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Synchrony Financial (SYF) Q3 Earnings Miss Estimates, Down Y/Y

Zacks.com logo Zacks.com 10/20/2020

Synchrony Financial’s SYF third-quarter 2020 earnings per share of 72 cents missed the Zacks Consensus Estimate by 13.3%. Further, the bottom line plunged 41% year over year due to muted revenues.

Results in Detail

The company’s net interest income decreased 21.2% to $3.5 billion in the third quarter due to the impact of the Walmart consumer portfolio sale and the COVID-19 pandemic.

However, its other income increased 54.1% to $131 million, primarily attributable to lower loyalty program expenses.

In the quarter under review, loan receivables declined 6% year over year.

Deposits were $63.5 billion, down 4% from the year-ago quarter.

Provision for credit loss increased 19% year over year to $1.2 billion on the back of Walmart-related prior-year reserve reduction and a hike in reserve induced by COVID-19 related losses. The same was partly offset by lower net charge-offs.

Total other expenses rose 0.3% year over year to $1.07 billion due to the restructuring charge and expenses related to the COVID-19 pandemic.

However, the same was offset by decreased cost from Walmart, lower purchase volume and accounts, and reduced discretionary cost.

Synchrony Financial Price, Consensus and EPS Surprise

chart, line chart: Synchrony Financial Price, Consensus and EPS Surprise © Provided by Zacks.com Synchrony Financial Price, Consensus and EPS Surprise

Synchrony Financial price-consensus-eps-surprise-chart | Synchrony Financial Quote

Sales Platforms Update

Retail Card

The company’s interest and fees on loans fell 27% year over year due to the sale of the Walmart consumer portfolio and lower loan receivables.

Loan receivables were down 6% due to COVID-19 impact while the average active accounts declined 19%.

Payment Solutions

Interest and fees on loans dropped 10% year over year owing to lower late fees. Loan receivables slid 5% year over year.

Purchase volume contracted 6% while average active account slipped 7%.

CareCredit

Interest and fees on loans decreased 8% year over year due to fall in merchant discount as a result of shrinkage in purchase volume.

Loan receivables were down 7% year over year on account of the coronavirus impact.

While purchase volume decreased 3%, the average active account fell 8%.

Financial Position

Total assets as of Sep 30, 2020 were $95.6 billion, down 9.7% year over year.

Total borrowings as of Sep 30, 2020 were $15.7 billion, down 22.6% from the year-ago quarter.

The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $26.8 billion reflecting 28% of total assets.

While return on assets was 1.3%, the return on equity was 10.3%.

Efficiency ratio was 39.7% in third-quarter 2020.

Capital Deployment

During the quarter under consideration, the company returned $129 million in capital through common stock dividends.

Zacks Rank

Synchrony Financial carries a Zacks Rank #3 (Hold). 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:

Capital One Financial Corporation COF has an Earnings ESP of +11.31% and a Zacks Rank #3 (Hold), currently. The company is scheduled to release third-quarter earnings 2020 on Oct 22.

Moodys Corporation MCO is set to report third-quarter earnings 2020 on Oct 29. The stock has a Zacks Rank of 2 and an Earnings ESP of +1.93% at present.

Arthur J. Gallagher Co. AJG is slated to announce third-quarter earnings 2020 on Oct 29. The stock has an Earnings ESP of +6.91% and is presently Zacks #2 Ranked.

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