Synchrony Financial

Good morning and welcome to the Synchrony Financial fourth quarter 2023 earnings conference call. Please refer to the company's investor relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. Currently, all callers have been placed in listen-only mode. The call will be opened up for your questions following the conclusion of management's prepared remarks. If you wish to ask a question following the prepared remarks, please press star 1. Also, if you should need operator assistance during today's call, please press star 0. I will now turn the call over to Katherine Miller, Senior Vice President of Investor Relations. Thank you. 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 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 website. 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, Kathryn. Good morning, everyone. Today, Synchrony reported strong fourth quarter results, including net earnings of $440 million, or $1.3 per diluted share, a return on average assets of 1.5 percent, and a return on tangible common equity of 14.7 percent. These fourth quarter results contributed to full-year 2023 net earnings of $2.2 billion, or $5.19 per diluted share, a return on average assets of 2 percent, and a return on tangible common equity of 19.8%. This strong financial performance was supported by continued consumer resilience and powered by our multi-product strategy and diversified sales platforms. We achieved another year of record purchase volume, totaling $185 billion for the full year and up 3% from last year. Our compelling products and value propositions help drive the origination of almost 23 million new accounts in 2023 and also help grow our average active accounts by 2.5%. The broad utility and value of our product offerings continue to resonate deeply with our customer base, leading to another year of record purchase volume. This combined with a continued moderation in payment rates to drive loan receivables growth of 11.4%. Credit continued to normalize as fourth quarter net charge-offs reached pre-pandemic levels in line with our expectations and contributing to a full year net charge-off rate of 4.87%, still below our target underwriting range of 5.5% to 6%. We also drove continued progress toward our target operating efficiency ratio, demonstrating cost discipline while maintaining investments to ensure the long-term success of our franchise. And through strong execution and prudent capital management over time, Synchrony continued our long history of capital returns, including $1.5 billion return to shareholders this year. Since 2016, we have paid $3.6 billion in dividends and reduced our outstanding shares by 50%. Synchrony's ability to consistently generate and return capital to our shareholders is enabled by our differentiated business model, which prioritizes the sustained delivery of attractive risk-adjusted returns through changing market conditions and economic cycles. Our focused execution across key strategic priorities enable Synchrony's resilient returns by reinforcing our core strengths and facilitating our ongoing evolution to meet changing preferences and needs. With that in mind, Synchrony continued to grow and win new partners over the past year. with the addition of more than 25 partners and over 30 renewed relationships. Among our new partnerships, we were excited to announce that J.Crew selected Synchrony to launch its first co-branded credit card, which will be a digital-first program with mobile wallet provisioning, robust pre-approval capabilities, scan to apply, and direct-to-device credit applications. This competitive win is a testament to our culture of innovation, consistent investment in our digital ecosystem, and a strategic focus to empower our customers and partners to connect seamlessly through best-in-class, omni-channel experiences. We also continue to diversify our programs, products, and markets during 2023, broadening the utility of our offerings and extending our reach. Synchrony believes in the power of choice, choice for our customers and partners, providers and merchants, as they engage in person and digitally across a full suite of everyday financing options. This year, we launched multi-product pre-qualification and began presenting customers with side-by-side offers of both revolving and installment solutions to bring choice to the forefront. These enhancements empower customers to weigh the benefits of various options in real time and make the decisions that best suit their financing needs in that moment. We continue to scale our Pay Later solution, which is now offered at over 200 provider locations in our health and wellness platform and at 18 retail partners. For our partners and providers, PayLater seamlessly integrates into the broader partner relationship and product offering, and provides another tool for deepening engagement with customers. And the response has been strong. Since we launched, partners who have offered these solutions have seen a 20% lift in new accounts, with 95% of PayLater sales coming from net new customers. Synchrony's continued diversification and expansion of our offerings over the last year benefited from opportunities to extend our reach. In the fourth quarter, we announced the sale of our PetsBest insurance business, and through a minority interest from that sale, the opportunity to build a strategic partnership with Independence Pet Holdings, or IPH, one of the leading pet-focused companies in North America. Since acquiring the Pets Best business in 2019, we've grown pets and forests by over 45% per year on average, more than double the industry's growth rate. We've become a leading pet insurance provider in the U.S. We're very proud of what we've been able to achieve with such a great business and team, which enabled us to gain considerable insight into the pet industry more broadly over the last four years. We are confident that IPH will be able to use its pet insurance expertise to unlock new opportunities for Pets Best and offer still greater value for pets' best customers. And through the strategic relationship forged between IPH and ourselves, Synchrony is positioned to gain still greater exposure and insights into the rapidly growing pet industry as we seek to expand access to flexible pet care financing across the country. More recently, Synchrony announced still another opportunity to expand our business and accelerate our growth with the acquisition of Ally Lending's point-of-sale financing business. This $2.2 billion loan portfolio consists of partnerships with nearly 2,500 merchant locations and supports more than 450,000 active borrowers in the home improvement services and healthcare industries. Through this acquisition, Synchrony will create a differentiated solution in the industry, simultaneously offering both revolving credit and installment loans at the point of sale in the home improvement vertical. This multi-product presentation furthers our product diversification strategy, delivering consumer choice while maximizing conversions and sales for our partners. This opportunity also enables Synchrony to expand our home specialty financing in roofing, windows, and electrical services. We are excited about the natural synergies we see between Ally Lending and Synchrony's home and auto and health and wellness platforms. We look forward to leveraging our industry expertise and scale to drive operating efficiency and accelerate growth across platforms with attractive market opportunities and return profiles over time. And of course, Synchrony's ability to successfully deliver a breadth of financing solutions across an expansive distribution network is reliant on delivering dusting class experiences with each customer interaction. This year, we continue to elevate the presence and utility of our offerings across in-person and digital transactions by adding digital wallet provision and capabilities for eight partners, including PayPal and Venmo, Verizon, TJX, and Belk. And our digital sales continue to grow at an outsized pace, climbing 9% to nearly 39% of our total 2023 sales. Over the last year, Synchrony launched the first phase of our marketplace on Synchrony.com and within our native app, where shoppers can find hundreds of offers showcasing our partner brands paired with Synchrony's tailored multi-product financing solutions. In fact, as Synchrony leveraged our analytics and marketing capabilities to develop compelling cross-shopping opportunities in this initial launch, Marketplace attracted over 220 million visits by shoppers for our partners, providers, and merchants. as we more than doubled the number of partners participating. In summary, Synchrony is increasingly anywhere our customer is looking to make a purchase or a payment, large or small, in person or digitally, and across an ever-expanding range of markets and industries. We can meet them whenever and however they want to be met with a variety of flexible financing solutions to meet their needs in any given moment. Our ability to deliver the versatility of our financial ecosystem seamlessly across channels, industries, partners, and providers alike is what positions Synchrony so well to sustainably grow and deliver attractive risk-adjusted returns, particularly as customer needs and market conditions evolve. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.