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Synchrony Financial revenues and profits rise in second quarter

July 24, 2017 GMT

Consumer financial-services firm Synchrony Financial recorded larger revenues and profits in the second quarter, according to the company’s latest earnings report released last week.

Net interest income hit about $3.64 billion, a 12.5 percent increase from the same period last year. Profits for the Stamford-based company amounted to $496 million, a 1.4 percent uptick from the second-quarter total in 2016. The bottom line had dropped by 14 percent in the first quarter.

“Organic growth remains an important business driver and contributed meaningfully to this quarter’s results,” Synchrony President and CEO Margaret Keane said in a statement. “Our focus on the application and development of digital innovations is yielding results as we continue to drive strong online sales volume growth and penetration. A primary funding objective for us is growing deposits, and we continued to execute on this, achieving double-digit growth again this quarter.”

Deposits rose by about 14 percent to nearly $53 billion.

Loan receivables grew by about 11 percent to some $75 billion. Purchase volume increased nearly 7 percent to about $33 billion.

Synchrony’s reserve to account for loan losses jumped to about $1.33 billion, up 30 percent from the total in the second quarter of 2016. The reserve had increased by 45 percent from the first quarter of 2016 to the first quarter of 2017, driving the drop in profits in the latter period.

Synchrony officials have attributed the recent spikes in the reserve to a need to account for “normalization,” which entails larger losses as credit availability expands. But they have said those hits are low and manageable and would stabilize in the second half of 2018.

Net charge-offs — which refer to debts the company does not expect — totaled 5.42 percent of loan receivables in the past quarter, compared with 4.51 percent in the second quarter of 2016.

During the past quarter, Synchrony signed a new deal with zulily, launched programs with Nissan and Infiniti and renewed partnerships with MEGA Group USA, City Furniture and National Veterinary Associates.

In the second quarter, Synchrony also issued a quarterly common stock dividend of 15 cents per share and repurchased up to $1.64 billion of the company’s common stock.

In response to the report, Synchrony’s shares closed at $30.87 last Friday, up about 4.5 percent from their closing price Thursday.

pschott@scni.com; 203-964-2236; twitter: @paulschott