Synchrony Financial

Good morning, and welcome to the Synchrony Financial Second Quarter 2020 Earnings Conference. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, during which you can dial star 1 if you have a question. Please note this conference is being recorded, and I will now turn it over to Greg Ketron. You may begin, sir.

Thanks, operator. Good morning, everyone, and welcome to our quarterly earnings conference call. Thanks for joining us. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the investor relations section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Margaret Keene, Brian Wenzel, and Brian Doubles. I will now turn the call over to Margaret.

Thanks, Greg. Good morning, everyone. When we last spoke, the world was facing a global health crisis and broad economic disruption. Sadly, while we saw some bright spots and began reopening here in the U.S., we've seen a resurgence of the COVID-19 virus. causing continued disruption to our lives, businesses, and economy. In addition, following more senseless loss of life within the black community, our country is awakening to the need to meaningfully address racial injustice and equality. Both challenges are difficult, emotional, and take hard work to address. I'm proud of how Synchrony continues to successfully manage through these extraordinarily challenging times. Our decisions are guided by putting people first. With COVID, we are focused on the health and safety of our employees and their families, providing support for our customers, and helping our partners get back up and running. In the fight for equality, we are implementing new actions to increase diverse employee talent at all levels, grow business relationships with diverse suppliers and small businesses, investing in diverse markets, and working with our partners, customers, and employees to address deeply rooted gender and racial inequality. With our values as our guide, we are resolute in addressing these challenges and emerging a better company and country. Now I'll turn to the second quarter results on slide three. Earnings were $48 million or six cents per diluted share. This included an increase in provision for credit losses as a result of the CECL implementation this year, which was $483 million or $365 million after tax and reduced EPS by 63 cents. The pandemic has impacted results this quarter. Brian will provide details on the trends later in the call, and I will provide a high-level overview here. On a core basis, which excludes Walmart and the Yamaha portfolios, the impact of COVID-19 drove a 3% decrease in loan receivables, a 7% decrease in interest and fees, a 13% decrease in purchase volume, and a 5% decrease in average active accounts. The efficiency ratio was 36.3% for the quarter. As a result of our liquidity and funding strategy, In response to the COVID-19 impact in our balance sheet, deposits were down $1.5 billion, or 2% versus last year. This includes a strategic decision to slow overall deposit growth given the excess liquidity we have. We have held direct deposits at last year's level of $53 billion. Our direct deposit platform remains an important funding source, and we will continue to focus efforts to make our bank attractive to depositors. As we navigate the day-to-day of this new environment in which we all find ourselves, we are also acutely focused on the future of our business. During the quarter, we extended several programs and added new partnerships, which you can see on the slide. We also executed a successful launch of the new Verizon program. We are very proud of this program and we work closely with Verizon to create a unique, robust rewards program for their customers that use simple and easy tools to apply, buy, and service the Verizon Visa card. This card includes a compelling value proposition, giving consumer wireless customers the ability to save on their monthly Verizon bill through rewards earned on everyday purchases and freedom to use those rewards towards Verizon purchases. including bill payments and the latest phones and accessories. Further, the Verizon Visa card is truly responsive to what consumers want right now, a contactless, frictionless, and digital-first experience. We are also excited about our new program with Venmo and continue to partner with them to launch their new program, which we anticipate will occur later this year. During the quarter, we also returned $128 million in capital through common stock dividends, We are pleased with the strength of our business, and we are well positioned to continue to help our cardholders and partners navigate through these challenging times. We continue to remain highly focused on digital innovation, accelerating our data analytics capability, and creating frictionless customer experiences, which are key to the success of our programs and winning new partnerships. I'm going to turn the call over to Brian Doubles to discuss some of the key highlights in this area.