Synchrony Financial

Welcome to the Synchrony Financial Second Quarter 2022 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press 0, then 1 on your touch-tone phone. I will now turn the call over to Catherine Miller, Senior Vice President of Investor Relations.

You may begin. Thank you and good morning, everyone. Welcome to our quarterly earnings conference call. 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 or 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 Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Catherine, and good morning, everyone. Synchrony continued to execute on our key strategic priorities and deliver strong financial results for the second quarter 2022, including net earnings of $804 million, or $1.60 per diluted share, a return on average assets of 3.4%, and a return on tangible common equity of 30.3%. These results were driven by Synchrony's differentiated business model and our deep understanding of the needs and expectations of our customers and partners. Consumer health also remained strong during the second quarter, which supported continued demand for the wide variety of products and services that our partners, merchants, and providers offer. As a result, Synchrony added 6 million new accounts, grew average active accounts by 4%, and achieved our highest purchase volume ever in a quarter of $47 billion, a year-over-year increase of 12%, or a 16% increase on a core basis. Dual and co-branded cards accounted for 38% of core purchase volume and increased 31% from the prior year. Consumer spend was broad-based across our platforms, leading to double-digit growth in our diversified value, health and wellness, digital, and home and auto platforms, as well as single-digit growth in our lifestyle platform. We also continue to see higher engagement across our portfolio as purchase volume per account grew by 8% compared to last year. The continued strength in purchase volume contributed to loan receivables growth of 5% year-over-year or 11% on a core basis. Our dual and co-branded cards accounted for 22% of core receivables and increased 27% from the prior year. We also continued to extend our reach and engage more customers, thanks to our ability to deliver our seamless experiences attractive value propositions, and broad suite of flexible financing options across our ever-growing network of distribution channels. To that end, we recently announced the launch of Synchrony SetPay, Pay in Four, through Pfizer's Clover point-of-sale and business management platform. This Buy Now, Pay Later offering further expands the suite of payment and financing options and will be part of the Pay with Synchrony app on the Clover app market for merchants. Through our partnership, Synchrony is able to expand our customer reach and distribution through hundreds of thousands of small businesses across the country. Synchrony's long-term partnership with AdventHealth, one of the largest not-for-profit healthcare providers in the U.S., is another example of how we continue to expand and deepen our reach in health and wellness. AdventHealth will offer CareCredit as its primary patient financing option and will accept Care Credit nationwide in more than 130 facilities, including hospitals, urgent care centers, outpatient clinics, and physician practices. As out-of-pocket health expenses continue to rise for consumers, Synchrony's Care Credit is a way for people to pay for care not covered by insurance, including deductibles, coinsurance, and copays. Care Credit's flexible financing options will be available for all points of care, and within the patient's AdventHealth account, which includes Epic's MyChart portal, enabling patients to manage their care needs alongside the resulting financial obligations. In addition to extending options for consumers to pay for care, CareCredit will also help streamline the health system's payment processes. In short, synchrony is increasingly anywhere our customer is looking to make a payment or finance a purchase, big or small, in person or digitally, We can meet them whenever and however they want to be met with a broad range of products and services to meet their needs in any given moment. This ability to deliver the versatility of our financial ecosystem seamlessly across channels, industries and retailers, and providers alike is what positions Synchrony so well to sustainably grow, particularly as customer needs change and market conditions evolve. We have one of the largest active account bases in the U.S. with more than 65 million active accounts, and yet our typical customer has less than two of our products on average. As we continue to expand our distribution channels and more effectively leverage our various marketplaces and networks, Synchrony can connect our partners with more customers and drive still greater lifetime value expansion. Take, for example, our home and auto care networks. where combined annual visits surpassed 300 million last year. And carecredit.com, which received almost 19 million provider views in 2021. As well as 19 health systems across the country and our strategic partnerships with point of sale platforms like Clover. No matter how you look at it, Synchrony is increasingly delivering the power of our networks on behalf of both our customers and our partners. Whether it's through the expansion of our existing customer wallet share, or increasing our reach to new customers, we are driving efficient and sustainable growth because of our increasingly ubiquitous presence and the universal utility of our offerings. From revolving lines like our private label, dual and co-branded cards, to our broad range of installment offerings and secured and commercial products, Synchrony's financial ecosystem can deliver the right financing offer for the right product at the right time. all while optimizing the value they see. And, of course, this is all enabled by our dynamic technology stack. Synchrony has prioritized innovation for many years and have the digital capabilities to facilitate deep integrations with sophisticated partners, as well as simple functionality for smaller local businesses. We can be as plug-and-play or as customized as necessary without increasing our level of investments. As Synchrony leverages our proprietary data, analytics, and underwriting through these integrations, we deliver not only seamless experiences, but also consistently powerful outcomes for both our customers and partners. The breadth and depth of our consumer lending expertise informs every aspect of our customer and partner strategies and allows us to support them and provide a great experience. The level of continuity that Synchrony provides across channels spend categories and partners, as well as through business and market changes, drives both loyalty and resilience for Synchrony and our stakeholders. From partners with digital omnipresence across spend categories and point of sale, and merchants that offer great value across discretionary and non-discretionary needs, to providers like doctors and dentists and major health systems like AdventHealth and St. Luke's, and practice management software like Epic. Synchrony is increasingly at the center of a broad range of financing needs, empowering our customers with choice and best-in-class value propositions that truly make a difference. This drives greater diversity and resilience in our portfolio, both in terms of our sales platforms and the industries we serve, as well as consumer spend categories. Our customers finance everyday purchases like gas, groceries, and routine medical expenses, as well as more episodic needs, like buying a new mattress or replacing a refrigerator. They derive great value from our general purpose and dual and co-brand cards, coupled with the best-in-class rewards they can earn on their spend. About half of our out-of-partner spend is comprised of non-discretionary spend like bill pay, discount store, drug store, health care, grocery, and auto and gas. And, of course, Synchrony also derives resilience from our disciplined approach to growth at appropriate risk-adjusted returns. Our sophisticated data analytics and our proprietary underwriting have enabled Synchrony to reach more customers and offer them greater financial flexibility while also maintaining or improving upon the predicted level of risk. In fact, since 2009, Synchrony has more than doubled our purchase volume, receivables, and interest income, while also growing our mix of prime and super prime customers by 14 percentage points. Meanwhile, we've built a very strong balance sheet, including a stable deposit base that represents more than 80% of our funding at any given time, consistent and efficient access to the debt capital markets, and a robust capital and liquidity position, such that we currently operate with 15% CET1 ratio and a 25% Tier 1 and credit reserve ratio. So when you bring it all together, Synchrony is uniquely positioned to deliver sustainable growth and resilient risk-adjusted returns even as market conditions change and the needs of our customers and our partners evolve. We leverage our proprietary data and analytics, diversified product suite, and dynamic tech stack to maintain low customer acquisition costs, deliver consistent credit performance, and drive greater customer lifetime value. We align our partners' interests with our own through retail share arrangements, which are designed to deliver consistent risk-adjusted returns for synchrony through changing market conditions. while also sharing program profitability with our partners. And we utilize a stable and efficient funding model to provide continuity to our customers and partners when they need it most. And with that, I'll turn the call over to Brian to discuss the second quarter financial performance in greater detail.