Synchrony Financial SYF reported first-quarter 2025 adjusted earnings per share (EPS) of $1.89, which outpaced the Zacks Consensus Estimate by 16%. However, the bottom line declined 39.8% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Net interest income was $4.5 billion, which inched up 1.3% year over year. However, it missed the consensus mark by 1.8%.
The quarterly results were aided by rising retailer share arrangements, improved net interest margin and increased interest and fees on loans in sales platforms like Home & Auto, Health & Wellness and Lifestyle. Reduced provision for credit losses also contributed to the upside. However, the upside was partly offset by declining overall loan receivables and purchase volumes due to the impact of credit actions and selective consumer spending.
Synchrony Financial Price, Consensus and EPS Surprise
Synchrony Financial Price, Consensus and EPS Surprise
Retailer share arrangements of Synchrony advanced 17% year over year to $895 million in the first quarter. Total loan receivables of $99.6 billion slipped 2% year over year and missed the Zacks Consensus Estimate of $102.1 billion as well as our estimate of $103.7 billion.
Total deposits dipped 0.1% year over year to $83.4 billion and fell short of our estimate of $84.5 billion. Provision for credit losses was $1.5 billion, which tumbled 20.9% year over year on the back of a reserve release. The metric came lower than our estimate of $1.7 billion.
Synchrony’s purchase volume fell 4% year over year to $40.7 billion due to selective consumer spending and credit actions. The figure lagged the consensus estimate of $42.3 billion and our estimate of $42.9 billion.
Interest and fees on loans totaled $5.3 billion, which remained relatively flat year over year but missed our estimate of $5.5 billion. The metric was aided by an expanding loan receivables portfolio, partly offset by a decline in benchmark rates and late fee incidence. Net interest margin improved 19 basis points (bps) year over year to 14.74% in the first quarter, lower than the Zacks Consensus Estimate of 14.76%.
Average active accounts of 69.3 million slipped 3% year over year and missed the consensus mark and our estimate of 71.7 million.
Total other expenses of SYF increased 3% year over year to $1.24 billion, higher than our estimate of $1.2 billion. The efficiency ratio of 33.4% improved 830 bps year over year and came above the consensus mark of 32.5%.
Movement in Individual Sales Platforms
Home & Auto period-end loan receivables decreased 6.6% year over year in the first quarter. Purchase volume tumbled 9% year over year due to the impact of credit actions and reduced consumer traffic. Interest and fees on loans rose 2.2% year over year.
Digital period-end loan receivables inched up 0.1% year over year. Yet, purchase volume dipped 1.2% year over year due to fewer active accounts. Interest and fees on loans declined 1.5% year over year.
Diversified & Value period-end loan receivables dipped 0.6% year over year in the quarter under review. Purchase volume slipped 2.1% year over year due to the impact of credit actions and fewer active accounts. Interest and fees on loans decreased 3% year over year.
Health & Wellness period-end loan receivables inched up 0.8% year over year. However, purchase volume fell 5.2% year over year due to decreased spending in Dental, Cosmetic and Vision and the impact of credit actions. Interest and fees on loans advanced 5.2% year over year.
Lifestyle period-end loan receivables inched up 0.5% year over year in the first quarter. Yet, purchase volume fell 6.1% year over year due to the impact of credit actions and reduced spending in Outdoor and Specialty. Interest and fees on loans grew 2.4% year over year.
Financial Position (as of March 31, 2025)
Synchrony exited the first quarter with cash and equivalents of $21.6 billion, which climbed 47% from the 2024-end level.
Total assets of $122 billion increased 2.1% from the figure at 2024-end.
Total borrowings were $17 billion, up 10% from the figure as of Dec. 31, 2024.
Total equity of $16.6 billion remained relatively flat from the 2024-end figure.
SYF’s balance sheet was consistently strong in the reported quarter, with total liquidity of $23.8 billion accounting for 19.5% of its total assets.
Return on assets decreased 190 bps year over year to 2.5% in the first quarter. Return on equity was 18.4%, which deteriorated 1,720 bps year over year.
Capital Deployment Update
Synchrony returned capital worth $600 million through share buybacks and paid common stock dividends of $97 million in the first quarter.
On the completion of its prior share buyback authorization as of March 31, 2025, management approved a new repurchase program of $2.5 billion that will run till June 30, 2026. Concurrently, a 20% hike in the quarterly cash dividend was also announced in the second quarter of 2025. The increased dividend amounted to 30 cents per share.
2025 Guidance
Synchrony continues to anticipate low single-digit growth in period-end loan receivables. Purchase volume growth is expected to reflect credit actions and consumer spending behavior. The company expects the payment rate to be generally in line with 2024.
Net revenues continue to be projected between $15.2 billion and $15.7 billion, the mid-point of which indicates a 4% decline from the 2024 figure.
Management expects net charge-offs to be between 5.8% and 6% compared with the earlier guidance of 5.8-6.1% and follow normal seasonal trends in the second half of the year.
The efficiency ratio is reiterated to stay between 31.5% and 32.5%, the mid-point of which suggests an increase of 200 bps from the 2024 level.
SYF’s Zacks Rank
Synchrony currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Sector Releases
Of the other Finance sector players that have reported first-quarter results so far, the bottom-line results of American Express Company AXP, State Street Corporation STT and Truist Financial Corporation TFC beat the respective Zacks Consensus Estimate.
American Express reported first-quarter 2025 EPS of $3.64, which beat the Zacks Consensus Estimate by 5.5%. The bottom line climbed 9% year over year. Total revenues net of interest expense amounted to $16.97 billion, which missed the consensus estimate by 0.2%. The top line improved 7% year over year. Network volumes of $439.6 billion rose 5% year over year in the first quarter. Total interest income of $6.1 billion increased 6% year over year and beat the consensus mark by 1%.
The U.S. Consumer Services segment’s pre-tax income of $1.7 billion improved 7% year over year in the first quarter. Total revenues, net of interest expenses, climbed 10% year over year to $8.2 billion. The Commercial Services segment recorded a pre-tax income of $836 million in the quarter under review, which fell 5% year over year. The International Card Services segment reported a pre-tax income of $381 million, which jumped 51% year over year. Total revenues net of interest expense improved 8% year over year to $2.9 billion.
State Street’s first-quarter 2025 earnings of $2.04 per share surpassed the Zacks Consensus Estimate of $1.98. The bottom line also increased 20.7% from the prior-year quarter. Net income available to common shareholders was $644 million, up 39.1% from the year-ago quarter. Total quarterly revenues of $3.28 billion increased 4.7% year over year. However, the top line missed the consensus estimate of $3.30 billion. NII was $714 million, down marginally year over year. The net interest margin (NIM) contracted 13 bps year over year to 1%.
Total fee revenues increased 6.1% year over year to $2.66 billion. Non-interest expenses were $2.45 billion, down 2.5% from the prior-year quarter. Provision for credit losses was $12 million, down 55.6%. The Common Equity Tier 1 ratio was 11% as of March 31, 2025, compared with 11.1% in the corresponding period of 2024. The return on average common equity was 10.6% compared with 7.7% in the year-ago quarter. AUM was $4.67 trillion, up 8.5% year over year.
Truist Financial reported first-quarter 2025 adjusted earnings of 87 cents per share, which beat the Zacks Consensus Estimate by a penny. However, the figure declined 3.3% year over year. Total quarterly revenues of $4.90 billion grew 1.7% year over year. The top line, however, missed the consensus estimate of $4.92 billion. Tax-equivalent NII increased 3.8% to $3.56 billion. NIM grew 13 bps to 3.01%.
Non-interest income was $1.40 billion, down 3.7%. Non-interest expenses were $2.91 billion, down 1.6%. The adjusted efficiency ratio was 56.4%, up from 56.2% in the prior-year quarter. As of March 31, 2025, total average deposits were $392.2 billion, up marginally on a sequential basis. Average loans and leases held for investment of $306.4 billion rose 1.1%. Net charge-offs were 0.60% of average loans and leases, down four bps. As of March 31, 2025, the Tier 1 risk-based capital ratio was 12.7% compared with 11.7% in the prior-year quarter.
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