Synchrony CEO: Credit Metrics Strong as Consumers ‘Are Being Disciplined’

Synchrony Financial’s first-quarter results indicated that consumers are pulling back on spending, particularly for larger ticket items, and have taken steps to pare down their credit card debt. The net result is that consumers are proving to be responsible stewards of their credit even amid an uncertain macro-economic environment.

Presentation materials released before the markets opened on Tuesday (April 22) detailed that purchase volumes on the company’s cards slipped 4% to $40.7 billion.

CEO and President Brian Doubles said on the conference call with analysts that the purchase volumes trends indicated a “continued moderation in customer spend as they navigated the challenges of affordability in their to day lives.”

Dual and co-branded cards were 45% of purchase volumes, the CEO said, adding that “purchase volume at the platform level range 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.”

The trends continued into April, according to management commentary on the call, amid the news of government layoffs and tariffs.

Managing Obligations

At the same time, receivables were down 2%, to $99.6 billion, as payments and paydowns on those cards increased.

Doubles told analysts that payments increased sequentially and are “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 … 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.”

Executive Vice President and CFO Brian Wenzel said on the call that the company’s 30-plus delinquency rate was 4.52%, a decline of 0.22% from 4.74% in the prior year. The net charge-off rate was up slightly, to 6.3%.

As for guidance, “we continue to expect purchase volume growth to be impacted by our previous credit actions and selective customer spend behavior, and that payment rate will remain generally in line with 2024 levels,” said Synchrony’s CFO, noting that loan receivables should be ahead by the low single-digit percentage points.

Shares were flat in intraday trading.

Asked later on the call about credit trends, Doubles said Synchrony executives felt “pretty constructive around the consumer and the trends that we’re seeing right now. I think our credit team did a fantastic job navigating the last two years. I think the investments that we made in our Prism proprietary underwriting system are certainly paying off. It was great to see us turn the corner on delinquencies … credit is trending better than we expected.”

Doubles said, too, that, with the first few weeks of April, “it’s important just to differentiate between all of the uncertainty in the market and the macroeconomic future and what people are predicting and what we’re seeing right now in terms of the health of the 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.”

And, he said, “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.”