Synchrony Looks to Best Rate Cut Environment With Innovation Mix

The consumer financing landscape is a dynamic one, where both strategy and execution are the key guardrails of success for financial service businesses.

This was reiterated on Tuesday (Jan. 28) during Synchrony Financial’s fourth-quarter and full-year 2024 earnings report. The Stamford, Connecticut-based company reported net earnings of $774 million, or $1.91 per diluted share, a significant, 76% year-over-year increase from $440 million, or $1.03 per diluted share, in the same quarter of 2023.

“We leveraged our scale, our deep lending expertise and advanced data analytics, and our sophisticated digital capabilities to deliver innovative financing solutions through seamless omnichannel experiences for approximately 70 million customers, and hundreds of thousands of partners, providers and small and mid-sized businesses that we serve,” Synchrony President and Chief Executive Officer Brian Doubles told investors.

The company’s focus on diversification shone through in its efforts to grow over 45 existing partner programs while adding more than 45 new ones. Renewed partnerships with established names such as Sam’s Club and JCPenney, alongside the addition of fresh collaborations like Generac, highlight Synchrony’s strategy to deepen market penetration.

Still, executives noted to investors that interest rate cuts by the U.S. Federal Reserve are expected to trim the margins of lenders providing credit card financing, which is among the costliest form of financing.

In this challenging inflationary environment, Synchrony reduced its provision for credit losses by $243 million to $1.6 billion, thanks to a $100 million reserve release. Yet, net charge-offs as a percentage of total average loan receivables rose by 87 basis points to 6.45%, a reflection of cautious but evolving credit dynamics.

Read more: What Credit Card Outsiders Want — and How FIs Can Bring Them Back

Balancing Growth and Risk Management Across Business Segments

Synchrony’s fourth-quarter financial results told a story of both progress and prudence. Despite a 3% decline in purchase volume, loan receivables rose 2% to $104.7 billion, driven by strategic product, pricing, and policy changes (PPPC). Net interest income increased by 3% to $4.6 billion, reflecting a combination of higher interest and fees on loans alongside disciplined credit actions. However, the company’s net interest margin fell by 9 basis points to 15.01%.

The company’s results by business segment also revealed varying performance levels. Across home and auto, purchase volume fell 6%, primarily due to lower consumer traffic and credit actions, despite a boost from Synchrony’s Ally Lending acquisition. Digital purchase volume declined 1%, as stable spend per account was offset by fewer active accounts following selective acquisition strategies.

Within health and wellness, the company saw a 3% decrease in purchase volume reflected weaker discretionary spending in categories like dental, cosmetic and vision care, though segments like pet care and audiology saw growth.

The responsibility of managing household health-related tasks disproportionately falls on women, with over 60% of both single mothers and those in nuclear families reporting that they shoulder these responsibilities, according to PYMNTS Intelligence’s “2024 Women’s Wellness Index.”

Across the lifestyle category, Synchrony reported that purchase volume dropped 5%, driven by declining transaction values and restrained spending on specialty goods and outdoor products.

These declines, executives noted on Tuesday’s investor call, highlight Synchrony’s strategic trade-offs, balancing customer acquisition and retention efforts with risk management priorities.

See also: Synchrony: Personalized Financing Strategy Boosts Big-Ticket Commerce

Synchrony’s credit quality metrics present a mixed picture. Loans 30+ days past due decreased slightly to 4.70% of total period-end loan receivables, a modest improvement from 4.74% in the prior year. However, net charge-offs increased to 6.45%, highlighting some pressure in consumer credit performance. Despite this, the company’s allowance for credit losses as a percentage of total period-end loan receivables improved, falling to 10.44% from 10.79% in the previous quarter.

CFO Brian Wenzel highlighted the resilience embedded in Synchrony’s diversified portfolio and underwriting discipline. “While our credit actions between mid-2023 and early 2024 impacted new account and purchase volume growth, our customers continued to seek flexible financing solutions. These actions also enabled us to improve delinquency performance,” Wenzel said.

“Looking to the year ahead, Synchrony is operating from a position of strength as we continue to drive greater financing and payment experiences,” Doubles said. “We are excited about the opportunities we see to deepen our role within the heart of American commerce and are confident in our ability to drive significant long-term value for our many stakeholders.”