![]() RSA's are incentive payments to Synchrony's retail card partners. On the cost side, retailer share arrangement (RSA) guidance has been revised down 10 basis points at the midpoint, to 3.95%-4.10%. This competition has put a little pressure on net interest margins, which are now forecasted to be 15.00%-15.15% for 2023, the lower half of the prior guidance. Other banks are starting to increase deposit rates, however. Synchrony has always offered attractive deposit rates, and most of the deposits are in FDIC insured accounts, reducing the risk of withdrawals. Deposits comprised 84% of funding sources, identical to a year ago. The bank has again grown deposits "in sync" with loans. Synchrony updated its 2023 guidance for charge-offs to 4.75%-4.90% of loan receivables, 5 basis points lower at the midpoint.ĭeposits, a key worry for other banks earlier this year, remain a source of strength for Synchrony. This quarter, the bank pushed out the timing for charge-offs to hit 2019 levels out to 2024. Similarly, loan delinquencies and charge-offs have been creeping up but also remain below 2019 levels. While slower spending growth and higher balances sound like signs of a stretched consumer, in this case trends are just returning to pre-pandemic (2019) levels. Looking forward, Synchrony still expects greater than 10% loan receivables growth for the year. On the other platforms, year-on-year purchase volume growth was down only 1-2 percentage points from last quarter. ![]() Home & Auto and Diversified & Value had the biggest slowdowns in purchase volume growth, but this was impacted by lower gas prices vs. The extent of this behavior varied across Synchrony's end market platforms. This means that consumer spending growth is slowing down, and they are taking longer to pay off their credit card balances. Synchrony's Q2 results show that the bank continues to grow loan balances by double digit percentages year over year, although purchase volume growth has moderated. The preferred shares ( NYSE: SYF.PA ) have increased since I bought more in March near the bottom, but stalled out this past quarter, remaining below pre-crisis levels. The common shares are now trading where they were in early March prior to the bank panic. Synchrony Financial ( NYSE: SYF) shares have recovered since I wrote about the company last quarter, outperforming the Financial sector ( XLF) and the broader market ( SPY). dia/iStock via Getty Images Back To Normal
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