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Synchrony Financial's (SYF) Q1 Earnings Miss, Decline Y/Y

Synchrony Financial’s SYF first-quarter 2020 earnings per share of 58 cents per share missed the Zacks Consensus Estimate by 25.6%. The bottom line also declined 42% year over year due to muted revenues.
Results in Detail

The company’s net interest income decreased 8% to $3.9 billion in the first quarter due to the impact of the Walmart consumer portfolio sale.

Moreover, its other income increased 5.4% to $97 million, mainly attributable to lower loyalty program expenses.

In the quarter under review, loan receivables inched up 3% year over year.
Deposits were $64.6 billion, up 1% from the year-ago quarter.

Provision for credit loss increased 95% year over year to $1.7 billion due to Walmart credit loss reserve reduction, a higher reserve build related to coronavirus and CECL in the first quarter.

Total other expense dipped 3.9% year over year to $1 billion due to lower employee costs, professional fees, marketing and business development expenses.

Synchrony Financial Price and EPS Surprise

Synchrony Financial Price and EPS Surprise
Synchrony Financial Price and EPS Surprise

Synchrony Financial price-eps-surprise | Synchrony Financial Quote

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The company’s interest and fees on loans fell 12% year over year due to the sale of the Walmart consumer portfolio.

Loan receivables were up 2% while the average active accounts declined 10%.

Payment Solutions

Interest and fees on loans rose 3% year over year on the back of loan receivables growth. Loan receivables augmented 3% year over year.

Purchase volume expanded 2% while average active account rose 2%.

CareCredit

Interest and fees on loans increased 9% year over year, attributable to higher loans receivables.

Loan receivables grew 7% year over year on the back of dental and veterinary.

While purchase volume registered 2% growth, the average active account reported a 5% rise.

Financial Position

Total assets as of Mar 31, 2020 were $98 billion, down 7% year over year.

Total borrowings as of Mar 31, 2020 were $17.2 billion, down 21.2% from the year-ago quarter.

The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $24.8 billion reflecting 25.3% of the total assets.

While return on assets was 1.1%, the return on equity was 9.1%.

Efficiency ratio was 32.7% in the first quarter of 2020.

Capital Deployment

During the quarter under consideration, the company repurchased shares worth $1 billion. However, it suspended the rest of the buyback capacity due to the COVID-19 impact.

Moreover, it paid quarterly dividend of 22 cents per share.

Rank

Synchrony Financial carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases From Finance Sector

Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

CURO Group Holdings Corp. CURO has an Earnings ESP of +1.47% and a Zacks Rank #1. The company is scheduled to release first-quarter earnings on May 4.

Credit Acceptance Corporation CACC is set to report first-quarter earnings on May 4. The stock has a Zacks Rank #3 and an Earnings ESP of +11.28%.

Virtu Financial, Inc. VIRT is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +41.57% and a Zacks Rank of 1.

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