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Synchrony Financial

SYF is a U.S. consumer financial services firm and the largest domestic issuer of private label credit cards. The Retail Card business is the largest segment (~70% of SYF platform revenue) and issues private label cards in conjunction with retail partners, as well as Dual Cards that function more like traditional general purpose cards. SYF's five largest Retail Card programs (Gap, JCPenney, Lowe's, Sam's Club, Walmart) accounted for 53% of total SYF interest and fees on loans in FY17. Programs with JCPenney, Lowes, and Walmart each accounted for more than 10%. Post-quarter, SYF announced the loss of the Walmart partnership, but also announced a multi-year extension with Lowe's. The Payment Solutions business (~15% of revenue) provides promotional financing for major purchases, primarily via cards and installment loans. The CareCredit business (~15% of revenue) provides financing for consumers making health-care related purchases, generally elective procedures, and typically involves promotional terms offered by SYF's partners. (14 Dec 2018)

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Synchrony & Walmart: Bad Blood Boiling Over?

IG Note: 02 Nov 2018, 3:04 PM ET - Walmart sued Synchrony, alleging breach of contract in a heavily redacted filing as the two sides tussle over what to do with the legacy loan book ahead of Capital One taking over as issuer. 

Discover: Moody's (Finally) Sees the Light

Worth Watching: 31 Oct 2018, 1:59 PM ET - Discover (Baa3/BBB-/BBB+) was upgraded one notch to Baa3 by Moody's (outlook stable), equalizing with S&P and Fitch, both of whom have maintained Discover at IG throughout its history while Moody's chopped to Ba1 at the height of the crisis (mid-2 ..
Focused

SYF 3Q18: Walmart Woes Fade a Bit on Solid Results

Earnings Note: 22 Oct 2018, 6:01 AM ET - Synchrony turned in a solid and quiet 3Q18, highlighted by continued improvement in asset quality, the PayPal on-boarding, and decent (~5%) core loan growth reflecting tightened underwriting. Stay O/P but biased more to FV after the rally.

US Strategy: What to Watch for on 3Q Earning Calls

Strategy Analysis: 11 Oct 2018, 4:37 AM ET - We surveyed our analyst teams for key sector level issues they will be paying close attention to with upcoming third quarter earnings calls beyond the typical sales, margins and earnings guidance. 
Focused

SYF: JCPenney Extended to '27, Moving Closer to M/P

Worth Watching: 10 Oct 2018, 10:55 AM ET - SYF (NR/BBB-/BBB-) extended its long-standing partnership with JCPenney in a multi-year agreement that now runs through January 2027. The retailer accounted for more than 10% of Synchrony's loan revenue in FY17 as one of the company's largest 5 pr ..

Specialty Finance: Barclays Conference Notes

Sector Analysis: 17 Sep 2018, 5:03 AM ET - We provide presentation write-ups for the slew of specialty finance companies represented at the Barclays 2018 Global Financial Services Conference this week; Ally, AmEx, CIT, Discover, iStar, and Navient.

Register Now: 2018 Global Financials Seminars

Announcement: 10 Sep 2018, 9:51 PM ET - Register for our upcoming fifth annual Global Financials Seminars.
Focused

Synchrony: Multi-Year Lowe's Extension

Worth Watching: 13 Aug 2018, 8:50 PM ET - Synchrony (NR/BBB-/BBB-) announced a multi-year extension of its long-standing partnership with Lowe's. The home improvement retailer accounted for more than 10% of Synchrony's loan revenue in FY17 as one of the company's 5 largest programs, with ..

Interplay Between US Banks & Fed's Balance Sheet

Sector Analysis: 08 Aug 2018, 5:36 AM ET - In this note, we discuss the impacts of the Fed's balance sheet unwind on banks. We expect that U.S. banks will become the "natural buyers" of U.S. Treasuries not bought by the Fed, offsetting the impact on rates.

July 2018 US Company Recommendation Changes

US Company Recommendation Changes: 31 Jul 2018, 9:39 PM ET - Our monthly report provides executive summaries for the thirty-nine company recommendation changes made on North American companies during the month of July.
Focused

Synchrony: Avoids Downgrade to HY, For Now

Worth Watching: 30 Jul 2018, 3:59 PM ET - Synchrony (NR/BBB-/BBB-) avoided a drop to HY in the aftermath of the Walmart loss as both Fitch and S&P have now weighed in, affirming at BBB- and moving to negative outlooks. Both agencies attributed the outlook revision to the negative implic ..
Focused

SYF 2Q18: Move to O/P on Walmart Rollback Sale

Earnings Note: 30 Jul 2018, 6:01 AM ET - Synchrony's 2Q18 results were overshadowed by the loss of the Walmart business to Capital One, causing spreads to gap out ~50 bp over the past two weeks. We shift to an Outperform, viewing the selloff as overdone.
Focused

Synchrony: Rapid Reaction to Walmart Fallout

Worth Watching: 27 Jul 2018, 10:02 AM ET - Synchrony (NR/BBB-/BBB-) got walloped yesterday as Walmart rumor became reality, pushing spreads firmly into HY territory. We found management's commentary on this morning's earnings call to be somewhat underwhelming from a broader strategic st ..
Focused

Synchrony: Could Walmart Walk?

Worth Watching: 12 Jul 2018, 9:52 PM ET - Synchrony (NR/BBB-/BBB-) got knocked around in the equity markets, dropping roughly 6% from the day's high on reports that Walmart is considering switching its card program to Capital One (long bonds look to be out ~10 bp). To be clear, media c ..

US Banks: Update to 2018 Debt Supply Forecast

Sector Analysis: 09 Jul 2018, 5:49 AM ET - Following a review of 1H18 debt supply, we are increasing our supply forecast for the full year for the banks in our coverage universe. The majority of the increase reflects increased expectations for OpCo debt from the GSIBs.
Focused

Synchrony: Closes PayPal Portfolio Acquisition

Worth Watching: 03 Jul 2018, 9:34 PM ET - Synchrony (NR/BBB-) closed its acquisition of the PayPal portfolio, bringing on $6.8 bn of loans and another $800 mn of participation interests in pools held by 3rd parties. The transaction also means Synchrony is now the exclusive issuer of Pa ..

US Banks: 2018 CCAR - It's OK to Breach Limits?

Sector Analysis: 29 Jun 2018, 5:15 AM ET - The Fed released the 2018 CCAR results. It did not object to the capital plans of 34 of the 35 banks, the exception being DB USA, Deutsche Bank's IHC. The Fed did not force a number of banks that fell below the minimums to raise capital.
Focused

Specialty Finance: Conference Recap Notes

Sector Analysis: 14 Jun 2018, 5:41 AM ET - We recap recent presentations by several fincos at the Morgan Stanley Financials conference. The sense we got from card issuers (SYF, DFS) and auto lenders (ALLY) is that consumer credit performance should remain solid and stable in 2Q18.

U.S. Consumer Credit: 1Q18 Trends and Takeaways

Sector Analysis: 24 May 2018, 4:25 AM ET - We delve into the Fed's consumer credit data, analyzing 1Q18 trends across asset classes. We also dig in to recently released data on age distributions and one thing is clear: consumer credit has gotten grayer.

US Banks: Crapo De-reg. Bill Heads to White House

Sector Analysis: 23 May 2018, 10:27 PM ET - The House approved the Senate bill on financial (de)regulation, which is now headed to the White House to be signed into law. While the bill provides regulatory relief for regional/community banks, it has minimal impact on the big-6 banks.

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