Synchrony Financial (SYF) Earnings Call Transcript & Summary

Good morning, and welcome to the Synchrony Financial First Quarter 2025 Earnings Conference Call. Please refer to the company's Investor Relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. [Operator Instructions]. I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

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 uncertainties, 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 webcast 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, and good morning, everyone. Synchrony delivered a strong financial performance in the first quarter of 2025 that included net earnings of $757 million or $1.89 per diluted share, a return on average assets of 2.5% and a return on tangible common equity of 22.4%. These results were driven by Synchrony's ability to leverage our core strengths in order to empower our customers with prudent financial flexibility and enduring value when they need it most, while also delivering loyalty and sales to the many partners, providers and small businesses that form the foundation of our economy. During the first quarter, Synchrony engaged with approximately 70 million customers and generated $41 billion of purchase volume. Year-over-year trends in both active accounts and purchase volume continued to be impacted by the credit actions that Synchrony previously implemented as well as continued moderation in customer spend as they navigated the challenges of affordability and economic uncertainty in their day-to-day lives. Dual and co-branded cards accounted for 45% of total purchase volume for the quarter and increased 2%, generally reflecting the growth from our CareCredit dual card launch which began last year and has been contributing to out-of-partner spend ever since. Purchase volume at the platform level ranged from between down 1% and down 9% year-over-year. as customers generally remain selective in their discretionary spend and bigger ticket purchases, particularly in categories like furniture, jewelry, outdoor, dental and cosmetics. Slide 3 of our earnings presentation provides a closer look at our weekly purchase volume during the first quarter as well as the first 2 weeks of April. Our week-to-week sales were generally consistent throughout the quarter, as was the weekly variance to prior year, including in March when news of government layoffs and tariffs began to intensify. And as you can see by the generational mix of weekly sales, we saw consistent engagement across the customer base throughout the quarter with no discernible shift between generational cohorts. These portfolio spend trends, in combination with our credit actions contributed to the 2% year-over-year decline in ending receivables. From a payment behavior perspective, payment rate remained flat compared to last year but increased sequentially by 10 basis points, generally in line with pre-pandemic seasonality. This sequential increase in payment behavior occurred across all credit grades as the proportion of above minimum payments increased and less than minimum payments decreased. In aggregate, the proportion of lessen minimum payments on our portfolio remained below the 2017 to 2019 average across all credit segments. Synchrony monitors our customers' behavior very closely across our portfolio through a comprehensive set of real-time indicators and data points, which range from cash usage and utility payment data to credit bureau and auto payment changes. And when viewed in combination with the spend and payment behaviors we've observed, we believe that customers are continuing to manage their spending needs and payment obligations amidst the challenges of a persistent inflationary environment and an uncertain economic backdrop. Of course, our customers, partners and small and mid-sized businesses rely on Synchrony for access to financial products and flexibility with attractive value propositions and utility for wherever life may take them. Our track record of leveraging our proprietary data, sophisticated underwriting and analytics, diverse product suite and channel distribution to drive sales and enhanced loyalty has reinforced Synchrony's position as the partner of choice, and we are proud of the consistently strong partner pipeline that has resulted from this execution. During the first quarter, Synchrony added or renewed more than 10 partners, including Sun Country, Texas A&M Veterinary Hospital, Ashley, Discount Tire and American Eagle. Synchrony is always seeking opportunities to expand access to flexible financing across the wide range of spend categories we serve, particularly those where customers seek to maximize value. Our new co-brand program with Sun Country Airlines, a Minnesota-based hybrid low-cost air carrier is a great opportunity to deliver compelling utility and rewards for flights throughout the United States and to destinations to Mexico, Central America, Canada and the Caribbean. We have also continued to expand our CareCredit acceptance across the veterinary space and are excited to announce that CareCredit has been named a preferred financing partner for the Texas A&M University veterinary medical teaching hospital. This new partnership reflects a significant milestone in solidifying CareCredit's acceptance at all 29 public veterinary university hospitals in the country as well as Synchrony's commitment to supporting a veterinarian community and ensuring pet parents have access to care for their beloved pets. In addition, our program renewal with Ashley, the #1 furniture selling brand in the U.S.A. and one of the world's largest furniture manufacturers, extends our nearly 15-year partnership. We are excited about the opportunity we see to help drive retail growth and enable customers to access flexible financing solutions to purchase quality furnishings that fit their lifestyle and budget. Meanwhile, our program renewal at Discount Tire will provide their millions of cardholders with access to expanded utility at over 1 million U.S. locations through the Synchrony CarCare network for automotive services and repairs as well as for purchases like insurance, gas, oil changes and more. And finally, we're proud to build on our nearly 30-year partnership with American Eagle Outfitters through a multiyear extension that will continue to deliver exceptional value, enhance the customer experience and deepen customer relationships. The real rewards by American Eagle and Aerie loyalty program was recognized as one of America's best loyalty programs by Newsweek for the fifth consecutive year. And the Real Rewards credit card was named my Best Retail Credit card in-store rewards for 2025. These awards reflect our collective commitment to delivering value to loyal customers and driving growth and we look forward to expanding access to these industry-leading financial solutions. So as we look to the remainder of 2025 and beyond, Synchrony remains in a position of strength. We are focused on executing across our strategic priorities, and maintaining our differentiated approach to serving our customers and partners. Synchrony's ability to optimize the outcomes for our many stakeholders has been made possible by the incredible people here at Synchrony who deeply understand their evolving needs and expectations. Our team approaches each opportunity to deliver best-in-class experiences with a passion and a commitment to excellence that is inspiring. That's why I'm so proud to share that Synchrony was named as the #2 best company to work for in the U.S. by Fortune Magazine and Great Places to Work. This recognition is a testament to our unique culture, our company values that our employees embody every day and our unwavering dedication to keeping our people at the heart of all that we do. And as our team continues to drive innovation, expand access to flexible financing and deliver compelling results for all those we serve. We also remain focused on building our leadership position and driving 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's first quarter performance continued to demonstrate the strength of our differentiated business model, which has been built to deliver resilient risk-adjusted returns through evolving market conditions. We generated $41 billion of purchase volume during the first quarter, which was down 4% year-over-year when compared to a record first quarter last year and include the effects of the credit actions we took between mid-2023 and early 2024, continued selectivity in customer spend behavior and one less day in the quarter, which had approximately 1% point impact. Ending loan receivables decreased 2% to $100 billion in the first quarter due to lower purchase volume. Our portfolio payment rate remained flat versus last year at 15.8% and was approximately 60 basis points above the pre-pandemic first quarter average. Net revenue decreased 23% to $3.7 billion, primarily reflecting the impact of the Pets Best gain on sale in the prior year. Excluding this impact, net revenue was essentially flat as lower interest expense and higher other income were offset by higher RSA. Net interest income increased 1% to $4.5 billion as a 7% decrease in interest expense was partially offset by a modest decline in interest income. Our first quarter net interest margin was 14.74% and increased 19 basis points compared to last year. The increase was driven in part by lower interest-bearing liabilities costs, which decreased 26 basis points versus last year and contributed approximately 25 basis points to our net interest margin. Our loan receivable yield grew 24 basis points, primarily driven by the impact of our product, pricing and policy changes or PPPCs and partially offset by lower benchmark rates and lower assessed late fees. This contributed approximately 20 basis points to our net interest margin. Our liquidity portfolio yield declined 88 basis points, generally reflecting the impact of lower benchmark rates and reduced our net interest margin by 15 basis points. And the mix of our interest-earning assets decreased by 62 basis points and reduced our net interest margin by approximately 11 basis points. RSAs of $895 million or 3.59% of average loan receivables in the first quarter and increased $131 million versus the prior year, primarily reflecting the program performance which included the impact of our PPPCs. And other income decreased 87% year-over-year to $149 million due to the impact of the Pets Best gain on sale in the prior year. Excluding that impact, other income increased 69% primarily driven by the impact of our PPPC related fees. Provision for credit losses decreased to $1.5 billion, driven by a $97 million reserve release in the first quarter compared to the prior year's reserve build of $299 million, which included $190 million reserve build related to our Ally Lending acquisition. Other expense increased 3% to $1.2 billion generally due to the costs associated with the technology investments and included a $15 million charitable contribution and a $12 million restructuring charge related to the Ally Lending business and the expected completion of its integration in the second quarter. Excluding the charitable contribution and the restructuring charge impacts, other expense would have been up 1% versus last year. The first quarter efficiency ratio was 33.4%, approximately 110 basis points higher than last year when excluding the impact of the Pets Best gain on sale. Taken together, Synchrony generated net earnings of $757 million or $1.89 per diluted share. and delivered an average return on assets of 2.5%, a return on tangible common equity of 22.4% and a 15% increase in tangible book value per share. Next, I'll cover our key credit trends on Slide 8, which highlights the efficacy of our credit actions that Symphony took from mid-2023 through early 2024, it gives us confidence in our portfolio trajectory towards our long-term net charge-off target of 5.5% to 6%. At quarter end, our 30-plus delinquency was 4.52%, a decline of 22 basis points from 4.74% in the prior year and 4 basis points below our historical average for the first quarter of 2017 to 2019. Our 90-plus delinquency rate was 2.29%, a decrease of 13 basis points from 2.42% in the prior year and 1 basis point above our historical average for the first quarter of 2017 to 2019. And our net charge-off rate was 6.38% in the first quarter, an increase of 7 basis points from 6.31% in the prior year and 54 basis points above our historical average in the first quarter of 2017 to 2019. Net charge-off dollars were down 4% sequentially. This compares favorably to the 2017 to 2019 average sequential increase of 9%. Our allowance for credit losses as a percent of loan receivables was 10.87%, which increased approximately 43 basis points from the 10.44% in the fourth quarter. Turning to Slide 9. Synchrony's funding, capital and liquidity continues to provide a strong foundation for our business. During the first quarter, Synchrony grew our direct deposits by approximately $1.7 billion and reduced our broker deposits by $338 million. In addition, we executed both secured and unsecured deals and attractive credit spreads when compared to historical deals. In the secured market, we issued $750 million of 3-year bonds with a coupon of 4.78%. In the unsecured market, we issued $800 million of 6-year non-call 5-year note at a coupon of 5.45%. We also achieved a credit rating upgrade from Fitch, holding our long-term issuer default rating up to BBB with a stable outlook. We are proud of this rating action as it reflects Synchrony's strong balance sheet, the resiliency of our business model and strong execution as a public company over a decade since our IPO. At quarter end, deposits represented 83% of our total funding, with secured and unsecured debt representing 9% and 8%, respectively. Total liquid assets increased 9% to $23.8 billion and represented 19.5% of total assets, 142 basis points higher than last year. Moving to our capital ratios. As a reminder, Synchrony elected to take the benefit of the CECL transition rules issued by the joint federal banking agencies. We made our final transitional adjustment of approximately 50 basis points to our regulatory capital metrics in January 2025. Our capital metrics now fully reflect the phasing effects of CECL. The impact of CECL has already been recognized in our income statement and balance sheet. We ended the first quarter with a CET1 ratio of 13.2%, 60 basis points higher than last year's 12.6%. Our Tier 1 capital ratio was 14.4%, 60 basis points above last year. Our total capital ratio increased 70 basis points to 16.5%. And our Tier 1 capital plus reserves ratio on a fully phased-in basis increased to 25.1% compared to 23.8% last year. During the first quarter, Synchrony completed our existing share repurchase authorization for the period ending June 30, 2025, and returned $697 million to shareholders, consisting of $600 million in share repurchases and $97 million in common stock dividends. Given our strong capital position, we announced today that as part of our capital plan, our board approved a new share repurchase authorization of $2.5 billion for the period ending June 30, 2026, and increased our regular quarterly dividend by 20% to $0.30 per common share beginning in the second quarter of 2025. Synchrony remains well positioned to return capital to shareholders as guided by our business performance, market conditions, regulatory restrictions and subject to our capital plan. Turning to our baseline outlook for 2025 on Slide 10. Given the court order entered last week in the litigation that ultimately vacated the late fee rule, Synchrony will begin the process of assessing next steps and engaging with the partners regarding the performance of our implemented PPPCs to determine if any adjustments are warranted. Our baseline assumptions exclude any potential impact from the changes to the PPPCs as well as any potential impact from a deteriorating macroeconomic environment or from the implementation of tariffs and retaliatory tariffs as they are unknown at this point. Turning to our outlook in more detail. We continue to expect purchase volume growth to be impacted by our previous credit actions and selective customer spend behavior that payment rate will remain generally in line with 2024 levels. As a result, we are maintaining our full year expectation of low single-digit growth in ending loan receivables. We continue to expect net revenue between $15.2 billion and $15.7 billion for the full year. Net interest income is expected to follow seasonal trends associated with growth, credit performance and liquidity and will ultimately be determined by a number of factors, including year-over-year growth in both interest income and other income as the impact of our PPPCs build, partially offset by the full through effect of lower average benchmark rates on our variable rate receivables. Lower assessed late fees as delinquency performance improves, a lower-yielding investment portfolio due to lower benchmark rates and finance charges and late fee reversals associated with the seasonality of our credit performance. Lower average benchmark rates should also continue to contribute to lower funding costs as our CD maturities reprice, although this will be influenced by competitive deposit beta trends in response to any additional rate cuts that may occur. In addition, we continue to expect higher level of liquidity in the second quarter given our desire to prioritize our deposit customer relationships and prefund future growth. We anticipate reducing our excess liquidity portfolio gradually as growth begins to build in the back half of the year. As a result, our liquid assets as a percent of total assets will average approximately 17% for the full year, which is higher than our historical average over the prior 3 years. We now expect RSA as a percent of average loan receivables to be between 3.70% and 3.85% driven by improving program performance as our net charge-off outlook has improved to be between 5.8% and 6.0%. Our revised net charge-off range expectation for the full year is now inside our long-term financial framework of 5.5% to 6%, driven by our prior credit actions and differentiated approach to underwriting and credit management. And lastly, we are maintaining our expectation of an efficiency ratio between 31.5% to 32.5%. Before I turn the call over to Q&A, I'd like to leave you three key takeaways from today's discussion. First, our customers have remained stable. They've been consistently making choices that align their day to day needs and seeing value and flexibility to prudently manage their financial situations amid an inflationary and highly fluid environment. Second, Synchrony's credit trends continue to outperform relative to the industry which is underscored by our current year outlook. Our sophisticated underwriting and credit management strategy have enabled a lower relative net charge-off peak than most of our peers and swifter expected return to our long-term target range. And while our credit actions create near-term impact on growth, our portfolio's credit position should provide greater long-term resilience as market conditions continue to evolve. And third, Synchrony's robust capital remains a clear strength. Our new capital plan reflects the confidence of our board and our company that Synchrony is well positioned to continue to drive progress towards our long-term financial targets and deliver significant long-term value for our stakeholders. With that, I'll turn the call back over to Kathryn to open to Q&A.

That concludes our prepared remarks. We will now begin the Q&A session. [Operator Instructions]. Operator, please start the Q&A session.

[Operator Instructions]. We'll take our first question from Ryan Nash with Goldman Sachs.

So obviously, lots of concerns in the market on credit. You guys are able to take down the top end of the guide. Can you maybe just talk about what you're seeing -- what gave you the confidence to bring down the upper end of the range? And second, the allowance was up with seasonality. But can you maybe just remind us what's assumed front employment, particularly when you overlay your qualitative reserves?

Yes. So Ryan, why don't I start on that, and then Brian can talk in more detail on the reserve assumptions. Look, I think we feel pretty constructive around the consumer and the trends that we're seeing right now. I think our credit team did a fantastic job kind of navigating the last 2 years. I think the investments that we made in our PRISM proprietary underwriting system are certainly paying off. It was great to see turn the corner on delinquencies. 30-plus was down 22 basis points, 90-plus is down 13 basis points. I think both a little better than our expectations. With that said, we didn't adjust the guidance all that much. But we did feel comfortable given the trends that we're seeing, just tweaking it a little bit. I think what's particularly important is we're doing that with receivables, maybe just a touch softer than we expected. So you've got the denominator impact, which isn't exactly helping. So credit is trending better than we expected. So we feel pretty good overall in terms of how we started the year on credit.

Yes Ryan, let me fill a little piece in the credit and then talk about the reserves. Obviously, as we look at the formation that was at the end of the first quarter, we're down 18 basis points versus last year, we're better than our '17 and '19 seasonality or pre-pandemic period by 4 basis points, 90-plus is right on top of that prepandemic period. And when we continue to look, we continue to see strength in entry rate as we -- as what's flowing into delinquency. And then what we're seeing is some improved performance in the back end of delinquency. That gives us comfort, right, how delinquency is performing. And those trends have been consistent. You look at outperforming seasonality for the better part of 6 months, we have been outperforming seasonality on a 30-plus, 90-plus. What's giving us comfort is obviously the credit actions that we've taken, both in the middle part of '23 and middle part of '24 has really resonated. If you look at the vintages that we see in '24, they're outperforming 2019 albeit it's early, outperforming 2019 and 2023. So we feel comfortable about the formation. We feel comfortable about where we're underwriting today as it relates to that. So that's what kind of gives us comfort. I mean, we're already 3 months into the year, you see delinquency, which gives you a pretty good indication for the next 6 months. So we felt good that we're back inside of our long-term target of 5.5% to 6% as a guide for this year. Now when you think about the reserves, albeit we had a release of $97 million. Inside of that, we had a $5 million post upfront acquisition. So if you think about $100 million reserve release, there was an increase to the qualitative reserves. So the quantitative reserve based on performance came down but we increased the qualitative reserve over $200 million and will really underpin that is the macroeconomic overlay that essentially has a 5.3% unemployment rate. When you factor in the imprecision factor, you're north of 5.3% on unemployment rate. So I think as we think about credit, charge-offs, we feel really good about. I think we probably have been thoughtful about a deteriorating macro, at least from a reserve standpoint, as we closed out the quarter.

Got it. I appreciate the color. And then Brian, the guidance says no changes to PPPCs is already implemented. And you mentioned starting to think about next steps. I guess, one, do we have enough clarity that the rule may not come back at a later date? And then how should we think about the timing and process as to whether you hold on to what's already been implemented or inevitably, they will be reversed.

Yes, Ryan. So I think we feel pretty comfortable that the rule has been vacated, and we don't expect it to come back in a similar form and come in the near future. So with that said, we don't currently have plans to roll anything back in terms of the changes that we made. Obviously, now that we have some certainty that the rule isn't going to go into effect. We're going to go out and we'll talk to our partners, just like we did when we rolled out those actions. We'll be transparent like we are with any major decisions that we make related to the program. We'll look at a number of different factors. And frankly, every partner we have is going to look at this differently. We're going to look at the behavioral changes that we saw when we rolled out the pricing actions. Frankly, they haven't been material. We didn't see a big reduction in accounts or spend related to the actions. We did a lot of test and control around that. Our partners will certainly look at where other merchants and providers are pricing their programs, so they always look at their competitive set. You have to keep in mind that the prime rate has come down. So our variable rate cards, consumers have gotten the benefit of that. And then lastly, we'll go through the financial impact of what it would mean if we were going to do some kind of roll back. They look at the RSA and they look at maybe a growth trade-off to that extent that there is one. And then the other thing I just want to highlight, I think this is important. Any kind of change that we're going to make could come in a variety of forms. So that could be adding value to the card and getting value back to the consumer through promotions and offers and stuff like that. It doesn't have to just be a price rollback necessarily. We could also approve more customers at the margins where we have the opportunity to do that at attractive returns. And lastly, I'd just say, look, it's going to take some time. We're going partner by partner, just like it took quite a bit of time to roll out the PPPCs. It's going to take a lot of time to get through those discussions. It's complex. Every partner is going to look at it differently. And frankly, our partners are focused on other stuff at the moment just given the uncertainty in the environment.

And we'll move next to Terry Ma with Barclays.

I'm just curious about your growth outlook. It's good to see that you reaffirmed your year-end receivables guide in the face of an uncertain macro. But purchase volumes, loan growth and account growth were all lower year-over-year. So what's the driver of the return to positive growth by year-end? And is there anything you can do to help drive that?

Yes. Thanks for the question, Terry. As we look at the -- start at the top of the funnel, the purchase volume. The purchase volume, we had negative 4%. It's negative 3% when you factor out a leap year. We're comping against the highest purchase volume for a single quarter -- in the first quarter in our history. So a tough comp. What we saw last year, though was a decline in purchase volume or slowing in purchase volume that began in June of last year through the end of the year. So the comps get a little bit better. I think you see on the charts that we kind of showed in the earnings deck today, this narrative that the consumer is pulling back, we have not seen the consumer pull back for us. Sales have been consistent both on a weekly basis all the way throughout second week into April. So sales will be consistent, and we haven't seen any generational shifts, which we try to show in the chart. So the consumer is continuing to be resilient through this period of time. When you think about some of the other metrics when you think about active accounts and the like, part of that's really influenced by our credit actions and the impact on new accounts. That has given us a little bit of a headwind. But again, we believe that as the consumer kind of gets their footing here with hopefully a lower core inflationary market that the strength continues. And we see the pickup in volume that should accelerate through the year mainly in the back half of the year following more seasonal trends. So we're encouraged by the first quarter performance is generally in line with how we thought it would play out. We kind of -- we indicated in the beginning part of the year, the first half would be much like the second half of last year. Again, once you start lapping that and getting through, we believe that a low single-digit receivable growth is achievable. This also doesn't factor in any potential adjustments to credit, right? If the environment holds the way it is today, there's some thought that we may do things that are to existing customers that we know and have relationships that could accelerate that growth, that's not factored into this outlook, but something we'll consider as we watch the macroeconomic environment and how things play out.

Got it. That's helpful. I guess to the extent that loan growth doesn't come in as expected in the low single digits. How does that impact the phase-in of your PPPCs, particularly the APR piece? Any way to kind of quantify or contextualize that?

Yes. Listen, I think you have a core book today, right, that's going to continue to build in value, right, as the APR continues to increase. If you have lower purchase volume, right, that means that the phase-in approach and the protective balance will accelerate -- will be impacted and the amount that the PPPCs become effective will actually accelerate throughout the year. So a lower volume actually does help the PPPCs from an interest perspective. Certainly having lower active accounts, will provide a little bit of headwind from an other income perspective when you think about paper statement fees.

We'll move next to Moshe Orenbuch with TD Cowen.

Brian Doubles, I was intrigued by your comment about using the benefits from the mitigants or PPPCs to kind of add value and add growth either by adding value to specific consumer propositions or by underwriting a little deeper. Maybe could you talk about maybe not specific merchants, but are there categories of merchants where that's going to where each of those could work better and maybe talk about how that factors into your growth plan for 2025.

Yes. It's interesting, Moshe. We've been talking about this. I think the investment community has been talking about this, this is just a simple rollback of what we've done. But given the work has already been completed to roll out the pricing changes, any changes from here on out will be similar to changes that we're always looking at with our partners. And they're typically looking at doing 1 or 2 things, incenting the consumer to spend more to drive growth for themselves, for the program, provide more value on the cards. So one of the things that -- particularly in times that are uncertain like this, our partners lean even more heavily on the card programs. And so we're in there discussing with some of the additional revenue, can we improve the value prop a little bit? Can we do more promotions, more marketing, different placements to drive growth. Those are the kind of discussions that we're having. I think the other interesting thing that we're talking to them about is now with maybe an increase in APR, can we approve more customers on the margin. Now obviously, we would do that at very strong risk-adjusted returns. We would likely do it in our highest returning portfolios. But can we approve more of that marginal customer that may not have been approved under the old APR. So there's a number of different things that we're looking at. I wouldn't say it's unique to any one platform or industry. It really is across the board, but those are the types of things that our teams are out there working on.

Great. And maybe as a follow-up, I know I probably gave you a little bit of hard time last year about not using the share repurchase as aggressively. And your comment about waiting for some market volatility, certainly we've seen that. Given that you're now past the full implementation of CECL. And at the moment, loans are not growing, you're expecting them to come back a little bit, but still be -- obviously, you'll be generating a lot of excess capital. Can you talk about in the current environment, given all the factors that we know, positive and negative, how you think about the use of that new share repurchase authorization?

Yes. Thanks for the question, Moshe. The way we think about -- we're starting from a place where we have a lot of excess capital, right? So -- and we know that this year, hopefully things play out, that we will generate, like other years, significant capital for utilization. Our #1 priority is always going to be organic RWA growth. And again, we have grown here low single digits, which is below our historic norm. Obviously, we would be pleased if it exceeded that. Our second is the dividend. And you noted -- hopefully noticed this morning, we increased our dividend 20% to $0.30 per share on a quarterly basis. Then you can do share repurchases or inorganic opportunities. And again, we're going to be very disciplined when it comes to inorganic opportunities to add things to the portfolio or add capabilities to the portfolio, either at attractive financial returns, IRR, ROIC or returns that are accretive to the baseline ROA of the company as we move forward. That being said, $2.5 billion is probably one of our larger historical server purchases. That doesn't preclude us to the extent that growth doesn't necessarily come through and going back to the board and increasing that if we deem that to be the best use of capital. So for us, it's a strategic advantage right now that we can employ either in the short term or invest in the longer term. So it gives us a lot of flexibility as a company and gives the board a lot of flexibility of how we can execute against our long-term strategy.

I'll just reiterate and emphasize that over the last 10 years, we bought back half the shares for the company. So we are laser-focused on returning capital to shareholders in the event that we don't need it for RWA growth.

We will move next to Mihir Bhatia with Bank of America.

Maybe I just want to take a step back first, just to amplify the macro commentary a little bit. I just want to talk a little bit about what you're seeing in your data, hearing from retail partners. How are they prepping for the potential of tariffs? What are you -- is there anything you guys are involved with that process with or just like even thinking through what it looks like when spending -- when the tariffs come in place? And then just on the weekly data, if you could just talk a little bit, it's been pretty stable, clearly, and you saw this in April, too. Do you think there's a little bit of a pull forward or Easter impact in there that's maybe propping the first 2 weeks of April up?

Yes. So there's a lot in there. Let me start on that. Look, I think it's important just to differentiate between all of the uncertainty in the market and the macroeconomic kind of futures and what people are predicting. And what we're seeing right now in terms of the health to consumer. The uncertainty is clearly out there. It's impacting consumer confidence. But at this point, it's not impacting what consumers are actually doing. Spend levels are still pretty strong. Credit is performing in line to better than we expected. I think the consumer is still in pretty good shape. I think the labor market is strong. With that said, look, they're being selective around how they spend. They're navigating inflation as they have been for quite some time now. I think as you look inside the portfolio, you've got the lower income consumer, they started tapering their spend about a year ago. That was largely driven by inflation. You saw a rotation out of discretionary and bigger ticket. You're seeing still pretty good spend levels for the higher-income consumer. Our client segment grew sales 1%. Average tickets were down a little bit, but frequency was up. And I think what can't get lost in all this is that, that moderation in spending patterns is actually a positive in terms of credit. We actually are encouraged by that pullback because consumers are not overextending. They're being disciplined. So overall, we're very pleased with the trends that we're seeing. I think it's responsible. It's in line with or better than our expectations when you look at credit. And so I think we feel like the setup is pretty good. Now on tariffs, we're obviously spending a lot of time with our partners. That's creating a lot of the uncertainty. I think our partners, some are more impacted than others. They're rethinking strategies around inventory management, supply chain, pricing actions. You're seeing some marketing to kind of pull forward sales. I would tell you, we haven't seen that yet. We haven't seen that materialize. We may. It's still very early, but we're not seeing it in the data. You saw the weekly data was still relatively consistent, relatively flat. So look, we're in an uncertain situation here. We're staying close to our partners. We're doing everything we can to serve them. Times like these, like I said, you generally see our partners lean on the credit program even more heavily. Those are their best customers typically, and that's where we're spending a lot of our time right now.

Yes, let me add a little bit more color on, I think, on the outlook and then answer your second question about pull forward. When you look at the outlook, I think people look at that and say, well, there's no macroeconomic deterioration that's in here or the impact of tariffs. Let me give you a little bit of a framework. If you think about a traditional macroeconomic called recessionary type environment, what you generally see in this industry, right is, in theory, slowing down of payment rate, higher revolve. You end up in the short term, having higher interest income, higher late fees, which precedes net charge-offs, put aside the reserve for a second. So if you got into a recessionary period like today, I think what you start to see is a change in the consumer behavior that in theory, will provide you incremental revenue offset by the RSA and then charge-offs because the way in which unemployment builds, people lose their jobs, they have severance, they get unemployment, they go through a period of trying to deal with their financial situation, they went to delinquency, then roll, your charge-offs are more a '26 issue, if you were in that scenario today. Then you got to consider whether or not your reserve outlook really took an account what you think the top end of the unemployment looks like in '25. So that's why it wasn't really factored in because there are -- if you were in a very traditional recessionary environment, upside to some of the base case that's in here. When we talk about consumer behavior -- behavioral attributes from tariffs, there are two elements that come through there. One, yes, sales volume may get or purchase may get a little bit more challenged as the consumer has to spend more on certain goods and rotate maybe added to discretionary goods but also payment rate should, in theory, decline, which would give you higher revolve. So those are the ones we'll watch. We haven't seen any of these factors today, either in unemployment or in changes in behavioral impact from tariffs. Your specific question about the pull forward and you look at the weekly sales, as we showed you the first couple of weeks of April, if you look at the weeks 12 and 13 versus week 15, so the second week in there, when we unpack that, there were three platforms that were impacted. One platform had what we believe is seasonal increase relative to home, right, which we traditionally see in the spring time. One platform had a significant campaign run by our partner, was included in our credit card where we saw an uplift in new accounts and activity. So that was fairly normal. And the third platform was really more Easter. I think we see it. We do not see -- even though we see some of our partners running tariff-related promotions, there's been no discernible information or data that says we have any pull forward from tariffs in and of themselves.

Got it. That was tremendously helpful. Maybe just switching gears a little bit to partners and competitive intensity for retail programs. Can you just talk about your appetite for onboarding a larger portfolio in this environment? And just relatedly, I did want to ask about deal renewals because I think in your 10-K, the percentage of revenue that's under contract 24 months out was a little lighter this year compared to the last few years. So anything to call out there?

I think the competitive environment is pretty consistent with where it's been the last couple of years. I think we haven't been in a very stable, predictable environment. And I think when you have some uncertainty out there, I think you see issuers demonstrate a little more discipline in terms of how their pricing programs, how they're looking at the risk return equation. We believe we have that discipline through cycles, more so than maybe anybody else. But I'll tell you, it's felt like a pretty good competitive environment. And look, we're always looking to bring on new programs. We signed some this quarter. We had some great renewals, big, small. We kind of cater to such a diversified set of partners, tons of small- to medium-sized businesses, hundreds of thousands, and we've got really large partners that are really attractive as well. And if you think about just the past year, we renewed Sam's Club, JCPenney. We're always in those types of discussions with our partners looking to early renew when we can outside of an RFP. And there's typically things inside of the program that as you get into these 10-year agreements, something that we want to fix, something that they want to change, maybe it's a refreshed value prop. So we'll typically get together on those with our partners and say, okay, we're both willing to make this investment, let's add some years to the back end of the contract.

Yes. Mihir, to answer the second part of your question, our 10-K disclosure, obviously, the year shifted between '23 and '24. So we split out to 2027 and beyond from a disclosure standpoint. I think back in December when we finalized the year and produced the K in February, we're in low 80% range relative to revenue that was beyond '27. That's now in the high 80s. So we continue to make progress, and we have some renewals to go here in the next couple of years. As Brian has always tells us, we earn renewals every day, and we'll continue to work on those over the course of the next year or so. But obviously, delivering for our partners, particularly in an uncertain environment, is the best way to have renewals.

We will move next to Rob Wildhack with Autonomous Research.

I think last quarter, you had mentioned running with higher levels of liquidity this -- at least for the early part of this year to prefund growth. Does that stance change at all with respect to the current macro environment and the uncertainty out there today? Is it possible that you would run with liquidity even higher now?

First of all, thanks for the question, Rob. I think our liquidity position, as we thought about as we entered the year was twofold. Number one, albeit a slower growth environment than historical norms, we realized we're going to return to growth, right? So coming on and off and trying to start the engine of growth on your digital bank and deposits, didn't make a lot of sense to us, given the rate environment even if I have excess liquidity. While it's a drain on NIM. If I'm borrowing at 4%, I'm getting 4.5% at the Fed, it's positive economic trade. So we weren't necessarily troubled by having necessarily excess liquidity, number one. The view hasn't really changed relative to the asset, the asset growth. We will use it at some point as we move forward. The second benefit of having excess liquidity, we're into some significant maturity towers here on CDs that are up for renewal. So it gives us a little bit of pricing flexibility as we think about that to lower our interest-bearing liabilities cost without the fear that we're going to have to raise rates somewhere else in order to keep that customer or maintain liquidity. We expect to run higher liquidity most certainly in the first half of the year. As we talked about growth should accelerate in the back half of the year. So we'll begin to use that liquidity both in the back half of this year and into next year. So simple answer is no, it hasn't changed our view since December.

Okay. And then I just wanted to dig in a little bit and ask about dual card and co-brands. The volume and loan growth there was better than the portfolio overall and accelerated sequentially. Last quarter, you had mentioned that as kind of being a way point for a reversal of some of your tightening. Maybe this is just normal ebbs and flows, Q4 to Q1, but could you just unpack that dynamic and then talk about how you're thinking about things with respect to private label growth versus dual card co-brand growth going forward?

Yes. Again, thanks for the question, Rob. So when you think about the dual card growth for a second, one of the areas that we've talked about kind of prioritizing for the company has been our health and wellness. So the dual card we have issued in our CareCredit business, which allows customers the flexibility, whether they're in network using -- in many of the places where CareCredit is accepted, the veterinary, dental offices and over the 40 specialties that we have in there, but also generating benefits in the world has been very attractive to folks. It's been one of our growth vectors for last year, and that continues to drive growth into this year. As you continue to think about our core partners, right, where we have a dual card private label offering, it really comes through through-the-door population as we get a stronger through-the-door population we're able to approve more dual cards. And they put on, they recognize the value in the world back into the brand at which they have intense loyalty to, which is why they apply for credit with us. So I think it really is a testament to the brand strength of our partners and in places where we're leaning into from a dual card perspective. Regardless of that, we still do run a strategy where we are lower line assignments than traditional general purpose cards, which allows us to maintain a very attractive risk-adjusted margin and maintain the charge-off profile of the company.

And this is why the multiproduct strategy is so important. I mean we can start somebody off in a secured card, in a set pay product, private label and then migrate them over time as they demonstrate the ability to pay creditworthiness, we get to know that customer, how they spend, what types of purchases they make. And that's really the power of the multiproduct strategy. That's really resonating with our partners. We talked about new wins, renewals. That's been a key component of particularly the big renewals where we've added a product or 2 to those programs.

We will move next to Sanjay Sakhrani with KBW.

I guess I wanted to follow up on credit quality. I know we've talked extensively about it. But when I look at sort of the path of the delinquency rate over the last several months and then the charge-off rates actually came down year-over-year in March. It seems like there's a good glide path all else equal, for credit to improve quite decently. I'm just trying to think about where we would expect, all else equal, the charge-off to migrate. Can you go below average given you've tightened so much? Maybe you could just talk a little bit about that.

Yes. Let me start at a high level, Sanjay. Look, I think we feel very pleased with the credit trends that we're seeing. The actions that we took starting in mid-'23, are clearly having the desired impact. We're trending a little bit better than we expected. We talked about 30, 90, now showing down year-over-year. If you look at our performance, relative to the industry, and you benchmark that against 2019, we've just simply performed better. And I think that's a lot of the investments that we've made. That's the investments we made in PRISM. I think our credit team has done a fantastic job navigating this. As Brian talked about earlier, I think there may be an opportunity where we can open up a little bit in the back half of the year. If we do that, it will be very methodical. We'll do that starting with our existing customers, giving them a little more spending power in some of our higher returning segments, I think we might have the opportunity to make some slight adjustments on approval rates. But generally, we feel like it's a pretty good setup for the back half of the year, and I'll turn it to Brian to talk a little more about the charge-offs guidance.

Yes. Sanjay, I gave some framework earlier in the call really relative to net charge-offs. I think as we look at it and you kind of peel the onion back here a little bit, there are a number of factors, right? Number one was the credit actions that we've taken in order to -- as far as origination and authorization of transactions on existing accounts to get that in a place where we feel comfortable with that being inside of our long-term guidance. We've also made a number of changes over the last couple of years around collections, our strategies, whether it's on a pre-delinquent basis or inside of delinquency where we're able to do different things than we did a couple of years ago. . We think is really helping entry rate and some of the flows back in. And I think some of the activity really with regard to even our recovery operation where we in-sourced that from a third party, has really delivered benefits. And to be honest with you, relative to peers, we didn't really have the [ different ] recoveries we had. So there are multiple different factors, I think, that help us produce that net charge-off rate, all of which are in our view performing well right now and gives us comfort that we can hit this net charge-off rate, most certainly sitting here in mid-April.

Okay. Great. And Brian Doubles, I think Mihir was also alluding to some of the larger RFPs out there for sizable portfolios. Could you just -- I'm not sure if I heard the answer to that, but can you just talk about how you guys feel about sort of the opportunity to secure larger portfolios?

Yes, we are very interested in securing larger portfolios. We always have been. We have a lot of discipline though around how we evaluate those opportunities. You've got to have really good alignment with the partner, you've got to have a good deal structure that's fair and equitable with both parties, good alignment in terms of how you want to grow because if you're going to sign a large program that's going to go over 10 years, you have to have that alignment because you're going to have to make changes to the program, whether it's underwriting, marketing strategies, placement and those things need to benefit both parties. . We do an enormous amount of financial due diligence on a lot of models. We stress those bigger opportunities significantly to make sure that as we look at a 10-year deal, we look at it every year and say, okay, are we going to like this deal in that year under these circumstances? Is the partner is still going to like this deal? And so we've got a ton of rigor around that process. And at the end of the day, we have other uses for our capital, and it has to compete with share repurchases and other things. And so it's got to be in line with the overall return for the business or accretive. And so these are very attractive opportunities when you look at larger programs and bringing on an earning portfolio, but it's got to meet a lot of hurdles and have a really attractive risk-adjusted return and really good alignment between the parties.

Is there a sense of timing on any of this, whether you know or not?

It sounds like you're talking about a specific opportunity or 2, Sanjay, that I'm obviously not going to get into.

And we will move next to Rick Shane with JPMorgan.

Look, I'd like to delve in a little bit more to the dual card. There was talk about the growth there. But I am curious when you think about the credit profile, is it different both from a FICO score perspective, but maybe even more importantly, from a utility perspective, should we in a slowdown, expect different performance for private label versus the dual cards?

Yes. Rick, thanks for the question. Yes. So dual card generally, we use a number of factors to underwrite them. Yes, credit quality is one, we have our own proprietary score as well as we use data from our partners in order to determine whether or not they're dual card eligible or private label card eligible. When we think through that, there are times when your credit score may be a little bit lower. But based on their performance, less we give them a dual card because they perform better, they perform like a higher credit grade. Generally speaking though, the credit quality of the dual card is higher, the spend in payment rates are generally higher than that of a private label card. I think you -- if you were enter into an economic downturn, well, certainly, we deploy the same type of credit actions we normally would take, which would make sure we are not overextending on lines. We watch account transactions and authorizations. It generally will have higher severity because it's a bigger balance, but lower incident rate of charge-offs, where your private label book has higher incident rate because it has a generally speaking, a lower credit profile, but a lower severity rate because of the average balance and line restrictions.

Got it. And can you speak a little bit to the impact of utility for the consumer being able to use the card in one place as opposed to having to be their primary card and how that impacts payment behaviors?

Yes. Listen, I think every individual makes a payment hierarchy decision, right, relative to what cards. In a lot of places, they'll make decisions and look at cards based upon the brand in which they are connected with, not solely utility. I mean it's not just a piece of plastic or a digital card, right? They want to sit back and say, listen, I like to go shop at retailer X or Y, and they want to continue to use that, and they use it there. That being said, we also have cards that are private label that have broad-based utility. You think about a PayPal card, you think about an Amazon card, you think about cards that we're now being able to load into -- or will be able to load in an Apple Pay that has broad utility. So the utility does matter. There's lots of places where utility is broad-based. If you think about our home segment, we have home cars, car care cards that go across multiple retailers, CareCredit goes across multiple specialties. So while Dual Card is one, we have broad-based utility, which meets the card important to the consumer. And honestly, the connection with the brand really is relevant.

We will move next to John Pancari with Evercore.

On the macro assumptions, Brian Wenzel, thanks for the color regarding the baseline assumptions and why they don't dial in the recessionary backdrop. But if you did dial in a weaker macro and recessionary dynamics into the baseline assumptions, I hear you that revenue and NII may benefit from a higher revolve rate. What would it mean for your charge-off expectation? I know maybe it's not a '25 thing, but it's more of 2026. I guess what I'm asking, what does a stressed charge-off level look like for Synchrony given your current business mix, your credit tightening as of today, how would that charge-off range compare to this 5.8% to 6% level that you're looking at for this year?

Yes. Thanks for the question, John. First of all, again, go back to our outlook. I know you talked a little bit about some of the impacts, 0you talked about the revenue impact. I also think on the growth side of the equation, you have lower purchase volume and slower payment rate, which kind of balance each other to some degree, it really depends upon the severity of the macroeconomic event. Again, when you sit around saying on the 22nd of April of this year, depending on the severity event, there's not as much net charge-off impact given the fact that it takes a while to go from losing your job to rolling through net charge-offs, less you say the person is going to go bankrupt or go into a settlement program right away, which has not been the historical norm. So to some degree, there is a lag time of generally, 9 or 12 months on certain economic events where you start to see the charge-offs. So the expectation, again, this is all theoretical because there's not an assumption here but there probably wouldn't be as much impact on that charge-off rate in '25, if it follows some of the historical norms that we've seen on typical recessions put aside the GFC and the pandemic.

And care to comment on what a '26 number would look like under a recessionary scenario given your business mix and the mix in the balance sheet?

I actually do not care to comment. We're not commenting on '26 yet or a hypothetical inflationary or -- I'm sorry, a recessionary environment. But thanks for the question.

I understand. And then separately, I guess, just in terms of the credit actions, I know you indicated that you're evaluating actions to accelerate growth and you talked about some of the partnerships and everything, does that include a widening of the credit box from here, just given how your credit has performed? I mean are you evaluating unwinding some of the tightening actions that you put in place in '23 and '24 to drive some acceleration in growth?

Yes. I mean, I alluded to that earlier. I think it's something we're evaluating. We'll be very methodical about how we'll do it. We would tend to start with our existing customers. We know them well. We know how they spend. They've built a credit history with us. So we would give them a little more spending power potentially. Where we have higher returning segments in the portfolio, there may be an opportunity to widen the box a little bit. But everything will be done in the context of that long-term net charge-off rate. So 5.5% to 6%, we're not looking to do anything outside of that. We don't want to run well below that because we're leaving growth on the table and we certainly don't want to run above that. And you've seen us manage it back into that long-term charge-off guidance. So that's how we would approach it. We're managing through a fairly uncertain environment. So we're obviously taking that in our account, and that's why we moved pretty methodically.

And we will move next to Mark DeVries with Deutsche Bank.

I had a follow-up question on just capital levels and returns. You're sitting here with CET1 at 13.2%, well above kind of the historic target range of 10% to 11%. So the question is, is that still the right target for you to manage down to? And any thoughts on kind of pace at which we should expect you to kind of manage down to those levels?

Yes. Thanks for the question, Mark. Our target level, which we've shared is 11%. So that's the goal in which we go through. Obviously, there's some buffer around that at different points, given seasonality. But we're on a consistent pace to do that. Remember, Mark, we started out where our capital peaked at 18% CET1 in this company. And Brian highlighted earlier on the call, we've taken out over half the shares since 2016 to kind of get here now. So we understand the importance of having an efficient balance sheet. We kind of built out our Tier 2. We have a little bit more on Tier 1 and we're on a pace in which we share with our board and regulators over the course of several years on how we -- how our capital trajectory goes. . The $2.5 billion today, we think is a good position relative to our -- the earnings power there and the capital we're going to generate this year given the RWA expenditure, the increase in the dividend and doesn't preclude us for coming back later in the year and discuss with the board whether or not that needs to be adjusted upwards. So while we haven't provided specific framework, our outlook hasn't changed to getting back to the 11%. And again, I do think we should get some level of credit for reducing over half the shares of the company in a period of 8 years.

Okay. And just a follow-up on that. When you set this latest authorization was it kind of sized to give you plenty of flexibility to outperform on the growth perspective? Because I just think about like what consensus earnings are and what implied payout if you use 100% of the repurchase with the new dividend, you'd be kind of neutral to CET1 at the end of the year. Am I thinking about that right? And so either you outperform on a growth perspective or it is likely you come back and potentially look to buy back more stock or extend the authorization?

Yes. I think we know when we do a capital plan, what we bring to the board is a number of different scenarios. We have baseline scenarios and obviously, we have the stressed scenarios. There are outlays that are in there. And so we have a full range that shows the type of resiliency the capital stack really has under different scenarios. We didn't go to the board and say we're going to be back later this year. But obviously, that's the option for us to discuss with the board whether it's warranted. I mean I think right now, $2.5 billion authorization is a good place to start. We'll execute throughout the year and see how growth develops and see what the opportunities are. And then if change is warranted, we'll bring it to the board and have that discussion. But again, we're very pleased with the capital plan that has a $0.30 dividend, up 20% from our existing dividend and $2.5 billion authorization, especially today given our market capitalization, which is unfortunately lower than its true value.

And we only have time for one last question. Our last question comes from the line of Don Fandetti with Wells Fargo.

Brian, can you talk a little bit about the sort of runway for CareCredit. It's been a good growth story competitively. Are you still seeing that as a fragmented market? And then also, how is the credit performance been versus your expectations?

Yes. Look, I think we still feel great about the health and wellness platform. That is certainly if I had to pick a platform that we're really investing in and trying to grow, it is that one. It's a huge market. We've got a leadership position. We've been in the business almost 40 years. Our NPS scores in that platform are off the charts. We had a really good reputation in terms of the providers that we serve across dental and vet. And it's a growing market as well. And so Brian Wenzel talked a little bit about the CareCredit dual card, we're employing a number of strategies to continue to grow there. It's obviously bigger ticket. So you've seen maybe just a little bit of softness here recently, but we are extremely optimistic about our ability to grow CareCredit over the long term. And I would say on the credit performance side, generally in line with the rest of the business, although given some of the margins, we are able to underwrite a little bit a touch deeper there at very attractive risk-adjusted returns.

And this concludes Synchrony's earnings conference call. You may disconnect your line at this time, and have a wonderful day. Thank you.