Q1 2026 Synchrony Financial Earnings Call

April 21, 2026

Speaker #1: Please stand by. Your program is about to begin. Good morning, and welcome to the Synchrony Financial First Quarter 2026 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 call is being recorded. Currently, all callers have been placed in listen-only mode. The call will be open 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 could 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, 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, and good morning, everyone. Synchrony started the year with strong momentum and delivered first-quarter financial results that included a record first-quarter purchase volume of $43 billion.

Speaker #3: Reflecting the enduring appeal of Synchrony's multi-product suite, customers engaged across our diversified portfolio, contributing to continued sequential improvement in average active account trends, higher spend per account across all five platforms, and 6% growth in total portfolio purchase volume compared to last year.

Speaker #3: At the platform level, diversified and value purchase volume grew 9%, primarily reflecting the impact of partner expansion. Digital platform purchase volume increased 8%, driven by strong customer response to enhanced product offerings and refreshed value propositions.

Speaker #3: Purchase volume and Lifestyle increased 7%, primarily driven by other apparel and goods and Luxury, partially offset by lower average active accounts. Health and Wellness purchase volume was 3% higher, primarily reflecting growth in Pet and Audiology.

Speaker #3: And purchase volume in Home and Auto was flat, generally reflecting partner expansion in Furniture and Electronics, offset by selective spend in Home Improvement and lower average active accounts.

Speaker #3: Synchrony's co-branded credit cards, including our Dual Cards, accounted for 51% of our total purchase volume in the first quarter and increased 20% versus last year.

Speaker #3: Driven by product upgrades, higher broad-based spend, and enhanced utility across these card programs. The mix of discretionary spend within our out-of-partner portfolio increased during the first quarter, making this the third consecutive quarter of year-on-year improvement.

Speaker #3: Additionally, the rate of discretionary spend growth continued to accelerate, outpacing non-discretionary spend growth, also for the third consecutive quarter. And even during the month of March, when fuel prices began to rise, this discretionary spend strength came in particular from categories like retail, entertainment, and electronics.

Speaker #3: And while spending on fuel was up significantly during March in our non-discretionary spend, total portfolio spend per account growth remained strong as consumers navigated the higher costs.

Speaker #3: Meanwhile, payment rate increased approximately 50 basis points compared to last year. Collectively, we believe these spend and payment trends are a testament to the efficacy of our prior credit actions and consistent credit discipline, as well as resilient consumer health supported by some early benefit from increased tax refunds and lower tax withholdings.

Speaker #3: Synchrony continued to execute across our key strategic priorities during the first quarter, adding or renewing more than 15 partners, including Indian Motorcycle, Harbor Freight, and Miracle-Ear.

Speaker #3: We renewed our partnership with Indian Motorcycle, America's first motorcycle company, founded in 1901, to offer flexible financing solutions through their nationwide dealer network. We also extended our relationship with Harbor Freight, America's number one tool store, with nearly 50 years in business and more than 1,600 locations nationwide.

Speaker #3: We provide private label credit card financing with the option of 5% back, or zero-interest equal payment installment loans. Our program with Miracle-Ear enables patients to pay for hearing devices and related services over time.

Speaker #3: Leveraging practice management software that optimizes the financing experience for both consumers and staff. Synchrony also continued to broaden distribution of CareCredit financing during the first quarter, through our expanded strategic partnerships with Planet DDS.

Speaker #3: As the preferred patient financing solution across all Planet DDS practice management platforms, CareCredit will be integrated across more than 2,500 Cloud9 orthodontic practices and more than 15,000 Denticon dental practices to improve patient access to treatment, while also supporting practice growth, operational efficiency, and better patient outcomes.

Speaker #3: And we're also delivering streamlined CareCredit experiences for pet families through our new partnership with both FIGO and Embrace Pet Insurance. Today, consumers can use CareCredit at approximately 85% of U.S.

Speaker #3: Vet locations and, now, approved pet insurance claims can be reimbursed directly as a credit to the consumer's CareCredit account after they pay for their pet's care using their CareCredit card.

Speaker #3: These partnerships extend CareCredit’s pet insurance reimbursement ecosystem to more than 1.7 million insured pets, and underscore the larger opportunity we have through our strategic partnership with Independence Pet Holdings.

Speaker #3: Together, we are making it easier for consumers to pay for and manage the cost of pet care. And lastly, we continue to enhance the utility of CareCredit by broadening its acceptance for eligible health and wellness purchases on Walmart.com.

Speaker #3: Complementing CareCredit's longstanding acceptance in-store across Walmart and Sam's Club locations nationwide, in addition to currently eligible health and wellness purchases, CareCredit cardholders can now use their card to make purchases across a wider selection of in-store and online product categories, including medical supplies and equipment, fitness products, and sleep essentials.

Speaker #3: This expanded collaboration with Walmart will enable us to empower more consumers with financial flexibility to purchase health and wellness products and services whenever and however the need arises.

Speaker #3: And as we look to the remainder of the year ahead, Synchrony's position: grow our existing partner programs and win new ones. Diversify our programs, products, and markets to reach and serve more consumers and more businesses across the country.

Speaker #3: Empower

Speaker #1: Our best-in-class experiences for all those we serve. I am proud to say that we are doing all of this while also earning the privilege of being ranked as the number one best company to work for in the U.S.

Speaker #1: By Fortune Magazine and Great place to Work in 2026 . Together , all of our incredible people at synchrony have built a high trust culture that makes us faster , bolder and better for the customers and partners who count on us every single day With that , I'll turn the call over to Brian to discuss our financial performance in greater detail Thanks , Brian , and good morning , everyone .

Speaker #1: Synchrony's first quarter financial performance delivered record first quarter purchase volume Driven by the combination of higher interest and fees and lower interest expense Interest and fees increased 2% , primarily driven by the impact of our PGP keys , partially offset by lower benchmark rates Interest expense decreased 11% , primarily due to lower benchmark rates Our first quarter net interest margin increased 76 basis points versus last year to 15.5% , reflecting three key drivers one a 47 basis point increase in our loan receivables yield , which was partially driven by the impact of our PGP keys and contributed approximately 39 basis points to our net interest margin Two a 44 basis point decline in our total interest bearing liabilities costs , which reflected the impact of lower benchmark rates and contributed approximately 35 basis points to our net interest margin and three a 76 basis point increase in the mix of loan receivables as a percent of interest earning assets versus last year , which contributed approximately 14 basis points to our net interest margin .

Speaker #1: These improvements were partially offset by a 69-basis-point reduction in our liquidity portfolio yield, which reduced our net interest margin by 12 basis points.

Speaker #1: The decline was driven by lower benchmark rates. Turning to the remainder of our P&L, our net charge-offs were $1.1 billion, or 4.31% of average loan receivables in the first quarter, and increased $175 million versus the prior year, primarily reflecting program performance, which included lower net charge-offs and the impact of our PGP. Key's provision for credit losses decreased $156 million to $1.3 billion.

Speaker #1: Our by $242 million decrease in net charge offs , partially offset by a $97 million reserve release in the prior year Other expense increased 6% to $1.3 billion , primarily driven by the costs related to technology investments and higher operational losses The first quarter efficiency ratio was 35.6% .

Speaker #1: Approximately 220 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA as program performance improved.

Speaker #1: Summarize Synchrony's first quarter results . We generated net earnings of $805 million , or $2.27 per diluted share . A return on average assets of 2.7% and return on tangible common equity of 24.5% and an 8% increase in tangible book value per share .

Speaker #1: Shifting focus to our key credit trends on slide eight, our portfolio's mix of low and mid payers remains well below pre-pandemic levels across all credit cohorts.

Speaker #1: During the first quarter, with the non-prime population outperforming relative to other credit cohorts. Since the end of 2023, we believe this continued trend in non-prime is reflective of our previous credit actions.

Speaker #1: We also continue to see normalization in the Prime and Super Prime cohorts, with some gradual shifting in the mix from above minimum to minimum payments at quarter-end.

Speaker #1: Both our 30 plus and 90 plus delinquency rates were generally in line with the prior year , and our net charge off rate was 5.42% in the first quarter , a decrease of 96 basis points from 6.38 in the prior year Collectively , these payment and credit trends underscore the efficacy of our previous credit actions and ongoing credit management strategies , as well as the resilience of our customers and portfolio .

Speaker #1: Amid an uncertain environment Finally , our allowance for credit losses as a percent of loan receivables was 10.42% , which increased approximately 36 basis points from 10.06% in the fourth quarter , in line with our seasonal trends and a decreased 45 basis points from 10.87 in the first quarter of 2025 .

Speaker #1: Turning to slide nine . Synchrony's funding capital and liquidity remain a foundational strength of our business . Synchrony grew . Our direct deposits by $3.1 billion and reduced broker deposits by $3.7 billion , compared to last year .

Speaker #1: During the first quarter , we issued $750 million of senior unsecured debt , at our five year credit spread . To date , and a final coupon of 4.95% and a 500,000,003 year secured public bond from synchrony card issuance Trust .

Operator: Good morning, and welcome to the Synchrony Financial Q1 2026 Earnings Conference Call. Please refer to the company's investor relations website for access to the earnings materials. Please be advised that today's conference call is being recorded. Currently, all callers have been placed in a listen-only mode.

Speaker #1: With the final coupon of 4.22%. As of March 31, deposits represented 83% of our total funding, with secured debt representing 9% and unsecured debt representing 8%.

Operator: The call will be open 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 #1: Total liquid assets decreased 4% to $22.8 billion and represented 18.8% of total assets, 72 basis points lower than last year. Now, focusing on our capital ratios, Synchrony ended the quarter with a CET1 ratio of 12.7%, a Tier One capital ratio of 13.9%, and a total capital ratio of 16%, each of which declined by approximately 50 basis points versus the prior year.

Kathryn Miller: Thank you, and good morning, everyone. Welcome to our Quarterly Earnings Conference Call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchrony.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 #1: And our tier one capital plus reserve ratio decreased to 24.1%, compared to 25.1% last year. Synchrony returned $1 billion to shareholders during the first quarter, which includes $900 million in share repurchases and $104 million in common stock dividends.

Kathryn Miller: Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During 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 #1: In addition, our board of directors approved a new share repurchase program of up to $6.5 billion of the company's common stock, which commenced in the second quarter of 2026 and changed from a prior share repurchase.

Speaker #1: The program does not have an expiration date. The new share repurchase program replaces the company's prior program, which was scheduled to expire on June 30, 2026, and had approximately $300 million remaining.

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 and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Speaker #1: The pace and amount of share repurchases are flexible and will be executed from time to time , subject to various factors , including capital levels , financial performance , market conditions , legal and regulatory requirements , and in accordance with our capital plans Finally , I'd like to discuss our outlook on slide ten .

Brian Doubles: Thanks, Katherine, and good morning, everyone. Synchrony started the year with strong momentum and delivered Q1 financial results that included record Q1 purchase volume of $43 billion, reflecting the enduring appeal of Synchrony's multi-product suite. Customers engaged across our diversified portfolio, contributing to continued sequential improvement in average active account trends, higher spend per account across all five platforms, and 6% growth in total portfolio purchase volume compared to last year. At the platform level, Diversified & Value purchase volume grew 9%, primarily reflecting the impact of partner expansion. Digital platform purchase volume increased 8%, driven by strong customer response to enhanced product offerings and refreshed value propositions. Lifestyle purchase volume increased 7%, primarily driven by other apparel, goods, and luxury, partially offset by lower average active accounts. Health and Wellness purchase volume was 3% higher, primarily reflecting growth in pet and audiology.

Speaker #1: We continue to expect accelerated growth in purchase volume and average active accounts without any further broad based credit refinements . As we move through the year The outcome should more than offset the impact of elevated payment rates to drive mid-single digit growth in ending loan receivables by year end .

Speaker #1: The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year. This will be driven by growth in our core portfolio, as well as a combination of both.

Speaker #1: Recently launched and soon to be launched programs , including Walmart one pay , Bob's Discount Furniture , RH and approximately 725 million of those commercial Co-brand loan receivables , which was added in early April .

Brian Doubles: At the platform level, Diversified & Value purchase volume grew 9%, primarily reflecting the impact of partner expansion. Digital platform purchase volume increased 8%, driven by strong customer response to enhanced product offerings and refreshed value propositions. Lifestyle purchase volume increased 7%, primarily driven by other apparel, goods, and luxury, partially offset by lower average active accounts. Health and Wellness purchase volume was 3% higher, primarily reflecting growth in pet and audiology.

Speaker #1: Net interest income is expected to grow in 2026, as a result of higher loan receivables. The impact of PBGC's continuing to build.

Speaker #1: And as we reduce our funding liabilities and costs, these trends will partially offset the lower late fee incidents. We expect delinquency and losses to follow.

Speaker #1: Normal seasonality through the year , with net charge offs peaking in the second quarter . We expect our net charge offs to be less than 5.5% for the full year , and we remain focused on our disciplined approach to underwriting our business and as program performance strengthens due to higher net interest income and lower losses compared to last year .

Brian Doubles: Purchase volume in home and auto was flat, generally reflecting partner expansion in furniture and electronics, offset by selective spend in home improvement and lower average active accounts. Synchrony's co-branded credit cards, including our Dual Cards, accounted for 51% of our total purchase volume in Q1 and increased 20% versus last year, driven by product upgrades, higher broad-based spend, and enhanced utility across these card programs. The mix of discretionary spend within our out-of-partner portfolio increased during Q1, making the third consecutive quarter of year-on-year improvement. Additionally, the rate of discretionary spend growth continued to accelerate, outpacing non-discretionary spend growth also for the third consecutive quarter, and even during the month of March when fuel prices began to rise. This discretionary spend strength came in particular from categories like retail, entertainment, and electronics.

Speaker #1: We continue to expect RSA to increase , but remain within our long term range of 4 to 4.5% of average receivables Lastly , we Remain focused on operating expense , discipline , while also investing in the long term potential of our business .

Brian Doubles: The mix of discretionary spend within our out-of-partner portfolio increased during Q1, making the third consecutive quarter of year-on-year improvement. Additionally, the rate of discretionary spend growth continued to accelerate, outpacing non-discretionary spend growth also for the third consecutive quarter, and even during the month of March when fuel prices began to rise. This discretionary spend strength came in particular from categories like retail, entertainment, and electronics.

Speaker #1: As a result , we continue to expect other expense growth to trend in line with loan receivables Putting all these elements together , synchrony remains on track to deliver between $9.10 and $9.50 in diluted earnings per share , while also executing across key strategic priorities to deliver consistent risk adjusted growth and strong capital generation .

Speaker #1: And we are well-positioned to return excess capital in an aggressive but prudent way. With that, I'll turn the call back over to Brian. Thanks, Brian.

Brian Doubles: While spending on fuel was up significantly during March in our non-discretionary spend, total portfolio spend per account growth remained strong as consumers navigated the higher costs. Meanwhile, payment rate increased approximately 50 basis points compared to last year. Collectively, we believe these spend and payment trends are a testament to the efficacy of our prior credit actions and consistent credit discipline, as well as resilient consumer health, supported by some early benefit from increased tax refunds and lower tax withholdings. Synchrony continued to execute across our key strategic priorities during Q1, adding or renewing more than 15 partners, including Indian Motorcycle, Harbor Freight, and Miracle-Ear. We renewed our partnership with Indian Motorcycle, America's first motorcycle company, founded in 1901 to offer flexible financing solutions through their nationwide dealer network.

Speaker #1: Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion. First, the consumer remains resilient, and the foundation of our portfolio is strong.

Speaker #1: Our consistent underwriting discipline , credit management strategies and portfolio performance have positioned us well for both the near and long term . Second , Synchrony's investments are driving results across our business and for the millions of consumers and hundreds of small and midsize businesses we serve across the country And third , because of the results we deliver , synchrony is generating growth at strong risk adjusted returns and robust capital , positioning us well to drive considerable long term value for our stakeholders .

Brian Doubles: Synchrony continued to execute across our key strategic priorities during Q1, adding or renewing more than 15 partners, including Indian Motorcycle, Harbor Freight, and Miracle-Ear. We renewed our partnership with Indian Motorcycle, America's first motorcycle company, founded in 1901 to offer flexible financing solutions through their nationwide dealer network.

Speaker #1: With that, I'll turn the call back to Kathryn to open the Q&A. That concludes our prepared remarks. We will now begin the Q&A session so that we can accommodate as many of you as possible.

Brian Doubles: We also extended our relationship with Harbor Freight, America's number one tool store with nearly 50 years in business and more than 1,600 locations nationwide, to provide private label credit card financing with the option of 5% back or 0 interest equal payment installment loans. Our program with Miracle-Ear enables patients to pay for hearing devices and related services over time, leveraging practice management software that optimizes the financing experience for both consumers and staff. Synchrony also continued to broaden distribution of CareCredit financing during Q1 through our expanded strategic partnerships with Planet DDS. As a preferred patient financing solution across all Planet DDS practice management platforms, CareCredit will be integrated across more than 2,500 Cloud 9 orthodontic practices and more than 15,000 Denticon dental practices to improve patient access to treatment while also supporting practice growth, operational efficiency, and better patient outcomes.

Speaker #1: 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 #1: 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 .

Speaker #1: Please limit yourself to one question and one follow-up question. We'll take our first question from Terry Ma with Barclays. Please go ahead.

Brian Doubles: Synchrony also continued to broaden distribution of CareCredit financing during Q1 through our expanded strategic partnerships with Planet DDS. As a preferred patient financing solution across all Planet DDS practice management platforms, CareCredit will be integrated across more than 2,500 Cloud 9 orthodontic practices and more than 15,000 Denticon dental practices to improve patient access to treatment while also supporting practice growth, operational efficiency, and better patient outcomes.

Speaker #2: Hi . Thank you . Good morning . I want to morning . Just wanted to start off with the loan Growth guide . A mid-single digits .

Speaker #2: Can you maybe just give a little more, a little bit more color on kind of what you're seeing in account acquisitions and just borrower behavior to give you confidence in that second half acceleration?

Speaker #3: Yeah . Thanks for the question , Terry . You know , as we look at the first quarter and how we exited , you saw clear acceleration of our purchase volume to a record high for the first quarter .

Brian Doubles: We're also delivering streamlined CareCredit experiences for pet families through our new partnership with both Figo and Embrace Pet Insurance. Today, consumers can use CareCredit at approximately 85% of US vet locations, and now approved pet insurance claims can be reimbursed directly as a credit to the consumer's CareCredit account after they pay for their pet's care using their CareCredit card. These partnerships extend CareCredit's pet insurance reimbursement ecosystem to more than 1.7 million insured pets and underscore the larger opportunity we have through our strategic partnership with Independence Pet Holdings. Together, we are making it easier for consumers to pay for and manage the cost of pet care. Lastly, we continued to enhance the utility of CareCredit by broadening its acceptance for eligible health and wellness purchases on walmart.com, complementing CareCredit's long-standing acceptance in store across Walmart and Sam's Club locations nationwide.

Speaker #3: 6% . You know , year over year . So we've seen that acceleration . You know , positively payment rates up from a credit 50 basis points .

Speaker #3: Some of that in the first quarter was a result of higher income tax refunds, which impacted the quarter by 14 basis points.

Speaker #3: But we feel good about the purchase volume coming through and we feel good about some of the discretionary purchases that we see as we as we go through as you kind of step out into the quarters again , what we're going to start to see is , is some of the the acquisitions , whether it's Walmart , one pay , Lowe's commercial , begin to build into the portfolio as we move into the back half of the year .

Brian Doubles: Together, we are making it easier for consumers to pay for and manage the cost of pet care. Lastly, we continued to enhance the utility of CareCredit by broadening its acceptance for eligible health and wellness purchases on walmart.com, complementing CareCredit's long-standing acceptance in store across Walmart and Sam's Club locations nationwide.

Speaker #3: And we saw strong new account originations of 15% in the first quarter of this year. So we see positive momentum as we exited out of the first quarter.

Speaker #3: For the first couple of weeks in April, we've seen that to be consistent with how we exited, to maybe slightly stronger from a purchase standpoint.

Speaker #3: So, we feel good that the consumer is engaging with our products and wanting our products—our products—as we move forward.

Brian Doubles: In addition to currently eligible health and wellness purchases, CareCredit cardholders can now use their card to make purchases across a wider selection of in-store and online product categories, including medical supplies and equipment, fitness products, and sleep essentials. This expanded collaboration with Walmart will enable us to empower more consumers with financial flexibility to purchase health and wellness products and services whenever and however the need arises. As we look to the remainder of the year ahead, Synchrony is positioned to grow our existing partner programs and win new ones, diversify our programs, products, and markets to reach and serve more consumers and more businesses across the country, and power best-in-class experiences for all those we serve.

Speaker #2: Got it . That's helpful . And then on the payment rate of 16.3% this quarter and it being , you know , over 100 basis points above your pre-pandemic average Has your product mix shift driven a permanent resetting of that payment rate , higher ?

Speaker #2: If that's the case, what does that mean for your long-term loss expectations and loan growth? Thank you.

Brian Doubles: As we look to the remainder of the year ahead, Synchrony is positioned to grow our existing partner programs and win new ones, diversify our programs, products, and markets to reach and serve more consumers and more businesses across the country, and power best-in-class experiences for all those we serve.

Speaker #3: Yeah . Thanks again Terry . So I don't think it's permanently reset . I think what you look at is two fundamental elements that have happened over the last couple of years , which , you know , has been driven by our credit actions .

Speaker #3: Number one, we have a higher credit quality in the portfolio, particularly in the higher super prime versus what we normally have.

Brian Doubles: I am proud to say that we are doing all of this while also earning the privilege of being ranked as the number 1 best company to work for in the US by Fortune Magazine and Great Place to Work in 2026. Together, all of our incredible people at Synchrony have built a high-trust culture that makes us faster, bolder, and better for the customers and partners who count on us every single day. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Speaker #3: So non-prime has gone down , which has a higher revolve rate . Number one . Number two , a mix in the portfolio as people pull back on discretionary purchases .

Speaker #3: The last couple of years , particularly in the home and auto space . And lifestyle . When you have those larger , you know , promotional purchases , those payment rates are generally , you know , sub sub 10% , probably around 8 or 9 .

Speaker #3: So when you remix the portfolio in the percent of promotional financings are down , you artificially bring the payment rate up . So that plus the acceleration of , of new accounts here in the last year or so , they tend to pay off at a slightly higher level .

Brian Wenzel: Thanks, Brian, and good morning, everyone. Synchrony's Q1 financial performance delivered record Q1 purchase volume, a positive and strong credit performance, and higher return on average assets and tangible common equity compared to last year. These results reflected Synchrony's disciplined execution as we focus on delivering consistent risk-adjusted returns amid evolving market conditions. Turning to our performance in more detail. Synchrony generated $43 billion of purchase volume, increased compared to last year. Ending loan receivables were flat at $100 billion, though we did achieve a positive inflection in ending loan receivables with an increase of approximately $477 million at the end of Q1.

Speaker #3: So it's more a phenomenon of a shift inside the portfolio as it relates to credit actions and to the return to growth.

Speaker #2: Got it. Thank you.

Speaker #3: Thanks, Terry. Have a good day.

Speaker #1: Thank you. We'll take our next question from Ryan Nash with Goldman Sachs.

Brian Wenzel: Turning to our performance in more detail. Synchrony generated $43 billion of purchase volume, increased compared to last year. Ending loan receivables were flat at $100 billion, though we did achieve a positive inflection in ending loan receivables with an increase of approximately $477 million at the end of Q1.

Speaker #4: Good morning everyone .

Speaker #3: Good morning, Ryan.

Speaker #4: Ryan, maybe to start on the EPS guide of $9.10 to $9.50, can you maybe just help us with how some of the moving pieces have shifted?

Speaker #4: It's clear credit's better with the guide below 550, but you know, what else would you say has shifted, given obviously we've seen rates moving?

Brian Wenzel: This reflected the impact of higher purchase volume, generally offset by the effects of elevated payment rates. The payment rate of 16.3% was approximately 50 basis points higher than last year and approximately 110 basis points above the pre-pandemic Q1 average, primarily reflecting shifts in portfolio and product mix, as well as the impacts of new portfolio seasoning, our previous credit actions, and higher average tax refunds. Net interest income increased 4% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense. Interest and fees increased 2%, primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates. Interest expense decreased 11%, primarily due to lower benchmark rates. Our Q1 net interest margin increased 76 basis points versus last year to 15.5%, reflecting three key drivers.

Speaker #4: And where do you think we're tracking within the range after a quarter? Thank you. And I have a follow-up.

Speaker #3: Yeah . Thanks , Ryan . So again , I think you started with net charge offs . I think as we guided at the start of the year that that our loss rate would be in line with our long term target Now it's below .

Speaker #3: So there's a little bit of favorability. You do have some, you know, payment rate pressure that we saw in the first quarter.

Brian Wenzel: Net interest income increased 4% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense. Interest and fees increased 2%, primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates. Interest expense decreased 11%, primarily due to lower benchmark rates. Our Q1 net interest margin increased 76 basis points versus last year to 15.5%, reflecting three key drivers.

Speaker #3: But if you take a step back and you say, okay, how do you think about the range for a second, and how do you move towards the higher end of the range?

Speaker #3: There's clearly a couple of things that can play into that . That equation . Number one , will you see a slowing in the payment rate , which will increase revolve rate , particularly on existing accounts that will drive more revenue towards your number one , two on the delinquency formation and performance of delinquencies , will that continue to improve or stay steady ?

Speaker #3: That improves . Most certainly . You have a little bit of headwind from from late fees , but most certainly you'll get potentially a reserve release .

Speaker #3: And net charge off benefits . Both of those offset to it . So so again , we're not guiding inside the range , but but clearly there are cases where you can get to the higher end of the range , even even if the payment rate stays higher and charge offs stay where they are from , from , you know , from , from our first quarter exit , you know , their lower end of the range .

Brian Wenzel: One, a 47 basis point increase in our loan receivables yield, which was partially driven by the impact of our PPPCs and contributed approximately 39 basis points to our net interest margin. Two, a 44 basis point decline in our total interest-bearing liabilities cost, which reflected the impact of lower benchmark rates and contributed approximately 35 basis points to our net interest margin. Three, a 76 basis point increase in the mix of loan receivables as a percent of interest-earning assets versus last year, which contributed approximately 14 basis points to our net interest margin. These improvements were partially offset by a 69 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 12 basis points. The decline was generally driven by lower benchmark rates. Turning to the remainder of our P&L.

Speaker #3: So again , I think we see pathways both ways . The , the question you're going to have to answer is what happens in the macro environment .

Brian Wenzel: Three, a 76 basis point increase in the mix of loan receivables as a percent of interest-earning assets versus last year, which contributed approximately 14 basis points to our net interest margin. These improvements were partially offset by a 69 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 12 basis points. The decline was generally driven by lower benchmark rates. Turning to the remainder of our P&L.

Speaker #3: The consumer has been incredibly resilient , both from a purchasing behavior pattern and a payment behavior pattern . So again , we'll have to watch , you know , the uncertainty as it relates to the geopolitical risks that exist today

Speaker #4: Gotcha . And then in terms of the buyback , you know , I guess , you know , how do we think about , you know , the , you know , pacing of the 6.5 billion , which is open ended ?

Speaker #4: Do you think it will be done differently than under the prior process? And I guess maybe just touch upon what are your expectations for capital relief under the Basel proposal?

Brian Wenzel: RSAs of $1.1 billion or 4.31% of average loan receivables in Q1 had 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 $156 million to $1.3 billion, primarily driven by a $242 million decrease in net charge-offs, partially offset by a $97 million reserve release in the prior year. Other expense increased 6% to $1.3 billion, primarily driven by the cost related to technology investments and higher operational losses. The Q1 efficiency ratio was 35.6%, approximately 220 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA as program performance improved.

Speaker #4: And how do you think about standard versus OBRA, which I'm assuming is more onerous on your business, but would be good to hear you flush it out.

Speaker #4: Thank you

Speaker #3: Yeah , yeah . So to parse that question , Ryan , when you think about the $6.5 billion , again , being open ended , we don't give quarterly cadence , but I would sit back and say is if you look back at , you know , the recent history and look at that cadence , that's , you know , probably what we'll end up doing , that's all dependent upon , you know , how the business performs macroeconomic environment , legal , regulatory , or capital plans , etc.

Brian Wenzel: Other expense increased 6% to $1.3 billion, primarily driven by the cost related to technology investments and higher operational losses. The Q1 efficiency ratio was 35.6%, approximately 220 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA as program performance improved.

Speaker #3: . There are a bunch caveats to that . But but again , looking back at history probably gives you a good cadence on how we step out under , under this plan .

Speaker #3: Again , this was designed really to align us now that we have a stress capital buffer of 250 basis points with our category , you know , for peers with regard to your question , in the Basil three proposal .

Brian Wenzel: To summarize Synchrony's Q1 results, we generated net earnings of $805 million, or $2.27 per diluted share, a return on average assets of 2.7%, and a return on tangible common equity of 24.5%, and an 8% increase in tangible book value per share. Shifting focus to our key credit trends on Slide 8. Our portfolio's mix of below-min payers remained well below pre-pandemic levels across all credit cohorts during Q1, with the non-prime population outperforming relative to other credit cohorts since the end of 2023. We believe this continued trend in non-prime is reflective of our previous credit actions. We also continue to see normalization in the prime and super prime cohorts, with some gradual shifting in the mix from above minimum to minimum payments.

Speaker #3: Under the standardized approach , you know , it is favorable to synchrony . So we absolutely appreciate the Fed's thoughtfulness of the rules here and their ability and willingness to listen to industry participants with regard to that , that rule .

Speaker #3: So when you look at the standardized approach , you know , we clearly get a benefit on the retail exposures , on on the risk weighting of assets and only a small negative as it goes to the AOC inclusion into that , that would generate if the rule was adopted .

Speaker #3: Exactly as it is, with no changes, you would see our go down and our capital get relief of 125 to 150 basis points.

Brian Wenzel: We believe this continued trend in non-prime is reflective of our previous credit actions. We also continue to see normalization in the prime and super prime cohorts, with some gradual shifting in the mix from above minimum to minimum payments. At quarter end, both our 30+ and 90+ delinquency rates were generally in line with the prior year, and our net charge-off rate was 5.42% in Q1, a decrease of 96 basis points from 6.38% in the prior year.

Speaker #3: If you step out and look at the enhanced risk based approach , that's a little bit more mixed . You do get more risk weighting with assets benefit , but you're now going to introduce a capital charge for the open to buy in the portfolio , which treats all those open buys .

Brian Wenzel: At quarter end, both our 30+ and 90+ delinquency rates were generally in line with the prior year, and our net charge-off rate was 5.42% in Q1, a decrease of 96 basis points from 6.38% in the prior year. Collectively, these payment and credit trends underscore the efficacy of our previous credit actions and ongoing credit management strategies, as well as the resilience of our customers and portfolio amid an uncertain environment. Finally, our allowance for credit losses as a percent of loan receivables was 10.42%, which increased approximately 36 basis points from 10.06% in Q4, in line with our seasonal trends, and it decreased 45 basis points from 10.87% in Q1 2025. Turning to slide 9, Synchrony's funding, capital, and liquidity remain a foundational strength of our business.

Speaker #3: The same way you're going to introduce operating risk into the equation . And then you have an impact on the DTA , which is when you combine all those and all those effects , it's a net negative for us .

Brian Wenzel: Collectively, these payment and credit trends underscore the efficacy of our previous credit actions and ongoing credit management strategies, as well as the resilience of our customers and portfolio amid an uncertain environment. Finally, our allowance for credit losses as a percent of loan receivables was 10.42%, which increased approximately 36 basis points from 10.06% in Q4, in line with our seasonal trends, and it decreased 45 basis points from 10.87% in Q1 2025. Turning to slide 9, Synchrony's funding, capital, and liquidity remain a foundational strength of our business.

Speaker #3: If the rule is adopted exactly as is . But I think we continue to study the rule . And I think we'll provide comments as well as industry participants in ways in which you can eliminate some of the double counts , particularly on the operating risk and maybe be a little bit more thoughtful on the open to buy and how that's converted to a risk weighted asset .

Speaker #4: Thanks for calling, Brian.

Speaker #3: Thanks, Ryan. Thanks, Ryan.

Speaker #1: Thank you. We'll go next to Sanjay Sakhrani with KBW. Please go ahead.

Speaker #5: Thank you . Maybe Brian Wenzel , if we could just follow up on the earnings guide questions . Just and the commentary when we look at sort of credit doing better and loan growth sort of still remaining the same , is it that the EPS remaining stable ?

Brian Wenzel: Synchrony grew our direct deposits by $3.1 billion and reduced broker deposits by $3.7 billion compared to last year. During Q1, we issued $750 million of senior unsecured debt at our tightest five-year credit spread to date and a final coupon of 4.95% and a $500 million three-year secured public bond from the Synchrony Card Issuance Trust with a final coupon of 4.22%. As of 31 March, deposits represented 83% of our total funding, with secured debt representing 9% and unsecured debt representing 8%. Total liquid assets decreased 4% to $22.8 billion and represented 18.8% of total assets, 72 basis points lower than last year. Now, focusing on our capital ratios.

Speaker #5: Is it that your expectation on yield has changed in some way lower or or maybe you could just flip that because it would seem like there's sort of you're moving towards the higher end of the range with the credit coming in better .

Speaker #3: Yeah . Thanks for the question , Sanjay . Again , I think if you go back to what I said back in January and I said kind of coming through here are our five and a half to 6% .

Speaker #3: Really, we're trying to give it a position of stability as it relates to the guidance. I think as you look at it now, being less than 5.5%.

Brian Wenzel: Total liquid assets decreased 4% to $22.8 billion and represented 18.8% of total assets, 72 basis points lower than last year. Now, focusing on our capital ratios. Synchrony ended the quarter with a CET1 ratio of 12.7%, a Tier 1 capital ratio of 13.9%, and a total capital ratio of 16%, each of which declined by approximately 50 basis points versus the prior year. Our Tier 1 capital plus reserve ratio decreased to 24.1% compared to 25.1% last year.

Speaker #3: I don't think there's a material difference in the way in which we thought about credit at the end of January and the way we think about credit today.

Speaker #3: So I think you may be overweighting that change relative to , to , to our guide .

Brian Wenzel: Synchrony ended the quarter with a CET1 ratio of 12.7%, a Tier 1 capital ratio of 13.9%, and a total capital ratio of 16%, each of which declined by approximately 50 basis points versus the prior year. Our Tier 1 capital plus reserve ratio decreased to 24.1% compared to 25.1% last year. Synchrony returned $1 billion to shareholders during Q1, which includes $900 million in share repurchases and $104 million in common stock dividends. In addition, our board of directors approved a new share repurchase program of up to $6.5 billion of the company's common stock, which commenced in Q2 2026, and, in a change from our prior share repurchase programs, does not have an expiration date. The new share purchase program replaces the company's prior program, which was scheduled to expire on 30 June 2026, and had approximately $300 million remaining.

Speaker #5: Got it . All right . Thank you . And then maybe just more of an elaboration on the health of the consumer . I'm just trying to think about the geopolitical events that are happening .

Speaker #5: The impact on fuel price . You guys talked a little bit about Brian Doubles . You talked about you're seeing early benefits of tax refunds .

Brian Wenzel: Synchrony returned $1 billion to shareholders during Q1, which includes $900 million in share repurchases and $104 million in common stock dividends. In addition, our board of directors approved a new share repurchase program of up to $6.5 billion of the company's common stock, which commenced in Q2 2026, and, in a change from our prior share repurchase programs, does not have an expiration date. The new share purchase program replaces the company's prior program, which was scheduled to expire on 30 June 2026, and had approximately $300 million remaining.

Speaker #5: I'm just curious if you could just sort of list how those are impacting the consumer. I mean, where are we with the tax refunds?

Speaker #5: Like is there more to come in the second quarter ? Maybe you could just help us think about the assumptions you're making and sort of where we are .

Speaker #5: Thanks .

Speaker #3: Yeah , I'll start on that one . Sanjay . Look , I think the consumer is still in pretty good shape , very consistent over the past few quarters .

Speaker #3: And when you look at spending patterns , credit continues to outperform our expectations . So I think the macro environment is still pretty constructive , strong labor market .

Speaker #3: You do have the higher tax refunds when you get into that, and you've got some watch items. You know, we're watching inflation very closely.

Brian Wenzel: The pace and amount of share repurchases are flexible and will be executed from time to time subject to various factors, including capital levels, financial performance, market conditions, legal and regulatory requirements, and in accordance with our capital plans. Finally, I'd like to discuss our outlook on slide 10. We continue to expect accelerated growth in purchase volume and average active accounts without any further broad-based credit refinements as we move through the year. The outcome should more than offset the impact of elevated payment rates to drive mid-single-digit growth in ending loan receivables by year-end. The rate of receivables growth should follow seasonality and accelerate as we move into H2.

Speaker #3: Higher gas prices, other factors that I think are creating some uncertainty out there with consumers. But, you know, they really seem to be looking past it at this point.

Speaker #3: We don't see it impacting spend . You know you saw spend for us accelerate really nicely this quarter . You look at the platforms .

Speaker #3: DMV was up 9% . Digital is up 8% . Lifestyle up 7% . You know , that's indicative of one . I think our product suite , but also a pretty healthy , resilient consumer .

Brian Wenzel: The outcome should more than offset the impact of elevated payment rates to drive mid-single-digit growth in ending loan receivables by year-end. The rate of receivables growth should follow seasonality and accelerate as we move into H2. This will be driven by growth in our core portfolio, as well as a combination of both recently launched and soon-to-be-launched programs, including Walmart OnePay, Bob's Discount Furniture, RH, and approximately $725 million of Lowe's commercial co-branded loan receivables, which was added in early April.

Speaker #3: So , you know , there's a lot of what I would call noise out there right now and things that we're watching and tracking , you know , really carefully .

Speaker #3: But at this point , you know , whether you're looking at spend patterns or you're looking at credit performance and early stage , late stage everything points to a pretty resilient consumer .

Brian Wenzel: This will be driven by growth in our core portfolio, as well as a combination of both recently launched and soon-to-be-launched programs, including Walmart OnePay, Bob's Discount Furniture, RH, and approximately $725 million of Lowe's commercial co-branded loan receivables, which was added in early April. Net interest income is expected to grow in 2026 as a result of higher loan receivables, the impact of PPPCs continuing to build, and as we reduce our funding liabilities costs. These trends will partially offset the lower late fee incidence. We expect delinquency and losses to follow normal seasonality through the year, with net charge-offs peaking in Q2. We expect our net charge-offs to be less than 5.5% for the full year, and we remain focused on our disciplined approach to underwriting our business.

Speaker #3: I know, if you want to add on tax refunds... Yeah, let me just add some color, both on tax and then on gas.

Speaker #3: Sanjay . So first on tax refunds , you know , the tax refunds are slightly lower than our expectations . Low end of the range for us .

Brian Wenzel: Net interest income is expected to grow in 2026 as a result of higher loan receivables, the impact of PPPCs continuing to build, and as we reduce our funding liabilities costs. These trends will partially offset the lower late fee incidence. We expect delinquency and losses to follow normal seasonality through the year, with net charge-offs peaking in Q2. We expect our net charge-offs to be less than 5.5% for the full year, and we remain focused on our disciplined approach to underwriting our business.

Speaker #3: We thought it would be around $500, $150. And the way we've seen that, it hasn't had a material effect on our book.

Speaker #3: We've seen the most impact when we look at payment rate and we lag payment rate to the refunds. There's about a 14 basis point impact in the quarter from higher payment rate in the quarter related to tax refunds.

Speaker #3: You know, you hit on a good point where, in the next couple of weeks, you tend to see a little bit higher refunds from people who file closer to the April 15th deadline.

Brian Wenzel: As program performance strengthens due to higher net interest income and lower losses compared to last year, we continue to expect RSAs to increase but remain within our long-term range of 4% to 4.5% of average receivables. Lastly, we remain focused on operating expense discipline while also investing in the long-term potential of our business. As a result, we continue to expect other expense growth to trend in line with loan receivables. Putting all these elements together, Synchrony remains on track to deliver between $9.10 and $9.50 in diluted earnings per share, while also executing across key strategic priorities to deliver consistent risk-adjusted growth and strong capital generation. We are well-positioned to return excess capital in an aggressive but prudent way. With that, I'll turn the call back over to Brian. Thanks, Brian.

Speaker #3: So that refund amount could , could creep up a little bit . But we didn't see on week on week . When you look at it , we did not see any real change in purchasing behavior pattern .

Speaker #3: When I look at the depository side of the business, we saw lower inflows and lower outflows. But that trend week on week with returns has mirrored for the last three years.

Speaker #3: So I think when we look at refunds , there hasn't been a material impact onto the business . When you look at gas prices , if you look at the average transaction value for gas in March It's up 17% sequentially .

Brian Wenzel: As a result, we continue to expect other expense growth to trend in line with loan receivables. Putting all these elements together, Synchrony remains on track to deliver between $9.10 and $9.50 in diluted earnings per share, while also executing across key strategic priorities to deliver consistent risk-adjusted growth and strong capital generation. We are well-positioned to return excess capital in an aggressive but prudent way. With that, I'll turn the call back over to Brian.

Speaker #3: February to March of this year, and up 10% year over year. But we haven't seen any change in the frequency. It's actually up slightly, to be honest with you.

Speaker #3: Year over year on frequency of gas purchases . And we haven't seen any pullback as it relates to gas . So at this point , I think the consumer is probably annoyed but they haven't changed as relates to that spending .

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, the consumer remains resilient, and the foundation of our portfolio is strong. Our consistent underwriting discipline, credit management strategies, and portfolio performance have positioned us well for both the near and long term.

Brian Wenzel: Before I turn the call over to Q&A, I'd like to leave you with three key takeaways from today's discussion. First, the consumer remains resilient, and the foundation of our portfolio is strong. Our consistent underwriting discipline, credit management strategies, and portfolio performance have positioned us well for both the near and long term. Second, Synchrony's investments are driving results across our business and for the millions of consumers and hundreds of thousands of small and mid-sized businesses we serve across the country. Third, because of the results we deliver, Synchrony is generating growth at strong risk-adjusted returns and robust capital, positioning us well to drive considerable long-term value for our stakeholders. With that, I'll turn the call back to Kathryn to open the Q&A.

Speaker #5: Thank you . Very helpful .

Speaker #3: Thanks. Thanks, Sanjay. Have a good day.

Speaker #1: Thank you. We'll go next to Darrin Peller with Wolfe Research. Please go ahead.

Speaker #6: Hey , guys . Thanks . Can we just start on expenses ? Just giving . It grew 8% on adjusted basis in first quarter .

Brian Doubles: Second, Synchrony's investments are driving results across our business and for the millions of consumers and hundreds of thousands of small and mid-sized businesses we serve across the country. Third, because of the results we deliver, Synchrony is generating growth at strong risk-adjusted returns and robust capital, positioning us well to drive considerable long-term value for our stakeholders. With that, I'll turn the call back to Kathryn to open the Q&A.

Speaker #6: And your guidance appears to imply expense growth decelerates throughout the year , even as receivables growth improves . So much of that is due to upfront investment in new program , adds , rolling off or any other color , any expense .

Speaker #6: That would be great .

Speaker #3: Yeah . Thanks , Darren . Good morning . You know the expense , you know , there are two . What I'd say items I'd point you to inside the quarter .

Speaker #3: Number one is slightly higher information technology expense that goes in there. There are two components that are in there. Number one is the association fees that we pay to Mastercard and Visa.

Kathryn Miller: That concludes our prepared remarks. We will now begin the Q&A session. 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 #3: So, on a volume basis, with volume being particularly in the co-brand space, you know, we see slightly higher expense—that should continue on for the year.

Speaker #3: And then you have some information technology investments that we're making , whether it's cloud and the like . And again , that will probably continue on the other item that you see is up is in the other , which relates to some operational losses , which I think is a little bit more idiosyncratic in the first quarter and should should reduce down as we move forward .

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 Terry Ma with Barclays. Please go ahead.

Speaker #3: So , so again , I think when you think about the run rate of expense dollars , there probably about the same . But again , you get a step up as assets come through and get some leverage in the back half of the year .

Terry Ma: Hi. Thank you. Good morning.

Brian Wenzel: Morning, Terry.

Terry Ma: Morning. Just wanted to start off with the loan growth guide of mid-single digits. Can you maybe just give a little bit more color on what you're seeing in account acquisitions and just borrower behavior to give you confidence in that H2 acceleration?

Speaker #6: Okay . All right . That's helpful . Thanks . And just just for my follow up , I want to touch on AI and for a moment , just maybe you guys can give us more color on any incremental investments you've been making around both the AI side and the efficiencies in the business .

Brian Wenzel: Yeah, thanks for the question, Terry. As we look at Q1 and how we exited, you saw a clear acceleration of our purchase volume to a record high for Q1, 6% year over year. We've seen that acceleration positively. Payment rates up from a credit perspective of 50 basis points. Some of that in Q1 was a result of higher income tax refunds, which impacted the quarter by 14 basis points. We feel good about the purchase volume coming through, and we feel good about some of the discretionary purchases that we see as we go through. As you step out into the quarters, again, what we're going to start to see is some of the acquisition, whether it's Walmart, OnePay, Lowe's Commercial, begin to build into the portfolio as we move into H2.

Brian Wenzel: Yeah, thanks for the question, Terry. As we look at Q1 and how we exited, you saw a clear acceleration of our purchase volume to a record high for Q1, 6% year-over-year. We've seen that acceleration positively. Payment rates up from a credit perspective of 50 basis points. Some of that in Q1 was a result of higher income tax refunds, which impacted the quarter by 14 basis points.

Speaker #6: I know your efforts have been effectively flat since 2023, but any early signs of evidence where you might be able to even create more efficiencies on that front? And then, on the tech side, also just incremental investments being made over the past couple of quarters to ensure that your placement on choice at the point of sale stays as high as it should be for Synchrony.

Speaker #6: And its merchant partners .

Speaker #3: Yeah , it's a great question . I'll start with the second piece of that , because I actually think this is the more important of the two , which is around agentic commerce .

Brian Wenzel: We feel good about the purchase volume coming through, and we feel good about some of the discretionary purchases that we see as we go through. As you step out into the quarters, again, what we're going to start to see is some of the acquisition, whether it's Walmart, OnePay, Lowe's Commercial, begin to build into the portfolio as we move into H2.

Speaker #3: You know , it's a big area of focus for us . You know , I think we're moving very quickly here . We've got hopefully first mover advantage .

Speaker #3: And, like you said, this is going to fundamentally change how consumers discover new products, how they research reviews, and ultimately purchase.

Brian Wenzel: We saw strong new account originations of 15% in Q1 of this year. We see positive momentum as we exited out of Q1. For the first couple of weeks in April, we've seen that to be consistent with how we exited to maybe slightly stronger from a purchase volume standpoint. We feel good that the consumer's engaging with our products and wanting our products as we move forward.

Speaker #3: It's still early . We're working with all the top companies to ensure that as that purchasing path changes , our financing offers , our products are embedded in that experience .

Speaker #3: So there's still a lot that is unknown here in terms of how this could play out . You know , one one scenario , which is probably the most prevalent right now , is that , you know , when a consumer researches a product inside of the the AI platform to complete the purchase , it will still go back to the merchant site .

Terry Ma: Got it. That's helpful. Then on the payment rate of 16.3% this quarter, and it being over 100 basis points above your pre-pandemic average, has your product mix shift driven a permanent resetting of that payment rate higher? If that's the case, what does that mean for your long-term loss expectations and loan growth? Thank you.

Speaker #3: We're already embedded there . So that's kind of the easier of the two use cases . I think the second one , which is bound to happen at some point , is that the purchase actually gets completed inside of the AI platform , and that's where you know , as you indicated , it's really important that that we're in there .

Brian Wenzel: Yeah. Thanks again, Terry. I don't think it's permanently reset. I think what you look at is two fundamental elements that have happened over the last couple of years, in which has been driven by our credit actions. Number one, we have a higher credit quality into the portfolio, particularly into the higher super prime versus what we normally have. Non-prime has gone down, which has a higher revolve rate, number one. Number two, you see a mix in the portfolio as people pulled back on discretionary purchases the last couple of years, particularly in the home and auto space and lifestyle. When you have those larger promotional purchases, those payment rates are generally sub 10%, probably around 8% or 9%. When you remix the portfolio and the percent of promotional financings are down, you artificially bring the payment rate up.

Speaker #3: Our financing options are present in that checkout process. The good news is our partners have a huge incentive to make sure that that's the case.

Speaker #3: So as they're talking to all of the AI companies about how this is going to work , they're pulling us in and saying , okay , it's imperative that synchronize , you know , cards , are cards with them are present .

Brian Wenzel: Number two, you see a mix in the portfolio as people pulled back on discretionary purchases the last couple of years, particularly in the home and auto space and lifestyle. When you have those larger promotional purchases, those payment rates are generally sub 10%, probably around 8% or 9%.

Speaker #3: And an option for the consumer to purchase because they want to make sure that those transactions run on our rails , that the valve prop is protected , that the consumer benefits .

Speaker #3: And it feels very similar to if they were purchasing on the merchant site. So that's kind of the agenda piece of it.

Speaker #3: The , the gen AI or what I would call it more the productivity and efficiency piece . We've been on this for , you know , well over a year at this point .

Brian Wenzel: When you remix the portfolio and the percent of promotional financings are down, you artificially bring the payment rate up. That, plus the acceleration of new accounts here in the last year or so, they tend to pay off at a slightly higher level. It's more a phenomenon of a shift inside the portfolio as it relates to credit actions and to the return to growth.

Brian Wenzel: That, plus the acceleration of new accounts here in the last year or so, they tend to pay off at a slightly higher level. It's more a phenomenon of a shift inside the portfolio as it relates to credit actions and to the return to growth.

Speaker #3: Big opportunity for us . You know , you referenced holding headcount flat . I think the bigger benefit , frankly , in the near term is just speed to market .

Speaker #3: Like , you know , we're using this , our coders are using it . 90% of professional workforce is using it across all functions , across all platforms .

Terry Ma: Got it. Thank you.

Brian Wenzel: Thanks, Terry. Have a good day.

Speaker #3: And they're getting real economies of scale . And so , you know , I think the , the early returns are this is going to help us be a lot faster , a lot more efficient , but also free up and redeploy our resources to things that are frankly , more challenging , more strategic .

Operator: Thank you. We'll take our next question from Ryan Nash with Goldman Sachs.

Ryan Nash: Good morning, everyone.

Brian Wenzel: Hey, Ryan.

Terry Ma: Good morning, Ryan.

Ryan Nash: Brian, maybe let's start on the EPS guide of $9.10 to $9.50. Can you maybe just help us with how some of the moving pieces have shifted? It's clear credit's better with the guide below 5.50%. What else would you say has shifted, given obviously we've seen rates moving, and where do you think we're tracking within the range after a quarter? Thank you. I have a follow-up.

Speaker #3: And , you know , frankly , more fun to work on . So I'm very optimistic about , you know , how we're how we're operating here .

Speaker #3: I think we're off and running, and there's big benefits in the future.

Speaker #6: Okay , that's great to hear . Thanks , man . Thanks , guys .

Speaker #3: Yeah, thanks. Thanks, Darren.

Speaker #1: Thank you. We'll take our next question from Rick Shane with J.P. Morgan. Please go ahead.

Brian Wenzel: Yeah. Thanks, Ryan. Again, I think you started with net charge-offs. I think as we guided at the start of the year that our loss rate would be in line with a long-term target. Right now it's slightly below, so there's a little bit of favorability. You do have some payment rate pressure that we saw in Q1. If you take a step back and you say, okay, how do you think about the range for a second, and how do you move towards the higher end of the range? There's clearly a couple things that can play into that equation. Number one, will you see a slowing of the payment rate, which will increase the pay rate, particularly on existing accounts that will drive more revenue towards you, number one?

Speaker #6: Hey guys, thanks for taking my questions. Look, you mentioned strength in luxury, strength in discretionary, and also mentioned a 17% increase at the pump on a ticket basis. To follow up on Sanjay's question, can you help us understand spending and credit performance right now based on both income level and FICO score?

Speaker #6: Realizing that, their difference—are you seeing divergence in the portfolio based upon sort of borrower category?

Speaker #3: Yeah . Thanks for the question , Shane . So when you go back , you know , one of the key things we talked about on this call has been payment rate .

Brian Wenzel: Two, on the delinquency formation and performance of delinquencies, will that continue to improve or stay steady? If it improves, most certainly you have a little bit of headwind from late fees, but most certainly you'll get potentially a reserve release in net charge-off metrics. Both of those two items have an RSA offset to it. Again, we're not guiding inside the range, but clearly there are cases where you can get to the higher end of the range, even if the payment rates stayed higher, and charge-offs stay where they are from our Q1 exit. You get a lower end of the range. Again, I think we see pathways both ways. The question you're going to have to answer is what happens in the macro environment? The consumer's been incredibly resilient, both from a purchasing behavior pattern and a payment behavior pattern.

Speaker #3: And when you look at payment rate , by credit cohort , I'm sorry , by credit . Yeah . Credit cohort . You see strength coming in at 787 80 plus .

Speaker #3: That is up the largest . As you look at that piece of it . The next group is then the the non-prime that is up and then the middle at six 57 , 20 and 722 .

Speaker #3: 780 is performing about equally . So again , you see the top end continuing to pull up , which goes back to the mix shift .

Speaker #3: I indicated earlier on the call . When you look at it by behavioral pattern inside of that , you do see a little bit of shift as it relates into pay , but that's really getting offset by by , you know , between A and statement pay .

Brian Wenzel: Again, we'll have to watch the uncertainty as it relates to the geopolitical risks that exist today.

Speaker #3: And when you look at it by cohort , then again , underneath that , in that most people are paying pay or full pay .

Ryan Nash: Got you. In terms of the buyback I guess how do we think about the pacing of the $6.5 billion, which is open-ended? Do you think it'll be done differently than under the prior process? I guess maybe just touch upon what are your expectations for capital relief under the Basel proposal, and how do you think about standard versus ERBA, which I'm assuming is more onerous on your business, but it'd be good to hear you flesh it out. Thank you.

Speaker #3: Again, the bottom end is holding firm with regard to that min pay. And really, where you see more min pay happening is in the prime segment between 650 and 780.

Speaker #3: So again , I think we see the middle moving a little bit here . But again , the high end is continuing to pull through when we get generationally , you know , again , generations in that high end cohort are continuing to pull the spend .

Speaker #3: But slightly higher payment rates, particularly at the high end of the portfolio.

Brian Wenzel: Yeah. To parse that question, Ryan, when you think about the $6.5 billion, again, being open-ended, we don't give quarterly cadence. What I'd sit back and say is if you look back at the recent history and look at that cadence, that's probably what we'll end up doing. That's all dependent upon how the business performs, macroeconomic environment, legal, regulatory, our capital plans, et cetera. There are a bunch of caveats to that. Again, looking back at history probably gives you a good cadence on how we step out under this plan. Again, this was designed really to align us now that we have a stress capital buffer of 250 basis points with our Category IV peers.

Speaker #6: Got it. Super interesting. Thank you, Brian.

Speaker #3: Thanks , sir . Thanks , Rick . Have a good day .

Speaker #1: Thank you. We'll go next to Mahir with UBS. Please go ahead.

Speaker #7: Hi . Thanks I think that's me . Okay . I'll just start with maybe just talking about average accounts for a second . You know , they've been declining for six quarters here .

Brian Wenzel: Again, looking back at history probably gives you a good cadence on how we step out under this plan. Again, this was designed really to align us now that we have a stress capital buffer of 250 basis points with our Category IV peers. With regard to your question on the Basel III proposal, under the standardized approach it is favorable to Synchrony, so we obviously appreciate the Fed's thoughtfulness of re-proposing the rules here and their ability and willingness to listen to industry participants with regard to that rule.

Speaker #7: I think some of that is just a deliberate byproduct of your previous credit restrictions . But I had a two part question on that .

Speaker #7: The first was just , are you seeing any shifts in consumer engagement with programs ? They're and may relatedly , we've seen a little bit of an increase in loyalty costs .

Brian Wenzel: With regard to your question on the Basel III proposal, under the standardized approach it is favorable to Synchrony, so we obviously appreciate the Fed's thoughtfulness of re-proposing the rules here and their ability and willingness to listen to industry participants with regard to that rule. When you look at the standardized approach, we clearly get a benefit on the retail exposures or on the risk weighting of assets, and only a small negative as it goes to the AOCI inclusion into that. If the rule was adopted exactly as is with no changes, you would see our RWAs go down and our capital get relief of 125 to 150 basis points. If you step out and look at the expanded risk-based approach, that's a little bit more mixed.

Speaker #7: So is that, like you, just readjusting programs to see if you can drive a little bit more volume there? Or is it just the Walmart and some of the other co-brand programs picking up speed in the loyalty costs?

Brian Wenzel: When you look at the standardized approach, we clearly get a benefit on the retail exposures or on the risk weighting of assets, and only a small negative as it goes to the AOCI inclusion into that. If the rule was adopted exactly as is with no changes, you would see our RWAs go down and our capital get relief of 125 to 150 basis points. If you step out and look at the expanded risk-based approach, that's a little bit more mixed.

Speaker #3: Yeah . Thanks for the question . I'm glad you didn't change firm's , by the way , as well . But but on the active account , the first part of your question , that the loan receivables , you should see that invert right .

Speaker #3: As we've accelerated new accounts and they begin to engage into the portfolio . So again , trail's a little bit , but but you will see that inversion happen probably in the middle part of this year .

Speaker #3: So so that's one I think when you get to the loyalty question again , the couple things one , we've enhanced certain value prop propositions last year on some of the cards that drives a slightly higher loyalty cost .

Brian Wenzel: You do get more risk-weighting with certain assets benefit, but you're now going to introduce a capital charge for the open to buy in the portfolio, which treats all those open to buys the same way. You're going to introduce operational risk into the equation, and then you have an impact on the DTA, which is when you combine all those effects, it's a net negative for us. If the rule is adopted exactly as is. I think we continue to study the rule, and I think we'll provide comments as well as industry participants in ways in which you can eliminate some of the double count, particularly on the operational risk, and maybe be a little bit more thoughtful on the open to buy and how that's converted to a risk-weighted asset. Thanks for the call, Brian. Thanks, Ryan. Thanks, Ryan.

Speaker #3: And then , you know , to a large degree , what happens when you launch some new programs , you are going to see higher loyalty costs in some of the most engaged people take up that product , and they tend to spend in store , which has a higher value proposition for our partners and merchants than it does in the world .

Brian Wenzel: If the rule is adopted exactly as is. I think we continue to study the rule, and I think we'll provide comments as well as industry participants in ways in which you can eliminate some of the double count, particularly on the operational risk, and maybe be a little bit more thoughtful on the open to buy and how that's converted to a risk-weighted asset.

Speaker #3: And that's that's just a phenomenal , you know , a byproduct of how the portfolio seasons when you add those , those new accounts , again , having 15% new account growth , again , will drive a little bit more of that in-store value proposition versus world .

Ryan Nash: Thanks for the call, Brian.

Speaker #3: As you launch . But again , when you look at the co-branded volume being up , you know , 20% , you are going to drive more loyalty , more loyalty costs , which is really a good thing .

Brian Doubles: Thanks, Ryan.

Brian Wenzel: Thanks, Ryan.

Operator: Thank you. We'll go next to Sanjay Sakhrani with KBW. Please go ahead.

Sanjay Sakhrani: Thank you. Maybe, Brian Wenzel, if we could just follow up on the earnings guide questions just, and the commentary. When we look at credit doing better and loan growth sort of still remaining the same and EPS remaining stable, is it that your expectation on yield has changed in some way lower? Or maybe you could just flip that because it would seem like you're moving towards the higher end of the range with the credit coming in better.

Speaker #3: When you look at transaction frequency , it is up . So it's not , you know , our customers are engaging with the product and engaging in a bigger way year over year .

Speaker #7: All right . Thank you . And then just to follow up , I wanted to go back to Ryan's question about just buybacks .

Speaker #7: Can you just remind us like , what's the what factors are impact that level of buyback is kt1 just the binding constraint there ?

Speaker #7: Or are there other considerations we should keep in mind ? Things like , you know , rating agencies requirements , etc. ?

Brian Wenzel: Yeah. Thanks for the question, Sanjay. Again, I think if you go back to what I said back in January, and I've said kind of coming through here our 5.5% to 6%. Really, we're trying to give a position of stability as it relates to the charge-off guidance. I think as you look at it now being less than 5.5%, I don't think there's a material difference in the way in which we thought about credit at the end of January and the way we think about credit today. I think you may be overweighting that change relative to our guide.

Speaker #3: Yeah . You know , Cet1 is not is not the binding constraint for us . Obviously , you know , the only thing left in the capital stack that we have to fully develop is the tier one .

Speaker #3: So there's a little bit more preferred to do that is not a binding constraint today for us. You know, we still have plenty of, plenty of room, right.

Speaker #3: Relative to our targets . There are multiple factors , you know . Yes . You hit on one , which is rating agencies and things like things like that , that kind of come in our regulators .

Speaker #3: But again , I think with how is the business performing ? What's the visibility to our business performance ? What do we what do we see as RWA growth as we move through ?

Sanjay Sakhrani: Got it. All right. Thank you. Then maybe just more of an elaboration on the health of the consumer. I'm just trying to think about the geopolitical events that are happening, the impact on fuel price. You guys talked a little bit about, I know, Brian Doubles, you talked about you're seeing early benefits of tax refunds. I'm just curious if you could just sort of list how those are impacting the consumer. I mean, where are we with the tax refunds? Is there more to come in Q2? Maybe you could just help us just think about the assumptions you're making and sort of where we are. Thanks.

Speaker #3: Then you start looking into factors around, okay, you know, what is the regulatory environment and how do you think about that?

Speaker #3: And you step through those things. That's when we set the cadence, along with our capital plan and the board, with regard to do it.

Speaker #3: We are going to be aggressive but prudent. And I think you'd have to appreciate the fact that we can't drop 100 basis points right away, or go right down to the target.

Speaker #3: I think the regulators, and most certainly rating agencies, probably wouldn't be comfortable on that. But I think we've shown a measured discipline.

Brian Wenzel: Yeah, I'll start on that one, Sanjay. Look, I think the consumer is still in pretty good shape. It's been very consistent over the past few quarters. We're seeing signs of strength when you look at spending patterns. Credit continues to outperform our expectations. I think the macro environment is still pretty constructive. Strong labor market. You do have the higher tax refunds when you get into that. You've got some watch items. We're watching inflation very closely, higher gas prices, other factors that I think are creating some uncertainty out there with consumers. They really seem to be looking past it at this point. We don't see it impacting spend. You saw spend for us accelerate really nicely this quarter. You look at the platforms, D&V was up 9%, digital was up 8%, lifestyle up 7%.

Brian Doubles: Yeah, I'll start on that one, Sanjay. Look, I think the consumer is still in pretty good shape. It's been very consistent over the past few quarters. We're seeing signs of strength when you look at spending patterns. Credit continues to outperform our expectations. I think the macro environment is still pretty constructive. Strong labor market.

Speaker #3: And you see that really on the chart that we laid out in the in the earnings deck on page three , where we have been accelerating capital return to , to , to shareholders .

Speaker #3: And most certainly , I think when you look at the latter part of the deck and you go back into the capital ratio page , which sits on page nine , you see the earnings generation power of the business generating , you know , year over year , 350 basis points of CPI won .

Brian Doubles: You do have the higher tax refunds when you get into that. You've got some watch items. We're watching inflation very closely, higher gas prices, other factors that I think are creating some uncertainty out there with consumers. They really seem to be looking past it at this point. We don't see it impacting spend. You saw spend for us accelerate really nicely this quarter. You look at the platforms, D&V was up 9%, digital was up 8%, lifestyle up 7%.

Speaker #3: So , you know , we are we are driving towards that target . And again , we'll use an appropriate cadence to to get there and hopefully an aggressive but prudent way .

Speaker #7: Thank you for taking my questions .

Speaker #3: Thanks . Thanks , Mia . Have a good day .

Speaker #1: Thank you . And we'll go next to Erica Najarian from UBS . Please go ahead . Hi . Good morning . I'm glad you didn't take my job .

Brian Wenzel: That's indicative of one, I think our product suite, but also a pretty healthy, resilient consumer. There's a lot of what I would call noise out there right now and things that we're watching and tracking really carefully. At this point, whether you're looking at spend patterns or you're looking at credit performance in early stage, late stage, everything points to a pretty resilient consumer. I don't know if you want to add on tax refunds. Yeah. Let me just add some color both on tax and then on gas, Sanjay. First on tax refunds. The tax refunds are slightly lower than our expectations. Low end of the range for us we thought would be around $500. They're coming in $350.

Brian Doubles: That's indicative of one, I think our product suite, but also a pretty healthy, resilient consumer. There's a lot of what I would call noise out there right now and things that we're watching and tracking really carefully. At this point, whether you're looking at spend patterns or you're looking at credit performance in early stage, late stage, everything points to a pretty resilient consumer. I don't know if you want to add on tax refunds.

Speaker #1: So just

Speaker #3: We're happy for you too, Erika. So,

Speaker #8: My first question is, I know you don't love this question, but it's a fierce debate in the marketplace right now. So I have to re-ask it.

Speaker #8: So for I guess it's two parts . First , based on the RSA math under Basel three endgame that you gave us , Brian , that would essentially take your Cet1 , you know , from 12.7 closer to 14 .

Brian Wenzel: Yeah. Let me just add some color both on tax and then on gas, Sanjay. First on tax refunds. The tax refunds are slightly lower than our expectations. Low end of the range for us we thought would be around $500. They're coming in $350. The way we've seen that, while it hasn't had a material effect on our book, we've seen it will certainly impact when we look at payment rate and we lag payment rate to the refunds.

Speaker #8: If I'm hearing you right , on 120 basis points , I guess as you think about having a higher level of Cet1 relative to that 11% minimum , is that going to be biased towards buybacks or , you know , more aggressive portfolio acquisition and additionally , I know you don't love the question about pacing of buybacks , but that is a fierce debate right now with the investor community over the past three quarters , your buyback average has been about 900 million .

Brian Wenzel: The way we've seen that, while it hasn't had a material effect on our book, we've seen it will certainly impact when we look at payment rate and we lag payment rate to the refunds. There's about a 14 basis point impact in the quarter from higher payment rate in a quarter related to tax refunds. You hit on a good point where the next couple of weeks you tend to see a little bit higher refunds of people who file closer to the April 15th deadline. That refund amount could creep up a little bit. We didn't see week-on-week when you look at it, we did not see any real change in purchasing behavior pattern. When I look at the depository side of the business, we saw lower inflows and lower outflows.

Brian Wenzel: There's about a 14 basis point impact in the quarter from higher payment rate in a quarter related to tax refunds. You hit on a good point where the next couple of weeks you tend to see a little bit higher refunds of people who file closer to the April 15th deadline. That refund amount could creep up a little bit. We didn't see week-on-week when you look at it, we did not see any real change in purchasing behavior pattern. When I look at the depository side of the business, we saw lower inflows and lower outflows.

Speaker #8: Would then suggest that you would go through this current authorization in under two years . And thus , I guess I'm just wondering , you know , what drove that $900 million pacing ?

Speaker #8: And as the receivables growth improves, is that an immediate offset to that buyback pacing?

Brian Wenzel: That trend week on week with returns has mirrored for the last three years. I think when we look at refunds, there hasn't been a material impact onto the business. When you look at gas prices, if you look at the average transaction value for gas in March, it's up 17% sequentially, February to March of this year, and up 10% year over year. We haven't seen any change in the frequency. It's actually up slightly, to be honest with you year over year on frequency of gas purchases. We haven't seen any pullback as it relates to gas. At this point, I think the consumer is probably annoyed, but they haven't changed as relates to that spending.

Brian Wenzel: That trend week on week with returns has mirrored for the last three years. I think when we look at refunds, there hasn't been a material impact onto the business. When you look at gas prices, if you look at the average transaction value for gas in March, it's up 17% sequentially, February to March of this year, and up 10% year-over-year. We haven't seen any change in the frequency. It's actually up slightly, to be honest with you year-over-year on frequency of gas purchases. We haven't seen any pullback as it relates to gas. At this point, I think the consumer is probably annoyed, but they haven't changed as relates to that spending.

Speaker #3: Thanks , Erica . I won't comment whether we'd love or dislike the question , but let me try to let me try to pass it out for you a little bit as you kind of go through it .

Speaker #3: With regard to , to , you know , what happens ultimately with Basel three . I mean , you know , to be honest with you , we don't know what the final rule will look like to the extent that that rule gets implemented the way it is today , we most certainly would have a discussion with the board with regards to our capital levels and what we do with that incremental capital .

Speaker #3: And I think we have shown over time to either invest that capital into acquisitions , such as ally lending and Allegro and other things , or , you know , we can return it back to shareholders .

Sanjay Sakhrani: Thank you. Very helpful.

Brian Wenzel: Thanks, Sanjay. Have a good day.

Operator: Thank you. We'll go next to Darrin Peller with Wolfe Research. Please go ahead.

Speaker #3: But that's a decision that's going to be going to be out . We don't we haven't really engaged the board with that today .

Speaker #3: It's not something that we're working on . We're we're currently studying that evaluation . Right in that rule . And seeing , you know , what are the positives and negatives and where does the need to be adjusted and where we may come in either with the or by ourselves .

Darrin Peller: Hey, guys. Thanks. Could we just start on expenses? Just given it grew 8% on adjusted basis in Q1 and your guidance appears to imply expense growth decelerates throughout the year even as receivables growth improves. How much of that is due to upfront investment in new program adds rolling off, or any other color on the expense side would be great.

Speaker #3: So that part of the question with regard to the cadence and the pacing , again , I look at a slightly longer horizon .

Brian Wenzel: Yeah. Thanks, Darren. Good morning. The expense, there are two, what I'd say items I'd point you to inside the quarter. Number one is slightly higher information technology expense that goes in there. There's two components that are in there. Number one is the association fees that we pay to Mastercard and Visa. So on a volume basis. With volume being up, particularly in the co-brand space, we see slightly higher expense. That should continue on for the year. And then you have some information technology and investments that we're making, whether it's cloud and the like, and again, that will probably continue on. The other item that you see is up is in the other, which relates to some operational losses, which I think is a little bit more idiosyncratic in Q1 and should reduce down as we move forward.

Brian Doubles: Yeah. Thanks, Darren. Good morning. The expense, there are two, what I'd say items I'd point you to inside the quarter. Number one is slightly higher information technology expense that goes in there. There's two components that are in there. Number one is the association fees that we pay to Mastercard and Visa. So on a volume basis.

Speaker #3: Again , where we see opportunities and where we saw the business perform right relative to the earnings power of the business , you know , and the market will lean in to the extent that that that shifts or we allocate more to RWA , we'll adjust that pattern .

Speaker #3: So again , I'm not sure many people give a quarterly cadence . I know it's something that everyone would like to do . But again , we will be aggressive but prudent .

Brian Doubles: With volume being up, particularly in the co-brand space, we see slightly higher expense. That should continue on for the year. And then you have some information technology and investments that we're making, whether it's cloud and the like, and again, that will probably continue on. The other item that you see is up is in the other, which relates to some operational losses, which I think is a little bit more idiosyncratic in Q1 and should reduce down as we move forward. Again, I think when you think about the run rate of expense dollars, they're probably about the same. Again, you'll get a step up as assets kind of come through and get some leverage in the H2.

Speaker #3: But I think if you look back over, you know, really versus a quarter or two.

Speaker #8: And just my second follow up , just clarifying your response to Ryan and Sanjay's question , is there reserve release in the guide , or is there only is there a reserve release of sort of the mid to high point of the EPS guide ?

Brian Wenzel: Again, I think when you think about the run rate of expense dollars, they're probably about the same. Again, you'll get a step up as assets kind of come through and get some leverage in the H2.

Speaker #3: Yeah . So , so let's make sure clear . Erica . I was trying to sit back and say ways in which you can get to the high end .

Speaker #3: Again , we haven't given any any view on on whether or not we'll be releasing reserves or not . I think if I take a step back right .

Darrin Peller: Okay. All right. That's helpful. Thanks. Just for my follow-up, I want to touch on AI and agentic for a moment. Just maybe you guys can give us more color on any incremental investments you've been making around both the AI side and the efficiencies in the business. I know your FTEs have been effectively flat since 2023, but any early signs of evidence where you might be able to either create more efficiencies on that front? And then on the agentic side, also, just incremental investments being made over the past couple of quarters to ensure that your placement on choice at the point of sale stays as high as it should be for Synchrony and its merchant partners. Thanks, and maybe.

Speaker #3: You know , credit has been a strength for us . I think we've been a leader in the industry . I think our our performance has been .

Speaker #3: Terrific . Now , the question becomes , in the macro , we have qualitative overlays that sit there and say , okay , we're prepared to the extent that the macro environment gets worse , I think I consistently said that , that , you know , where I see this as the environment continues to play out the way we think , there's a little bit more of a downward bias .

Darrin Peller: And then on the agentic side, also, just incremental investments being made over the past couple of quarters to ensure that your placement on choice at the point of sale stays as high as it should be for Synchrony and its merchant partners. Thanks, and maybe.

Speaker #3: But but I'm not necessarily necessarily sure where I would plan on that today . Again , we continue to evaluate the environment and , and we step out quarter by quarter .

Speaker #3: But again, we haven't provided guidance. And I was only trying to give us a way in which you think about the range of where you can end up inside the range.

Brian Wenzel: Yeah, it's a great question. I'll start with the second piece of that because I actually think this is the more important of the two, which is around agentic commerce. It's a big area of focus for us. I think we're moving very quickly here. We've got, hopefully, first-mover advantage. Like you said, this is going to fundamentally change how consumers discover new products, how they research, read reviews, and ultimately purchase. It's still early. We're working with all the top companies to ensure that as that purchasing path changes, our financing offers, our products are embedded in that experience. There's still a lot that is unknown here in terms of how this could play out.

Brian Doubles: Yeah, it's a great question. I'll start with the second piece of that because I actually think this is the more important of the two, which is around agentic commerce. It's a big area of focus for us. I think we're moving very quickly here. We've got, hopefully, first-mover advantage. Like you said, this is going to fundamentally change how consumers discover new products, how they research, read reviews, and ultimately purchase.

Speaker #1: Thank you .

Speaker #3: Thanks , Erica . Have a good day .

Speaker #1: Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Please go ahead.

Speaker #9: Yeah , thanks . You know , could you comment on signs look kind of relative to recent history and how meaningful those types of opportunities could be for growth over the next year and if possible , come on , kind of how big of an opportunity you think the new RH program could be ?

Brian Doubles: It's still early. We're working with all the top companies to ensure that as that purchasing path changes, our financing offers, our products are embedded in that experience. There's still a lot that is unknown here in terms of how this could play out. One scenario which is probably the most prevalent right now is that when a consumer researches a product inside of the AI platform to complete the purchase, it'll still go back to the merchant site.

Speaker #6: Yeah ,

Speaker #3: We continue to have a very active pipeline combination of , you know , new startup de novo programs , with are really excited about some existing programs .

Brian Wenzel: One scenario which is probably the most prevalent right now is that when a consumer researches a product inside of the AI platform to complete the purchase, it'll still go back to the merchant site. We're already embedded there. That's kind of the easier of the two use cases. I think the second one, which is bound to happen at some point, is that the purchase actually gets completed inside of the AI platform. That's where, as you indicated, it's really important that we're in there, our financing options are present in that checkout process. The good news is our partners have a huge incentive to make sure that that's the case.

Speaker #3: I would say the existing programs that are coming to market in the next year or two are in kind of a mid-size range.

Brian Doubles: We're already embedded there. That's kind of the easier of the two use cases. I think the second one, which is bound to happen at some point, is that the purchase actually gets completed inside of the AI platform. That's where, as you indicated, it's really important that we're in there, our financing options are present in that checkout process. The good news is our partners have a huge incentive to make sure that that's the case.

Speaker #3: Nothing , nothing really that significant in terms of portfolios . We acquired , but you know , we've got a great track record of , you know , buying portfolios , winning programs .

Speaker #3: And then driving a lot of penetration and seeing really good growth there . So , you know , across all five of our platforms , we've got a very robust pipeline .

Speaker #3: I would say in traditional programs , but also , a nice pipeline of opportunities in what I would consider non-traditional opportunities , whether it's , you know , is inside of health and wellness or home and auto .

Brian Wenzel: As they're talking to all of the AI companies about how this is going to work, they're pulling us in and saying, "Okay, it's imperative that Synchrony's cards, our cards with them are present and an option for the consumer to purchase," because they want to make sure that those transactions run on our rails, that the val prop is protected, that the consumer benefits, and it feels very similar to if they were purchasing on the merchant site. That's kind of the agentic piece of it. The GenAI, or what I would call more the productivity and efficiency piece, we've been on this for well over a year at this point. A big opportunity for us, you referenced holding headcount flat. I think the bigger benefit, frankly, in the near term is just speed to market. We're using this, our coders are using it.

Brian Doubles: As they're talking to all of the AI companies about how this is going to work, they're pulling us in and saying, "Okay, it's imperative that Synchrony's cards, our cards with them are present and an option for the consumer to purchase," because they want to make sure that those transactions run on our rails, that the val prop is protected, that the consumer benefits, and it feels very similar to if they were purchasing on the merchant site.

Speaker #3: And the more fragmented space . So , and , you know , the good news too , just to add on to that , you know , we're seeing pretty good price discipline in the market that continues to be the case .

Speaker #3: That's been consistent for the last 2 or 3 years . You know , there's pockets of rational behavior , but you know , generally , I think the industry is is pricing in the right way for this environment .

Brian Doubles: That's kind of the agentic piece of it. The GenAI, or what I would call more the productivity and efficiency piece, we've been on this for well over a year at this point. A big opportunity for us, you referenced holding headcount flat. I think the bigger benefit, frankly, in the near term is just speed to market. We're using this, our coders are using it.

Speaker #3: And we're winning the programs that that we want to win . And we're very excited about . RH the great franchise . And we think we'll be able to drive a lot more penetration and really grow that program

Speaker #9: Got it. Thank you.

Speaker #3: Thanks , Mark .

Brian Wenzel: 90% of the professional workforce is using it across all functions, across all platforms, and they're getting real economies of scale. I think the early returns are this is going to help us be a lot faster, a lot more efficient, but also free up and redeploy our resources to things that are frankly more challenging, more strategic, and frankly, more fun to work on. I'm very optimistic about how we're operating here. I think we're off and running, and there's big benefits in the future.

Brian Doubles: 90% of the professional workforce is using it across all functions, across all platforms, and they're getting real economies of scale. I think the early returns are this is going to help us be a lot faster, a lot more efficient, but also free up and redeploy our resources to things that are frankly more challenging, more strategic, and frankly, more fun to work on. I'm very optimistic about how we're operating here. I think we're off and running, and there's big benefits in the future.

Speaker #1: Thank you . And we'll go next to Moshe Orenbuch from TD Cohen . Please go ahead .

Speaker #6: Great . Thanks . Maybe to kind of follow up , you know , four out of your five verticals all had growth , some of them pretty strong growth in purchase volume .

Speaker #6: And home and auto was flat , although with down 6% accounts , you know , I guess had okay growth per account . Could you drill into that a little bit like what , you know , what went on there from an account perspective ?

Speaker #6: Are there things that you're doing to restart account growth in some of those programs ? Obviously , you've got some new programs , but you know , in other words , that existing base , you know , because that is , you know , about 30% of your receivables .

Darrin Peller: Okay. That's great to hear. Thanks, Brian. Thanks, guys.

Brian Wenzel: Yep, thanks. Thanks, Darren.

Operator: Thank you. We'll take our next question from Richard Shane with JP Morgan. Please go ahead.

Richard Shane: Hey, guys. Thanks for taking my questions. Look, you mentioned strength in luxury, strength in discretionary, also mentioned 17% increase at the pump on a ticket basis. To follow up on Sanjay's question, can you help us understand spending and credit performance right now based on both income level and FICO score, realizing that they're different? Are you seeing divergence in the portfolio based upon sort of borrower category?

Rich Shane: Hey, guys. Thanks for taking my questions. Look, you mentioned strength in luxury, strength in discretionary, also mentioned 17% increase at the pump on a ticket basis. To follow up on Sanjay's question, can you help us understand spending and credit performance right now based on both income level and FICO score, realizing that they're different? Are you seeing divergence in the portfolio based upon sort of borrower category?

Speaker #6: So, if you talk about the plans there a little bit.

Speaker #4: Yeah .

Speaker #10: Thanks so for the question . So when you think about the home and auto platform , this is a business . So those average active accounts when consumers are engaging in those discretionary purchases have a tendency to stick again , as we said , they have been a little bit more challenged , particularly in the home specialty space with regard to making those bigger ticket purchases .

Speaker #10: So that has impacted more of the more of the average account growth . Again , what you've seen is a positive trajectory on home receivables .

Brian Wenzel: Yeah. Thanks for the question, Shane. When you go back, one of the key things we've talked about on this call has been payment rate, and when you look at payment rate by credit cohort, you see strength coming in at 780+. That is up the largest as you look at that piece of it. The next group is then the non-prime that is up, and then the middle at 650 to 720 and 720 to 780 is performing about equally. Again, you see the top end continuing to pull up, which goes back to the mix shift I indicated earlier on the call. When you look at it by behavioral pattern inside of that, you do see a little bit of shift as it relates into min pay, but that's really getting offset between min pay and statement pay.

Brian Doubles: Yeah. Thanks for the question, Shane. When you go back, one of the key things we've talked about on this call has been payment rate, and when you look at payment rate by credit cohort, you see strength coming in at 780+. That is up the largest as you look at that piece of it. The next group is then the non-prime that is up, and then the middle at 650 to 720 and 720 to 780 is performing about equally. Again, you see the top end continuing to pull up, which goes back to the mix shift I indicated earlier on the call. When you look at it by behavioral pattern inside of that, you do see a little bit of shift as it relates into min pay, but that's really getting offset between min pay and statement pay.

Speaker #10: But again , you have a fairly broad mix inside that , that , that sales platform everywhere from do yourself a load to home furnishings .

Speaker #10: Then to furniture . And then most certainly you have auto , which has a different dynamic , right ? Relative to the average transaction values .

Speaker #10: And frequencies of purchase. So it's more about the mix inside of the Home and Auto platform than any deliberate strategy that we have.

Speaker #10: Again , we're moving into an important part of the year for that vertical . As you begin to see more things around the home , whether they're home projects and specialty will certainly do it yourself , etc.

Speaker #10: , that that , again , you tend to see a little bit more of the volume acceleration . So that with the launch of a couple of new programs , both Bob's and RH , again , hopefully that will that will create a little bit of a tailwind for that platform

Speaker #6: Thanks . And maybe just as a follow up , you know , Brian , you had mentioned , you know , that not just the impact of tax refunds , but but the benefit going forward of , you know , kind of lower withholdings , I guess , you know , could you talk about that a little bit and whether that , you know , has , has been a driver in your , you know , both credit and spend outlook ?

Brian Wenzel: When you look at it by cohort, then again, underneath that and whether people are paying min pay or full pay, again, the bottom end is holding firm with regard to that min pay. Really where you see more min pay happening is in the prime segment between 650 and 780. Again, I think we see the middle moving a little bit here. Again, the high end is continuing to pull through. When we look at it generationally, again, generations in that high-end cohort are continuing to pull the spend, but slightly higher payment rates, particularly at the high end of the portfolio.

Speaker #10: Yeah . You know , that's a , that's a great question . And it's probably harder to discern that piece of it . You can look , you can look at the flow of dollars into the economy in a stimulus level relative to the refunds themselves , because they're lumpy .

Richard Shane: Got it. Super interesting. Thank you, Brian.

Rich Shane: Got it. Super interesting. Thank you, Brian.

Speaker #10: As you begin to see this flow that comes through throughout the year , it is harder to pull that part that part . What I'd say is , if you look at our purchase volume going through the through the quarter , it has been relatively consistent .

Brian Wenzel: Thanks, Rick. Have a good day.

Operator: Thank you. We'll go next to Mihir Bhatia with UBS. Please go ahead.

Mihir Bhatia: Hi. Thanks. I think that's me. Okay. I'll just start. Maybe just talking about average accounts for a second. They've been declining for six quarters here. I think some of that is just a deliberate by-product of your previous credit restrictions. I had a two-part question on that. The first was just, are you seeing any shifts in consumer engagement with programs there? Maybe relatedly, we've seen a little bit of an increase in loyalty costs. Is that you just readjusting programs to see that, to drive a little bit more volume there? Or is it just the Walmart and some of the other co-brand programs picking up speed in the loyalty costs?

Mahir Bhatia: Hi. Thanks. I think that's me. Okay. I'll just start. Maybe just talking about average accounts for a second. They've been declining for six quarters here. I think some of that is just a deliberate by-product of your previous credit restrictions. I had a two-part question on that. The first was just, are you seeing any shifts in consumer engagement with programs there? Maybe relatedly, we've seen a little bit of an increase in loyalty costs. Is that you just readjusting programs to see that, to drive a little bit more volume there? Or is it just the Walmart and some of the other co-brand programs picking up speed in the loyalty costs?

Speaker #10: You know , absent the two storms we saw at the end of January and early February , it's been pretty consistent with regard to the growth .

Speaker #10: Now, that's a combination part that's going to be withholding part of its income tax refunds. But really, it's the consumer and some of the discretionary purchases and rotation that Brian talked about in the prepared remarks kind of pulling through.

Speaker #10: Again , you know , if I look at the first three weeks of April , we continue to see that strength kind of come through again , I'm not sure I can isolate or anyone can really isolate the withholding piece of it , but but it must have some effect inside the overall consumer spending .

Speaker #10: Behavioral patterns . And the last thing I'd say , even inside of , April , we saw the last three weekends have been , you know , three strongest weekends of the year , most certainly , you know , ahead of last year's pace .

Brian Wenzel: Yeah. Thanks, Mihir, for the question. I'm glad you didn't change firms by the way as well. On the active account, the first part of your question, that's only just lagging the loan receivables. You should see that invert as we've accelerated new accounts, and they begin to engage into the portfolio. Again, trails a little bit, but you will see that inversion happen probably in the middle part of this year. That's one. I think when you get to the loyalty question, again, a couple things. One, we've enhanced certain value propositions last year on some of the cards. That drives a slightly higher loyalty cost. Then, to a large degree, what happens when you launch some new programs, you are going to see higher loyalty costs as some of the most engaged people take up that product.

Brian Doubles: Yeah. Thanks, Mihir, for the question. I'm glad you didn't change firms by the way as well. On the active account, the first part of your question, that's only just lagging the loan receivables. You should see that invert as we've accelerated new accounts, and they begin to engage into the portfolio. Again, trails a little bit, but you will see that inversion happen probably in the middle part of this year.

Speaker #10: So, you know, we're encouraged about the consumer, their resilience, and their willingness to engage with our products.

Speaker #6: Thanks very much .

Speaker #10: Thanks so much .

Speaker #3: Marsha .

Speaker #1: Thank you. At this time, we have time for one final question, and we'll take our final question from Saul Martinez with HSBC.

Speaker #1: Please go ahead .

Speaker #6: Great . Thank you for squeezing me in here . I wanted to go back to expenses . I know 26 , you're expecting expenses track loan beyond 26 is is the idea .

Brian Doubles: That's one. I think when you get to the loyalty question, again, a couple things. One, we've enhanced certain value propositions last year on some of the cards. That drives a slightly higher loyalty cost. Then, to a large degree, what happens when you launch some new programs, you are going to see higher loyalty costs as some of the most engaged people take up that product.

Speaker #6: Can you just comment on your ability to deliver operating leverage as you go into '26 and into '27 and top line growth accelerates? And just kind of, how do you weigh investment needs?

Brian Wenzel: They tend to spend in-store, which has a higher value proposition for our partners and merchants than it does in the world. That's just a phenomenal by-product of how the portfolio seasons when you add those new accounts. Again, having 15% new account growth again will drive a little bit more of that in-store value proposition versus world as you launch. Again, when you look at the co-branded volume being up 20%, you are going to drive more loyalty costs, which is really a good thing. When you look at transaction frequency, it is up. Our customers are engaging with the product and engaging in a bigger way year over year.

Speaker #6: You talked about AI earlier versus the ability and willingness to let revenue flow down to the bottom line.

Speaker #10: Yeah , thanks for the question , Saul . You know , our intended way in which we want to run the company is we don't want to be adding headcount right now .

Speaker #10: We want to be able to drive productivity through tools that Brian talked about . You know , when you think about simple , simpler things like engineering , but how do we drive AI for all aspects of our business to drive a flat headcount environment and get leverage and drive the operating leverage ?

Speaker #10: When you look at and growth relative to opex growth , so again , where we want to increase our spending inside opex is around some of the technology that creates a differentiator for us .

Mihir Bhatia: Got it. Thank you. Just to follow up, I wanted to go back to Ryan's question about just buybacks. Can you just remind us, though, what factors impact that level of buyback? Is CET1 just a binding constraint there, or are there other considerations we should keep in mind, things like rating agencies, requirements, et cetera?

Mahir Bhatia: Got it. Thank you. Just to follow up, I wanted to go back to Ryan's question about just buybacks. Can you just remind us, though, what factors impact that level of buyback? Is CET1 just a binding constraint there, or are there other considerations we should keep in mind, things like rating agencies, requirements, et cetera?

Speaker #10: And gives us first mover advantage , particularly when Brian talks about things like AI . So again , I think we want to be disciplined on the core costs , bring our core operating costs down for the consumer .

Speaker #10: But then continue that investment for the medium to long term in technology, whether it's cloud or AI, or other things in that nature.

Brian Wenzel: Yeah. CET1 is not the binding constraint for us. Obviously, the only thing left in the capital stack that we have to fully develop is the Tier 1, so there's a little bit more preferred to do. That is not a binding constraint today for us. We still have plenty of room relative to our targets. There are multiple factors. Yes, you hit on one, which is rating agencies, things like that that kind of come in, our regulators. Again, I think we start with how is the business performing? What's the visibility to our business performance? What do we see as RWA growth as we move through? Then you start looking into factors around, okay, what is the regulatory environment and how do you think about that?

Brian Doubles: Yeah. CET1 is not the binding constraint for us. Obviously, the only thing left in the capital stack that we have to fully develop is the Tier 1, so there's a little bit more preferred to do. That is not a binding constraint today for us. We still have plenty of room relative to our targets. There are multiple factors. Yes, you hit on one, which is rating agencies, things like that that kind of come in, our regulators. Again, I think we start with how is the business performing? What's the visibility to our business performance? What do we see as RWA growth as we move through? Then you start looking into factors around, okay, what is the regulatory environment and how do you think about that?

Speaker #10: So again, while trying to drive that operating leverage of having NII growth faster than, than, than operating expenses.

Speaker #6: Okay , great . That's helpful . Then maybe just follow up on the consumer . Seems like there's a little bit of a divergence between , you know , really strong credit trends , high payment rates for suspension , minimum payments having gone up and correct me if I get some of these details wrong , but in the subprime and maybe the higher end of the prime market , can you just comment on what you're seeing there ?

Speaker #6: Is that just a normalization from historically low levels , just any color ? You know , there would be helpful .

Brian Wenzel: As you step through those things, that's when we set the cadence along with our capital plan and the board with regard to doing. We are going to be aggressive but prudent. I think you'd have to appreciate the fact that we can't drop 100 basis points right away or go right down to the target. I think the regulators and, most certainly, rating agencies on board probably wouldn't be comfortable on that. I think we've shown a measured discipline. You see that really on the chart that we laid out in the earnings deck on page three, where we have been accelerating capital return to shareholders.

Brian Doubles: As you step through those things, that's when we set the cadence along with our capital plan and the board with regard to doing. We are going to be aggressive but prudent. I think you'd have to appreciate the fact that we can't drop 100 basis points right away or go right down to the target. I think the regulators and, most certainly, rating agencies on board probably wouldn't be comfortable on that. I think we've shown a measured discipline. You see that really on the chart that we laid out in the earnings deck on page three, where we have been accelerating capital return to shareholders.

Speaker #4: Yeah .

Speaker #10: I don't I don't believe it's necessarily saw a divergence . I think it's the way customers engage with how they pay . A lot of times you see people engage in auto payments and they set it for minimum payments versus setting it for a full payment and then make the option to make incremental payments .

Speaker #10: So it's not really a divergence . I think if you take if you take it up a level , what we're clearly trying to articulate is that we see strength in the consumer from a spending behavior pattern , from a payment behavior pattern , and a flowing through which has a little bit of a drag on , on NII , but clear strength in maintaining credit .

Brian Wenzel: Most certainly, I think when you look at the latter part of the deck and you go back into the capital ratio page, which sits on page 9, you see the earnings generation power of the business generating year over year 350 basis points of CET1. We are driving towards that target. Again, we'll use an appropriate cadence to get there in hopefully an aggressive but prudent way.

Brian Doubles: Most certainly, I think when you look at the latter part of the deck and you go back into the capital ratio page, which sits on page 9, you see the earnings generation power of the business generating year-over-year 350 basis points of CET1. We are driving towards that target. Again, we'll use an appropriate cadence to get there in hopefully an aggressive but prudent way.

Speaker #10: You know, now we see in April, and we have a good portion of the year now covered. That's a—that's a good base for us to continue to deliver through.

Speaker #10: What is a evolving macroeconomic environment . So I think it's relatively consistent , and we're pleased with the performance of the consumer inside of our products .

Speaker #6: All right. Thank you very much.

Speaker #10: Thank you. Have a good day.

Mihir Bhatia: Thank you for taking my questions.

Mahir Bhatia: Thank you for taking my questions.

Brian Doubles: Thanks.

Brian Doubles: Thanks, Mihir. Have a good day.

Operator: Thank you. We'll go next to Erika Najarian from UBS. Please go ahead.

Erika Najarian: Hi. Good morning. I'm glad Mihir didn't take my job.

Brian Wenzel: We're happy for you too, Erika.

Erika Najarian: My first question is. I know you don't love this question, but it's a fierce debate in the marketplace right now, so I have to re-ask it. I guess it's two-part. First, based on the RSA math under Basel III endgame that you gave us, Brian, that would essentially take your CET1 from 12.7 closer to 14, if I'm hearing you right on the 120 basis points. I guess as you think about having a higher level of CET1 relative to that 11% minimum. Is that going to be biased towards buybacks or more aggressive portfolio acquisition? Additionally, I know you don't love the question about pacing of buybacks, but that is a fierce debate right now with the investor community. Over the past three quarters, your buyback average has been about $900 million, would then suggest that you would go through this current authorization in under two years.

Erika Najarian: I guess as you think about having a higher level of CET1 relative to that 11% minimum. Is that going to be biased towards buybacks or more aggressive portfolio acquisition? Additionally, I know you don't love the question about pacing of buybacks, but that is a fierce debate right now with the investor community. Over the past three quarters, your buyback average has been about $900 million, would then suggest that you would go through this current authorization in under two years. Thus, I guess I'm just wondering, what drove that $900 million pacing? As the receivables growth improves, is that an immediate offset to that buyback pacing?

Erika Najarian: Thus, I guess I'm just wondering, what drove that $900 million pacing? As the receivables growth improves, is that an immediate offset to that buyback pacing?

Brian Wenzel: Thanks, Erika. I won't comment whether we love or dislike the question, but let me try to parse it out for you a little bit as you go through it. With regard to what happens ultimately with Basel III, to be honest with you, we don't know what the final rule will look like. To the extent that rule gets implemented the way it is today, we most certainly would have a discussion with the board with regard to our capital levels and what we do with that incremental capital. I think we have shown over time to either invest that capital into acquisitions such as Ally Lending and Allegro and other things or we can return it back to shareholders. That's a decision that's going to be out. We haven't really engaged the board with that today. It's not something that we're working on.

Brian Doubles: Thanks, Erika. I won't comment whether we love or dislike the question, but let me try to parse it out for you a little bit as you go through it. With regard to what happens ultimately with Basel III, to be honest with you, we don't know what the final rule will look like. To the extent that rule gets implemented the way it is today, we most certainly would have a discussion with the board with regard to our capital levels and what we do with that incremental capital. I think we have shown over time to either invest that capital into acquisitions such as Ally Lending and Allegro and other things or we can return it back to shareholders.

Brian Doubles: That's a decision that's going to be out. We haven't really engaged the board with that today. It's not something that we're working on. We're currently studying that evaluation, writing that rule, and seeing what are the positives and negatives, and where does it need to be adjusted, and where we may comment either with the industries or by ourselves. That part of the question. With regard to the cadence and the pacing, again, I look at a slightly longer horizon.

Brian Wenzel: We're currently studying that evaluation, writing that rule, and seeing what are the positives and negatives, and where does it need to be adjusted, and where we may comment either with the industries or by ourselves. That part of the question. With regard to the cadence and the pacing, again, I look at a slightly longer horizon. Again, where we see opportunities and where we saw the business perform, right? Relative to the earnings power of the business. The market will lean in to the extent that shifts or we allocate more to RWAs, we'll adjust that pattern. Again, I'm not sure many people give a quarterly cadence. I know that's something everyone would like to do. Again, we'll be aggressive but prudent. I think if you look back over year versus a quarter or two.

Brian Doubles: Again, where we see opportunities and where we saw the business perform, right? Relative to the earnings power of the business. The market will lean in to the extent that shifts or we allocate more to RWAs, we'll adjust that pattern. Again, I'm not sure many people give a quarterly cadence. I know that's something everyone would like to do. Again, we'll be aggressive but prudent. I think if you look back over year versus a quarter or two.

Erika Najarian: Just my second follow-up, just clarifying your response to Ryan and Sanjay's question. Is there reserve release in the guide or is there reserve release that's sort of been baked into high point of the EPS guide?

Brian Wenzel: Yeah. Let's make sure we're clear, Erika. I was trying to sit back and say ways in which you can get to the high end. Again, we haven't given any view on whether or not we'll be releasing reserves or not. I think if I take a step back, right? Credit has been a strength for us. I think we've been a leader in the industry. I think our performance has been terrific. Now the question becomes into macro. We have qualitative overlays that sit there and say, okay, we're prepared to the extent that the macro environment gets worse. I think I've consistently said that where I see this, if the environment continues to play out the way we think, there's a little bit more of a downward bias, but I'm not necessarily sure where I would plan on that today.

Brian Doubles: Yeah. Let's make sure we're clear, Erika. I was trying to sit back and say ways in which you can get to the high end. Again, we haven't given any view on whether or not we'll be releasing reserves or not. I think if I take a step back, right? Credit has been a strength for us. I think we've been a leader in the industry. I think our performance has been terrific.

Brian Doubles: Now the question becomes into macro. We have qualitative overlays that sit there and say, okay, we're prepared to the extent that the macro environment gets worse. I think I've consistently said that where I see this, if the environment continues to play out the way we think, there's a little bit more of a downward bias, but I'm not necessarily sure where I would plan on that today. Again, we continue to evaluate the environment and we step out quarter by quarter. But again, we haven't provided guidance, and I was only trying to give us a way in which you think about the range and where you can end up inside the range.

Brian Wenzel: Again, we continue to evaluate the environment and we step out quarter by quarter. But again, we haven't provided guidance, and I was only trying to give us a way in which you think about the range and where you can end up inside the range.

Erika Najarian: Thank you.

Brian Wenzel: Thanks, Erika. Have a good day.

Operator: Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Please go ahead.

Mark DeVries: Yeah, thanks. Could you comment on how opportunities or signs look kind of relative to recent history and how meaningful those types of opportunities could be for growth over the next year? If possible, comment on kind of how big of an opportunity you think the new RH program could be.

Brian Wenzel: Yeah, look, we continue to have a very active pipeline. A combination of new startups, de novo programs, which we're really excited about. Some existing programs. I would say the existing programs that are coming to market in the next year or two are in kind of the mid-size range. Nothing really that significant in terms of portfolios we acquire. We've got a great track record of buying portfolios, winning programs, and then driving a lot of penetration and seeing really good growth there. Across all five of our platforms, it's got a very robust pipeline, I would say, in traditional programs, but also a nice pipeline of opportunities in what I would consider non-traditional opportunities, whether it's ISBs inside of health and wellness or home and auto in the more fragmented space.

Brian Doubles: Yeah, look, we continue to have a very active pipeline. A combination of new startups, de novo programs, which we're really excited about. Some existing programs. I would say the existing programs that are coming to market in the next year or two are in kind of the mid-size range. Nothing really that significant in terms of portfolios we acquire.

Brian Doubles: We've got a great track record of buying portfolios, winning programs, and then driving a lot of penetration and seeing really good growth there. Across all five of our platforms, it's got a very robust pipeline, I would say, in traditional programs, but also a nice pipeline of opportunities in what I would consider non-traditional opportunities, whether it's ISBs inside of health and wellness or home and auto in the more fragmented space.

Brian Wenzel: the good news, too, just to add onto that, we're seeing pretty good price discipline in the market. That continues to be the case. That's been consistent for the last two or three years. There's always some pockets of irrational behavior, but generally I think the industry is pricing in the right way for this environment, and we're winning the programs that we want to win. We're very excited about RH. It's a great franchise, and we think we'll be able to drive a lot more penetration and really grow that program.

Brian Doubles: The good news, too, just to add onto that, we're seeing pretty good price discipline in the market. That continues to be the case. That's been consistent for the last two or three years. There's always some pockets of irrational behavior, but generally I think the industry is pricing in the right way for this environment, and we're winning the programs that we want to win. We're very excited about RH. It's a great franchise, and we think we'll be able to drive a lot more penetration and really grow that program.

Mark DeVries: Got it. Thank you.

Brian Wenzel: Thanks, Mark.

Operator: Thank you. We'll go next to Moshe Orenbuch from TD Cowen. Please go ahead.

Moshe Orenbuch: Great. Thanks. Maybe to kind of follow up, four out of your five verticals all had growth, some of them pretty strong growth in purchase volume. Home and auto was flat, although, with accounts down 6%, I guess, had okay growth per account. Could you drill into that a little bit? What went on there from an account perspective? Are there things that you're doing to restart account growth in some of those programs? Obviously, you've got some new programs. In other words, that existing base, because that is about 30% of your receivables. Can you talk about the plans there a little bit?

Brian Wenzel: Yeah. Thanks, Moshe, for the question. When you think about the home and auto platform, this is a business, so those average active accounts, when consumers are engaging in those discretionary purchases, have a tendency to stick. Again, as we've said, they have been a little bit more challenged, particularly in the home specialty space, with regard to making those bigger ticket purchases. That has impacted more of the average account growth. Again, what you've seen is a positive trajectory on home receivables. Again, you have a fairly broad mix inside that sales platform, everywhere from do it yourself at Lowe's to home furnishings, then to furniture, and then most certainly you have auto, which has a very different dynamic, right, relative to average transaction values and frequencies of purchase.

Brian Doubles: Yeah. Thanks, Moshe, for the question. When you think about the home and auto platform, this is a business, so those average active accounts, when consumers are engaging in those discretionary purchases, have a tendency to stick. Again, as we've said, they have been a little bit more challenged, particularly in the home specialty space, with regard to making those bigger ticket purchases. That has impacted more of the average account growth.

Brian Doubles: Again, what you've seen is a positive trajectory on home receivables. Again, you have a fairly broad mix inside that sales platform, everywhere from do it yourself at Lowe's to home furnishings, then to furniture, and then most certainly you have auto, which has a very different dynamic, right, relative to average transaction values and frequencies of purchase.

Brian Wenzel: It's more about the mix inside the home and auto platform than any deliberate strategy that we have. Again, we're moving into an important part of the year for that vertical as you begin to see more things around the home, whether they're home projects and specialty, most certainly in do it yourself, et cetera, that again, you tend to see a little bit more of the volume acceleration. That with the launch of a couple of new programs, both Bob's and RH. Again, hopefully that will create a little bit of a tailwind for that platform.

Brian Doubles: It's more about the mix inside the home and auto platform than any deliberate strategy that we have. Again, we're moving into an important part of the year for that vertical as you begin to see more things around the home, whether they're home projects and specialty, most certainly in do it yourself, et cetera, that again, you tend to see a little bit more of the volume acceleration. That with the launch of a couple of new programs, both Bob's and RH. Again, hopefully that will create a little bit of a tailwind for that platform.

Moshe Orenbuch: Thanks. Maybe just as a follow-up, Brian, you had mentioned that not just the impact of tax refunds, but the benefit going forward of kind of lower withholdings. I guess, could you talk about that a little bit and whether that has been a driver in your both credit and spend outlook?

Brian Wenzel: Yeah. That's a great question, Moshe, and it's probably harder to discern that piece of it. You can look at the flow of dollars into the economy on a stimulus level relative to the refunds themselves, because they're lumpy. As you begin to see this flow that comes through throughout the year, it is harder to pull that piece apart. What I'd say is, if you looked at our purchase volume going through Q1, it has been relatively consistent. Absent the two storms we saw at the end of January and early February, it's been pretty consistent with regard to the growth. Now, that's a combination. Part of that's going to be withholding. Part of it's income tax refunds. But really, it's the consumer, some of the discretionary purchases, and rotation that Brian talked about in prepared remarks kind of pulling through.

Brian Doubles: Yeah. That's a great question, Moshe, and it's probably harder to discern that piece of it. You can look at the flow of dollars into the economy on a stimulus level relative to the refunds themselves, because they're lumpy. As you begin to see this flow that comes through throughout the year, it is harder to pull that piece apart.

Brian Doubles: What I'd say is, if you looked at our purchase volume going through Q1, it has been relatively consistent. Absent the two storms we saw at the end of January and early February, it's been pretty consistent with regard to the growth. Now, that's a combination. Part of that's going to be withholding. Part of it's income tax refunds. But really, it's the consumer, some of the discretionary purchases, and rotation that Brian talked about in prepared remarks kind of pulling through.

Brian Wenzel: Again, if I look at the first three weeks of April, we continue to see that trend kind of come through. Again, I'm not sure I can isolate or anyone can really isolate the withholding piece of it, but it must have some effect inside the overall consumer spending behavioral patterns. The last thing I'd say, even inside of April, we saw the last three weekends have been three strongest weekends of the year, most certainly ahead of last year's pace. We're encouraged about the consumer, the resilience, and their willingness to engage with our products.

Brian Doubles: Again, if I look at the first three weeks of April, we continue to see that trend kind of come through. Again, I'm not sure I can isolate or anyone can really isolate the withholding piece of it, but it must have some effect inside the overall consumer spending behavioral patterns. The last thing I'd say, even inside of April, we saw the last three weekends have been three strongest weekends of the year, most certainly ahead of last year's pace. We're encouraged about the consumer, the resilience, and their willingness to engage with our products.

Moshe Orenbuch: Thanks so much.

Brian Wenzel: Thanks, Moshe.

Moshe Orenbuch: Thanks, Moshe.

Brian Doubles: Thanks, Moshe.

Operator: Thank you. At this time, we have time for one final question, and we'll take our final question from Saul Martinez with HSBC. Please go ahead.

Saul Martinez: Great. Thank you for squeezing me in here. I wanted to go back to expenses. I know for 2026, you're expecting expenses to track loan growth. Beyond 2026, is the idea, can you just comment on your ability to deliver operating leverage as you exit 2026 and into 2027, and top-line growth accelerates? Just kind of how do you weigh investment needs, you talked about AI and agentic earlier, versus the ability and willingness to let revenue flow down to the bottom line?

Brian Wenzel: Yeah. Thanks for the question, Saul. Our intended way in which we want to run the company is we don't want to be adding headcount right now. We want to be able to drive productivity through tools that Brian talked about. When you think about simpler things like engineering, but how do we drive AI through all aspects of our business to drive a flat headcount environment and get leverage, and drive the operating leverage when you look at NII growth relative to OpEx growth. Again, where we want to increase our spending inside OpEx is around some of the technology that creates a differentiator for us and gives us first-mover advantage, particularly when Brian talks about things like AI.

Brian Doubles: Yeah. Thanks for the question, Saul. Our intended way in which we want to run the company is we don't want to be adding headcount right now. We want to be able to drive productivity through tools that Brian talked about. When you think about simpler things like engineering, but how do we drive AI through all aspects of our business to drive a flat headcount environment and get leverage, and drive the operating leverage when you look at NII growth relative to OpEx growth.

Brian Doubles: Again, where we want to increase our spending inside OpEx is around some of the technology that creates a differentiator for us and gives us first-mover advantage, particularly when Brian talks about things like AI. I think we want to be disciplined on the core costs, bring our core operating costs down for the consumer, but then continue that investment for the medium to long term in technology, whether it's cloud or AI or other things in that nature, while trying to drive that operating leverage of having NII grow faster than operating expenses.

Brian Wenzel: I think we want to be disciplined on the core costs, bring our core operating costs down for the consumer, but then continue that investment for the medium to long term in technology, whether it's cloud or AI or other things in that nature, while trying to drive that operating leverage of having NII grow faster than operating expenses.

Saul Martinez: Okay. Great. That's helpful. Maybe just follow up on the consumer. It seems like there's a little bit of a divergence between really strong credit trends, high payment rates versus the minimum payments having gone up, and correct me if I get some of these details wrong, but in the super prime and maybe the higher end of the prime market. Can you just comment on what you're seeing there? Is that just a normalization from historically low levels? Just any color there would be helpful.

Brian Wenzel: Yeah. I don't believe it's necessarily a divergence. I think it's the way customers engage with how they pay. A lot of times you see people engage in auto payments, and they set it for minimum payments versus setting it for full stated payments, and then make the option to make incremental payments. It's not really a divergence. I think if you take it up a level, what we're clearly trying to articulate is that we see strength in the consumer from a spending behavior pattern, from a payment behavior pattern, and it's flowing through, which has a little bit of a drag on NII, but clear strength in maintaining credit. Now we sit in April, and we have a good portion of the year now covered. That's a good base for us to continue to deliver through what is an evolving macroeconomic environment.

Brian Doubles: Yeah. I don't believe it's necessarily a divergence. I think it's the way customers engage with how they pay. A lot of times you see people engage in auto payments, and they set it for minimum payments versus setting it for full stated payments, and then make the option to make incremental payments. It's not really a divergence.

Brian Doubles: I think if you take it up a level, what we're clearly trying to articulate is that we see strength in the consumer from a spending behavior pattern, from a payment behavior pattern, and it's flowing through, which has a little bit of a drag on NII, but clear strength in maintaining credit. Now we sit in April, and we have a good portion of the year now covered. That's a good base for us to continue to deliver through what is an evolving macroeconomic environment. I think it's relatively consistent, and we're pleased with the performance of the consumer inside of our products.

Brian Wenzel: I think it's relatively consistent, and we're pleased with the performance of the consumer inside of our products.

Saul Martinez: All right. Thank you very much.

Brian Wenzel: Thank you. Have a good day.

Operator: Thank you. Have a good day.

Operator: This concludes Synchrony's earnings conference call. You may disconnect your line at this time, and have a wonderful day. Thank you.

Q1 2026 Synchrony Financial Earnings Call

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