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Synchrony Financial's (SYF) Earnings Surpass Estimates in Q1

Synchrony Financial’s SYF first-quarter 2018 earnings per share of 83 cents surpassed the Zacks Consensus Estimate of 74 cents by 12.2%. The bottom line also improved 36% year over year.

Results in Detail

The company’s net interest income increased 7% to $3.8 billion in the first quarter, primarily owing to strong loan receivables growth.

However, other income was down 19.4% to $75 million, primarily due to higher loyalty program expenses, partially offset by increased interchange revenues.

Loan receivables rose 6% year over year to $78 billion.

Deposits were $57 billion, up 10% from the year-ago quarter.

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Purchase volume expanded 3% from the first quarter of 2017 to $30 billion.

Provision for loan loss increased 4% year over year to $1.4 billion on credit normalization.

Total other expenses increased 8.8% to $988 million, primarily due to business growth and marketing expenses.

Sales Platforms Update

Retail Card

Interest and fees on loans grew 7% year over year, primarily driven by loan receivables growth. Loan receivables grew 5% on broad-based across partner programs.

Purchase volume and average active account rose 2% each.

Payment Solutions

Interest and fees on loans rose 9% year over year on the back of period-end loan receivables growth of 8%. Loan receivables growth was led by home furnishings and automotive.

Purchase volume growth was 7%, adjusted to exclude the impact of the hhgregg bankruptcy, and a 5% rise in average active account. 

CareCredit

Interest and fees on loans increased 8% year over year, attributable to period-end loan receivables growth of 8%. Loan receivables growth was enhanced by dental and veterinary.

While purchase volume  registered 8% growth, average active account reported 7% rise.

Synchrony Financial Price, Consensus and EPS Surprise

Synchrony Financial Price, Consensus and EPS Surprise | Synchrony Financial Quote

 

Financial Position

Total assets as of Mar 31, 2018 were $95.6 billion, up 7.3% year over year.

Total borrowings as of Mar 31, 2018 were $21 billion, up 4.1% year over year.

The company’s balance sheet remained strong during the quarter with total liquidity of $25 billion or 26% of total assets.

Return on assets was 2.7% while return on equity was 18.2%.

Efficiency ratio was 30.9% compared with 30.3% in first-quarter 2017.

Share Repurchase and Dividend Update

In the first quarter, the company paid a quarterly common stock dividend of 15 cents per share and bought back $410 million of Synchrony Financial common stock.

Zacks Rank

Synchrony Financial carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players in the Finance sector that have reported first-quarter earnings so far, Bank of America Corporation BAC, Citigroup Inc. C and U.S. Bancorp USB beat the respective Zacks Consensus Estimate.

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