Synchrony Financial Reports Fourth Quarter Net Earnings of $547 Million or $0.65 Per Diluted Share

Synchrony Financial (NYSE:SYF) today announced fourth quarter 2015 net earnings of $547 million, or $0.65 per diluted share. Net earnings for the full year 2015 totaled $2.2 billion, or $2.65 per diluted share. Highlights for the quarter included:

  • Total platform revenue increased 5% from the fourth quarter of 2014 to $2.8 billion
  • Loan receivables grew $7 billion, or 11%, from the fourth quarter of 2014 to $68 billion
  • Purchase volume increased 8% from the fourth quarter of 2014
  • Strong deposit growth continued, up $8 billion, or 24%, over the fourth quarter of 2014
  • Renewed key programs - Dick’s Sporting Goods, Discount Tire, P.C. Richard & Son, Polaris and Mohawk Flooring
  • Launched Newegg and Stash Hotel Rewards card programs
  • Piloting J.C. Penney private label credit card in Apple Pay
  • Completed separation from the General Electric Company (GE) following the successful exchange offer
  • Added to the S&P 500 Index

“The fourth quarter marked a successful conclusion to a historic year for Synchrony Financial. We maintained strong momentum across each of our business platforms and our receivables, deposits, and revenue growth remained solid. We continue to leverage our array of value-added capabilities and vast experience to propel growth, expand our distribution, and attract new business. This past year alone we renewed five key relationships and signed a number of new partners, while expanding our network through new strategic alliances. And we were able to achieve this while executing on our separation from GE. We aim to continue to build on this momentum in 2016 and are excited about our future growth prospects and opportunities as a stand-alone company,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.

Business and Financial Highlights for the Fourth Quarter of 2015

All comparisons below are for the fourth quarter of 2015 compared to the fourth quarter of 2014, unless otherwise noted.

Earnings

  • Net interest income increased $230 million, or 8%, to $3.2 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 9%.
  • Total platform revenue increased $131 million, or 5%. Platform revenue in the fourth quarter of 2014 included a $46 million gain from portfolio sales.
  • Provision for loan losses increased $26 million to $823 million largely due to loan receivables growth, partially offset by asset quality improvement.
  • Other income decreased $75 million to $87 million, driven primarily by the $46 million gain from portfolio sales in the fourth quarter of 2014.
  • Other expense increased $78 million to $870 million, primarily driven by investments in growth and infrastructure build associated with the separation from GE.
  • Net earnings totaled $547 million for the quarter compared to $531 million in the fourth quarter of 2014. The fourth quarter of 2014 included a $29 million after-tax gain associated with portfolio sales.

Balance Sheet

  • Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 8% and average active account growth of 5%, and included the acquisition of the BP portfolio during the second quarter of 2015.
  • Deposits grew to $43 billion, up $8 billion, or 24%, from the fourth quarter of 2014, and comprised 64% of funding compared to 56% last year.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) of $21 billion, or 25% of total assets.
  • The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 16.8% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 15.9%.

Key Financial Metrics

  • Return on assets was 2.6% and return on equity was 17.5%.
  • Net interest margin increased 13 basis points to 15.73% due mainly to an improvement in interest-earning asset yields that resulted from carrying a higher mix of receivables versus lower-yielding liquidity.
  • Efficiency ratio was 34.0% for the fourth quarter of 2015, and 33.5% for the full year 2015.

Credit Quality

  • Loans 30+ days past due as a percentage of period-end loan receivables improved 8 basis points to 4.06%.
  • Net charge-offs as a percentage of total average loan receivables improved 9 basis points to 4.23%.
  • The allowance for loan losses as a percentage of total period-end receivables was 5.12%.

Sales Platforms

  • Retail Card platform revenue increased 5%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 12%, which included the acquisition of the BP portfolio during the second quarter of 2015. Average active account growth was 4%. Loan receivables growth was broad-based across partner programs. Platform revenue in the fourth quarter of 2014 included the $46 million gain from portfolio sales.
  • Payment Solutions platform revenue increased 7%, driven primarily by purchase volume growth of 9% and period-end loan receivables growth of 12%. Average active account growth was 11%. Loan receivables growth was led by the home furnishings and automotive product categories.
  • CareCredit platform revenue increased 3%, driven primarily by purchase volume growth of 9% and period-end loan receivables growth of 7%. Average active account growth was 6%. 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 forthcoming Annual Report on Form 10-K for the fiscal year ended December 31, 2015. 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, January 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 42015#, and can be accessed beginning approximately two hours after the event through February 5, 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 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 300,000 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. Our offerings include 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; our need for additional financing, 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 reliance on dividends, distributions and other payments from Synchrony Bank; 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; 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; significant and extensive regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Act and the impact of the CFPB’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules; restrictions that limit Synchrony Bank’s ability to pay dividends; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; failure to comply with anti-money laundering and anti-terrorism financing laws; obligations associated with being a public company; and failure caused by us of GE’s distribution of our common stock to its stockholders in exchange for its common stock to qualify for tax-free treatment, which may result in significant tax liabilities to GE for which we may be required to indemnify GE.

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, 2014, as filed on February 23, 2015. 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.

SYNCHRONY FINANCIAL
FINANCIAL SUMMARY
(unaudited, in millions, except per share statistics)
Quarter EndedTwelve Months Ended
Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Dec 31,

2014

4Q'15 vs. 4Q'14Dec 31,

2015

Dec 31,

2014

YTD'15 vs. YTD'14

EARNINGS

Net interest income $3,208 $3,103 $2,907 $2,875 $2,978 $230 7.7% $12,093 $11,320 $773 6.8%
Retailer share arrangements (734) (723) (621) (660) (698) (36) 5.2% (2,738) (2,575) (163) 6.3%
Net interest income, after retailer share arrangements 2,474 2,380 2,286 2,215 2,280 194 8.5% 9,355 8,745 610 7.0%
Provision for loan losses 823 702 740 687 797 26 3.3% 2,952 2,917 35 1.2%
Net interest income, after retailer share arrangements and provision for loan losses 1,651 1,678 1,546 1,528 1,483 168 11.3% 6,403 5,828 575 9.9%
Other income 87 84 120 101 162 (75) (46.3)% 392 485 (93) (19.2)%
Other expense 870 843 805 746 792 78 9.8% 3,264 2,927 337 11.5%
Earnings before provision for income taxes 868 919 861 883 853 15 1.8% 3,531 3,386 145 4.3%
Provision for income taxes 321 345 320 331 322 (1) (0.3)% 1,317 1,277 40 3.1%
Net earnings $547 $574 $541 $552 $531 $16 3.0% $2,214 $2,109 $105 5.0%
Net earnings attributable to common stockholders $547 $574 $541 $552 $531 $16 3.0% $2,214 $2,109 $105 5.0%

COMMON SHARE STATISTICS

Basic EPS $0.66 $0.69 $0.65 $0.66 $0.64 $0.02 3.1% $2.66 $2.78 $(0.12) (4.3)%
Diluted EPS $0.65 $0.69 $0.65 $0.66 $0.64 $0.01 1.6% $2.65 $2.78 $(0.13) (4.7)%
Common stock price $30.41 $31.30 $32.93 $30.35 $29.75 $0.66 2.2% $30.41 $29.75 $0.66 2.2%
Book value per share $15.12 $14.58 $13.89 $13.24 $12.57 $2.55 20.3% $15.12 $12.57 $2.55 20.3%
Tangible book value per share(1) $13.14 $12.67 $12.06 $11.43 $10.81 $2.33 21.6% $13.14 $10.81 $2.33 21.6%
Beginning common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 705.3 128.5 18.2%
Issuance of common shares through initial public offering - - - - - - - % - 128.5 (128.5) (100.0)%
Shares repurchased - - - - - - - % - - - - %
Ending common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 833.8 - - %
Weighted average common shares outstanding 833.8 833.8 833.8 833.8 833.8 - - % 833.8 757.4 76.4 10.1%
Weighted average common shares outstanding (fully diluted) 835.8 835.8 835.4 835.0 834.3 1.5 0.2% 835.5 757.6 77.9 10.3%
(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.
SYNCHRONY FINANCIAL
SELECTED METRICS
(unaudited, $ in millions, except account data)
Quarter EndedTwelve Months Ended
Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Dec 31,

2014

4Q'15 vs. 4Q'14Dec 31,

2015

Dec 31,

2014

YTD'15 vs. YTD'14

PERFORMANCE METRICS

Return on assets(1) 2.6% 2.9% 2.9% 3.0% 2.7% (0.1)% 2.9% 3.2% (0.3)%
Return on equity(2) 17.5% 19.2% 19.2% 20.8% 20.2% (2.7)% 19.1% 26.7% (7.6)%
Return on tangible common equity(3) 20.1% 22.0% 22.2% 24.1% 23.4% (3.3)% 22.0% 32.4% (10.4)%
Net interest margin(4) 15.73% 15.97% 15.77% 15.79% 15.60% 0.13% 15.77% 17.20% (1.43)%
Efficiency ratio(5) 34.0% 34.2% 33.5% 32.2% 32.4% 1.6% 33.5% 31.7% 1.8%
Other expense as a % of average loan receivables, including held for sale 5.28% 5.35% 5.37% 5.06% 5.16% 0.12% 5.25% 5.13% 0.12%
Effective income tax rate 37.0% 37.5% 37.2% 37.5% 37.7% (0.7)% 37.3% 37.7% (0.4)%

CREDIT QUALITY METRICS

Net charge-offs as a % of average loan receivables, including held for sale 4.23% 4.02% 4.63% 4.53% 4.32% (0.09)% 4.33% 4.51% (0.18)%
30+ days past due as a % of period-end loan receivables(6) 4.06% 4.02% 3.53% 3.79% 4.14% (0.08)% 4.06% 4.14% (0.08)%
90+ days past due as a % of period-end loan receivables(6) 1.86% 1.73% 1.52% 1.81% 1.90% (0.04)% 1.86% 1.90% (0.04)%
Net charge-offs $697 $633 $693 $668 $663 $34 5.1% $2,691 $2,573 $118 4.6%
Loan receivables delinquent over 30 days(6) $2,772 $2,553 $2,171 $2,209 $2,536 $236 9.3% $2,772 $2,536 $236 9.3%
Loan receivables delinquent over 90 days(6) $1,273 $1,102 $933 $1,056 $1,162 $111 9.6% $1,273 $1,162 $111 9.6%
Allowance for loan losses (period-end) $3,497 $3,371 $3,302 $3,255 $3,236 $261 8.1% $3,497 $3,236 $261 8.1%
Allowance coverage ratio(7) 5.12% 5.31% 5.38% 5.59% 5.28% (0.16)% 5.12% 5.28% (0.16)%

BUSINESS METRICS

Purchase volume(8) $32,460 $29,206 $28,810 $23,139 $30,081 $2,379 7.9% $113,615 $103,149 $10,466 10.1%
Period-end loan receivables $68,290 $63,520 $61,431 $58,248 $61,286 $7,004 11.4% $68,290 $61,286 $7,004 11.4%
Credit cards $65,773 $60,920 $58,827 $55,866 $58,880 $6,893 11.7% $65,773 $58,880 $6,893 11.7%
Consumer installment loans $1,154 $1,171 $1,138 $1,062 $1,063 $91 8.6% $1,154 $1,063 $91 8.6%
Commercial credit products $1,323 $1,380 $1,410 $1,295 $1,320 $3 0.2% $1,323 $1,320 $3 0.2%
Other $40 $49 $56 $25 $23 $17 73.9% $40 $23 $17 73.9%
Average loan receivables, including held for sale $65,406 $62,504 $60,094 $59,775 $59,547 $5,859 9.8% $62,120 $57,101 $5,019 8.8%
Period-end active accounts (in thousands)(9) 68,314 62,831 61,718 59,761 64,286 4,028 6.3% 68,314 64,286 4,028 6.3%
Average active accounts (in thousands)(9) 64,892 62,247 60,923 61,604 61,667 3,225 5.2% 62,643 60,009 2,634 4.4%

LIQUIDITY

Liquid assets
Cash and equivalents $12,325 $12,271 $10,621 $11,218 $11,828 $497 4.2% $12,325 $11,828 $497 4.2%
Total liquid assets $14,836 $15,305 $13,660 $13,813 $12,942 $1,894 14.6% $14,836 $12,942 $1,894 14.6%
Undrawn credit facilities
Undrawn committed securitization financings $6,075 $6,550 $6,125 $6,600 $6,100 $(25) (0.4)% $6,075 $6,100 $(25) (0.4)%
Total liquid assets and undrawn credit facilities $20,911 $21,855 $19,785 $20,413 $19,042 $1,869 9.8% $20,911 $19,042 $1,869 9.8%
Liquid assets % of total assets 17.63% 19.27% 18.03% 18.99% 17.09% 0.54% 17.63% 17.09% 0.54%
Liquid assets including undrawn committed securitization financings % of total assets 24.85% 27.51% 26.12% 28.07% 25.15% (0.30)% 24.85% 25.15% (0.30)%
(1) Return on assets represents net earnings as a percentage of average total assets.
(2) Return on equity represents net earnings as a percentage of average total equity.
(3) 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.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
(5) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.
(6) Based on customer statement-end balances extrapolated to the respective period-end date.
(7) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.
(8) 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.
(9) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
SYNCHRONY FINANCIAL
STATEMENTS OF EARNINGS
(unaudited, $ in millions)
Quarter EndedTwelve Months Ended
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
4Q'15 vs. 4Q'14Dec 31,
2015
Dec 31,
2014
YTD'15 vs. YTD'14
Interest income:
Interest and fees on loans $3,494 $3,379 $3,166 $3,140 $3,252 $242 7.4% $13,179 $12,216 $963 7.9%
Interest on investment securities 15 13 11 10 8 7 87.5% 49 26 23 88.5%
Total interest income 3,509 3,392 3,177 3,150 3,260 249 7.6% 13,228 12,242 986 8.1%
Interest expense:
Interest on deposits 165 159 146 137 139 26 18.7% 607 470 137 29.1%
Interest on borrowings of consolidated securitization entities 56 54 53 52 57 (1) (1.8)% 215 215 - - %
Interest on third-party debt 80 76 71 82 78 2 2.6% 309 124 185 149.2%
Interest on related party debt - - - 4 8 (8) (100.0)% 4 113 (109) (96.5)%
Total interest expense 301 289 270 275 282 19 6.7% 1,135 922 213 23.1%
Net interest income 3,208 3,103 2,907 2,875 2,978 230 7.7% 12,093 11,320 773 6.8%
Retailer share arrangements (734) (723) (621) (660) (698) (36) 5.2% (2,738) (2,575) (163) 6.3%
Net interest income, after retailer share arrangements 2,474 2,380 2,286 2,215 2,280 194 8.5% 9,355 8,745 610 7.0%
Provision for loan losses 823 702 740 687 797 26 3.3% 2,952 2,917 35 1.2%
Net interest income, after retailer share arrangements and provision for loan losses 1,651 1,678 1,546 1,528 1,483 168 11.3% 6,403 5,828 575 9.9%
Other income:
Interchange revenue 147 135 123 100 120 27 22.5% 505 389 116 29.8%
Debt cancellation fees 62 61 61 65 67 (5) (7.5)% 249 275 (26) (9.5)%
Loyalty programs (125) (122) (94) (78) (91) (34) 37.4% (419) (281) (138) 49.1%
Other 3 10 30 14 66 (63) (95.5)% 57 102 (45) (44.1)%
Total other income 87 84 120 101 162 (75) (46.3)% 392 485 (93) (19.2)%
Other expense:
Employee costs 285 268 250 239 227 58 25.6% 1,042 866 176 20.3%
Professional fees(1) 165 162 156 162 139 26 18.7% 645 563 82 14.6%
Marketing and business development 128 115 108 82 165 (37) (22.4)% 433 460 (27) (5.9)%
Information processing 83 77 74 63 60 23 38.3% 297 212 85 40.1%
Other(1) 209 221 217 200 201 8 4.0% 847 826 21 2.5%
Total other expense 870 843 805 746 792 78 9.8% 3,264 2,927 337 11.5%
Earnings before provision for income taxes 868 919 861 883 853 15 1.8% 3,531 3,386 145 4.3%
Provision for income taxes 321 345 320 331 322 (1) (0.3)% 1,317 1,277 40 3.1%
Net earnings attributable to common shareholders $547 $574 $541 $552 $531 $16 3.0% $2,214 $2,109 $105 5.0%
(1) We have reclassified certain amounts within Professional fees to Other for all periods in 2014 to conform to the current period classifications.
SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION
(unaudited, $ in millions)
Quarter Ended
Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Dec 31,

2014

Dec 31, 2015 vs.

Dec 31, 2014

Assets
Cash and equivalents $12,325 $12,271 $10,621 $11,218 $11,828 $497 4.2%
Investment securities 3,142 3,596 3,682 3,121 1,598 1,544 96.6%
Loan receivables:
Unsecuritized loans held for investment 42,826 38,325 36,019 33,424 34,335 8,491 24.7%
Restricted loans of consolidated securitization entities 25,464 25,195 25,412 24,824 26,951 (1,487) (5.5)%
Total loan receivables 68,290 63,520 61,431 58,248 61,286 7,004 11.4%
Less: Allowance for loan losses (3,497) (3,371) (3,302) (3,255) (3,236) (261) 8.1%
Loan receivables, net 64,793 60,149 58,129 54,993 58,050 6,743 11.6%
Loan receivables held for sale - - - 359 332 (332) (100.0)%
Goodwill 949 949 949 949 949 - - %
Intangible assets, net 701 646 575 557 519 182 35.1%
Other assets 2,225 1,831 1,794 1,524 2,431 (206) (8.5)%
Total assets $84,135 $79,442 $75,750 $72,721 $75,707 $8,428 11.1%
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts $43,295 $40,408 $37,629 $34,788 $34,847 $8,448 24.2%
Non-interest-bearing deposit accounts 152 140 143 162 108 44 40.7%
Total deposits 43,447 40,548 37,772 34,950 34,955 8,492 24.3%
Borrowings:
Borrowings of consolidated securitization entities 13,603 13,640 13,948 13,817 14,967 (1,364) (9.1)%
Bank term loan 4,151 4,651 5,151 5,651 8,245 (4,094) (49.7)%
Senior unsecured notes 6,590 5,590 4,593 4,592 3,593 2,997 83.4%
Related party debt - - - - 655 (655) (100.0)%
Total borrowings 24,344 23,881 23,692 24,060 27,460 (3,116) (11.3)%
Accrued expenses and other liabilities 3,740 2,855 2,708 2,675 2,814 926 32.9%
Total liabilities 71,531 67,284 64,172 61,685 65,229 6,302 9.7%
Equity:
Common stock 1 1 1 1 1 - - %
Additional paid-in capital 9,351 9,431 9,422 9,418 9,408 (57) (0.6)%
Retained earnings 3,293 2,746 2,172 1,631 1,079 2,214 NM
Accumulated other comprehensive income: (41) (20) (17) (14) (10) (31) NM
Total equity 12,604 12,158 11,578 11,036 10,478 2,126 20.3%
Total liabilities and equity $84,135 $79,442 $75,750 $72,721 $75,707 $8,428 11.1%
SYNCHRONY FINANCIAL

AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN

(unaudited, $ in millions)
Quarter Ended
Dec 31, 2015Sep 30, 2015Jun 30, 2015Mar 31, 2015Dec 31, 2014
InterestAverageInterestAverageInterestAverageInterestAverageInterestAverage
AverageIncome/Yield/AverageIncome/Yield/AverageIncome/Yield/AverageIncome/Yield/AverageIncome/Yield/
BalanceExpenseRateBalanceExpenseRateBalanceExpenseRateBalanceExpenseRateBalanceExpenseRate
Assets
Interest-earning assets:
Interest-earning cash and equivalents $12,070 $9 0.30% $11,059 $7 0.25% $10,728 $6 0.22% $11,331 $6 0.21% $13,631 $7 0.20%
Securities available for sale 3,445 6 0.69% 3,534 6 0.67% 3,107 5 0.65% 2,725 4 0.60% 962 1 0.40%
Loan receivables:
Credit cards, including held for sale 62,834 3,432 21.67% 59,890 3,315 21.96% 57,588 3,106 21.63% 57,390 3,079 21.76% 57,075 3,186 21.68%
Consumer installment loans 1,163 26 8.87% 1,160 27 9.23% 1,101 26 9.47% 1,057 25 9.59% 1,072 27 9.78%
Commercial credit products 1,361 36 10.49% 1,400 36 10.20% 1,372 34 9.94% 1,305 36 11.19% 1,379 38 10.70%
Other 48 - - % 54 1 NM 33 - - % 23 - - % 21 1 NM
Total loan receivables, including held for sale 65,406 3,494 21.19% 62,504 3,379 21.45% 60,094 3,166 21.13% 59,775 3,140 21.30% 59,547 3,252 21.21%
Total interest-earning assets 80,921 3,509 17.20% 77,097 3,392 17.46% 73,929 3,177 17.24% 73,831 3,150 17.30% 74,140 3,260 17.07%
Non-interest-earning assets:
Cash and due from banks 1,268 1,216 583 497 1,220
Allowance for loan losses (3,440) (3,341) (3,285) (3,272) (3,160)
Other assets 3,280 3,023 2,916 2,802 2,831
Total non-interest-earning assets 1,108 898 214 27 891
Total assets $82,029 $77,995 $74,143 $73,858 $75,031
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $42,162 $165 1.55% $39,136 $159 1.61% $35,908 $146 1.63% $34,981 $137 1.59% $33,980 $139 1.59%
Borrowings of consolidated securitization entities 13,565 56 1.64% 13,730 54 1.56% 14,026 53 1.52% 14,101 52 1.50% 14,766 57 1.50%
Bank term loan(1) 4,526 28 2.45% 4,901 29 2.35% 5,401 32 2.38% 6,531 47 2.92% 8,057 46 2.22%
Senior unsecured notes 5,840 52 3.53% 5,340 47 3.49% 4,592 39 3.41% 4,093 35 3.47% 3,593 32 3.46%
Related party debt - - - % - - - % - - - % 407 4 3.99% 843 8 3.68%
Total interest-bearing liabilities 66,093 301 1.81% 63,107 289 1.82% 59,927 270 1.81% 60,113 275 1.86% 61,239 282 1.79%
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 147 149 166 142 182
Other liabilities 3,396 2,859 2,750 2,854 3,382
Total non-interest-bearing liabilities 3,543 3,008 2,916 2,996 3,564
Total liabilities 69,636 66,115 62,843 63,109 64,803
Equity
Total equity 12,393 11,880 11,300 10,749 10,228
Total liabilities and equity $82,029 $77,995 $74,143 $73,858 $75,031
Net interest income $3,208 $3,103 $2,907 $2,875 $2,978
Interest rate spread(2) 15.39% 15.64% 15.43% 15.44% 15.28%
Net interest margin(3) 15.73% 15.97% 15.77% 15.79% 15.60%
(1) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014 were 2.26%, 2.23%, 2.21%, 2.21%, and 2.19%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.
(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
(unaudited, $ in millions)
Twelve Months Ended

Dec 31, 2015

Twelve Months Ended

Dec 31, 2014

InterestAverageInterestAverage
AverageIncome/Yield/AverageIncome/Yield/
BalanceExpenseRateBalanceExpenseRate
Assets
Interest-earning assets:
Interest-earning cash and equivalents $11,406 $28 0.25% $8,230 $16 0.19%
Securities available for sale 3,142 21 0.67% 487 10 2.05%
Loan receivables:
Credit cards, including held for sale 59,603 12,932 21.70% 54,686 11,967 21.88%
Consumer installment loans 1,119 104 9.29% 1,025 99 9.66%
Commercial credit products 1,359 142 10.45% 1,373 149 10.85%
Other 39 1 2.56% 17 1 5.88%
Total loan receivables, including held for sale 62,120 13,179 21.22% 57,101 12,216 21.39%
Total interest-earning assets 76,668 13,228 17.25% 65,818 12,242 18.60%
Non-interest-earning assets:
Cash and due from banks 904 881
Allowance for loan losses (3,340) (3,039)
Other assets 3,013 2,492
Total non-interest-earning assets 577 334
Total assets $77,245 $66,152
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $38,148 $607 1.59% $30,110 $470 1.56%
Borrowings of consolidated securitization entities 13,868 215 1.55% 14,835 215 1.45%
Bank term loan(1) 5,383 136 2.53% 3,056 74 2.42%
Senior unsecured notes 4,976 173 3.48% 1,382 50 3.62%
Related party debt 125 4 3.20% 5,335 113 2.12%
Total interest-bearing liabilities 62,500 1,135 1.82% 54,718 922 1.69%
Non-interest-bearing liabilities
Non-interest-bearing deposit accounts 152 240
Other liabilities 3,015 3,306
Total non-interest-bearing liabilities 3,167 3,546
Total liabilities 65,667 58,264
Equity
Total equity 11,578 7,888
Total liabilities and equity $77,245 $66,152
Net interest income $12,093 $11,320
Interest rate spread(2) 15.43% 16.91%
Net interest margin(3) 15.77% 17.20%

(1) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the 12 months ended December 31, 2015 and December 31, 2014 were 2.23% and 2.20%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan.

(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average interest-earning assets.

SYNCHRONY FINANCIAL
BALANCE SHEET STATISTICS
(unaudited, $ in millions, except per share statistics)
Quarter Ended
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Dec 31, 2015 vs.
Dec 31, 2014

BALANCE SHEET STATISTICS

Total common equity $12,604 $12,158 $11,578 $11,036 $10,478 $2,126 20.3%
Total common equity as a % of total assets 14.98% 15.30% 15.28% 15.18% 13.84% 1.14%
Tangible assets $82,485 $77,847 $74,226 $71,215 $74,239 $8,246 11.1%
Tangible common equity(1) $10,954 $10,563 $10,054 $9,530 $9,010 $1,944 21.6%
Tangible common equity as a % of tangible assets(1) 13.28% 13.57% 13.55% 13.38% 12.14% 1.14%
Tangible common equity per share(1) $13.14 $12.67 $12.06 $11.43 $10.81 $2.33 21.6%

REGULATORY CAPITAL RATIOS(2)

Basel III TransitionBasel I
Total risk-based capital ratio(3)(8) 18.1% 18.8% 18.5% 18.2% 16.2%
Tier 1 risk-based capital ratio(4)(8) 16.8% 17.5% 17.2% 16.9% 14.9%
Tier 1 common ratio(5)(8) n/a n/a n/a 16.9% 14.9%
Tier 1 leverage ratio(6)(8) 14.3% 14.6% 14.6% 13.7% 12.5%
Common equity Tier 1 capital ratio(7)(8) 16.8% 17.5% 17.2% n/a n/a
Basel III Fully Phased-in
Common equity Tier 1 capital ratio(7) 15.9% 16.6% 16.4% 16.4% 14.5%

(1) 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.

(2) Regulatory capital metrics at December 31, 2015 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.

(3) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.

(4) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.

(5) Tier 1 common ratio is the ratio of common equity Tier 1 capital divided by risk-weighted assets.

(6) 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.

(7) 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.

(8) 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 periods prior to June 30, 2015.

SYNCHRONY FINANCIAL

PLATFORM RESULTS AND RECONCILIATION OF NON-GAAP MEASURES

(unaudited, $ in millions)
Quarter EndedTwelve Months Ended
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
4Q'15 vs. 4Q'14Dec 31,
2015
Dec 31,
2014
YTD'15 vs. YTD'14

RETAIL CARD

Purchase volume(1)(2) $26,768 $23,560 $23,452 $18,410 $24,855 $1,913 7.7% $92,190 $83,591 $8,599 10.3%
Period-end loan receivables $47,412 $43,432 $42,315 $39,685 $42,308 $5,104 12.1% $47,412 $42,308 $5,104 12.1%
Average loan receivables, including held for sale $44,958 $42,933 $41,303 $40,986 $40,929 $4,029 9.8% $42,687 $39,278 $3,409 8.7%
Average active accounts (in thousands)(2)(3) 52,038 49,953 48,981 49,617 49,871 2,167 4.3% 50,358 48,599 1,759 3.6%
Interest and fees on loans(2) $2,594 $2,508 $2,335 $2,337 $2,405 $189 7.9% $9,774 $9,040 $734 8.1%
Other income(2) 76 70 107 86 141 (65) (46.1)% 339 407 (68) (16.7)%

Platform revenue, excluding retailer share arrangements(2)

2,670 2,578 2,442 2,423 2,546 124 4.9% 10,113 9,447 666 7.0%
Retailer share arrangements(2) (723) (708) (606) (651) (686) (37) 5.4% (2,688) (2,530) (158) 6.2%
Platform revenue(2) $1,947 $1,870 $1,836 $1,772 $1,860 $87 4.7% $7,425 $6,917 $508 7.3%

PAYMENT SOLUTIONS

Purchase volume(1) $3,714 $3,635 $3,371 $2,948 $3,419 $295 8.6% $13,668 $12,447 $1,221 9.8%
Period-end loan receivables $13,543 $12,933 $12,194 $11,833 $12,095 $1,448 12.0% $13,543 $12,095 $1,448 12.0%
Average loan receivables $13,192 $12,523 $11,971 $11,970 $11,772 $1,420 12.1% $12,436 $11,171 $1,265 11.3%
Average active accounts (in thousands)(3) 7,896 7,468 7,231 7,271 7,113 783 11.0% 7,478 6,869 609 8.9%
Interest and fees on loans $462 $442 $412 $403 $426 $36 8.5% $1,719 $1,582 $137 8.7%
Other income 3 5 4 5 9 (6) (66.7)% 17 32 (15) (46.9)%

Platform revenue, excluding retailer share arrangements

465 447 416 408 435 30 6.9% 1,736 1,614 122 7.6%
Retailer share arrangements (10) (13) (14) (8) (11) 1 (9.1)% (45) (41) (4) 9.8%
Platform revenue $455 $434 $402 $400 $424 $31 7.3% $1,691 $1,573 $118 7.5%

CARECREDIT

Purchase volume(1) $1,978 $2,011 $1,987 $1,781 $1,807 $171 9.5% $7,757 $7,111 $646 9.1%
Period-end loan receivables $7,335 $7,155 $6,922 $6,730 $6,883 $452 6.6% $7,335 $6,883 $452 6.6%
Average loan receivables $7,256 $7,048 $6,820 $6,819 $6,846 $410 6.0% $6,997 $6,652 $345 5.2%
Average active accounts (in thousands)(3) 4,958 4,826 4,711 4,716 4,683 275 5.9% 4,807 4,541 266 5.9%
Interest and fees on loans $438 $429 $419 $400 $421 $17 4.0% $1,686 $1,594 $92 5.8%
Other income 8 9 9 10 12 (4) (33.3)% 36 46 (10) (21.7)%

Platform revenue, excluding retailer share arrangements

446 438 428 410 433 13 3.0% 1,722 1,640 82 5.0%
Retailer share arrangements (1) (2) (1) (1) (1) - - % (5) (4) (1) 25.0%
Platform revenue $445 $436 $427 $409 $432 $13 3.0% $1,717 $1,636 $81 5.0%

TOTAL SYF

Purchase volume(1)(2) $32,460 $29,206 $28,810 $23,139 $30,081 $2,379 7.9% $113,615 $103,149 $10,466 10.1%
Period-end loan receivables $68,290 $63,520 $61,431 $58,248 $61,286 $7,004 11.4% $68,290 $61,286 $7,004 11.4%

Average loan receivables, including held for sale

$65,406 $62,504 $60,094 $59,775 $59,547 $5,859 9.8% $62,120 $57,101 $5,019 8.8%

Average active accounts (in thousands)(2)(3)

64,892 62,247 60,923 61,604 61,667 3,225 5.2% 62,643 60,009 2,634 4.4%
Interest and fees on loans(2) $3,494 $3,379 $3,166 $3,140 $3,252 $242 7.4% $13,179 $12,216 $963 7.9%
Other income(2) 87 84 120 101 162 (75) (46.3)% 392 485 (93) (19.2)%

Platform revenue, excluding retailer share arrangements(2)

3,581 3,463 3,286 3,241 3,414 167 4.9% 13,571 12,701 870 6.8%
Retailer share arrangements(2) (734) (723) (621) (660) (698) (36) 5.2% (2,738) (2,575) (163) 6.3%
Platform revenue(2) $2,847 $2,740 $2,665 $2,581 $2,716 $131 4.8% $10,833 $10,126 $707 7.0%

(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.

SYNCHRONY FINANCIAL

RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES(1)

(unaudited, $ in millions, except per share statistics)

Quarter Ended
Dec 31,

2015

Sep 30,

2015

Jun 30,

2015

Mar 31,

2015

Dec 31,

2014

COMMON EQUITY MEASURES

GAAP Total common equity $12,604 $12,158 $11,578 $11,036 $10,478
Less: Goodwill (949) (949) (949) (949) (949)
Less: Intangible assets, net (701) (646) (575) (557) (519)
Tangible common equity $10,954 $10,563 $10,054 $9,530 $9,010

Adjustments for certain other intangible assets, deferred tax liabilities and certain items in accumulated comprehensive income (loss)

293 287

Basel I - Tier 1 capital and Tier 1 common equity

$9,823 $9,297

Adjustments for certain other intangible assets and deferred tax liabilities

(12) (20)

Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)

280 291 293

Basel III - Common equity Tier 1 (fully phased-in)

$11,234 $10,854 $10,347 $9,811 $9,277

Adjustment related to capital components during transition

399 375 331

Basel III - Common equity Tier I (transition)

$11,633 $11,229 $10,678

RISK-BASED CAPITAL

Tier 1 capital and Tier 1 common equity(2) $11,633 $11,229 $10,678 $9,823 $9,297

Add: Allowance for loan losses includible in risk-based capital

900 835 806 759 809
Risk-based capital(2) $12,533 $12,064 $11,484 $10,582 $10,106

ASSET MEASURES

Total assets(3) $82,029 $77,995 $74,143 $72,721 $75,707
Adjustments for:

Disallowed goodwill and other disallowed intangible assets, net of related deferred tax liabilities

(992) (931) (903) (1,213) (1,181)
Other 92 104 60 136 79
Total assets for leverage purposes(2) $81,129 $77,168 $73,300 $71,644 $74,605
Risk-weighted assets - Basel I n/a n/a n/a $58,184 $62,270

Risk-weighted assets - Basel III (fully phased-in)(4)

$70,654 $65,278 $62,970 $59,926 $64,162

Risk-weighted assets - Basel III (transition)(4)

$69,386 $64,244 $61,985 n/a n/a

TANGIBLE COMMON EQUITY PER SHARE

GAAP book value per share $15.12 $14.58 $13.89 $13.24 $12.57
Less: Goodwill (1.14) (1.14) (1.14) (1.14) (1.14)
Less: Intangible assets, net (0.84) (0.77) (0.69) (0.67) (0.62)
Tangible common equity per share $13.14 $12.67 $12.06 $11.43 $10.81

(1) Regulatory capital metrics at December 31, 2015 are preliminary and therefore subject to change.

(2) 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 periods prior to June 30, 2015.

(3) Represents total average assets beginning June 30, 2015 and total assets for all periods prior to June 30, 2015.

(4) 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.

Contacts:

Synchrony Financial
Investor Relations
Greg Ketron, 203-585-6291
or
Media Relations
Samuel Wang, 203-585-2933

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