Should Synchrony Financial Get More Credit for Q1 Results?

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Synchrony Financial (NYSE: SYF) released its first-quarter financial results before the markets opened on Thursday. The company said that it had $1.00 in earnings per share (EPS) and $4.79 billion in revenue, which compares with consensus estimates of $0.93 in EPS and revenue of $4.29 billion. The same period of last year reportedly had EPS of $0.83 on $3.84 billion in revenue.

During the most recent quarter, loan receivables grew 3% year-over-year to $80.4 billion. Excluding the Walmart portfolio from both periods, loan receivables grew 17% to $79.7 billion. At the same time, deposits grew $7.5 billion, or 13% to $64.1 billion, and comprised 75% of funding.

Average active accounts grew 8% to 77.1 million.

The estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.5%, compared to 16.8% a year ago, reflecting the impact of capital deployment through the PayPal Credit program acquisition and continued execution of the capital plan. Book value per share was $21.35, while tangible book value per common share was $17.96.

Return on assets was 4.3% and return on equity was 30.4%.

Margaret Keane, president and CEO of Synchrony, commented:

We are maintaining the momentum we generated over the last several quarters. Our focus on organic growth, program renewals, valuable strategic partnerships, forward-thinking technology investments, and actionable data analytics, continue to be key factors in driving solid growth and strong partnerships. Synchrony’s balance sheet remains strong as we continue to focus on creating value for shareholders through growth, portfolio acquisitions, and the execution of our capital plan.

Shares of Synchrony closed Wednesday at $33.24, in a 52-week range of $21.77 to $36.32. The consensus price target is $37.44. Following the announcement, the stock is up about 2% at $34.00 in early trading indications Thursday.

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