SYNCHRONY FINANCIAL 2026 Q3 Earnings Call

Thank you, and good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the investor relations section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.

Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Kathryn. Good morning, everyone. Synchrony delivered strong third-quarter results, highlighted by broad-based purchase volume growth across each of our five sales platforms. Spend within our Diversified & Value platform increased 13% compared to last year, primarily reflecting the impact of partner expansion and higher gas prices. In Home & Auto, purchase volume increased 9% compared to last year, primarily reflecting the performance of new programs, select furniture retailers, and the impact of higher gas prices. Purchase volume was 6% higher in our Lifestyle platform, primarily reflecting strength in categories like other apparel and luxury, as well as the impact from our new programs. Meanwhile, digital platform sales grew 5%, driven by strong customer engagement across partners with broad diversified offerings and refreshed value propositions. In Health & Wellness, purchase volume grew 3%, primarily reflecting growth in pet.

Total purchase volume reached nearly $50 billion again this quarter, the highest third-quarter level in our history and an increase of 8% compared to last year. Approximately 53% of that spend occurred through Synchrony's co-branded cards in the third quarter, which increased 23% versus last year and was driven by the combination of new programs and product upgrades, delivering enhanced value propositions and increased utility, and higher broad-based spend across our card programs. Both discretionary and non-discretionary out-of-partner spend on our consumer co-brand cards grew by double digits. Strength in discretionary spend came from categories like electronics and entertainment, while in non-discretionary, gas station and discount store spend grew fastest.

As slide 3 shows, spend across Synchrony's portfolio is growing fastest among Gen Z and millennials, particularly in our Diversified & Value, digital, and Home & Auto platforms, where the strong value propositions and broad utility of our offerings resonate deeply. The significant growth across the younger age demographics has been enabled by our proprietary underwriting and data analytics platform, PRISM. Synchrony leverages over 9,000 data variables in cash flow underwriting to responsibly deliver purchase power to credit-ready customers, even when they are earlier in their financial journeys and often overlooked by other traditional lenders. Because we can meet our customer wherever and however they want to be met with the right product for that purchase, Synchrony is building relationships and delivering experiences that can unlock greater financial flexibility over time.

To that end, we recently introduced CareCredit Pay Later, an enhanced and rebranded installment loan product that will appear alongside CareCredit's existing credit card as another way for eligible customers to plan and pay for Health & Wellness-related products and services. It is now available at nearly 20,000 Health & Wellness locations, including dental, cosmetic, vision, and audiology care providers. By providing tailored choices upfront after one seamless application, this multi-product experience empowers customers with financing flexibility and payment structure optionality that aligns with their preferences. In addition, Synchrony and Venmo collaborated on a refreshed value proposition for the Venmo Credit Card with an industry-first feature that rewards social spending, offering cardholders more cashback for splitting purchases with friends on Venmo.

The Venmo Credit Card issued by Synchrony delivers unlimited daily cashback deposited directly into the account and offers a simple way to manage money and rewards together, all within the Venmo app. As we all know, the spending experience is constantly evolving. Digital wallets and agentic commerce are changing the way consumers discover, decide, and buy. Synchrony remains focused on the heart of what matters, connecting our customers, partners, merchants, and providers through seamless experiences and unmistakable value. Our new integration with Stripe, the programmable financial services company, will make it easier for both Synchrony's and Stripe's providers, and Health & Wellness retailers to offer CareCredit financing as part of their online checkout experience. More than 12 million CareCredit cardholders, as well as new approved applicants, will have opportunities to access trusted CareCredit financing for Health & Wellness purchases through participating Stripe providers.

Synchrony is also integrating with Vetspire, a leading cloud-based veterinary practice management software provider, to embed CareCredit financing options directly within Vetspire's AI-enabled cloud-based platform and give veterinary practices a more modern way to offer real-time payment solutions at the point of care. Vetspire is used by more than 1,000 veterinary hospitals and clinics nationwide, and about 85% are already CareCredit-enrolled providers. By operationalizing checkout workflows and making financial options easier to access, our collaboration aims to improve the experience for pet owners, reduce administrative friction for clinic teams, and support timely care for pets. Meanwhile, Synchrony's enterprise collaboration with OpenAI is designed to strengthen our positioning at the center of AI's next chapter in shopping and payments.

We have launched our Synchrony ChatGPT plugin, which allows consumers to discover savings and offers within the Synchrony Marketplace directly within ChatGPT and browse promotional financing deals and everyday value from participating partners in a fast conversational experience. From a corporate perspective, we are deploying the latest OpenAI models like GPT-6 Astra to enable deeper engagement with advanced capabilities, more meaningful product development, and faster technology innovation. Of course, Synchrony's AI strategy extends beyond adopting emerging technologies to helping define how they will operate across the broader commerce ecosystem. We have joined the Personal Agent Protocol, PAPI initiative, led by Sierra and Meta as a design partner, reflecting our commitment to helping define the open standards that will underpin the future of agentic commerce.

By contributing to the development of secure, transparent, and permission-based protocols for AI agents, Synchrony is helping advance an ecosystem that can deliver greater customer choice, trust, and scalability across digital commerce. As we look to the remainder of this year and the years ahead, Synchrony is executing on what we set out to do. We are extending our reach, enhancing the experiences we deliver, and driving optionality for our customers and partners. As a result, we are delivering attractive growth and strong risk-adjusted returns that position us to drive significant long-term value for our stakeholders. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Thanks, Brian, and good morning, everyone. Synchrony continued our focused execution and delivered another strong financial performance in the third quarter. We achieved record third quarter purchase volume, which grew across all five platforms. Ending loan receivables growth continued to accelerate while credit performance remained strong, resulting in attractive returns for our shareholders. More specifically, we generated net earnings of $892 million or $2.68 per diluted share, a return on average assets of 2.9%, a return on tangible common equity of 25.2%, and a 6% increase in tangible book value per share. Focusing on our performance in more detail. Purchase volume grew 8% versus last year and reached almost $50 billion, the second consecutive quarter at this level while maintaining our disciplined approach to credit. Ending loan receivables increased 3% to $103 billion as higher purchase volume more than offset ongoing effects of elevated payment rates.

The payment rate of 16.9% was approximately 60 basis points higher than last year and approximately 180 basis points above the pre-pandemic third quarter average, primarily reflecting the impacts of new portfolio seasoning, shifts in portfolio and product mix, and our previous credit actions. Net interest income increased 2% to $4.8 billion, primarily driven by the combination of higher interest and fees and lower interest expense, partially offset by lower investment income. Interest and fees increased 1%, primarily reflecting growth in average loan receivables. Interest expense decreased 3%, primarily due to lower benchmark rates. Our third quarter net interest margin decreased 12 basis points versus last year to 15.5%, reflecting three key drivers. One, a 20-basis point decrease in our loan receivable yield, which was primarily driven by lower assessed late fee incidents resulting from our strong credit performance.

The decline in loan receivables yield reduced our net interest margin by approximately 16 basis points. Two, a 62-basis point reduction in our liquidity portfolio yield, primarily due to lower benchmark rates. The decline in liquidity portfolio yield reduced our net interest margin by 10 basis points. Three, a 22-basis point decrease in the mix of loan receivables as a percent of interest-earning assets versus last year. This reduced our net interest margin by approximately five basis points. These factors were partially offset by a 27-basis point decline in our total interest-bearing liabilities cost, primarily due to lower benchmark rates, which contributed approximately 19 basis points to our net interest margin. On a sequential basis, net interest margin increased by 42 basis points, primarily due to two key factors.