Synchrony’s Earnings Flat, But Credit Metrics and Walmart Growth Shine

Date of Call: Jan 27, 2026

Financials Results

• Revenue: Net revenue of $3.8 billion, flat versus last year
• EPS: Q4: $2.04 per diluted share, including a 14-cent restructuring charge. Full year: $9.28 per diluted share.
• Operating Margin: Return on average assets of 2.5% for Q4; return on tangible common equity of 21.8% for Q4.

Guidance:

• Expect mid-single-digit ending receivables growth in 2026, driven by average active account and purchase volume growth.
• Net charge-off rate expected to be in line with long-term target of 5.5%-6%.
• Net interest income expected to grow in 2026 due to PPPCs and lower funding costs.
• Reserve for credit losses as a percent of loan receivables expected to be around 10.06%.
• Net interest margin expected to increase, with NII growth.
• EPS guidance for full year 2026 between $9.10 and $9.50.

Business Commentary:

Financial Performance and Earnings:

• Synchrony Financial reported net earnings of $751 million or $2.04 per diluted share in Q4 2025, with a return on average assets of 2.5% and return on tangible common equity of 21.8%.
• The strong performance was driven by increased purchase volume and improved credit results.

Purchase Volume and Platform Growth:

• The company generated a record purchase volume of $49 billion in Q4, a 3% year-over-year increase.
• Growth was driven by strong customer response to enhanced product offerings, increased spend per account, and partner expansion.

Credit Performance and Risk Management:

• Synchrony achieved a net charge-off rate of 5.37% in Q4, a decrease of 108 basis points from the previous year.
• Improvements in credit performance were attributed to disciplined underwriting, effective prior credit actions, and selective customer spend behavior.

Partnership Expansion and Strategic Initiatives:

• Synchrony added or renewed over 75 partners in 2025, including major retailers like Bob’s Discount Furniture and Polaris.
• The expansion was driven by strategic initiatives to enhance product utility and broaden reach, with a focus on partnerships in health and wellness, home, and auto sectors.

Technological and Digital Advancements:

• The company saw an 18% increase in total visits and a 17% increase in sales in 2025 due to enhancements in digital platforms and AI search capabilities.
• Investments in digital capabilities, such as Synchrony’s Marketplace and AI-driven tools, contributed to the growth in digital engagement and sales.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Synchrony ended the year with a strong fourth quarter performance' and 'we are confident in the momentum we’ve built to drive considerable long-term value.' Credit metrics are strong, with net charge-off rate decreasing to 5.37% and delinquency rates below historical averages. Strategic initiatives are progressing well, with new partnerships and product launches.

Q&A:

• Question from Sanjay Sakrani (KBW): Can you talk about the building blocks for mid-single-digit receivables growth guidance? Is co-brand volume growth due to Walmart? Views on potential APR caps?
  Response: CEO: Consumer spending is resilient with strength across platforms; co-brand growth up 16%. Walmart is the fastest-growing program launched. CFO: Purchase volume accelerated in early 2026; APR caps would eliminate credit for low-to-mid-income consumers and hurt merchants, with Synchrony approving more such customers than many issuers.

• Question from Ryan Nash (Goldman Sachs): Can you unpack the credit guide for 2026? Any benefit from elevated tax refunds?
  Response: CFO: Strong delinquency performance entering 2026 but new portfolios (Walmart, Lowe’s) add upward bias. Tax refund tailwinds are included in the guide; macroeconomic conditions, particularly unemployment, will influence outcomes.

• Question from Terry Ma (Barclays): How are PPPCs tracking? How much more lift can NIM get after 2026?
  Response: CFO: PPPCs are ahead of schedule on APR changes; performance generally in line with expectations. NIM should increase with continued benefits from PPPCs and lower rates, though offset by factors like prime rate and late fees.

• Question from Moshe Orenbuch (TD Cowen): Are there other areas (verticals/partners) where pay later could impact the portfolio? What are ripe areas for new programs?
  Response: CFO: Pay later is incremental to existing products, resonating with partners and helping win new programs. The pipeline is broad across platforms with 75 partners added/renewed last year, aided by tech and underwriting investments.

• Question from Mahir Bhatia (Bank of America): How are you thinking about the reserve rate level into 2026? Progress on pay later and learnings from rollouts?
  Response: CFO: Reserve rate is near CECL day-one levels; potential downward bias if macro stabilizes. Pay later is performing well with no cannibalization of existing products; partners are seeing incremental sales.

• Question from Erika Najarian (UBS): Within the EPS guidance, should we assume ALLL ratio comes down to offset higher reserves from Walmart growth? How might tax refunds impact payment rate?
  Response: CFO: Reserve trajectory is downward over time but dollar reserves will increase with growth. Tax refunds may boost purchase volume or lead to debt paydown; both outcomes are positive for Synchrony.

• Question from Rick Shane (J.P. Morgan): Why is EPS guidance flat despite buybacks and mid-single-digit loan growth? Should we expect normalized efficiency ratios in 2027?
  Response: CFO: Early growth in new programs (Walmart) with higher reserves and lower-yielding assets drives current efficiency; CECL accounting impacts. Normalization expected over time, with goal of double-digit EPS growth.

• Question from Rob Wildhack (Autonomous Research): Is the translation from Pay Later to loan growth different than legacy products? Any early indications on loan size or ticket?
  Response: CFO: Pay Later tends to be more one-time but shows repeat usage; it’s a key part of the multiproduct strategy. Loan duration is similar to private label, mostly 6-12 months.

• Question from Jeff Adelson (Morgan Stanley): Update on credit posture? Why not open up credit more given favorable metrics?
  Response: CFO: Prior credit actions remain; no incremental tightening assumed in 2026 guide. Probability of default across credit grades remains elevated; credit aperture may expand based on performance.

• Question from Brian Foran (Truist): Why switch to an EPS range for guidance? Key markers for tracking mid-single-digit loan growth?
  Response: CFO: EPS range simplifies modeling for analysts. Key markers: purchase volume trends and average active account growth in the first half of 2026.

• Question from Don Fandetti (Wells Fargo): Can you detail the Walmart partnership rollout and growth expectations?
  Response: CFO: Walmart program is fully launched with strong early results, fastest growth ever; leveraging OnePay app and digital placement. Strong value proposition with Walmart+ cash back incentives driving adoption.

Contradiction Point 1

Primary Drivers of Growth Guidance

Inconsistent emphasis on which factors are most critical for achieving mid-single-digit loan growth.

What are the key factors driving the mid-single-digit receivables growth guidance, and is Walmart's acceleration a contributing factor? Is the guidance assuming any changes to underwriting standards? - Sanjay Sakrani (KBW)

2025Q4: The mid-single-digit loan growth guide is encouraged by strength in the consumer, momentum in purchase volume, and optimism from new programs like Walmart and Lowe's Commercial. - Brian Doubles(CFO)

How will credit rollbacks, Walmart's launch, and positive Paylater feedback drive mid-single-digit growth? - Ryan Nash (Goldman Sachs)

2025Q3: Multiple growth drivers are in place: the early momentum from the Walmart program launch is strong; the Paylater launch at Amazon is performing well; the PayPal physical card launch is early but promising; and balanced credit box openings in areas like health/wellness for good risk-adjusted returns. - Brian Doubles(CFO)

Contradiction Point 2

Outlook for the Reserve Rate

Contradiction on the direction and certainty of the reserve rate trend.

Will the ALLL ratio decrease due to qualitative reserves offsetting increased reserves from Walmart growth within the $9.10–$9.50 EPS range? - Erika Najarian (UBS)

2025Q4: The reserve trajectory is downward-biased over time if the environment remains stable, but the company did not provide specific guidance on the ALLL within the EPS range. - Brian Wenzel(CFO)

What triggers are you monitoring to further unwind credit actions, and are they macro-driven or based on your own credit results? - Robert Wildhack (Autonomous Research)

2025Q3: Continued improvement in credit metrics (e.g., declining 30+ delinquencies) also encourages cautious opening." "As restrictions are gradually reversed, trends should migrate back to generally seasonal patterns. - Brian Wenzel(CFO)

Contradiction Point 3

Performance and Expectations for the Walmart Program

Different characterization of the Walmart program's launch status and growth potential.

What's the status of the Walmart partnership rollout and growth expectations? - Don Fandetti (Wells Fargo)

2025Q4: The Walmart program is fully launched and performing incredibly well, with the fastest growth of any new program. - Brian Wenzel(CFO)

What path leads to mid-single-digit growth amid credit rollbacks, Walmart's launch, and positive Paylater feedback, and what are the key drivers? - Ryan Nash (Goldman Sachs)

2025Q3: The early momentum from the Walmart program launch is strong. - Brian Doubles(CFO)