Synchrony Financial Earnings Call: Growth, Margins, and Risks

Synchrony Financial ((SYF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Synchrony Financial Balances Record Volumes With Near-Term Growth Headwinds in Latest Earnings Call

Synchrony Financial’s latest earnings call struck a notably constructive tone, highlighting record purchase volumes, expanding margins, improving credit metrics, and strong digital and partnership momentum. Management acknowledged several near-term pressures — including elevated payment rates, higher profit-sharing with partners, rising expenses, and regulatory uncertainty — but framed these as manageable trade-offs to support long-term growth. The overall message to investors was that the company’s earnings power, risk profile, and strategic positioning are strengthening even as short-term receivables growth and net revenue are constrained.

Record Purchase Volume and Customer Reach

Synchrony reported record fourth-quarter purchase volume of $49.0 billion, up 3% year over year, underscoring the resilience of consumer spending across its platforms. For full-year 2025, the company generated more than $182 billion of sales for its retail and commercial partners and connected nearly 70 million customers to its products. This scale reinforces Synchrony’s role as a key player in private-label, co-brand, and embedded finance, and provides a broad base of activity from which to grow receivables once payment behavior normalizes.

Strong Earnings and Attractive Returns on Capital

Financial performance remained robust, with fourth-quarter net earnings of $751 million, or $2.40 per diluted share, even after a $0.14 per-share restructuring charge. For the full year, net earnings reached $3.6 billion, or $9.28 per diluted share. Profitability metrics were particularly strong: Q4 return on average assets was 2.5% and return on tangible common equity reached 21.8%, while full-year ROA and ROTCE came in at 3.0% and 25.8%, respectively. These numbers showcase Synchrony’s ability to generate high returns on capital even during a period of elevated investments and a modest decline in receivables.

Net Interest Income Growth and Margin Expansion

Net interest income rose 4% year over year to $4.8 billion in the quarter, driven by improved asset yields and lower funding costs. Net interest margin expanded a striking 82 basis points versus the prior year to 15.83%. Behind this, loan receivables yield increased by 53 basis points while interest-bearing liability costs declined by 51 basis points, reflecting both pricing discipline and favorable funding dynamics. For investors, this margin expansion is a key driver of earnings growth and a buffer against other pressures such as higher revenue sharing and operating expenses.

Improving Credit Trends and Lower Loss Provisions

Credit performance moved in the right direction across key metrics. The 30+ day delinquency rate improved to 4.49%, down 21 basis points year over year, while 90+ day delinquencies declined 23 basis points to 2.17%. The net charge-off rate for the quarter fell 108 basis points to 5.37%. These improvements allowed Synchrony to reduce its provision for credit losses by $118 million to $1.4 billion, largely driven by a $294 million decrease in net charge-offs. The better-than-expected credit environment supports current earnings and reduces pressure on capital and reserves, even as the company continues to operate within its long-term loss targets.

Digital Growth and Product Innovation

Digital remained a core growth engine, with digital platform purchase volume up 6% year over year. Total site visits climbed 18%, and digital channel sales grew 17% in 2025, signaling deeper customer engagement online. Unique provisioned accounts and digital wallet sales more than doubled, helping drive a 400-basis-point increase in wallet penetration for dual and co-branded cards. This digital momentum reflects Synchrony’s efforts to meet consumers where they are shopping — on mobile and online — and positions the company to benefit as more spend migrates to digital ecosystems.

Multi-Product Strategy and Pay Later Expansion

Synchrony’s multi-product strategy is gaining traction, with dual and co-branded cards now accounting for 50% of total purchase volume and growing 16% year over year. The Synchrony Pay Later offering is live at more than 6,200 merchants, and management highlighted that when Pay Later and revolving products are offered together, merchants typically see at least a 10% average increase in sales. This combination of revolving, co-brand, and Pay Later solutions strengthens merchant relationships and broadens Synchrony’s revenue streams, while also aligning with evolving consumer preferences for flexible payment options.

Partner Wins, Renewals, and Long-Term Visibility

Business development was a bright spot, with more than 25 partners added or renewed in the fourth quarter alone, including names such as Bob’s Discount Furniture, RH, and Polaris, and over 75 partner actions over the past year. Importantly, approximately 97% of interest and fees from Synchrony’s top 25 partners are now renewed through 2028, and the top five partners are renewed through at least 2030. This long-duration partnership visibility provides a stable foundation for future volumes and earnings, reducing concentration risk and supporting the company’s multi-year growth narrative.

Capital Returns and Stable Funding Structure

Synchrony continued to deploy capital aggressively to shareholders while maintaining a conservative funding profile. In the fourth quarter, the company returned $1.1 billion via $952 million of share repurchases and $106 million of dividends, and $3.3 billion over the full year. On the liability side, deposits represented 84% of total funding at year-end, demonstrating a strong, relatively low-cost funding base. The company also issued a $750 million three-year secured bond at a 4.06% coupon, adding term funding at an attractive rate. For investors, this mix indicates room for continued capital return while retaining flexibility to fund growth and absorb regulatory or credit shifts.

Receivables Pressure and Segment Softness

Despite record purchase volumes, ending loan receivables declined 1% in the quarter to $104 billion, reflecting higher payment rates and lower average active accounts in certain portfolios. Home and Auto purchase volume fell 2% year over year, and some platforms saw reduced activity per customer. The disconnect between purchase volume and receivables growth underscores a key theme of the call: consumers are still spending, but they are also paying down balances more quickly, which weighs on reported loan growth in the near term.

Elevated Payment Rates and Slower Receivables Growth

Payment behavior remains a headwind. The payment rate rose roughly 45 basis points year over year to 16.3%, which is about 155 basis points above pre-pandemic fourth-quarter averages. This elevated payoff activity helps credit quality but limits the buildup of receivables, tempering near-term loan growth and net interest income potential. Management emphasized that as long as payment rates remain above historical norms, investors should expect a lag between strong purchase volumes and receivables expansion.

Higher Revenue Sharing Dampens Net Revenue

Revenue sharing agreements (RSAs) with partners increased meaningfully, reflecting strong program performance. RSAs totaled $1.1 billion in the quarter, or 4.3% of average loan receivables, up $175 million from a year earlier. While this signals healthy underlying partner economics, it also offset the benefit of higher net interest income, leaving net revenue roughly flat at $3.8 billion. For shareholders, this dynamic means that part of the upside from better margins and volumes is being shared back with partners, which supports long-term relationships but caps short-term revenue growth.

Rising Expenses and Efficiency Challenges

Operating expenses moved higher as the company invested in people, technology and restructuring. Other expenses increased 10% to $1.4 billion, driven by higher employee costs, technology spending and a $67 million restructuring charge. The efficiency ratio rose to 36.9%, roughly 360 basis points higher year over year; even excluding the restructuring item, the efficiency ratio would still be about 180 basis points higher. Management framed these costs as necessary investments in capabilities such as AI, cloud infrastructure, and new product launches that should support future growth and competitiveness, albeit at the cost of near-term operating leverage.

Allowance, Capital Levels, and Liquidity Position

Synchrony’s risk buffers remain solid, though they nudged lower over the year. The allowance for credit losses stood at 10.06% of loan receivables and declined modestly quarter over quarter, indicating confidence in credit trends while still maintaining substantial reserves. Regulatory capital ratios eased by about 70 basis points year over year, with CET1 at 12.6%, Tier 1 at 13.8%, and total capital at 15.8%. Total liquid assets decreased 3% to $16.6 billion, or 13.9% of total assets. Overall, the balance sheet remains well positioned to withstand stress scenarios while supporting ongoing share repurchases and growth initiatives.

Regulatory and Policy Uncertainty

Management called out regulatory and policy risk as a key watch item, particularly proposals to cap credit card APRs at very low levels. Such measures, if enacted, could significantly reduce credit availability for lower-income consumers and force changes in merchant and program economics. While no specific regulatory change was assumed in the company’s outlook, investors were reminded that the policy landscape is fluid and could influence pricing, product mix, and growth strategies over time.

Investment Drag and the J-Curve Effect

The company described a “J-curve” effect from new program launches and growth investments. As Synchrony ramps new portfolios, marketing, staffing, and technology spending — along with upfront CECL reserving — weigh on early-period earnings and increase reserve requirements before the portfolios fully scale. Management argued that this investment drag is deliberate and should yield higher revenues and returns over time, but it does mean that some of the current expense and reserve build is front-loaded against future growth.

Forward-Looking Guidance and 2026 Outlook

For 2026, Synchrony guided to net earnings per diluted share of $9.10–$9.50, signaling confidence in sustaining strong profitability. The company expects mid-single-digit growth in ending loan receivables, with growth accelerating in the back half of the year as new programs such as Walmart One Pay, the Lowe’s commercial co-brand transfer in the second quarter, and Versatile ramp up. Portfolio net charge-offs are anticipated to align with the long-term 5.5%–6.0% target, while RSAs are expected to remain within a 4.0%–4.5% range of average receivables. Management assumes payment rates will stay elevated and that net interest income will continue to grow, helped by pricing initiatives and lower funding costs. Expenses, excluding notable items, are expected to grow in line with receivables, and receivables growth itself is expected to be driven by higher average active accounts and purchase volume rather than loosened credit standards.

Synchrony’s earnings call painted a picture of a company leveraging its scale, digital capabilities, and deep partner network to drive attractive returns, even as it navigates slower receivables growth, higher revenue sharing, and investment-driven expense pressure. The balance of record purchase volumes, margin expansion, and improving credit against near-term growth and regulatory headwinds suggests a fundamentally healthy franchise in investment mode. For investors, the story is one of solid current profitability and disciplined risk management, paired with a credible path to moderate receivables growth and sustained earnings power through 2026 and beyond.