Synchrony Financial (SYF) Earnings Call Transcript & Summary

All right. Hello again, everybody. Super excited to have Brian Wenzel, CFO of Synchrony.

Great, Erika, I appreciate the invite and being here in Miami.

Absolutely. So given your purview in your business, let's get started, maybe with the line of questioning with the consumer. So we saw your January card data 2 weeks ago. And for now, it still seems like the economy is set up for a soft landing. How would you describe to see it as the consumer today? And are things relatively stable versus where they were at the end of last year?

Yes. So I'm going to use one of the terms that's probably most used in views right now. The consumer is resilient in total. As we talked about, there's always this -- when we view a K-shaped recovery. So folks at the higher end, credit and income doing better than some of the ones who are either prime to non-prime. And that really hasn't changed as we entered into the first couple of months. If I was to give you a little bit of color on the consumer here kind of 2 months in, so let me just talk about spending. I think we're -- our fourth quarter earnings in January, one of the things that we noticed where sales were a little bit slower, right, in the first part of -- first couple of weeks of January. As we dissected that, I don't want to sound like a retailer, but there was a big weather. We looked at geography, the weather events did have a play with regard to that. So what we saw really into the back half of January now through, I'll call it, second or third week of February has been a better trend than I think, the beginning part, but I would say, a little bit slower than our anticipation in what we'd say on a year-over-year basis. If you break that down a little bit further, one of the things you're seeing is that some of the larger tickets, so particularly in Home and Auto, furniture, that's lower. Home Specialty is still doing incredibly well for us, which is great. And I think if you look at Lifestyle, again, the bigger ticket outside Outdoor, we're seeing a little bit of pressure year-over-year on volume as people kind of rotate. When you look at where they're spending, right? So we saw a slowdown in travel. That picked up a little bit in January as we kind of pulled in, but we still see restaurant, entertainment coming lower, clothing coming lower. So there's some interesting trends. When we look at that and then by credit grade, probably a little bit more pressure in the prime to 720 and below. But when you look at frequency, it's all fairly much in line except for nonprime. So I think the consumer is kind of being resilient as you think about that for a second. If I just take a step further because I know you're going to get to one point, but just wrap the other piece together, when you look at credit, right, which is the other angle, I know a lot of folks are thinking about credit. We're probably through '24 cycles in February. I think what we would think about is on a dollar basis, $30-plus is to be flattish to January, which I think from a trend perspective, bodes well, but that's what you want to see relative to how we thought about the charge-off. So I think overall credit is kind of in line, sales are a little bit softer. The last thing I'd say is if you go to payments, the payment rate has been a little bit slower. But I think from the asset standpoint, the asset holds in there. But just got there a slightly different way so far in the first couple of months of the year.

So speaking of credit. Back in January, for charge-offs, you did lay out an expectation for 5.75% to 6% this year. And the upper half of your long-term range would peak in the first half of the year. Can you help us unpack a little bit what gives you confidence? And I know you mentioned the dollar [ DQs ] to get to that first half peak.

Sure. First, Erika, I really want to take a step back and talk about how we got here. First of all, we don't -- as you know, and we talked about this quite often. We don't [ accordion ] in the [ credit box ]. So we don't use credit to expand growth or really track. We usually manage to a combined company loss rate and a risk-adjusted return. So as we kind of went through and exited the pandemic, it's that philosophy that, first of all, is a foundation. The second one is the investment that we've made in, we call it advanced underwriting. It's moving away from a lot of the score base, but more data-driven approaches as we get a lot of data from our partners, a lot of unique data that comes into the underwriting system. The way in which we originate, it requires us to be different. So we think those 2 things as fundamental foundations of our current program. I think as you look at -- you frame it as what gives us confidence, a couple of things. One, when we look at the year-over-year delinquency, it's been stable. We haven't seen an acceleration. It's just been very consistent. I think now, they just kind of told you, we think February is generally flattish. I think it's positive, you start to see the potentially -- hopefully, you'd see that kind of continuation or bend down. So I think that gives you the output. The second thing that we did, we talked about this both in the second and third quarters. We took some broader-based actions. We're always doing credit refinements on idiosyncratic basis. We took some broader-based actions on score migration or other things last year. That takes time to season. So I think when you look at the actions, the account management and origination actions we took last year, that should really help you not in 12 months out, which puts you more middle to back half of the year, the effects of those actions. So I think it's a combination of the foundation. It's a combination of the actions that we've taken that really give me the confidence to say we're going to be inside that range. And we're going to continue to manage to do that. We don't view going above the 6% as opportunistic for us. It's just not the right risk-adjusted margin we want to have. So I think it's a combination of those factors.

I'm going to put a pin on that and ask about the reserve later, but maybe going back to the first question. You alluded to this a little bit. Has there been any change in the spend patterns. And as we break out of the idiosyncrasy in weather. How do you think, spend trends are generally going to evolve this year?

Yes. First of all, the consumer as much as we give him credit for consuming a lot and overconsuming at times, they've managed to relative budget. So what we've seen is generally transaction values decreasing. Even though you see inflationary pressure throughout, all '23. But you see frequency kind of going up, you see the counter [ balancing ]. So consumers are being more thoughtful with where they get goods. We clearly see because we are a full spectrum lender. We're largest by number of accounts from a credit card perspective. We see pretty broad-based cost. We have seen shifts away from travel, even -- restaurant -- like restaurant values have trailed down. Both a little bit in frequency, but also on transactional value. So maybe not as high and maybe people takeout. They're not doing. We've seen some shifts there. We saw some shifts in the fourth quarter into clothing goods, which you've seen is more holiday. We've seen that back off here in the first month of 2024. So it's relatively consistent. We don't see things that are significant. Even when I look at by generational. So we look at the Gen Zs and millennials. They're all following the normal patterns and moving generally in the same direction. So we don't see anything that's troubling to us or outliers with regard to any segment where there's credit, call it the millennial, Gen Z type equation credit grade. So it's been fairly again, resilient or benign. I sit back and say.

Resilient, I think, is the critical word for the consumer these days, especially around here. Normalizing payment rates, which you mentioned, have been a big contributor to both loan growth and the increase in yields that we've seen over the past year. I think as of the fourth quarter, your payment rate was about 115 basis points...

Correct.

Above pre-pandemic levels. And you noted that you expect that to moderate further but remain above pre-pandemic. Just curious, do you feel like there's anything that's changed in terms of your customers, the way they use their cards that would suggest that this is the new normal?

Yes. So the simple answer is, no. We have not seen data. We can theorize why it's above. Most certainly, I think when you look at the mix for us, we have more super prime in, which will push the rate a little bit higher, a little bit less subprime. We have a little more shift to autopay, which a lot of people when they said autopay may be a level not necessarily statement balance. But generally speaking, I don't think we see something that says fundamentally, there's a shift. You always have shifts as we grow health and wellness, that has a slightly different payment rate given the promotional nature of it. But there's not something fundamental with the consumer that we see. Again, I go back to that K-shape recovery. We do see payment rate differential by credit grade. And again, the upper part of the credit spectrum has greater access, still has access to money that probably shouldn't have been afforded them through the pandemic period, where if it was more surgical, probably what it should have gone to lower credit grades. But other than that, we think that burns through, which just has a longer to kind of go but nothing -- as we sit here structurally, I can say that I have a new rerate, I think as you think about growth for '24. We say it's going to moderate. We don't have a significant moderation in play. And as I said earlier, even some of the softness we've seen in sales has been offset really by a slightly higher pay rate than we expected. Lower pay rates than expected, sorry.

So 6% to 8% loan growth for the year. And your others, and obviously, a huge swing in macro. What are the biggest factors that would drive you towards either the low or high end of that range?

It's really simple. It's going to be that those purchase volume either exceed or significantly fall short expectations, number one. And how does payment rate develop? And a lot of times, what you see is those 2 counterbalance each other. So if purchase volume was to fall slower, you would expect the payment rate to decline. So from an asset standpoint, you should get some resiliency in there. And it can go the other way. If you see payment, if you see purchase volume accelerate, it can be higher than expectations, your payment rate is probably going to be higher as well.

So you also announced right before last earnings season that you'll be acquiring the $2 billion Ally Lending portfolio. Talk to us what was attractive about the portfolio in the first place. How you see that fitting into your current strategy? And I know you wanted to mention also the Pets Best transition.

Yes. Yes. And so first, they were totally delinked. A lot of people are trying to put them together...

Yes. Yes.

But they really weren't. Let me first start with Ally Lending. We're really excited. I think it's a good transaction both for Ally and for us. We had a Home Specialty business. We like it a lot. We like the return profile of that relative to the company average. We like the loss profile of that relative to the company average. And it's a space that we know well and know how to do. And so when this asset became available, I think we looked at it as, number one, it provides us the ability to get into certain other aspects in Home Specialty. We weren't necessarily as deep in today. So take HVAC or roofing. So it added for us kind of new sub verticals inside the Home Specialty. We've had a number of different merchants and customers that gives us scale. So when we take a step back, we believe that the scale that we have, we get cost synergies and revenue synergies and that makes it really attractive. It operates at a return higher than our company average, loss rate attractive. And then when we look at all the measures of the transaction it's going to be accretive to earnings, excluding the day 1 reserve post, immediately when you look at the effect on the tangible book value, it's a little over a 3-year payback on that, great IRR. So when we look at that and we look at the depth of expertise, this was new to Ally. I think it fits in very nicely with the portfolio. We're excited for the under 300 people that we're going to acquire. So we think we get scale there, and there's real momentum, and we're on track to close that here in the first quarter. The other one, which we talk about is Pets Best. And I always get the question, was there another Pets Best? And like this was a very unique opportunity. We acquired that business, I believe, back in 2019, it had 125,000 pets in force. We were focused on scaling that business. So we scale pets in force to just under 800,000. And that industry from [scratch], the assets evaluations really took off. And what that transaction allows to do with both IPH and [ Pets JAB ] was to unlock the value that we create for scale, which presented the game, but also gave us the opportunity to have a significant equity exposure inside IPH. So we actually have greater exposure now because there's more pets in force. And combining our CareCredit product with that, we think there's a greater opportunity. And what allows us to do is really to transfer the operational side but really have the opportunity to continue to grow our business commercially with them as we move forward. The other thing I'd say is we have a good relationship with JAB and IPH. IPH as an underwriter for us that we're doing business with. JAB has a veterinary group, which is a large and an attractive one. So we like doing business with them. And I think we're excited about really what lies ahead. It produced a great game for us, but really it's the value as we move forward that continue the exposure because we believe the combination of having a credit product with insurance is valuable both to pet parents as well as our veterinary partners.

Can I go back to Ally Lending for a second...

Sure.

Because I do believe that you've said that you could improve the underwriting in this portfolio over time. At the same time, you just mentioned that you like to scale it. How do you balance those 2 dynamics?

Yes. So a lot of times, when you look at the underwriting, it's really -- we write to a risk-adjusted margin. And I think as Ally pushed in, they acquired the -- I think it's the old [ ATS ] business, they were pushing into more home improvement, where they probably didn't have a deep models as you think about the underwriting. So it's the combination of the price loss equation. So we bring deeper underwriting expertise. So as we convert that over to our underwriting platform, we would expect to get an outcome very similar to our outcome. So it's just -- they were trying to scale a business of bringing in and trying to move into verticals that they didn't have that -- it's quite as much experience in, which makes it attractive for us.

Health & Wellness has been a real driver of growth for you guys with loans up, I think, 19% in 2023. Could you talk a little bit about the drivers of the strong momentum here? And are there any pockets on the health care side in particular where you've seen more success than others?

Yes. So the Health & Wellness business has been a very important part of our strategic focus over the last couple of years. We've invested more heavily both in resources there, our direct-to-consumer platform. And there's a real need. I think as you look at consumers where the cost of dental procedures, orthodontics, even the veterinary presence, they rapidly expand. And when you have a pet emergency and it's $3,000, it's tough to tie up your line. So having promotional financing there makes a lot of sense. So there's tremendous need. We've gone through the, a puppy boom with the pandemic and even the dental. So there's a real need for the product. And I think we have a high NPS score on this product. It really fits in with what the consumer wants and how they want to manage their health care expenditure. Also, what's in there, we acquired a business Allegro a couple of years ago, which was really an audiology but provided a base for an installment product that now allowed us to offer both installment financing closed end or the open-end revolving promotional financing. So we have a broader suite and allowed us to kind of wrap the 2 products around each other and say, give more customer choice. I think when you look at, I think when you look at the way in which we've got to prequal and [ QR Codes ] in the offices provider. So you've disengaged some of the front office folks. It really made a lot of sense, a lot of momentum around that. I think we're maintaining focus on what we want to do in Health & Wellness. We're not trying to do everything to everybody. Most certainly, we rely on the non-emergent services. So it's attractive business, has a very attractive financial profile for someone that we think will continue as you think about our sales platforms going forward, be probably the leader with regard to receivable growth and volume growth.

I want to turn for a minute to some of the trends that have been reported recently from the buy now, pay later space which clearly was part of the engine of the holiday spending season. I think looking back at the pandemic when these products really started to take off, it seems like -- it wasn't really a credit card substitute. It was like a debit card substitute. But -- do you think that's still the case today because you are always stepped up in a discussion in terms of credit card market share getting taken away from you from these players.

Yes. So a lot has been made of the growth rates in that sector. And to be honest with you, they're very small players. So growth rates don't really count too as much volume...

Low base.

Low base. But listen, they're -- let me start with their competitors, we watch. Most certainly, they've invested a lot in the customer experience. So we want to make sure that we continue to innovate there. So I think it's good for us. I think if you look at their development as companies though, in the pandemic period when capital was -- had a less cost to it, when credit was incredibly benign, and the pandemic -- they effectively use MDR and retailers are willing to say, listen, I'm going to ship dollars maybe from marketing to here and try to create that base. Now as things normalize, I think retailers go back and say, I'm not going to pay the heavy MDR for installs, particularly, short-term installments. And so they've had to transform their model, right? So where it used to be, the pay in 4 or the pay in 6, now is kind of getting into more monthly and longer-term installments. And I think you see some of the competitors understanding that they need a multiproduct. Our whole model is having multiproduct. So we can do -- we can actually do a pay in 4, if you want, we can do monthly close net installments for different durations. We can do a secured product, we can do a private label product, we get a dual card product. I can do it here, I can do it on our commercial. That breadth of products, bringing it to a retail partner gives you options to say, how would you want to use this in order to pull through sales? I think you see in their evolution, they're trying to create that multiproduct setting, but they're starting from scratch, all over the place. So we watch them. We always have productive paranoia about them. To your original question, though, we don't see them directly competing with us. They are still in debit, people who aren't necessarily going to apply for credit and get credit. So we don't really see an overlap onto our business and been influenced really by their existence there. And the final thing I'd say about those companies, and we'll see how it develops. What we'd like to see is really a level playing field. So if you're applying for a buy now, pay later loan or a product with us, that ability to have the same fair and transparent disclosures or providing your income, having that level playing field. That's all we want. We think that the regulatory buys are kind of focusing on now or reporting to bureaus, unique concept to report indebtedness to the bureau. So we just hope that playing field gets leveled, then again, we don't mind competition, but they're really not quite in our space today.

Got it. I wanted to -- speaking of partners, in your 10-K a few weeks back, you updated us on your partnership agreements with 92% of your loans from your top 25 programs, having an expiration date in 2026 or beyond, right, up a bit from 90% at the end of '22. Could you tell us anything about the state of the partnership market with the competitive intensities like there. And maybe with the biggest sticking points are with your partners when you're talking about renewing programs are starting new ones?

Yes. So first, let me describe what I'd say the competitive environment is. And I'd say it's generally rational, to be honest with you. You don't see everybody everywhere. So I do think issuers have certain swim lanes they want to stay in, a certain attributes of programs that they want to engage in. So one, I think you see that. There's times we'll see somebody that we don't see another one. So -- and I think pricing for some degree has been in check. I think part of this is now getting through late fees, which I'm sure you may ask me a question about at some point, maybe not. But getting through the late fee, potential rule becoming finalized. So I think it's somewhat rational. I think what we hear more and there's more time that's spent, I think, today than there was 5 or 10 years ago capabilities, where are you digitally? How are you engaging my customers digitally? Can you move us fast, what's your API structure? So more technology and digital base, which we have invested a lot in. I think we have some of the best digital assets in the business. So I think continuing for us to invest there and showing that differential. And I do think when you see new entrants into the market, one of the things that partners are looking at is like how well have things performed in partnerships that have moved or new ones? And what do you take from that and our partner's ability to execute in this space. So we think we have a strong track record in -- for our existing partners, we try to win their business every day. It's not -- not just on renewal. They have long memory, so we try to do the best we can every day with them.

Maybe we can tie that to retailer share agreements or RSAs. You guided to RSA in the 3.5% to 3.75% range as a percentage of loans this year, a step down from about in [ 3.8% ] in 2023. Could you talk about what drives your expectations in RSA this year? And maybe tie that with the growth in Health & Wellness and also your earlier statement about net charge-offs.

Yes. So I think when you think about year-on-year sequencing, you have a continued increase in the net charge-off rate from '23 to '24. So that has an inherently a way to push the RSAs as a percent of loan receivables down. I think in the same respect, we do have a cycling on interest-bearing liabilities cost that will be for full year '24 higher than '23. So those 2 actually push the RSA percent loan receivables down, partially offset by some higher revenue right, as you see a little bit more revolve on the book. So that kind of explains with the more sequential movement down between '23 and '24. I think as you think about that, as you move forward, we would expect then as interest-bearing liabilities cost to come lower in the future. We call it debate when that starts to come lower, that's when you'd begin to see the RSA probably continue to maybe migrate back towards a more historical norm. But this is the way they're designed, right? I know people were a bit concerned when it got over 6%, but that was when historic losses were incredibly low. Interest rates were incredibly low. That's what it's designed to do. So it's designed in those times to share more and we'll be below our long-term average, as you see things probably above where they normally have said. So we think about that. Obviously, between all the sales platforms, there's a little bit of mix, but that's not really the driver of the movement, to be honest with you, between years. It's more of the dynamics between the charge-off and interest-bearing liabilities.

So Brian, just want to take note that we've been chatting for over 25 minutes, and now the late fee question is coming. So what are you willing to tell us at this point? We've been waiting with bated breath for the final rule to come out. And clearly, it is so critical, not just for current shareholders, but prospective shareholders. As we think about, all the good things that you have just mentioned in terms of strong momentum in business and strategy, but then there's this overhang. So as we think about mitigants. What are you willing to tell us today in terms of how Synchrony is going to approach those mitigants before we have a final rule.

Yes. So I know it's been incredibly frustrating for you and for investors because we're all waiting to see if a final rule comes out. Some people ask me if a final rule will come out. I said I'm not sure. I would only hope that the regulatory body is considering the common letters and taking that into play, but that's not the base case we're presuming and we would expect the rule. The best we can tell from people around the regulatory agency, it will come shortly. So that said, I don't have a lot of new for you, and I wish I did. What I'd say is, if the rule comes out and looks substantially similar to the proposed rule. We'll be out very quickly with disclosure around what it means for us and how people should think about how those things play out for 2024 for our company. And it's not lost on us. People's focus on the implication not only for this year, how we exit out of '24 but what it means for the business. What I would take away from this conversation is we have over 400 people that have been engaged for now a year on this project. We engaged early with our partners, different than others. There's not a lot of recycling that happens with partners. So we're ready to execute against that. And as Brian indicated, January, we started some of that execution and we build plans around it. So now it's just waiting for that final rule and assessing it regardless of whether or not there's litigation or not, we understand the magnitude, and we're ready and it prepares a company to deal with it. So we'll be as transparent as we can, assuming that the rule comes out that day to engage with people and dimensionalize the form.

Are there a lot of pre-conversations that could happen with your regulatory stakeholders in terms of mitigants ahead of this final rule. In other words, you've been working on this for over a year, 400 people, right? Obviously, you're thinking about the risk/reward of every mitigant. As we think about like the risk of reaction, let's say, how much could you have actually pre-vetted that during this waiting process, if you will?

Yes. I can't get into specific details of our conversations with all the regulators. But certainly, they have access and understand what we are doing. So the important part is when you think about replacing our product strategy is -- what are you doing? And is that practice existing in the marketplace today? Is it a new practice? Is it acceptable? And we have a team that kind of goes through that. So I think for us, the focus really becomes around the execution around that. This is the largest effort I think anyone's ever undertaken, as most probably is our company and is really as an industry, so we think we've put the things in place from monitoring, servicing on standpoint to deal with it. And I think our focus, a lot of which is making sure that we execute well and that we go as hopefully, as seamlessly as we can with our customers. That's really the focus. But again, they have access to what we're doing. It's not going to be necessarily a surprise, but again, we're focused on execution and ready whenever -- where if a rule comes out.

This might be a good time to remind people that if you do have a question for Brian, you could scan the QR queue code at your table and submit it, and I'll see you on my iPad. Let's shift to net interest income for a moment. You guided to 14.5% to -- you guided for the full year. I think we have a typo here, 14.5% to 14.8%?

We got it on dollars.

Dollars. Yes, yes, dollars.

17.5% to...

Yes, sorry. I knew this was -- I think this range is like $4 billion. This is a typo, clearly. Your outlook included 3 rate cuts which -- the market is going to you, by the way. How do you see your NIM progressing throughout the year? And how does that translate into the NII trajectory?

Yes. So let's talk about the rate cut. So we have 3 rig cuts really starting in September. Generally speaking, digitally-oriented institutions like us lag a little bit. So that's why I think when people look at the beta, again, we start the beta when the rate cycle goes down, it's not as high this year. It should be, right, relative to the way up, similar to the way down ultimately. As we think about NII, the interest-bearing liabilities really doesn't have a big impact, to be honest with you on the NII dollars this year as much as it's more around the asset growth, where you come in on the range on the asset growth and then really how the payment rate works. If there were rate cuts that happen sooner, so if you do see something in May, then there could be some benefit to that. But if it happens towards the back half of the year, it's just not a lot given the reset of...

And the lag.

And the lag factor, yes.

So speaking of that lag, how is the competitive intensity right now for high-yield savings?

Yes. So I think it's been -- it's financially in the first 2 months. I think you've seen most -- a lot of issuers that we look at in the competitive set, flattening out and pulling in CD rates. And generally speaking, when I see that, it looks like people are trying to shorten the duration in the event that you do have rate decreases out there. And when you pull the CD rates in closer to your high-yield savings rate, you're not really [ incenting ] people to go long, so you're trying to keep them in the high-yield savings rate, which means most of our competition is preparing for rate decreases and then go down. Well, certainly, the larger institutions, I think, will want to move faster in the rate declines of the regionals and digitals may be generally lag anywhere from 30 to 90 days down, but I do think you will follow similar beta. I think some of the outflows and money market mutual funds are helpful as those rates kind of come down. So I'd say it's very rational. I'd say the flattening out and pulling it into the CDs probably has been a little bit surprising to me so early, but it's helpful.

So there may have been a small deal announced last week. And clearly, one of the big talking points of that deal has been the debit interchange advantage of owning [ PULSE ]. How does that -- does that impact eventually the intensity for deposits in general, even if the Fed cuts, right, even if the Fed cuts to what seems to be an ideal neutral rate for you, and I have a question for you there, like 2.5%. If someone has different interchange dynamics, they could have a very competitive deposit product. Any thoughts there?

Yes. First of all, I said we do like competition. It creates innovation for us. Most certainly, they have an advantage -- we'll let folks figure out whether that advantage on the debit side is going to stay or how people think about it. I know [ Jamie ] commented on yesterday from a little bit south to here. So we'll let people figure that out. Well, certainly, I think when you look at both capital, one from their product and discover, it creates a large depository digital bank that we're going to have to compete on. I'm not sure that the debit interchange advantage moves it because you need different products, but it's something we're going to continue to focus on. We think we have a niche in who we go to market with, and we'll sort out. But that's something that we will focus our attention on and how that plays out because that's one of the more -- correct as well, some of the direct connection with the merchants, some of the things that are more impactful to us as a result of that acquisition, potential acquisition.

So your margin was 15.1% in the fourth quarter. Your long-term target is 16%. What is the ideal rate backdrop again, late fees aside that would get you back to 16%?

Probably a Fed funds target around 2.5% which puts prime roughly 5.5% and a normalized charge-off rate between 5.5% and 6%. And with that, a normalized revolve rate. That's really the biggest factor that kind of get us back. Again, we'll see different mix come into play over time. If we continue to grow Health & Wellness at the pace we are, that's probably accretive to earnings, but may have an impact down the road as it becomes a bigger percent. We want it to be a bigger percent, but we'll see. But it really is getting Fed funds back to 2.5%.

And maybe to wrap up the conversation, let's talk about capital and capital priorities. You have 2 transactions that are expecting to complete shortly. $600 million remaining in your current authorization. How should we think about your appetite for repurchase this year?

Yes. What's great is starting with the point of excess capital, number one. Number two, I think we put a CET1 walk in the fourth quarter, we generate a lot of capital each year. We have one more after this year, one more installment on CECL transition, but we generate a lot of capital. So I think as we look at that, we start from a real position spreads relative to our target. As I think about the remaining $600 million of authorization, the current view, obviously, we feel comfortable with the macro environment. We're able to deal with these 2 transactions and continue to move forward. So I think for capital, we feel good. We're in the process of completing our capital plan now. We start the CCAR process this year. So we'll submit our capital plan. We won't get a stress capital buffer until '26, but we're well on to that process, and we feel good about where we are. And hopefully, we'll be back in the second quarter to talk about our plans for '24, '25. But we feel good about macro. We'll see where Basel III ends up. I do think there's going to be significant modifications to that rule, we would hope. And based upon our discussions with both Fed governors and others. So we'll deal with that when it comes. But right now, we continue to be on the same type of trajectory and cadence that we've laid out for people.

Maybe my last question here. The late fee rule has really just sort of overshadowed I think the narrative of the franchise over the past 12 months. What would you like to say to investors in terms of the things that are going right in the company and maybe sort of one more statement on -- you've talked a lot about how you're thinking about the mitigants. But maybe another statement about how those mitigants naturally play into the strategy of the firm.

Yes. Let me -- probably I'll give you 3 things. I think our execution around Health & Wellness and accelerating the growth in that sales platform has done incredibly well in line with our expectations. Our focus around -- we call it accelerating the customer experience in marketplaces and driving that customer experience is really leveraging growth throughout the platform, which is driving the value and execution. And the third thing is, I think we've controlled credit better than I would argue most everyone other than maybe one issuer. So I think that people should walk away with the sense that we have credit in a perspective where we should get credit [ closely ]. So I think there's a lot of really positive things. I think as we think about the execution for this year, we've invested a lot to potentially deal with the potential late fee rule. If you go back, we had a chart in our fourth quarter. We dealt with the CARD Act, we've given the goal to be ROA neutral. We're trying to maintain the same level of sales that hasn't wavered. I think the alignment of partners through RSA and how it functions helps us with that. There's sense of urgency. I know when we come out we can give some disclosures. My hope is that people gain confidence in the plan that we've put together with our partners to execute. And then I'm sure there some will be, okay, prove it to me. And we're ready for that. But I think we're set up for that. And then it just goes into the execution around Ally and Pets Best. So I think from a growth standpoint, we set ourselves up with the right strategic investments. Our digital capabilities help us win in the market. we think we are controlling credit better than most. And I think we have a plan around some of the bigger initiatives inside our company. So we're excited about how we exited '23 and what we have in front of us in '24.

Great. Just checking in our last 45 seconds, if there are any analog questions in the room for Brian?

I will give you a lot credit. The iPad thing, which is very unique. It's working fairly well. I'm not sure you got any questions.

High Tech. Well, the late fee rule didn't out at 5. So I'm sure you would have a lot of questions in the day. Anyway, thank you so much Brian...

Thank you, Erika.

For your time. Appreciate it. Thank you.

Thank you.