Document
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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
July 21, 2020
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))
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.001 per share
SYF
New York Stock Exchange
Depositary Shares Each Representing a 1/40th Interest in a Share of 5.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A
SYFPrA
New York Stock Exchange




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨




Item 2.02    Results of Operations and Financial Condition.
On July 21, 2020, Synchrony Financial (the “Company”) issued a press release setting forth the Company’s second quarter 2020 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 July 21, 2020, issued by Synchrony Financial
99.2
 
Financial Data Supplement of the Company for the quarter ended June 30, 2020
99.3
 
Financial Results Presentation of the Company for the quarter ended June 30, 2020
99.4
 
Explanation of Non-GAAP Measures
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL





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: July 21, 2020
 
 
 
By:
 
/s/ Jonathan Mothner
 
 
 
 
Name:
 
Jonathan Mothner
 
 
 
 
Title:
 
Executive Vice President, General Counsel and Secretary






EXHIBIT INDEX
 
 
 
 
Number
  
Description
 
 
  
 
 
 
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL




Exhibit 99.1

syf1q16eprimage16.jpg
Investor Relations    Media Relations
Greg Ketron    Sue Bishop
(203) 585-6291    (203) 585-2802
For Immediate Release: July 21, 2020
Synchrony Reports Second Quarter Net Earnings of $48 Million or $0.06 Per Diluted Share
Increase in Provision for Credit Losses Includes CECL Impact of $483 Million or $0.63 Per Diluted Share

STAMFORD, Conn. – Synchrony Financial (NYSE: SYF) today announced second quarter 2020 earnings results amid the continuing Coronavirus (COVID-19) pandemic. Synchrony reported second quarter 2020 net earnings of $48 million, or $0.06 per diluted share; this includes an increase in the provision for credit losses as a result of CECL implementation earlier this year of $483 million, or $365 million after tax, which equates to an EPS reduction of $0.63. Highlights included*:
•
Loan receivables decreased 4% to $78.3 billion, or 3% on a Core** basis
•
Interest and fees on loans decreased 18% to $3.8 billion, or 7% on a Core basis
•
Purchase volume decreased 19% to $31.2 billion, or 13% on a Core basis
•
Average active accounts decreased 14% to 65 million, or 5% on a Core basis
•
Deposits decreased $1.5 billion, or 2%, to $64.1 billion
•
Successfully launched the new Verizon program
•
Established new relationships with Adorama, AdventHealth, Club Champion, Hisun, and Modani
•
Renewed and extended key relationships with CarX, Englert, Bernina, Hanks, Puronics, Vanderhall, and West Coast Dental
•
Returned $128 million in capital through common stock dividends

“We continue to support our employees, partners, customers and communities during the uncertainty of today’s health and economic crisis. In addition, our country is awakening to the need to meaningfully address racial injustice and equality. We continue to be guided by the principle of putting clients, partners, shareholders and communities at the forefront of all we do, and believe that the values which underpin our organization will empower us to become an even stronger, better company,” said Margaret Keane, Chief Executive Officer of Synchrony Financial. “As we navigate this new environment, we remain acutely focused on the future of our business. During the quarter, we successfully launched an exciting new program with Verizon and extended several programs, while also adding new partnerships. We believe we have an advantageous position as the shift to digital has accelerated—we will continue to prioritize investments to augment our digital assets and capabilities to meet the rapidly evolving needs of our cardholders and partners.”


1

Business and Financial Highlights for the Second Quarter of 2020*
Earnings
•
Net interest income decreased $759 million, or 18%, to $3.4 billion, mainly due to the Walmart consumer portfolio sale and impact of COVID-19.
•
Retailer share arrangements decreased $86 million, or 10%, to $773 million, reflecting the initial impact of COVID-19 on program performance.
•
Provision for credit losses increased $475 million, or 40%, to $1.7 billion, mainly driven by the reserve increase for the projected impact of COVID-19 related losses and the prior year reserve reduction related to Walmart.
•
Other income increased $5 million, or 6%, to $95 million.
•
Other expense decreased $73 million, or 7%, mainly due to the cost reductions from Walmart, lower purchase volume and accounts as well as reductions in certain discretionary spend, partially offset by higher operational losses, expenses related to the COVID-19 response and charitable contributions.
•
Net earnings totaled $48 million compared to $853 million last year.
Balance Sheet
•
Period-end loan receivables decreased 4%, or 3% on a Core basis; purchase volume decreased 19%, or 13% on a Core basis; and average active accounts decreased 14%, or 5% on a Core basis.
•
Deposits decreased $1.5 billion, or 2%, to $64.1 billion and comprised 80% of funding.
•
The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $28.0 billion, or 29.0% of total assets.
•
The Company has elected to defer the regulatory capital effects of CECL for two years; the estimated Common Equity Tier 1 ratio was 15.3% compared to 14.3%, and the estimated Tier 1 Capital ratio was 16.3% compared to 14.3%, reflecting the Company’s strong capital generation capabilities. The estimated Tier 1 Capital ratio also reflects the $750 million preferred stock issuance in November 2019.
Key Financial Metrics
•
Return on assets was 0.2% and return on equity was 1.6%.
•
Net interest margin was 13.53%.
•
Efficiency ratio was 36.3%.
Credit Quality
•
Loans 30+ days past due as a percentage of total period-end loan receivables were 3.13% compared to 4.43% last year; excluding the Walmart consumer portfolio, the rate was down approximately 90 basis points compared to last year.
•
Net charge-offs as a percentage of total average loan receivables were 5.35% compared to 6.01% last year; excluding the Walmart consumer portfolio, the rate decreased approximately 20 basis points compared to last year.
•
The allowance for credit losses as a percentage of total period-end loan receivables was 12.52%.
Sales Platforms
•
Retail Card period-end loan receivables decreased 4%, driven primarily by the impact from COVID-19, partially offset by growth in digital partners. Interest and fees on loans decreased 22%, purchase volume

2

decreased 17%, and average active accounts decreased 18%, driven primarily by the sale of the Walmart consumer portfolio and the decline in loan receivables.
•
Payment Solutions period-end loan receivables decreased 3%; period-end loan receivables increased 1% on a Core basis led by growth in Power, substantially offset by the impact from COVID-19. Interest and fees on loans decreased 8%, driven primarily by lower late fees. Purchase volume decreased 19% and average active accounts decreased 3%.
•
CareCredit period-end loan receivables decreased 5%, driven primarily by the impact from COVID-19, partially offset by growth in Veterinary. Interest and fees on loans decreased 4%, driven primarily by lower merchant discount as a result of the decline in purchase volume, which decreased 31%. Average active accounts decreased 2%.
* All comparisons are for the second quarter of 2020 compared to the second quarter of 2019, unless otherwise noted.
** Financial measures shown above on a Core basis are non-GAAP measures and exclude from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the financial tables.
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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed February 13, 2020, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. 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 Tuesday, July 21, 2020, at 8:30 a.m. Eastern Time, Margaret Keane, Chief Executive Officer, Brian Doubles, President, and Brian Wenzel Sr., 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 the Synchrony Financial corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will also be available on the website.
About Synchrony Financial
Synchrony (NYSE: SYF) is a premier consumer financial services company. We deliver a wide range of specialized financing programs, as well as innovative consumer banking products, across key industries including digital, retail, home, auto, travel, health and pet. Synchrony enables our partners to grow sales and loyalty with consumers. We are one of the largest issuers of private label credit cards in the United States; we also offer co-branded products, installment loans and consumer financing products for small- and medium-sized businesses, as well as healthcare providers.
Synchrony is changing what’s possible through our digital capabilities, deep industry expertise, actionable data insights, frictionless customer experience and customized financing solutions.
For more information, visit www.synchrony.com and Twitter: @Synchrony.


3

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 "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "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, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; 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; 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 acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; 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; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, 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; 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 other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau’s regulation of our business; 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 the 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

4

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, 2019, as filed on February 13, 2020, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed on April 22, 2020. You should not consider any list of such factors to be an exhaustive statement of all 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 "tangible common equity" and certain “Core” financial measures that have been adjusted to exclude amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively, 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.


5
Exhibit 99.2


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Six Months Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
2Q'20 vs. 2Q'19
 
Jun 30,
2020
 
Jun 30,
2019
 
YTD'20 vs. YTD'19
EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
3,396

 
$
3,890

 
$
4,029

 
$
4,389

 
$
4,155

 
$
(759
)
(18.3
)%
 
$
7,286

 
$
8,381

 
$
(1,095
)
(13.1
)%
Retailer share arrangements
(773
)
 
(926
)
 
(1,029
)
 
(1,016
)
 
(859
)
 
86

(10.0
)%
 
(1,699
)
 
(1,813
)
 
114

(6.3
)%
Provision for credit losses
1,673

 
1,677

 
1,104

 
1,019

 
1,198

 
475

39.6
 %
 
3,350

 
2,057

 
1,293

62.9
 %
Net interest income, after retailer share arrangements and provision for credit losses
950

 
1,287

 
1,896

 
2,354

 
2,098

 
(1,148
)
(54.7
)%
 
2,237

 
4,511

 
(2,274
)
(50.4
)%
Other income
95

 
97

 
104

 
85

 
90

 
5

5.6
 %
 
192

 
182

 
10

5.5
 %
Other expense
986

 
1,002

 
1,079

 
1,064

 
1,059

 
(73
)
(6.9
)%
 
1,988

 
2,102

 
(114
)
(5.4
)%
Earnings before provision for income taxes
59

 
382

 
921

 
1,375

 
1,129

 
(1,070
)
(94.8
)%
 
441

 
2,591

 
(2,150
)
(83.0
)%
Provision for income taxes
11

 
96

 
190

 
319

 
276

 
(265
)
(96.0
)%
 
107

 
631

 
(524
)
(83.0
)%
Net earnings
$
48

 
$
286

 
$
731

 
$
1,056

 
$
853

 
$
(805
)
(94.4
)%
 
$
334

 
$
1,960

 
$
(1,626
)
(83.0
)%
Net earnings available to common stockholders
$
37

 
$
275

 
$
731

 
$
1,056

 
$
853

 
$
(816
)
(95.7
)%
 
$
312

 
$
1,960


$
(1,648
)
(84.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 


 


 
 
 
 
 
 
 
 


 


 


 
COMMON SHARE STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
$
0.06

 
$
0.45

 
$
1.15

 
$
1.60

 
$
1.25

 
$
(1.19
)
(95.2
)%
 
$
0.52

 
$
2.82

 
$
(2.30
)
(81.6
)%
Diluted EPS
$
0.06

 
$
0.45

 
$
1.15

 
$
1.60

 
$
1.24

 
$
(1.18
)
(95.2
)%
 
$
0.52

 
$
2.81

 
$
(2.29
)
(81.5
)%
Dividend declared per share
$
0.22

 
$
0.22

 
$
0.22

 
$
0.22

 
$
0.21

 
$
0.01

4.8
 %
 
$
0.44

 
$
0.42

 
$
0.02

4.8
 %
Common stock price
$
22.16

 
$
16.09

 
$
36.01

 
$
34.09

 
$
34.67

 
$
(12.51
)
(36.1
)%
 
$
22.16

 
$
34.67

 
$
(12.51
)
(36.1
)%
Book value per share
$
19.13

 
$
19.27

 
$
23.31

 
$
23.13

 
$
22.03

 
$
(2.90
)
(13.2
)%
 
$
19.13

 
$
22.03

 
$
(2.90
)
(13.2
)%
Tangible common equity per share(1)
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
$
18.60

 
$
(3.32
)
(17.8
)%
 
$
15.28

 
$
18.60

 
$
(3.32
)
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning common shares outstanding
583.2

 
615.9

 
653.7

 
668.9

 
688.8

 
(105.6
)
(15.3
)%
 
615.9

 
718.8

 
(102.9
)
(14.3
)%
Issuance of common shares
—

 
—

 
—

 
—

 
—

 
—

—
 %
 
—

 
—

 
—

—
 %
Stock-based compensation
0.5

 
0.9

 
0.6

 
0.4

 
1.2

 
(0.7
)
(58.3
)%
 
1.4

 
2.1

 
(0.7
)
(33.3
)%
Shares repurchased
—

 
(33.6
)
 
(38.4
)
 
(15.6
)
 
(21.1
)
 
21.1

(100.0
)%
 
(33.6
)
 
(52.0
)
 
18.4

(35.4
)%
Ending common shares outstanding
583.7

 
583.2

 
615.9

 
653.7

 
668.9

 
(85.2
)
(12.7
)%
 
583.7

 
668.9

 
(85.2
)
(12.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
583.7

 
604.9

 
633.7

 
658.3

 
683.6

 
(99.9
)
(14.6
)%
 
594.3

 
694.8

 
(100.5
)
(14.5
)%
Weighted average common shares outstanding (fully diluted)
584.4

 
607.4

 
637.7

 
661.7

 
686.5

 
(102.1
)
(14.9
)%
 
595.9

 
697.7

 
(101.8
)
(14.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Six Months Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
2Q'20 vs. 2Q'19
 
Jun 30,
2020
 
Jun 30,
2019
 
YTD'20 vs. YTD'19
PERFORMANCE METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on assets(1)
0.2
%
 
1.1
%
 
2.7
%
 
3.9
%
 
3.3
%
 


(3.1
)%
 
0.7
%
 
3.8
%
 


(3.1
)%
Return on equity(2)
1.6
%
 
9.1
%
 
19.0
%
 
28.3
%
 
23.1
%
 


(21.5
)%
 
5.4
%
 
26.7
%
 


(21.3
)%
Return on tangible common equity(3)
1.6
%
 
11.6
%
 
23.0
%
 
33.4
%
 
27.4
%
 


(25.8
)%
 
6.7
%
 
31.6
%
 


(24.9
)%
Net interest margin(4)
13.53
%
 
15.15
%
 
15.01
%
 
16.29
%
 
15.75
%
 


(2.22
)%
 
14.35
%
 
15.92
%
 


(1.57
)%
Efficiency ratio(5)
36.3
%
 
32.7
%
 
34.8
%
 
30.8
%
 
31.3
%
 


5.0
 %
 
34.4
%
 
31.1
%
 


3.3
 %
Other expense as a % of average loan receivables, including held for sale
5.04
%
 
4.77
%
 
5.01
%
 
4.66
%
 
4.78
%
 


0.26
 %
 
4.90
%
 
4.74
%
 


0.16
 %
Effective income tax rate
18.6
%
 
25.1
%
 
20.6
%
 
23.2
%
 
24.4
%
 


(5.8
)%
 
24.3
%
 
24.4
%
 


(0.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs as a % of average loan receivables, including held for sale
5.35
%
 
5.36
%
 
5.15
%
 
5.35
%
 
6.01
%
 


(0.66
)%
 
5.35
%
 
6.04
%
 


(0.69
)%
30+ days past due as a % of period-end loan receivables(6)
3.13
%
 
4.24
%
 
4.44
%
 
4.47
%
 
4.43
%
 


(1.30
)%
 
3.13
%
 
4.43
%
 


(1.30
)%
90+ days past due as a % of period-end loan receivables(6)
1.77
%
 
2.10
%
 
2.15
%
 
2.07
%
 
2.16
%
 


(0.39
)%
 
1.77
%
 
2.16
%
 


(0.39
)%
Net charge-offs
$
1,046

 
$
1,125

 
$
1,109

 
$
1,221

 
$
1,331

 
$
(285
)
(21.4
)%
 
$
2,171

 
$
2,675

 
$
(504
)
(18.8
)%
Loan receivables delinquent over 30 days(6)
$
2,453

 
$
3,500

 
$
3,874

 
$
3,723

 
$
3,625

 
$
(1,172
)
(32.3
)%
 
$
2,453

 
$
3,625

 
$
(1,172
)
(32.3
)%
Loan receivables delinquent over 90 days(6)
$
1,384

 
$
1,735

 
$
1,877

 
$
1,723

 
$
1,768

 
$
(384
)
(21.7
)%
 
$
1,384

 
$
1,768

 
$
(384
)
(21.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for credit losses (period-end)
$
9,802

 
$
9,175

 
$
5,602

 
$
5,607

 
$
5,809

 
$
3,993

68.7
 %
 
$
9,802

 
$
5,809

 
$
3,993

68.7
 %
Allowance coverage ratio(7)
12.52
%
 
11.13
%
 
6.42
%
 
6.74
%
 
7.10
%
 


5.42
 %
 
12.52
%
 
7.10
%
 


5.42
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BUSINESS METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(8)(9)
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

 
$
38,291

 
$
(7,136
)
(18.6
)%
 
$
63,197

 
$
70,804

 
$
(7,607
)
(10.7
)%
Period-end loan receivables
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

 
$
81,796

 
$
(3,483
)
(4.3
)%
 
$
78,313

 
$
81,796

 
$
(3,483
)
(4.3
)%
Credit cards
$
75,353

 
$
79,832

 
$
84,606

 
$
79,788

 
$
78,446

 
$
(3,093
)
(3.9
)%
 
$
75,353

 
$
78,446

 
$
(3,093
)
(3.9
)%
Consumer installment loans
$
1,779

 
$
1,390

 
$
1,347

 
$
2,050

 
$
1,983

 
$
(204
)
(10.3
)%
 
$
1,779

 
$
1,983

 
$
(204
)
(10.3
)%
Commercial credit products
$
1,140

 
$
1,203

 
$
1,223

 
$
1,317

 
$
1,328

 
$
(188
)
(14.2
)%
 
$
1,140

 
$
1,328

 
$
(188
)
(14.2
)%
Other
$
41

 
$
44

 
$
39

 
$
52

 
$
39

 
$
2

5.1
 %
 
$
41

 
$
39

 
$
2

5.1
 %
Average loan receivables, including held for sale
$
78,697

 
$
84,428

 
$
85,376

 
$
90,556

 
$
88,792

 
$
(10,095
)
(11.4
)%
 
$
81,563

 
$
89,344

 
$
(7,781
)
(8.7
)%
Period-end active accounts (in thousands)(9)(10)
63,430

 
68,849

 
75,471

 
77,094

 
76,065

 
(12,635
)
(16.6
)%
 
63,430

 
76,065

 
(12,635
)
(16.6
)%
Average active accounts (in thousands)(9)(10)
64,836

 
72,078

 
73,734

 
76,695

 
75,525

 
(10,689
)
(14.2
)%
 
68,401

 
76,545

 
(8,144
)
(10.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIQUIDITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liquid assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
16,344

 
$
13,704

 
$
12,147

 
$
11,461

 
$
11,755

 
$
4,589

39.0
 %
 
$
16,344

 
$
11,755

 
$
4,589

39.0
 %
Total liquid assets
$
22,352

 
$
19,225

 
$
17,322

 
$
15,201

 
$
16,665

 
$
5,687

34.1
 %
 
$
22,352

 
$
16,665

 
$
5,687

34.1
 %
Undrawn credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undrawn credit facilities
$
5,650

 
$
5,600

 
$
6,050

 
$
6,500

 
$
7,050

 
$
(1,400
)
(19.9
)%
 
$
5,650

 
$
7,050

 
$
(1,400
)
(19.9
)%
Total liquid assets and undrawn credit facilities
$
28,002

 
$
24,825

 
$
23,372

 
$
21,701

 
$
23,715

 
$
4,287

18.1
 %
 
$
28,002

 
$
23,715

 
$
4,287

18.1
 %
Liquid assets % of total assets
23.15
%
 
19.61
%
 
16.52
%
 
14.35
%
 
15.66
%
 


7.49
 %
 
23.15
%
 
15.66
%
 


7.49
 %
Liquid assets including undrawn credit facilities % of total assets
29.00
%
 
25.32
%
 
22.30
%
 
20.48
%
 
22.29
%
 


6.71
 %
 
29.00
%
 
22.29
%
 


6.71
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 available to common stockholders 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, plus other income, less retailer share arrangements.
 
 
 
 
 
 
 
(6) Based on customer statement-end balances extrapolated to the respective period-end date.
 
 
 
 
 
 
 
(7) Allowance coverage ratio represents allowance for credit 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) Includes activity and accounts associated with loan receivables held for sale.
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 

2


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENTS OF EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Six Months Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
2Q'20 vs. 2Q'19
 
Jun 30,
2020
 
Jun 30,
2019
 
YTD'20 vs. YTD'19
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

 
$
4,636

 
$
(828
)
(17.9
)%
 
$
8,148

 
$
9,323

 
$
(1,175
)
(12.6
)%
Interest on cash and debt securities
22

 
67

 
93

 
91

 
102

 
(80
)
(78.4
)%
 
89

 
201

 
(112
)
(55.7
)%
Total interest income
3,830

 
4,407

 
4,585

 
4,981

 
4,738

 
(908
)
(19.2
)%
 
8,237

 
9,524

 
(1,287
)
(13.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on deposits
293

 
356

 
383

 
411

 
397

 
(104
)
(26.2
)%
 
649

 
772

 
(123
)
(15.9
)%
Interest on borrowings of consolidated securitization entities
59

 
73

 
80

 
88

 
90

 
(31
)
(34.4
)%
 
132

 
190

 
(58
)
(30.5
)%
Interest on senior unsecured notes
82

 
88

 
93

 
93

 
96

 
(14
)
(14.6
)%
 
170

 
181

 
(11
)
(6.1
)%
Total interest expense
434

 
517

 
556

 
592

 
583

 
(149
)
(25.6
)%
 
951

 
1,143

 
(192
)
(16.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
3,396

 
3,890

 
4,029

 
4,389

 
4,155

 
(759
)
(18.3
)%
 
7,286

 
8,381

 
(1,095
)
(13.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retailer share arrangements
(773
)
 
(926
)
 
(1,029
)
 
(1,016
)
 
(859
)
 
86

(10.0
)%
 
(1,699
)
 
(1,813
)
 
114

(6.3
)%
Provision for credit losses
1,673

 
1,677

 
1,104

 
1,019

 
1,198

 
475

39.6
 %
 
3,350

 
2,057

 
1,293

62.9
 %
Net interest income, after retailer share arrangements and provision for credit losses
950

 
1,287

 
1,896

 
2,354

 
2,098

 
(1,148
)
(54.7
)%
 
2,237

 
4,511

 
(2,274
)
(50.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interchange revenue
134

 
161

 
192

 
197

 
194

 
(60
)
(30.9
)%
 
295

 
359

 
(64
)
(17.8
)%
Debt cancellation fees
69

 
69

 
64

 
64

 
69

 
—

—
 %
 
138

 
137

 
1

0.7
 %
Loyalty programs
(134
)
 
(158
)
 
(181
)
 
(203
)
 
(192
)
 
58

(30.2
)%
 
(292
)
 
(359
)
 
67

(18.7
)%
Other
26

 
25

 
29

 
27

 
19

 
7

36.8
 %
 
51

 
45

 
6

13.3
 %
Total other income
95

 
97

 
104

 
85

 
90

 
5

5.6
 %
 
192

 
182

 
10

5.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee costs
327

 
324

 
385

 
359

 
358

 
(31
)
(8.7
)%
 
651

 
711

 
(60
)
(8.4
)%
Professional fees
189

 
197

 
199

 
205

 
231

 
(42
)
(18.2
)%
 
386

 
463

 
(77
)
(16.6
)%
Marketing and business development
91

 
111

 
152

 
139

 
135

 
(44
)
(32.6
)%
 
202

 
258

 
(56
)
(21.7
)%
Information processing
116

 
123

 
122

 
127

 
123

 
(7
)
(5.7
)%
 
239

 
236

 
3

1.3
 %
Other
263

 
247

 
221

 
234

 
212

 
51

24.1
 %
 
510

 
434

 
76

17.5
 %
Total other expense
986

 
1,002

 
1,079

 
1,064

 
1,059

 
(73
)
(6.9
)%
 
1,988

 
2,102

 
(114
)
(5.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before provision for income taxes
59

 
382

 
921

 
1,375

 
1,129

 
(1,070
)
(94.8
)%
 
441

 
2,591

 
(2,150
)
(83.0
)%
Provision for income taxes
11

 
96

 
190

 
319

 
276

 
(265
)
(96.0
)%
 
107

 
631

 
(524
)
(83.0
)%
Net earnings
$
48

 
$
286

 
$
731

 
$
1,056

 
$
853

 
$
(805
)
(94.4
)%
 
$
334

 
$
1,960

 
$
(1,626
)
(83.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings available to common stockholders
$
37

 
$
275

 
$
731

 
$
1,056

 
$
853

 
$
(816
)
(95.7
)%
 
$
312

 
$
1,960

 
$
(1,648
)
(84.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 


3


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENTS OF FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
Jun 30, 2020 vs. Jun 30, 2019
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
16,344

 
$
13,704

 
$
12,147

 
$
11,461

 
$
11,755

 
$
4,589

39.0
 %
Debt securities
6,623

 
6,146

 
5,911

 
4,584

 
6,147

 
476

7.7
 %
Loan receivables:
 
 
 
 
 
 
 
 
 
 
 
 
Unsecuritized loans held for investment
52,629

 
54,765

 
58,398

 
56,220

 
55,178

 
(2,549
)
(4.6
)%
Restricted loans of consolidated securitization entities
25,684

 
27,704

 
28,817

 
26,987

 
26,618

 
(934
)
(3.5
)%
Total loan receivables
78,313

 
82,469

 
87,215

 
83,207

 
81,796

 
(3,483
)
(4.3
)%
Less: Allowance for credit losses(1)
(9,802
)
 
(9,175
)
 
(5,602
)
 
(5,607
)
 
(5,809
)
 
(3,993
)
68.7
 %
Loan receivables, net
68,511

 
73,294

 
81,613

 
77,600

 
75,987

 
(7,476
)
(9.8
)%
Loan receivables held for sale
4

 
5

 
725

 
8,182

 
8,096

 
(8,092
)
(100.0
)%
Goodwill
1,078

 
1,078

 
1,078

 
1,078

 
1,078

 
—

—
 %
Intangible assets, net
1,166

 
1,208

 
1,265

 
1,177

 
1,215

 
(49
)
(4.0
)%
Other assets
2,818

 
2,603

 
2,087

 
1,861

 
2,110

 
708

33.6
 %
Total assets
$
96,544

 
$
98,038

 
$
104,826

 
$
105,943

 
$
106,388

 
$
(9,844
)
(9.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
63,857

 
$
64,302

 
$
64,877

 
$
65,677

 
$
65,382

 
$
(1,525
)
(2.3
)%
Non-interest-bearing deposit accounts
291

 
313

 
277

 
295

 
263

 
28

10.6
 %
Total deposits
64,148

 
64,615

 
65,154

 
65,972

 
65,645

 
(1,497
)
(2.3
)%
Borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings of consolidated securitization entities
8,109

 
9,291

 
10,412

 
10,912

 
11,941

 
(3,832
)
(32.1
)%
Senior unsecured notes
7,960

 
7,957

 
9,454

 
9,451

 
9,303

 
(1,343
)
(14.4
)%
Total borrowings
16,069

 
17,248

 
19,866

 
20,363

 
21,244

 
(5,175
)
(24.4
)%
Accrued expenses and other liabilities
4,428

 
4,205

 
4,718

 
4,488

 
4,765

 
(337
)
(7.1
)%
Total liabilities
84,645

 
86,068

 
89,738

 
90,823

 
91,654

 
(7,009
)
(7.6
)%
Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
734

 
734

 
734

 
—

 
—

 
734

NM

Common stock
1

 
1

 
1

 
1

 
1

 
—

—
 %
Additional paid-in capital
9,532

 
9,523

 
9,537

 
9,520

 
9,500

 
32

0.3
 %
Retained earnings
9,852

 
9,960

 
12,117

 
11,533

 
10,627

 
(775
)
(7.3
)%
Accumulated other comprehensive income:
(37
)
 
(49
)
 
(58
)
 
(44
)
 
(43
)
 
6

(14.0
)%
Treasury stock
(8,183
)
 
(8,199
)
 
(7,243
)
 
(5,890
)
 
(5,351
)
 
(2,832
)
52.9
 %
Total equity
11,899

 
11,970

 
15,088

 
15,120

 
14,734

 
(2,835
)
(19.2
)%
Total liabilities and equity
$
96,544

 
$
98,038

 
$
104,826

 
$
105,943

 
$
106,388

 
$
(9,844
)
(9.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses ("CECL") that measures the allowance for credit losses based on management’s best estimate of expected credit losses for the life of our loan receivables. Prior periods presented reflect measurement of the allowance based on management’s estimate of probable incurred credit losses in accordance with the previous accounting guidance effective for those periods.

4


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
 
 
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
$
15,413

 
$
3

 
0.08
%
 
$
12,902

 
$
42

 
1.31
%
 
$
16,269

 
$
68

 
1.66
%
 
$
10,947

 
$
59

 
2.14
%
 
$
10,989

 
$
66

 
2.41
%
Securities available for sale
6,804

 
19

 
1.12
%
 
5,954

 
25

 
1.69
%
 
4,828

 
25

 
2.05
%
 
5,389

 
32

 
2.36
%
 
6,010

 
36

 
2.40
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan receivables, including held for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit cards
75,942

 
3,740

 
19.81
%
 
81,716

 
4,272

 
21.03
%
 
81,960

 
4,409

 
21.34
%
 
87,156

 
4,807

 
21.88
%
 
85,488

 
4,557

 
21.38
%
Consumer installment loans
1,546

 
37

 
9.63
%
 
1,432

 
35

 
9.83
%
 
2,058

 
48

 
9.25
%
 
2,022

 
48

 
9.42
%
 
1,924

 
44

 
9.17
%
Commercial credit products
1,150

 
30

 
10.49
%
 
1,243

 
33

 
10.68
%
 
1,311

 
34

 
10.29
%
 
1,329

 
35

 
10.45
%
 
1,330

 
34

 
10.25
%
Other
59

 
1

 
NM

 
37

 
—

 
—
%
 
47

 
1

 
NM

 
49

 
—

 
—
%
 
50

 
1

 
NM

Total loan receivables, including held for sale
78,697

 
3,808

 
19.46
%
 
84,428

 
4,340

 
20.67
%
 
85,376

 
4,492

 
20.87
%
 
90,556

 
4,890

 
21.42
%
 
88,792

 
4,636

 
20.94
%
Total interest-earning assets
100,914

 
3,830

 
15.26
%
 
103,284

 
4,407

 
17.16
%
 
106,473

 
4,585

 
17.08
%
 
106,892

 
4,981

 
18.49
%
 
105,791

 
4,738

 
17.96
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,486

 
 
 
 
 
1,450

 
 
 
 
 
1,326

 
 
 
 
 
1,374

 
 
 
 
 
1,271

 
 
 
 
Allowance for credit losses
(9,221
)
 
 
 
 
 
(8,708
)
 
 
 
 
 
(5,593
)
 
 
 
 
 
(5,773
)
 
 
 
 
 
(5,911
)
 
 
 
 
Other assets
4,779

 
 
 
 
 
4,696

 
 
 
 
 
3,872

 
 
 
 
 
3,920

 
 
 
 
 
3,752

 
 
 
 
Total non-interest-earning assets
(2,956
)
 
 
 
 
 
(2,562
)
 
 
 
 
 
(395
)
 
 
 
 
 
(479
)
 
 
 
 
 
(888
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
97,958

 
 
 
 
 
$
100,722

 
 
 
 
 
$
106,078

 
 
 
 
 
$
106,413

 
 
 
 
 
$
104,903

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
64,298

 
$
293

 
1.83
%
 
$
64,366

 
$
356

 
2.22
%
 
$
65,380

 
$
383

 
2.32
%
 
$
65,615

 
$
411

 
2.49
%
 
$
64,226

 
$
397

 
2.48
%
Borrowings of consolidated securitization entities
8,863

 
59

 
2.68
%
 
9,986

 
73

 
2.94
%
 
10,831

 
80

 
2.93
%
 
11,770

 
88

 
2.97
%
 
11,785

 
90

 
3.06
%
Senior unsecured notes
7,958

 
82

 
4.14
%
 
8,807

 
88

 
4.02
%
 
9,452

 
93

 
3.90
%
 
9,347

 
93

 
3.95
%
 
9,543

 
96

 
4.03
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-bearing liabilities
81,119

 
434

 
2.15
%
 
83,159

 
517

 
2.50
%
 
85,663

 
556

 
2.58
%
 
86,732

 
592

 
2.71
%
 
85,554

 
583

 
2.73
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposit accounts
309

 
 
 
 
 
299

 
 
 
 
 
281

 
 
 
 
 
283

 
 
 
 
 
271

 
 
 
 
Other liabilities
4,349

 
 
 
 
 
4,672

 
 
 
 
 
4,906

 
 
 
 
 
4,570

 
 
 
 
 
4,260

 
 
 
 
Total non-interest-bearing liabilities
4,658

 
 
 
 
 
4,971

 
 
 
 
 
5,187

 
 
 
 
 
4,853

 
 
 
 
 
4,531

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
85,777

 
 
 
 
 
88,130

 
 
 
 
 
90,850

 
 
 
 
 
91,585

 
 
 
 
 
90,085

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity
12,181

 
 
 
 
 
12,592

 
 
 
 
 
15,228

 
 
 
 
 
14,828

 
 
 
 
 
14,818

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
$
97,958

 
 
 
 
 
$
100,722

 
 
 
 
 
$
106,078

 
 
 
 
 
$
106,413

 
 
 
 
 
$
104,903

 
 
 
 
Net interest income
 
 
$
3,396

 
 
 
 
 
$
3,890

 
 
 
 
 
$
4,029

 
 
 
 
 
$
4,389

 
 
 
 
 
$
4,155

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread(1)
 
 
 
 
13.11
%
 
 
 
 
 
14.66
%
 
 
 
 
 
14.50
%
 
 
 
 
 
15.78
%
 
 
 
 
 
15.23
%
Net interest margin(2)
 
 
 
 
13.53
%
 
 
 
 
 
15.15
%
 
 
 
 
 
15.01
%
 
 
 
 
 
16.29
%
 
 
 
 
 
15.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average interest-earning assets.

5


 
 
 
 
 
 
 
 
 
 
 
 
SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
Jun 30, 2020
 
Six Months Ended
Jun 30, 2019
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-earning cash and equivalents
$
14,158

 
$
45

 
0.64
%
 
$
11,011

 
$
131

 
2.40
%
Securities available for sale
6,379

 
44

 
1.39
%
 
5,826

 
70

 
2.42
%
 
 
 
 
 
 
 
 
 
 
 
 
Loan receivables:
 
 
 
 
 
 
 
 
 
 
 
Credit cards, including held for sale
78,830

 
8,012

 
20.44
%
 
86,125

 
9,168

 
21.47
%
Consumer installment loans
1,489

 
72

 
9.72
%
 
1,884

 
86

 
9.21
%
Commercial credit products
1,196

 
63

 
10.59
%
 
1,291

 
68

 
10.62
%
Other
48

 
1

 
4.19
%
 
44

 
1

 
4.58
%
Total loan receivables, including held for sale
81,563

 
8,148

 
20.09
%
 
89,344

 
9,323

 
21.04
%
Total interest-earning assets
102,100

 
8,237

 
16.22
%
 
106,181

 
9,524

 
18.09
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,468

 
 
 
 
 
1,303

 
 
 
 
Allowance for loan losses
(8,965
)
 
 
 
 
 
(6,125
)
 
 
 
 
Other assets
4,737

 
 
 
 
 
3,741

 
 
 
 
Total non-interest-earning assets
(2,760
)
 
 
 
 
 
(1,081
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
99,340

 
 
 
 
 
$
105,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
64,332

 
$
649

 
2.03
%
 
$
64,002

 
$
772

 
2.43
%
Borrowings of consolidated securitization entities
9,425

 
132

 
2.82
%
 
12,592

 
190

 
3.04
%
Senior unsecured notes
8,382

 
170

 
4.08
%
 
9,219

 
181

 
3.96
%
Total interest-bearing liabilities
82,139

 
951

 
2.33
%
 
85,813

 
1,143

 
2.69
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposit accounts
304

 
 
 
 
 
278

 
 
 
 
Other liabilities
4,511

 
 
 
 
 
4,205

 
 
 
 
Total non-interest-bearing liabilities
4,815

 
 
 
 
 
4,483

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
86,954

 
 
 
 
 
90,296

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
Total equity
12,386

 
 
 
 
 
14,804

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
$
99,340

 
 
 
 
 
$
105,100

 
 
 
 
Net interest income
 
 
$
7,286

 
 
 
 
 
$
8,381

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread(1)
 
 
 
 
13.89
%
 
 
 
 
 
15.40
%
Net interest margin(2)
 
 
 
 
14.35
%
 
 
 
 
 
15.92
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average interest-earning assets.



6


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
BALANCE SHEET STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
Jun 30, 2020 vs.
Jun 30, 2019
BALANCE SHEET STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
Total common equity
$
11,165

 
$
11,236

 
$
14,354

 
$
15,120

 
$
14,734

 
$
(3,569
)
(24.2
)%
Total common equity as a % of total assets
11.56
%
 
11.46
%
 
13.69
%
 
14.27
%
 
13.85
%
 

(2.29
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible assets
$
94,300

 
$
95,752

 
$
102,483

 
$
103,688

 
$
104,095

 
$
(9,795
)
(9.4
)%
Tangible common equity(1)
$
8,921

 
$
8,950

 
$
12,011

 
$
12,865

 
$
12,441

 
$
(3,520
)
(28.3
)%
Tangible common equity as a % of tangible assets(1)
9.46
%
 
9.35
%
 
11.72
%
 
12.41
%
 
11.95
%
 

(2.49
)%
Tangible common equity per share(1)
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
$
18.60

 
$
(3.32
)
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 

Basel III - CECL Transition
 
Basel III
 
 
 
Total risk-based capital ratio(4)
17.6
%
 
16.5
%
 
16.3
%
 
15.8
%
 
15.6
%
 
 
 
Tier 1 risk-based capital ratio(5)
16.3
%
 
15.2
%
 
15.0
%
 
14.5
%
 
14.3
%
 
 
 
Tier 1 leverage ratio(6)
12.7
%
 
12.3
%
 
12.6
%
 
12.6
%
 
12.4
%
 
 
 
Common equity Tier 1 capital ratio
15.3
%
 
14.3
%
 
14.1
%
 
14.5
%
 
14.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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 ratios at June 30, 2020 are preliminary and therefore subject to change.
(3) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.
(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 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments. Tier 1 leverage ratios are based upon the use of daily averages for all periods presented.


 
 
 
 
 
 
 
 
 
 
 
 
 

7


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PLATFORM RESULTS
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Six Months Ended
 
 
 
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
 
2Q'20 vs. 2Q'19
 
Jun 30,
2020
 
Jun 30,
2019
 
YTD'20 vs. YTD'19
RETAIL CARD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
24,380

 
$
24,008

 
$
30,968

 
$
29,282

 
$
29,530

 
$
(5,150
)
(17.4
)%
 
$
48,388

 
$
54,190

 
$
(5,802
)
(10.7
)%
Period-end loan receivables
$
49,967

 
$
52,390

 
$
56,387

 
$
52,697

 
$
52,307

 
$
(2,340
)
(4.5
)%
 
$
49,967

 
$
52,307

 
$
(2,340
)
(4.5
)%
Average loan receivables, including held for sale
$
50,238

 
$
53,820

 
$
54,505

 
$
60,660

 
$
59,861

 
$
(9,623
)
(16.1
)%
 
$
52,029

 
$
60,409

 
$
(8,380
)
(13.9
)%
Average active accounts (in thousands)(2)(3)
46,970

 
53,018

 
54,662

 
58,082

 
57,212

 
(10,242
)
(17.9
)%
 
49,982

 
58,132

 
(8,150
)
(14.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
2,640

 
$
3,037

 
$
3,143

 
$
3,570

 
$
3,390

 
$
(750
)
(22.1
)%
 
$
5,677

 
$
6,844

 
$
(1,167
)
(17.1
)%
Other income
$
56

 
$
59

 
$
77

 
$
65

 
$
59

 
$
(3
)
(5.1
)%
 
$
115

 
$
135

 
$
(20
)
(14.8
)%
Retailer share arrangements
$
(752
)
 
$
(904
)
 
$
(988
)
 
$
(998
)
 
$
(836
)
 
$
84

(10.0
)%
 
$
(1,656
)
 
$
(1,776
)
 
$
120

(6.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PAYMENT SOLUTIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
4,823

 
$
5,375

 
$
6,402

 
$
6,281

 
$
5,948

 
$
(1,125
)
(18.9
)%
 
$
10,198

 
$
11,197

 
$
(999
)
(8.9
)%
Period-end loan receivables
$
19,119

 
$
19,973

 
$
20,528

 
$
20,478

 
$
19,766

 
$
(647
)
(3.3
)%
 
$
19,119

 
$
19,766

 
$
(647
)
(3.3
)%
Average loan receivables, including held for sale
$
19,065

 
$
20,344

 
$
20,701

 
$
20,051

 
$
19,409

 
$
(344
)
(1.8
)%
 
$
19,705

 
$
19,453

 
$
252

1.3
 %
Average active accounts (in thousands)(2)(3)
11,900

 
12,681

 
12,713

 
12,384

 
12,227

 
(327
)
(2.7
)%
 
12,266

 
12,321

 
(55
)
(0.4
)%
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
632

 
$
706

 
$
737

 
$
721

 
$
685

 
$
(53
)
(7.7
)%
 
$
1,338

 
$
1,371

 
$
(33
)
(2.4
)%
Other income
$
14

 
$
13

 
$
4

 
$
(1
)
 
$
11

 
$
3

27.3
 %
 
$
27

 
$
12

 
$
15

125.0
 %
Retailer share arrangements
$
(18
)
 
$
(18
)
 
$
(37
)
 
$
(15
)
 
$
(21
)
 
$
3

(14.3
)%
 
$
(36
)
 
$
(33
)
 
$
(3
)
9.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CARECREDIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)
$
1,952

 
$
2,659

 
$
2,842

 
$
2,832

 
$
2,813

 
$
(861
)
(30.6
)%
 
$
4,611

 
$
5,417

 
$
(806
)
(14.9
)%
Period-end loan receivables
$
9,227

 
$
10,106

 
$
10,300

 
$
10,032

 
$
9,723

 
$
(496
)
(5.1
)%
 
$
9,227

 
$
9,723

 
$
(496
)
(5.1
)%
Average loan receivables, including held for sale
$
9,394

 
$
10,264

 
$
10,170

 
$
9,845

 
$
9,522

 
$
(128
)
(1.3
)%
 
$
9,829

 
$
9,482

 
$
347

3.7
 %
Average active accounts (in thousands)(3)
5,966

 
6,379

 
6,359

 
6,229

 
6,086

 
(120
)
(2.0
)%
 
6,153

 
6,092

 
61

1.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
536

 
$
597

 
$
612

 
$
599

 
$
561

 
$
(25
)
(4.5
)%
 
$
1,133

 
$
1,108

 
$
25

2.3
 %
Other income
$
25

 
$
25

 
$
23

 
$
21

 
$
20

 
$
5

25.0
 %
 
$
50

 
$
35

 
$
15

42.9
 %
Retailer share arrangements
$
(3
)
 
$
(4
)
 
$
(4
)
 
$
(3
)
 
$
(2
)
 
$
(1
)
50.0
 %
 
$
(7
)
 
$
(4
)
 
$
(3
)
75.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SYF
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

 
$
38,291

 
$
(7,136
)
(18.6
)%
 
$
63,197

 
$
70,804

 
$
(7,607
)
(10.7
)%
Period-end loan receivables
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

 
$
81,796

 
$
(3,483
)
(4.3
)%
 
$
78,313

 
$
81,796

 
$
(3,483
)
(4.3
)%
Average loan receivables, including held for sale
$
78,697

 
$
84,428

 
$
85,376

 
$
90,556

 
$
88,792

 
$
(10,095
)
(11.4
)%
 
$
81,563

 
$
89,344

 
$
(7,781
)
(8.7
)%
Average active accounts (in thousands)(2)(3)
64,836

 
72,078

 
73,734

 
76,695

 
75,525

 
(10,689
)
(14.2
)%
 
68,401

 
76,545

 
(8,144
)
(10.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

 
$
4,636

 
$
(828
)
(17.9
)%
 
$
8,148

 
$
9,323

 
$
(1,175
)
(12.6
)%
Other income
$
95

 
$
97

 
$
104

 
$
85

 
$
90

 
$
5

5.6
 %
 
$
192

 
$
182

 
$
10

5.5
 %
Retailer share arrangements
$
(773
)
 
$
(926
)
 
$
(1,029
)
 
$
(1,016
)
 
$
(859
)
 
$
86

(10.0
)%
 
$
(1,699
)
 
$
(1,813
)
 
$
114

(6.3
)%
(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.
 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

8


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES(1)
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
COMMON EQUITY AND REGULATORY CAPITAL MEASURES(2)
 
 
 
 
 
 
 
 
 
GAAP Total equity
$
11,899

 
$
11,970

 
$
15,088

 
$
15,120

 
$
14,734

Less: Preferred stock
(734
)
 
(734
)
 
(734
)
 
—

 
—

Less: Goodwill
(1,078
)
 
(1,078
)
 
(1,078
)
 
(1,078
)
 
(1,078
)
Less: Intangible assets, net
(1,166
)
 
(1,208
)
 
(1,265
)
 
(1,177
)
 
(1,215
)
Tangible common equity
$
8,921

 
$
8,950

 
$
12,011

 
$
12,865

 
$
12,441

Add: CECL transition amount
2,570

 
2,417

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)
302

 
304

 
319

 
290

 
283

Common equity Tier 1
$
11,793

 
$
11,671

 
$
12,330

 
$
13,155

 
$
12,724

Preferred stock
734

 
734

 
734

 
—

 
—

Tier 1 capital
$
12,527

 
$
12,405

 
$
13,064

 
$
13,155

 
$
12,724

 
 
 
 
 
 
 
 
 
 
Add: Allowance for credit losses includible in risk-based capital
1,031

 
1,082

 
1,147

 
1,190

 
1,169

Total Risk-based capital
$
13,558

 
$
13,487

 
$
14,211

 
$
14,345

 
$
13,893

 
 
 
 
 
 
 
 
 
 
ASSET MEASURES(2)
 
 
 
 
 
 
 
 
 
Total average assets
$
97,958

 
$
100,722

 
$
106,078

 
$
106,413

 
$
104,903

Adjustments for:
 
 
 
 
 
 
 
 
 
Add: CECL transition amount
2,570

 
2,417

 
—

 
—

 
—

Disallowed goodwill and other disallowed intangible assets
(net of related deferred tax liabilities) and other
(1,980
)
 
(2,010
)
 
(2,059
)
 
(1,975
)
 
(2,003
)
Total assets for leverage purposes
$
98,548

 
$
101,129

 
$
104,019

 
$
104,438

 
$
102,900

 
 
 
 
 
 
 
 
 
 
Risk-weighted assets
$
77,048

 
$
81,639

 
$
87,302

 
$
90,772

 
$
88,890

 
 
 
 
 
 
 
 
 
 
CECL FULLY PHASED-IN CAPITAL MEASURES
 
 
 
 
 
 
 
 
 
Tier 1 capital
$
12,527

 
$
12,405

 
$
13,064

 
$
13,155

 
$
12,724

Less: CECL transition adjustment
(2,570
)
 
(2,417
)
 
—

 
—

 
—

Tier 1 capital (CECL fully phased-in)
$
9,957

 
$
9,988

 
$
13,064

 
$
13,155

 
$
12,724

Add: Allowance for credit losses
9,802

 
9,175

 
5,602

 
5,607

 
5,809

Tier 1 capital (CECL fully phased-in) + Reserves for credit losses
$
19,759

 
$
19,163

 
$
18,666

 
$
18,762

 
$
18,533

 
 
 
 
 
 
 
 
 
 
Risk-weighted assets
$
77,048

 
$
81,639

 
$
87,302

 
$
90,772

 
$
88,890

Less: CECL transition adjustment
(2,361
)
 
(2,204
)
 
—

 
—

 
—

Risk-weighted assets (CECL fully phased-in)
$
74,687

 
$
79,435

 
$
87,302

 
$
90,772

 
$
88,890

 
 
 
 
 
 
 
 
 
 
TANGIBLE COMMON EQUITY PER SHARE
 
 
 
 
 
 
 
 
 
GAAP book value per share
$
19.13

 
$
19.27

 
$
23.31

 
$
23.13

 
$
22.03

Less: Goodwill
(1.85
)
 
(1.85
)
 
(1.75
)
 
(1.65
)
 
(1.61
)
Less: Intangible assets, net
(2.00
)
 
(2.07
)
 
(2.06
)
 
(1.80
)
 
(1.82
)
Tangible common equity per share
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
$
18.60

 
 
 
 
 
 
 
 
 
 
(1) Regulatory measures at June 30, 2020 are presented on an estimated basis.
(2) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.


9


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES (Continued)
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Jun 30,
2019
ALLOWANCE FOR LOAN LOSSES (1)
 
 
 
 
 
 
 
 
 
Allowance for credit losses
$
9,802

 
$
9,175

 
N/A

 
N/A

 
N/A

Less: Impact from CECL(2)
(3,605
)
 
(3,122
)
 
—

 
—

 
—

Allowance for loan losses(1)
$
6,197

 
$
6,053

 
$
5,602

 
$
5,607

 
$
5,809

 
 
 
 
 
 
 
 
 
 
ALLOWANCE FOR LOAN LOSSES AS A % OF PERIOD-END LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
Allowance for credit losses as a % of period-end loan receivables
12.52
 %
 
11.13
 %
 
N/A

 
N/A

 
N/A

Less: Impact from CECL(2)
(4.61
)%
 
(3.79
)%
 
—
%
 
—
%
 
—
%
Allowance for loan losses as a % of period-end loan receivables
7.91
 %
 
7.34
 %
 
6.42
%
 
6.74
%
 
7.10
%
 
 
 
 
 
 
 
 
 
 
CORE PURCHASE VOLUME
 
 
 
 
 
 
 
 
 
Purchase Volume
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

 
$
38,291

Less: Walmart and Yamaha Purchase volume
—

 
—

 
(267
)
 
(2,381
)
 
(2,512
)
Core Purchase volume
$
31,155

 
$
32,042

 
$
39,945

 
$
36,014

 
$
35,779

 
 
 
 
 
 
 
 
 
 
CORE LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
Loan receivables
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

 
$
81,796

Less: Walmart and Yamaha Loan receivables
—

 
—

 
(3
)
 
(872
)
 
(1,188
)
Core Loan receivables
$
78,313

 
$
82,469

 
$
87,212

 
$
82,335

 
$
80,608

 
 
 
 
 
 
 
 
 
 
Retail Card Loan receivables
$
49,967

 
$
52,390

 
$
56,387

 
$
52,697

 
$
52,307

Less: Walmart Loan receivables
—

 
—

 
—

 
(112
)
 
(431
)
Core Loan receivables
$
49,967

 
$
52,390

 
$
56,387

 
$
52,585

 
$
51,876

 
 
 
 
 
 
 
 
 
 
Payment Solutions Loan receivables
$
19,119

 
$
19,973

 
$
20,528

 
$
20,478

 
$
19,766

Less: Yamaha Loan receivables
—

 
—

 
(3
)
 
(760
)
 
(757
)
Core Loan receivables
$
19,119

 
$
19,973

 
$
20,525

 
$
19,718

 
$
19,009

 
 
 
 
 
 
 
 
 
 
CORE AVERAGE ACTIVE ACCOUNTS (in thousands)
 
 
 
 
 
 
 
 
 
Average active accounts (in thousands)
64,836

 
72,078

 
73,734

 
76,695

 
75,525

Less: Walmart and Yamaha average Active accounts (in thousands)
—

 
—

 
(1,777
)
 
(7,001
)
 
(7,215
)
Core Average active accounts (in thousands)
64,836

 
72,078

 
71,957

 
69,694

 
68,310

 
 
 
 
 
 
 
 
 
 
CORE INTEREST AND FEES ON LOANS
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

 
$
4,636

Less: Walmart and Yamaha Interest and fees on loans
—

 
—

 
(69
)
 
(531
)
 
(520
)
Core Interest and fees on loans
$
3,808

 
$
4,340

 
$
4,423

 
$
4,359

 
$
4,116

 
 
 
 
 
 
 
 
 
 
(1) Beginning in 1Q'20, allowance for loan losses is calculated based upon accounting standards no longer effective, and as such is a Non-GAAP measure.
(2) Impact from CECL reflects the additional allowance for credit losses recorded in accordance with ASC 2016-13, as compared to the allowance for credit losses required had the prior accounting guidance been applied.


10

Exhibit 99.3 2Q’20 Financial Results July 21, 2020

 
Disclaimers 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 "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "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, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; 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; 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 acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; 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; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, 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; 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 other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau’s regulation of our business; 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 the 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, 2019, as filed on February 13, 2020, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed on April 22, 2020. You should not consider any list of such factors to be an exhaustive statement of all 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. 2

 
2Q’20 Highlights Financial Highlights Business Highlights • $48 million Net earnings, $0.06 diluted EPS • Launched a new partnership ‒ Increase in provision for credit losses for the quarter included impact from CECL implementation of $483 million, or $365 million after-tax, which equates to an EPS reduction of $0.63 • Core Growth metrics(a) down in 2Q’20 primarily due to COVID-19: • Added new partnerships ‒ Loan receivables down 4%; down 3% on a Core basis ‒ Interest and fees on loans down 18%; down 7% on a Core basis ‒ Purchase volume down 19%; down 13% on a Core basis ‒ Average active accounts down 14%; down 5% on a Core basis • Renewed and extended key relationships • Net charge-offs 5.35% compared to 6.01% in the prior year • Provision for credit losses up 40% primarily driven by reserve increase for projected impact of COVID-19 related losses and prior year reserve reduction related to Walmart • Efficiency ratio 36.3% compared to 31.3% in the prior year • Deposits down $1.5 billion compared to prior year • Strong capital and liquidity • Renewed, extended and established new CareCredit ‒ 15.3% CET1 & $22.4 billion liquid assets key relationships ‒ Returned $128 million in capital through common stock dividends (a) Growth Metrics shown above on a Core basis are non-GAAP measures and excludes from both the prior year and the current year amounts related to the Walmart and Yamaha 3 portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the appendix.

 
Accelerating Digital Innovation Digital Investments Helping Partners Fast-Track Online Transition Customers are Seeking and Rapidly Adopting Contactless Commerce (a) 72% 80% 49% prefer to skip are concerned agree that COVID- signature at the about signing 19 has inspired point of sale them to use contactless Digital Digital Digital Synchrony Apply Wallet Servicing Plug-In (SyPI®) 43% ~70% 48% >60% >$6B Mobile Channel Digital Online Digital Payments Application Applications* Sales* Payments* Made Through Growth* SyPI®* * 2Q’20 vs 2Q’19 * Percentage of Total Applications * Percentage of Retail Card total * 2Q’20 % of Total Payments * Through 2Q’20 excluding Walmart 4 (a) MASTERCARD PROPRIETARY RESEARCH, APRIL 10-12, 2020

 
COVID-19 Impact on Core Metrics (a) Purchase Volume Growth New Accounts (b) % in YoY Growth Rates 6.2 (36)% Mar 1-17 Mar 18-31 Apr 1-15 Apr 16-30 May 1-15 May 16-31 Jun 1 -15 Jun 16-30 4.0 14% 3% (4)% 2Q'19 2Q'20 (9)% (15)% (c) (23)% (26)% Purchase Volume per Account (31)% (8)% $524 $481 Platform Purchase Volume Growth % in YoY Growth Rates Jan Feb Mar Apr May Jun 10% 13% 0% Retail Card 2Q'19 2Q'20 (2)% (9)% (d) (21)% Average Balance per Account 13% 10% 1% Payment $1,164 $1,214 4% Solutions (11)% (15)% (41)% 14% 18% CareCredit (4)% (22)% (29)% (60)% 2Q'19 2Q'20 (a) All metrics exclude from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. (b) New Accounts represent accounts that were approved in the respective period in millions. 5 (c) Purchase Volume per Account is calculated as the Purchase volume divided by Average active accounts, in $. (d) Average Balance per Account is calculated as the Average loan receivables divided by Average active accounts, in $.

 
COVID Forbearance Impact – Program-to-Date through June 30th Min Pay Due (MPD) Performance Statistics Fee Waivers $ in millions Enrollments 56% $ in millions, accounts in thousands $47 $3,178 Program-to-Date Enrolled At June 30, 2020 Never Enrolled 27% 1,655 $20 $1,075 16% 509 6% Balance Accounts Credit Line Utilization Payment Rate Late Fees Interest Charges MPD Enrollment by Payment Behavior of Credit Score (b) (a) Date and Delinquency Enrolled Accounts 11% 40 35 40% 33% 30 8% Thousands 25 31% 20 34% 36% 15 61% 10 17% 5 22% 0 7% No Pay Currently Enrolled Not Enrolled Pay Less than Full Balance Current & < 30 days past due 30+ days past due Pay Balance in Full < 600 601-660 661-720 721+ (a) Reflects June performance for percent of accounts by payment status ever enrolled in the program. (b) Based on most recent FICO scores available for our customers in each period, weighted by balance, as a % of period-end receivables. If FICO score was not available, credit 6 bureau-based scores were mapped to a FICO equivalent. If neither score was available, the account was excluded.

 
Financial Results Summary earnings statement 2Q’20 Highlights B/(W) $ in millions, except per share statistics 2Q’20 2Q’19 $ % • $48 million Net earnings, $0.06 diluted EPS Total interest income $3,830 $4,738 $(908) (19)% • Net interest income down 18% driven by the Walmart sale and impact of COVID-19 Total interest expense 434 583 149 26% − Interest and fees on loans down 18% driven by the Net interest income (NII) 3,396 4,155 (759) (18)% Walmart sale and impact of COVID-19 Retailer share arrangements (RSA) (773) (859) 86 10% − Interest expense decrease driven primarily by lower benchmark rates Provision for credit losses 1,673 1,198 (475) (40)% • Retailer share arrangements down 10% Other income 95 90 5 6% • Provision for credit losses up 40% Other expense 986 1,059 73 7% − Increase is primarily driven by reserve increase for Pre-Tax earnings 59 1,129 (1,070) (95)% projected impact of COVID-19 related losses and prior year reserve reduction related to Walmart Provision for income taxes 11 276 265 96% − Net charge-offs of 5.35% compared to 6.01% in Net earnings 48 853 (805) (94)% the prior year primarily driven by the Walmart sale Preferred dividends 11 0 (11) NM • Other expense down 7% Net earnings available to common $37 $853 $(816) (96)% stockholders Diluted earnings per share $0.06 $1.24 $(1.18) 7

 
Growth Metrics Purchase volume (19)% Loan receivables (4)% $ in billions $ in billions $38.3 $81.8 $78.3 $31.2 Core (a) $35.8 $31.2 (13)% Core (a) $80.6 $78.3 (3)% 2Q'19 2Q'20 2Q'19 2Q'20 Dual Card / Dual Card / (b) $13.4 $10.4 (22)% (b) $19.2 $18.4 (4)% Co-Brand Co-Brand Average active accounts (14)% Interest and fees on loans (18)% in millions $ in millions 75.5 $4,636 64.8 $3,808 Core (a) 68.3 64.8 (5)% Core (a) $4,116 $3,808 (7)% 2Q'19 2Q'20 2Q'19 2Q'20 a) Financial measures shown above on a Core basis are non-GAAP measures. See non-GAAP reconciliation in the appendix. b) Dual Card / Co-Brand Purchase volume and Loan receivables shown above are consumer only and excludes from the prior year amounts related to the Walmart portfolio. 8

 
Platform Results(a) Retail Card Payment Solutions CareCredit Loan receivables, $ in billions Loan receivables, $ in billions Loan receivables, $ in billions (4)% (3)% (5)% $52.3 $19.8 $9.7 $50.0 $19.1 $9.2 Core(b) $51.9 $50.0 (4)% $19.0 $19.1 1% 2Q'19 2Q'20 V% 2Q'19 2Q'20 V% 2Q'19 2Q'20 V% Purchase volume $29.6 $24.4 (17)% $5.9 $4.8 (19)% $2.8 $2.0 (31)% Accounts 57.2 46.9 (18)% 12.2 11.9 (3)% 6.1 6.0 (2)% Interest and $3,390 $2,640 (22)% $685 $632 (8)% $561 $536 (4)% fees on loans • Receivable reduction primarily due • Core receivable growth driven by • Receivable reduction primarily to COVID-19 and partially offset by Power and substantially offset by due to COVID-19 and partially growth in digital partners COVID-19 offset by growth in Veterinary • Interest and fees on loans down • Interest and fees on loans down 8% • Interest and fees on loans down 22% driven primarily by the Walmart driven primarily by lower late fees 4% driven primarily by lower sale and the decline in loan merchant discount as a result of receivables the decline in purchase volume (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 Interest and fees on loans $ in millions. (b) Loan receivables shown above on a Core basis is a non-GAAP measure. See non-GAAP reconciliation in the appendix. 9

 
Net Interest Income Net interest income 2Q’20 Highlights $ in millions, % of average interest-earning assets • Net interest income decreased 18% compared to prior year driven by the Walmart sale and impact of COVID-19 (18)% − Interest and fees on loans decreased 18% compared to prior year driven by the Walmart sale and impact of $4,155 COVID-19 • Net interest margin (NIM) down 222bps. $3,396 − Loan receivables mix as a percent of total Earning Assets decreased from 83.9% to 78.0% driven by the impact of COVID-19 − Loan receivables yield 19.46%, down 148bps. versus prior year primarily driven by lower benchmark rates 15.75% 13.53% − Total interest-bearing liabilities cost decreased 58bps. to 2.15%, due primarily to lower benchmark rates NIM Walk 2Q’19 NIM 15.75% Mix of Interest-earning assets (1.13)% 2Q'19 2Q'20 Forbearance impact (0.24)% Loan receivables yield (1.01)% Liquidity portfolio yield (0.32)% Interest-bearing liabilities cost 0.48% 2Q’20 NIM 13.53% 10

 
Asset Quality Metrics 30+ days past due Net charge-offs $ in millions, % of period-end loan receivables $ in millions, % of average loan receivables including held for sale $4,430 $1,344 $1,331 $4,021 $3,957 $1,248 $1,221 $3,723 $3,874 $1,159 $3,625 $3,500 $1,087 $1,109 $1,125 $3,293 $1,046 4.92% $2,453 4.59% 4.76% 4.17% 4.43% 4.47% 4.44% 4.24% (a) (a) 5.97% 5.54% 6.06% 6.01% 3.13% 4.97% 5.35% 5.15% 5.36% 5.35% 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 90+ days past due Allowance for credit losses(b) $ in millions, % of period-end loan receivables $ in millions, % of period-end loan receivables $9,802 $9,175 $2,135 $2,019 12.52% $1,833 $1,877 $1,768 $1,723 $1,735 11.13% $6,223 $6,427 $1,561 $5,859 $5,942 $5,809 $1,384 $5,607 $5,602 $6,197 7.43% 7.39% $6,053 7.11% 6.90% 7.10% 6.74% 2.51% 6.42% 2.29% 1.98% 2.09% 2.16% 2.07% 2.15% 2.10% (a) 7.91% 1.77% 7.34% 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 (a) Excluding the Walmart Portfolio, 2Q’20 30+ rate was down ~90bps versus 2Q’19; 2Q’20 net charge-off rate was down ~20bps versus 2Q’19; 2Q’20 90+ rate was down ~10bps versus 2Q’19. (b) Allowance for credit losses reflects adoption of CECL on January 1, 2020, which included a $3.0 billion increase in reserves upon adoption. For comparability purposes, allowance for 11 loan losses in FY20 is also presented. This measure reflects the prior accounting guidance and is a non-GAAP measure for FY20. See non-GAAP reconciliation in appendix.

 
Other Expense Other expense $ in millions (7)% 2Q’20 Highlights $1,059 $986 • Other expense down 7% – Decrease primarily due to the cost reductions from Walmart, lower purchase volume and accounts as well as reductions in certain discretionary spend • Efficiency ratio 36.3% vs. 31.3% prior year – Other expense was negatively impacted by operational losses, expenditures related to our response to COVID-19 and charitable contributions 2Q'19 2Q'20 V$ V% – Excluding these impacts, efficiency ratio would Employee costs $358 $327 $(31) (9)% have been 260 bps lower in 2Q’20 Professional fees 231 189 (42) (18)% Marketing/BD 135 91 (44) (33)% Information processing 123 116 (7) (6)% Other 212 263 51 24% Other expense $1,059 $986 $(73) (7)% (a) Efficiency 31.3% 36.3% 5.0 pts. 12 (a) “Other expense” divided by sum of “NII” plus “Other income” less “Retailer share arrangements (RSA)”.

 
Funding, Capital and Liquidity Funding sources Capital ratios (b) $ in billions CET1 Capital Ratio $86.9 $80.2 V$ 14.3% 15.3% Unsecured $9.3 $8.0 $(1.3) $12.0 Securitization $8.1 $(3.9) 2Q’19 2Q’20 Transition Deposits $65.6 $64.1 $(1.5) Tier 1 Capital Ratio 14.3% 16.3% 2Q'19 2Q'20 Variance 2Q’19 2Q’20 Deposits 75% 80% +5 pts. Total Capital Ratio Transition Securitization 14% 10% (4) pts. 15.6% 17.6% Unsecured 11% 10% (1) pt. Liquidity (a) $28.0 $23.7 $ in billions 2Q’19 2Q’20 Tier 1 Capital + (c) Transition Credit Loss Reserve Ratio 26.5% 2Q'19 2Q'20 20.8% Liquid assets $16.7 $22.4 Undrawn credit facilities 7.0 5.6 Total liquidity $23.7 $28.0 2Q’19 2Q’20 % of Total assets 22.3% 29.0% Fully Phased-in (a) Does not include unencumbered assets in the Bank that could be pledged. (b) Capital ratios reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in 1Q’20. (c) The “Tier 1 Capital + Reserves Ratio” is the sum of our “Tier 1 Capital” and “Allowance for Credit Losses,” divided by our “Total Risk-Weighted Assets”. For 2Q’20, both Tier 1 Capital and 13 Risk-Weighted Assets are adjusted to reflect the fully phased-in impact of CECL. These adjusted metrics are non-GAAP measures, see non-GAAP reconciliation in appendix.

 
2Q’20 Wrap Up • Net earnings of $48 million … $0.06 diluted earnings per share • Increase in provision for credit losses for the quarter included impact from CECL implementation of $483 million, or $365 million after-tax, which equates to an EPS reduction of $0.63 • Core Growth metrics(a) down due to impact of COVID-19 … Purchase volume (13)%, Loan receivables (3)%, Average Active Accounts (5)%, Interest and fees on loans (7)% • Successfully launched a new partnership with Verizon • Established new relationships with Adorama, Advent Health, Club Champion, Hisun and Modani • Renewed and extended key relationships with CarX, Englert, Bernina, Hanks, Puronics, Vanderhall and West Coast Dental • Strong deposit platform … deposits at $64.1 billion comprising 80% of funding • Returned $128 million in capital through common stock dividends • Strong balance sheet, 15.3% CET1 and $22.4 billion of liquid assets (a) Growth Metrics shown above on a Core basis are non-GAAP measures and excludes from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the appendix. 14

 
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Appendix 16

 
Non-GAAP Reconciliation(a) The following table sets forth the components of our Growth Metrics and impact from CECL for the periods indicated below. At June 30, Total Retail Card Payment Solutions 2019 2020 2019 2020 2019 2020 Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $81.8 $78.3 $52.3 $50.0 $19.8 $19.1 Less: Walmart and Yamaha Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . (1.2) - (0.4) - (0.8) - Core Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80.6 $78.3 $51.9 $50.0 $19.0 $19.1 Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,809 $9,802 Less: 2Q’20 impact from CECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (3,605) Allowance for loan losses . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,809 $6,197 Allowance for credit losses as a % of period-end loan receivables . . . . . . . . N/A 12.52% Less: 2Q’20 impact from CECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (4.61)% Allowance for loan losses as a % of period-end loan receivables . . . . 7.10% 7.91% For the quarter ended June 30, Total 2019 2020 Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38.3 $31.2 Less: Walmart and Yamaha Purchase volume . . . . . . . . . . . . . . . . . . . . (2.5) - Core Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35.8 $31.2 Average active accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.5 64.8 Less: Walmart and Yamaha Average active accounts . . . . . . . . . . . . . . (7.2) - Core Average active accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68.3 64.8 Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,636 $3,808 Less: Walmart and Yamaha Interest and fees on loans . . . . . . . . . . . . . (520) - Core Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,116 $3,808 (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 17 the current month. Loan receivables and Purchase volume $ in billions. Interest and fees on loans, Allowance for credit losses, and Allowance for loan losses $ in millions.

 
Non-GAAP Reconciliation (continued)(a) The following table sets forth the components of our Tier 1 Capital + Reserves ratio for the periods indicated below. At June 30, Total 2019 2020 Tier 1 capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,724 $12,527 Less: CECL transition adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,570) Tier 1 capital (CECL fully phased-in) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,724 $9,957 Add: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,809 9,802 Tier 1 capital (CECL fully phased-in) plus Reserves for credit losses. $18,533 $19,759 Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $88,890 $77,048 Less: CECL transition adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,361) Risk-weighted assets (CECL fully phased-in) . . . . . . . . . . . . . . . . . . . . . . $88,890 $74,687 (a) Estimated at June 30, 2020, $ in millions. 18

 
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").
We present certain financial measures that have been adjusted to exclude amounts related to the Walmart and Yamaha portfolios from the prior year periods presented, which we refer to as "Core" financial measures, in this Form 8-K and exhibits. These Core financial measures are not measures presented in accordance with GAAP. Given the sale of the Walmart and Yamaha portfolios which were completed in October 2019 and January 2020, respectively, we believe the presentation of certain Core financial measures is a more meaningful measure to investors of the Company's ongoing credit programs.
On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”). For the initial year of adoption of the new accounting standard, we present what both our allowance for credit losses and allowance for credit losses as a percentage of our period-end loan receivables (“allowance coverage ratio”) would have been if the prior accounting guidance was still in effect. These measures are non-GAAP measures. We believe the presentation of these measures is meaningful to investors in providing comparability with the corresponding GAAP measures we report in prior year periods when the prior accounting guidance was effective.
In addition, we also present certain capital measures in this Form 8-K and exhibits. Our “fully-phased Tier 1 Capital and Credit Loss Reserve Ratio” is not required by regulators to be disclosed, and therefore is considered a non-GAAP measure. We believe this ratio is a useful measure to investors as it provides a meaningful measure of what the Company’s total loss absorption capacity would be if the transitional rules currently in effect, which permit the temporary deferral of the regulatory capital effects of CECL, were no longer available for us to apply.
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 reconciliations of the above non-GAAP measures to the applicable comparable GAAP financial measure are included in the detailed financial tables included in Exhibit 99.2.