Synchrony Financial Q4 2025 Synchrony Financial Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Synchrony Financial Earnings Call
Speaker #1: Please stand by. Your meeting is about to begin. Good morning, and welcome to the Synchrony Financial Q4 2025 earnings conference call. Please refer to the company's investor relations website for access to their earnings materials.
Speaker #1: Please be advised that today's conference is being recorded. Currently, all callers have been placed on hold. The call will be opened up for your questions following the conclusion of management's prepared remarks.
Speaker #1: If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the prepared remarks, please press star one.
Speaker #1: I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you, you may begin.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: We list the factors that might cause actual results to differ materially, and our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance.
Speaker #2: You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for, and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties.
Speaker #2: The only authorized webcasts are located on our website. 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.
Speaker #2: I will now turn the call over to Brian Doubles.
Speaker #3: Thanks, Kathryn. Good morning, everyone. Synchrony ended the year with a strong Q4 performance, highlighted by net earnings of $751 million, or $2.04 per diluted share.
Which included a $0.14 restructuring charge related to a voluntary employee early retirement program. A return on average assets of 2.5%, and a return on tangible common equity of 21.8%.
Speaker #3: During the quarter, we connected nearly 70 million customers to our partners and generated more than $49 billion of purchase volume, a Q4 record and a year-over-year increase of 3%.
Speaker #3: As average active account and spend trends continue to sequentially strengthen across almost all of our platforms, purchase volume across our digital platform increased 6%, driven by higher spend per account and strong customer response to enhanced product offerings and refreshed value propositions.
Speaker #3: Diversified in value purchase volume grew 4%, primarily reflecting the impact of partner expansion this year. Purchase volume in Health and Wellness also grew 4%, reflecting growth in pet and audiology, partially offset by lower spending in cosmetic.
Speaker #3: In addition, higher spend per account exceeded the impact of lower average active accounts. Purchase volume in our lifestyle platform increased 3%. Reflecting higher broad-based spend per account, partially offset by lower average active accounts.
Speaker #3: And purchase volume in home and auto was down 2%, generally reflecting selective spend in home improvement, and lower average active accounts, partially offset by strong growth in spend per account.
Speaker #3: Synchrony's dual and co-branded cards accounted for 50% of our total purchase volume in Q4, and increased 16% versus last year. This was driven by product upgrades, higher broad-based spend, and expanded utility across these card programs.
Speaker #3: We also continue to see year-over-year improvement in the mix of discretionary spend within our out-of-partner purchase volume, with strength coming from categories like electronics, entertainment, and travel.
Speaker #3: In addition, both average transaction values and average transaction frequency continue to grow across the portfolio. Average transaction values rose about 30 basis points compared to last year, reflecting growth from non-prime and super-prime customers.
Speaker #3: Average transaction frequency increased across all credit cohorts, up about 3.7% versus last year. Collectively, these strengthened core trends across our portfolio are a reflection of Synchrony's focus and disciplined execution throughout the year.
Speaker #3: We delivered strong credit results, while also advancing our key strategic priorities to enhance the value and utility of our financing solutions, broaden our reach, and deliver more powerful experiences for our customers and partners alike.
Speaker #3: And as a result, Synchrony added more than 20 million new accounts, drove engagement with nearly 70 million existing customers, and generated more than $182 billion of sales for our partners, merchants, and providers in 2025.
Speaker #3: This is the kind of proven success that has established Synchrony as a trusted partner. In Q4, we added or renewed more than 25 partners, including Bob's Discount Furniture, RH, and Polaris.
Speaker #3: We're excited to announce our exclusive multi-year agreement with Bob's Discount Furniture to offer short- and long-term promotional financing options to customers at more than 200 Bob's locations.
Speaker #3: This partnership is expected to launch mid-year and strengthens Synchrony's leadership in the home furnishings industry, with partnerships across more than half of Furniture Today's Top 100 retailers.
Speaker #3: In addition, our renewed partnership with Polaris, a leading manufacturer of off-road vehicles, builds on a nearly two-decade-long relationship of collaboration to provide financing for vehicles, parts, accessories, gear, as well as vehicle service and protection products through customized promotional financing and loan options.
Speaker #3: Throughout the past year, Synchrony expanded our portfolio across both national and local businesses, bringing our total added or renewed partners to more than 75, including two of our top five partners and seven of our top 20.
Speaker #3: Approximately 97% of our total interest and fees from our top 25 partners are renewed through 2028, and our top five partners are renewed through 2030 and beyond.
Speaker #3: Reflecting the deep trust our partners have in Synchrony, and our ability to deliver for their businesses. Synchrony also continued to diversify our programs, products, and markets over the past year.
Speaker #3: Providing greater flexibility and broader access for our customers and partners as their needs evolve and priorities shift. We entered into more than 10 merchant and practice management platform partnerships, including Weave, one of the largest patient relationship management software providers in the health and wellness space, that supports over 35,000 small and medium-sized practices across dental, cosmetic, vision, and vet.
Speaker #3: Together, we're focused on eliminating the friction between patient communication and payment experiences, and empowering customers with access and financial flexibility, so we're excited to develop a best-in-class patient engagement and payment solution that will seamlessly integrate CareCredit across critical moments that matter in the patient journey.
Speaker #3: From appointment scheduling and reminders to bill pay, Synchrony now partners with over 50 merchant and practice management platforms like Weave, in both the health and wellness, and home and auto markets.
Speaker #3: So that we can enable seamless access to our financing solution suite, while converting more sales for hundreds of thousands of small and mid-sized businesses that utilize these technology platforms to operate their businesses.
Speaker #3: Similarly, our acquisition of Versatile is expected to accelerate our multi-source financing strategy, reaching and empowering more customers with smarter financing options across online, in-store, and mobile points of sale.
Speaker #3: While driving seamless integrations, higher approval rates, and detailed reporting to drive sales across home, auto, and elective medical merchants and providers, and our continued launch of new products across our portfolio for our customers.
Speaker #3: While driving loyalty and sales for our partners. For example, Synchrony PayLater is now offered through more than 6,200 merchants, and thus far, our data shows that when we offer PayLater and revolving products together, we experience at least a 10% average increase in sales.
Speaker #3: Pointing to the expansive purchase power Synchrony can deliver through our multi-product strategy. And in today's world, where purchases are often decided and financing approved before checkout, Synchrony is increasingly wherever our customer is—on the product page, in search results, in digital shopping carts, and even in their inbox—providing effortless access to flexible financing options.
Speaker #3: The investments we've been making are driving these and other innovations at Synchrony, as we seek to expand and deepen the role we play across the consumer finance and payments ecosystem.
Speaker #3: Over the last year, we have enriched the experiences we deliver, while empowering our customers with more dynamic access and choice through the combination of Synchrony's marketplace—which features our AI search capability called Joy Hunt—and Synchrony's website and native app.
Speaker #3: Together, the enhancements we've made across these channels contributed to an 18% increase in total visits and 17% more in sales in 2025. Our digital wallet strategy also continued to accelerate, having more than doubled the number of unique, provisioned accounts and digital wallet sales compared to last year.
Speaker #3: This growth also supported a 400 basis point gain in our dual and co-branded cards wallet penetration rate, which should enhance the stickiness of these products and provide natural tailwinds to Synchrony's mobile wallet share, as we continue to invest in this strategy and aim to ensure that our products are anywhere our customers want them to be.
Speaker #3: So, no matter how our customers come to Synchrony, with the hundreds of thousands of partners, providers, and small- and mid-sized businesses we serve, our digital ecosystem is designed to connect them with the compelling value propositions, broad utility, and flexible payment structures that best align with their needs in that moment.
Speaker #3: By almost any account, we believe the ways in which Synchrony has executed throughout 2025 have positioned us well for the future. We have invested in our products and digital capabilities to drive greater reach, deeper penetration, and broader utility.
Speaker #3: And we have built enduring relationships with a diverse range of partners, who are primed to deliver strong, risk-adjusted growth as conditions allow. And with that, I'll turn the call over to Brian to discuss our financial performance in greater detail.
Speaker #2: Thanks, Brian. And good morning, everyone. Synchrony's fourth quarter and full-year financial performance delivered strong, risk-adjusted returns amidst evolving market conditions. The combination of our underwriting discipline and the efficacy of our prior credit actions enabled the return of our full-year net charge-off rate to within our long-term target range of 5.5% to 6%.
Speaker #2: We achieved strong new account and purchase line growth across the portfolio, despite maintaining our net credit-restricted position. And despite the associated effects of an elevated payment rate, ending loan receivables grew across three of our five platforms, and interest income increased, reflecting the building impact of our product, pricing, and policy changes, or PPPCs, and the reduction of our funding liabilities costs.
Speaker #2: The combination of these trends drove enhanced program performance, which was shared through our RSAs, maintaining economic alignment with our partners, enabling them to reinvest in our mutual customers and drive loyalty amidst a backdrop of a more discerning spend behavior.
Speaker #2: To summarize Synchrony's fourth quarter results, we generated net earnings of $751 million, or $2.04 per diluted share, which included the impact of a $0.14 restructuring charge related to a voluntary employee early retirement program.
Speaker #2: A return on average assets of 2.5%, a return on tangible common equity of 21.8%, and a 9% increase in tangible book value per share.
Speaker #2: And for the full year, Synchrony delivered net earnings of $3.6 billion, or $9.28 per diluted share, a return on average assets of 3.0%, and a return on tangible common equity of 25.8%.
Speaker #2: We look forward to building on this momentum across our business in both the short and medium term. Focusing on our fourth quarter results in more detail.
Operator: Please stand by. Your meeting is about to begin. Good morning, and welcome to the Synchrony Financial Q4 2025 Earnings Conference Call. Please refer to the company's investor relations website for access to their earnings materials. Please be advised that today's conference is being recorded. Currently, all callers have been placed. The call will be opened up for your questions following the conclusion of management's prepared remarks. If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the 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.
Operator: Please stand by. Your meeting is about to begin. Good morning, and welcome to the Synchrony Financial Q4 2025 Earnings Conference Call. Please refer to the company's investor relations website for access to their earnings materials. Please be advised that today's conference is being recorded. Currently, all callers have been placed. The call will be opened up for your questions following the conclusion of management's prepared remarks. If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the 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.
Speaker #2: We generated $49 billion of purchase volume, a fourth-quarter record and a 3% year-over-year increase, despite the ongoing effects of net credit-restrictive actions we took between mid-2023 and early 2024, and continued selectivity in customer spend behavior.
Speaker #2: Ending loan receivables decreased 1% to $104 billion in the fourth quarter, reflecting the combination of higher payment rates, lower average active accounts, and the effects of lower purchase volume in the first half of this year.
Speaker #2: The payment rate increased by approximately 45 basis points versus last year, to 16.3%, and was approximately 155 basis points above the pre-pandemic fourth quarter average.
Speaker #2: Net revenue of $3.8 billion was flat versus last year, as higher net interest income was offset by higher RSAs driven by program performance. Net interest income increased 4% to $4.8 billion, primarily driven by higher loan receivables yield, the impact of our PPPCs, and lower interest-bearing liabilities costs associated with lower benchmark rates, partially offset by lower liquidity portfolio yield.
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. 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 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: 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. 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 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.
Speaker #2: Our fourth quarter net interest margin increased 82 basis points versus last year to 15.83%, reflecting three key drivers. One, a 53 basis point increase in our loan receivables yield, which contributed approximately 44 basis points to our net interest margin.
Speaker #2: This increase was primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates and lower assessed late fees. Two, a 51 basis point decline in our total interest-bearing liabilities costs versus last year, which contributed approximately 41 basis points to our net interest margin.
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. 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. I will now turn the call over to Brian Doubles.
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. 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. I will now turn the call over to Brian Doubles.
Speaker #2: And three, a 46 basis point increase in the mix of loan receivables as a percent of interest-bearing assets, which increased our net interest margin by approximately 8 basis points.
Speaker #2: These improvements were partially offset by a 73-basis-point reduction in our liquidity portfolio yield, which reduced our net interest margin by 11 basis points.
Brian Doubles: Thanks, Kathryn, and good morning, everyone. Synchrony ended the year with a strong fourth quarter performance, highlighted by net earnings of $751 million, or $2.04 per diluted share, which included a 14-cent restructuring charge related to a voluntary employee early retirement program, a return on average assets of 2.5%, and a return on tangible common equity of 21.8%. During the quarter, we connected nearly 70 million customers to our partners and generated more than $49 billion of purchase volume, a fourth quarter record, and a year-over-year increase of 3%, as average active account and spend trends continued to sequentially strengthen across almost all of our platforms. Purchase volume across our digital platform increased 6%, driven by higher spend per account and strong customer response to enhanced product offerings and refreshed value propositions.
Brian Doubles: Thanks, Kathryn, and good morning, everyone. Synchrony ended the year with a strong fourth quarter performance, highlighted by net earnings of $751 million, or $2.04 per diluted share, which included a 14-cent restructuring charge related to a voluntary employee early retirement program, a return on average assets of 2.5%, and a return on tangible common equity of 21.8%. During the quarter, we connected nearly 70 million customers to our partners and generated more than $49 billion of purchase volume, a fourth quarter record, and a year-over-year increase of 3%, as average active account and spend trends continued to sequentially strengthen across almost all of our platforms. Purchase volume across our digital platform increased 6%, driven by higher spend per account and strong customer response to enhanced product offerings and refreshed value propositions.
Speaker #2: The decline generally reflected the impact of lower benchmark rates. Moving on. RSAs of $1.1 billion, or 4.30% of average loan receivables in the fourth quarter, increased $175 million versus the prior year.
Speaker #2: Primarily reflecting program performance, which included lower net charge-offs and the impact of our PPPCs. Revision for credit losses decreased $119 million to $1.4 billion, driven by a $294 million decrease in net charge-offs, and partially offset by a reserve build of $76 million versus a $100 million release in the prior year.
Speaker #2: Other expense increased 10% to $1.4 billion, generally reflecting higher employee costs and technology investments. The employee cost increase was primarily due to a $67 million restructuring charge associated with a voluntary employee early retirement program, as well as a shift in headcount mix.
Brian Doubles: Diversified and value purchase volume grew 4%, primarily reflecting the impact of partner expansion this year. Purchase volume in health and wellness also grew 4%, reflecting growth in pet and audiology, partially offset by lower spend in cosmetic. In addition, higher spend per account exceeded the impact of lower average active accounts. Purchase volume in our lifestyle platform increased 3%, reflecting higher broad-based spend per account, partially offset by lower average active accounts. And purchase volume in home and auto was down 2%, generally reflecting selective spend in home improvement and lower average active accounts, partially offset by strong growth in spend per account. Synchrony Dual and co-brand cards accounted for 50% of our total purchase volume in Q4 and increased 16% versus last year, driven by product upgrades, higher broad-based spend, and expanded utility across these card programs.
Diversified and value purchase volume grew 4%, primarily reflecting the impact of partner expansion this year. Purchase volume in health and wellness also grew 4%, reflecting growth in pet and audiology, partially offset by lower spend in cosmetic. In addition, higher spend per account exceeded the impact of lower average active accounts. Purchase volume in our lifestyle platform increased 3%, reflecting higher broad-based spend per account, partially offset by lower average active accounts. And purchase volume in home and auto was down 2%, generally reflecting selective spend in home improvement and lower average active accounts, partially offset by strong growth in spend per account. Synchrony Dual and co-brand cards accounted for 50% of our total purchase volume in Q4 and increased 16% versus last year, driven by product upgrades, higher broad-based spend, and expanded utility across these card programs.
Speaker #2: The fourth quarter efficiency ratio was 36.9%, approximately 360 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA on net revenue, as program performance improved.
Speaker #2: Excluding the impacts of the restructuring charge, the fourth quarter efficiency ratio would have been approximately 180 basis points lower. Shifting focus to our key credit trends on slide nine, you can see that our 30-plus and 90-plus delinquency rates, as well as our net charge-off rate, are all below our historical average for the fourth quarters of 2017 to 2019.
Speaker #2: At quarter end, our 30-plus delinquency rate was 4.49%, a decrease of 21 basis points from 4.70% in the prior year. Our 90-plus delinquency rate was 2.17%, a decrease of 23 basis points from 2.40% in the prior year.
Brian Doubles: We also continue to see year-over-year improvement in the mix of discretionary spend within our out-of-partner purchase volume, with strength coming from categories like electronics, entertainment, and travel. In addition, both average transaction values and average transaction frequency continued to grow across the portfolio. Average transaction values rose about 30 basis points compared to last year, reflecting growth from non-prime and super prime customers. Average transaction frequency increased across all credit cohorts, up about 3.7% versus last year. Collectively, these strengthening core trends across our portfolio are a reflection of Synchrony's focus and disciplined execution throughout the year. We delivered strong credit results while also advancing our key strategic priorities to enhance the value and utility of our financing solutions, broaden our reach, and deliver more powerful experiences for our customers and partners alike.
We also continue to see year-over-year improvement in the mix of discretionary spend within our out-of-partner purchase volume, with strength coming from categories like electronics, entertainment, and travel. In addition, both average transaction values and average transaction frequency continued to grow across the portfolio. Average transaction values rose about 30 basis points compared to last year, reflecting growth from non-prime and super prime customers. Average transaction frequency increased across all credit cohorts, up about 3.7% versus last year. Collectively, these strengthening core trends across our portfolio are a reflection of Synchrony's focus and disciplined execution throughout the year. We delivered strong credit results while also advancing our key strategic priorities to enhance the value and utility of our financing solutions, broaden our reach, and deliver more powerful experiences for our customers and partners alike.
Speaker #2: And our net charge-off rate was 5.37% in the fourth quarter, a decrease of 108 basis points from 6.45% in the prior year. When evaluating our credit performance, our portfolio delinquency and net charge-off trends reflect both the efficacy of our credit actions and the power of our disciplined underwriting and credit management strategies.
Speaker #2: These trends reinforce our confidence in our portfolio's credit positioning as we move forward, and provide a strong foundation for us to execute our business strategy.
Speaker #2: Finally, our allowance for credit losses as a percent of loan receivables was 10.06%, which decreased approximately 29 basis points from 10.35% in the third quarter, and declined 38 basis points from 10.44% in the fourth quarter of 2024.
Speaker #2: Turning to slide 10, Synchrony's funding, capital, and liquidity continue to provide a strong foundation for our business as we exited 2025. Synchrony grew our direct deposits by $2.9 billion versus last year, as we reduced broker deposits by $3.8 billion.
Brian Doubles: As a result, Synchrony added more than 20 million new accounts, drove engagement with nearly 70 million existing customers, and generated more than $182 billion of sales for our partners, merchants, and providers in 2025. This is the kind of proven success that has established Synchrony as a trusted partner. In the fourth quarter, we added or renewed more than 25 partners, including Bob's Discount Furniture, RH, and Polaris. We're excited to announce our exclusive multi-year agreement with Bob's Discount Furniture to offer short and long-term promotional financing options to customers at more than 200 Bob's locations. This partnership is expected to launch mid-year and strengthens Synchrony's leadership in the home furnishings industry, with partnerships across more than half of Furniture Today's top 100 retailers.
As a result, Synchrony added more than 20 million new accounts, drove engagement with nearly 70 million existing customers, and generated more than $182 billion of sales for our partners, merchants, and providers in 2025. This is the kind of proven success that has established Synchrony as a trusted partner. In the fourth quarter, we added or renewed more than 25 partners, including Bob's Discount Furniture, RH, and Polaris. We're excited to announce our exclusive multi-year agreement with Bob's Discount Furniture to offer short and long-term promotional financing options to customers at more than 200 Bob's locations. This partnership is expected to launch mid-year and strengthens Synchrony's leadership in the home furnishings industry, with partnerships across more than half of Furniture Today's top 100 retailers.
Speaker #2: Also, during the fourth quarter, we issued a $750 million three-year secured public bond from the Synchrony Card Issuance Trust with the tightest benchmark-adjusted spread we've had in the past seven years, and a final coupon of 4.06%.
Speaker #2: At December 31, deposits represented 84% of our total funding, with secured debt representing 9% and unsecured debt representing 7%. Total liquid assets decreased 3% to $16.6 billion and represented 13.9% of total assets, 45 basis points lower than last year.
Speaker #2: Moving to our capital ratios, Synchrony ended the quarter with a CET1 ratio of 12.6%, a Tier 1 capital ratio of 13.8%, and a total capital ratio of 15.8%.
Brian Doubles: In addition, our renewed partnership with Polaris, a leading manufacturer of off-road vehicles, builds on a nearly 2-decade-long relationship of collaboration to provide financing for vehicles, parts, accessories, and gear, as well as vehicle service and protection products through customized promotional financing and loan options. Throughout the past year, Synchrony expanded our portfolio across both national and local businesses, bringing our total added or renewed partners to more than 75, including 2 of our top 5 partners and 7 of our top 20. Approximately 97% of our total interest in fees from our top 25 partners are renewed through 2028, and our top 5 partners are renewed through 2030 and beyond, reflecting the deep trust our partners have in Synchrony and our ability to deliver for their businesses.
In addition, our renewed partnership with Polaris, a leading manufacturer of off-road vehicles, builds on a nearly 2-decade-long relationship of collaboration to provide financing for vehicles, parts, accessories, and gear, as well as vehicle service and protection products through customized promotional financing and loan options. Throughout the past year, Synchrony expanded our portfolio across both national and local businesses, bringing our total added or renewed partners to more than 75, including 2 of our top 5 partners and 7 of our top 20. Approximately 97% of our total interest in fees from our top 25 partners are renewed through 2028, and our top 5 partners are renewed through 2030 and beyond, reflecting the deep trust our partners have in Synchrony and our ability to deliver for their businesses.
Speaker #2: Each declined approximately 70 basis points versus the prior year. Our Tier 1 capital plus reserves ratio decreased to 23.7%, compared to 24.3% last year.
Speaker #2: During the fourth quarter, Synchrony returned $1.1 billion to shareholders, consisting of $952 million in share repurchases and $106 million in common stock dividends. For the full year, we returned $3.3 billion, including $2.9 billion in share repurchases and $427 million in common stock dividends.
Speaker #2: Synchrony remains well-positioned to return capital to shareholders, subject to our business performance, market conditions, regulatory restrictions or expectations, and our capital plan. Turning to our outlook for 2026 on slide 11.
Brian Doubles: Synchrony also continued to diversify our programs, products, and markets over the past year, providing greater flexibility and broader access for our customers and partners as their needs evolve and priorities shift. We entered into more than 10 merchant and practice management platform partnerships, including Weave, one of the largest patient relationship management software providers in the health and wellness space, that supports over 35,000 small and medium-sized practices across dental, cosmetic, vision, and vet. Together, we're focused on eliminating the friction between patient communication and payment experiences and empowering customers with access and financial flexibility, so we're excited to develop a best-in-class patient engagement and payment solution that will seamlessly integrate CareCredit across critical moments that matter in the patient journey, from appointment scheduling and reminders to bill pay.
Synchrony also continued to diversify our programs, products, and markets over the past year, providing greater flexibility and broader access for our customers and partners as their needs evolve and priorities shift. We entered into more than 10 merchant and practice management platform partnerships, including Weave, one of the largest patient relationship management software providers in the health and wellness space, that supports over 35,000 small and medium-sized practices across dental, cosmetic, vision, and vet. Together, we're focused on eliminating the friction between patient communication and payment experiences and empowering customers with access and financial flexibility, so we're excited to develop a best-in-class patient engagement and payment solution that will seamlessly integrate CareCredit across critical moments that matter in the patient journey, from appointment scheduling and reminders to bill pay.
Speaker #2: Synchrony’s high-level execution throughout the past year, coupled with our ongoing investments, has positioned us well to grow our portfolio in a prudent, risk-adjusted manner should conditions allow.
Speaker #2: Our baseline assumptions include no regulatory or legislative changes, a stable macroeconomic environment with no significant reduction in inflation rates, full-year GDP growth of 2%, a year-end unemployment rate of 4.8%, a year-end Fed funds rate of 3.25%, and a full-year deposit basis of approximately 65%.
Speaker #2: For 2026, we expect average active account and purchase volume growth to drive mid-single-digit ending receivables growth, even while payment rates remain elevated. The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year, as recently launched programs grow, and the Lowe's commercial co-brand credit card program transfers to our portfolio in the second quarter.
Brian Doubles: Synchrony now partners with over 50 merchant and practice management platforms like Weave in both the health and wellness and home and auto markets, so that we can enable seamless access to our financing solution suite while converting more sales for hundreds of thousands of small and mid-sized businesses that utilize these technology platforms to operate their businesses. Similarly, our acquisition of Versatile is expected to accelerate our multi-source financing strategy, reaching and empowering more customers with smarter financing options across online, in-store, and mobile points of sale, while driving seamless integrations, higher approval rates, and detailed reporting to drive sales across home, auto, and elective medical merchants and providers. Our continued launch of new products across our portfolio for our customers, while driving loyalty and sales for our partners.
Synchrony now partners with over 50 merchant and practice management platforms like Weave in both the health and wellness and home and auto markets, so that we can enable seamless access to our financing solution suite while converting more sales for hundreds of thousands of small and mid-sized businesses that utilize these technology platforms to operate their businesses. Similarly, our acquisition of Versatile is expected to accelerate our multi-source financing strategy, reaching and empowering more customers with smarter financing options across online, in-store, and mobile points of sale, while driving seamless integrations, higher approval rates, and detailed reporting to drive sales across home, auto, and elective medical merchants and providers. Our continued launch of new products across our portfolio for our customers, while driving loyalty and sales for our partners.
Speaker #2: This growth outlook also assumes no additional broad-based credit refinements. We currently also expect our portfolio net charge-off rate to be in line with our long-term target of 5.5% to 6%.
Speaker #2: We will continue to monitor our portfolio performance and broader macroeconomic conditions closely. To the extent we see notable changes in the portfolio trends or macroeconomic conditions, we will consider making further adjustments to our credit positioning.
Speaker #2: We expect net interest income to continue to grow in 2026, as the impact of PPPCs continues to build and as we reduce our funding liabilities costs.
Speaker #2: These trends will be partially offset by lower lengthy incidents and the yield-dilutive effect of accelerating new account growth. RSAs are expected to increase, reflecting stronger program performance, but remain within our target of 4.0% to 4.5% of average receivables.
Brian Doubles: For example, Synchrony Pay Later is now offered to more than 6,200 merchants, and thus far, our data shows that when we offer a Pay Later and revolving products together, we experience an at least 10% average increase in sales, pointing to the expansive purchase power Synchrony can deliver through our multi-product strategy. And in today's world, where purchases are often decided and financing approved before checkout, Synchrony is increasingly wherever our customer is, on the product page, in search results, in digital shopping carts, and even in their inbox, providing effortless access to flexible financing options. The investments we've been making are driving these and other innovations at Synchrony as we seek to expand and deepen the role we play across the consumer finance and payments ecosystem.
For example, Synchrony Pay Later is now offered to more than 6,200 merchants, and thus far, our data shows that when we offer a Pay Later and revolving products together, we experience an at least 10% average increase in sales, pointing to the expansive purchase power Synchrony can deliver through our multi-product strategy. And in today's world, where purchases are often decided and financing approved before checkout, Synchrony is increasingly wherever our customer is, on the product page, in search results, in digital shopping carts, and even in their inbox, providing effortless access to flexible financing options. The investments we've been making are driving these and other innovations at Synchrony as we seek to expand and deepen the role we play across the consumer finance and payments ecosystem.
Speaker #2: Other expenses, excluding the impact of the $98 million of notable items in 2025, should grow in line with loan receivables, reflecting continued investment in our growth and innovation as we look to drive our momentum forward.
Speaker #2: We remain focused on delivering operating-level leverage in our business while balancing the opportunities we see to power leading-edge experiences and portfolio expansion. Altogether, these financial drivers are expected to deliver net earnings per diluted share between $9.10 and $9.50 for the full year 2026.
Brian Doubles: Over the last year, we have enriched the experiences we deliver while empowering our customers with more dynamic access and choice through the combination of Synchrony's Marketplace, which features our AI search capability called JoyHunt, and Synchrony's website and native app. Together, the enhancements we made across these channels contributed to an 18% increase in total visits and 17% more in sales in 2025. Our digital wallet strategy also continued to accelerate, having more than doubled the number of unique provisioned accounts and digital wallet sales compared to last year.
Over the last year, we have enriched the experiences we deliver while empowering our customers with more dynamic access and choice through the combination of Synchrony's Marketplace, which features our AI search capability called JoyHunt, and Synchrony's website and native app. Together, the enhancements we made across these channels contributed to an 18% increase in total visits and 17% more in sales in 2025. Our digital wallet strategy also continued to accelerate, having more than doubled the number of unique provisioned accounts and digital wallet sales compared to last year.
Speaker #2: Growth-related initiatives, like Walmart OnePay, those commercial—this range includes the impact of co-brand and versatile credit, as well as investments in other key technology initiatives.
Speaker #2: These combined investments will impact loan receivables yield, provision for credit losses, other income, and other expenses to varying degrees. Synchrony's model is designed to generate double-digit earnings per share growth, on average, over time and through cycles.
Speaker #2: This reflects our disciplined approach to underwriting and credit management, as well as our expense base and economic alignment we achieve through our RSAs. As we look to 2026 and beyond, these core drivers have set the stage, as conditions allow, for Synchrony to drive strong earnings and continue progress towards our long-term financial targets while generating incremental excess capital.
Brian Doubles: This growth also supported a 400 basis point gain in our dual and co-branded cards wallet penetration rate, which should enhance the stickiness of these products and provide natural tailwinds to Synchrony's mobile wallet share as we continue to invest in this strategy and aim to ensure that our products are anywhere our customers want them to be. No matter how our customers come to Synchrony, with the hundreds of thousands of partners, providers, and small and mid-sized businesses we serve, our digital ecosystem is designed to connect them with the compelling value propositions, broad utility, and flexible payment structures that best align with their needs in that moment. By almost any account, we believe the ways in which Synchrony has executed throughout 2025 have positioned us well for the future.
This growth also supported a 400 basis point gain in our dual and co-branded cards wallet penetration rate, which should enhance the stickiness of these products and provide natural tailwinds to Synchrony's mobile wallet share as we continue to invest in this strategy and aim to ensure that our products are anywhere our customers want them to be. No matter how our customers come to Synchrony, with the hundreds of thousands of partners, providers, and small and mid-sized businesses we serve, our digital ecosystem is designed to connect them with the compelling value propositions, broad utility, and flexible payment structures that best align with their needs in that moment. By almost any account, we believe the ways in which Synchrony has executed throughout 2025 have positioned us well for the future.
Speaker #2: With that, I'll turn the call back to Brian. Thanks, Brian. Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion.
Speaker #2: First, Synchrony is executing on our key strategic priorities to grow and win new partners, diversify our programs, products, and markets, and deliver best-in-class experiences for all those we serve.
Speaker #2: And we are doing this while also earning the honor of being ranked second among the top best companies to work for in the US by Fortune Magazine and Great Place to Work in 2025.
Brian Doubles: We have invested in our products and digital capabilities to drive greater reach, deeper penetration, and broader utility. We have built enduring relationships with a diverse range of partners who are primed to deliver strong, risk-adjusted growth as conditions allow. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.
We have invested in our products and digital capabilities to drive greater reach, deeper penetration, and broader utility. We have built enduring relationships with a diverse range of partners who are primed to deliver strong, risk-adjusted growth as conditions allow. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.
Speaker #2: I am incredibly proud of the great work we are doing together, and the great strides we are making as we seek to solidify Synchrony at the heart of American commerce.
Speaker #2: Second, Synchrony's past, present, and future are grounded in our ability to drive sustainable growth at appropriate risk-adjusted returns through cycles and the evolving consumer landscape.
Brian Wenzel: ... Thanks, Brian, and good morning, everyone. Synchrony's Q4 and full year financial performance delivered strong risk-adjusted returns amidst evolving market conditions. The combination of our underwriting discipline and the efficacy of our prior credit actions enabled the return of our full year net charge-off rate to within our long-term target range of 5.5% to 6%. We achieved strong new account and purchase volume growth across the portfolio, despite maintaining our net credit restrictive position. Despite the associated effects of an elevated payment rate, ending loan receivables grew across 3 of our 5 platforms, and interest income increased, reflecting the building impact of our product, pricing, and policy changes, or PPPCs, and the reduction of our funding liabilities costs.
Brian Wenzel: Thanks, Brian, and good morning, everyone. Synchrony's Q4 and full year financial performance delivered strong risk-adjusted returns amidst evolving market conditions. The combination of our underwriting discipline and the efficacy of our prior credit actions enabled the return of our full year net charge-off rate to within our long-term target range of 5.5% to 6%. We achieved strong new account and purchase volume growth across the portfolio, despite maintaining our net credit restrictive position. Despite the associated effects of an elevated payment rate, ending loan receivables grew across 3 of our 5 platforms, and interest income increased, reflecting the building impact of our product, pricing, and policy changes, or PPPCs, and the reduction of our funding liabilities costs.
Speaker #2: Our expertise, discipline, and consistent innovation have made this possible, allowing us to deliver products and experiences with enduring appeal and compelling value for both our customers and partners alike.
Speaker #2: Since exiting the pandemic in 2021, Synchrony has added or renewed more than 300 partners, including 16 of our top 20, while also growing ending receivables at an average rate of approximately 7% and delivering an average return on assets of approximately 3%, and an average return on tangible common equity of approximately 25%.
Speaker #2: And third, Synchrony's robust capital generation capacity positions us well to continue to invest in our business and growth opportunities, while also returning capital as conditions allow.
Brian Wenzel: The combination of these trends drove enhanced program performance, which was shared through our RSAs, maintaining economic alignment with our partners, enabling them to reinvest in our mutual customers and drive loyalty amidst a backdrop of more discerning spend behavior. To summarize Synchrony's fourth quarter results, we generated net earnings of $751 million or $2.04 per diluted share, which included the impact of a $0.14 restructuring charge related to a voluntary employee early retirement program, a return on average assets of 2.5%, a return on tangible common equity of 21.8%, and a 9% increase in tangible book value per share.
The combination of these trends drove enhanced program performance, which was shared through our RSAs, maintaining economic alignment with our partners, enabling them to reinvest in our mutual customers and drive loyalty amidst a backdrop of more discerning spend behavior. To summarize Synchrony's fourth quarter results, we generated net earnings of $751 million or $2.04 per diluted share, which included the impact of a $0.14 restructuring charge related to a voluntary employee early retirement program, a return on average assets of 2.5%, a return on tangible common equity of 21.8%, and a 9% increase in tangible book value per share.
Speaker #2: So, as we look to 2026 and beyond, we are confident in the momentum we've built to drive considerable long-term value for our many stakeholders.
Speaker #2: With that, I'll turn the call back to Kathryn to open the Q&A.
Speaker #3: 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 yourselves to one primary and one follow-up question.
Speaker #3: If you have additional questions, the Investor Relations team will be available after the call. Operator, please start the Q&A session.
Speaker #4: Thank you. And 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.
Brian Wenzel: For the full year, Synchrony delivered net earnings of $3.6 billion or $9.28 per diluted share, a return on average assets of 3.0%, and a return on tangible common equity of 25.8%. We look forward to building on this momentum across our business in both the short and medium term. Focusing on our fourth quarter results in more detail, we generated $49 billion of purchase volume, a fourth quarter record, and a 3% year-over-year increase, despite the ongoing effects of net credit restrictive actions we took between mid-2023 and early 2024, and continued selectivity in customer spend behavior.
For the full year, Synchrony delivered net earnings of $3.6 billion or $9.28 per diluted share, a return on average assets of 3.0%, and a return on tangible common equity of 25.8%. We look forward to building on this momentum across our business in both the short and medium term. Focusing on our fourth quarter results in more detail, we generated $49 billion of purchase volume, a fourth quarter record, and a 3% year-over-year increase, despite the ongoing effects of net credit restrictive actions we took between mid-2023 and early 2024, and continued selectivity in customer spend behavior.
Speaker #4: Please limit yourself to one question and one follow-up question. We'll take our first question from Sanjay Sakrani with KBW. Please go ahead. Your line.
Speaker #4: is open. Good
Speaker #5: Morning. Good job on 2025. I know you guys had a lot to deal with. Maybe just starting on the mid-single-digit growth guide for receivables growth.
Speaker #5: I think that's quite encouraging. Brian, can you just talk about sort of the building blocks for that? I saw the co-brand volume growth accelerated.
Speaker #5: Is that partly due to Walmart or how are the early views of Walmart looking? And then Brian, Wenzel, you talked a little bit about not necessarily assuming any changes to so the underwriting stance for the year, but is that something you're considering inside the guide?
Brian Wenzel: Ending loan receivables decreased 1% to $104 billion in Q4, reflecting the combination of higher payment rates, lower average active accounts, and the effects of lower purchase volume in the first half of this year. The payment rate increased by approximately 45 basis points versus last year to 16.3% and was approximately 155 basis points above the pre-pandemic Q4 average. Net revenue of $3.8 billion was flat versus last year, as higher net interest income was offset by higher RSAs, driven by program performance. Net interest income increased 4% to $4.8 billion, primarily driven by higher loan receivables yield and the impact of our PPPCs and lower interest-bearing liabilities costs associated with lower benchmark rates, partially offset by lower liquidity portfolio yield.
Ending loan receivables decreased 1% to $104 billion in Q4, reflecting the combination of higher payment rates, lower average active accounts, and the effects of lower purchase volume in the first half of this year. The payment rate increased by approximately 45 basis points versus last year to 16.3% and was approximately 155 basis points above the pre-pandemic Q4 average. Net revenue of $3.8 billion was flat versus last year, as higher net interest income was offset by higher RSAs, driven by program performance. Net interest income increased 4% to $4.8 billion, primarily driven by higher loan receivables yield and the impact of our PPPCs and lower interest-bearing liabilities costs associated with lower benchmark rates, partially offset by lower liquidity portfolio yield.
Speaker #2: Yeah, Sanjay. Why don't I start on that? So, look, I think overall we're pretty encouraged by what we're seeing in terms of the consumer.
Speaker #2: I think consumers have been resilient all year, I think better than we expected. We're not really seeing any signs of weakness. We're actually seeing strength as we look at the spending patterns, and credit continues to outperform our expectations, as you mentioned.
Speaker #2: So, I think the macro environment is still pretty constructive. Bigger tax runs, refunds could potentially help us a little bit here in the short term as well.
Speaker #2: But if you look at our business more specifically, I think purchase volume turned the corner—nice trajectory, up 3% versus last year. We've got four out of five platforms improving sequentially.
Brian Wenzel: Our fourth quarter net interest margin increased 82 basis points versus last year to 15.83%, reflecting three key drivers. One, a 53 basis point increase in our loan receivables yield, which contributed approximately 44 basis points to our net interest margin. This increase was primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates and lower assessed late fees. Two, a 51 basis point decline in our total interest-bearing liabilities costs versus last year, which contributed approximately 41 basis points to our net interest margin. And three, a 46 basis point increase in the mix of loan receivables as a percent of interest-earning assets, which increased our net interest margin by approximately 8 basis points. These improvements were partially offset by a 73 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 11 basis points.
Our fourth quarter net interest margin increased 82 basis points versus last year to 15.83%, reflecting three key drivers. One, a 53 basis point increase in our loan receivables yield, which contributed approximately 44 basis points to our net interest margin. This increase was primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates and lower assessed late fees. Two, a 51 basis point decline in our total interest-bearing liabilities costs versus last year, which contributed approximately 41 basis points to our net interest margin. And three, a 46 basis point increase in the mix of loan receivables as a percent of interest-earning assets, which increased our net interest margin by approximately 8 basis points. These improvements were partially offset by a 73 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 11 basis points.
Speaker #2: We're seeing really nice growth in co-brand purchase volume, up 16% versus prior years. You mentioned still, we're kind of firing also in there, as we feel pretty good about that mid-single-digit loan guide.
Speaker #2: If you look at the components, Walmart's obviously a big part of that. We launched in September. It's the fastest-growing program we've ever launched.
Speaker #2: So we feel great about that. We're making continued investments in health and wellness. That's a platform that continues to outperform, and we expect it to continue to outperform next year.
Speaker #2: So those commercial programs, there's just a lot of things, as you tick down the list, that we're really optimistic about as we look forward to '26.
Speaker #2: I don't know, Brian, if you want to add to that.
Speaker #2: that. Yeah, good morning, Sanjay.
Speaker #3: So a couple of things I’ll just add on to what Brian said. I mean, first, look at the trajectory as you step through 2025, where minus four, minus two, and you get through the end part of 2025, you’re plus three on purchase volume.
Brian Wenzel: The decline generally reflected the impact of lower benchmark rates. Moving on. RSAs of $1.1 billion, or 4.30% of average loan receivables in the fourth quarter, and increased $175 million versus the prior year, primarily reflecting program performance, which included lower net charge-offs and the impact of our PPPCs. Provision for credit losses decreased $119 million to $1.4 billion, driven by a $294 million decrease in net charge-offs, and partially offset by a reserve build of $76 million versus a $100 million release in the prior year. Other expenses increased 10% to $1.4 billion, generally reflecting higher employee costs and technology investments.
The decline generally reflected the impact of lower benchmark rates. Moving on. RSAs of $1.1 billion, or 4.30% of average loan receivables in the fourth quarter, and increased $175 million versus the prior year, primarily reflecting program performance, which included lower net charge-offs and the impact of our PPPCs. Provision for credit losses decreased $119 million to $1.4 billion, driven by a $294 million decrease in net charge-offs, and partially offset by a reserve build of $76 million versus a $100 million release in the prior year. Other expenses increased 10% to $1.4 billion, generally reflecting higher employee costs and technology investments.
Speaker #3: If you take that and extrapolate that into the first several weeks of 2026, we have accelerated the purchase volume beyond that rate. Now, again, we'll see what happens this weekend, but we were encouraged by that—the snowstorm.
Speaker #3: The ice storm came through, but increased spending. Even when you look at the holiday inside of the fourth quarter, our holiday partners, which make up about two-thirds of our portfolio, grew above a 4% rate.
Speaker #3: It's really the non-holiday parties which get in, with about a third was growing. Significantly less than that, which is how you got to the three.
Brian Wenzel: Employee costs increased primarily due to a $67 million restructuring charge associated with a voluntary employee early retirement program, as well as a shift in headcount mix. The Q4 efficiency ratio was 36.9%, approximately 360 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA on net revenue as program performance improved. Excluding the impacts of the restructuring charge, the Q4 efficiency ratio would have been approximately 180 basis points lower. Shifting focus to our key credit trends on slide 9, which shows that our 30+ and 90+ delinquency rates, as well as our net charge-off rate, are all below our historical average for the Q4s of 2017 to 2019.
Employee costs increased primarily due to a $67 million restructuring charge associated with a voluntary employee early retirement program, as well as a shift in headcount mix. The Q4 efficiency ratio was 36.9%, approximately 360 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA on net revenue as program performance improved. Excluding the impacts of the restructuring charge, the Q4 efficiency ratio would have been approximately 180 basis points lower. Shifting focus to our key credit trends on slide 9, which shows that our 30+ and 90+ delinquency rates, as well as our net charge-off rate, are all below our historical average for the Q4s of 2017 to 2019.
Speaker #3: And even you see green shoots in the portfolio. One of the biggest things that you think about that guide, Sanjay, is: Where's consumer confidence?
Speaker #3: You saw it tick up. Most certainly, that trails a lot of times what we're starting to see in our portfolio. And if you look at Home Specialty, here's something that was comping down every single quarter, was kind of flattish in the fourth.
Speaker #3: So if you can get that bigger ticket, to turn a consumer confidence, to turn, I think that gives you momentum. I think if you pull up for a second, the growth rate, as you think about it for moving forward, we were just slightly down one.
Speaker #3: To the mid-single digits is really putting three buckets, right? Number one, the core book, which we just talked about, some of the momentum, you highlighted co-brand.
Speaker #3: The other thing we're seeing is some of the green shoots in consumer confidence. Two, going into the credit aperture changes we made in 2025 that will contribute into the portfolio, we don't have incremental credit aperture changes in the guide here.
Brian Wenzel: At quarter end, our 30+ delinquency rate was 4.49%, a decrease of 21 basis points from 4.70% in the prior year. Our 90+ delinquency rate was 2.17%, a decrease of 23 basis points from 2.40% in the prior year. Our Net Charge-Off Rate was 5.37% in Q4, a decrease of 108 basis points from 6.45% in the prior year. When evaluating our credit performance, our portfolio delinquency and Net Charge-Off Rate trends reflect both the efficacy of our credit actions and the power of our disciplined underwriting and credit management strategies. These trends reinforce our confidence in our portfolio's credit positioning as we move forward and provide a strong foundation for us to execute our business strategy.
At quarter end, our 30+ delinquency rate was 4.49%, a decrease of 21 basis points from 4.70% in the prior year. Our 90+ delinquency rate was 2.17%, a decrease of 23 basis points from 2.40% in the prior year. Our Net Charge-Off Rate was 5.37% in Q4, a decrease of 108 basis points from 6.45% in the prior year. When evaluating our credit performance, our portfolio delinquency and Net Charge-Off Rate trends reflect both the efficacy of our credit actions and the power of our disciplined underwriting and credit management strategies. These trends reinforce our confidence in our portfolio's credit positioning as we move forward and provide a strong foundation for us to execute our business strategy.
Speaker #3: That's something, obviously, at our discretion, depending on how credit performs. And then third, it's really Walmart and Lowe's as they kind of come into the portfolio.
Speaker #3: And again, the opportunity with Walmart is obviously significant given their customer base. So I think there's many different levers and even when you look at the consumer behavior, both on a frequency and average transaction value basis, we're showing improvement in both of those as we exit out of 2025.
Speaker #3: So really, I think strong performance by the consumer in an uncertain environment.
Speaker #5: Thank you. Just my follow-up question is on the news on the 10% APR cap. So I'm just curious—obviously, I’d like your views on it—but also if you guys have had any chances to talk to some of your partners about how they’re thinking about it, because it definitely affects both you and them as well.
Brian Wenzel: Finally, our allowance for credit losses as a percent of loan receivables was 10.06%, which decreased approximately 29 basis points from 10.35% in the third quarter, and declined 38 basis points from the 10.44% in the fourth quarter of 2024. Turning to slide 10. Synchrony's funding, capital, and liquidity continued to provide a strong foundation for our business as we exited 2025. Synchrony grew our direct deposits by $2.9 billion versus last year, as we reduced broker deposits by $3.8 billion. Also, during the fourth quarter, we issued a $750 million, 3-year secured public bond from the Synchrony Card Issuance Trust, with the tightest benchmark-adjusted spread we've had in the past 7 years and a final coupon of 4.06%.
Finally, our allowance for credit losses as a percent of loan receivables was 10.06%, which decreased approximately 29 basis points from 10.35% in the third quarter, and declined 38 basis points from the 10.44% in the fourth quarter of 2024. Turning to slide 10. Synchrony's funding, capital, and liquidity continued to provide a strong foundation for our business as we exited 2025. Synchrony grew our direct deposits by $2.9 billion versus last year, as we reduced broker deposits by $3.8 billion. Also, during the fourth quarter, we issued a $750 million, 3-year secured public bond from the Synchrony Card Issuance Trust, with the tightest benchmark-adjusted spread we've had in the past 7 years and a final coupon of 4.06%.
Speaker #5: So just curious to hear your views and your feedback.
Speaker #2: Yeah, sure, Sanjay. So look, I think the administration is focused on affordability, which we completely agree is important for consumers and the economy. And as you know, we pride ourselves on offering credit to a very broad cross-section of the US consumer.
Speaker #2: We approve more customers at that low- to mid-income level than many other issuers. And I think that availability of credit is critical to the economy.
Speaker #2: As you know, this is a highly competitive industry. Credit cards are one of the most competitive spaces in banking. Our products have to be competitively priced.
Brian Wenzel: At December 31, deposits represented 84% of our total funding, with secured debt representing 9% and unsecured debt representing 7%. Total liquid assets decreased 3% to $16.6 billion and represented 13.9% of total assets, 45 basis points lower than last year. Moving to our capital ratios. Synchrony ended the quarter with a CET1 ratio of 12.6%, a Tier One capital ratio of 13.8%, and a total capital ratio of 15.8%, each declined approximately 70 basis points versus prior year. Our Tier One capital plus reserves ratio decreased to 23.7%, compared to 24.3% last year.
At December 31, deposits represented 84% of our total funding, with secured debt representing 9% and unsecured debt representing 7%. Total liquid assets decreased 3% to $16.6 billion and represented 13.9% of total assets, 45 basis points lower than last year. Moving to our capital ratios. Synchrony ended the quarter with a CET1 ratio of 12.6%, a Tier One capital ratio of 13.8%, and a total capital ratio of 15.8%, each declined approximately 70 basis points versus prior year. Our Tier One capital plus reserves ratio decreased to 23.7%, compared to 24.3% last year.
Speaker #2: And we also have to offer significant value to the consumer. So any price controls like an APR cap would not make credit more affordable.
Speaker #2: It would. A cap would require issuers to significantly reduce the amount of credit they're able to provide. And again, that disproportionately impacts the consumers at the lower-income levels.
Speaker #2: And then you mentioned our partners. I mean, this is very bad for merchants that depend on those credit programs. We support 400,000 small- to medium-sized businesses who depend on those credit programs.
Speaker #2: In some cases, we can be over 40% of their sales, so this would be a huge hit for them. So, when you look at the severe impact on both the consumers and businesses, there's no question this would be very bad for the economy.
Brian Wenzel: During the fourth quarter, Synchrony returned $1.1 billion to shareholders, consisting of $952 million in share repurchases and $106 million in common stock dividends. For the full year, we returned $3.3 billion, including $2.9 billion in share repurchases and $427 million in common stock dividends. Synchrony remains well positioned to return capital to shareholders, subject to our business performance, market conditions, regulatory restrictions or expectations, and our capital plan. Turning to our outlook for 2026 on slide 11. Synchrony's high-level execution throughout the past year, coupled with our ongoing investments, has positioned us well to grow our portfolio in a prudent, risk-adjusted manner should conditions allow.
During the fourth quarter, Synchrony returned $1.1 billion to shareholders, consisting of $952 million in share repurchases and $106 million in common stock dividends. For the full year, we returned $3.3 billion, including $2.9 billion in share repurchases and $427 million in common stock dividends. Synchrony remains well positioned to return capital to shareholders, subject to our business performance, market conditions, regulatory restrictions or expectations, and our capital plan. Turning to our outlook for 2026 on slide 11. Synchrony's high-level execution throughout the past year, coupled with our ongoing investments, has positioned us well to grow our portfolio in a prudent, risk-adjusted manner should conditions allow.
Speaker #2: And we're out there talking to our partners every day—the big partners, small to medium-sized businesses—and they're very concerned when they think about what this would do to their
Speaker #2: businesses. Thank
Speaker #2: Thanks, Sanjay. you.
Speaker #6: Thank Thanks, Sanjay. you. Our next question comes from Ryan Nash with Goldman Sachs. Please go ahead. Your line is
Speaker #6: open. Hey, good morning,
Speaker #7: guys.
Speaker #2: Hey, Good morning, Ryan. Ryan.
Speaker #7: Maybe just start on credit. The guide, I think, would imply losses increasing slightly at the midpoint, despite strong delinquency performance. And if I'm doing the math correctly, if I use the '17 to '19 seasonality, that would put losses on the low end, although I guess losses were rising in '17, so that overstates the seasonality.
Brian Wenzel: Our baseline assumptions include no regulatory or legislative changes, a stable macroeconomic environment with no significant reduction in inflation rates, full-year GDP growth of 2%, a year-end unemployment rate of 4.8%, a year-end Fed funds rate of 3.25%, and full-year deposit betas of approximately 65%. For 2026, we expect average active account and purchase volume growth to drive mid-single-digit ending receivables growth, even while payment rates remain elevated. The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year, as recently launched programs grow and the Lowe's Commercial co-brand credit card program transfers to our portfolio in Q2. This growth outlook also assumes no additional broad-based credit refinements.
Our baseline assumptions include no regulatory or legislative changes, a stable macroeconomic environment with no significant reduction in inflation rates, full-year GDP growth of 2%, a year-end unemployment rate of 4.8%, a year-end Fed funds rate of 3.25%, and full-year deposit betas of approximately 65%. For 2026, we expect average active account and purchase volume growth to drive mid-single-digit ending receivables growth, even while payment rates remain elevated. The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year, as recently launched programs grow and the Lowe's Commercial co-brand credit card program transfers to our portfolio in Q2. This growth outlook also assumes no additional broad-based credit refinements.
Speaker #7: So, maybe can you unpack the credit guide a bit? Do you expect to be at the low end of that, or potentially lower? And maybe just talk about any benefit that is baked in from the elevated tax refunds.
Speaker #7: Thank you.
Speaker #2: Yeah. Let me unpack that a little bit, Ryan. Thanks for the question. First, way to start on the performance, right, and where delinquency is as we enter into 2026.
Speaker #2: I mean, obviously, when you look at the net charge-offs of $537 million for the fourth quarter, and how that kind of steps out in the favorability that you have versus the historical loss rate in '17 and '19, to 12 basis points better.
Speaker #2: Obviously, 30-plus, being 13 basis points better than that historical period, and a little bit narrower on 90-plus. At 217, but 7 basis points better.
Brian Wenzel: We currently also expect our portfolio net charge-off rate to be in line with our long-term target of 5.5 to 6%. We will continue to monitor our portfolio performance and the broader macroeconomic conditions closely. To the extent we see notable changes in the portfolio trends or macroeconomic conditions, we will consider making further adjustments to our credit positioning. We expect net interest income to continue to grow in 2026 as the impact of PPPCs continue to build and as we reduce our funding liabilities costs. These trends will be partially offset by lower leasing incidents and the yield dilutive effect of accelerating new account growth. RSAs are expected to increase, reflecting stronger program performance, but remain within our target of 4.0 to 4.5% of average receivables.
We currently also expect our portfolio net charge-off rate to be in line with our long-term target of 5.5 to 6%. We will continue to monitor our portfolio performance and the broader macroeconomic conditions closely. To the extent we see notable changes in the portfolio trends or macroeconomic conditions, we will consider making further adjustments to our credit positioning. We expect net interest income to continue to grow in 2026 as the impact of PPPCs continue to build and as we reduce our funding liabilities costs. These trends will be partially offset by lower leasing incidents and the yield dilutive effect of accelerating new account growth. RSAs are expected to increase, reflecting stronger program performance, but remain within our target of 4.0 to 4.5% of average receivables.
Speaker #2: So the formation as we enter into 2026 is strong, right? Number one. The full year, obviously, for this year was $565. The way to think about it, Ryan, a little bit is you've got a strong foundation bringing you into the year, but you're also bringing into it a new portfolio.
Speaker #2: We talked quite a bit about Walmart kind of coming in. You have early losses associated with that. So there's an upward bias, right, relative to the one-day Walmart program.
Speaker #2: You also have a little bit of upward bias, right, relative to, I'd say, the credit aperture changes that we made during the middle part to fourth quarter of this year.
Speaker #2: They begin to bleed in the back half of the year, so they do factor into losses to some degree, as you kind of come through here.
Brian Wenzel: Other expenses, excluding the impact of the $98 million of notable items in 2025, should grow in line with loan receivables, reflecting continued investment in our growth and innovation as we look to drive our momentum forward. We remain focused on delivering operating leverage in our business while balancing the opportunities we see to power leading-edge experiences and portfolio expansion. Altogether, these financial drivers are expected to deliver net earnings per diluted share between $9.10 and $9.50 for the full year 2026. This range includes the impact of growth-related initiatives like Walmart 1PAY, Lowe's Commercial co-brand, and Versatile Credit, as well as investments in other key technology initiatives. These combined investments will impact loan receivables yield, provision for credit losses, other income, and other expenses to varying degrees.
Other expenses, excluding the impact of the $98 million of notable items in 2025, should grow in line with loan receivables, reflecting continued investment in our growth and innovation as we look to drive our momentum forward. We remain focused on delivering operating leverage in our business while balancing the opportunities we see to power leading-edge experiences and portfolio expansion. Altogether, these financial drivers are expected to deliver net earnings per diluted share between $9.10 and $9.50 for the full year 2026. This range includes the impact of growth-related initiatives like Walmart 1PAY, Lowe's Commercial co-brand, and Versatile Credit, as well as investments in other key technology initiatives. These combined investments will impact loan receivables yield, provision for credit losses, other income, and other expenses to varying degrees.
Speaker #2: So there are some moving pieces here. We don't really kind of give you a point within the guide. Obviously, the biggest thing is going to be has the macro developed?
Speaker #2: In our models and these reserves, we have unemployment rising a little bit in the back half of the year. From a model standpoint, that obviously produces higher net charge-offs.
Speaker #2: So, to the extent that unemployment remains in a checked position, I think you're going to have some favorability as it comes to that. So we're going to have to see how it plays out as we step through the year again.
Speaker #2: I think we're really proud of the efficacy of what we've done. It sets us up nicely for the
Speaker #2: year.
Speaker #7: Ryan, can you maybe just talk about what kind— Gotcha. Maybe as my follow-up, what kind of net interest margin is embedded within the guidance? Should we assume continued improvement given the PPPCs and the benefits from lower rates, or are there other headwinds that we should be considering?
Brian Wenzel: Synchrony's model is designed to generate double-digit earnings per share growth on average over time and through cycles. This reflects our disciplined approach to underwriting and credit management, as well as our expense base and economic alignment we achieve through our RSAs. As we look to 2026 and beyond, these core drivers have set the stage, as conditions allow, for Synchrony to drive strong earnings and continued progress towards our long-term financial targets while generating incremental excess capital. With that, I'll turn the call back to Brian.
Synchrony's model is designed to generate double-digit earnings per share growth on average over time and through cycles. This reflects our disciplined approach to underwriting and credit management, as well as our expense base and economic alignment we achieve through our RSAs. As we look to 2026 and beyond, these core drivers have set the stage, as conditions allow, for Synchrony to drive strong earnings and continued progress towards our long-term financial targets while generating incremental excess capital. With that, I'll turn the call back to Brian.
Speaker #7: Thank you.
Speaker #2: Yeah, obviously, we refer on the outlook page that you should see NII increase, right? And, obviously, there's probably a greater bias for the margin to increase.
Speaker #2: I think when you look at the pieces, Ryan, there’s probably different gives and takes, right? So, number one, when you think about the interest and fee line, clearly, that’s going to continue to benefit, albeit at a slower pace as you kind of move through 2026, from the PPPCs, as they continue to build, both on the APR piece and then as the delinquent pricing piece kind of comes in.
Brian Doubles: ... Thanks, Brian. Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion. First, Synchrony is executing on our key strategic priorities to grow and win new partners, diversify our programs, products, and markets, and deliver best-in-class experiences for all those we serve. And we are doing this while also earning the honor of being ranked second among the top best companies to work for in the US by Fortune Magazine and Great Places to Work in 2025. I am incredibly proud of the great work we are doing together and the great strides we are making as we seek to solidify Synchrony at the heart of American commerce. Second, Synchrony's past, present, and future are grounded in our ability to drive sustainable growth at appropriate risk-adjusted returns through cycles and the evolving consumer landscape.
Brian Doubles: Thanks, Brian. Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion. First, Synchrony is executing on our key strategic priorities to grow and win new partners, diversify our programs, products, and markets, and deliver best-in-class experiences for all those we serve. And we are doing this while also earning the honor of being ranked second among the top best companies to work for in the US by Fortune Magazine and Great Places to Work in 2025. I am incredibly proud of the great work we are doing together and the great strides we are making as we seek to solidify Synchrony at the heart of American commerce. Second, Synchrony's past, present, and future are grounded in our ability to drive sustainable growth at appropriate risk-adjusted returns through cycles and the evolving consumer landscape.
Speaker #2: So that's actually favorable. If you kind of think about that line again, you're going to have part of the interest rate environment kind of coming down.
Speaker #2: So you're going to have prime rate going down. Against that, as you step through, depending upon where you come out on losses, you obviously have a late fee impact that's going to either be neutral, higher, or lower, depending upon where you sit.
Speaker #2: That charge-offs in your model. I think then, when you kind of continue on and think about the different pieces, interest rates obviously will be favorable year-over-year again.
Speaker #2: That should be offset, I would say, by both prime rate on number one, the investment portfolio yield number two, and the MDR number three.
Brian Doubles: Our expertise, discipline, and consistent innovation have made this possible, allowing us to deliver products and experiences with enduring appeal and compelling value for both our customers and partners alike. Since exiting the pandemic in 2021, Synchrony has added or renewed more than 300 partners, including 16 of our top 20, while also growing ending receivables at an average rate of approximately 7% and delivering an average return on assets of approximately 3% and an average return on tangible common equity of approximately 25%. And third, Synchrony's robust capital generation capacity positions us well to continue to invest in our business and growth opportunities, while also returning capital as conditions allow. So as we look to 2026 and beyond, we are confident in the momentum we've built to drive considerable long-term value for our many stakeholders.
Our expertise, discipline, and consistent innovation have made this possible, allowing us to deliver products and experiences with enduring appeal and compelling value for both our customers and partners alike. Since exiting the pandemic in 2021, Synchrony has added or renewed more than 300 partners, including 16 of our top 20, while also growing ending receivables at an average rate of approximately 7% and delivering an average return on assets of approximately 3% and an average return on tangible common equity of approximately 25%. And third, Synchrony's robust capital generation capacity positions us well to continue to invest in our business and growth opportunities, while also returning capital as conditions allow. So as we look to 2026 and beyond, we are confident in the momentum we've built to drive considerable long-term value for our many stakeholders.
Speaker #2: So that should probably be a little bit more neutral as you kind of step through it. So as you kind of look at it, the biggest thing is going to be, obviously, payment rate.
Speaker #2: And we have payment rate to remain elevated here, which is a combination of the credit mix of the portfolio being one of its best periods of time, number one, and then number two, having a lower percentage of promotional financing assets, which carry a lower payment rate.
Speaker #2: To the extent that we get some of that big ticket that I talked about and some of the bigger items, that will effectively slow down the payment rate as well as the credit mix can slow down the payment rate to give you an upward bias.
Speaker #2: So, I think when you put the pieces together again, NII should go up, NIM should go up, but again, it's how you factor those different moving parts together.
Speaker #7: Thanks, Brian.
Brian Doubles: With that, I'll turn the call back to Kathryn to open the Q&A.
Brian Doubles: With that, I'll turn the call back to Kathryn to open the Q&A.
Speaker #2: Have a good day.
Speaker #3: Thanks, Thanks, Ryan.
Speaker #3: Ryan. Thank
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. If you have additional questions, the investor relations team will be available after the call. Operator, please start the Q&A session.
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. If you have additional questions, the investor relations team will be available after the call. Operator, please start the Q&A session.
Speaker #8: You. Our next question comes from Karima with Barclays. Please go ahead. Your line is open.
Speaker #8: Our next question comes from Karima with Barclays. Please go ahead, your line is open.
Speaker #9: you. Good morning. Maybe just to follow up on the QQQCs. Can you maybe just talk about how those are kind of tracking relative to your expectations?
Speaker #9: I think you had indicated about 75% should be kind of priced in by June of this year. And then kind of going forward, how much more lift can we expect from them kind of after
Operator: Thank you. 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. Please limit yourself to one question and one follow-up question. We'll take our first question from Sanjay Sakrani with KBW. Please go ahead. Your line is open.
Operator: Thank you. 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. Please limit yourself to one question and one follow-up question. We'll take our first question from Sanjay Sakrani with KBW. Please go ahead. Your line is open.
Speaker #9: 2026? Yeah.
Speaker #2: Good morning, Terry. Thanks for the question. I think when you take a step back and look at the BPPCs, I think, as we've said, we're slightly ahead of the burn-in of the APR changes.
Speaker #2: To date, because of the fact that the payment rate has been elevated, the protected balance is paid down a little bit quicker. So, again, you're probably a little bit ahead of that pace towards the 75% in the middle part of this year.
[Analyst] (KBW): Good morning. Good job on 2025. I know you guys had a lot to deal with. Maybe just starting on the mid-single digit growth guide for receivables growth. I think that's quite encouraging. Brian, can you just talk about sort of the building blocks for that? I saw the co-brand volume growth accelerated. Is that partly due to Walmart, or how are the early views of Walmart looking? And then, Brian Wenzel, you talked a little bit about not necessarily assuming any changes to, you know, so the underwriting stance for the year, but is that something you're considering inside the guides?
Sanjay Sakhrani: Good morning. Good job on 2025. I know you guys had a lot to deal with. Maybe just starting on the mid-single digit growth guide for receivables growth. I think that's quite encouraging. Brian, can you just talk about sort of the building blocks for that? I saw the co-brand volume growth accelerated. Is that partly due to Walmart, or how are the early views of Walmart looking? And then, Brian Wenzel, you talked a little bit about not necessarily assuming any changes to, you know, so the underwriting stance for the year, but is that something you're considering inside the guides?
Speaker #2: Again, the back end of that curve, it's not as steep, right? So the growth will continue to bleed through. So I think that's developed other than coming in a little bit quicker.
Speaker #2: It's developed as we thought, right, relative to the various assumptions on attrition rates, etc. So we feel good about the PPPCs. On the APR line, when you think about on the paper statement fee line, I think that has settled in.
Speaker #2: And to some degree, has been relatively flat. And I think the combination of that is even, as you see average active pick up in the fourth quarter, it's the really growth in our EBIL percentage of people electing digitally, which I think is a better thing for us as a company, not only for them to avoid the fee, but engage with us digitally.
Brian Doubles: Yeah, Sanjay, why don't I start on that? So look, I think overall, we're pretty encouraged by what we're seeing in terms of the consumer. I think, you know, the consumer's been resilient, all year, I think better than we expected. We're not really seeing any signs of weakness. You know, we're actually seeing strength as we look at the spending patterns, and credit continues to outperform our expectations, as you mentioned. So I think the macro environment is still pretty constructive. You know, bigger tax runs, with refunds could potentially help us a little bit here in the short term as well. But if you look at our business more specifically, I think, you know, purchase volume turned the corner, you know, nice trajectory, up 3% versus last year. We've got four out of five platforms improving sequentially.
Brian Doubles: Yeah, Sanjay, why don't I start on that? So look, I think overall, we're pretty encouraged by what we're seeing in terms of the consumer. I think, you know, the consumer's been resilient, all year, I think better than we expected. We're not really seeing any signs of weakness. You know, we're actually seeing strength as we look at the spending patterns, and credit continues to outperform our expectations, as you mentioned. So I think the macro environment is still pretty constructive. You know, bigger tax runs, with refunds could potentially help us a little bit here in the short term as well. But if you look at our business more specifically, I think, you know, purchase volume turned the corner, you know, nice trajectory, up 3% versus last year. We've got four out of five platforms improving sequentially.
Speaker #2: So we're seeing the benefit that's going to come through the expense line there. So, when I look at that in combination, most certainly, I think we're pleased with the way the PPPCs have performed.
Speaker #2: And it's generally in line with our
Speaker #2: expectations. Got it.
Speaker #9: Helpful. And then as my follow-up on the expense growth guide, that's in line with receivables. Maybe just talk about what sort of investments related to growth you're making and then after 2026, should we kind of expect kind of more positive operating leverage going forward?
Brian Doubles: We're seeing really nice growth in co-brand purchase volume, up 16% versus prior year, as you mentioned. So, you know, we're kind of firing on all cylinders, and we feel pretty good about that mid-single digit loan guide. You know, if you look at the components, Walmart's obviously a big part of that. You know, we launched in September. It's the fastest growing program we've ever launched, so we feel great about that. You know, we're making continued investments in health and wellness. That's a platform that continues to outperform, and we expect it to continue to outperform next year. So, you know, Lowe's commercial program, there's just a lot of things, as you tick down the list, that we're really optimistic about as we look forward to 2026. I don't know, Brian, if you want to add to that.
We're seeing really nice growth in co-brand purchase volume, up 16% versus prior year, as you mentioned. So, you know, we're kind of firing on all cylinders, and we feel pretty good about that mid-single digit loan guide. You know, if you look at the components, Walmart's obviously a big part of that. You know, we launched in September. It's the fastest growing program we've ever launched, so we feel great about that. You know, we're making continued investments in health and wellness. That's a platform that continues to outperform, and we expect it to continue to outperform next year. So, you know, Lowe's commercial program, there's just a lot of things, as you tick down the list, that we're really optimistic about as we look forward to 2026. I don't know, Brian, if you want to add to that.
Speaker #9: Thank
Speaker #9: you. Yeah.
Speaker #2: So, let me pull up and maybe address one broader point here, which is really the significant investments in growth we kind of highlighted here, which affect all the lines, really, in the P&L.
Speaker #2: The largest line when we talk about significant investments is going to be on the reserve line, right? Really, for the asset growth, as you think about growing not only the Walmart portfolio but obviously Lowe's—that comes in in the first half—but also the new programs when you think about Bob's and RH, etc., kind of coming in.
Speaker #2: But the biggest piece is reserves. I think when you think about the expense component of that, right, there's a couple of things that happened, right?
Brian Wenzel: Yeah. Good morning, Sanjay. So, a couple of things I'd just add on to what Brian said. I mean, first, look at the trajectory as you step through 2025, we're minus 4, minus 2, and you get through the end part of 2025, we're plus 3 on purchase volume. You know, if you take that and extrapolate that into the first, you know, several weeks of 2026, we have accelerated the purchase volume beyond that rate. Now, again, we'll see what happens this weekend after the snowstorm and ice storm came through, but we were encouraged by that increased spending. Even when you look at the holiday inside of Q4, our holiday partners, which make up about two-thirds of our portfolio, grew above a 4% rate.
Brian Wenzel: Yeah. Good morning, Sanjay. So, a couple of things I'd just add on to what Brian said. I mean, first, look at the trajectory as you step through 2025, we're minus 4, minus 2, and you get through the end part of 2025, we're plus 3 on purchase volume. You know, if you take that and extrapolate that into the first, you know, several weeks of 2026, we have accelerated the purchase volume beyond that rate. Now, again, we'll see what happens this weekend after the snowstorm and ice storm came through, but we were encouraged by that increased spending. Even when you look at the holiday inside of Q4, our holiday partners, which make up about two-thirds of our portfolio, grew above a 4% rate.
Speaker #2: You have launch costs associated with new programs. You invest in some of the early month-on books and marketing programs associated with kind of getting a lot of new accounts up and running and engaged.
Speaker #2: As you think about that, so there's the launch costs, there's the conversion costs for certain portfolios. Then you have most certainly the investment in marketing.
Speaker #2: Also, from an expense standpoint, you really want to make sure you're investing, and we have to have the staffing in ahead of this. This is more of a nonexempt standpoint—to take the calls that come with it.
Speaker #2: All in all, those are really positive investments for growth and most certainly will pay back and you'll get that operating leverage. The one thing I'd say is we have increased our capital spend a bit.
Brian Wenzel: It's really the non-holiday partners, which, again, was about 1/3, was growing, you know, significantly less than that, which is how you got to the 3. And even you see green shoots in the portfolio. One of the biggest things as you think about that guide, Sanjay, is where's consumer confidence? You saw it tick up. Most certainly, that trails a lot of times what we're starting to see in our portfolio. And if you look at, like, home specialty, here's something that was comping down every single quarter, was kind of flattish in the fourth. So if we can get that bigger ticket-... to turn and consumer confidence to turn, I think that gives you momentum.
It's really the non-holiday partners, which, again, was about 1/3, was growing, you know, significantly less than that, which is how you got to the 3. And even you see green shoots in the portfolio. One of the biggest things as you think about that guide, Sanjay, is where's consumer confidence? You saw it tick up. Most certainly, that trails a lot of times what we're starting to see in our portfolio. And if you look at, like, home specialty, here's something that was comping down every single quarter, was kind of flattish in the fourth. So if we can get that bigger ticket-... to turn and consumer confidence to turn, I think that gives you momentum.
Speaker #2: And that's really around, I'd say, three key areas. Number one, it's around increased investment in AI and driving AI in various areas of the business—not only that drive productivity, but also drive growth for us.
Speaker #2: That is our focus, and we can most certainly chat about that more. The second area is around our cloud journey and accelerating expenditures related to getting that done a little bit faster.
Speaker #2: So we can get the productivity and efficiency benefits that come through that. And then third, Brian's talked quite a bit about our desire to continue to grow health and wellness at a faster pace.
Brian Wenzel: I think if you pull up for a second, the growth rate as you think about it for, you know, moving forward, we were, you know, just, you know, slightly down 1 to the mid-single digits is really, you know, put in three buckets, right? Number 1, the core book, which we just talked about some of the momentum. You highlighted co-brand. You know, the other things we're seeing is some of the green shoots in the consumer confidence. 2 goes into the credit aperture changes we made in 2025 that will contribute into the portfolio. We don't have incremental credit aperture changes in the guide here. That's something obviously at our discretion, depending on how credit performs.
I think if you pull up for a second, the growth rate as you think about it for, you know, moving forward, we were, you know, just, you know, slightly down 1 to the mid-single digits is really, you know, put in three buckets, right? Number 1, the core book, which we just talked about some of the momentum. You highlighted co-brand. You know, the other things we're seeing is some of the green shoots in the consumer confidence. 2 goes into the credit aperture changes we made in 2025 that will contribute into the portfolio. We don't have incremental credit aperture changes in the guide here. That's something obviously at our discretion, depending on how credit performs.
Speaker #2: So investments in that health and wellness business, those are the big pieces. But again, if I go back to where I started on the significant investments, the biggest piece is reserves.
Speaker #2: But again, as you think about all the lines in the P&L, they're going to be impacted by growth. You're going to have as you think about the J curve, you're going to have assets in there at a lower yielding as they go through maturity and seasoning.
Speaker #2: You're going to see it on the other income line when it comes into loyalty, maybe in advance of, again, some of the income coming off the assets.
Speaker #2: And then expense line, when I think about the various pieces on the individual lines, they're less than 10 basis points, but they're on each of the lines.
Brian Wenzel: And then third, it's really, you know, Walmart and, and, and Lowe's as they kind of come into the portfolio. And again, the opportunity with Walmart is, is obviously significant given their customer base. So I, I think there's many different levers. And even when you look at the consumer behavior, both on a frequency and average transaction value basis, you know, we're showing improvement in both of those as we exit out of 2025. So, really, I, I think strong performance by the consumer in a uncertain environment.
And then third, it's really, you know, Walmart and, and, and Lowe's as they kind of come into the portfolio. And again, the opportunity with Walmart is, is obviously significant given their customer base. So I, I think there's many different levers. And even when you look at the consumer behavior, both on a frequency and average transaction value basis, you know, we're showing improvement in both of those as we exit out of 2025. So, really, I, I think strong performance by the consumer in a uncertain environment.
Speaker #2: So that's why we kind of try to call it out, as you guys model it. Again, these are all investments that we believe across the business really set us up for the longer term to be a much better company.
Speaker #9: Great. Thanks, Terry.
Speaker #10: Our next question comes from Moshe Orenbach with C.D. Cohen. Please go ahead, your line is open.
[Analyst] (KBW): Thank you. Just my follow-up question is on these, the news on the 10% APR caps. I'm just curious if you guys obviously, your, your views on it, but, but if you guys have had chances to talk to some of your partners about sort of how they're thinking about it, because it definitely affects both you and them as well. So just curious to hear your views and, and your feedback.
Sanjay Sakhrani: Thank you. Just my follow-up question is on these, the news on the 10% APR caps. I'm just curious if you guys obviously, your, your views on it, but, but if you guys have had chances to talk to some of your partners about sort of how they're thinking about it, because it definitely affects both you and them as well. So just curious to hear your views and, and your feedback.
Speaker #9: Great. Thanks. Going back to kind of loan growth and opportunities, you mentioned adding the pay later gives you a lift. Can you talk a little bit about are there other areas, whether they're verticals or partners and how much of the portfolio kind of could that impact over the course of '26?
Speaker #9: Great. Thanks. Going back to kind of loan growth and opportunities, you mentioned adding the pay later gives you a lift. Can you talk a little bit about are there other areas, whether they're verticals or partners and how much of the portfolio kind of could that impact over the course of
Brian Wenzel: Yeah, sure, Sanjay. So look, I think the administration is focused on affordability, which we completely agree is important for consumers and the economy. And as you know, like, we pride ourselves on offering credit to a very broad cross-section of the US consumer. You know, we approve more customers at that low to mid-income level than many other issuers, and I think that availability of credit is critical to the economy. As you know, this is a highly competitive industry, and credit cards are one of the most competitive spaces in banking. Our products have to be competitively priced, and we also have to offer significant value to the consumer. So any price controls, like an APR cap, would not make credit more affordable. It would, you know, a cap would require issuers to significantly reduce the amount of credit they're able to provide.
Brian Wenzel: Yeah, sure, Sanjay. So look, I think the administration is focused on affordability, which we completely agree is important for consumers and the economy. And as you know, like, we pride ourselves on offering credit to a very broad cross-section of the US consumer. You know, we approve more customers at that low to mid-income level than many other issuers, and I think that availability of credit is critical to the economy. As you know, this is a highly competitive industry, and credit cards are one of the most competitive spaces in banking. Our products have to be competitively priced, and we also have to offer significant value to the consumer. So any price controls, like an APR cap, would not make credit more affordable. It would, you know, a cap would require issuers to significantly reduce the amount of credit they're able to provide.
Speaker #2: Yeah. I think I'll start just by talking a little bit about the multi-product strategy because I think this has been very successful, I think, over the last couple of years.
Speaker #2: And pay later is an important part of that. It's resonating with our partners, we now have it at some of our largest partners, Lowe's, Amazon, Penney's, Belk, Sleep Number.
Speaker #2: And the accounts that we're seeing come through on that product are incremental. And I think that's great news, right? So we still have kind of the same flow of new customers coming into private label, co-brand, and the pay later.
Speaker #2: Customers are incremental. Which means our partners are getting late. So our partners are not looking at this as an either/or. They're really now seeing the power of having these products kind of work in concert with one another.
Brian Wenzel: And again, that disproportionately impacts the consumers at the lower income levels. And then you mentioned our partners, and this is very bad for merchants that depend on those credit programs. You know, we support 400,000 small to medium-sized businesses who depend on those credit programs. You know, in some cases, we can be over 40% of their sales, so this would be a huge hit for them. So when you look at, like, the severe impact on both the consumers and businesses, there's no question this would be very bad for the economy. And, you know, we're out there talking to our partners every day, the big partners, small to medium-sized businesses, and they're very concerned when they think about what this would do to their businesses.
And again, that disproportionately impacts the consumers at the lower income levels. And then you mentioned our partners, and this is very bad for merchants that depend on those credit programs. You know, we support 400,000 small to medium-sized businesses who depend on those credit programs. You know, in some cases, we can be over 40% of their sales, so this would be a huge hit for them. So when you look at, like, the severe impact on both the consumers and businesses, there's no question this would be very bad for the economy. And, you know, we're out there talking to our partners every day, the big partners, small to medium-sized businesses, and they're very concerned when they think about what this would do to their businesses.
Speaker #2: And given customers have different financing needs, sometimes we're evolving products—the right product for them. Some may prefer fixed payments or installment products. And the strength of our franchises is we offer all the above.
Speaker #2: So, we really like how this is working. Like I said, it's resonating with our partners. It's helping us win new programs as well. And we can show them that kind of migration strategy.
Speaker #2: So, we might be starting—starting off a customer with a Pay Later account, getting comfortable with them and their payment behavior, and then upgrading them to a private label card. Ultimately, a co-brand card with a larger line.
[Analyst] (KBW): Thank you.
Sanjay Sakhrani: Thank you.
Speaker #2: So that's like I said, really resonating with our partners. We think that's the right strategy for the long
Speaker #2: So that's like I said, really resonating with our partners. We think that's the right strategy for the long term. Great.
Brian Wenzel: Thanks, Sanjay.
Brian Wenzel: Thanks, Sanjay.
Operator: Thank you. Our next question comes from Ryan Nash with Goldman Sachs. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Ryan Nash with Goldman Sachs. Please go ahead. Your line is open.
Speaker #9: Thanks. And maybe, Brian, you did just reference kind of new programs. Can you talk a little bit about state of play? I mean, there are some startups that are in the space, but I think a lot of others have kind of pulled back.
[Analyst] (Goldman Sachs): Hey, good morning, guys.
Ryan M. Nash: Hey, good morning, guys.
Brian Wenzel: Good morning, Ryan.
Brian Wenzel: Good morning, Ryan.
[Analyst] (KBW): Hey, Ryan.
Sanjay Sakhrani: Hey, Ryan.
[Analyst] (Goldman Sachs): Maybe just start on credit. You know, the guide, I think, would imply, you know, losses increasing slightly at the midpoint despite strong delinquency performance. And, you know, if, if I'm doing the math correct, if I use the 17 to 19 seasonality, you know, that would put losses on the low end, although I guess losses were rising in 17, so that overstates the seasonality. So maybe can you unpack the credit guide a bit? You know, do you expect to be at the low end of that or potentially lower? And maybe just talk about any benefit that is baked in from the elevated tax refunds. Thank you.
Ryan M. Nash: Maybe just start on credit. You know, the guide, I think, would imply, you know, losses increasing slightly at the midpoint despite strong delinquency performance. And, you know, if, if I'm doing the math correct, if I use the 17 to 19 seasonality, you know, that would put losses on the low end, although I guess losses were rising in 17, so that overstates the seasonality. So maybe can you unpack the credit guide a bit? You know, do you expect to be at the low end of that or potentially lower? And maybe just talk about any benefit that is baked in from the elevated tax refunds. Thank you.
Speaker #9: What are the areas you think that are most ripe kind of for new programs and talk a little bit about what you're seeing in the market?
Speaker #2: Yeah. Look, we've got a great pipeline across all of our platforms. If you just look at last year, we added or renewed 75 partners.
Speaker #2: We renewed seven of our top 20, I think, and it's broad. It's across every industry—both existing programs, startup programs—so we feel really good about our ability to compete.
Speaker #2: We're winning the deals that we want to win. And I think this is back to a little bit of what Brian talked about, the investments that we're making are helping us stay ahead of the competition.
Brian Wenzel: Yeah, let me unpack that a little bit, Ryan. Thanks for the question. You know, first way to start on the performance, right, and where delinquency is as we enter into 2026. I mean, obviously, when you look at you know, net charge-offs of 5.37 for the fourth quarter and how that kind of steps out, and the favorability that you have versus the historical loss rate in 2017 to 2019 and 12 basis points better. You know, obviously, 30+ being 13 basis points better than that historical period and a little bit narrower on 90+, at 2.17, but 7 basis points better. So the formation as we enter into 2026 is strong, right? Number one. You know, the full year, obviously, for this year was 5.65.
Brian Wenzel: Yeah, let me unpack that a little bit, Ryan. Thanks for the question. You know, first way to start on the performance, right, and where delinquency is as we enter into 2026. I mean, obviously, when you look at you know, net charge-offs of 5.37 for the fourth quarter and how that kind of steps out, and the favorability that you have versus the historical loss rate in 2017 to 2019 and 12 basis points better. You know, obviously, 30+ being 13 basis points better than that historical period and a little bit narrower on 90+, at 2.17, but 7 basis points better. So the formation as we enter into 2026 is strong, right? Number one. You know, the full year, obviously, for this year was 5.65.
Speaker #2: Every RFP that we go into, we're told that our tech is best in the industry—our ability to integrate, the investments we've made in our proprietary underwriting model, PRISM—those are all helping us win and compete.
Speaker #2: New business. We are never going to be the low-cost provider—we're very clear on that upfront. We've made big investments in the business and the platform, and we need to earn a return commensurate with that.
Speaker #2: And we think that we're the best in the partner-based financing business. And we're proving that out every day with the deals that we're renewing, the partner base that we have.
Brian Wenzel: The way to think about it, Ryan, a little bit is, you got a strong foundation bringing you into the year, but you're also bringing into it, you know, a new portfolio. We talked quite a bit about, you know, Walmart kind of coming in. You have early losses associated with that, so there's an upward bias, right, relative to the one-day Walmart program. You also have a little bit of upward bias, right, relative to, you know, I'd say the credit aperture changes that we made during the middle part to fourth quarter this year. They begin to bleed in the back half of the year. So they do factor into losses to some degree as you kind of come through here. So there are some moving pieces here.
The way to think about it, Ryan, a little bit is, you got a strong foundation bringing you into the year, but you're also bringing into it, you know, a new portfolio. We talked quite a bit about, you know, Walmart kind of coming in. You have early losses associated with that, so there's an upward bias, right, relative to the one-day Walmart program. You also have a little bit of upward bias, right, relative to, you know, I'd say the credit aperture changes that we made during the middle part to fourth quarter this year. They begin to bleed in the back half of the year. So they do factor into losses to some degree as you kind of come through here. So there are some moving pieces here.
Speaker #2: And where we're adding new
Speaker #2: partnerships. Thanks very Yeah.
Speaker #2: Thanks, Moshe. much.
Speaker #4: Thanks, Moshe. Have a good day.
Speaker #10: Thank you. We will move next with Mahir Bhatia with Bank of America. Please go ahead, your line is open.
Speaker #11: Hi. Thank you for taking my question. Maybe just first to start on the reserve rate, you're approaching day one, CISO levels here. So just wondering, I mean, I know obviously you've tightened credit and it's gotten better, but just how are you thinking about the reserve rate level from here?
Brian Wenzel: We don't really kind of give you a point within the guide. You know, obviously, the biggest thing is going to be, you know, how does the macro develop? You know, in our models, in the software reserves, we have unemployment rising a little bit in the back half of the year from a model standpoint. That obviously produces higher net charge-offs. So to the extent that that unemployment remains in a checked position, I think you're going to have some favorability as it comes to that. So we're going to have to see how it plays out as we step through the year. Again, I think we're really proud of the FC, what we've done. It sets us up nicely for the year.
We don't really kind of give you a point within the guide. You know, obviously, the biggest thing is going to be, you know, how does the macro develop? You know, in our models, in the software reserves, we have unemployment rising a little bit in the back half of the year from a model standpoint. That obviously produces higher net charge-offs. So to the extent that that unemployment remains in a checked position, I think you're going to have some favorability as it comes to that. So we're going to have to see how it plays out as we step through the year. Again, I think we're really proud of the FC, what we've done. It sets us up nicely for the year.
Speaker #11: And any thoughts into 2026 on how that would trend as you widen the credit aperture
Speaker #11: again? Yeah.
Speaker #2: Thanks, Mahir. Honestly, as we look at the reserve rate, clearly it's come down—and most certainly, it's come down relative to the loss rate we've experienced.
Speaker #2: As you think, as you look out into 2026, most certainly we've given you the guide where we see unemployment rate rising here towards the end of the year, which is really the Moody's forecast. And most certainly, we maintained the qualitative overlays where you have an unemployment rate consistent with past quarters.
[Analyst] (Goldman Sachs): Gotcha. Maybe as my follow-up, Brian, can you maybe just talk about what kind of net interest margin is embedded within the guidance? And should we assume continued improvement, given the PPPCs and the benefits from lower rates, or are there other headwinds that we should be considering? Thank you.
Ryan M. Nash: Gotcha. Maybe as my follow-up, Brian, can you maybe just talk about what kind of net interest margin is embedded within the guidance? And should we assume continued improvement, given the PPPCs and the benefits from lower rates, or are there other headwinds that we should be considering? Thank you.
Speaker #2: So we have not eased off of that. I think as you look forward, the question becomes, if you believe the macro environment becomes stable, at what point can the qualitative reserve kind of come down, which would end up giving you a little bit of, on a rate basis, a downward bias to the reserve rate?
Brian Wenzel: Yeah, you know, obviously, we refer on the outlook page that you should see NII increase, right? And obviously, there's probably a greater bias for the margin to increase. I think when you look at the pieces, Ryan, there's probably different gives and takes, right? So number one, when you think about the interest and fee line, clearly that's gonna continue to benefit, albeit at a slower pace, as you kind of move through 2026 from the PPPCs, as they continue to build both on the APR piece, and then as the delinquent pricing piece kind of comes in. So that's actually favorable.
Brian Wenzel: Yeah, you know, obviously, we refer on the outlook page that you should see NII increase, right? And obviously, there's probably a greater bias for the margin to increase. I think when you look at the pieces, Ryan, there's probably different gives and takes, right? So number one, when you think about the interest and fee line, clearly that's gonna continue to benefit, albeit at a slower pace, as you kind of move through 2026 from the PPPCs, as they continue to build both on the APR piece, and then as the delinquent pricing piece kind of comes in. So that's actually favorable.
Speaker #2: When that actually happens, it's a little bit unclear. I think we're the closest to it we've been to day one—not that that's necessarily the greatest anchor—but it's most certainly the first mile marker you look at of where your rate should be.
Speaker #2: So I think we're encouraged around that, but obviously a lot's going to depend upon how our number one, how our delinquency formation develops. And then number two, the macro environment.
Speaker #2: So again, I would say we're a little more downward-biased on a rate basis. Obviously, as I talked about, the significant investments you're going to see on a dollar basis increase with the growth going back to the mid-single.
Brian Wenzel: If you kind of think about that line again, you're gonna have part of the interest rate environment kind of coming down, so you're gonna have prime rate going down, against that, as you step through. Depending upon how you come out on losses, you obviously have a late fee impact, that's gonna, you know, either be neutral, higher or lower, depending upon where you set that charge-offs in your model. I think then when you kind of continue on and think about the different pieces, the interest rates obviously will be favorable year-over-year. Again, that should be, you know, offset, I would say, by both prime rate, number one, the investment portfolio yield, number two, and the MDR, number three.
If you kind of think about that line again, you're gonna have part of the interest rate environment kind of coming down, so you're gonna have prime rate going down, against that, as you step through. Depending upon how you come out on losses, you obviously have a late fee impact, that's gonna, you know, either be neutral, higher or lower, depending upon where you set that charge-offs in your model. I think then when you kind of continue on and think about the different pieces, the interest rates obviously will be favorable year-over-year. Again, that should be, you know, offset, I would say, by both prime rate, number one, the investment portfolio yield, number two, and the MDR, number three.
Speaker #2: digits. Got it.
Speaker #11: And then, maybe just going back to the pay later conversation that we were just having, could you just comment on how the progress has been? I think you gave an impressive stat about a 10% increase with it offered side by side.
Speaker #11: Is that across all your platforms? And just maybe comment, if you would, on Lowe's, Amazon, some of the big ones—any learnings from those rollouts that you can share, and where you are with that process currently?
Speaker #2: Yeah. I think what generally we're. So far across all of the partners where we've launched it. I think going back to the multi. Product strategy, we believe that that's the right one.
Brian Wenzel: So that should probably be a little bit more neutral as you kind of step through it. So as you kind of look at it, the biggest thing is gonna be obviously payment rate, and we have payment rate to remain elevated here, which is a combination of the credit mix of the portfolio being, you know, at one of its best periods of time, number one. And then number two, having a lower percentage of promotional financing assets, which carry a lower payment rate. To the extent that we get some of that big ticket that I talked about and some of the bigger items, that will effectively slow down the payment rate, as well as the credit mix can slow down the payment rate to give you, you know, give you an upward bias.
So that should probably be a little bit more neutral as you kind of step through it. So as you kind of look at it, the biggest thing is gonna be obviously payment rate, and we have payment rate to remain elevated here, which is a combination of the credit mix of the portfolio being, you know, at one of its best periods of time, number one. And then number two, having a lower percentage of promotional financing assets, which carry a lower payment rate. To the extent that we get some of that big ticket that I talked about and some of the bigger items, that will effectively slow down the payment rate, as well as the credit mix can slow down the payment rate to give you, you know, give you an upward bias.
Speaker #2: We're anchored in that strategy. The one question for us, as we started to roll this out, I think the question for our partners was, would there be any cannibalization of the private label card and the dual card and co-brand card that we offer?
Speaker #2: And the good news is there hasn't been. So we track that very closely across all of our partners where we have the multi-product strategy in place.
Speaker #2: And we can clearly see that the volume flowing through private label and co-brand is very consistent, and that the Pay Later accounts that we're getting are net new.
Brian Wenzel: So I think when you put the pieces together, again, NII should go up, NIM should go up, but again, it's how you factor those different moving parts together.
So I think when you put the pieces together, again, NII should go up, NIM should go up, but again, it's how you factor those different moving parts together.
Speaker #2: And I think that's great news. That allows us to attract a new customer base that ultimately we want to offer other products to. And so, as we embarked on this a number of years ago, that was kind of a question that we were getting from our partners.
[Analyst] (Goldman Sachs): Thanks, Brian.
Ryan M. Nash: Thanks, Brian.
Brian Wenzel: Thanks, Ryan. Have a good day.
Brian Wenzel: Thanks, Ryan. Have a good day.
[Analyst] (Barclays): Thanks, Brian.
Brian Doubles: Thanks, Brian.
Operator: Thank you. Our next question comes from Terry Ma with Barclays. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Terry Ma with Barclays. Please go ahead. Your line is open.
[Analyst] (Barclays): Hey, thank you. Good morning. Maybe just to follow up on PPPCs. Can you maybe just talk about how those are kind of tracking relative to your expectations? I think you had indicated about 75% should be kind of priced in by June of this year. And then kind of going forward, like, how much more lift can we expect from them, kind of after 2026?
Terry Ma: Hey, thank you. Good morning. Maybe just to follow up on PPPCs. Can you maybe just talk about how those are kind of tracking relative to your expectations? I think you had indicated about 75% should be kind of priced in by June of this year. And then kind of going forward, like, how much more lift can we expect from them, kind of after 2026?
Speaker #2: We were pretty confident that this was going to attract a new customer base, and that's been the case so far. So we're very pleased across the
Speaker #2: board. Thank you.
Speaker #2: Thanks, Mahir. Thanks, Mahir.
Speaker #4: Have a good day.
Speaker #11: Bye.
Speaker #10: Thank you. Our next question comes from Erica Najarian. With UBS, please go ahead, your line is open.
Brian Wenzel: Yeah. Good morning, Terry, thanks for the question. You know, I think when you take a step back and look at the PPPCs, you know, I think as what we've said is, we're slightly ahead of the burn-in of the APR changes to date because of the fact that the payment rate has been elevated, so the protected balance has paid down a little bit quicker. So again, you're probably a little bit ahead of that pace towards the 75% in the middle part of this year. Again, the back end of that curve, you know, it's not as steep, right? So the growth but will continue to bleed through. So I think that's developed, other than coming in a little bit quicker, it's developed as we thought, right?
Brian Wenzel: Yeah. Good morning, Terry, thanks for the question. You know, I think when you take a step back and look at the PPPCs, you know, I think as what we've said is, we're slightly ahead of the burn-in of the APR changes to date because of the fact that the payment rate has been elevated, so the protected balance has paid down a little bit quicker. So again, you're probably a little bit ahead of that pace towards the 75% in the middle part of this year. Again, the back end of that curve, you know, it's not as steep, right? So the growth but will continue to bleed through. So I think that's developed, other than coming in a little bit quicker, it's developed as we thought, right?
Speaker #12: Hi. Good morning. Just wanted to clarify your response to Mahir's question. So within the 9/10 to 9/50, we should assume that the ALLL ratio is going to come down due to qualitative reserves coming down, and that offsets perhaps the higher reserves from Walmart growth?
Speaker #2: Yeah, good morning, Erica. So again, I was more giving the trajectory of the reserve. We haven't given guidance of what you actually should think about, relative to—or any of the commodities, to be honest with you—relative to the $910 to $950.
Brian Wenzel: Relative to the various assumptions on attrition rates, et cetera. So we feel good about the PPPCs on the APR line. When you think about the paper statement fee line, I think that has settled in, and to some degree has been relatively flat. And I think the combination of that is even as you see the average actives pick up in the Q4, it's the real growth in our e-bill percentage of people electing digitally, which I think is a better thing for us as a company, not only for them to avoid the fee, but engage with us digitally. So we're seeing the benefit that's gonna come through the expense line there.
Relative to the various assumptions on attrition rates, et cetera. So we feel good about the PPPCs on the APR line. When you think about the paper statement fee line, I think that has settled in, and to some degree has been relatively flat. And I think the combination of that is even as you see the average actives pick up in the Q4, it's the real growth in our e-bill percentage of people electing digitally, which I think is a better thing for us as a company, not only for them to avoid the fee, but engage with us digitally. So we're seeing the benefit that's gonna come through the expense line there.
Speaker #2: It's over time that you have a downward bias to it. Again, on a dollar basis, most certainly we would hope that the rate comes down to offset some of the growth, but we'll have to see how that plays out.
Speaker #2: But again, we have a very stable outlook here, which I think, as you think about the reserve, I was just more talking about the trajectory over time.
Speaker #2: If you believe that the environment gets better—which, again, we haven't, on the assumptions we put on our outlook side, haven't—aren't getting better.
Speaker #2: There's things staying the same, Erica.
Speaker #10: Got it. And just as a follow-up, you talked about the tax refund as a potential tailwind for purchase volume. I'm wondering, as we think about the inflection point in growth and your assumption that payment rates stay high, one of your peers have talked about the tax refund in context more of better credit rather than better spend.
Brian Wenzel: So when I look at that in combination, most certainly, I think we're pleased with the way the PPPC fees have performed, and it's generally in line with our expectations.
So when I look at that in combination, most certainly, I think we're pleased with the way the PPPC fees have performed, and it's generally in line with our expectations.
[Analyst] (Barclays): Got it. Helpful. And then as my follow-up on the expense growth guide that's in line with receivables, maybe just talk about, what sort of investments, related to growth you're making. And then, you know, after 2026, should we kind of expect, kind of more positive operating leverage going forward? Thank you.
Terry Ma: Got it. Helpful. And then as my follow-up on the expense growth guide that's in line with receivables, maybe just talk about, what sort of investments, related to growth you're making. And then, you know, after 2026, should we kind of expect, kind of more positive operating leverage going forward? Thank you.
Speaker #10: And I'm wondering, how have you sort of thought about the different scenarios, in terms of how the tax refund dynamic could impact the payment rate?
Brian Wenzel: Yeah, so let me pull up and maybe address one broader point here, which is really the significant investments in growth we kind of highlighted here, which affect, you know, all the lines really in the P&L. The largest line when we talk about significant investments is gonna be on the reserve line, right? Really for the asset growth, as you think about growing, you know, not only the Walmart portfolio, but obviously Lowe's that comes in in the first half. But also the new programs, when you think about Bob's and RH, et cetera, kind of coming in, but the biggest piece is reserves. I think when you think about the expense component of that, right, there's a couple things that happen, right? You have launch costs associated with new programs.
Brian Doubles: Yeah, so let me pull up and maybe address one broader point here, which is really the significant investments in growth we kind of highlighted here, which affect, you know, all the lines really in the P&L. The largest line when we talk about significant investments is gonna be on the reserve line, right? Really for the asset growth, as you think about growing, you know, not only the Walmart portfolio, but obviously Lowe's that comes in in the first half. But also the new programs, when you think about Bob's and RH, et cetera, kind of coming in, but the biggest piece is reserves. I think when you think about the expense component of that, right, there's a couple things that happen, right? You have launch costs associated with new programs.
Speaker #2: Yeah, it's a great question. It's going to be interesting to see how it plays out. Most certainly, I think this tax refund season will be one of the largest, if not the largest, that we've seen.
Speaker #2: That's really a factor of the retroactive nature of some of the benefits that were passed in legislation in the middle of last year, number one.
Speaker #2: Then number two, the withholding rates, which were not adjusted for 2025, will produce some people say between 500 and 1,000 dollar incremental refunds off of an average refund of call it between between 3 and 4 thousand dollars.
Speaker #2: So, a significant amount of cash flows in. That cash generally flows in—if you look at historical refunds—50 to 60 percent comes by mid-March, and 80 to 90 percent comes by May.
Brian Wenzel: You invest in some of the early, month on books and marketing programs associated with kind of getting a lot of new accounts up and running and engaged, as you think about that. So there's the launch cost, there's the conversion cost for certain portfolios. Then you have, most certainly, the investment in marketing. Also from an expense standpoint, you really wanna make sure you're investing, and we have to have the staffing in ahead of, this is more on a non-exempt standpoint, to take the calls that come with it. All in all, those are really positive investments for growth, and most certainly will pay back and we'll get that operating leverage-
You invest in some of the early, month on books and marketing programs associated with kind of getting a lot of new accounts up and running and engaged, as you think about that. So there's the launch cost, there's the conversion cost for certain portfolios. Then you have, most certainly, the investment in marketing. Also from an expense standpoint, you really wanna make sure you're investing, and we have to have the staffing in ahead of, this is more on a non-exempt standpoint, to take the calls that come with it. All in all, those are really positive investments for growth, and most certainly will pay back and we'll get that operating leverage.
Speaker #2: So you're going to see a large influx of cash into the economy. I think when you take a step back, Erica, and you look at where the benefits associated with the tax law changes—who do they affect, when you think about whether it's the SALT deduction, the childcare deduction, things like that?
Speaker #2: They're going to affect a certain part of the population that probably income skews a little bit higher. So when you think about the little bit higher, the higher people generally will sit back and say, "Okay, let me either save that or pay down debt." When you think about a more moderate income consumer, that consumer probably is either going to spend that money as it kind of comes through or not.
Brian Doubles: ... You know, the one thing I'd say is we have increased our capital spend a bit. And that's really around, I'd say three key areas. Number one, it's around, you know, increased investment in AI and driving AI in various areas of the business, not only that drive productivity, but also drive growth for us. You know, which is our focus, and we can most certainly chat about that more. The second area is around our cloud journey on accelerating expenditures related to getting that done a little bit faster, so we can get the productivity and efficiency benefits that it comes from that. And then third, you know, Brian's talked quite a bit about our desire to continue to grow health and wellness at a faster pace, so investments in that health and wellness business.
You know, te one thing I'd say is we have increased our capital spend a bit. And that's really around, I'd say three key areas. Number one, it's around, you know, increased investment in AI and driving AI in various areas of the business, not only that drive productivity, but also drive growth for us. You know, which is our focus, and we can most certainly chat about that more. The second area is around our cloud journey on accelerating expenditures related to getting that done a little bit faster, so we can get the productivity and efficiency benefits that it comes from that. And then third, you know, Brian's talked quite a bit about our desire to continue to grow health and wellness at a faster pace, so investments in that health and wellness business.
Speaker #2: So our impact on the payment rates really kind of goes back to our view on the consumer and what they're going to do. We're going to obviously track it very closely.
Speaker #2: But there's going to be a large influx of cash again in that end part of the first quarter into the second quarter that we'll look to see what it's
Speaker #2: doing. I think the good news, both of
Speaker #11: Those are positive outcomes for us. You go back to a few years, the stimulus payments—some consumers spent, and we saw an increase in purchase volume; some paid down debt, and we saw record low losses.
Speaker #11: So, any kind of boost like that is a good result for us, and we'll drive a little tailwind as we get into next.
Brian Doubles: Those are the big pieces. But again, if I go back to where I started on the significant investments, the biggest piece is reserves. But again, as you think about all the lines in the P&L, they're gonna be impacted by growth. You're gonna have, as you think about the J Curve, you're gonna have assets in there that are lower yielding as they go to maturity and seasoning. You're gonna see it on the other income line when it comes into loyalty, maybe in advance of, again, some of the income coming off the assets, and then the expense line. You know, when I think about the various pieces on the individual lines, they're less than ten basis points, but they're on each of the lines. So that's why we kind of try to call it out as you guys model it.
Those are the big pieces. But again, if I go back to where I started on the significant investments, the biggest piece is reserves. But again, as you think about all the lines in the P&L, they're gonna be impacted by growth. You're gonna have, as you think about the J Curve, you're gonna have assets in there that are lower yielding as they go to maturity and seasoning. You're gonna see it on the other income line when it comes into loyalty, maybe in advance of, again, some of the income coming off the assets, and then the expense line. You know, when I think about the various pieces on the individual lines, they're less than ten basis points, but they're on each of the lines. So that's why we kind of try to call it out as you guys model it.
Speaker #11: year. Thank
Speaker #11: Great. Thanks, Erica. Have a you. good day.
Speaker #10: Thank you. We will move next with Rick Shane with J.P. Morgan. Please go ahead, your line is open.
Speaker #13: Hey, guys. Thanks for taking my questions this morning. Look, you're calling for mid-single-digit loan growth and some degree of NII growth in 2026. The midpoint of EPS is flat.
Speaker #13: Despite the expectations of continued buybacks. And again, we're this is sort of revisiting Terry's question. RSA is up pretty significantly, basically takes you back to pre-pandemic levels, which is consistent with pre-pandemic credit expectations.
Brian Doubles: Again, these are all investments that we believe, across the business, really set us up for the longer term to be a, much better company.
Again, these are all investments that we believe, across the business, really set us up for the longer term to be a, much better company.
[Analyst] (KBW): Great. Thanks, Terry.
Sanjay Sakhrani: Great. Thanks, Terry.
Operator: Thank you. Our next question comes from Moshe Orenbuch with TD Cowen. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Moshe Orenbuch with TD Cowen. Please go ahead. Your line is open.
Speaker #13: Implication is obviously that the efficiency ratio was higher in 2026. I'm trying to understand, I think, part is the RSA function of sort of a pull forward, pay it forward on the new programs.
[Analyst] (TD Cowen): Great, thanks. Going back to kind of loan growth and opportunities, you mentioned, you know, adding the pay later gives you a lift. Can you talk a little bit about are there other, you know, areas, whether they're, you know, verticals or partners, you know, and how much of the portfolio kind of could that impact over the course of 2026?
Moshe Orenbuch: Great, thanks. Going back to kind of loan growth and opportunities, you mentioned, you know, adding the pay later gives you a lift. Can you talk a little bit about are there other, you know, areas, whether they're, you know, verticals or partners, you know, and how much of the portfolio kind of could that impact over the course of 2026?
Speaker #13: And should we revert start to revert to normalized efficiency ratios in 2027 as that sort of pull forward anniversary? How do we look at this going forward?
Speaker #2: Yeah. Thanks for the question, Rick. And good morning. I think as you look at the model, as you try to put the pieces together, this is why we kind of called out some of the significant investors because what you are seeing is some of the early growth and some of the programs where you have the heavy reserve rate when you have assets that are not yielding as much because they're just in the early stage of the J curve.
Brian Doubles: Yeah, I think, Moshe, I'll start just by talking a little bit about the multiproduct strategy, because I think, you know, this has been very successful, I think, over the last couple years, and pay later is an important part of that. It's resonating with our partners. You know, we now have it at some of our largest partners, Lowe's, Amazon, Penneys, Belk, Sleep Number. And the accounts that we're seeing come through on that product are incremental, and I think that's great news, right? So we still have kind of the same flow of new customers coming into private label, co-brand, and the pay later customers are incremental, which means our partners are getting, you know, so our partners are not looking at this as like an either/or.
Brian Doubles: Yeah, I think, Moshe, I'll start just by talking a little bit about the multiproduct strategy, because I think, you know, this has been very successful, I think, over the last couple years, and pay later is an important part of that. It's resonating with our partners. You know, we now have it at some of our largest partners, Lowe's, Amazon, Penneys, Belk, Sleep Number. And the accounts that we're seeing come through on that product are incremental, and I think that's great news, right? So we still have kind of the same flow of new customers coming into private label, co-brand, and the pay later customers are incremental, which means our partners are getting, you know, so our partners are not looking at this as like an either/or.
Speaker #2: It's just the nature of the businesses when you think about these vintages. And when you go from a flat growth rate to an accelerating growth rate, you see that that vintage slow down on some of the lines.
Speaker #2: The RSA, moving to a large degree when you have newer programs, they're not necessarily an RSA perspective, right? Because of the early J-curve dynamics.
Speaker #2: So, I think that ultimately, as you step out—and what we expect as we go beyond 2026—obviously, we would be moving closer back to the long-term framework on all the lines, we hope.
Brian Doubles: They're really now seeing the power of having these products kind of work in concert with one another. And given customers have different financing needs, you know, sometimes we're evolving products, the right product for them. Some may prefer fixed payments or installment product, and, you know, the strength of our franchises, we offer all the above. So we really like how this is working. Like I said, it's resonating with our partners. It's helping us win new programs as well, and we can show them that kind of migration strategy. So we might be starting off a customer with a Pay Later account, getting comfortable with them and their payment behavior, and then upgrading them to a private label card, ultimately a co-brand card with a larger line.
They're really now seeing the power of having these products kind of work in concert with one another. And given customers have different financing needs, you know, sometimes we're evolving products, the right product for them. Some may prefer fixed payments or installment product, and, you know, the strength of our franchises, we offer all the above. So we really like how this is working. Like I said, it's resonating with our partners. It's helping us win new programs as well, and we can show them that kind of migration strategy. So we might be starting off a customer with a Pay Later account, getting comfortable with them and their payment behavior, and then upgrading them to a private label card, ultimately a co-brand card with a larger line.
Speaker #2: And most certainly, our goal is to grow the business at a double-digit EPS. I think the investments this year in moving from a flattish to down one to a mid-single digits gives you an EPS profile this year that's a little bit different.
Speaker #2: that's. But again, we think
Speaker #11: for the medium to long term. And that's what our focus is on creating that value.
Speaker #13: Got it. Brian, that's helpful. And so I think what you're steering me to understand is, hey, yes, it's a little bit RSA, but it's really the timing differential associated in part with the CECL reserve, reserving of the loan growth.
Brian Doubles: So that's, like I said, really resonating with our partners, and we think that's the right strategy for the long term.
So that's, like I said, really resonating with our partners, and we think that's the right strategy for the long term.
Speaker #13: Is that the best way to distill
Speaker #13: it? Yeah.
Speaker #2: I mean, yeah, Rick, I don't want to get into my tirade around my views on Cecil and whether or not that's good accounting or bad accounting.
[Analyst] (TD Cowen): Great, thanks. And maybe, I mean, Brian, you did just reference kind of new programs. Can you talk a little bit about state of play? I mean, there are some startups that are in the space, but I think a lot of others have kind of pulled back. What are the areas you think that are most ripe, kind of, for new programs? And, you know, talk a little bit about what, you know, you're seeing in the market.
Moshe Orenbuch: Great, thanks. And maybe, I mean, Brian, you did just reference kind of new programs. Can you talk a little bit about state of play? I mean, there are some startups that are in the space, but I think a lot of others have kind of pulled back. What are the areas you think that are most ripe, kind of, for new programs? And, you know, talk a little bit about what, you know, you're seeing in the market.
Speaker #2: I think we'll take up another hour. But most certainly, when you have to book those losses upfront before you get any earnings off the asset, to me is not necessarily the right way to look at the business per se.
Brian Doubles: Yeah, look, we've got a great pipeline across all of our platforms. You know, if you just look at last year, we added or renewed 75 partners. We renewed seven of our top 20. You know, I think, and it's broad. It's across every industry, both, you know, existing programs, startup programs. So we feel really good about our ability to compete. We're winning the deals that we want to win. You know, and I think this is, you know, back to a little bit of what Brian talked about, the investments that we're making are helping us stay ahead of the competition.
Brian Doubles: Yeah, look, we've got a great pipeline across all of our platforms. You know, if you just look at last year, we added or renewed 75 partners. We renewed seven of our top 20. You know, I think, and it's broad. It's across every industry, both, you know, existing programs, startup programs. So we feel really good about our ability to compete. We're winning the deals that we want to win. You know, and I think this is, you know, back to a little bit of what Brian talked about, the investments that we're making are helping us stay ahead of the competition.
Speaker #2: That's why we kind of look at things without reserves first, and then with reserves, obviously, because it's a GAAP basis. But yes, CECL does dwarf the true reality a little bit.
Speaker #11: Brian, it could be a short tirade. You'd be preaching to the choir on that one. Thank you. Thanks,
Speaker #2: Thanks, Rick. Have a good day.
Speaker #11: Rick. Thank
Speaker #10: Thank you. We will move next to Rob Welch with Autonomous Research. Please go ahead, your line is open.
Speaker #14: Good morning, guys. One more on the pay later discussion. You sound quite positive on the uptake and conversion there. But I guess what I'm wondering is, is the translation from the top of the funnel in pay later to loan growth in any way different than the more legacy Synchrony products?
Brian Doubles: You know, every RFP that we go into, you know, we're told that, you know, our tech is, you know, best in the industry, our ability to integrate, the investments we've made in our proprietary underwriting model PRISM, you know, those are all helping us win and compete in business. You know, we are never gonna be the low-cost provider. We're very clear on that up front. We've made big investments in the business and the platform, and we need to earn a return commensurate with that. We think that, you know, we're the best in the partner-based financing business, and we're proving that out every day with the deals that we're renewing, the partner base that we have, and where we're adding new partnerships.
You know, every RFP that we go into, you know, we're told that, you know, our tech is, you know, best in the industry, our ability to integrate, the investments we've made in our proprietary underwriting model PRISM, you know, those are all helping us win and compete in business. You know, we are never gonna be the low-cost provider. We're very clear on that up front. We've made big investments in the business and the platform, and we need to earn a return commensurate with that. We think that, you know, we're the best in the partner-based financing business, and we're proving that out every day with the deals that we're renewing, the partner base that we have, and where we're adding new partnerships.
Speaker #14: I'm thinking that maybe Pay Later might be more of a one-time purchase versus a larger open-to-buy amount—maybe a smaller ticket on a per-transaction basis.
Speaker #14: Any early indications you can share
Speaker #14: there?
Speaker #13: Yeah. Look, I
Speaker #13: It does tend, I would say, to be a little bit more one-time, although we're seeing good repeat usage in Pay Later across the partners where we have it, which is encouraging.
Speaker #13: Ultimately, our goal and kind of where our partners want to be is to get them into that revolving product because I think that allows you to do lifecycle marketing, push promotions, push offers, but we like look, the customers that are that take out a pay later loan, we're going to be front and center with them offering another pay later loan to buy whatever it is they're buying next.
[Analyst] (TD Cowen): Thanks very much.
Moshe Orenbuch: Thanks very much.
Brian Doubles: Yeah. Thanks, Moshe.
Brian Doubles: Yeah. Thanks, Moshe.
[Analyst] (KBW): Thanks, Moshe.
Brian Wenzel: Thanks, Moshe.
Brian Doubles: Have a good day.
Brian Doubles: Have a good day.
Operator: Thank you. We will move next with Mihir Bhatia, with Bank of America. Please go ahead. Your line is open.
Operator: Thank you. We will move next with Mihir Bhatia, with Bank of America. Please go ahead. Your line is open.
[Analyst] (Bank of America): Hi, thank you for taking my question. Maybe just first to start on the reserve rate. You're approaching day one delinquency levels here, so just wondering... I mean, I know obviously you've tightened credit, and it's gotten better, but just how are you thinking about the reserve rate level from here? And any, any thoughts into 2026 on how that would trend as you widen the credit aperture again?
Mihir Bhatia: Hi, thank you for taking my question. Maybe just first to start on the reserve rate. You're approaching day one delinquency levels here, so just wondering... I mean, I know obviously you've tightened credit, and it's gotten better, but just how are you thinking about the reserve rate level from here? And any, any thoughts into 2026 on how that would trend as you widen the credit aperture again?
Speaker #13: So it's not that you can't do the lifecycle marketing. It's just it's a little bit more natural in terms of how our partners think about it in the PLCC and co-brand space.
Speaker #13: But we like all three products. They're working really well in concert together. That was the thesis we were trying to prove out, and so far, we've proven it.
Brian Wenzel: ... Yeah, thanks, thanks, Mihir. You know, honestly, as we look at the reserve rate, you know, clearly it's come down, and most certainly it's come down relative to the loss rate we've experienced. As you look out into 2026, most certainly, you know, we've given you the guide where we see unemployment rate rising here, you know, towards the end of the year, which is really, you know, the Moody's forecast. And most certainly we maintained the qualitative overlays where you have an unemployment rate consistent with past quarters. So we have not eased off of that. I think as you look forward, you know, the question becomes, if you believe the macro environment becomes stable, at what point can the qualitative reserves kind of come down?
Brian Wenzel: Yeah, thanks, thanks, Mihir. You know, honestly, as we look at the reserve rate, you know, clearly it's come down, and most certainly it's come down relative to the loss rate we've experienced. As you look out into 2026, most certainly, you know, we've given you the guide where we see unemployment rate rising here, you know, towards the end of the year, which is really, you know, the Moody's forecast. And most certainly we maintained the qualitative overlays where you have an unemployment rate consistent with past quarters. So we have not eased off of that. I think as you look forward, you know, the question becomes, if you believe the macro environment becomes stable, at what point can the qualitative reserves kind of come down?
Speaker #2: Yeah. The one thing, Rob, let me just add a little bit of financial dimension to it, right? If you look at an entire portfolio our entire portfolio turns just under two, right?
Speaker #2: 100-plus million billion dollars of receivables on the purchase volume. I think when you tear that apart into pieces, obviously, the dual card and co-branded turn faster, right?
Speaker #2: Whatever turns a little bit slower. When you think about the pay later that we originate, we generally originate majority in the 6 to 12 months.
Speaker #2: You go really it is probably the biggest part. You then see 18 to 24 months. So the turn is a little bit more consistent with, I'd say, private label.
Speaker #2: We do not do a lot of volume and don't really push anything below six months. We just it's hard to make money or it's really impossible to make money, most certainly in the paying for and stuff like that.
Brian Wenzel: Which would end up giving you a little bit of a downward bias on a rate basis to the reserve rate. When that actually happens, it's a little bit unclear. I think we're the closest to it we've been to day one, not that that's necessarily the greatest anchor, but it's most certainly the first mile marker you look at, of where your rate should be. So, I think we're encouraged around that, but obviously a lot's gonna depend upon how our number one, how our delinquency formation develops, and then number two, the macro environment. So again, I would assume a little more downward bias on a rate basis. Obviously, as I talked about the significant investments you're gonna see on a dollar basis increase with the growth going back to the mid-single digits.
Which would end up giving you a little bit of a downward bias on a rate basis to the reserve rate. When that actually happens, it's a little bit unclear. I think we're the closest to it we've been to day one, not that that's necessarily the greatest anchor, but it's most certainly the first mile marker you look at, of where your rate should be. So, I think we're encouraged around that, but obviously a lot's gonna depend upon how our number one, how our delinquency formation develops, and then number two, the macro environment. So again, I would assume a little more downward bias on a rate basis. Obviously, as I talked about the significant investments you're gonna see on a dollar basis increase with the growth going back to the mid-single digits.
Speaker #2: But think about it, it's going to be something more similar to a private label when you think about that type of duration. But again, we do pay later longer than that, but the book is going to be in the 6- to 12-month variety of installments.
Speaker #14: Okay. Very interesting. Thank
Speaker #14: you. Thanks.
Speaker #2: Thanks, Rob. Have a good
Speaker #2: day. Thank
Speaker #10: Our next question comes from Jeff Adelson with Morgan Stanley. Please go ahead, your line is open.
Speaker #10: open. Hey, good morning.
Speaker #15: Thanks for taking my questions. Maybe just a follow-up on the credit actions or refinements. Can you maybe just update us on your current posture at this point?
Speaker #15: Are you kind of continuing to lift off the prior tightening actions as you go along? Has that trend accelerated, or maybe slowed at all, from where you were earlier last year?
[Analyst] (Bank of America): Got it. And then maybe just going back to the pay later conversation that you were just having. Could you just comment, like, on how the progress has been? I think you meant—you gave an impressive stat about 10% increase where it's offered side by side. Is that across all, all your platforms? And just, you know, maybe just comment, if you would, on Lowe's, Amazon, some of the big ones, any learnings from those rollouts that you can share, and where you are with that process currently?
Mihir Bhatia: Got it. And then maybe just going back to the pay later conversation that you were just having. Could you just comment, like, on how the progress has been? I think you meant—you gave an impressive stat about 10% increase where it's offered side by side. Is that across all, all your platforms? And just, you know, maybe just comment, if you would, on Lowe's, Amazon, some of the big ones, any learnings from those rollouts that you can share, and where you are with that process currently?
Speaker #15: And then, Brian Wenzel, you mentioned the guide doesn't really include the additional broad-based credit refinements, and that this would really depend on credit performance as it comes through.
Speaker #15: I guess my question is, what maybe holds you back from opening up a bit more, given that you're already within that historical charge-off range you target?
Speaker #15: You're perhaps getting a little bit of a positive bias and shorter with tax refunds. Is this maybe just some conservatism? You prefer to see the delinquency improvement continue to come through before you maybe make a more definitive commitment there on the credit actions?
Brian Wenzel: Yeah, I think, yeah, look, generally, we're so far across all of the partners where we've launched it, you know. I think going back to the multi-product strategy, we believe that that's the right one. We're anchored in that strategy. The one question for us, like, as we started to roll this out, I think the question for our partners was, would there be any cannibalization of the private label card, the dual card, and co-brand cards that we offer? And the good news is, there hasn't been. So we track that very closely across all of our partners where we have the multi-product strategy in place. And we can clearly see that, you know, the volume flowing through private label and co-brand is very consistent, and that the pay later accounts that we're getting are net new.
Brian Wenzel: Yeah, I think, yeah, look, generally, we're so far across all of the partners where we've launched it, you know. I think going back to the multi-product strategy, we believe that that's the right one. We're anchored in that strategy. The one question for us, like, as we started to roll this out, I think the question for our partners was, would there be any cannibalization of the private label card, the dual card, and co-brand cards that we offer? And the good news is, there hasn't been. So we track that very closely across all of our partners where we have the multi-product strategy in place. And we can clearly see that, you know, the volume flowing through private label and co-brand is very consistent, and that the pay later accounts that we're getting are net new.
Speaker #2: Yeah, thanks for the question, Jeff. Let me unpack that a little bit. First, let me remind you, the credit actions that we took in '23 and '24 were around very specific types of items.
Speaker #2: So you think about student loans, think about personal loans, things like that that we thought about ability to pay. So some of the actions that we've taken in 2025 in the third and fourth quarter were not necessarily as you have in place, but there are other strategies that have had the effect of adding sales or expanding your credit aperture.
Speaker #2: So I wouldn't necessarily refer to it as we're just unwinding those because I think those do stay. The reason why we haven't done incremental tightening is just to be clear, in our guide, the actions that we took in the end part of '25 are in the guide.
Brian Wenzel: And I think that's, that's great news. That allows us to attract a new customer base that ultimately, you know, we wanna offer other products to. And so that was... You know, as we embarked on this a number of years ago, that was, that was kind of the question that we were getting from our partners. You know, we were pretty confident that this was gonna attract a new customer base, and, and that's been the case so far. So we're very pleased across the board.
And I think that's, that's great news. That allows us to attract a new customer base that ultimately, you know, we wanna offer other products to. And so that was... You know, as we embarked on this a number of years ago, that was, that was kind of the question that we were getting from our partners. You know, we were pretty confident that this was gonna attract a new customer base, and, and that's been the case so far. So we're very pleased across the board.
Speaker #2: No incremental broad-based changes are assumed for 2026 as we enter the year. The reason why if you're asking me why aren't we taking loan more because we have a 565 loss rate delinquency looks good, I think when you look across the credit cohorts, the one thing that you'd see across all those years, this is in the synchrony issue, probability of default across credit grades is higher than historical norm.
[Analyst] (Bank of America): Thank you.
Mihir Bhatia: Thank you.
Brian Wenzel: Thanks, Mihir. Thanks, Mihir. Have a good day.
Brian Wenzel: Thanks, Mihir. Thanks, Mihir. Have a good day.
[Analyst] (Bank of America): Bye.
Mihir Bhatia: Bye.
Operator: Thank you. Our next question comes from Erika Najarian with UBS. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Erika Najarian with UBS. Please go ahead. Your line is open.
Speaker #2: So, we benefit a little bit more because of our line structures and our ability to maintain a lower line structure and control that exposure at default.
[Analyst] (UBS): Hi, good morning. Just wanted to clarify your response to Mihir's question. So within the 9.10 to 9.50, we should assume that the ALL ratio is going to come down due to qualitative reserves coming down, and that offsets perhaps the higher reserves from Walmart growth?
Erika Najarian: Hi, good morning. Just wanted to clarify your response to Mihir's question. So within the 9.10 to 9.50, we should assume that the ALL ratio is going to come down due to qualitative reserves coming down, and that offsets perhaps the higher reserves from Walmart growth?
Speaker #2: But most certainly, we're continuing to watch that probability of default. Again, across all the credit grades—it's not into one part. So it's how it normalizes.
Speaker #2: And most certainly, there's a focus we've been tighter at the bottom end, which you've seen our shift a little bit less into non-prime is in that kind of right at the prime level.
Brian Wenzel: Yeah. Good morning, Erika. So again, I was more giving the trajectory of the reserve. We haven't given guides of what you actually should think about relative to, or any of the, to be honest with you, relative to the 910 to 950. It's over time that you have a downward bias to it. Again, on a dollar basis, most certainly, you know, we would hope that the rate comes down to offset some of the growth, but we'll have to see how that plays out. But again, you know, again, we have a very stable outlook here, which I think as you think about the reserve, I was just more talking about the trajectory over time.
Brian Wenzel: Yeah. Good morning, Erika. So again, I was more giving the trajectory of the reserve. We haven't given guides of what you actually should think about relative to, or any of the, to be honest with you, relative to the 910 to 950. It's over time that you have a downward bias to it. Again, on a dollar basis, most certainly, you know, we would hope that the rate comes down to offset some of the growth, but we'll have to see how that plays out. But again, you know, again, we have a very stable outlook here, which I think as you think about the reserve, I was just more talking about the trajectory over time.
Speaker #2: So, that kind of advantage—650 to 700—and seeing what that customer, who is feeling the effects of affordability for a number of years, is experiencing.
Speaker #2: So we're watching that probability of default across not only us, but across the
Speaker #2: industry. Okay.
Speaker #15: Great. And as my follow-up, it's nice to hear of the success you're having in pay later. And I think you mentioned that 62,000—6,200 merchants.
Speaker #15: So I guess maybe a different way of asking some of the other questions that have been asked is, is there a way to think about how material that Pay Later offering can be for your forward loan growth—either the mid-single-digit growth you're looking for—and then talk about?
Brian Wenzel: If you believe that the environment gets better, which again, we haven't, on the assumptions we've put on our outlook side, haven't, you know, aren't getting better. They're staying the same, Erika.
If you believe that the environment gets better, which again, we haven't, on the assumptions we've put on our outlook side, haven't, you know, aren't getting better. They're staying the same, Erika.
Speaker #15: Is that something that could be 100 basis points or more of a pickup? And maybe just—we’ve gotten some questions on progress of the Pay Later offering.
[Analyst] (UBS): Got it. And just as a follow-up, you know, you talked about, you know, the tax refund as a potential tailwind for purchase volume. You know, I'm wondering, as we think about the inflection point in growth and, you know, your assumption that payment rates stay high, one of your peers have talked about the tax refund in context more of better credit rather than better spend. And I'm wondering, how have you sort of thought about the different scenarios in terms of how the tax refund, you know, a dynamic could impact the payment rate?
Erika Najarian: Got it. And just as a follow-up, you know, you talked about, you know, the tax refund as a potential tailwind for purchase volume. You know, I'm wondering, as we think about the inflection point in growth and, you know, your assumption that payment rates stay high, one of your peers have talked about the tax refund in context more of better credit rather than better spend. And I'm wondering, how have you sort of thought about the different scenarios in terms of how the tax refund, you know, a dynamic could impact the payment rate?
Speaker #15: At Amazon, you launched earlier last year. I think we did notice that it's not available at the checkout anymore. Is there maybe just an update on how that program is going?
Speaker #15: Thanks.
Speaker #2: Yeah, sure, Jeff. Look, we can't get specific on any of our individual programs, but I would again just say we're very happy with the results on the product so far across all of our partners.
Speaker #2: We're seeing really strong growth in new accounts. Obviously, that's included in the loan guide. Again, it's a little bit about what Pay Later can deliver, but it's also that vehicle to bring in new customers and then migrate them over time.
Brian Wenzel: Yeah, it's a great question. It's gonna be interesting to see how it plays out. Most certainly, I think this tax refund season will be one of the largest, if not the largest, that we've seen. That's really a factor of the retroactive nature of some of the benefits that were passed in legislation in the middle of last year, number one. Then number two, the withholding rates, which were not adjusted for 2025, will produce, you know, you know, some people say between $500 and $1,000 incremental refunds off of a, you know, an average refund of, you know, call it between $3,000 and $4,000, so a significant amount of cash that flows in. That cash generally flows in, if you look at historical refunds-...
Brian Wenzel: Yeah, it's a great question. It's gonna be interesting to see how it plays out. Most certainly, I think this tax refund season will be one of the largest, if not the largest, that we've seen. That's really a factor of the retroactive nature of some of the benefits that were passed in legislation in the middle of last year, number one. Then number two, the withholding rates, which were not adjusted for 2025, will produce, you know, you know, some people say between $500 and $1,000 incremental refunds off of a, you know, an average refund of, you know, call it between $3,000 and $4,000, so a significant amount of cash that flows in. That cash generally flows in, if you look at historical refunds-...
Speaker #2: So it's obviously a big part of the strategy. It's included in the mid-single digits. And I don't know, Brian, if you want to give a little more color.
Speaker #3: Yeah, I think the one thing, Jeff, to understand about that product demo itself is the average ticket size and what that product is meant to do.
Speaker #3: And this is where Brian highlights the multi-product strategy. The product fits a certain purchase type and a certain thing. You do not see as much large ticket going into that 6 and 12-month installment on a closed end.
Speaker #3: You generally see a smaller ticket size. So when you see a smaller ticket size, the relative contribution—when I think about a company that's got over $100 billion of receivable—it's not going to be as a meaningful driver to move the company's overall growth rate, but it's an important part for us to continue to expand penetration at our partners.
Brian Wenzel: You know, 50 to 60 percent comes by mid-March, 80, 80 to 90 percent come by May. So you're gonna see a large influx of cash into the economy. I think when you take a step back, Erika, and you look at where the benefits associated with the tax law changes, who do they affect when you think about whether it's the SALT deduction, the childcare deduction, things like that, they're gonna affect a certain part of the population that probably income skews a little bit higher.
You know, 50 to 60 percent comes by mid-March, 80, 80 to 90 percent come by May. So you're gonna see a large influx of cash into the economy. I think when you take a step back, Erika, and you look at where the benefits associated with the tax law changes, who do they affect when you think about whether it's the SALT deduction, the childcare deduction, things like that, they're gonna affect a certain part of the population that probably income skews a little bit higher.
Speaker #3: So it's important to have that. Today, we have a bigger ticket offering, right, relative to equal pay installments. It just sits inside a revolving account, which is what you see primarily in our home and auto business or a little bit in our lifestyle business and health and wellness.
Speaker #3: So again, from a growth rate standpoint, again, given the denominator, I'd sit back and say the smaller ticket doesn't move the growth rate as fast right now.
Brian Wenzel: So when you think about the little bit higher, the higher people generally will sit back and say, "Okay, let me, let me either save that or, or pay down debt." When you think about a more moderate income consumer, that consumer probably is either gonna spend that money as it kind of comes through or not. So, you know, our impact on the payment rates really kind of goes back to our view on the consumer and what they're gonna do. You know, we're gonna obviously track it very closely, but there's gonna be a large influx of cash, you know, again, in that, you know, end part of Q1 into Q2 that we'll look to see, you know, what it's doing.
So when you think about the little bit higher, the higher people generally will sit back and say, "Okay, let me, let me either save that or, or pay down debt." When you think about a more moderate income consumer, that consumer probably is either gonna spend that money as it kind of comes through or not. So, you know, our impact on the payment rates really kind of goes back to our view on the consumer and what they're gonna do. You know, we're gonna obviously track it very closely, but there's gonna be a large influx of cash, you know, again, in that, you know, end part of Q1 into Q2 that we'll look to see, you know, what it's doing. I think the good news, look, both of those are positive outcomes for us. You go back a few years.
Speaker #3: Again, it's important to have it as part of a holistic offering to our
Speaker #3: partners. Great.
Speaker #15: Thank
Speaker #15: you. Have a great day.
Speaker #3: Thanks, Thanks, Jeff.
Speaker #1: Thank Jeff. you. Our next question comes from Brian Foran with Truist. Please go ahead. Your line is
Speaker #1: open. Hi.
Speaker #4: You've kind of touched on this throughout your comments, but just the decision on the guide to move from kind of the— and I know there's no standard to the way you've done it, but generally, over time, you've given line items, and now you're giving an EPS range.
Brian Wenzel: I think the good news, look, both of those are positive outcomes for us. You go back a few years-
Operator: Yep.
Erika Najarian: Yep.
Brian Wenzel: The stimulus payments, some consumers spent, and we saw an increase in purchase volume. Some paid down debt, and we saw record low losses. So, you know, any kind of boost like that is a good result for us, and will drive a little tailwind as we get into next year.
Brian Wenzel: The stimulus payments, some consumers spent, and we saw an increase in purchase volume. Some paid down debt, and we saw record low losses. So, you know, any kind of boost like that is a good result for us, and will drive a little tailwind as we get into next year.
Speaker #4: With a little bit less line item detail, is the conclusion you're happy with where consensus is on an EPS basis, but you're flagging some of the line items might need to change as people think through these investments for growth?
Operator: Thank you.
Erika Najarian: Thank you.
Brian Wenzel: Great. Thanks, Erika, have a good day.
Brian Wenzel: Great. Thanks, Erika, have a good day.
Speaker #4: Or, I don't want to lead the witness. Maybe you could just say, 'Why switch to an EPS range this year?'
Operator: Thank you. We will move next with Rick Shane, with JPMorgan. Please go ahead, your line is open.
Operator: Thank you. We will move next with Rick Shane, with JPMorgan. Please go ahead, your line is open.
Speaker #2: Yeah, thanks. Good morning, Brian, and thanks for the question. This is an interesting—it's an interesting question on how we try to help analysts understand the results of our company.
[Analyst] (JPMorgan): Hey, guys, thanks for taking my questions this morning.
Rick Shane: Hey, guys, thanks for taking my questions this morning.
Brian Wenzel: Hey, Rick.
Brian Wenzel: Hey, Rick.
[Analyst] (JPMorgan): Look, you're calling for mid-single-digit loan growth and some degree of NII growth in 2026. Midpoint of EPS is flat, despite the expectations of continued buybacks. And again, we're, this is sort of revisiting Terry's question. RSA is up pretty significantly. It basically takes you back to pre-pandemic levels, which is consistent with pre-pandemic credit expectations. Implication is obviously that the efficiency ratio was higher in 2026. I'm trying to understand; I think part is the RSA a function of sort of a pull forward, pay it forward on the new programs? And should we start to revert to normalized efficiency ratios in 2027 as that sort of pull forward anniversaries? How do we look at this going forward?
Rick Shane: Look, you're calling for mid-single-digit loan growth and some degree of NII growth in 2026. Midpoint of EPS is flat, despite the expectations of continued buybacks. And again, we're, this is sort of revisiting Terry's question. RSA is up pretty significantly. It basically takes you back to pre-pandemic levels, which is consistent with pre-pandemic credit expectations. Implication is obviously that the efficiency ratio was higher in 2026. I'm trying to understand; I think part is the RSA a function of sort of a pull forward, pay it forward on the new programs? And should we start to revert to normalized efficiency ratios in 2027 as that sort of pull forward anniversaries? How do we look at this going forward?
Speaker #2: And I think, to a large degree, Brian, to be honest with you, with a large number of analysts, there's quite a diversity in, even though we provided line-item guidance, the outcomes on line items relative to the guidance—how people built their models.
Speaker #2: So effectively, we said, "Listen, the best way for you to understand and value our company ultimately at the end of the day was to provide as I sometimes call it the cheat code on the test, which is what we think the EPS amount will be on the different line items." So it was more a factor of how do we try to get people to the best way to think about the performance of the company for 2026 than trying to get five line items right.
Speaker #4: That's helpful. And I think you mentioned the mid-single-digit loan growth is going to be a little bit more evident in the back half of the year.
Speaker #4: If that's right, what would you say are the one or two key markers we should watch for in the front half of the year that would show whether you're on track above or below tracking above or below that kind of trajectory?
Brian Wenzel: Yeah, you know, thanks for the question, Rick, and good morning. You know, I think as you look at the model, as you try to, you know, put the pieces together, this is why we kind of called out some of the significant investments, because what you are seeing is some of the early growth in some of the programs where you have the heavy reserve rate, when you have assets that are not yielding as much because they're just in the early stages of the J Curve. It's just the nature of the businesses when you think about these vintages. And when you go from a flat growth rate to an accelerating growth rate, you see that vintage slow down on some of the lines.
Brian Wenzel: Yeah, you know, thanks for the question, Rick, and good morning. You know, I think as you look at the model, as you try to, you know, put the pieces together, this is why we kind of called out some of the significant investments, because what you are seeing is some of the early growth in some of the programs where you have the heavy reserve rate, when you have assets that are not yielding as much because they're just in the early stages of the J Curve. It's just the nature of the businesses when you think about these vintages. And when you go from a flat growth rate to an accelerating growth rate, you see that vintage slow down on some of the lines.
Speaker #2: Yeah, it's a great question, Brian. I think the first thing you have to look at is what's purchase volume, and what's that flow of volume that's coming into the system?
Speaker #2: Number one, I think number two, you got to watch your average actives. And whether or not you see average active growth. And you think about sequential, whether it's purchase volume for average active, etc.
Brian Wenzel: The RSA moving, you know, to, to a large degree, when you have newer programs, they're not necessarily an RSA perspective, right? Because of the, the early J Curve dynamics. So I think that, that ultimately normalizes. I think as you step out, and what we expect as we go beyond, you know, 2026, you know, obviously would be, you know, moving closer back to the long-term framework on all the lines, we hope. And most certainly, you know, our goal is to grow the business at a double-digit EPS. I think the investments this year in moving from a, you know, flattish to down 1 to a mid-single digits gives you an EPS profile this year that's a little bit different.
The RSA moving, you know, to, to a large degree, when you have newer programs, they're not necessarily an RSA perspective, right? Because of the, the early J Curve dynamics. So I think that, that ultimately normalizes. I think as you step out, and what we expect as we go beyond, you know, 2026, you know, obviously would be, you know, moving closer back to the long-term framework on all the lines, we hope. And most certainly, you know, our goal is to grow the business at a double-digit EPS. I think the investments this year in moving from a, you know, flattish to down 1 to a mid-single digits gives you an EPS profile this year that's a little bit different.But again, we think that's, you know, nicely for the medium to long term, and that's what our focus is on, creating that value.
Speaker #2: So you can kind of step through and say, "Does the growth make sense?" Right? Again, we're optimistic about what we saw here in the first three weeks of January, but those are the kind of two big mile markers I'd be looking at.
Speaker #2: As you kind of come through, I mean, the payment rate will manifest itself ultimately in the turn of the portfolio. And the receivables. But that's really you won't really see that until the end of period.
Speaker #2: Again, each of the monthly delinquency reporting credit you'll get a snapshot of what average loans do. And then most certainly what end of period
Speaker #2: If I could sneak in one...
Speaker #4: Last one, just on the tax refund thing. So is the conclusion that your best guess of the impacts is included in the guide? Or, to the extent there are benefits to your business from elevated tax refunds, that would be incremental to the guide?
Brian Wenzel: But again, we think that's, you know, nicely for the medium to long term, and that's what our focus is on, creating that value.
[Analyst] (JPMorgan): Got it. Brian, that's helpful. And so I think what you're steering me to understand is, hey, yes, it's a little bit RSA, but it's really the timing differential associated in part with the CECL re-reserving of the loan growth. Is that the best way to distill it?
Rick Shane: Got it. Brian, that's helpful. And so I think what you're steering me to understand is, hey, yes, it's a little bit RSA, but it's really the timing differential associated in part with the CECL re-reserving of the loan growth. Is that the best way to distill it?
Speaker #2: Brian, I'm going to let you deal with Kathryn for going beyond one extra question, but it is included in the guide.
Speaker #4: Okay. Thank you
Speaker #4: so much.
Speaker #2: Have a good day,
Speaker #2: Brian. Thank you.
Speaker #1: And we have time for one more question. That question comes from Don Fandetti with Wells Fargo. Please go ahead, your line is open.
Brian Wenzel: Yeah. I mean, yeah, yeah, Rick, I don't want to get into my tirade around my views on CECL and whether or not that's good accounting or bad accounting. I think we'll take up another hour. But most certainly, when you have to book those losses upfront before you get any earnings off the asset, you know, to me is not necessarily the right way to look at the business per se. I think that's why, you know, we kind of look at things, you know, without reserves first and then with reserves, obviously, because it's a GAAP basis, so. But yes, CECL does, you know, dwarf the true reality a little bit.
Brian Wenzel: Yeah. I mean, yeah, yeah, Rick, I don't want to get into my tirade around my views on CECL and whether or not that's good accounting or bad accounting. I think we'll take up another hour. But most certainly, when you have to book those losses upfront before you get any earnings off the asset, you know, to me is not necessarily the right way to look at the business per se. I think that's why, you know, we kind of look at things, you know, without reserves first and then with reserves, obviously, because it's a GAAP basis, so. But yes, CECL does, you know, dwarf the true reality a little bit.
Speaker #1: open. Hi.
Speaker #2: Can you maybe just dig in a little bit on the Walmart partnership? I mean, obviously, that's going very well. Is this going to be just a steady ramp-up in loan growth?
Speaker #2: Are there any milestones? Or could you maybe just talk about how the rollout's going?
Speaker #2: Are there any milestones? Or can you just maybe talk about how the rollout's going? Yeah.
Speaker #3: Look, Don, it's going incredibly well. The program is fully launched in market, really strong early results. I mentioned fastest growth we've ever seen in the de novo program.
Speaker #3: There’s a couple of things that I would highlight as you think about it. First, it is a leading-edge program from a tech perspective. So we’re fully leveraging the OnePay app, which is a great app.
[Analyst] (JPMorgan): Brian, it could be a short tirade. You'd be preaching to the choir on that one. Thank you.
Rick Shane: Brian, it could be a short tirade. You'd be preaching to the choir on that one. Thank you.
Brian Wenzel: Thanks, Rick. Have a good day. Thanks, Rick.
Brian Wenzel: Thanks, Rick. Have a good day. Thanks, Rick.
Operator: Thank you. We will move next with Rob Wildhack, with Autonomous Research. Please go ahead, your line is open.
Operator: Thank you. We will move next with Rob Wildhack, with Autonomous Research. Please go ahead, your line is open.
Speaker #3: We're leveraging our API stack, so we're completely embedded with a digital experience. The entire experience is inside the application—all the way through when you apply for credit, all the way through servicing.
[Analyst] (Autonomous Research): Morning, guys. One more on the, on the pay later discussion. You know, you sound quite positive on the uptake and conversion there, but I, I guess what I'm wondering is, is the translation from, from the top of the funnel and pay later to loan growth in any way different than the more legacy Synchrony products? I'm thinking that maybe pay later might be more of a one-time purchase versus a larger, open to buy amount. Maybe it's smaller ticket on a per transaction basis. Any early indications you could share there?
Rob Wildhack: Morning, guys. One more on the, on the pay later discussion. You know, you sound quite positive on the uptake and conversion there, but I, I guess what I'm wondering is, is the translation from, from the top of the funnel and pay later to loan growth in any way different than the more legacy Synchrony products? I'm thinking that maybe pay later might be more of a one-time purchase versus a larger, open to buy amount. Maybe it's smaller ticket on a per transaction basis. Any early indications you could share there?
Speaker #3: The second thing I'd highlight is it's got a very strong value prop on the card. So Walmart Plus members get unlimited 5% cash back at Walmart.
Speaker #3: 1.5% cash back everywhere else. That's a big improvement and a big lift compared to how we were running the program when we last had it.
Speaker #3: And we're seeing it convert a lot of Walmart Plus members, which is really great. We've got really good digital in-store placement. You'll see that if you're on Walmart.com, you'll see it if you're in the stores.
Brian Doubles: ... Yeah, look, I would say that it does tend to be a little bit more one time, although we're seeing good repeat usage in pay later across the partners where we have it, which is encouraging. You know, ultimately, our goal and kind of where our partners want to be is to get them into that revolving product because I think that allows you to do life cycle marketing, push promotions, push offers. But we like. Now look, the customers that take out a pay later loan, you know, we're gonna be front and center with them, offering them another pay later loan to buy whatever it is they're buying next.
Brian Doubles: Yeah, look, I would say that it does tend to be a little bit more one time, although we're seeing good repeat usage in pay later across the partners where we have it, which is encouraging. You know, ultimately, our goal and kind of where our partners want to be is to get them into that revolving product because I think that allows you to do life cycle marketing, push promotions, push offers. But we like. Now look, the customers that take out a pay later loan, you know, we're gonna be front and center with them, offering them another pay later loan to buy whatever it is they're buying next.
Speaker #3: And overall, I'd say we just have really good alignment. Alignment through the deal structure. We're both incented to grow the program. So we couldn't be off to a better start.
Speaker #3: And we're really encouraged about what this is going to do for growth, not just in '26, but in the future.
Speaker #2: Okay. Thanks so much for that.
Speaker #2: Thanks, Don. Thanks, Don. Have a good—
Speaker #2: Thanks, Don. Thanks, Don. Have a good day. Thank you.
Speaker #1: you. And this concludes our Q&A session. As well as synchronous earnings conference call. You may disconnect your line at this time, and have a wonderful day.
Brian Doubles: So it's not that you can't do the life cycle marketing; it's just it's a little bit more natural in terms of how our partners think about it in the PLCC and co-brand space. But we like all three products. They're working really well in concert together. You know, that was the thesis we were trying to prove out, and so far we've proven it.
So it's not that you can't do the life cycle marketing; it's just it's a little bit more natural in terms of how our partners think about it in the PLCC and co-brand space. But we like all three products. They're working really well in concert together. You know, that was the thesis we were trying to prove out, and so far we've proven it.
Brian Wenzel: Yeah, the one thing, Rob, let me just add a little bit of financial dimension to it, right? If you look at our entire portfolio, you know, our entire portfolio turns, you know, just under 2, right? $100-plus billion of receivables on the purchase volume. I think when you tear that apart into pieces, obviously the dual card and co-branded turn faster, private label turns a little bit slower. When you think about the pay later that we originate, we generally originate majority in the 6 to 12 months. You go really, you know, it is probably the biggest part. You then see 18 to 24 months. So, the turn is a little bit more consistent with, I'd say, private label.
Brian Wenzel: Yeah, the one thing, Rob, let me just add a little bit of financial dimension to it, right? If you look at our entire portfolio, you know, our entire portfolio turns, you know, just under 2, right? $100-plus billion of receivables on the purchase volume. I think when you tear that apart into pieces, obviously the dual card and co-branded turn faster, private label turns a little bit slower. When you think about the pay later that we originate, we generally originate majority in the 6 to 12 months. You go really, you know, it is probably the biggest part. You then see 18 to 24 months. So, the turn is a little bit more consistent with, I'd say, private label.
Brian Wenzel: We do not do a lot of volume and don't really push anything below 6 months. We just, it's hard to make money, or it's really impossible to make money, most certainly in the pay in 4 and stuff like that. But think about it, it's gonna be something more similar to a private label when you think about that type of duration. But again, we do pay later longer than that, but the bulk is gonna be in the 6- to 12-month variety of installments.
We do not do a lot of volume and don't really push anything below 6 months. We just, it's hard to make money, or it's really impossible to make money, most certainly in the pay in 4 and stuff like that. But think about it, it's gonna be something more similar to a private label when you think about that type of duration. But again, we do pay later longer than that, but the bulk is gonna be in the 6- to 12-month variety of installments.
Brian Doubles: Okay, very interesting. Thank you.
Rob Wildhack: Okay, very interesting. Thank you.
Brian Wenzel: Thanks. Thanks, Rob. Have a good day.
Brian Wenzel: Thanks. Thanks, Rob. Have a good day.
Operator: Thank you. Our next question comes from Jeff Adelson with Morgan Stanley. Please go ahead, your line is open.
Operator: Thank you. Our next question comes from Jeff Adelson with Morgan Stanley. Please go ahead, your line is open.
[Analyst] (Morgan Stanley): Hey, good morning. Thanks for taking my questions. Maybe just to follow up on the credit actions or refinements, can you maybe just update us on your current posture at this point? Are you kind of continuing to lift off the prior tightening actions as you go along? Has that trend accelerated or maybe slowed at all from where you were earlier last year? And then Brian Wenzel, you mentioned the guide doesn't really include the additional broad-based credit refinements, and that this would really depend on credit performance as it comes through. I guess my question is, what maybe holds you back from opening up a bit more, given that you're already within that historical charge-off range you target? You're perhaps getting a little bit of a positive bias in short order with tax refunds.
Jeffrey Adelson: Hey, good morning. Thanks for taking my questions. Maybe just to follow up on the credit actions or refinements, can you maybe just update us on your current posture at this point? Are you kind of continuing to lift off the prior tightening actions as you go along? Has that trend accelerated or maybe slowed at all from where you were earlier last year? And then Brian Wenzel, you mentioned the guide doesn't really include the additional broad-based credit refinements, and that this would really depend on credit performance as it comes through. I guess my question is, what maybe holds you back from opening up a bit more, given that you're already within that historical charge-off range you target? You're perhaps getting a little bit of a positive bias in short order with tax refunds.
[Analyst] (Morgan Stanley): Is this maybe just, you know, some conservatism you prefer to see the delinquency improvement continue to come through before you maybe make a more definitive commitment there on the credit actions?
Is this maybe just, you know, some conservatism you prefer to see the delinquency improvement continue to come through before you maybe make a more definitive commitment there on the credit actions?
Brian Wenzel: Yeah, thanks for the question, Jeff. Let me unpack that a little bit. You know, first, let me remind you, you know, the credit actions that we took in 2023 and 2024 were around very specific types of items. So you think about student loans, think about personal loans, things like that, that we thought about ability to pay. So some of the actions that we've taken in 2025, in Q3 and Q4, were not necessarily measures you have in place, but there are other strategies that have had the effect of adding sales or expanding your credit aperture. So I wouldn't necessarily refer to it as we're just unwinding those, because I think those do stay.
Brian Wenzel: Yeah, thanks for the question, Jeff. Let me unpack that a little bit. You know, first, let me remind you, you know, the credit actions that we took in 2023 and 2024 were around very specific types of items. So you think about student loans, think about personal loans, things like that, that we thought about ability to pay. So some of the actions that we've taken in 2025, in Q3 and Q4, were not necessarily measures you have in place, but there are other strategies that have had the effect of adding sales or expanding your credit aperture. So I wouldn't necessarily refer to it as we're just unwinding those, because I think those do stay.
Brian Wenzel: The reason why we haven't done, you know, incremental guidance, just to be clear, in our guide, the actions that we took in the end part of 2025 are in the guide. No incremental broad-based changes are assumed for 2026 as we enter the year. The reason why, if you're asking me why, why aren't we taking loan more because we have a 5.65% loss rate, delinquency looks good. I think when you look across the credit cohorts, you know, the one thing that you'd see across all segments is the Synchrony PD issue, probability of default across credit grades is higher than historical norms. So we benefit a little bit more because of our line structures and our ability to maintain a lower line structure and control that exposure at default.
The reason why we haven't done, you know, incremental guidance, just to be clear, in our guide, the actions that we took in the end part of 2025 are in the guide. No incremental broad-based changes are assumed for 2026 as we enter the year. The reason why, if you're asking me why, why aren't we taking loan more because we have a 5.65% loss rate, delinquency looks good. I think when you look across the credit cohorts, you know, the one thing that you'd see across all segments is the Synchrony PD issue, probability of default across credit grades is higher than historical norms. So we benefit a little bit more because of our line structures and our ability to maintain a lower line structure and control that exposure at default.
Brian Wenzel: But most certainly, we're continuing to watch that probability of default, again, across all the credit grades. It's not into one part, so it's how it normalizes. And most certainly there's a focus, you know, we've been tighter at the bottom end, which you've seen, you know, our shift a little bit less into non-prime, is in that kind of right at the prime level, so that kind of advantage 650 to 700, and see where that customer who is feeling the effects of affordability, for a number of years. So we're watching that probability to default across not only us, but across the industry.
But most certainly, we're continuing to watch that probability of default, again, across all the credit grades. It's not into one part, so it's how it normalizes. And most certainly there's a focus, you know, we've been tighter at the bottom end, which you've seen, you know, our shift a little bit less into non-prime, is in that kind of right at the prime level, so that kind of advantage 650 to 700, and see where that customer who is feeling the effects of affordability, for a number of years. So we're watching that probability to default across not only us, but across the industry.
[Analyst] (Morgan Stanley): Okay, great. And as my follow-up, it's nice to hear of the success you're having in pay later, and I think you mentioned that 6,200 merchants. So I guess maybe a different way of asking some of the other questions that have been asked, is there a way to think about how your... you know, how material that pay later offering can be for your forward loan growth, either, you know, the mid-single digit growth you're looking for, and then talk about, is that something that could be 100 basis points or more of a pickup? And maybe just, you know, we've gotten some questions on progress of the pay later offering, at Amazon you launched earlier, last year. I think we did notice that it's not available at the checkout anymore.
Jeffrey Adelson: Okay, great. And as my follow-up, it's nice to hear of the success you're having in pay later, and I think you mentioned that 6,200 merchants. So I guess maybe a different way of asking some of the other questions that have been asked, is there a way to think about how your... you know, how material that pay later offering can be for your forward loan growth, either, you know, the mid-single digit growth you're looking for, and then talk about, is that something that could be 100 basis points or more of a pickup? And maybe just, you know, we've gotten some questions on progress of the pay later offering, at Amazon you launched earlier, last year. I think we did notice that it's not available at the checkout anymore.
[Analyst] (Morgan Stanley): Is there maybe just an update on how that program is going? Thanks.
Is there maybe just an update on how that program is going? Thanks.
Brian Wenzel: Yeah, sure, Jeff. Look, we can't get specific on any of our individual programs, but I, I would again just say, we're very happy with the results on the product so far across all of our partners.
Brian Doubles: Yeah, sure, Jeff. Look, we can't get specific on any of our individual programs, but I, I would again just say, we're very happy with the results on the product so far across all of our partners. We're seeing really strong growth in new accounts. Obviously, that's included in the loan guide. Again, it's a little bit about what Pay Later can deliver, but it's also that vehicle to bring in new customers and then migrate them over time. So it's obviously a big part of the strategy. It's included in the mid-single digits. And I don't know, Brian, if you want to give a little more color?
Brian Doubles: ... We're seeing really strong growth in new accounts. Obviously, that's included in the loan guide. Again, it's a little bit about what Pay Later can deliver, but it's also that vehicle to bring in new customers and then migrate them over time. So it's obviously a big part of the strategy. It's included in the mid-single digits. And I don't know, Brian, if you want to give a little more color?
Brian Wenzel: Yeah, I think the one thing, Jeff, to understand about that product in and of itself is the average ticket size and what that product is meant to do, and this is where Brian highlights the multi-product strategy, is the product fits a certain purchase type and a certain thing. You do not see as much large ticket going into that six- and 12-month with installment on a closed end. You generally see a smaller ticket size. So when you see a smaller ticket size, the relative contribution, when I think about the, you know, a company that's got over $100 billion of receivable, it's not gonna be as a meaningful driver to move the company's overall growth rate, but an important part for us to continue to expand penetration at our partners. So it's important to have that.
Brian Wenzel: Yeah, I think the one thing, Jeff, to understand about that product in and of itself is the average ticket size and what that product is meant to do, and this is where Brian highlights the multi-product strategy, is the product fits a certain purchase type and a certain thing. You do not see as much large ticket going into that six- and 12-month with installment on a closed end. You generally see a smaller ticket size. So when you see a smaller ticket size, the relative contribution, when I think about the, you know, a company that's got over $100 billion of receivable, it's not gonna be as a meaningful driver to move the company's overall growth rate, but an important part for us to continue to expand penetration at our partners. So it's important to have that.
Brian Wenzel: You know, today, we have a bigger ticket offering, right, relative to, you know, equal pay installments. It just sits inside a revolving account, which is what you see primarily in our home and auto business, or a little bit our lifestyle business, and health and wellness. So again, from a growth rate standpoint, again, given the denominator, you know, I'd sit back and say the smaller ticket doesn't move the growth rate as fast right now. Again, it's important to have it as part of a holistic offering to our partners.
You know, today, we have a bigger ticket offering, right, relative to, you know, equal pay installments. It just sits inside a revolving account, which is what you see primarily in our home and auto business, or a little bit our lifestyle business, and health and wellness. So again, from a growth rate standpoint, again, given the denominator, you know, I'd sit back and say the smaller ticket doesn't move the growth rate as fast right now. Again, it's important to have it as part of a holistic offering to our partners.
[Analyst] (Goldman Sachs): Great. Thank you.
Jeffrey Adelson: Great. Thank you.
Brian Wenzel: Thanks, Jeff.
Brian Wenzel: Thanks, Jeff.
Brian Doubles: Thanks, Jeff.
Brian Wenzel: Thanks, Jeff.
Operator: Thank you. Our next question comes from Brian Foran with Truist. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Brian Foran with Truist. Please go ahead. Your line is open.
[Analyst] (Truist): Hi. You've kind of touched on this throughout your comments, but just the decision on the guide to move from kind of the... And I know there's no standard the way you've done it, but generally, over time, you've given line items, and now you're giving an EPS range with a little bit less line item detail. Is the conclusion you're happy with where consensus is on an EPS basis, but you're flagging, you know, some of the line items might need to change as people think through these investments for growth? Or I don't want to lead the witness. Maybe you could just say, you know, why switch to an EPS range this year?
Brian Foran: Hi. You've kind of touched on this throughout your comments, but just the decision on the guide to move from kind of the... And I know there's no standard the way you've done it, but generally, over time, you've given line items, and now you're giving an EPS range with a little bit less line item detail. Is the conclusion you're happy with where consensus is on an EPS basis, but you're flagging, you know, some of the line items might need to change as people think through these investments for growth? Or I don't want to lead the witness. Maybe you could just say, you know, why switch to an EPS range this year?
Brian Wenzel: Yeah, thanks. Good morning, Brian, and thanks for the question. You know, this is an interesting, it's an interesting question on how we try to help analysts, you know, understand the results of our company. And I think to a large degree, Brian, to be honest with you, with a large number of analysts, there's quite a diversity in, even though we provided line item guidance, the outcomes on line items relative to the guidance, how people built their models.
Brian Wenzel: Yeah, thanks. Good morning, Brian, and thanks for the question. You know, this is an interesting, it's an interesting question on how we try to help analysts, you know, understand the results of our company. And I think to a large degree, Brian, to be honest with you, with a large number of analysts, there's quite a diversity in, even though we provided line item guidance, the outcomes on line items relative to the guidance, how people built their models.
Brian Wenzel: So effectively, we said, "Listen, the best way for you to understand and value our company, ultimately, at the end of the day, was to provide, as I sometimes call it, the cheat code on the test, which is what we think the EPS amount will be on the different line items." So it was more a factor of how do we try to get people to the best way to think about the performance of the company for 2026 than trying to get five line items right.
So effectively, we said, Listen, the best way for you to understand and value our company, ultimately, at the end of the day, was to provide, as I sometimes call it, the cheat code on the test, which is what we think the EPS amount will be on the different line items." So it was more a factor of how do we try to get people to the best way to think about the performance of the company for 2026 than trying to get five line items right.
[Analyst] (Truist): That's helpful. And I think you mentioned the mid-single-digit loan growth is gonna be a little bit more evident in the back half of the year. If that's right, what would you say are the one or two key markers we should watch for in the front half of the year that would show, you know, whether you're on track, above or below, tracking above or below, that kind of trajectory?
Brian Foran: That's helpful. And I think you mentioned the mid-single-digit loan growth is gonna be a little bit more evident in the back half of the year. If that's right, what would you say are the one or two key markers we should watch for in the front half of the year that would show, you know, whether you're on track, above or below, tracking above or below, that kind of trajectory?
Brian Wenzel: Yeah, you know, it's a great question, Brian. I think the first thing you have to look at is what's purchase volume, and what's that flow of volume that's coming into the system, number one. I think number two, you got to watch your average actives, and whether or not you see average active growth. And you think about sequential, whether it's purchase volume for average active, et cetera. So you can kind of step through, and say: Does the growth make sense, right? You know, again, we're optimistic about what we saw here in the first three weeks of January, but those are the kind, you know, two big mile markers I'd be looking at as you kind of come through them.
Brian Wenzel: Yeah, you know, it's a great question, Brian. I think the first thing you have to look at is what's purchase volume, and what's that flow of volume that's coming into the system, number one. I think number two, you got to watch your average actives, and whether or not you see average active growth. And you think about sequential, whether it's purchase volume for average active, et cetera. So you can kind of step through, and say: Does the growth make sense, right? You know, again, we're optimistic about what we saw here in the first three weeks of January, but those are the kind, you know, two big mile markers I'd be looking at as you kind of come through them.
Brian Wenzel: I mean, the payment rate will manifest itself ultimately in the turn of the portfolio and the receivables, but that's really... You won't really see that until the end of period. Again, each of the monthly delinquency reporting credit, you'll get a snapshot of what average loans do, and then, most certainly what end of period is.
I mean, the payment rate will manifest itself ultimately in the turn of the portfolio and the receivables, but that's really... You won't really see that until the end of period. Again, each of the monthly delinquency reporting credit, you'll get a snapshot of what average loans do, and then, most certainly what end of period is.
[Analyst] (Truist): If I could sneak in one last one, just on the tax refund thing. So is the conclusion that your best guess at the impacts is included in the guide, or to the extent there are benefits to your business from elevated tax refunds, that would be incremental to the guide?
Brian Foran: If I could sneak in one last one, just on the tax refund thing. So is the conclusion that your best guess at the impacts is included in the guide, or to the extent there are benefits to your business from elevated tax refunds, that would be incremental to the guide?
Brian Wenzel: Brian, I'm gonna let you deal with Kathryn for going beyond one extra question, but it is included in the guide.
Brian Wenzel: Brian, I'm gonna let you deal with Kathryn for going beyond one extra question, but it is included in the guide.
[Analyst] (Truist): Okay, thank you so much.
Brian Foran: Okay, thank you so much.
Brian Doubles: Have a good day, Brian.
Brian Doubles: Have a good day, Brian.
Operator: Thank you. And we have time for one more question. That question comes from Don Fandetti with Wells Fargo. Please go ahead. Your line is open.
Operator: Thank you. And we have time for one more question. That question comes from Don Fandetti with Wells Fargo. Please go ahead. Your line is open.
[Analyst] (Wells Fargo): Hi. Can you maybe just dig in a little bit on the Walmart partnership? I mean, obviously, that's going very well. Like, is this gonna be just a steady ramp-up in loan growth? Are there any milestones or, can you just maybe talk about how the rollout's going?
Don Fandetti: Hi. Can you maybe just dig in a little bit on the Walmart partnership? I mean, obviously, that's going very well. Like, is this gonna be just a steady ramp-up in loan growth? Are there any milestones or, can you just maybe talk about how the rollout's going?
Brian Wenzel: Yeah, look, Don, it's going incredibly well. You know, the program is fully launched in market, really strong early results. I mentioned fastest growth that we've ever seen in the de novo program. You know, there's a couple things that I would highlight as you think about it. First, it is a leading-edge program from a tech perspective, so we're fully leveraging the One Pay app, which is a great app. We're leveraging our API stack, so we're completely embedded with a digital experience. The entire experience is inside the application all the way through when you apply for credit, all the way through servicing. The second thing I'd highlight is it's got a very strong value prop on the card.
Brian Wenzel: Yeah, look, Don, it's going incredibly well. You know, the program is fully launched in market, really strong early results. I mentioned fastest growth that we've ever seen in the de novo program. You know, there's a couple things that I would highlight as you think about it. First, it is a leading-edge program from a tech perspective, so we're fully leveraging the One Pay app, which is a great app. We're leveraging our API stack, so we're completely embedded with a digital experience. The entire experience is inside the application all the way through when you apply for credit, all the way through servicing. The second thing I'd highlight is it's got a very strong value prop on the card.
Brian Wenzel: So Walmart+ members get unlimited 5% cash back at Walmart, 1.5% cash back everywhere else. That's a big improvement and a big lift compared to, you know, how we were running the program when we last had it. And we're seeing it convert a lot of Walmart+ members, which is really great. We've got really good digital in-store placement. You know, you'll see that if you're on walmart.com. You'll see it if you're in the stores. And overall, I'd say we just have really good alignment, an alignment through the deal structure. We're both incented to grow the program. So we couldn't be off to a better start, and we're really encouraged about what this is gonna do for growth, not just in 2026, but in the future.
So Walmart+ members get unlimited 5% cash back at Walmart, 1.5% cash back everywhere else. That's a big improvement and a big lift compared to, you know, how we were running the program when we last had it. And we're seeing it convert a lot of Walmart+ members, which is really great. We've got really good digital in-store placement. You know, you'll see that if you're on walmart.com. You'll see it if you're in the stores. And overall, I'd say we just have really good alignment, an alignment through the deal structure. We're both incented to grow the program. So we couldn't be off to a better start, and we're really encouraged about what this is gonna do for growth, not just in 2026, but in the future.
[Analyst] (Wells Fargo): Okay. Thanks a lot for that.
Don Fandetti: Okay. Thanks a lot for that.
Brian Wenzel: Thanks, Don.
Brian Wenzel: Thanks, Don.
Brian Doubles: Thanks, Don. Have a good day.
Brian Doubles: Thanks, Don. Have a good day.
Operator: Thank you. And this concludes our Q&A session, as well as Synchrony's earnings conference call. You may disconnect your line at this time, and have a wonderful day.
Operator: Thank you. And this concludes our Q&A session, as well as Synchrony's earnings conference call. You may disconnect your line at this time, and have a wonderful day.
