Q3 2024 Synchrony Financial Earnings Call

Operator: Star Zero.

Operator: If you wish to ask a question following the prepared remarks, please press star one.

To ask a question following their prepared remarks. Please press star one I will now turn the call over to Kathryn Miller Senior Vice President of Investor Relations. Thank you you may begin.

Kathryn Miller: I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Kathryn Miller: Thank you and good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, SynchronyFinancial.com. This information can be accessed by going to the Investor Relations section of the website.

Yeah.

Kathryn Miller: Thank you and good morning, everyone welcome to our quarterly earnings Conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release detailed financial schedules and presentation are available on our website synchrony financial Dot com.

Kathryn Miller: Information can be accessed by going to the Investor Relations section of the website.

Kathryn Miller: Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results can differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website.

Kathryn Miller: Before we get started I wanted to remind you that our comments today will include forward looking statements. These statements are subject to risks and uncertainty and actual results could differ materially we list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website during.

Kathryn Miller: During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP payment. We will provide financial measures in our materials for today's call.

Kathryn Miller: During the call we will refer to non-GAAP financial measures in discussing the company's performance you can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.

Kathryn Miller: Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website.

Kathryn Miller: Finally, synchrony financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties.

Kathryn Miller: The only authorized webcasts are located on our website.

Brian Doubles: On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer. Thanks, Katherine.

Speaker Change: On the call. This morning are Brian doubles, synchrony, as President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer.

Brian Doubles: Thanks, Kathryn and good morning, everyone. Today's synchrony reported strong third quarter results, including net earnings of $789 million or $1 94 per diluted share a return on average assets of two 6% and return on tangible common equity of 24, 3%.

Brian Doubles: Good morning, everyone. Today, Synchrony reported strong third quarter results, including net earnings of $789 million, or $1.94 per diluted share, a return on average assets of 2.6%, and a return on tangible common equity of 24.3%. These results reflect Synchrony's commitment to driving value for our customers, partners, providers, small businesses, and our shareholders, as the operating environment continues to evolve. During the quarter, we continue to deliver responsible access to credit through powerful, omnichannel experiences. Our broad range of flexible financing solutions and compelling value propositions continue to resonate with customers as they engage across our diversified portfolio.

These results reflect <unk> commitment to driving value for our customers partners providers small businesses and our shareholders as the operating environment continues to evolve.

Brian Doubles: During the quarter, we continued to deliver responsible access to credit through powerful omnichannel experiences our broad range of flexible financing solutions and compelling value propositions continue to resonate with customers as they engaged across our diversified portfolio.

Brian Doubles: We added 4.7 million new accounts and generated 45 billion of purchase volume. Both new account and purchase volume growth continue to be impacted by a modest pullback in consumer spending, as well as the credit actions that Synchrony has taken since the middle of 2023 to reinforce the credit trajectory of our portfolio in 2024 and beyond. Despite those actions, average active accounts remain stable versus last year, and ending receivables grew 4%. Purchase volume and receivables at the platform level reflected a continuation of the trends we discussed over the course of this year. Customers continue to be selective in how and where they spend, particularly as they manage their spend to navigate the effects of inflation on needs like groceries, utilities, and rent.

Brian Doubles: We added $4 7 million, new accounts and generated 45 billion of purchase volume.

Brian Doubles: Both new accounts and purchase volume growth continued to be impacted by a modest pullback in consumer spending as well as the credit actions with synchrony has taken since the middle of 2023 to reinforce the credit trajectory of our portfolio in 2024 and beyond.

Brian Doubles: Despite those actions average active accounts remained stable versus last year and ending receivables grew 4%.

Brian Doubles: Purchase volume and receivables at the platform level reflected a continuation of the trends we've discussed over the course of this year customers.

Brian Doubles: Continuing to be selective in how and where they spend particularly as they manage their spend to navigate the effects of inflation on needs like groceries utilities and rent.

Brian Doubles: Platform purchase volume growth range between down 3% and down 7% year over year, generally reflecting lower spend per account, as customers moderated both bigger ticket and discretionary spend, particularly in categories like furniture, electronics, cosmetics, and vision, as well as the impact of Synchrony's credit act.

Brian Doubles: Platform purchase volume growth range between down, 3% and down 7% year over year, generally reflecting lower spend per account as customers moderated both bigger ticket and discretionary spend particularly in categories like furniture electronics cosmetic envision as well as the impact of synchronous credit actions.

Brian Doubles: Actions. Receivable growth across the platforms range from 3 to 10% higher versus last year, primarily driven by payment rate moderation. Dual and co-branded cards accounted for 43% of total purchase volume for the quarter and decreased 2%, generally due to more selective consumer spend behavior and the impact of our credit actions. The trends we see in the outer partner spend on these products have generally remained consistent with those at the platform level. Our customers continue to be discerning in their discretionary purchases, particularly around larger ticket categories such as home furnishing, travel and entertainment, and are prioritizing non-discretionary spend like grocery and pharmacy.

Brian Doubles: Receivables growth across the platforms range from 3% to 10% higher versus last year, primarily driven by payment rate moderation.

Brian Doubles: Dual and co branded cards accounted for 43% of total purchase volume for the quarter and decreased 2% generally due to more selective consumer spend behavior and the impact of our credit actions.

Brian Doubles: The trends, we see in the outer partner spend on these products have generally remained consistent with those at the platform level.

Brian Doubles: Our customers continue to be discerning in their discretionary purchases.

Brian Doubles: Particularly around larger ticket categories, such as home furnishing travel and entertainment and are prioritizing non discretionary spend like grocery and pharmacy.

Brian Doubles: As we would generally expect, our customers across credit grades are spending less per transaction in most categories, with average transaction values declining 3% versus last year. More specifically, our non-crime customers reduce their average transaction values by about 5% versus last year, while prime transaction values moderated by 3%. Our super-prime customers continue to drive more out of partner spend; the transaction value declines of around 2% year-over-year. That said, customers across credit grades are transacting with relatively stable frequency compared to last year, which has partially offset the impact of lower transaction values. From a pain in behavior perspective, we continue to see relative stability in our non-prime segment.

Brian Doubles: As we would generally expect our customers across credit grades are spending less per transaction in most categories with average transaction values declined 3% versus last year.

Brian Doubles: More specifically, our non prime customers reduce their average transaction values by about 5% versus last year.

Brian Doubles: While prime transaction values moderated by 3%.

Brian Doubles: Our Super Prime customers continued to drive more out of partner spend the transaction Barry declines of around 2% year over year.

Brian Doubles: That said customers across credit grades are transacting with relatively stable frequency compared to last year, which was partially offset the impact of lower transaction values.

Brian Doubles: From a payment behavior perspective, we continue to see relative stability in our non prime segment.

Brian Doubles: New while our prime and super-prime customers have continued to gradually shift from above minimum payment to minimum payment. The proportion of less than minimum payments in our portfolio remains below the 2017 to 2019 average across all credit segments. When taken together, we believe the spend and payment trends we're observing across our portfolio reflect a consumer that is making healthy decisions that align with their respected priorities and budget. And as our customer needs and priorities continue to shift, Synchronous remains focused on delivering financial solutions, with compelling value propositions, and broad utility for wherever life takes on.

Brian Doubles: While our prime and Super Prime customers have continued to gradually shift from above minimum payment to minimum payment the proportion of less than minimum payments and our portfolio remains below the 2017 to 2019 average across all credit segments.

Brian Doubles: When taken together, we believe the spend in payment trends, we're observing across our portfolio reflects a consumer that is making healthy decisions that align with their respected priorities and budget.

Brian Doubles: And as our customer needs and priorities continue to shift to synchrony remains focused on delivering financial solutions with compelling value propositions and broad utility for wherever life takes them.

Brian Doubles: Disability to evolve and enhance our offerings also allows us to deliver loyalty and resilient risk-adjusted returns for our partners, providers, and merchants, and strengths and synchronized position as a partner of choice.

Brian Doubles: <unk> ability to evolve and enhance our offerings also allows us to deliver loyalty and resilient risk adjusted returns for our partners providers and merchants and strengthened synchrony position as a partner of choice.

Brian Doubles: During the third quarter, we added or renewed more than 15 partners, including Dick Sporting Goods and Gibson, and strategic partnerships like Albertsons. We're proud to extend our partnership with Dick's, which builds on our more than 20-year-long relationship. We will maintain our commitment to athletes or our score rewards credit card program by providing the ability to earn rewards twice as fast, exclusive member-only offers, and digital account management. Athletes will be able to continue using these cards online and in stores across the company's 800-plus retail locations, including Dick's Sporting Goods, House of Sport, Gulf Galaxy, and Public Land.

Brian Doubles: During the third quarter, we added a renewed more than 15 partners, including Dick's sporting goods, and Gibson and strategic partnerships like Albertsons.

Brian Doubles: We're proud to extend our partnership with <unk>, which builds on our more than 20 year long relationship.

Brian Doubles: We will maintain our commitment to athletes through our score rewards credit card program by providing the ability to earn rewards twice as fast.

Brian Doubles: Exclusive member only offers in digital account management.

Athletes will be able to continue using these cards online and in stores across the company has 800, plus retail locations, including Dick's Sporting goods houses for golf Galaxy and public lands.

Brian Doubles: Meanwhile, synchronized partnership with Gibson, the most iconic brand in the music industry, represents what we believe to be an industry first through Gibson's launch of a direct consumer credit program, which is available at Gibson.com and at the Gibson Garage Nashville flagship store. Gibson will also participate as part of our manufacturer OEM sponsorship program to drive customer engagement with their dealer framework, as well as the Synchrony Music and Sound Network.

Brian Doubles: Meanwhile, Synchroneyes partnership with Gibson, the most iconic brand in the music industry represents what we believe to be an industry first through Gibson's launch of a direct to consumer credit program, which is available on Gibson dot com and at the Gibson garage Nashville flagship store.

Brian Doubles: Gibson will also participate as part of our manufacturer OEM sponsorship program to drive customer engagement with their dealer framework as well as the synchrony music and sound network.

Brian Doubles: Synchrony is also excited to launch a strategic partnership between CareCredit and Albertsons Companies, a leading food and drug retailer in our communities. This collaboration allows customers to use their Care Credit card to pay for select health and wellness items in nearly 2,200 Albertsons Company stores, which includes Albertsons Safeway, Bond, Acme, Shaw's, and Jewel-Osco.

Brian Doubles: Synchrony is also excited to launch a strategic partnership between care credit and Albertsons companies, a leading food and drug retailer in our communities.

Brian Doubles: This collaboration allows customers to use our care credit card to pay for a select health and wellness items and nearly 2200 Albertsons company stores, which includes Albertsons Safeway bonds, Acme Shaw's and jewel Osco.

Brian Doubles: This adds to our expanding list of partners such as St. Club, Walgreens, and Walmart, where CareCredit is accepted for payment of select health and wellness products and services.

Brian Doubles: This adds to our expanding list of partners, such as Sam's Club, Walgreens, and Walmart where care credit has accepted for payment of select health and wellness products and services.

Brian Doubles: And lastly, Synchrony is proud to launch a first-of-its-kind payment experience for pet parents with our patent-pending insurance reimbursement functionality that will streamline the process for managing pet health care expenses. Customers who have both the CareCredit and Pet Special Insurance product will now be able to have their Pet Special Insurance claims directly reimbursed to their CareCredit health and wellness credit card. This seamless new technology reflects Synchrony's focus on driving best-in-class experiences, and through our collaboration with independent pet holdings, builds on our commitment to enable more pets to get the veterinary care they need. The weather is through the delivery of scalable, innovative financial solutions that empower our customers or the addition and renewal of partnerships that span most consumer STEM categories.

Brian Doubles: And lastly, synchrony is proud to launch a first of its kind payment experience for pet parents with our patent pending insurance reimbursement functionality that will streamline the process for managing pet health care expenses custom.

Brian Doubles: Customers, who have both the care credit and pets best insurance product will now be able to have their pets best insurance claims directly reimbursed to their care credit health and wellness credit card.

Brian Doubles: This seamless new technology reflects synchrony is focused on driving best in class experiences.

Brian Doubles: Through our collaboration with Independents Pep holdings.

Brian Doubles: Our commitment to enable more pets to get the veterinary care they need.

Brian Doubles: So whether it's through the delivery of scalable innovative financial solutions that empower our customers or the addition, and renewal of partnerships spanned most consumer spend categories synchrony is powering access flexibility and utility for our customers and partners alike and in turn we are driving greater long term value for our stakeholders.

Brian Doubles: Synchrony is powering access, flexibility, and utility for our customers and partners alike, and in turn we are driving greater long-term value for our stakeholders.

Brian Wenzel: With that, I'll turn the call over to Brian to discuss our financial performance in greater detail. Thanks, Brian.

Brian Doubles: With that I'll turn the call over to Brian to discuss our financial performance in greater detail.

Brian Wenzel: Good morning, everyone. Synchrony delivered another quarter of strong financial results, demonstrating the resilience of our differentiated business model and our ability to execute across our key strategic priorities to deliver consistently compelling outcomes for our stakeholders. Any loan receivables reach $102 billion in the third quarter, reflecting growth of 4% compared to last year, as the benefit of approximately 60-based point decrease in payment rate more than offset the 4% decline in purchase volume. Yet revenue grew 10% to $3.8 billion due to the combined impact of higher interest in fees, lower RSA, and higher other income. Yet, interest income increased 6% to $4.6 billion as interest and fees grew 7%, primarily reflecting growth in average loan receivables and a higher loan receivable yield.

Brian Doubles: Thanks, Brian and good morning, everyone Synchrony delivered another quarter of strong financial results demonstrating the resilience of our differentiated business model and our ability to execute across our key strategic priorities to deliver consistently compelling outcome for our stakeholders.

Brian: Any loan receivables reached $102 million in the third quarter, reflecting growth of 4% compared to last year as the benefit of approximately 60 basis point decrease in payment rates more than offset the 4% decline in purchase volume.

Brian: Net revenue grew 10% to $3 8 billion due.

Brian: Due to the combined impact of higher interest and fees lower RSA and higher other income.

Brian: Net interest income increased 6% to four 6 billion.

Brian: Interest and fees grew 7%, primarily reflecting growth in average loan receivables and a higher loan receivable yields.

Brian Wenzel: For loan receivable yield grew 30 basis points due to the combined impact of our product, pricing, and policy changes or PPPCs, and lower pay rate, partially offset by higher reversals. Total interest bearing liabilities cost was 4.78%, 44 basis points higher year-over-year due to higher benchmark rates. RSA's of $914 million, worth 3.57% of average loan receivables in the third quarter, declined $65 million versus the prior year, primarily driven by higher net charge offs. Another income increased to $1.19 million, primarily related to the impact of our PPPC-related fees, which were partially offset by the impact of our pet's best disposition in venture, investment gains, and loss.

Brian: Our loan receivable yield grew 30 basis points due to the combined impact of our product pricing and policy changes or PPP fees and lower <unk>, partially offset by higher reversals.

Brian: Total interest bearing liabilities cost was 478% 44 basis points higher year over year due to higher benchmark rates.

<unk> of $914 million were three 7% of average loan receivables in the third quarter and declined $65 million versus the prior year, primarily driven by higher net charge offs.

Brian: And other income increased to $118 million, primarily related to the impact of our PPC related fees, which were partially offset by the impact of our pets best disposition and venture investment gains and losses.

Brian Wenzel: Services. Provision for critical losses increased to $1.6 billion, reflecting higher net charge-off at a $47 million reserve bill. Other expenses grew 3% to $1.2 billion, which was driven by cost-related to the Allied lending acquisition, technology investment, and preparatory expenses related to the LAPE rule change, partially offset by lower operational losses. The preparatory expenses related to the LAPE rule change reflected $11 million of incremental costs related to both the execution of our PPPCs and the implementation costs of the rule itself should become effective. Even with these incremental costs, the efficiency ratio was 31.2% for the third quarter, and improvement over approximately 200 basis points versus the last year, reflecting Synchrony's continued cost-disciplining commitment to driving operational leverage in our business.

Provision for credit losses increased to $1 $6 billion reflect the higher net charge offs and a $47 million reserve build.

Brian: Other expenses grew 3% to $1 2 billion, which was driven by costs relating to the ally lending acquisition technology investments and preparatory expenses related to the <unk> rule change, partially offset by lower operational losses.

Brian: The preparatory expenses related to legacy rule change reflected $11 million of incremental costs related to both the execution of our PPP fees and implementation costs of the rule itself should it become effective.

Brian: Even with these incremental costs the efficiency ratio was 31, 2% for the third quarter, an improvement of approximately 200 basis points versus last year.

Brian: <unk> synchrony as continued cost discipline and commitment to driving operational leverage in our business.

Brian Wenzel: Taken together, Synchrony generated net earnings of $789 million, or $1.94 per diluted share. This produced a return average assets of 2.6% in return on tangible common equity of 24.3%.

Brian: Taken together synchrony generated net earnings of $789 million or $1 94 per diluted share.

Brian: This produced a return on average assets of two 6% and return on tangible common equity of 24, 3%.

Brian Wenzel: Next, our current key credit trends on slide 9. At quarter end, our primary year, in 16 basis points above our historical average from the third quarter of 2017 to 2019, our 90 plus legacy rate was 2.33% versus 2.06% in the prior year, and 20 basis points above our historical average from the third quarter of 2017 to 2019. Our net charge-off rate was 6.06% in the third quarter versus 4.60% in the prior year, and 97 basis points above our historical average from the third quarter of 2017 to 2019. Our allows for credit losses as a percent alone receivables was 10.79%, which was generally consistent with the second quarter coverage ratio of 10.74%.

Brian: Next I'll cover our key credit trends on slide nine.

Brian: At quarter end, our 30, plus delinquency rate was 478% versus four 4% in the prior year and 16 basis points above our historical average for the third quarters of 2017 to 2019.

Brian: Our 90, plus delinquency rate was 233% versus two 6% in the prior year and 20 basis points above our historical average for the third quarters of 2017 to 2019.

Brian: And our net charge off rate was six 6% in the third quarter versus four 6% in the prior year and 97 basis points above our historical average from the third quarters of 2017 to 2019.

Brian: Our allowance for credit losses, as a percent of loan receivables was 10, 79%, which was generally consistent with the second quarter coverage ratio of 10, 74%.

Brian Wenzel: I shall slide 10. The credit action we've taken from mid-2023 to early 2024 are improving our delinquency trajectory, and the rate of year-over-year growth in both 30 plus and 90 plus delinquency rates continue to defellerate. We'll continue to closely monitor our portfolio performance, as well as credit trends for the broader industry, giving our share consumer, and we'll take additional credit actions if necessary. While the actions we have taken since last year have reduced new account and purchase volume growth in the short term, we expect they will strengthen our portfolio's position as we exit 2024 and support our ability to deliver our targeted risk-adjusted returns over the long term.

Brian: As shown on slide 10, the credit actions, we've taken from mid 2023 to early 2024 are improving our delinquency trajectory as rate of year over year growth in both 30, plus and 90 plus delinquency rates continued to decelerate.

Brian: We will continue to closely monitor our portfolio performance as well as credit trends for the broader industry.

Brian: Even our share consumer and will take additional credit actions if necessary.

Brian: While the actions we've taken since last year have reduced new account and purchase volume growth in the short term. We expect it will strengthen our portfolio is positioned as we exit 2024 and support our ability to deliver our targeted risk adjusted returns over the long term.

Brian Wenzel: Turning this slide 11, simply funding capital and liquidity continued to provide a strong foundation for our business. During the third quarter, simply to grow our direct deposits by approximately $780 million, reduced our broker deposits by $1.5 billion, and issued $759 a senior, unsecured fixed the flowing rate notes due in 2030. At quarter end, deposits represent 84% of our total funding, while secured and unsecured, that each representing 8% of our total funding, respectively.

Brian: Turning to slide 11, synchronous funding capital and liquidity continue to provide a strong foundation for our business.

Brian: During the third quarter synchrony grow our direct deposits by approximately $780 million.

Brian: Reduced our broker deposits by $1 5 billion.

And issued $750 million of senior unsecured fixed to floating rate notes due in 2030.

Brian: At quarter end deposits represented 84% of our total funding, while secured and unsecured debt each representing 8% of our total funding respectively.

Brian Wenzel: Early. Full of liquid assets and undrawn credit facilities were $22.4 billion, a $1.9 billion increase versus last year, and represented 18.8% of total assets, a 60 basis point increase from last year, focusing on our capital ratios. As a reminder, we elected to take the benefit of the Cecil transition rules issued by the Joint Federal Banking Regencies. Synchrony will make a final transition adjustment to our regulatory capital metrics of approximately 50 basis points in January 2025. The impact of Cecil has already been recognized in our income statement and balance sheet. Under the Cecil transition rules, we had a third quarter with the CET-1 ratio at 13.1%, 30 basis points higher than last year's 12.8%.

Brian: Total liquid assets and Undrawn credit facilities were $22 4 billion.

Brian: A $1 9 billion increased versus last year and represented 18, 8% of total assets, a 60 basis point increase from last year.

Brian: Focusing on our capital ratios.

Brian: As a reminder, we elected to take the benefit of the seasonal transition rules issued by the joint federal banking agencies <unk>.

Brian: <unk> will make a final transition adjustment to our regulatory capital metrics of approximately 50 basis points in January 2025.

Brian: The impact of seasonal has already been recognized in our income statement and balance sheet.

Brian: Under the seafood transition rules, we ended third quarter with a CET one ratio of 13, 1% 30 basis points higher than last year's 12, 8%.

Brian Wenzel: Our CET-1 capital ratio was 14.3%, 70 basis points above last year. Our total capital ratio increased 70 basis points to 16.4%. And our CET-1 capital plus reserves ratio on a fully based end basis increased to 24.5% compared to 22.9% last year. Cecil returns $399 million to shareholders during a third quarter, which consisted of $300 million in share purchases and $99 million in common stock dividends. As of quarter-end, we had $700 million meaning in our share purchase authorization for the period ending June 30, 2025. Cecil remains well positioned to return capital to shareholders as guided by our business performance, market conditions, regulatory restrictions, and subject to our capital plan.

Our tier one capital ratio was 14, 3% 70 basis points above last year, our total capital ratio increased 70 basis points to 16, 4% and our tier one capital plus reserves ratio on a fully phased in basis increased to 24, 5% compared to <unk>.

Brian: Two 9% last year.

Brian: Since we returned $399 million to shareholders during the third quarter, which consisted of $300 million in share repurchases and $99 million in common stock dividends.

Brian: As of quarter end, we had $700 million remaining in our share repurchase authorization for the period ending June 32025.

Brian: Particularly remains well positioned to return capital to shareholders is guided by our business performance market conditions regulatory restrictions and subject to our capital plan.

Brian Wenzel: Turning to our outlook, Cecil remains focused on executing our key strategic priorities and taking appropriate actions to reinforce our business performance for years to come, particularly our ability to deliver our long-term financial targets on average over time. We have been closely monitoring our portfolio and believe that both our credit actions and the PPPCs are performing in line with our expectations. With the first quarter of our PPPCs in effect, we are experiencing slightly lower paper statements being done and expected, but stronger enrollment in the bill. We're also experiencing less customer-trition than expected, which is a testament to the value propositions of the products we offer.

Turning to our outlook simply remains focused on executing our key strategic priorities and taking the appropriate actions to reinforce our business performance for years to come, particularly our ability to deliver our long term financial targets on average over time.

Brian: We've been closely monitoring our portfolio and believe that both our credit actions and the PPP fees are performing in line with our expectations.

Brian: With the first quarter of our PPP season effect, we are experiencing slightly lower paper statement fee income than expected with stronger enrollment and ego.

Brian: Also experiencing less customer attrition than expected, which is a testament to the value proposition of the products we offer.

Brian Wenzel: We will continue to track the financial and operational impact on our customers, partners, and portfolios to determine, alongside our partners, whether any refinements or strategies are warranted to achieve our share objectives of sustainable risk-adjusted growth at our target in the long-term returns.

Brian: We will continue to attract a financial and operational impact on our customers partners and portfolios to determine alongside our partners whether any refinements to our strategies are warranted to achieve our share objectives of sustainable risk adjusted growth and our targeted long term returns.

Brian Wenzel: As a reminder, specifically related to the framework around the pending LAPE bull change and our PPPCs, there continues to be uncertainty regarding the timing and outcome of LAPE-related litigation that was filed in March. The potential changes in consumer behavior that could occur as a result of LAPE bull change and any potential changes in consumer behavior in response to the PPPCs we and the broader industry have implemented as a result of the new rule. Outcomes, natural performance rates, and these uncertainties could impact our outlook.

Brian: As a reminder, specifically related to the framework around the pending Lacey rule change and our PPE Pcs there continues to be uncertainty regarding the timing and outcome of leafy related litigation that was filed in March.

Brian: Potential changes in consumer behavior that could occur as a result of late fee will change and any potential changes in consumer behavior response to <unk> and.

In the broader industry have implemented as a result of the new rule.

Brian: Outcomes natural performance rates any of these uncertainties could impact our outlook with that framework, let's turn to our outlook for the remainder of 2024.

Brian Wenzel: With that framework, let's turn to our outlook for the remainder of 2024. We expect the consumer to continue to manage their spending, which, when combined with their credit actions, should result in low single-digit decline and purchase buying for the fourth quarter. We continue to expect candidates to moderate, which when combined with the purchase buying expectations should contribute to low single digit growth and ending loan receivables to pair it last year. With regard to late fee litigation, we assume the late fee rule will not become effective in 2024. As a result, we expect net interest income to remain sequentially flat, as the impacts of our PPPCs are offset by seasonally higher reversals.

Brian: We expect the consumer to continue to manage our spending which when combined with our credit actions should result in low single digit decline in purchase volume for the fourth quarter.

Brian: We continue to expect payment rates combined rate, which when combined with the purchase volume expectations should contribute to low single digit growth in ending loan receivables compared to last year.

Brian: Given the delay <unk> rule was not implemented on October one is assumed in our previous outlook and the continued uncertainty with regard to legacy litigation, we assumed a lengthy rule will not become effective in 2024.

Brian: As a result, we expect net interest income to remain sequentially flat as the impacts of our PPP fees are offset by seasonally higher reversals.

Brian Wenzel: Other income is expected to remain consistent with the third quarter level. RSA will continue to line program the company performance and should decrease sequentially on a dollar basis and as a percentage of average loan receivables, reflecting the net impact of seasonally higher net charge on flat revenue. Other expenses expect to increase sequentially with the seasonally higher growth. And from a credit perspective, we expect the equities to fall seasonally in the fourth quarter. We also continue to expect the second half of 2024 net charge-off rate will be lower than the first half. Lastly, we continue to expect our year-end 2024 reserve rate to be generally in line with the year-end 2023 rate.

Brian: Other income is expected to remain consistent with the third quarter level.

RSA will continue aligned program and company performance and should decrease sequentially on a dollar basis and as a percentage of average loan receivables, reflecting the net impact of seasonally higher net charge offs on flat revenue.

Brian: Other expenses is expected to increase sequentially with the seasonally higher growth.

And from a credit perspective, we expect delinquencies to policies analogy in the fourth quarter.

Brian: We also continue to expect the second half of 2024 net charge off rate will be lower than the first half.

Brian: Lastly, we continue to expect our year end 2024 reserve rate to be generally in line with the year end 2023 right.

Brian Wenzel: Given these assumptions, Synchrony expected to lower fully brewed earnings per share between $8.45 and $8.55 for the full year 2024. The approximate 80 cent improvement from the midpoint of our prior four-year EPS outlook reflects the combination of factors. First, the rule rule is something that the late fee rule will be implemented on October 1, 2024. And therefore, also the rule will be related benefit from the RSA offset. Second, the impact of our PPPCs and the increase in RSA associated with those changes. And finally, strong performers of our core business as we enter the fourth quarter.

Brian: Given these assumptions, we expect to deliver fully diluted earnings per share between $8 45.

Brian: And $8 55 for the full year 2024.

Brian: The approximate 80% improvement from the midpoint of our prior full year EPS outlook reflects a combination of factors.

Brian: <unk>.

Brian: The removal of our assumption that the lengthy rule will be implemented on October one 2024.

Brian: And therefore also the removal of the related benefit from the RSA offset.

Brian: Second the impact of our PPP fees and the increase in RSA associated with those changes.

Brian: And finally strong performance of our core business as we entered the fourth quarter.

Brian Wenzel: In summary, Synchrony has continued to deliver on key strategic priorities that matter most to our stakeholders. We remain confident in measures we've taken thus far to strengthen our business in an evolving environment and believe we're well positioned to drive resilient risk-adjusted returns over the long term.

In summary, synchrony has continue to deliver on key strategic priorities that matter most to our stakeholders. We remain confident in the measures we've taken thus far to strengthen our business in an evolving environment and believe we are well positioned to drive resilient risk adjusted returns over the long term.

Brian Doubles: With that, I'll now turn the call back over to Brian's first closing thoughts.

With that I'll now turn the call back over to Brian for his closing thoughts.

Brian Doubles: Thanks, Brian. Synchrony is leveraging our proprietary data analytics, our deep lending expertise, and our innovative digital capabilities to provide seamless customer experiences, compelling value propositions, and enhanced utility with each customer interaction we have.

Speaker Change: Thanks, Brian Synchrony is leveraging our proprietary data and analytics, our deep learning expertise and our innovative digital capabilities to provide seamless customer experiences compelling value propositions and enhanced utility with each customer interaction we have we.

Brian Doubles: We are increasingly anywhere our customers want to be met with financial solutions that drive loyalty and fail for our partners, providers, and small businesses.

Brian: We are increasingly anywhere our customers want to be met with financial solutions that drive loyalty and sales for our partners providers and small businesses.

Brian Doubles: And we are consistently deepening our leadership position while driving sustainable risk-adjusted growth and long-term value for our shareholders.

Brian: And we are consistently and deepening our leadership position, while driving sustainable risk adjusted growth and long term value for our shareholders with that I will turn the call back to Catherine to open the Q&A.

Kathryn Miller: With that, I'll turn the call back to Catherine to open the Q&A.

Kathryn Miller: That concludes our prepared remarks. We will now begin the Q&A session so that we can accommodate as many of you as possible. I'd like to ask the participants to please limit yourself to one primary and one follow-up question. Question.

Catherine: That concludes our prepared remarks, we will now begin the Q&A session. So that we can accommodate as many of you as possible I'd like to ask the participants to please limit yourself to one primary and one follow up question.

Operator: If you have additional questions, the Investor Relations team will be available after the call. Operator, please start the Q&A session. At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. Again, please submit yourself to one question and one follow-up question.

Catherine: If you have additional questions the investor relations team will be available after the call.

Catherine: Operator, please start the Q&A session.

Speaker Change: At this time, if you wish to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue by pressing star two.

Again, please limit yourself to one question and one follow up question, we will take our first question from Ryan Nash with Goldman Sachs. Please go ahead.

Ryan Nash: We will take our first question from Ryan Nash with Goldman Sachs. Please go ahead. Thank you. Morning everyone.

Speaker Change: Hey, good morning, everyone, Hey, Ryan Good morning, Ryan.

Brian Wenzel: Brian, maybe you could unpack the NII guy for a little bit. I understand 4Q is seasonally lower from reversals, as you highlighted, but how did the PPPC fit in along with your liability sensitive position, which I don't think you highlighted in your comments? And then I guess just given forward curb expectations outside of seasonality, do you expect the NIM to have a continued upward bias over the next several quarters?

Ryan: Brian maybe you could unpack the NII guide for us all a bit I understand <unk> is seasonally lower from reversals as you highlighted but how does the PPE PPP sees fit in along with your liability sensitive position, which I don't think youre highlighting your comments and then I guess just given the forward curve expectations outside of seasonality do you expect the NIM to have.

Ryan: Continued upward bias over the next several quarters.

Brian Wenzel: Thanks. Yes, thanks, Ryan. So when you think about NII sequentially, just step into the fourth quarter. The first, when you think about the trends that are into delinquency and use, going into delinquency, dollars assessed on late fees should be down on in 4Q versus 3Q. You could bind that with higher reversals; that is essentially offsetting the positivity you should see, and you will see on interest income and the benefit that we see in interest expense. So it kind of washes out in the quarter more just a function of how the favorability from delinquencies impacting late fees.

Speaker Change: Yeah. Thanks, Brian So when you think about NII sequentially as you step into the fourth quarter.

Speaker Change: First when you think about the trends that are into delinquency and used flowing into delinquency.

Dollars assessed on late fees should be down in <unk> versus <unk>, you combine that with higher reversals that as essentially offsetting the positivity you should see and you will see an interest.

Speaker Change: Income.

Speaker Change: And the benefit that we see in interest expense. So so it kind of washes out in the quarter more just a function of how.

Speaker Change: The favorability from delinquencies impacting late fees as you start to think out.

Brian Wenzel: And just start to think out against the manager's margin for a second. You should continue to see the interest component relative to the PPPC's, as well as the raw rate of payment rates decline, increase in guy the NIM higher. And you should also see a benefit of interest expense that will lag a little bit because of the reset of the debt stack, particularly in the CDs that happens on over the first half of the year. So there's generally more more talons as you think about margin as you move into next year, but it's going to be a little bit lagged given the reset of CDs in the first half of the year.

The net interest margin for a second you should continue to see the interest component relative to the <unk> as well as the run rate is payment payment rates decline.

Speaker Change: Increase in <unk>.

Speaker Change: Higher and you should also see a benefit of interest expense that will lag a little bit because of the reset of the dead stack, particularly in the Cds that happens in over the first half of the year. So there is generally more more tailwind as you think about margin as you move into next year, but it's going to be a little bit of lag given the reset of Cds in the <unk>.

Ryan Nash: What would happen to the second quarter? Got it.

Speaker Change: Half of the year, local which happened in the second quarter.

Speaker Change: Got it and then as my follow up question.

Ryan Nash: And as my follow-up question, you know, your outlook for credit calls for delinquencies to follow seasonality. I guess first you expect losses to do the same. And then, you know, in terms of delinquencies following seasonality, like what does that mean for the trajectory of losses into 25? And if they do follow seasonality, can losses move back below 6% into next year?

Speaker Change: Your outlook for credit calls for delinquencies to follow seasonality I guess first do you expect losses to do the same.

Speaker Change: Then.

Speaker Change: In terms of delinquencies following seasonality like what does that mean for the trajectory of losses into 'twenty five and if they do follow seasonality Ken losses move back below 6% into next year. Thank you.

Brian Wenzel: Thank you. Yeah, so Ryan, we'll be back in January to talk really, really about next year, but I think here's a couple of things that I would think about credit as a whole. First, there's probably four points that I raised. Number one, the delinquency trends themselves: we're seeing strong entry rate, which is better than the pre-pandemic period, which is continuing to benefit the flow into delinquency. We're seeing early stage delinquency really being stable as far as its performance month on month, and then we're seeing some improvement last several months in late stage collections, which are positive.

Speaker Change: Yes, so Ryan will be back in January to talk really really about next year, but I think just a couple of things I would think about credit as a whole.

Speaker Change: First.

Speaker Change: Probably four points that I raised number one the delinquency trends themselves, we're seeing strong entry rate, which is better than the pre pandemic period.

Speaker Change: Which is continuing to benefit the flow into delinquency, we're seeing early stage delinquency really be stable as far as its performance month on month and then we're seeing some improvement the last several months and late stage collections, which are positive. So I think the delinquency trends are doing fairly well when you think about that relative to seasonality.

Brian Wenzel: So I think delinquency trends are doing fairly well. When you think about that relative to seasonality last several months, we've actually been low, low to mid single digits better than seasonality when you look at 17th and 19th period. So that's a favorable trend that continues to go back, continue to go back last several months. Again, I think I've highlighted publicly the vintage performance both of the second half of '23 in the first half of '24, albeit very early. It's pretty better than the 18 advantages. And again, I think you can see both in the purchase volume and the new account.

Speaker Change: Last several months, we've actually been.

Speaker Change: Low low to mid single digits better than seasonality when you look at 17% to 19 period.

Speaker Change: So that's a favorable trend that continues to go back.

Speaker Change: Then you go back last several months again, I think I've highlighted publicly the vintage performance both of the second half of 'twenty three in the first half of 'twenty four, albeit very early.

Speaker Change: Is trending better than the 18 vintages and again I think you can see both in the purchase volume and the new account.

Brian Wenzel: Rich nation, you know, most certainly the credit actions are having, you know, some effect there, which I think bolsters credits. We moved back through our underings designed to give us that five and a half to 6%. So the intention and the intention would be that we would get back to that point. Again, we're moving down. I can see in the slides that the year-over-year growth and delinquencies, both 30 plus and 90 plus, continue their climb. So again, tracking to our expectations has been moved through a remaining part of 24.

Speaker Change: Origination most certainly the credit actions are having some effect, there, which I think bolsters credit as we move back through our underwriting is designed to give us that five 5% to 6%. So the intention and the intention would be that we would get back to that point.

Speaker Change: Again, we're moving down and you can see in the slides that the year over year growth in delinquencies, both 30, plus and 90 plus continue their clients, so again tracking to our expectations as.

Speaker Change: As we move through the remaining part of 'twenty four.

Ryan Nash: Thanks, Brian.

Speaker Change: Thanks, Brian.

Operator: Have a good day. Thank you.

Brian: Thanks, Ron and I have a good day.

Terry MA: We'll take our next question from Terry Ma with Barker. Please go ahead. Hey, thank you. Good morning.

Speaker Change: Thank you we'll take our next question from Terry MA with Barclays. Please go ahead.

Speaker Change: Hey, Thank you good morning.

Brian Wenzel: So you called out a 30-basis point year-of-year increase in loan yields from PPPCs, lower payment rates, and offset by interest reversals. Anyway, you can kind of quantify each of those components and maybe just help us think about how that. PPPC component kind of grows into next year.

Speaker Change: You called out a 30 basis point year over year increase in loan yields from <unk>.

Speaker Change: Your payment rates and <unk>.

Speaker Change: All set by interest reversals any way you can kind of quantify each of those components and may be just help us think about how that.

Speaker Change: TPC component kind of grows into next year.

Brian Wenzel: Yeah, you know, Terry, we're not going to break out the individual components of the PPPCs by the line eyes, but most certainly the benefit is flowing through on the interest, interest yield line number one. You can, it is math a little bit when you think sequentially given the gain a second quarter on the visa shares, but clearly showing up another income. Again, this is the first full quarter that we have the first state of the CITs in. We continue to expect that to build into next year. I think we'll go back in January.

Speaker Change: Yes Terry.

Speaker Change: We're not going to breakout the individual components of the <unk> by the liner is but we will certainly the benefit is flowing through on the interest.

Speaker Change: Interest yield line number one you can it is masked a little bit when you think sequentially given the the gain in the second quarter and the visa shares, but clearly it's showing up in other income again. This is the first full quarter that.

Speaker Change: We have the first phase of the cities in we continue to expect that to build into next year I think when we come back in January we will try to provide a little bit more view on that I think when you take a step back Terry the important thing and I highlighted in my prepared remarks is.

Brian Wenzel: We'll try to provide a little bit more view on that. I think when you take a step back, Terry, the important thing in how that in prepare remarks is the actions we've taken have generally been in line with our expectations. You know, there's a positivity in the fact that, you know, customer Christian is not as been high as our expectations. Now again, that would have had a reserve release. So it's negative from a financial perspective, but it's really better from a customer standpoint as they recognize the value propositions of our cards. You know, we did highlight favorite things with a little bit lower than expectations, you know, partially due to this often as partially due to our accounts being a little bit lower than expectations, but all good.

Speaker Change: The actions we've taken have generally been in line with our expectations of positivity and the fact that.

Speaker Change: Customer attrition is not has been high as our expectations now again that would've had a reserve release. So it's negative from a financial perspective, but it's really better from a customer standpoint, as they recognize the value propositions of our cards.

We did highlight favorite statements were little bit lower than expectations, partially due to softness partially due to.

Speaker Change: Our accounts being a little bit lower than expectations.

Brian Wenzel: As option of e-build in our customers' willingness to change behavior and do that has been positive. So when we look at that, generally speaking, in line. So even though there's a little bit less customer Christian, that generally means the course is performing a little bit better. So, you know, as we sit here today, you know, we are, we are feeling good about where we are, but we'll continue to watch customer behavior, and we'll certainly watch the market. A lot of issues are already started to implement changes as this rule comes effective. God, that's helpful.

Speaker Change: But all in all good adoption of <unk> and our customers willingness to to change behavior and do that has been positive. So when we look at that generally speaking.

Speaker Change: It aligns so even though there's a little bit less customer attrition that generally means the core is performing a little bit better so.

Speaker Change: As we sit here today, we are.

Speaker Change: We are feeling good about where we are but we'll continue to watch customer behavior, and we will certainly watch the market. There's a lot of issuers are already started to implement changes.

Speaker Change: As this rule becomes effective.

Speaker Change: Got it that's helpful. And then just to follow up on credit or teams.

Terry MA: And then just to follow up on credit, a team's credit performance is more or less performing in line with your expectations. But as I look at the charge offerings this year, it's running somewhat north of 6%.

Speaker Change: <unk> performance is more or less performing in line with your expectations, but as I look at the charge off rate for this year its running somewhat north of 6% I don't want to tie it to your initial guide that may be just.

Brian Wenzel: I don't want to tie it to your initial guide that maybe just talk about how credit performance has evolved relative to kind of what you expected coming into this year. Yeah, you know, the way I think about Terry is we took some actions; it really in the late first quarter, early second quarter, again, to try to set off and protect ourselves again. Any deterioration that could happen late this year into next year. So we took those actions. Most certainly, I think you've seen some of the purchase line, which is slightly lower than our expectations that, you know, unfortunately, has an impact on the denominator, which brings the rate a little bit higher than what you think about.

Speaker Change: Talk about how credit performance has evolved relative to kind of what you expected coming into this year.

Speaker Change: Yeah, the way I would think about Terry as we took some actions it really in the late first quarter early second quarter again to try to set up and protect ourselves against.

Speaker Change: Any deterioration that could happen late this year into next year. So we took those actions.

Speaker Change: Most certainly I think you've seen some of the purchase volume, which is slightly lower than our expectations that Unfortunately has an impact on the denominator, which brings the rate a little bit higher than.

Brian Wenzel: But again, I think that the fact that we're not taking broad-based actions today gives us some credit, you know, some confidence in credit.

Speaker Change: And what you think about but again I think that the fact that we're not taken broad based actions today gives us some credit.

Speaker Change: Some confidence in credit and we will certainly be very my points with Ryan a little bit earlier around the four things that we look at to say listen we feel good about where we are as we enter into the fourth quarter.

Terry MA: And most certainly, we've heard my points with Ryan a little bit earlier around the four things that we look at to say, listen, we feel good about where we are as we enter into the fourth quarter. Great, thank you.

Speaker Change: Great. Thank you. Thanks.

Operator: Thanks, Terry. Have a good day.

Speaker Change: Thanks, Larry I have a good day.

Don Fandetti: Thank you. We'll take our next question from Don Fandetti with Wells Fargo. Please go ahead.

Speaker Change: Thank you we'll take our next question from Don <unk> with Wells Fargo. Please go ahead.

Brian Wenzel: Good morning, Brian. You mentioned some improvement over the last few months in late-stage collections. I was wondering if you could talk a little bit about that, if that just kind of mix, catch up. And generally speaking, is it harder to execute on collections today versus prior? Yes. Thank you.

Don: Good morning, Brian you mentioned some improvement over the last few months and late stage collections. I was wondering if you could talk a little bit about that effective capex catch up.

Generally speaking is it harder to execute on collection today versus prior.

Brian: Yes, Thank you and good morning, Don Let me start with the latter part of your question is it harder to collect today. Most certainly I think if you look at this versus a number of years ago, most certainly making customer context, a little bit tougher, but that's where we've expanded and through the pandemic divesting in digital collections investing in other forms into other.

Brian Wenzel: Good morning, Don. Let me start with the latter part of your question. Is it harder to collect today? Most certainly, I think if you look at this versus a number of years ago, most certainly making customer contacts a little bit tougher. But that's where we've expanded, and through the pandemic, investing in digital collections, investing in other forms into other channels, which we can connect with the customer in order to kind of get those collections done, such as text and things like that. So it is a little bit tougher. I think it's the game where you have to deploy more products than you do have to do, just get more collectors on the phone.

Brian: <unk>, which we can connect with the customer in order to kind of get those collections done such as text.

Brian: And things like that so it is a little bit tougher I think its the game, where you have to deploy more products than you do have to do just get more collectors on the phone and most certainly the rules.

Brian Wenzel: And most certainly, the rules have evolved where the number of collections you can make to someone has declined. But I think we've adapted to that. I think when you think about the late-stage for a second, when your early stage has deteriorated quite a bit, what flows into their back potentially has the ability to be slightly better and able to collect. So while I look at the late stage, it is still performing worse than 2019 and 2020, the pre-pandemic period, it has started to improve more recently, which we take is optimistic with regard to performance. But again, it is worse than what it was.

Brian: Have evolved where the number of collections you can make the someone has.

Brian: Declines, but I think we've adapted to that I think when you think about the late stage for a second when you when you're when you're early stage has deteriorated quite a bit with flows into the back potentially has the ability to be slightly better enabled to collect so while I look at the late stage. It is still performing worse than 2019.

Brian: And <unk> the pre pandemic period, it has started to improve.

Brian: More recently, which we take as optimistic.

Brian: With regard to performance, but again it is it is worse than what it was.

Brian Wenzel: And you would expect a little bit of that. If you have a very positive entry rate into the frequency, what flows in is a little bit tougher to collect. So we would anticipate both early stage and late stage to be worse. But right now and last, you know, I'd say several months we've seen a little bit of improvement in that late stage collections. Got it.

And you would expect a little bit of that if you have very positive entry rate into delinquency workflows and it is a little bit tougher to collect so so we would have anticipated both early stage and late stage to be worse.

Brian: But right now in the last I'd say several months, we've seen a little bit of improvement in our late stage collections.

Brian Wenzel: My follow up just, you know, I know there's a lot of concern around the low end. It seems like, you know, your customers in the low end are kind of managing changing behavior, containing change behavior. But it doesn't seem like it's sort of accelerating in terms of a pressure point. Is that fair? Yeah, I think it's absolutely fair. I mean, you know, we look at it done a couple of different ways. When you look at pioneering people making payments, when we look at the trends by credit rate, which if you say that, that, you know, somewhat aligns with income desire, you're seeing more of the movement in the prime.

Speaker Change: Got it and my follow up just I know, there's a lot of concern around the low end. It seems like your customers on the low end arcata, managing changing behavior continuing to change behavior doesn't seem like it's sort of accelerating in terms of a pressure point is that fair.

Speaker Change: Yes, I think that's absolutely fair I mean, we look at it Dan a couple of different ways. When you look at <unk> people, making payments when we look at the trends by credit rate, which if you say that.

Speaker Change: Somewhat aligns with the income decile you see.

Speaker Change: More of the movement in the prime so that $6 60 to 780 range Youre seeing a little bit more movement, there and then base youre not really seeing as much movement.

Brian Wenzel: So that 660 to 780 range, you're seeing a little bit more movement there and demand days. You're not releasing as much movement of the non-prime in there. I want to say, you know, the movement to mint day is about a point difference on the prime and it was half of that in the non prime. So we're not seeing stress when it comes to payment. You know, I think when you look at the case shape recovery, clearly affordability has impact that some of the lower end consumer and they pull back spending and they're managing fairly well.

Speaker Change: The non prime and they don't want to say.

Speaker Change: Moving into mid data is about a point difference on the prime and it was half of that in the non prime so were not seeing stress when it comes to payment.

Speaker Change: I think when you look at the case shape recovery clearly.

Speaker Change: <unk> ability has impacted some of the lower end consumer and they pulled back spending and they're managing fairly well. So so I think when we look at those two combined we don't see stress in the consumer we see them actually doing somewhat rational things right now so it's more normalization, but again when you still look back against the prime customers. They are paying you.

Brian Wenzel: So, so I think when we look at those two combined, we don't see stress in the consumer. We see them actually doing somewhat rational things right now. So it's more normalization. But again, when you still look back against, you know, the prime customers, they are paying your rates still above the 2019 level. So we don't we don't necessarily see signs of stress in the low end today. Thank you.

Speaker Change: So above.

Speaker Change: 2019 level. So we don't we don't necessarily see signs of stress.

And the low end today.

Thanks.

Operator: Thanks for having me, Dad. Thank you.

Speaker Change: Thanks, Doug.

Moshe Orenbuch: We'll look at our next question from Moshe Orenbuch with P.D. Callins, please go ahead. Great.

Speaker Change: Thank you we'll take our next question from Moshe Orenbuch with BD Cowen. Please go ahead.

Moshe Orenbuch: Great. So.

Brian Wenzel: So, Brian, I was wondering if you could talk a little bit about, you know, the slowdown in volume and sort of separate it between the impacts of kind of your own tightening consumer preferences, and then perhaps also the policy changes. One of the questions we've gotten is, do you think, I know you said that the tradition wasn't affected by that, but what about spending volume? So, those three factors, thanks.

Moshe Orenbuch: Brian I was wondering if you could talk a little bit about.

Moshe Orenbuch: The slowdown in spending volume.

Moshe Orenbuch: And sort of separate it between the impacts of kind of your own tightening.

Moshe Orenbuch: Similar preferences and then perhaps also the policy changes one of them one of the questions. We've gotten is do you think I know you said that attrition wasn't affected by that but what about spending volumes. So those three factors. Thanks.

Brian Wenzel: Yeah, first of all, good morning, Moshe. Thanks for the question. So, let me start where you ended. When you look at the actions in which we took in the portfolio with regards to pricing changes in the leg, the positive news is we were able to have a controlled group in which we tested against that. So, when we look at volume changes between the people who received CITs and those who didn't receive the CITs, there's not a material difference. So, we somewhat have a base to say that the actions having, have a heated created solid nutrition that were not aware of.

Speaker Change: Yes first of all good morning Moshe Thanks for the question. So let me start where you ended when you look at the actions, which we took in the portfolio with regards to pricing changes in the leg.

Speaker Change: The positive news is that we were able to have a control group in which we test it against that so when we look at that volume changes between the people who receive cit's and those who didn't receive the cities. There is not a material difference. So we somewhat have a base to say that the the actions having havent heated created solid attrition.

Speaker Change: That we're not aware of so that's one I think the latter part of your question I think when you look at the purchase volume in the move itself. What you see is most certainly across the board almost transaction values coming down so the consumer is trading down a bit.

Brian Wenzel: So, that's one, I think, a lot of part of your question. I think when you look at the purchase volume in them of itself, what you see is, most certainly across the board, almost transaction values coming down. So, the consumer is trading down a bit. You know, we see that, and I use examples mattresses, you know, where the frequency maybe hasn't moved down as much, but the average transaction value has moved down. As consumers say, "Listen, I'm willing to purchase a mattress, but then again, I'm not willing to spend $4,000." I'm going to go out to something at $2,500, and we've seen that across the board and retires.

We see that I used examples mattresses, where the frequency maybe hasnt moved down as much but the average transaction values moved out as consumers say listen I'm willing to purchase a matches, but then again I'm not willing to spend $4000 I'm going to go out to something at 2500, and we've seen that across the board our retailers and I think youll see a generally.

Brian Wenzel: And I think you see it generally speaking across the board. I mean, in discretionary items, even our health and wellness business, you see in cosmetics and lasings, things that can be deferred. Now, that's a short-term impact. Well, certainly that will create a tailwind at some point because those things of procedures don't go away. And you're right, you know, some of the actions we took, you know, we had a modest impact on purchase volume, a more meaningful impact on new accounts in order to make sure that the origination of the books are at risk of just returns that are attracted to us.

Speaking across the board.

Speaker Change: Discretionary items, even in our health and wellness business you see it in cosmetics and lasik things that can be deferred yes, thats a short term impact almost certainly that will create a tailwind at some point as those those thanks.

Speaker Change: Procedures don't go away and you're right some of the actions we took.

Speaker Change: Had a modest impact on purchase volume a more meaningful impact on new accounts in order to make sure that the origination of the books are at risk adjusted returns that are attractive to us.

Brian Doubles: Maybe to kind of at a high level for either Brian, you know, as you think about, you know, the underlying economic environment, you know, we've been in a period where, you know, wage growth has exceeded inflation, although, you know, the consumer still feels kind of, you know, kind of pressured and is still in that process, as you pointed out, of trading down. When you think about, you know, the sort of things that you are looking for to, you know, to try and, you know, jumpstart or, you know, reverse some of those tightening, what are the things that you'd be looking for, you know, kind of from a macro standpoint and maybe talk a little bit about that.

Speaker Change: Maybe to kind of at a high level for either Brian.

Speaker Change: As you think about the underlying economic environment, we've been in a period, where wage growth has exceeded inflation, although the consumer still feels kind of.

Speaker Change: Kind of pressure then is still in that process as you pointed out of trading down when you think about the sort of things that you are looking forward to try and jumpstart or reverse some of those tightening. So what are the things that you'd be looking for kind of from a macro standpoint can you talk a little bit about that.

Brian Doubles: Thank you.

Brian Doubles: Yeah, motion. Maybe I'll start on this one. Look, I think, I think to Brian's point, the consumer is still in pretty good shape. You know, the trends that we're seeing are pretty similar across the industry. You know, inflation is having an impact, but I think, you know, to your point, the strong labor market is definitely helping to offset some of that pressure. And consumers are slow and spend, but they're doing it in a very kind of rational, disciplined way. You know, we actually like the fact that we can see that they're managing to a budget; they're navigating the higher costs of goods.

Speaker Change: Yes, maybe I'll start on this one look I think I think to Brian's point, the consumer is still in pretty good shape. The trends that we're seeing are pretty similar across the industry inflation.

Speaker Change: Inflation is having an impact but I think to your point the strong labor market is definitely helping to offset some of that pressure.

Speaker Change: And consumers are slowing spend but they're doing it in a very kind of rational disciplined way, we actually like the fact that we can see that they're managing to a budget, they're navigating the higher cost of goods.

Brian Doubles: You know, this isn't a new trend. You know, we started to see it earlier this year. You're seeing it a little bit more broad-based right now, but not in a concerning way. I think from a credit perspective, this is exactly what we wanted to see. Some of that is pullback on behalf of the consumer, and some of that is just the actions that we took. But again, I think similar to credit, you're just seeing spend kind of move back to a normalized level. I think when credit levels often you start to see some stability, you're still a lot of uncertainty out there, and I think when those clouds start to clear, then you start to get back to what we would consider more normal growth in the business, striving, you know, you accounts back to levels that, you know, would be similar to prior to this year.

Speaker Change: This isn't a new trend we started to see it earlier this year.

Speaker Change: You're seeing it a little bit more broad based right now, but not in a concerning way I think from a credit perspective.

Speaker Change: This is exactly what we wanted to see some of that is pullback on behalf of the consumer.

Speaker Change: And some of that is just the actions that we took.

Speaker Change: But again I think similar to credit Youre, just seeing spend kind of move back to a normalized level.

Speaker Change: I think when credit level off and you start to see some stability. There is still a lot of uncertainty out there and I think when those cloud start to clear then you start to get back to what we would consider more normal growth in.

Speaker Change: In the business driving new accounts back to levels that would be similar to prior to this year.

Operator: Thanks very much.

Speaker Change: Thanks very much.

Sanjay Sakhrani: Thanks, Lucien. Have a good day.

Speaker Change: Thanks, a lot you have a good day.

Brian Wenzel: Thank you. We'll take our next question from Sanjay Sakhrani with KVW. Please go ahead. Thanks.

Speaker Change: Thank you we'll take our next question from Sanjay Zaccone with VW. Please go ahead.

Brian Wenzel: Good morning. I mean, just to close the loop on credit, Brian Wenzel. Maybe talk about the reserve rate, trend, line, maybe how we should think about the direction in the next year. I know you're not going to be guidance for next year, and I'm not going to be guidance by your end, but like just to think about when we might rate back to some normalized levels of reserve rate. Yeah, thank you for the morning's trying to do. You know, I think the guys we kind of give you is that the reserve rate at the end of this year will generally be in line with reserve rate, the end of last year, which was, you know, 10.26 or 10.3 percent.

Sanjay Zaccone: Thanks, Good morning.

Sanjay Zaccone: Close the loop on credit Brian Wenzel, maybe just talk about the reserve rate trend line, maybe how we should think about the direction into next year I know youre not giving guidance for next year and a nice guidance by year end I would like to think about when we migrate back to some normalized level.

Sanjay Zaccone: Or is there a frame.

Brian Wenzel: Yes, Thank you and good morning Sanjay.

Brian Wenzel: I think the.

Brian Wenzel: The guidance, we can give you is that the reserve rate at the end of this year will generally be in line with reserve rate at the end of last year, which was.

Brian Wenzel: 10.26, or 10, 3%.

Brian Wenzel: You know, I know people probably focus in the term generally. Obviously, you know, when you look at a year in number, and that's a big seasonal factor. It's just really how the receable develops and how it plays out. I think most certainly, you know, I give you someone to look and see trends that builds into the quantitative model. And again, I think we've seen, you know, while it's been a little bit choppy, the macroeconomic environment being a little bit more stable. We're pleased that the Federal Reserve did lower rates. So again, I, I think the readings that out of this year, you know, generally aligned with last year. I think you kind of have some in the case that you think about the lost trajectory.

Brian Wenzel: I know people probably focusing on the term generally obviously when you look at a year end number and Thats a big seasonal factor just really how the receivable develops and how it plays out I think most certainly giving.

Brian Wenzel: Giving you some of the delinquency trends that builds into the quantitative model and again I think we've seen.

Brian Wenzel: Well, it's been a little bit choppy macroeconomic environment being a little bit more stable and we're pleased that the federal reserve did lower rates. So again I think as we exit out.

Brian Wenzel: Of this year.

Brian Wenzel: Generally in line with last year, I think you kind of have some indication of how you think about.

Brian Wenzel: The loss trajectory and most certainly I don't think we see anything today that says to us we're not going to continue to March back towards that day, one see so most certainly as you see.

Brian Wenzel: And most certainly, I don't think we see anything today that says to us, we're not going to continue to march back towards that day when see so most certainly as you see. The length of two levels, which was clearly above where we were in a pre-pandemic period, where you compare back to a 30 plus and 90 plus, as that moves back towards normal, we really expect the reserve rate to continue to flow down. Okay, right.

Brian Wenzel: The delinquency levels, which are slightly above where we were.

Brian Wenzel: And the pre pandemic period right when you compare back below 30, plus 90 plus.

Brian Wenzel: As that moves back towards normal we would expect the reserve rate to continue to flow down absent mix shifts.

Speaker Change: Okay great.

Brian Wenzel: I mean, on the CFPB latency rule, I guess, you probably talked a lot about sort of the behavior of the consumer, but anything changed in terms of when you expect. So if we mitigate the impact of the expenses, those in some time next year, and then maybe if it doesn't happen, like, what, how should we think about the game plan? If it doesn't go into effect, you call back. Some of the changes that you've made or do other things that I'm just trying to think through the implications there. Okay. Yeah, let me start in and see if Brian has any additional time.

Brian Wenzel: Hey.

Speaker Change: On the CFPB latency rules I guess.

Speaker Change: Ryan hardly talked a lot about.

Speaker Change: But the behavior of the consumer but anything changed in terms of.

Speaker Change: When do you expect.

Speaker Change: We mitigate the impact of the extended those in sometime next year.

Speaker Change: And maybe if it doesn't happen.

Speaker Change: How should we think about.

Speaker Change: The game plan, if it doesn't go into effect and claw back some of the changes that you've made.

Speaker Change: Ed or Dave do other things I'm, just trying to think through the implications there yes.

Speaker Change: Yes, let me start and see if Brian has any additional comments to your first part of your question Sanjay It doesn't doesn't really impact appointed neutrality rate. It really goes from the starting point to the neutrality point, what's the trough level, depending upon when the lead if you will kind of comes in place. So I don't think it's necessarily one.

Brian Wenzel: If you're first for your question, Sanjay, it doesn't really impact the pointed neutrality rate. He really goes from the starting point to the neutrality point. What's the tross level, depending upon when the leap you will kind of come to play? So I don't think it's necessarily one where we look back and say, you know, the early performance we've seen changes that exaggerated neutrality based upon our analysis. So I think that piece of it remains in place with regard to when the rule may become effect of, you know, we'll probably do that. Sometimes, you know, even the fourth quarter or gender, if we have more information, when we have a better assumption with regard to when that rule does go and plays it.

When we look back and say.

Speaker Change: The early performance, we've seen changes that exit rate of neutrality based upon our analysis. So I think that piece of it I'll.

Speaker Change: Remains in place.

Speaker Change: With regard to when the rule may become effective.

Speaker Change: We'll probably do that sometime in the fourth quarter or January if we have more information when we have a better assumption with regard to win that rule does go in place.

Brian Wenzel: We are operating as a company, and most certainly in the administration has taken the view that they want to let you roll in, and we're planning is it's going to go in. It's just the point of entry or when it goes in. So your question really around, you know, is there a, you know, claw back, you people use term roll back. You know, as a company we haven't spent any real time thinking about that. Again, we view it's going to come in effect in some way. And if it doesn't, then we have to have a high degree of certainty that it wouldn't go back and play.

Speaker Change: Our operating as a company and most certainly in administration has taken the view that they want the <unk> rule in and we're planning as if it's going to go in and just the point of entry of when it goes in.

Speaker Change: So your question really around is there a <unk>.

Speaker Change: Call back if you lease term roll back as a company. We haven't spent any real time thinking about that again, we view it is going to come into effect in some some way.

And if it doesn't then we have to.

Speaker Change: To have a high degree of certainty that it Wouldnt go back into play and then it's really a conversation for those that share the economic impact of this and then for our properties we'd have to do that assessment, but again, we haven't spent a lot of time and as we believe the rule will go into effect and we're planning as a company to execute that Brian do you have any further comments you want to.

Brian Wenzel: And then it's really a conversation, you know, for those that share the economic impact of this. And then, for our properties, we'd have to do that assessment. But again, we haven't spent a lot of time on this. We believe the rule will go in effect, and we're planning as a company to execute that. And I'll bring a few of any further comments you want to know. Yeah, I think we had the plan as that's there. We're going to be an eight-dollar lay faith because it takes time for these assets to bleed in. We work with our partners on that.

Brian: Yes, no I think look.

Brian: We had the plan is if there was going to be <unk> because it takes time for these offsets to bleed in and we work with our partners on that.

Brian Wenzel: You know, it's hard to speculate on, you know, whether $8 actually goes into effect as they remove the safe harbor. There's a lot of different ways that this can play out, but we're prepared for all of those events. And in terms of rolling anything back, I think, like Brian said, that's a discussion that we have with our partners, just like when we roll out the initial pricing actions. And, you know, we operate very transparently with them. And we get when we roll out the pricing changes, and we'll do that depending on the eventual outcome of the lay thing.

Brian: It's hard to speculate on whether $8 actually goes into a factor they removed the safe Harbor Theres a lot of different ways that this can play out, but we're prepared for all of those events and.

Speaker Change: In terms of rolling anything back I think like Brian said, that's a discussion we have with our partners just like when we rolled out the initial pricing actions and we operate very transparently with them.

Speaker Change: And we did when we rolled out the pricing changes and we will do that.

Speaker Change: Pending on the eventual outcome of a lengthy.

Brian Wenzel: Again, our goal has been changed here. We're trying to protect our partners and continue to approve the same customers that we do today. Thank you.

Speaker Change: Again, our goal hasn't changed there we're trying to protect our partners and continue to approve the same customers that we do today.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: Great, Sanjay. Have a good day. Thank you.

Great sounds you have a good day.

Mihir Bhatia: We'll take our next question from Mihir Bhatia with Bank of America. Please go ahead. Hi, thank you for taking my question. Maybe the Scott, it's sort of done through net interest modules for a little bit. How do you expect them to perform? In a declining rate environment? I ask because your portfolio is a little different than some of your large bills, you know, with a little bit more fixed rate in it. So just thinking if you could walk through the moving pieces there, and also need to call this beta assumption here, do you believe in the chef?

Speaker Change: Thank you we'll take our next question from Mihir Bhatia with Bank of America. Please go ahead.

Mihir Bhatia: Hi, Thank you for taking my question.

Mihir Bhatia: Maybe just Scott just wanted to.

Speaker Change: Net interest margin, but a little bit.

Mihir Bhatia: How do you expect them to perform at a declining rate environment, because your portfolio is a little different than some of your large.

Mihir Bhatia: With a little bit more fixed rate.

Mihir Bhatia: If you could walk through the moving pieces, there and also any deposit beta assumptions you'd be willing to share.

Brian Wenzel: Yeah, good morning. I'm here, and thanks. Thanks for your question. So, so I think when you think about a framework for net interest margin, I'm going to put aside a little bit of the alarm. I'll come back to that at the end. I think when you first think about the interest in field interest in the component yield piece of this, you should be getting a little bit of a benefit as the impact of prime rate movements for that portion of the business. For that portion of the business to flow through, right, because prime lags the way which we build.

Speaker Change: Yes, good morning, and thanks. Thanks for your question. So I think when you think about a framework for net interest margin.

Speaker Change: I'm going to put aside a little bit of the ALR mix I'll come back to that at the end I think when you first think about the interest in field interest in B component yield piece of this.

Speaker Change: You should be getting a little bit of a benefit is the impact of prime rate movements for that portion of the business.

For that portion of the business to flow through right because prime lags the way, which we bill it. So hopefully we get a benefit on the floating rate component of it. Most certainly is paying rate continues to come down the revolve rate components should should rise so those two.

Brian Wenzel: So, so hopefully we get a benefit on the floating rate component of it. We'll certainly, as pain rate continues to come down, the revolve rate component. It should rise. So those two should create tailwinds inside the interest of the side of the name component. I think when you think about the funding side of both the investment, investment portfolio as well as the interest expense, you know, obviously, you know, we're at the fall market. I traditionally we've lagged a little bit from a digital banking perspective. I think what you've seen here in the third quarter is that digital banks have been a little bit more proactive.

Speaker Change: <unk> create tailwind inside the interest and fee side of.

Speaker Change: The NIM component I think when you think about the funding side of growing both the investment.

Speaker Change: The portfolio as well as the interest expense.

Speaker Change: Honestly, we don't have to follow market traditionally we've lagged the market a little bit from a digital banking perspective, I think what you've seen here in the third quarter or is that digital banks have been a little bit more proactive or lowering rates.

Brian Wenzel: Lowering the rates, you know, earlier than normal, given there are probably funding meets, we follow them down. So, so I think that creates an additional tailwind. When you think about that for a second, you get to break it out between the high yield savings component, which has a more immediate impact. But again, it's probably 40% of our retail deposits. And then you have to 60% of CDs of a book of which will reprice in the first half. And we'll certainly, you know, more than. I want to say 75% reprice entirely during our training here, but a bulk of it really reprice in the first half of the year, a lot of which didn't the second quarter given the delay, which we originated certificate this year or so.

Speaker Change: Earlier than normal given there are probably funding needs. So we filed them down.

Speaker Change: So I think that creates an additional tailwind.

Speaker Change: When you think about that for a second you had to break it out between the high yield savings component, which has a more immediate impact, but again, its probably 40% of our retail deposits and then you have the 60% of Cds, a bulk of which will.

We will reprice in the first half and will certainly more than.

Speaker Change: I don't want to say, 75% reprice entirely during next year, but a bulk of it really repriced in the first half of the year a lot of which is in the second quarter given the way in which we originated certificates. This year. So so again that lags a little bit on some of the earlier fed movements, but should be able to capture that rate movement down.

Brian Wenzel: So again, that lags a little bit on some of the earlier, but movements, but should be able to capture that movement down as we move back in.

Speaker Change: One as we move back in and the last thing I bring in is a.

Brian Wenzel: And the last thing I bring in is ALRs, a little bit of a wild car when it comes to them. You know, I look at it today; if we're paying some of 4.3% on a high yield savings, getting 4.9% from the Fed, it's a positive economic position for the company. So I'm not necessarily sure I want to take liquidity down at that point, because we're in the heat as we begin to exit and row here from this period of time. So again, if that turns more negative or flat, we will rethink how much we're currently carrying.

Speaker Change: A little bit of a wildcard when it comes to them I look at it today.

We're paying someone four 3% on a high yield savings and a four 9% from the fed it as a positive.

Speaker Change: Economic.

Speaker Change: Position for the company, so I'm not necessarily sure I wanted to take the liquidity down at that point, because we are in need as we begin to exit and grow here from this period of time. So again, if that turns more negative or flat that we will rethink how we how much. We currently carry so those are the moving pieces I think here to kind of give you some sense on how I should think about.

Mihir Bhatia: So those are the moving pieces I think here to kind of give you some sense on how you should think about them. Thank you. No, that's very helpful. Thank you.

Speaker Change: In them.

Speaker Change: Okay, No Thats fair.

Speaker Change: Very helpful. Thank you and then maybe switching back to the fortunate volume and just following up on I think it is most of your questions.

Brian Wenzel: And then maybe switching back to Portia's volume and just following up on, I think, a motion question. Well, I just want to make sure I understand what gives you confidence that Portia's volume declined. I guess Portia's volume of stabilized here at the down low, fingers which is level and relatively other certain platforms which you look at, which are leading indicators of where Portia's volume is going or consumer financial health. Thanks. Yeah, you know, obviously we look at the trend that daily and we watch daily sales and see where, where they flow and watch the, what I would call a calendar adjusted year of year view and a kind of daily year of year view.

Speaker Change: Just wanted to make sure of is that what gives you confidence that we'll achieve volume declines I guess, both booking volumes have stabilized.

Speaker Change: Low single digit level and related the other seven platform, which you can look at which are leading indicators.

Speaker Change: Okay volume by going more consumer financial health.

Speaker Change: Yes.

Speaker Change: Obviously, we look at the trends daily and we watch daily sales in and see where they flow and watch the what I would call a calendar adjusted year over year view and any kind of daily year over year view. So I think we we try to gain insights to see whether or not we see trends and I think we see stability, where we are Bryan mentioned earlier, you know again, we started to see it.

Brian Wenzel: So I think we, we try to gain insight to see what that we see trends. And I think we see stability where we are. Brian mentioned earlier, you know, again, we started to see the client really in the second quarter and accelerate into the third quarter. But now it's somewhat stabilized. You know, again, holiday is always an interesting period of time. How, how promotional will be and which retailers weren't going to lose there. So that's a little bit of a lot of car by. I think, generally speaking, when we look at the spending behavior patterns, probably speaking, the aggregate, we don't see things that are continuing to slow.

Speaker Change: Declined.

Speaker Change: Really in the second quarter and accelerated into the third quarter, but now it's somewhat stabilized again holiday is always an interesting period of time, how our promotional day in which retailers werent win or lose there. So that's a little bit of a wildcard, but I think generally speaking when we look at the spending behavior patterns.

Speaker Change: <unk> speaking in the aggregate, we don't see things that are continuing to to slow I think when we further break that down by.

Brian Wenzel: I think when we further break that down by. What I would call the credit rate pieces of it, it's been fairly consistent where your higher credit rates continue to be. You know, higher than your lower credit rates with regard to what they're consuming. So I think we look at that and say, OK, there is some stability heading into the holiday season. I think your point is, is there a platform that leads to a client. I think you have to look at and say, is there platforms that are much more discretionary or their ones that aren't.

Speaker Change: What I would call the credit great pieces of it it's been fairly consistent where youre higher credit grades continue to be.

Speaker Change: Higher than your lower credit grades with regard to what they're consuming so I think we look at that and say okay. There is some stability heading into the holiday season, I think to your point or is there a platform that Liza decline I think you have to look at it and say is there are platforms that are much more discretionary or the ones that arent side, So I think youre going to see.

Brian Wenzel: So I think you're going to see. The ones that have more discretion, spend maybe a little bit more down than others. I'll be still, you still see strength in certain parts of the portfolio inside of the platform. So example, that's performing better than other pieces inside health and wellness that should continue. Well, I think the other thing is if you just go back and think about the two years prior to this, we're coming off of record levels of consumers, then, not just in our business, but across the industry. And I think we all knew at some point inflation was going to catch up to the consumer, particularly at the lower income levels.

Speaker Change: The ones that have more discretionary spend maybe a little bit more down than others.

Speaker Change: You still see strength in certain parts of the portfolio inside of the platform. So for example, best performing better than other pieces inside health on loans that should continue I think the other thing is if you just go back and think about the two years prior to this we're coming off a record levels of consumer spend not just our business, but across the industry and I think.

Speaker Change: We all knew at some point inflation was going to catch up to the consumer, particularly at the lower income levels and we're starting to see that so a slowdown is not necessarily a bad thing in this environment.

Operator: And we're starting to see that. So the slowdown is not necessarily a bad thing in this environment. Thank you for taking my question.

Speaker Change: Thank you for taking my questions.

John Hecht: Thanks for your happy good day. Thank you.

Speaker Change: Thanks, Mary I have a good day.

Brian Wenzel: We'll take your next question from Mark Beverage with Deutsche Bank. Please go ahead. Yeah, thanks.

Speaker Change: Thank you we'll take our next question from Mark Devries with Deutsche Bank. Please go ahead.

Mark Devries: Yes. Thanks.

Brian Wenzel: You mentioned earlier that you started to see others implement changes.

Mentioned earlier.

Speaker Change: Turning to see others implement changes.

Brian Wenzel: Just interesting your thoughts on kind of what you've learned from that, whether, you know, you've decided you need to recalibrate the remain competitive. It doesn't only sound like it; just given the low attrition, or alternatively, whether you kind of miss an opportunity to change terms with some bars, you know, that you've viewed as more marginal. Yes, thank you. So again, we maintain a competitive screen of those people who are in the partnership-based business. You know, you don't necessarily look at broad-based general purpose cards. You have a different competitive dynamic relative to their value proposition. This is, but we look at people who have implemented changes in the partnership side, you know, from a competitive standpoint, they generally have done similar types of things relative to APRs.

Mark Devries: Just interested in your thoughts on kind of what you've learned from that weather.

Speaker Change: Yeah.

Speaker Change: Decided you need to recalibrate to remain competitive it doesn't really sound like it just given the low attrition or alternatively, whether.

Speaker Change: Miss an opportunity to change terms for some borrowers.

Speaker Change: That you viewed as more marginal.

Speaker Change: Yes, Thank you Duane.

Speaker Change: Again.

Speaker Change: We maintain a competitive screening of those people who are in the partnership based business.

Speaker Change: You don't necessarily look at broad based general purpose cards, who have a different competitive dynamic relative to their value proposition, but when we look at people who have implemented changes in the partnership side.

Speaker Change: From a competitive standpoint, they generally have done similar types of things relative to <unk>.

Brian Wenzel: Some have done things with vapor safety. So I think we look at that landscape, and I think we feel comfortable with the actions that we've taken. And again, we look more so to how our portfolio performs, our relationships with our merchants, and the value proposition we have with our customers, you know, clearly. The pricing of a credit product has to resonate with the value proposition that they get. If those two are out of equilibrium, you're going to have a situation where the consumer is not going to want your product. So it's more work focused on ourselves.

Speaker Change: Some have done things with a per se. So I think we look at that landscape and I think we feel comfortable with the actions that we've taken.

Speaker Change: And again, we look more so to how our portfolio performs our relationships with our merchants and the value proposition, we have with our customers with clearly the pricing of a credit product has that resonated with the value proposition that they get it those two are out of equilibrium youre going to have a.

Speaker Change: <unk>, where the consumer is not going to launch a product. So so it's more of our focus on ourselves I think when we look at the competitive screening I think we think about it.

Brian Wenzel: I think when we look at the competitive screen, I think we think about it as being in line with, and we're honestly an outlier relative to our peers. Okay, got it. Thanks.

Speaker Change: As.

Speaker Change: As being in line with.

Speaker Change: And we're not necessarily an outlier relative to our peers.

Okay got it thanks.

Brian Wenzel: And then on the guidance for reserve coverage at the end of the year, it implies a bigger kind of step down seasonally than we saw in the last couple of years.

Speaker Change: And then on the guidance for reserve coverage at the end of the year. It implies a bigger step down seasonally than we saw in the last couple of years could you just talk about what's driving that.

Brian Wenzel: Could you just talk about what's driving that? You know, most certainly I think when you think about the reserve coverage rate, it's generally a forward-looking view on how you think losses will be over a reasonable period of time.

Well certainly I think when you think about the reserve coverage rate. It's generally a forward looking view on how you think losses will be over a reasonable period of time number one and two are there other things that aren't in your quantitative model that you need to account for macroeconomic being one I think as we think about the end of the year.

Brian Wenzel: Number one and two, are there other things that aren't in your quantitative model? That you need to account for macroeconomic being one, I think is we think about the end of the year and think about the lost content through the liquidity receipt today. And how we feel about the macro, I think we feel comfortably generally going to be in line with what we had the end of last year.

Speaker Change: Here and think about the lost content through the delinquency, we see today.

Speaker Change: And how we feel about the macro.

Speaker Change: I think we feel comfortably generally going to be in line with what we had at the end of last year.

Brian Wenzel: Okay, thank you.

Speaker Change: Okay.

Operator: Thank you.

Speaker Change: Thank you.

John Hecht: Have a good day. Thank you.

Speaker Change: Thank you have a good day.

John Hecht: We'll take our next question from John Hecht with Jeffries. Please go ahead. Good morning, guys.

Speaker Change: Thank you we'll take our next question from John Hecht with Jefferies. Please go ahead.

John Hecht: Good morning, guys. Thanks, very much for taking my questions most have been asked and answered.

Brian Wenzel: Thanks very much for taking my questions. Most have been asked and answered. I'm wondering, you know, the health and wellness segments, always been a good contributor to growth.

John Hecht: Im wondering the health and wellness segments had always been a good contributor to growth and I'm. Just wondering are you seeing similar kind of spending trends from a discretionary non discretionary perspective in that category and is there anything else to call out there that might be different from the kind of the rest of the portfolio.

Brian Wenzel: And I'm just wondering, are you seeing similar kind of spend trends from a discretionary, non-discretionary perspective and that category, you know, is there anything else to call out there that might be different from the kind of the rest of the portfolio?

John Hecht: Palio.

Brian Wenzel: Yeah, John, we start on this and then hand it to Brian. I think what the health and wellness segment has been a big area of focus for us over the last couple of years. We think, you know, we've got the right to win in that space. It's a huge market, you know, 400 billion roughly. We've seen a little bit of a pullback recently, but, you know, if you look over a little bit longer period of time, we've definitely been able to accelerate the growth there. We think we've got a great value proposition. We've got a well-recognized brand.

Speaker Change: Yes, John let me start on this and then hand it to Brian I think look the health and wellness segment has been a big area of focus for us over the last couple of years, we think we.

Speaker Change: We've got the right to win in that space, It's a huge market $400 billion roughly.

Speaker Change: We've seen a little bit of a pullback recently, but if you look over a.

Speaker Change: A little bit longer period of time, we've definitely been able to accelerate the growth there.

Speaker Change: I think we've got a great value proposition, we've got a well recognized brand.

Brian Wenzel: Actually, we get the best customer NPS and customer satisfaction scores with those products. So, we feel great about how we're positioned and health and wellness. You know, not surprisingly, where you've seen some pullback more broadly across the business has been in, you know, bigger ticket discretionary purchases, and you're seeing some of that in the care credit space. Again, nothing concerning from our perspective. You're still seeing, you know, largely better growth there than you are in the rest of the business is based on the investments that we've made today. Yeah, just maybe a little bit more color.

Speaker Change: Actually we get the best customer NPS and customer satisfaction scores with those products. So we.

Speaker Change: We feel great about how we're positioned in health and wellness not surprisingly, where you've seen some pullback more broadly across the business has been in <unk>.

Speaker Change: Bigger ticket discretionary purchases.

We're seeing some of that and the care credit space again.

Speaker Change: Nothing concerning from our perspective, you are still seeing largely better growth there than you are.

Speaker Change: And the rest of the business is based on the investments that we've made to date.

Speaker Change: Yes, just maybe to add a little bit more color I think when you look inside the health and wellness sales platform and think about the diversity again highlighted pads pads up 4% year over year. So there are pieces of that portfolio that are that are doing well cosmetics down six.

Brian Wenzel: I think when you look inside the health and wellness sales platform and think about the diversity, again, a highlighted pet, you know, pets up 4% year over year. So there are pieces of that portfolio that are doing well; cosmetics down six, etcetera. You know, you see some things in we talk about the customer being discretionary. Some of your high ticket dental, which is more of a deferable expense for some, you know, that's down. So I think you look at that. The positive news we take out of that platform again. You know, the reuse of the cards up to 65%, which is up 500 basis points from what are so last year.

Speaker Change: Et cetera, Youll see some things and we talked about the consumer being discretionary.

Speaker Change: Of your high ticket dental, which is more of a deferral both expense for some.

Speaker Change: Thats down so I think you look at that the positive news, we take out of that platform again.

Speaker Change: So the cards up to 65%, which is up 500 basis points from lower so last year. So again, Brian highlights net debt the net promoter score in the liability of this product the value proposition and the brand in this product resonates with those consumers. So again, we continue to see the use and most certainly.

Brian Wenzel: So again, Brian highlights that the net promoter score in the likability of this product, you know, the value proposition and the brand of this product resonates with those consumers. So again, we can see the use and will certainly it's an area where I think when people start to lean back into some of the more discretionary type procedures, you know, that they're not medical that will begin to see that left. And again, having 10% longer with year over year, still a very strong part of the portfolio part of our company strategy.

Speaker Change: It's an area, where I think when people start to lean back into some of the more discretionary type procedures.

Speaker Change: There are non medical.

We'll begin to see that lift and again, having 10% loan growth year over year is still a very strong part of the portfolio part of our company strategy.

Speaker Change: Okay, great. Thanks, and then.

Operator: Thank you.

John Hecht: I know you guys are preparing for a variety of outcomes with the late fee backdrop.

I know you guys are preparing for a variety of outcomes with the late fee.

Speaker Change: Backdrop, I'm wondering though can you give us a sort of an update on where it stands on litigation is there anything on the docket or on the calendar that we should be looking to that might represent.

Brian Wenzel: I'm wondering, can you give us an update on where it stands on litigation? Is there anything on the docket or on the calendar that we should be looking to that might represent an event that could give us a little bit more color about what's going to happen there? Yeah, John, what I'd say is there was a hearing that was held at the end of August. You know, most certainly right now we're waiting for the, and the, and the plans are waiting for the decision with regards to the motion that's in front of the court, which is both about venue and the standing one of the plaintiffs in the case.

Speaker Change: In event that could give us a little bit more color about what's going to happen there.

Speaker Change: Yes, John what I'd say is there was a hearing that was held at the end of.

Speaker Change: And August most certainly right now we are waiting for the.

Speaker Change: And the plants are waiting for the data.

Speaker Change: Decision with regard to the motion that's in front of the core which is both about venue understanding of one of the plaintiffs in the case there is not a timetable for that district court to respond to.

Brian Wenzel: There's not a timetable for that district court to respond to that motion, so we're waiting for that. You think going to whether or not one of the parties whoever was on the other side of that, whether or not they would take action with the Fifth Circuit to appeal it or whether or not the next, next motion would be around the, the injunction itself and whether or not the injunction itself should be lifted from there. So again, I think we're waiting.

Speaker Change: To that motion. So so we're waiting for that you then go into whether or not one of the parties whoever was on the other side of that.

Speaker Change: Whether or not they would take action with the fifth circuit to appeal, it or whether or not the next next motion would be around the injunction itself and whether or not the injunction itself should be lifted.

Speaker Change: From there so again I think were in a waiting game I.

Brian Wenzel: It's, I think, it's fair to say that anyone who's trying to predict this has been wrong. So, so we're not in the prediction business today, so we continue to operate the business as if the AP rule will go in, and we'll obviously wait what the court with courts has about the litigation, but obviously, you know, we feel that the merit litigation there, but, but really it's inherently uncertain. I mean, John, if you think about it, we're prepared, and our entire plan was enacted to offset what is a worst case, which was $8 by October 1st.

Speaker Change: I think it's fair to say that anyone who is trying to predict this has been wrong.

Speaker Change: So we're not in the prediction business today. So we continue to operate the business as if the <unk> rule go in and and we'll obviously wait what the court a court says about the litigation, but obviously.

Speaker Change: We feel good that the merits of the litigation there, but really it's inherently uncertain. Let me John if you think about it.

We are prepared and our entire plan was.

Speaker Change: Enacted to offset what is a worst case, which was $8 by October one obviously that has come and gone. It is difficult to speculate on when this is actually going to become effective but if you think about it is all the pricing actions that we rolled out policy changes et cetera, we're done.

Brian Wenzel: Obviously, that has come and gone. It is difficult to speculate on when this is actually going to become effective, but if you think about it as, you know, all the pricing actions that were rolled out, policy changes, etc. We're done assuming an October 1st implementation date and $8. And so, you know, as we kind of buy time, that's helpful from that perspective. But again, we weren't; we didn't have the luxury of waiting. You know, we acted very quickly here and rolled out the pricing changes, and you know, they're performing as expected.

Speaker Change: Assuming an October one implementation date and $8 so as.

Speaker Change: As we kind of by time.

Speaker Change: That's helpful from that perspective, but again, we weren't we didn't have the luxury of waiting we acted very quickly here and rolled out.

Speaker Change: Racing changes.

Speaker Change: They are performing as expected.

John Hecht: Great. I appreciate that guy. Thanks very much.

Speaker Change: Okay I appreciate that guys. Thanks very much.

Operator: Great Jenna.

Jeff Edelson: We did. Thank you.

Speaker Change: John I have a good day.

Brian Wenzel: We'll take our next question from Jeff Edelson with Morgan Stanley. Please go ahead. Thank you, Morgan.

Speaker Change: Thank you we'll take our next question from Jeff Adelson with Morgan Stanley. Please go ahead.

Brian Wenzel: Thanks for taking my questions. Yes. I just wanted to circle back on the loan growth out of some of the credit actions you took.

Jeff Adelson: Hey, good morning, Thanks for taking my questions.

Jeff Adelson: I just wanted to circle back on the loan growth outlook.

Jeff Adelson: And some of the credit actions you've taken it sounds like if I'm hearing it right you maybe have slowed the intensity of the <unk>.

Brian Wenzel: It sounds like I'm hearing it right. You maybe have slowed the intensity of these credit actions. You took earlier in the year.

Jeff Adelson: Credit actions you took earlier in the year.

Brian Wenzel: So just, you know, assuming you keep that stance in place today, does that mean this slowing trend you're looking for exiting the year? Kind of a slow single-digit growth rate maybe can reverse itself in the next year or, you know, what would it take for that to be accelerating? And how should we think eventually about the timeline to getting back to that? You know, high single-digit kind of long-term growth that you look for? Yeah. Thanks, Jeff, for the question and good morning.

Jeff Adelson: So just assuming you can keep that stance in place today does that mean, the slowing Chinese looking for exiting the year kind of at a low single digit growth rate, maybe can reverse itself in the next year or what would it take for that to re accelerating and how should we think eventually about the timeline to getting back to that high single digit kind of long term growth rate you before.

Jeff Adelson: Yes.

Speaker Change: Thanks, Jeff for the question and good morning the.

Brian Wenzel: You know, the first thing I just want to clarify: when we take action, a lot of this strategy action that aren't necessarily a single point in time. So, so for instance, some of the action we took around that consolidation loans or student loans to some degree that strategy trips today, you know, action happens. So, you know, they're ongoing. They're not new actions. They're the same actions, just whether it counts as applicable to that action. So, again, the actions that we are taking today are more idiosyncratic based upon a partner channel or product performance relative to the risk of just a return.

First thing I just wanted to clarify one when we take action a lot of this strategy.

Speaker Change: Strategy actions that arent necessarily a single point in time. So so for instance, some of the actions we took around debt consolidation loans, our student loans to some degree it that at that strategy trips today.

Speaker Change: Can happen so.

They are ongoing they're not new actions that are the same actions just whether account as applicable to that action. So so again the actions. We are taking today are more idiosyncratic based upon our partner channel our product performance relative to the risk adjusted return I think when you think about how credit actions play out and how the consumer.

Brian Wenzel: I think when you think about how credit actions play out and how the consumer plays out, you know, Brian highlighted earlier. You know, most certainly we're in when a period of time that's, that's a little bit more transitory, right? So, you have affordability issues for some of the low rent, the lower income consumers. Hopefully, with interest rates coming down and the place you're coming down, that abates a bit and takes some of that pressure off. Remember a lot of the pressure on credit today. Stens, not necessarily from economics of the consumer, but more that the fact that too much credit has been put in the system in the 21 to early 23 year, that has to work its way through the system.

Speaker Change: As Brian highlighted earlier.

Speaker Change: Most certainly we're in a period of time, that's a little bit more transitory right. So you have affordability issues for some of the lower end lower income consumers.

Speaker Change: With interest rates coming down and inflation coming down that abates, a bit and take some of that pressure off remember a lot of the pressure on credit today.

Speaker Change: Stems not necessarily from economics of the consumer but more of that the fact that too much credit has been put in the system.

Speaker Change: In the 'twenty one early 'twenty three years it has to work its way through the system I think as that begins to recede, which I think youre seeing.

Brian Wenzel: I think is that begins to receive, which I think you're seeing, you know, in certain issuers across the industry, that gives us a little bit of a tailwind, which says that we can begin to unwind some of the restricted credit actions that we took over the past two years, you know, potentially in the latter part of 25. But again, that's going to be based upon performance. So I don't think this is a long-term trend on growth. It's probably a good thing in this period where the credit is a little bit more uncertain, but obviously a long-term framework in our models are built to deliver 7 to 10% on a lower sale of growth.

Speaker Change: And certain issuers across the industry.

Speaker Change: That gives us a little bit of a tailwind, which says that we can begin to unwind some of the restricted credit actions that we took over the past two years.

Speaker Change: So in the latter part of 'twenty five, but again, that's going to be based upon performance. So I don't think this is a long term trend on growth is probably a good thing in this period where the.

Speaker Change: Credit is a little bit more uncertain.

Speaker Change: But obviously, our long term framework and our models are built to deliver 7% to 10%.

Speaker Change: Loan receivable growth.

Brian Wenzel: And it's my follow-up. I know you're not biasing the PPC drivers in the lines, but could you maybe talk about how you feel you're shocking versus that initial six to seven hundred million you were talking about earlier in the year. And just maybe remind us of any of the PPC changes you're holding up on at this point until the way you will come through. If it comes in rather. Yeah, you know, the way I think about it, Jeff, you know, it's generally in line with, you know, as I talk about customer nutrition being lower, that's a swing between VAU bucket and this bucket.

Speaker Change: And as my follow up I know you are not.

Speaker Change: Rising.

Speaker Change: The drivers in the lines, but could you maybe talk about how you feel you're shocking versus that initial success year to 700 million and you were talking about earlier.

Speaker Change: Earlier in the year end.

Speaker Change: And just maybe remind us on any of the PTC changes or you are holding off on at this point until the <unk> Airport as it comes to the router.

Speaker Change: Yes.

Jeff Adelson: Way I think about it Jeff.

Jeff Adelson: Generally in line with as I talk about.

Jeff Adelson: Customer attrition being low and Thats a swing between Bayou bucket in this bucket so.

Brian Wenzel: So again, you know, I sit back and say, if you were to take a step back and go to 10,000 feet, I think you'd say the PPC actions, PPC actions, generally are in line with, and course five performing a little bit better. But again, the point I brought up earlier, the point in neutrality as we look at the analysis hasn't changed for us. It's really just the troughs of when does the rule come effective and our trajectory to there. But the point has, it hasn't pushed that. I know we haven't really talked about that because we want them to be able to understand when that rule goes in place.

Jeff Adelson: Again I.

Jeff Adelson: I would sit back and say if you were to take a step back and go to 10000 feet I think you'd say.

Jeff Adelson: The the PPC actions PPC actions.

Jeff Adelson: We are in line with and corresponding performing a little bit better, but again the point I brought up earlier the appointment of <unk> as we look at the analysis Hasnt changed for US. It's really just the troughs of windows the rule come effective and our trajectory to there, but the point as it hasnt pushed out I know, we haven't really talked about that because we want to be able to understand when.

Operator: And as soon as it does, we will certainly provide that neutrality point. But, but again, it's, you know, things are before and generally in line, and the course performed a little bit better than our expectations, which I think is reflected in the outcome page 12. Thank you.

Jeff Adelson: That rule goes in place and as soon as it does we will we will certainly provide that <unk> point, but but again.

Jeff Adelson: It's things are performing generally in line and of course performed a little bit better than our expectations, which I think is reflected in the outlook on page 12.

Speaker Change: Okay, great. Thank you.

Speaker Change: Great. Thank you and we are at our allotted time for questions. So we will have time for one more and we will take our final question from Rick Shane with J P. Morgan. Please go ahead.

Rick Shane: And we are at our amount of time for questions. We will have time for one more.

Brian Wenzel: We'll take our final question from Rick Shane with JP Morgan. Please go ahead. Hey, guys, thanks for taking my question.

Rick Shane: Hey, guys. Thanks for taking my question I was afraid Jojo can run out the clock on that.

Brian Wenzel: I was afraid Jeff is going to run out the clock on me. Look, I realized that SQL reserve is a thought exercise. And I realized that guidance on your reserve rate is a thought exercise on the thought exercise. I'm curious, though, if we look at the third quarter reserve rate, it's basically at a cyclical high. And you're guiding for the fourth quarter back to 23 levels. Basically, you have 16 days of incremental information, and it feels like you've gone from a very cautious outlook to a more or less cautious outlook.

Rick Shane: Look I realize that sequel reserve is a thought exercise and I realize the guidance on your reserve rate is a thought exercise on a thought exercise.

Rick Shane: I'm curious, though if we look at the third quarter reserve rate, it's basically at a cyclical high and Youre guiding for the fourth quarter back to 2003 levels.

Rick Shane: Basically have 16 days of incremental information and it feels like you've gone from a very cautious outlook two way more.

Rick Shane: Less cautious outlook, what's changed what mechanically is driving the sort of decline that Marc Henri pointed out as well.

Brian Wenzel: What's changed or what methodically is driving the sort of decline that Mark Degrees had pointed out as well? Yeah, good morning, Rick. We're glad that we run the clock out on you. You got to answer your question. Simply put, it really goes back to the denominator. Your lost content right now is baked, right? I mean, you can, most certainly in your model, roll what the fourth quarter lost number should look like and what the first quarter dollar losses should look like. It really just becomes the denominator. So I don't view it as saying that we're trying to be any more cautious or guide to something that says we fundamentally see a different, different, a different credit trajectory.

Speaker Change: Yes, good morning, Rick and I would claim that we run the clock out I know you got to answer ask your question.

Speaker Change: Simply put it really goes back to the denominator of your loss content right. Now is data right. I mean, you can most of them in your model roll with the fourth quarter loss numbers should look like and what the first quarter dollar dollar losses should look like is it really just becomes the denominator. So I don't view us as saying that we're trying to be any more cautious or guide to something.

Speaker Change: That says we fundamentally see a different different.

A different credit trajectory more so it's just more the mechanics of the calculation of taking your reserve over.

Brian Wenzel: More so, which is more than the mechanics of the calculation of taking your reserve over a, an end of period loan number. Got it. Okay.

Speaker Change: And in the period loan number.

Speaker Change: Got it okay. Thank you very much guys.

Operator: Thank you very much, guys. Thanks, Rick. Have a good day.

Speaker Change: Thanks, Ron Thanks for having a good day.

Operator: Thank you, and this does conclude Tinkerny's earnings conference call.

Speaker Change: Thank you and this does conclude <unk> earnings conference call. You may disconnect. Your lines at this time and have a wonderful day.

Operator: You may disconnect your line at this time and have a wonderful day.

Speaker Change: Uh-huh.

Speaker Change: [music].

Speaker Change: Uh huh.

Speaker Change: Mhm.

Speaker Change: [music].