered strong performance resulting in double-digit growth in overall purchase volume, platform revenue and loan receivables. To support this growth, we have significantly expanded our deposit base, growing deposits $10 billion over last year. Our innovative payments, analytics, loyalty and financing solutions are delivering value to our partners and cardholders and continue to build the foundation for future growth,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.
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Business and Financial Highlights for the First Quarter of 2016
All comparisons below are for the first quarter of 2016 compared to the first quarter of 2015, unless otherwise noted.
Earnings
• | Net interest income increased $334 million, or 12%, to $3.2 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 15%. |
• | Total platform revenue increased $339 million, or 13%. |
• | Provision for loan losses increased $216 million to $903 million due to loan receivables growth and lower loan loss reserve build in the first quarter of 2015. |
• | Other income decreased $9 million to $92 million, driven primarily by an increase in loyalty programs, partially offset by higher interchange income. |
• | Other expense increased $54 million to $800 million, primarily driven by growth. |
• | Net earnings totaled $582 million for the quarter compared to $552 million in the first quarter of 2015. |
Balance Sheet
• | Period-end loan receivables growth remained strong at 13%, primarily driven by purchase volume growth of 17% and average active account growth of 7%, and included the acquisition of the BP portfolio in the second quarter of 2015. |
• | Deposits grew to $45 billion, up $10 billion, or 29%, and comprised 69% of funding compared to 59% last year. |
• | Fully paid off Bank Term Loan on April 5, 2016. |
• | The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) of $22 billion, or 27% of total assets. |
• | The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 18.1% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 17.5%. |
Key Financial Metrics
• | Return on assets was 2.8% and return on equity was 18.1%. |
• | Net interest margin was relatively stable, declining 3 basis points to 15.76%. |
• | Efficiency ratio was 30.4% for the first quarter of 2016, a 180 basis point improvement from the first quarter of 2015 mainly due to strong revenue growth. |
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Credit Quality
• | Credit quality performance was relatively stable and in-line with expectations. |
◦ | Loans 30+ days past due as a percentage of period-end loan receivables were 3.85% compared to 3.79% last year. |
◦ | Net charge-offs as a percentage of total average loan receivables were 4.70% compared to 4.53% last year. |
◦ | The allowance for loan losses as a percentage of total period-end loan receivables was 5.50% compared to 5.59% last year. |
Sales Platforms
• | Retail Card platform revenue increased 15%, driven primarily by purchase volume growth of 17% and period-end loan receivables growth of 14%, which included the acquisition of the BP portfolio in the second quarter of 2015. Average active account growth was 7%. Loan receivables growth was broad-based across partner programs. |
• | Payment Solutions platform revenue increased 14%, driven primarily by purchase volume growth of 15% and period-end loan receivables growth of 13%. Average active account growth was 12%. Loan receivables growth was led by the home furnishings and automotive product categories. |
• | CareCredit platform revenue increased 6%, driven primarily by purchase volume growth of 14% and period-end loan receivables growth of 9%. Average active account growth was 7%. Loan receivables growth was led by the dental and veterinary specialties. |
Corresponding Financial Tables and Information
No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed February 25, 2016, and in the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.
Conference Call and Webcast Information
On Friday, April 22, 2016, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on Synchrony Financial’s corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 12016#, and can be accessed beginning approximately two hours after the event through May 6, 2016.
About Synchrony Financial
Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label
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credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 350,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial (formerly GE Capital Retail Finance) offers private label and co-branded Dual Card™ credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial and twitter.com/SYFNews.
*Source: The Nilson Report (April, 2015, Issue # 1062) - based on 2014 data.
Cautionary Statement Regarding Forward-Looking Statements
This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our platform revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; our transition to a replacement third-party vendor to manage the technology platform for our online retail deposits; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the
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tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; obligations associated with being an independent public company; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed on February 25, 2016. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
Non-GAAP Measures
The information provided herein includes measures we refer to as “platform revenue,” “platform revenue excluding retailer share arrangements” and “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.
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Exhibit 99.2
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
FINANCIAL SUMMARY | |||||||||||||||||||||||||
(unaudited, in millions, except per share statistics) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | 1Q'16 vs. 1Q'15 | ||||||||||||||||||||
EARNINGS | |||||||||||||||||||||||||
Net interest income | $ | 3,209 | $ | 3,208 | $ | 3,103 | $ | 2,907 | $ | 2,875 | $ | 334 | 11.6 | % | |||||||||||
Retailer share arrangements | (670 | ) | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (10 | ) | 1.5 | % | |||||||||||
Net interest income, after retailer share arrangements | 2,539 | 2,474 | 2,380 | 2,286 | 2,215 | 324 | 14.6 | % | |||||||||||||||||
Provision for loan losses | 903 | 823 | 702 | 740 | 687 | 216 | 31.4 | % | |||||||||||||||||
Net interest income, after retailer share arrangements and provision for loan losses | 1,636 | 1,651 | 1,678 | 1,546 | 1,528 | 108 | 7.1 | % | |||||||||||||||||
Other income | 92 | 87 | 84 | 120 | 101 | (9 | ) | (8.9 | )% | ||||||||||||||||
Other expense | 800 | 870 | 843 | 805 | 746 | 54 | 7.2 | % | |||||||||||||||||
Earnings before provision for income taxes | 928 | 868 | 919 | 861 | 883 | 45 | 5.1 | % | |||||||||||||||||
Provision for income taxes | 346 | 321 | 345 | 320 | 331 | 15 | 4.5 | % | |||||||||||||||||
Net earnings | $ | 582 | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 30 | 5.4 | % | |||||||||||
Net earnings attributable to common stockholders | $ | 582 | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 30 | 5.4 | % | |||||||||||
COMMON SHARE STATISTICS | |||||||||||||||||||||||||
Basic EPS | $ | 0.70 | $ | 0.66 | $ | 0.69 | $ | 0.65 | $ | 0.66 | $ | 0.04 | 6.1 | % | |||||||||||
Diluted EPS | $ | 0.70 | $ | 0.65 | $ | 0.69 | $ | 0.65 | $ | 0.66 | $ | 0.04 | 6.1 | % | |||||||||||
Common stock price | $ | 28.66 | $ | 30.41 | $ | 31.30 | $ | 32.93 | $ | 30.35 | $ | (1.69 | ) | (5.6 | )% | ||||||||||
Book value per share | $ | 15.84 | $ | 15.12 | $ | 14.58 | $ | 13.89 | $ | 13.24 | $ | 2.60 | 19.6 | % | |||||||||||
Tangible common equity per share(1) | $ | 13.86 | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | $ | 2.43 | 21.3 | % | |||||||||||
Beginning common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | |||||||||||||||||
Issuance of common shares | — | — | — | — | — | — | — | % | |||||||||||||||||
Shares repurchased | — | — | — | — | — | — | — | % | |||||||||||||||||
Ending common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | |||||||||||||||||
Weighted average common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | |||||||||||||||||
Weighted average common shares outstanding (fully diluted) | 835.5 | 835.8 | 835.8 | 835.4 | 835.0 | 0.5 | 0.1 | % | |||||||||||||||||
(1) Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||
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SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
SELECTED METRICS(1) | |||||||||||||||||||||||||
(unaudited, $ in millions, except account data) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | 1Q'16 vs. 1Q'15 | ||||||||||||||||||||
PERFORMANCE METRICS | |||||||||||||||||||||||||
Return on assets(2) | 2.8 | % | 2.7 | % | 2.9 | % | 2.9 | % | 3.0 | % | (0.2 | )% | |||||||||||||
Return on equity(3) | 18.1 | % | 17.5 | % | 19.2 | % | 19.2 | % | 20.8 | % | (2.7 | )% | |||||||||||||
Return on tangible common equity(4) | 20.8 | % | 20.1 | % | 22.0 | % | 22.2 | % | 24.1 | % | (3.3 | )% | |||||||||||||
Net interest margin(5) | 15.76 | % | 15.73 | % | 15.97 | % | 15.77 | % | 15.79 | % | (0.03 | )% | |||||||||||||
Efficiency ratio(6) | 30.4 | % | 34.0 | % | 34.2 | % | 33.5 | % | 32.2 | % | (1.8 | )% | |||||||||||||
Other expense as a % of average loan receivables, including held for sale | 4.82 | % | 5.28 | % | 5.35 | % | 5.37 | % | 5.06 | % | (0.24 | )% | |||||||||||||
Effective income tax rate | 37.3 | % | 37.0 | % | 37.5 | % | 37.2 | % | 37.5 | % | (0.2 | )% | |||||||||||||
CREDIT QUALITY METRICS | |||||||||||||||||||||||||
Net charge-offs as a % of average loan receivables, including held for sale | 4.70 | % | 4.23 | % | 4.02 | % | 4.63 | % | 4.53 | % | 0.17 | % | |||||||||||||
30+ days past due as a % of period-end loan receivables(7) | 3.85 | % | 4.06 | % | 4.02 | % | 3.53 | % | 3.79 | % | 0.06 | % | |||||||||||||
90+ days past due as a % of period-end loan receivables(7) | 1.84 | % | 1.86 | % | 1.73 | % | 1.52 | % | 1.81 | % | 0.03 | % | |||||||||||||
Net charge-offs | $ | 780 | $ | 697 | $ | 633 | $ | 693 | $ | 668 | $ | 112 | 16.8 | % | |||||||||||
Loan receivables delinquent over 30 days(7) | $ | 2,538 | $ | 2,772 | $ | 2,553 | $ | 2,171 | $ | 2,209 | $ | 329 | 14.9 | % | |||||||||||
Loan receivables delinquent over 90 days(7) | $ | 1,212 | $ | 1,273 | $ | 1,102 | $ | 933 | $ | 1,056 | $ | 156 | 14.8 | % | |||||||||||
Allowance for loan losses (period-end) | $ | 3,620 | $ | 3,497 | $ | 3,371 | $ | 3,302 | $ | 3,255 | $ | 365 | 11.2 | % | |||||||||||
Allowance coverage ratio(8) | 5.50 | % | 5.12 | % | 5.31 | % | 5.38 | % | 5.59 | % | (0.09 | )% | |||||||||||||
BUSINESS METRICS | |||||||||||||||||||||||||
Purchase volume(9) | $ | 26,977 | $ | 32,460 | $ | 29,206 | $ | 28,810 | $ | 23,139 | $ | 3,838 | 16.6 | % | |||||||||||
Period-end loan receivables | $ | 65,849 | $ | 68,290 | $ | 63,520 | $ | 61,431 | $ | 58,248 | $ | 7,601 | 13.0 | % | |||||||||||
Credit cards | $ | 63,309 | $ | 65,773 | $ | 60,920 | $ | 58,827 | $ | 55,866 | $ | 7,443 | 13.3 | % | |||||||||||
Consumer installment loans | $ | 1,184 | $ | 1,154 | $ | 1,171 | $ | 1,138 | $ | 1,062 | $ | 122 | 11.5 | % | |||||||||||
Commercial credit products | $ | 1,318 | $ | 1,323 | $ | 1,380 | $ | 1,410 | $ | 1,295 | $ | 23 | 1.8 | % | |||||||||||
Other | $ | 38 | $ | 40 | $ | 49 | $ | 56 | $ | 25 | $ | 13 | 52.0 | % | |||||||||||
Average loan receivables, including held for sale | $ | 66,705 | $ | 65,406 | $ | 62,504 | $ | 60,094 | $ | 59,775 | $ | 6,930 | 11.6 | % | |||||||||||
Period-end active accounts (in thousands)(10) | 64,689 | 68,314 | 62,831 | 61,718 | 59,761 | 4,928 | 8.2 | % | |||||||||||||||||
Average active accounts (in thousands)(10) | 66,134 | 64,892 | 62,247 | 60,923 | 61,604 | 4,530 | 7.4 | % | |||||||||||||||||
LIQUIDITY | |||||||||||||||||||||||||
Liquid assets | |||||||||||||||||||||||||
Cash and equivalents | $ | 12,500 | $ | 12,325 | $ | 12,271 | $ | 10,621 | $ | 11,218 | $ | 1,282 | 11.4 | % | |||||||||||
Total liquid assets | $ | 14,915 | $ | 14,836 | $ | 15,305 | $ | 13,660 | $ | 13,813 | $ | 1,102 | 8.0 | % | |||||||||||
Undrawn credit facilities | |||||||||||||||||||||||||
Undrawn committed securitization financings | $ | 7,325 | $ | 6,075 | $ | 6,550 | $ | 6,125 | $ | 6,600 | $ | 725 | 11.0 | % | |||||||||||
Total liquid assets and undrawn credit facilities | $ | 22,240 | $ | 20,911 | $ | 21,855 | $ | 19,785 | $ | 20,413 | $ | 1,827 | 9.0 | % | |||||||||||
Liquid assets % of total assets | 18.27 | % | 17.66 | % | 19.30 | % | 18.07 | % | 19.04 | % | (0.77 | )% | |||||||||||||
Liquid assets including undrawn committed securitization financings % of total assets | 27.24 | % | 24.90 | % | 27.56 | % | 26.17 | % | 28.13 | % | (0.89 | )% | |||||||||||||
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position. | |||||||||||||||||||||||||
(2) Return on assets represents net earnings as a percentage of average total assets. | |||||||||||||||||||||||||
(3) Return on equity represents net earnings as a percentage of average total equity. | |||||||||||||||||||||||||
(4) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||
(5) Net interest margin represents net interest income divided by average interest-earning assets. | |||||||||||||||||||||||||
(6) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income. | |||||||||||||||||||||||||
(7) Based on customer statement-end balances extrapolated to the respective period-end date. | |||||||||||||||||||||||||
(8) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables. | |||||||||||||||||||||||||
(9) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period. | |||||||||||||||||||||||||
(10) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. | |||||||||||||||||||||||||
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SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
STATEMENTS OF EARNINGS | |||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | 1Q'16 vs. 1Q'15 | ||||||||||||||||||||
Interest income: | |||||||||||||||||||||||||
Interest and fees on loans | $ | 3,498 | $ | 3,494 | $ | 3,379 | $ | 3,166 | $ | 3,140 | $ | 358 | 11.4 | % | |||||||||||
Interest on investment securities | 22 | 15 | 13 | 11 | 10 | 12 | 120.0 | % | |||||||||||||||||
Total interest income | 3,520 | 3,509 | 3,392 | 3,177 | 3,150 | 370 | 11.7 | % | |||||||||||||||||
Interest expense: | |||||||||||||||||||||||||
Interest on deposits | 172 | 165 | 159 | 146 | 137 | 35 | 25.5 | % | |||||||||||||||||
Interest on borrowings of consolidated securitization entities | 58 | 56 | 54 | 53 | 52 | 6 | 11.5 | % | |||||||||||||||||
Interest on third-party debt | 81 | 80 | 76 | 71 | 82 | (1 | ) | (1.2 | )% | ||||||||||||||||
Interest on related party debt | — | — | — | — | 4 | (4 | ) | (100.0 | )% | ||||||||||||||||
Total interest expense | 311 | 301 | 289 | 270 | 275 | 36 | 13.1 | % | |||||||||||||||||
Net interest income | 3,209 | 3,208 | 3,103 | 2,907 | 2,875 | 334 | 11.6 | % | |||||||||||||||||
Retailer share arrangements | (670 | ) | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (10 | ) | 1.5 | % | |||||||||||
Net interest income, after retailer share arrangements | 2,539 | 2,474 | 2,380 | 2,286 | 2,215 | 324 | 14.6 | % | |||||||||||||||||
Provision for loan losses | 903 | 823 | 702 | 740 | 687 | 216 | 31.4 | % | |||||||||||||||||
Net interest income, after retailer share arrangements and provision for loan losses | 1,636 | 1,651 | 1,678 | 1,546 | 1,528 | 108 | 7.1 | % | |||||||||||||||||
Other income: | |||||||||||||||||||||||||
Interchange revenue | 130 | 147 | 135 | 123 | 100 | 30 | 30.0 | % | |||||||||||||||||
Debt cancellation fees | 64 | 62 | 61 | 61 | 65 | (1 | ) | (1.5 | )% | ||||||||||||||||
Loyalty programs | (110 | ) | (125 | ) | (122 | ) | (94 | ) | (78 | ) | (32 | ) | 41.0 | % | |||||||||||
Other | 8 | 3 | 10 | 30 | 14 | (6 | ) | (42.9 | )% | ||||||||||||||||
Total other income | 92 | 87 | 84 | 120 | 101 | (9 | ) | (8.9 | )% | ||||||||||||||||
Other expense: | |||||||||||||||||||||||||
Employee costs | 280 | 285 | 268 | 250 | 239 | 41 | 17.2 | % | |||||||||||||||||
Professional fees | 146 | 165 | 162 | 156 | 162 | (16 | ) | (9.9 | )% | ||||||||||||||||
Marketing and business development | 94 | 128 | 115 | 108 | 82 | 12 | 14.6 | % | |||||||||||||||||
Information processing | 82 | 83 | 77 | 74 | 63 | 19 | 30.2 | % | |||||||||||||||||
Other | 198 | 209 | 221 | 217 | 200 | (2 | ) | (1.0 | )% | ||||||||||||||||
Total other expense | 800 | 870 | 843 | 805 | 746 | 54 | 7.2 | % | |||||||||||||||||
Earnings before provision for income taxes | 928 | 868 | 919 | 861 | 883 | 45 | 5.1 | % | |||||||||||||||||
Provision for income taxes | 346 | 321 | 345 | 320 | 331 | 15 | 4.5 | % | |||||||||||||||||
Net earnings attributable to common shareholders | $ | 582 | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 30 | 5.4 | % | |||||||||||
3
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
STATEMENTS OF FINANCIAL POSITION(1) | |||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Mar 31, 2016 vs. Mar 31, 2015 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and equivalents | $ | 12,500 | $ | 12,325 | $ | 12,271 | $ | 10,621 | $ | 11,218 | $ | 1,282 | 11.4 | % | |||||||||||
Investment securities | 2,949 | 3,142 | 3,596 | 3,682 | 3,121 | (172 | ) | (5.5 | )% | ||||||||||||||||
Loan receivables: | |||||||||||||||||||||||||
Unsecuritized loans held for investment | 41,730 | 42,826 | 38,325 | 36,019 | 33,424 | 8,306 | 24.9 | % | |||||||||||||||||
Restricted loans of consolidated securitization entities | 24,119 | 25,464 | 25,195 | 25,412 | 24,824 | (705 | ) | (2.8 | )% | ||||||||||||||||
Total loan receivables | 65,849 | 68,290 | 63,520 | 61,431 | 58,248 | 7,601 | 13.0 | % | |||||||||||||||||
Less: Allowance for loan losses | (3,620 | ) | (3,497 | ) | (3,371 | ) | (3,302 | ) | (3,255 | ) | (365 | ) | 11.2 | % | |||||||||||
Loan receivables, net | 62,229 | 64,793 | 60,149 | 58,129 | 54,993 | 7,236 | 13.2 | % | |||||||||||||||||
Loan receivables held for sale | — | — | — | — | 359 | (359 | ) | (100.0 | )% | ||||||||||||||||
Goodwill | 949 | 949 | 949 | 949 | 949 | — | — | % | |||||||||||||||||
Intangible assets, net | 702 | 701 | 646 | 575 | 557 | 145 | 26.0 | % | |||||||||||||||||
Other assets | 2,327 | 2,080 | 1,679 | 1,640 | 1,362 | 965 | 70.9 | % | |||||||||||||||||
Total assets | $ | 81,656 | $ | 83,990 | $ | 79,290 | $ | 75,596 | $ | 72,559 | $ | 9,097 | 12.5 | % | |||||||||||
Liabilities and Equity | |||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||
Interest-bearing deposit accounts | $ | 44,721 | $ | 43,215 | $ | 40,323 | $ | 37,539 | $ | 34,695 | $ | 10,026 | 28.9 | % | |||||||||||
Non-interest-bearing deposit accounts | 256 | 152 | 140 | 143 | 162 | 94 | 58.0 | % | |||||||||||||||||
Total deposits | 44,977 | 43,367 | 40,463 | 37,682 | 34,857 | 10,120 | 29.0 | % | |||||||||||||||||
Borrowings: | |||||||||||||||||||||||||
Borrowings of consolidated securitization entities | 12,423 | 13,589 | 13,624 | 13,933 | 13,802 | (1,379 | ) | (10.0 | )% | ||||||||||||||||
Bank term loan | 1,494 | 4,133 | 4,630 | 5,126 | 5,622 | (4,128 | ) | (73.4 | )% | ||||||||||||||||
Senior unsecured notes | 6,559 | 6,557 | 5,560 | 4,569 | 4,567 | 1,992 | 43.6 | % | |||||||||||||||||
Related party debt | — | — | — | — | — | — | — | % | |||||||||||||||||
Total borrowings | 20,476 | 24,279 | 23,814 | 23,628 | 23,991 | (3,515 | ) | (14.7 | )% | ||||||||||||||||
Accrued expenses and other liabilities | 2,999 | 3,740 | 2,855 | 2,708 | 2,675 | 324 | 12.1 | % | |||||||||||||||||
Total liabilities | 68,452 | 71,386 | 67,132 | 64,018 | 61,523 | 6,929 | 11.3 | % | |||||||||||||||||
Equity: | |||||||||||||||||||||||||
Common stock | 1 | 1 | 1 | 1 | 1 | — | — | % | |||||||||||||||||
Additional paid-in capital | 9,359 | 9,351 | 9,431 | 9,422 | 9,418 | (59 | ) | (0.6 | )% | ||||||||||||||||
Retained earnings | 3,875 | 3,293 | 2,746 | 2,172 | 1,631 | 2,244 | 137.6 | % | |||||||||||||||||
Accumulated other comprehensive income: | (31 | ) | (41 | ) | (20 | ) | (17 | ) | (14 | ) | (17 | ) | 121.4 | % | |||||||||||
Total equity | 13,204 | 12,604 | 12,158 | 11,578 | 11,036 | 2,168 | 19.6 | % | |||||||||||||||||
Total liabilities and equity | $ | 81,656 | $ | 83,990 | $ | 79,290 | $ | 75,596 | $ | 72,559 | $ | 9,097 | 12.5 | % | |||||||||||
(1) In January 2016, we adopted ASU 2015-03, Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of deferred issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability. Accordingly, we have reclassified issuance costs associated with our borrowings and certain brokered deposits, from other assets, and reflected as a reduction of borrowings and interest-bearing deposit accounts, as applicable, for each period presented to conform to the current period presentation. Related selected financial metrics included within this Financial Data Supplement have also been updated where applicable to reflect this reclassification. | |||||||||||||||||||||||||
4
SYNCHRONY FINANCIAL | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, $ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | Average | Interest | Average | Interest | Average | Interest | Average | Interest | Average | |||||||||||||||||||||||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||||||||||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning cash and equivalents | $ | 12,185 | $ | 16 | 0.53 | % | $ | 12,070 | $ | 9 | 0.30 | % | $ | 11,059 | $ | 7 | 0.25 | % | $ | 10,728 | $ | 6 | 0.22 | % | $ | 11,331 | $ | 6 | 0.21 | % | ||||||||||||||||||||||||
Securities available for sale | 2,995 | 6 | 0.81 | % | 3,445 | 6 | 0.69 | % | 3,534 | 6 | 0.67 | % | 3,107 | 5 | 0.65 | % | 2,725 | 4 | 0.60 | % | ||||||||||||||||||||||||||||||||||
Loan receivables: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards, including held for sale | 64,194 | 3,436 | 21.53 | % | 62,834 | 3,432 | 21.67 | % | 59,890 | 3,315 | 21.96 | % | 57,588 | 3,106 | 21.63 | % | 57,390 | 3,079 | 21.76 | % | ||||||||||||||||||||||||||||||||||
Consumer installment loans | 1,159 | 27 | 9.37 | % | 1,163 | 26 | 8.87 | % | 1,160 | 27 | 9.23 | % | 1,101 | 26 | 9.47 | % | 1,057 | 25 | 9.59 | % | ||||||||||||||||||||||||||||||||||
Commercial credit products | 1,313 | 35 | 10.72 | % | 1,361 | 36 | 10.49 | % | 1,400 | 36 | 10.20 | % | 1,372 | 34 | 9.94 | % | 1,305 | 36 | 11.19 | % | ||||||||||||||||||||||||||||||||||
Other | 39 | — | — | % | 48 | — | — | % | 54 | 1 | NM | 33 | — | — | % | 23 | — | — | % | |||||||||||||||||||||||||||||||||||
Total loan receivables, including held for sale | 66,705 | 3,498 | 21.09 | % | 65,406 | 3,494 | 21.19 | % | 62,504 | 3,379 | 21.45 | % | 60,094 | 3,166 | 21.13 | % | 59,775 | 3,140 | 21.30 | % | ||||||||||||||||||||||||||||||||||
Total interest-earning assets | 81,885 | 3,520 | 17.29 | % | 80,921 | 3,509 | 17.20 | % | 77,097 | 3,392 | 17.46 | % | 73,929 | 3,177 | 17.24 | % | 73,831 | 3,150 | 17.30 | % | ||||||||||||||||||||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 1,277 | 1,268 | 1,216 | 583 | 497 | |||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | (3,583 | ) | (3,440 | ) | (3,341 | ) | (3,285 | ) | (3,272 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Other assets | 3,256 | 3,133 | 2,869 | 2,758 | 2,639 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total non-interest-earning assets | 950 | 961 | 744 | 56 | (136 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 82,835 | $ | 81,882 | $ | 77,841 | $ | 73,985 | $ | 73,695 | ||||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposit accounts | $ | 44,101 | $ | 172 | 1.57 | % | $ | 42,079 | $ | 165 | 1.56 | % | $ | 39,048 | $ | 159 | 1.62 | % | $ | 35,816 | $ | 146 | 1.64 | % | $ | 34,887 | $ | 137 | 1.59 | % | ||||||||||||||||||||||||
Borrowings of consolidated securitization entities | 12,950 | 58 | 1.80 | % | 13,550 | 56 | 1.64 | % | 13,715 | 54 | 1.56 | % | 14,011 | 53 | 1.52 | % | 14,087 | 52 | 1.50 | % | ||||||||||||||||||||||||||||||||||
Bank term loan(2) | 2,565 | 24 | 3.76 | % | 4,507 | 28 | 2.46 | % | 4,878 | 29 | 2.36 | % | 5,374 | 32 | 2.39 | % | 6,498 | 47 | 2.93 | % | ||||||||||||||||||||||||||||||||||
Senior unsecured notes | 6,558 | 57 | 3.50 | % | 5,810 | 52 | 3.55 | % | 5,312 | 47 | 3.51 | % | 4,568 | 39 | 3.42 | % | 4,071 | 35 | 3.49 | % | ||||||||||||||||||||||||||||||||||
Related party debt | — | — | — | % | — | — | — | % | — | — | — | % | — | — | — | % | 407 | 4 | 3.99 | % | ||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 66,174 | 311 | 1.89 | % | 65,946 | 301 | 1.81 | % | 62,953 | 289 | 1.82 | % | 59,769 | 270 | 1.81 | % | 59,950 | 275 | 1.86 | % | ||||||||||||||||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposit accounts | 226 | 147 | 149 | 166 | 142 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 3,534 | 3,396 | 2,859 | 2,750 | 2,854 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total non-interest-bearing liabilities | 3,760 | 3,543 | 3,008 | 2,916 | 2,996 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 69,934 | 69,489 | 65,961 | 62,685 | 62,946 | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total equity | 12,901 | 12,393 | 11,880 | 11,300 | 10,749 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and equity | $ | 82,835 | $ | 81,882 | $ | 77,841 | $ | 73,985 | $ | 73,695 | ||||||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 3,209 | $ | 3,208 | $ | 3,103 | $ | 2,907 | $ | 2,875 | ||||||||||||||||||||||||||||||||||||||||||||
Interest rate spread(3) | 15.40 | % | 15.39 | % | 15.64 | % | 15.43 | % | 15.44 | % | ||||||||||||||||||||||||||||||||||||||||||||
Net interest margin(4) | 15.76 | % | 15.73 | % | 15.97 | % | 15.77 | % | 15.79 | % | ||||||||||||||||||||||||||||||||||||||||||||
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, and March 31, 2015 were 2.47%, 2.26%, 2.23%, 2.21%, and 2.21%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(4) Net interest margin represents net interest income divided by average interest-earning assets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
5
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
BALANCE SHEET STATISTICS(1) | |||||||||||||||||||||||||
(unaudited, $ in millions, except per share statistics) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Mar 31, 2016 vs. Mar 31, 2015 | ||||||||||||||||||||
BALANCE SHEET STATISTICS | |||||||||||||||||||||||||
Total common equity | $ | 13,204 | $ | 12,604 | $ | 12,158 | $ | 11,578 | $ | 11,036 | $ | 2,168 | 19.6 | % | |||||||||||
Total common equity as a % of total assets | 16.17 | % | 15.01 | % | 15.33 | % | 15.32 | % | 15.21 | % | 0.96 | % | |||||||||||||
Tangible assets | $ | 80,005 | $ | 82,340 | $ | 77,695 | $ | 74,072 | $ | 71,053 | $ | 8,952 | 12.6 | % | |||||||||||
Tangible common equity(2) | $ | 11,553 | $ | 10,954 | $ | 10,563 | $ | 10,054 | $ | 9,530 | $ | 2,023 | 21.2 | % | |||||||||||
Tangible common equity as a % of tangible assets(2) | 14.44 | % | 13.30 | % | 13.60 | % | 13.57 | % | 13.41 | % | 1.03 | % | |||||||||||||
Tangible common equity per share(2) | $ | 13.86 | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | $ | 2.43 | 21.3 | % | |||||||||||
REGULATORY CAPITAL RATIOS(3) | |||||||||||||||||||||||||
Basel III Transition | Basel I | ||||||||||||||||||||||||
Total risk-based capital ratio(4)(9) | 19.4 | % | 18.1 | % | 18.8 | % | 18.6 | % | 18.2 | % | |||||||||||||||
Tier 1 risk-based capital ratio(5)(9) | 18.1 | % | 16.8 | % | 17.5 | % | 17.3 | % | 16.9 | % | |||||||||||||||
Tier 1 common ratio(6)(9) | n/a | n/a | n/a | n/a | 16.9 | % | |||||||||||||||||||
Tier 1 leverage ratio(7)(9) | 14.8 | % | 14.4 | % | 14.6 | % | 14.6 | % | 13.7 | % | |||||||||||||||
Common equity Tier 1 capital ratio(8)(9) | 18.1 | % | 16.8 | % | 17.5 | % | 17.3 | % | n/a | ||||||||||||||||
Basel III Fully Phased-in | |||||||||||||||||||||||||
Common equity Tier 1 capital ratio(8) | 17.5 | % | 15.9 | % | 16.7 | % | 16.5 | % | 16.4 | % | |||||||||||||||
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position. | |||||||||||||||||||||||||
(2) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||
(3) Regulatory capital metrics at March 31, 2016 are preliminary and therefore subject to change. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these ratios are non-GAAP measures. See Reconciliation of Non-GAAP Measures and Calculation of Regulatory Measures for components of capital ratio calculations. | |||||||||||||||||||||||||
(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(6) Tier 1 common ratio is the ratio of common equity Tier 1 capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(7) Tier 1 leverage ratio reported under Basel III transition rules is calculated based on Tier 1 capital divided by total average assets, after certain adjustments. Total assets, after certain adjustments is used as the denominator for prior periods calculated under Basel I rules. | |||||||||||||||||||||||||
(8) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance. | |||||||||||||||||||||||||
(9) Beginning June 30, 2015, regulatory capital ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I rules for period ending March 31, 2015. | |||||||||||||||||||||||||
6
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
PLATFORM RESULTS AND RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | 1Q'16 vs. 1Q'15 | ||||||||||||||||||||
RETAIL CARD | |||||||||||||||||||||||||
Purchase volume(1),(2) | $ | 21,550 | $ | 26,768 | $ | 23,560 | $ | 23,452 | $ | 18,410 | $ | 3,140 | 17.1 | % | |||||||||||
Period-end loan receivables | $ | 45,113 | $ | 47,412 | $ | 43,432 | $ | 42,315 | $ | 39,685 | $ | 5,428 | 13.7 | % | |||||||||||
Average loan receivables, including held for sale | $ | 45,900 | $ | 44,958 | $ | 42,933 | $ | 41,303 | $ | 40,986 | $ | 4,914 | 12.0 | % | |||||||||||
Average active accounts (in thousands)(2),(3) | 52,969 | 52,038 | 49,953 | 48,981 | 49,617 | 3,352 | 6.8 | % | |||||||||||||||||
Interest and fees on loans(2) | $ | 2,614 | $ | 2,594 | $ | 2,508 | $ | 2,335 | $ | 2,337 | $ | 277 | 11.9 | % | |||||||||||
Other income(2) | 79 | 76 | 70 | 107 | 86 | (7 | ) | (8.1 | )% | ||||||||||||||||
Platform revenue, excluding retailer share arrangements(2) | 2,693 | 2,670 | 2,578 | 2,442 | 2,423 | 270 | 11.1 | % | |||||||||||||||||
Retailer share arrangements(2) | (661 | ) | (723 | ) | (708 | ) | (606 | ) | (651 | ) | (10 | ) | 1.5 | % | |||||||||||
Platform revenue(2) | $ | 2,032 | $ | 1,947 | $ | 1,870 | $ | 1,836 | $ | 1,772 | $ | 260 | 14.7 | % | |||||||||||
PAYMENT SOLUTIONS | |||||||||||||||||||||||||
Purchase volume(1) | $ | 3,392 | $ | 3,714 | $ | 3,635 | $ | 3,371 | $ | 2,948 | $ | 444 | 15.1 | % | |||||||||||
Period-end loan receivables | $ | 13,420 | $ | 13,543 | $ | 12,933 | $ | 12,194 | $ | 11,833 | $ | 1,587 | 13.4 | % | |||||||||||
Average loan receivables | $ | 13,482 | $ | 13,192 | $ | 12,523 | $ | 11,971 | $ | 11,970 | $ | 1,512 | 12.6 | % | |||||||||||
Average active accounts (in thousands)(3) | 8,134 | 7,896 | 7,468 | 7,231 | 7,271 | 863 | 11.9 | % | |||||||||||||||||
Interest and fees on loans | $ | 457 | $ | 462 | $ | 442 | $ | 412 | $ | 403 | $ | 54 | 13.4 | % | |||||||||||
Other income | 4 | 3 | 5 | 4 | 5 | (1 | ) | (20.0 | )% | ||||||||||||||||
Platform revenue, excluding retailer share arrangements | 461 | 465 | 447 | 416 | 408 | 53 | 13.0 | % | |||||||||||||||||
Retailer share arrangements | (7 | ) | (10 | ) | (13 | ) | (14 | ) | (8 | ) | 1 | (12.5 | )% | ||||||||||||
Platform revenue | $ | 454 | $ | 455 | $ | 434 | $ | 402 | $ | 400 | $ | 54 | 13.5 | % | |||||||||||
CARECREDIT | |||||||||||||||||||||||||
Purchase volume(1) | $ | 2,035 | $ | 1,978 | $ | 2,011 | $ | 1,987 | $ | 1,781 | $ | 254 | 14.3 | % | |||||||||||
Period-end loan receivables | $ | 7,316 | $ | 7,335 | $ | 7,155 | $ | 6,922 | $ | 6,730 | $ | 586 | 8.7 | % | |||||||||||
Average loan receivables | $ | 7,323 | $ | 7,256 | $ | 7,048 | $ | 6,820 | $ | 6,819 | $ | 504 | 7.4 | % | |||||||||||
Average active accounts (in thousands)(3) | 5,031 | 4,958 | 4,826 | 4,711 | 4,716 | 315 | 6.7 | % | |||||||||||||||||
Interest and fees on loans | $ | 427 | $ | 438 | $ | 429 | $ | 419 | $ | 400 | $ | 27 | 6.8 | % | |||||||||||
Other income | 9 | 8 | 9 | 9 | 10 | (1 | ) | (10.0 | )% | ||||||||||||||||
Platform revenue, excluding retailer share arrangements | 436 | 446 | 438 | 428 | 410 | 26 | 6.3 | % | |||||||||||||||||
Retailer share arrangements | (2 | ) | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | 100.0 | % | |||||||||||
Platform revenue | $ | 434 | $ | 445 | $ | 436 | $ | 427 | $ | 409 | $ | 25 | 6.1 | % | |||||||||||
TOTAL SYF | |||||||||||||||||||||||||
Purchase volume(1),(2) | $ | 26,977 | $ | 32,460 | $ | 29,206 | $ | 28,810 | $ | 23,139 | $ | 3,838 | 16.6 | % | |||||||||||
Period-end loan receivables | $ | 65,849 | $ | 68,290 | $ | 63,520 | $ | 61,431 | $ | 58,248 | $ | 7,601 | 13.0 | % | |||||||||||
Average loan receivables, including held for sale | $ | 66,705 | $ | 65,406 | $ | 62,504 | $ | 60,094 | $ | 59,775 | $ | 6,930 | 11.6 | % | |||||||||||
Average active accounts (in thousands)(2),(3) | 66,134 | 64,892 | 62,247 | 60,923 | 61,604 | 4,530 | 7.4 | % | |||||||||||||||||
Interest and fees on loans(2) | $ | 3,498 | $ | 3,494 | $ | 3,379 | $ | 3,166 | $ | 3,140 | $ | 358 | 11.4 | % | |||||||||||
Other income(2) | 92 | 87 | 84 | 120 | 101 | (9 | ) | (8.9 | )% | ||||||||||||||||
Platform revenue, excluding retailer share arrangements(2) | 3,590 | 3,581 | 3,463 | 3,286 | 3,241 | 349 | 10.8 | % | |||||||||||||||||
Retailer share arrangements(2) | (670 | ) | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (10 | ) | 1.5 | % | |||||||||||
Platform revenue(2) | $ | 2,920 | $ | 2,847 | $ | 2,740 | $ | 2,665 | $ | 2,581 | $ | 339 | 13.1 | % | |||||||||||
(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period. | |||||||||||||||||||||||||
(2) Includes activity and balances associated with loan receivables held for sale. | |||||||||||||||||||||||||
(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. | |||||||||||||||||||||||||
7
SYNCHRONY FINANCIAL | |||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES(1)(2) | |||||||||||||||||||
(unaudited, $ in millions, except per share statistics) | |||||||||||||||||||
Quarter Ended | |||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | |||||||||||||||
COMMON EQUITY MEASURES | |||||||||||||||||||
GAAP Total common equity | $ | 13,204 | $ | 12,604 | $ | 12,158 | $ | 11,578 | $ | 11,036 | |||||||||
Less: Goodwill | (949 | ) | (949 | ) | (949 | ) | (949 | ) | (949 | ) | |||||||||
Less: Intangible assets, net | (702 | ) | (701 | ) | (646 | ) | (575 | ) | (557 | ) | |||||||||
Tangible common equity | $ | 11,553 | $ | 10,954 | $ | 10,563 | $ | 10,054 | $ | 9,530 | |||||||||
Adjustments for certain other intangible assets, deferred tax liabilities and certain items in accumulated comprehensive income (loss) | 293 | ||||||||||||||||||
Basel I - Common Equity Tier 1 | $ | 9,823 | |||||||||||||||||
Adjustments for certain other intangible assets and deferred tax liabilities | (12 | ) | |||||||||||||||||
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) | 281 | 280 | 291 | 293 | |||||||||||||||
Basel III - Common equity Tier 1 (fully phased-in) | $ | 11,834 | $ | 11,234 | $ | 10,854 | $ | 10,347 | $ | 9,811 | |||||||||
Adjustment related to capital components during transition | 265 | 399 | 375 | 331 | |||||||||||||||
Basel III - Common equity Tier I (transition) | $ | 12,099 | $ | 11,633 | $ | 11,229 | $ | 10,678 | |||||||||||
RISK-BASED CAPITAL | |||||||||||||||||||
Common equity Tier 1(3) | $ | 12,099 | $ | 11,633 | $ | 11,229 | $ | 10,678 | $ | 9,823 | |||||||||
Add: Allowance for loan losses includible in risk-based capital | 869 | 898 | 833 | 804 | 757 | ||||||||||||||
Risk-based capital(3) | $ | 12,968 | $ | 12,531 | $ | 12,062 | $ | 11,482 | $ | 10,580 | |||||||||
ASSET MEASURES | |||||||||||||||||||
Total assets(4) | $ | 82,835 | $ | 81,882 | $ | 77,841 | $ | 73,985 | $ | 72,559 | |||||||||
Adjustments for: | |||||||||||||||||||
Disallowed goodwill and other disallowed intangible assets, net of related deferred tax liabilities | (1,117 | ) | (991 | ) | (931 | ) | (903 | ) | (1,213 | ) | |||||||||
Other | — | — | 104 | 60 | 136 | ||||||||||||||
Total assets for leverage purposes(3) | $ | 81,718 | $ | 80,891 | $ | 77,014 | $ | 73,142 | $ | 71,482 | |||||||||
Risk-weighted assets - Basel I | n/a | n/a | n/a | n/a | $ | 58,020 | |||||||||||||
Risk-weighted assets - Basel III (fully phased-in)(5) | $ | 67,701 | $ | 70,493 | $ | 65,125 | $ | 62,814 | $ | 59,762 | |||||||||
Risk-weighted assets - Basel III (transition)(5) | $ | 66,693 | $ | 69,224 | $ | 64,090 | 61,829 | n/a | |||||||||||
TANGIBLE COMMON EQUITY PER SHARE | |||||||||||||||||||
GAAP book value per share | $ | 15.84 | $ | 15.12 | $ | 14.58 | $ | 13.89 | $ | 13.24 | |||||||||
Less: Goodwill | (1.14 | ) | (1.14 | ) | (1.14 | ) | (1.14 | ) | (1.14 | ) | |||||||||
Less: Intangible assets, net | (0.84 | ) | (0.84 | ) | (0.77 | ) | (0.69 | ) | (0.67 | ) | |||||||||
Tangible common equity per share | $ | 13.86 | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | |||||||||
(1) Certain balance sheet amounts and related metrics have been updated to reflect the adoption of ASU 2015-03. More detail on this update is in footnote (1) on the Statements of Financial Position. | |||||||||||||||||||
(2) Regulatory measures at March 31, 2016 are presented on an estimated basis. | |||||||||||||||||||
(3) Beginning June 30, 2015, regulatory capital amounts are calculated under Basel III rules subject to transition provisions. The company reported under Basel I rules for period ending March 31, 2015. | |||||||||||||||||||
(4) Represents total average assets beginning June 30, 2015 and total assets for period ending March 31, 2015. | |||||||||||||||||||
(5) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets. | |||||||||||||||||||
8
1Q’16 Financial Results April 22, 2016 Exhibit 99.3
2 Cautionary Statement Regarding Forward-Looking Statements The following slides are part of a presentation by Synchrony Financial in connection with reporting quarterly financial results. No representation is made that the information in these slides is complete. For additional information, see the earnings release and financial supplement included as exhibits to our Current Report on Form 8-K filed today and available on our website (www.synchronyfinancial.com) and the SEC’s website (www.sec.gov). All references to net earnings and net income are intended to have the same meaning. This presentation contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our platform revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; our transition to a replacement third-party vendor to manage the technology platform for our online retail deposits; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; obligations associated with being an independent public company; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this presentation and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed on February 25, 2016. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. Differences between this presentation and the supplemental financials may occur due to rounding. Non-GAAP Measures The information provided herein includes measures we refer to as “platform revenue” and “platform revenue excluding retailer share arrangements” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The reconciliations of such measures to the most directly comparable GAAP measures are included in the appendix of this presentation. Disclaimers
3 1Q'16 Highlights Financial highlights • $582 million Net earnings, $0.70 diluted EPS • Strong growth across the business Purchase volume +17%, Loan receivables +13%, Platform revenue +13% • Asset quality metrics relatively stable … Net charge-offs were 4.70% compared to 4.53% in the prior year 30+ delinquency at 3.85% compared to 3.79% in the prior year • Expenses +7% driven by growth … Efficiency ratio improved to 30.4% from 32.2% in prior year • Deposits +$10 billion compared to prior year … fully paid off Bank term loan April 5, 2016 • Strong capital and liquidity 18.1% CET1 & $14.9 billion liquid assets (a) Business highlights (a) CET1 % calculated under the Basel III transition guidelines Renewed key relationships Launched new program Signed new partnership with Marvel Launched new 3-2-1 Save value proposition at Walmart
4 Growth Metrics +17% Purchase volume $ in billions Loan receivables $ in billions Active accounts Average active accounts in millions Platform revenue $ in millions 1Q'15 1Q'16 $23.1 $27.0 $58.2 $65.8 $2,920 $2,581 66.1 61.6 +7% +13% +13% 1Q'15 1Q'16 1Q'15 1Q'16 1Q'15 1Q'16
5 Platform Results Retail Card Loan receivables, $ in billions $39.7 $45.1 1Q'15 1Q'16 Strong receivable growth across partner programs Platform revenue up 15% driven primarily by receivable growth Payment Solutions Loan receivables, $ in billions $11.8 $13.4 1Q'15 1Q'16 Broad receivable growth led by home furnishings and auto Platform revenue up 14% driven by receivable growth CareCredit Loan receivables, $ in billions $6.7 $7.3 1Q'15 1Q'16 Receivable growth led by dental and veterinary Platform revenue up 6% driven by receivable growth Purchase volume Accounts $18.4 49.6 $21.6 53.0 +17% +7% $2.9 7.3 $3.4 8.1 +15% +12% $1.8 4.7 $2.0 5.0 +14% +7% Platform revenue $1,772 $2,032 +15% $400 $454 +14% $409 $434 +6% +14% +13% +9% (a) (a) Accounts represent average active accounts in millions, which are credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. Purchase volume $ in billions and Platform revenue $ in millions V% V% V%
6 Financial Results Summary earnings statement First quarter 2016 highlights $ in millions, except ratios Total interest income $3,520 $3,150 $370 12% Total interest expense 311 275 (36) (13)% Net interest income (NII) 3,209 2,875 334 12% Retailer share arrangements (RSA) (670) (660) (10) (2)% NII, after RSA 2,539 2,215 324 15% Provision for loan losses 903 687 (216) (31)% Other income 92 101 (9) (9)% Other expense 800 746 (54) (7)% Pre-Tax earnings 928 883 45 5% Provision for income taxes 346 331 (15) (5)% Net earnings $582 $552 $30 5% Return on assets 2.8% 3.0% (0.2)pts. 1Q'16 1Q'15 % $ B/(W) • $582 million Net earnings, 2.8% ROA • Net interest income up 12% driven by growth in loan receivables Interest and fees on loan receivables up 11% driven by average receivable growth Interest expense increase driven by growth • Provision for loan losses driven by growth and lower reserve build in 1Q’15 30+ delinquency 3.85% compared to 3.79% in the prior year ... NCO’s 4.70% compared to 4.53% in the prior year • Other income down 9% Other income decrease driven by higher loyalty partially offset by interchange • Other expense in-line with expectations Other expense increase primarily driven by growth
7 Net Interest Income First quarter 2016 highlights • Net interest income increased 12% compared to prior year driven by growth in receivables Interest and fees on loans increased 11% compared to prior year driven by average loan receivable growth • Net interest margin stable Liquid assets as a percent of total assets declined to 18.3% from 19.0% in the prior year, conservatively invested in cash and short-term U.S. Treasuries Receivable yield 21.09%, down 21bps. reflecting higher payment rate and growth in promotional balances Interest expense 1.89%, increased 3bps. reflecting rising benchmark rates Net interest income $ in millions, % of average interest-earning assets 15.79% 15.76% 1Q'15 1Q'16 +12% $2,875 $3,209
8 Asset Quality Metrics Net charge-offs $ in millions, % of average loan receivables including held for sale 30+ days past due $ in millions, % of period-end loan receivables 90+ days past due $ in millions, % of period-end loan receivables 4.26% $1,051 4.02% $2,772 $2,416 $673 1.85% $579 3.82% $2,097 $908 1.65% 4.14% $2,536 $1,162 1.90% $663 3.79% $2,209 $1,056 1.81% $668 3.53% $2,171 2Q’14 2Q’15 3Q’14 4Q’14 1Q’15 3Q’15 4Q’15 1Q’16 $933 1.52% $693 $1,102 1.73% $633 $2,553 4.06% $697 $1,273 1.86% 4.88% 4.05% 4.32% 4.53% 4.63% 4.02% 4.23% Allowance for loan losses $ in millions, % of period-end loan receivables 5.46% $3,102 5.48% $3,006 5.28% $3,236 5.59% $3,255 5.38% $3,302 5.31% $3,371 5.12% $3,497 2Q’14 2Q’15 3Q’14 4Q’14 1Q’15 3Q’15 4Q’15 1Q’16 2Q’14 2Q’15 3Q’14 4Q’14 1Q’15 3Q’15 4Q’15 1Q’16 2Q’14 2Q’15 3Q’14 4Q’14 1Q’15 3Q’15 4Q’15 1Q’16 $2,538 3.85% $1,212 1.84% $780 4.70% 5.50% $3,620
9 Other expense $ in millions Other Expense Employee costs $239 $280 $41 17% Professional fees 162 146 (16) (10)% Marketing/BD 82 94 12 15% Information processing 63 82 19 30% Other 200 198 (2) (1)% Other expense $746 $800 $54 7% Efficiency 32.2% 30.4% (1.8)pts. $746 • Expense increase compared to prior year primarily driven by growth • Employee costs up $41 million Driven by employees added for separation and growth • Professional fees down $16 million Driven primarily by less 3rd party expense as a result of completion of separation • Marketing/BD costs up $12 million Driven by an increase in portfolio marketing campaigns and offers • Information processing up $19 million Driven by continued IT investments and purchase volume growth (a) “Other Expense” divided by sum of “NII, after RSA” plus “Other income” (1) V$ V% +7% (a) $800 1Q'15 1Q'16 First quarter 2016 highlights
10 Funding, Capital and Liquidity (c) Liquid assets $13.8 $14.9 Undrawn securitization capacity 6.6 7.3 Total liquidity $20.4 $22.2 % of total assets 28.1% 27.2% Common equity Tier 1 $12.1 $11.8 Risk-weighted assets $66.7 $67.7 Liquidity $ in billions 1Q'16 $22.2 $20.4 1Q'15 Capital ratios 1Q'16, $ in billions BIII CET1 T% (d) Does not include unencumbered assets in the Bank that could be pledged (d) BIII CET1 % (a) Estimated percentages and amounts (b) Calculated under the Basel III transition guidelines (c) Calculated under the fully phased-in Basel III guidelines 18.1% 17.5% Funding sources $ in billions 1Q'15 1Q'16 Variance Deposits 59% 69% +10pts. Securitization 24% 19% (5)pts. 3rd Party Debt 17% 12% (5)pts. $58.8 $65.5 Deposits Securitization 3rd Party Debt $34.8 $13.8 $10.2 $45.0 $12.4 $8.1 V$ (2.1) (1.4) +10.2 (a) (b)
11 1Q’16 Wrap Up • Net earnings of $582 million … $0.70 earnings per diluted share • Broad based growth … Purchase volume +17%, Loan receivables +13%, Platform revenue +13% • Renewed key partners … Stein Mart and La-Z-Boy • Signed new partnership with Marvel • Launched a new program with Citgo • Launched a new 3-2-1 Save value proposition at Walmart • Digital channels remain strong … good growth on native apps and online • Fast-growing deposit platform … deposits at $45 billion, now 69% of funding • Fully paid off $1.5 billion remaining bank term loan on April 5, 2016 • Strong balance sheet, $14.9 billion of liquid assets and 18.1% CET1 (BIIIT) (a) (a) CET1 % calculated under the Basel III transition guidelines
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13 Appendix
14 Non-GAAP Reconciliations In order to assess and internally report the revenue performance of our three sales platforms, we use measures we refer to as “platform revenue” and “platform revenue excluding retailer share arrangements.” Platform revenue is the sum of three line items in our Condensed Consolidated and Combined Statements of Earnings prepared in accordance with GAAP: “interest and fees on loans,” plus “other income,” less “retailer share arrangements.” Platform revenue and platform revenue excluding retailer share arrangements are not measures presented in accordance with GAAP. To calculate platform revenue we deduct retailer share arrangements but do not deduct other line item expenses, such as interest expense, provision for loan losses and other expense, because those items are managed for the business as a whole. We believe that platform revenue is a useful measure to investors because it represents management’s view of the net revenue contribution of each of our platforms. Platform revenue excluding retailer share arrangements represents management’s view of the gross revenue contribution of each of our platforms. These measures should not be considered a substitute for interest and fees on loans or other measures of performance we have reported in accordance with GAAP. We present certain capital ratios. Our Basel III Tier 1 common ratio, calculated on a fully phased-in basis, is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance. This ratio is not currently required by regulators to be disclosed, and therefore is considered a non-GAAP measure. We believe this capital ratio is a useful measure to investors because it is widely used by analysts and regulators to assess the capital position of financial services companies, although this ratio may not be comparable to similarly titled measures reported by other companies.
15 Non-GAAP Reconciliation The following table sets forth each component of our platform revenue for periods indicated below. ($ in millions) 2016 2015 Platform Revenue Total: Interest and fees on loans . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,498 $3,140 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92 $101 Retailer share arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(670) $(660) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,920 $2,581 Retail Card: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,614 $2,337 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $79 $86 Retailer share arrangements . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(661) $(651) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,032 $1,772 Payment Solutions: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $457 $403 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4 $5 Retailer share arrangements . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(7) $(8) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $454 $400 CareCredit: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $427 $400 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9 $10 Retailer share arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2) $(1) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $434 $409 For the Three Months Ended Mar 31,
16 Non-GAAP Reconciliation The following table sets forth a reconciliation of each component of our capital ratios to the comparable GAAP component at March 31, 2016. COMMON EQUITY MEASURES GAAP Total common equity .................................................................................................... Less: Goodwill ............................................................................................................... Less: Intangible assets, net ............................................................................................. Tangible common equity ........................................................................................................ Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) ................................................................ Basel III – Common equity Tier 1 (fully phased-in) ............................................................ Adjustments related to capital components during transition ........................................ Basel III – Common equity Tier 1 (transition) ................................................................... Risk-weighted assets – Basel III (fully phased-in) .............................................................. Risk-weighted assets – Basel III (transition) ....................................................................... $13,204 (949) (702) $11,553 281 $11,834 265 $12,099 $67,701 $66,693 $ in millions at March 31, 2016
Exhibit 99.4
Explanation of Non-GAAP Measures
The information provided in this Form 8-K and exhibits includes measures which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
In order to assess and internally report the revenue performance of our three sales platforms, we use measures we refer to as “platform revenue" and “platform revenue excluding retailer share arrangements.” Platform revenue is the sum of three line items in our Condensed Consolidated Statements of Earnings prepared in accordance with GAAP: “interest and fees on loans,” plus “other income,” less “retailer share arrangements.” Platform revenue and platform revenue excluding retailer share arrangements are not measures presented in accordance with GAAP. To calculate platform revenue, we deduct retailer share arrangements but do not deduct other line item expenses, such as interest expense, provision for loan losses and other expense, because those items are managed for the business as a whole. We believe that platform revenue is a useful measure to investors because it represents management’s view of the net revenue contribution of each of our platforms. Platform revenue excluding retailer share arrangements represents management’s view of the gross revenue contribution of each of our platforms. These measures should not be considered a substitute for interest and fees on loans or other measures of performance we have reported in accordance with GAAP. The reconciliation of platform revenue, and platform revenue excluding retailer share arrangements, to interest and fees on loans for each platform is included in the detailed financial tables included in Exhibit 99.2.
We present certain capital ratios in this Form 8-K and exhibits. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these capital ratios are non-GAAP measures. We believe these capital ratios are useful measures to investors because they are widely used by analysts and regulators to assess the capital position of financial services companies, although our Basel I Tier 1 common ratio is not a Basel I defined regulatory capital ratio, and our Basel I and Basel III Tier 1 common ratios may not be comparable to similarly titled measures reported by other companies. Our Basel I Tier 1 common ratio is the ratio of Tier 1 common equity to total risk-weighted assets as calculated in accordance with the U.S. Basel I capital rules. Our Basel III Tier 1 common ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated in accordance with the U.S. Basel III capital rules. Our Basel III Tier 1 common ratio (on a fully phased-in basis) is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance. The reconciliation of each component of our capital ratios included in this Form 8-K and exhibits to the comparable GAAP component is included in the detailed financial tables included in Exhibit 99.2.
We also present a measure we refer to as “tangible common equity” in this Form 8-K and exhibits. Tangible common equity itself is not a measure presented in accordance with GAAP. We believe tangible common equity is a more meaningful measure to investors of the net asset value of the Company. The reconciliation of tangible common equity, to total equity reported in accordance with GAAP is included in the detailed financial tables included in Exhibit 99.2.