Synchrony Financial

Good morning and welcome to the Synchrony Financial Third Quarter 2023 Earnings Conference Call. Please refer to the company's investor relations website for access to their earning materials. Please be advised that today's conference call is being recorded. Currently, all callers have been placed in a listen-only mode. The call will be open for your questions following the conclusion of the management's prepared remarks. If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the prepared remarks, please press star one. I will now turn the call over to Catherine Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Catherine Miller 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 can 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 websites. On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wentzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Catherine, and good morning, everyone. Today, Synchrony reported strong third quarter results, including net earnings of $628 million, or $1.48 per diluted share. a return on average assets of 2.3%, and a return on tangible common equity of 22.9%. These results highlight the strength of Synchrony's differentiated model and the resiliency of our business through economic cycles. Our diversified product suite and advanced digital capabilities enable Synchrony to continue to deliver consistently strong results in an ever-changing environment. We are increasingly at the center of customers' everyday financing needs, and positioned as the partner of choice for retailers, merchants, and providers alike as they seek enhanced value, greater utility, and best-in-class experiences. We opened 5.7 million new accounts in the third quarter and grew average active accounts by 6%. We continue to drive growth with our $47 billion of purchase volume representing a record third quarter and a 5% increase versus the prior year. This momentum is a testament to the power of our diversified portfolio. Health and wellness purchase volume grew 14% compared to last year, reflecting broad-based growth in active accounts led by dental, pet, and cosmetic. The 7% growth in digital purchase volume was driven by higher average active accounts, as several of our newer programs continue to resonate with consumers. In diversified value, purchase volume grew 7%, reflecting growth in out-of-partner spend and strong retailer performance. Lifestyle purchase volume increased 8%, reflecting growth in average transaction values and outdoor luxury. And in home and auto, purchase volume remained flat versus last year, as growth in commercial products, home specialty, and the auto network was generally offset by lower retail traffic in furniture and electronics and the impact of lower gas and lumber prices. Dueling co-branded cards accounted for 42% of total purchase volume in the quarter and increased 13% as several of our newer value propositions continue to drive greater customer engagement. Synchrony's range of products and platforms gives us a unique view into the health of the consumer. Through our monitoring, we see continued trends of behavior normalizing to pre-pandemic levels. Across the portfolio, average transaction values leveled off through the quarter after modestly declining in the second quarter. Meanwhile, average transaction frequency, which had climbed throughout the year, showed some signs of stabilization toward the end of the quarter. Looking at our out-of-partner spend, our customers are becoming more selective in making larger purchases, including home furnishings and electronics, and spending less on travel. Directionally, we see broad trends that are in line with our expectations across the portfolio, with slowing spend growth, normalization of payment rates, and growth in balances, which is driving higher net interest income. While in the external deposit data we track, consumer savings balances remain approximately 8% above the average level in 2020. In summary, these trends show a consumer that continues to benefit from a strong labor market while reverting gradually towards historical spend and payment norms. As we closely monitor the health of the consumer, we also continue to develop and deploy the compelling products and value propositions that attract consumers and partners to synchrony. We announced earlier this month that both the PayPal and Venmo cards can now be provisioned in the Apple Wallet, representing our latest enhancement as we evolve to meet the demands of our increasingly digital-first customers. Synchrony's journey began with in-store financing options, which have long been valued tools for both retailers and consumers to build loyalty and drive value. Over time, we've broadened the utility of these products through our dual and co-brand card strategies, which enable customers to make out-of-partner purchases, accumulate rewards, and extract even greater value. And increasingly, our customers are taking that engagement even further, as digital wallets enable everyday use functionality and extend our leading value propositions well beyond the store. Active wallet users are up over 45% year-to-date, and sales on wallets are up over 70%. This trend is more than a simple technological enhancement. Synchrony's strategy to deliver enhanced utility and best-in-class experiences requires seamlessly integrated, tailored solutions, and our investments in technology allow us to meet this demand. When our customers combine the broad utility of our products and services with our digital wallet functionality, the impact is clear. Our digital wallet users spend nearly twice as much and have over double the transactions on average. More broadly, we see the impact of expanded product utility in our results. Out-of-partner spend continued its outsized growth this quarter, up 12% compared to last year. We continue to develop our solution suite and extend the reach of our products, meeting consumer demand for fast and secure shopping and opening new opportunities for customers to engage with their favorite brands. In health and wellness, we were pleased to announce partnerships with veterinary hospitals at three additional universities. CareCredit is now accepted at 95% of the nation's public veterinary university hospitals, in addition to more than 25,000 provider locations, expanding access to flexible financing tools that enable a lifetime of care for all pets. The power of Synchrony's continually evolving model, supported by our focus on technological innovation, continues to position Synchrony as the partner of choice as we deliver digitally powered experiences and compelling value for our many stakeholders. And with that, I'll turn the call over to Brian.