Synchrony Financial (SYF) Q1 Earnings Top Estimates, Up Y/Y

Synchrony Financial’s SYF first-quarter 2019 earnings per share of $1 beat the Zacks Consensus Estimate by 13.6%. The bottom line also improved 20.5% year over year on the back of higher net interest income and the PayPal Credit Program purchase. This excludes the impact of Walmart portfolio.

Results in Detail

The company’s net interest income increased 10% to $4.2 billion in the first quarter, primarily owing to the PayPal Credit program acquisition and loan receivables growth.

However, other income rose 22.7% to $92 million.

In the quarter under review, loan receivables inched up 3% year over year to $80.4 billion.

Deposits were $64.1 billion, up 13% from the year-ago quarter.

Purchase volume expanded 10% from the first quarter of 2018 to $32.5 billion.

Provision for loan loss decreased 37% year over year to $859 million due to the reserve release related to the reclassification of the Walmart portfolio to loans held for sale.

Total other expenses climbed 6% to $1 billion, primarily due to the PayPal Credit program buyout and the growth-related costs.

Synchrony Financial Price, Consensus and EPS Surprise

Synchrony Financial Price, Consensus and EPS Surprise | Synchrony Financial Quote

Sales Platforms Update

Retail Card

The company’s interest and fees on loans grew 14.6% year over year.

Loan receivables inched up 1% while the average active accounts ascended 10%, all driven by the company’s consolidation of the PayPal Credit program.

Payment Solutions

Interest and fees on loans rose 7% year over year on the back of loan receivables growth. Loan receivables augmented 8%, led by home furnishings and luxury products.

Purchase volume expanded 4% while average active account rose 3%.

CareCredit

Interest and fees on loans increased 6% year over year, attributable to loan receivables growth. The metric was enhanced by dental and veterinary.

While purchase volume registered 8% growth, the average active account reported a 4% rise.

Financial Position

Total assets as of Mar 31, 2018 were $105.4 billion, up 10.3% year over year.

Total borrowings as of 2018 end were $21.8 billion, up 4.2% year over year.

The company’s balance sheet was consistently strong during the reported quarter with a total liquidity of $23.4 billion reflecting 22.2% of the total assets.

While return on assets was 4.3%, the return on equity was 30.4%.

Efficiency ratio was 31% compared with 30.9% in first-quarter 2018.

Capital Deployment

During the quarter under review, the company paid a common stock dividend of 21 cents per share and also repurchased shares worth $966 million.

Zacks Rank

Synchrony Financial carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases From Finance Sector

Brown & Brown, Inc. BRO is slated to announce first-quarter earnings on Apr 22. The consensus estimate for earnings is pegged at 36 cents, implying growth from 33 cents reported in the prior-year quarter. The stock carries a Zacks Rank of 3.

Discover Financial Services DFS is scheduled to release first-quarter earnings on Apr 25. The Zacks Consensus Estimate for the same stands at $2, indicating growth of 9.9% from the year-ago reported figure. The stock is a Zacks #3 Ranked player.

Willis Towers Watson Public Limited Company WLTW is set to report first-quarter earnings on May 1. The consensus mark for earnings is $2.97, suggesting 9.6% growth from the year-ago reported figure. The company is a #3 Ranked player.

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