Q2 2026 Synchrony Financial Earnings Call

July 21, 2026

Speaker #1: Thank you.

Speaker #2: Good morning, and welcome to the Synchrony Financial Q2 2026 earnings conference call. Please refer to the company's investor relations website for access to the earnings materials.

Speaker #2: Please be advised that today's conference is being recorded. Currently, all callers have been placed in a listen-only mode. The call will be opened up for your questions following the conclusion of management's prepared remarks.

Speaker #1: Please stand by. Your meeting is about to begin. Good morning, and welcome to Synchrony Financial's earnings conference call. Please refer to the company.

Operator: Please stand by. Your meeting is about to begin. Good morning, and welcome to the Synchrony Financial Earnings Conference Call. Please refer to the company for access to their earnings materials. Please be advised that today's conference is being recorded. Currently, all callers have been placed in a listen. The call will be opened up for your questions following the conclusion of management's prepared remarks. If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the prepared remarks, please press star one. I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Speaker #2: If at any time you should need operator assistance, please press *0. If you wish to ask a question following the prepared remarks, please press *1.

Speaker #1: For access to the earnings materials, please be advised that today's conference is being recorded. Currently, all callers have been placed on hold. The call will be opened up for your questions following the conclusion of management's prepared remarks.

Speaker #2: I will now turn the call over to Catherine Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Speaker #1: If at any time you should need operator assistance, please press *0. If you wish to ask a question following the prepared remarks, please press *1.

Speaker #3: 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 #1: I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Speaker #3: 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 #3: Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results can differ materially.

Speaker #2: 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 #3: 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.

Kathryn Miller: Thank you, good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the Investor Relations section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.

Speaker #2: 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 #3: 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: Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results can differ materially.

Speaker #3: The only authorized webcasts are located on our website. On the call this morning, our Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer.

Speaker #2: 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.

Speaker #3: I will now turn the call over to Brian Doubles.

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 on the call to everyone.

Speaker #4: Thanks, Catherine. Good morning, everyone. Synchrony's Q2 performance reflected strong momentum across our core business drivers. New accounts continued to grow and average active accounts inflected to growth.

Kathryn Miller: Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earn on the call.

Speaker #4: Customer engagement continued to be strong, leading to higher spend per account across each of our five sales platforms and 8% growth in purchase volume.

Speaker #4: Which reached an all-time high of almost $50 billion in the quarter. Growth was broad-based across all five of our sales platforms, led by diversified in value.

Speaker #4: The broad utility and strong value offered by the partners in this vertical continued to resonate deeply with customers, including our ongoing partner expansion and in combination with higher gas sales drove a 12% increase in purchase volume compared to last year.

Brian Doubles: Good morning, everyone. Strong momentum. Continued to grow, and average active accounts inflected to growth. Customer engagement continued to be strong, leading to higher spend per account across each of our five sales platforms and 8% growth in purchase volume, which reached an all-time high of almost $50 billion in the quarter. Growth was broad-based across all five of our sales platforms, led by diversified in value. The broad utility and strong value offered by the partners in this vertical continued to resonate deeply with customers, including our ongoing partner expansion, and in combination with higher gas sales, drove a 12% increase in purchase volume compared to last year. Spend across our digital platform grew 9%, primarily reflecting strong performance across partners with broad diversified offerings and highly engaged customers. Purchase volume in both our home and auto and lifestyle platforms increased by 6% compared to last year.

Speaker #3: I continue to grow and average active accounts inflected to growth. Customer engagement continued to be strong, leading to higher spend per account across each of our five sales platforms and 8% growth in purchase volume.

Speaker #4: Spend across our digital platform grew 9%, primarily reflecting strong performance across partners with broad diversified offerings and highly engaged customers. Purchase volume in both our home and auto and lifestyle platforms increased by 6% compared to last year.

Speaker #3: Which reached an all-time high of almost $50 billion in the quarter. Growth was broad-based across all five of our sales platforms, led by Diversified and Value.

Speaker #3: The broad utility and strong value offered by the partners in this vertical continued to resonate deeply with customers, including our ongoing partner expansion, and in combination with higher gas sales, drove a 12% increase in purchase volume compared to last year.

Speaker #4: Home and auto growth was driven by the performance of new programs. And in our lifestyle platform, higher spend was primarily driven by the performance of new programs and strength in the other apparel and goods category, as well as in the luxury category.

Speaker #3: Spend across our digital platform grew 9%, primarily reflecting strong performance across partners with broad, diversified offerings and highly engaged customers. Purchase volume in both our Home & Auto and Lifestyle platforms increased by 6% compared to last year.

Speaker #4: Meanwhile, health and wellness purchase volume grew 2%, primarily reflecting growth in pet. Synchrony's co-branded cards, including our consumer and commercial dual cards, accounted for 52% of our total purchase volume in the Q2, an increase 23% versus last year.

Speaker #3: Home and auto growth was driven by the performance of new programs. In our Lifestyle platform, higher spend was primarily driven by the performance of new programs.

Speaker #4: This trend was driven by the combination of new programs and product upgrades, as well as higher broad-based spend and enhanced utility across our card programs.

Speaker #3: And strength in the other apparel and goods category, as well as in the luxury category. Meanwhile, health and wellness purchase volume grew 2%, primarily reflecting growth in pet.

Speaker #4: Out-of-partner discretionary spend in our consumer co-branded products grew in line with non-discretionary, both up double digits despite elevated fuel prices in the Q2. Particular strengths came from electronics.

Brian Doubles: Home and auto growth was driven by the performance of new programs. In our lifestyle platform, higher spend was primarily driven by the performance of new programs and strength in the other apparel and goods category, as well as in the luxury category. Meanwhile, health and wellness purchase volume grew 2%, primarily reflecting growth in pet. Synchrony's co-branded cards, including our consumer and commercial dual cards, accounted for 52% of our total purchase volume in Q2 and increased 23% versus last year. This trend was driven by the combination of new programs and product upgrades, as well as higher broad-based spend and enhanced utility across our card programs. Out of partner discretionary spend on our consumer co-branded products grew in line with non-discretionary. Both up double digits despite elevated fuel prices in Q2. Particular strength came from categories like entertainment, retail, and electronics.

Speaker #3: Synchrony's co-branded cards, including our consumer and commercial dual cards, accounted for 52% of our total purchase volume in the second quarter and increased 23% versus last year.

Speaker #4: And as you can see in the charts at the bottom of slide 3, the proportion of discretionary spend was consistent or higher across customer cohorts throughout the quarter, even as fuel prices rose significantly.

Speaker #3: This trend was driven by the combination of new programs and product upgrades, as well as higher broad-based spend and enhanced utility across our card programs.

Speaker #4: Overall, we believe these trends reflect resilient consumer behavior, likely supported by some benefit from increased tax refunds and lower tax withholdings, and strong demand for the value and utility our products deliver.

Speaker #3: Out-of-partner discretionary spend in our consumer co-branded products grew in line with non-discretionary, both up double digits despite elevated fuel prices in the second quarter.

Speaker #3: Particular strengths came from categories like entertainment, retail, and electronics. And as you can see in the charts at the bottom of slide three, the proportion of discretionary spend was consistent or higher across customer cohorts throughout the quarter, even as fuel prices rose significantly.

Speaker #4: Synchrony is focused on providing the purchasing power customers need for each of life's moments. That kind of financial flexibility depends on dynamic underwriting capabilities, a diversified product suite, and the industry expertise to reach and serve a broad range of both local and national businesses and providers.

Speaker #3: Overall, we believe these trends reflect resilient consumer behavior, likely supported by some benefit from increased tax refunds and lower tax withholdings, and strong demand for the value and utility our products deliver.

Brian Doubles: As you can see in the charts at the bottom of slide three, the proportion of discretionary spend was consistent or higher across customer cohorts throughout the quarter, even as fuel prices rose significantly. Overall, we believe these trends reflect resilient consumer behavior, likely supported by some benefit from increased tax refunds and lower tax withholdings, and strong demand for the value and utility our products deliver. Synchrony is focused on providing the purchasing power customers need for each of life's moments. That kind of financial flexibility depends on dynamic underwriting capabilities, a diversified product suite and the industry expertise to reach and serve a broad range of both local and national businesses and providers. To that end, we added or renewed more than 15 partners during Q2, ranging from Suzuki Motor to AmeriVet and Roto-Rooter.

Speaker #4: To that end, we added a renewed more than 15 partners during the Q2, ranging from Suzuki Motor to Ameravet and Roto-Router. Our renewal with Suzuki Motor extends our 17-year partnership, continuing to deliver secured installment financing solutions through their more than 700 dealers nationwide.

Speaker #3: Synchrony is focused on providing the purchasing power customers need for each of life's moments. That kind of financial flexibility depends on dynamic underwriting capabilities, a diversified product suite, and the industry expertise to reach and serve a broad range of both local and national businesses and providers.

Speaker #4: Meanwhile, our renewed relationship with Ameravet, which supports a network of over 200 locally led veterinary clinics across 37 states, positions CareCredit as their exclusive financing partner through a seamless single application waterfall solution.

Speaker #3: To that end, we added or renewed more than 15 partners during the second quarter, ranging from Suzuki Motor to AmeraVet and Roto-Rooter. Our renewal with Suzuki Motor extends our 17-year partnership, continuing to deliver secured installment financing solutions through their more than 700 dealers nationwide.

Speaker #4: Together, CareCredit and Ameravet are helping more pet parents access the care they need ultimately enabling better outcomes and healthier pets. And Synchrony's multi-year agreement with Roto-Router Plumbing and Water Cleanup will enable us to expand how customers pay for essential home repairs and ongoing home care.

Speaker #3: Meanwhile, our renewed relationship with AmeriVet, which supports a network of over 200 locally led veterinary clinics across 37 states, positions CareCredit as their—

Brian Doubles: Our renewal with Suzuki Motor extends our 17-year partnership, continuing to deliver secured installment financing solutions through their more than 700 dealers nationwide. Meanwhile, our renewed relationship with AmeriVet, which supports a network of over 200 locally led veterinary clinics across 37 states, positions CareCredit as their seamless, single-application waterfall solution. Together, CareCredit and AmeriVet are helping more pet parents access the care they need, ultimately enabling better outcomes and healthier pets. Synchrony's multi-year agreement with Roto-Rooter Plumbing & Water Cleanup will enable us to expand how customers pay for essential home repairs and ongoing home care. We will deliver our multi-product capabilities with revolving installment financing options available side by side to enhance flexibility and choice as customers manage these often unplanned expenses. Synchrony's partnerships typically span decades because we continue to evolve together as the consumer landscape changes and our customers' everyday needs and expectations shift.

Speaker #4: We will deliver our multi-product capabilities with revolving installment financing options available side by side to enhance flexibility and choice as customers manage these often unplanned expenses.

Speaker #3: With a seamless, single-application waterfall solution, CareCredit and AmeraVet are helping more pet parents access the care they need, ultimately enabling better outcomes and healthier pets.

Speaker #4: Synchrony's partnerships typically span decades, because we continue to evolve together as the consumer landscape changes and our customers' everyday needs and expectations shift. We recently refreshed our credit card program with Dick Sporting Goods, building on our longstanding partnership of over 20 years.

Speaker #3: And Synchrony's multi-year agreement with Roto-Rooter Plumbing and Water Cleanup will enable us to expand how customers pay for essential home repairs and ongoing home care.

Speaker #3: We will deliver our multi-product capabilities, with revolving and installment financing options available side by side, to enhance flexibility and choice as customers manage these often unplanned expenses.

Speaker #4: Our products now feature an everyday 10% back-end scorecard rewards on qualifying Dick's purchases to drive greater value, financing flexibility, and convenience for consumers. And in April, we completed our acquisition of the Milo's Pro Rewards American Express Card portfolio and became the issuer.

Speaker #3: Synchrony's partnerships typically span decades because we continue to evolve together as the consumer landscape changes and our customers' everyday needs and expectations shift. We recently refreshed our credit card program with Dick's Sporting Goods, building on our long-standing partnership of over 20 years.

Speaker #4: Delivering a cohesive customer experience with simpler applications, digital servicing, and more utility and value. The Milo's Pro Rewards Card complements the existing Milo's Pro Rewards private label credit card by extending pro-purchasing power and rewards, earning potential beyond lows.

Speaker #3: Our products now feature an everyday 10% back-end Scorecard rewards on qualifying Dick's purchases to drive greater value, financing flexibility, and convenience for consumers. And in April, we completed our acquisition of the Milo's Pro Rewards American Express Card portfolio and became the issuer.

Brian Doubles: We recently refreshed our credit card program with Dick's Sporting Goods, building on our long-standing partnership of over 20 years. Our products now feature an everyday 10% back in Scorecard Rewards on qualifying Dick's purchases to drive greater value, financing flexibility, and convenience for consumers. In April, we completed our acquisition of the MyLowe's Pro Rewards American Express card portfolio and became the issuer, delivering a cohesive customer experience with simpler applications, digital servicing, and more utility and value. The MyLowe's Pro Rewards card complements the existing MyLowe's Pro Rewards private label credit card by extending pro purchasing power and rewards earning potential beyond Lowe's.

Speaker #4: The weather we are empowering small and medium-sized contractors to keep their businesses running smoothly, unlocking greater value and loyalty for hobby purchases, or enabling pet families to access the care their pets need, Synchrony is driving more meaningful customer and partner outcomes through the moments that matter.

Speaker #3: Delivering a cohesive customer experience with simpler applications, digital servicing, and more utility and value. The Milo's Pro Rewards Card complements the existing Milo's Pro Rewards private label credit card by extending pro purchasing power and rewards earning potential beyond those.

Speaker #4: With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Speaker #3: Whether we are empowering small and medium-sized contractors to keep their businesses running smoothly, unlocking greater value and loyalty for hobby purchases, or enabling pet families to access the care their pets need, Synchrony is driving more meaningful customer and partner outcomes through the moments that matter.

Speaker #5: Thanks, Brian. And good morning, everyone. Synchrony's Q2 financial performance was highlighted by a positive inflection average active account growth, all-time high purchase volume, and continued acceleration in ending loan receivable growth.

Speaker #3: With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Speaker #5: All while maintaining our credit discipline and delivering a strong credit performance. As a result, we generated net earnings of $885 million, or $2.59 per diluted share, a return on average assets of 2.9%, a return on tangible common equity of 25.2%, and an 8% increase in tangible book value per share.

Brian Doubles: Whether we are empowering small and medium-sized contractors to keep their businesses running smoothly, unlocking greater value and loyalty for hobby purchases, or enabling pet families to access the care their pets need, Synchrony is driving more meaningful customer and partner outcomes through the moments that matter. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Speaker #4: Thanks, Brian. And good morning, everyone. Synchrony's second quarter financial performance was highlighted by a positive inflection in average active account growth, all-time-high purchase volume, and continued acceleration in ending loan receivable growth, all while maintaining our credit discipline and delivering a strong credit performance.

Speaker #4: As a result, we generated net earnings of $885 million, or $2.59 per diluted share, a return on average assets of 2.9%, a return on tangible common equity of 25.2%, and an 8% increase in tangible book value per share.

Speaker #5: Turning to our performance in detail, purchase volume grew 8% versus last year, and reached almost $50 billion. Ending loan receivables grew 2% to $102 billion, reflecting the impact of higher purchase volume, partially offset by the continued effects of elevated payment rates.

Brian Wenzel: Thanks, Brian, and good morning, everyone. Synchrony's Q2 financial performance was highlighted by a positive inflection in average active account growth, all-time high purchase volume, and continued acceleration in ending loan receivable growth, all while maintaining our credit discipline and delivering a strong credit performance. As a result, we generated net earnings of $885 million, or $2.59 per diluted share, a return on average asset of 2.9%, a return on tangible common equity of 25.2%, and an 8% increase in tangible book value per share. Turning to our performance in detail, purchase volume grew 8% versus last year and reached almost $50 billion. Ending loan receivables grew 2% to $102 billion, reflecting the impact of higher purchase volume, partially offset by the continued effects of elevated payment rates.

Speaker #4: Returning to our performance in detail, purchase volume grew 8% versus last year and reached almost $50 billion. Ending loan receivables grew 2% to $102 billion, reflecting the impact of higher purchase volume, partially offset by the continued effects of elevated payment rates.

Speaker #5: The payment rate of 17% was approximately 70 basis points higher than last year, and approximately 170 basis points above the pre-pandemic Q2 average. Primarily reflecting the impacts of new portfolio seasoning shifts in portfolio and product mix, and our previous credit actions.

Speaker #4: The payment rate of 17% was approximately 70 basis points higher than last year, and approximately 170 basis points above the pre-pandemic second quarter average.

Speaker #5: Net interest income increased 2% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense. Interest and fees increased 1%, primarily driven by the growth in average loan receivables.

Speaker #4: Primarily reflecting the impacts of new portfolio seasoning, shifts in portfolio and product mix, and our previous credit actions. Net interest income increased 2% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense.

Speaker #5: Interest expense decreased 8%, primarily due to lower benchmark rates. Our Q2 net interest margin increased 30 basis points versus last year to 15.08%, reflecting two key drivers.

Brian Wenzel: The payment rate of 17% was approximately 70 basis points higher than last year and approximately 170 basis points above the pre-pandemic Q2 average, primarily reflecting the impacts of new portfolio seasoning, shifts in portfolio and product mix, and our previous credit actions. Net interest income increased 2% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense. Interest and fees increased 1%, primarily driven by the growth in average loan receivables. Interest expense decreased 8%, primarily due to lower benchmark rates. Our Q2 net interest margin increased 30 basis points versus last year to 15.08%, reflecting two key drivers. One, a 39-basis point decline in our total interest-bearing liabilities cost, which reflected the impact of lower benchmark rates and contributed approximately 29 basis points to our net interest margin. Two, a 131-basis point increase.

Speaker #4: Interest and fees increased 1%, primarily driven by the growth in average loan receivables. Interest expense decreased 8%, primarily due to lower benchmark rates. Our second quarter net interest margin increased 30 basis points versus last year, to 15.08%, reflecting two key drivers.

Speaker #5: One, a $39 basis point decline in our total interest-bearing liabilities cost, which reflected the impact of lower benchmark rates and contributed approximately 29 basis points to our net interest margin.

Speaker #4: One, a 39-basis-point decline in our total interest-bearing liabilities cost, which reflected the impact of lower benchmark rates and contributed approximately 29 basis points to our net interest margin.

Speaker #5: And two, a $131 basis point increase in the mix of loan receivables as a percent of interest-earning assets versus last year, which contributed approximately 23 basis points to our net interest margin.

Speaker #4: And two, a 131 basis point increase. These improvements in our net interest margin by 13 basis points—the decline was generally driven by lower benchmark rates.

Speaker #5: These improvements were partially offset by two factors. One, a $68 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 13 basis points.

Speaker #5: The decline was generally driven by lower benchmark rates. And two, an 11 basis point decrease in our loan receivables yield, which was primarily driven by lower benchmark rates and lower assessed late fees, partially offset by the continued impact of our PPPCs.

Speaker #5: This reduced our net interest margin by approximately 9 basis points. On a sequential basis, net interest margin decreased 42 basis points primarily due to two drivers.

Speaker #5: One, the decline in our interest and fee yield, which reduced our net interest margin by approximately 31 basis points. This was primarily due to the lower assessed late fees as delinquency reached its seasonal low, and as the efficacy of our credit actions and ongoing credit discipline supported fewer defaulting accounts.

Brian Wenzel: These improvements. Our net interest margin by 13 basis points. Decline was generally driven by lower benchmark rates. Two, an 11-basis point decrease in our loan receivables yield, which was primarily driven by lower benchmark rates. The impact of our PPP fees. This reduced our net interest margin by approximately 9 basis points. On a sequential basis, net interest margin decreased 42 basis points, primarily due to two drivers. One, the decline in our interest and fee yield, which reduced our net interest margin by approximately 31 basis points. This was primarily due to the lower assessed late fees as delinquency reaches seasonal low and as the efficacy of our credit actions and ongoing credit discipline support fewer defaulting accounts. Two, the decline in the mix in loan receivables as a percent of interest-earning assets, which reduced our net interest margin by approximately 16 basis points.

Speaker #4: And two, an 11-basis point decrease in our loan receivables yield, which was primarily driven by lower benchmark rates and the continued impact of our PPPCs.

Speaker #5: And two, the decline in the mix in loan receivables as a percent of interest-earning assets, which reduced our net interest margin by approximately 16 basis points.

Speaker #5: This was generally due to seasonal pre-funding ahead of our expected loan acceleration in the back half of the year. Turning to the remainder of our P&L, RSAs of $1 billion were 4% of average loan receivables in the Q2, an increase 35 million versus the prior year, primarily reflecting program performance and higher purchase volume.

Speaker #4: This reduced our net interest margin by approximately 9 basis points. On a sequential basis, net interest margin decreased 42 basis points, primarily due to two drivers.

Speaker #4: One, the decline in our interest and fee yield, which reduced our net interest margin by approximately 31 basis points. This was primarily due to the lower assessed late fees as delinquency reached its seasonal low, and as the efficacy of our credit actions and ongoing credit discipline supported fewer defaulting accounts.

Speaker #5: Provision for credit losses increased 55 million, to $1.2 billion, primarily driven by the reserve release of $163 million, versus a $265 million release in the prior year.

Speaker #4: And two, the decline in the mix in loan receivables as a percent of interest-earning assets, which reduced our net interest margin by approximately 16 basis points.

Speaker #5: Partially offset by a $47 million decrease in net charge-offs. Other income increased $19 million to $137 million, primarily reflecting the impact of a $30 million gain related to the exchange of our Visa B2 shares, partially offset by higher loyalty costs.

Speaker #4: This was generally due to seasonal pre-funding ahead of our expected loan acceleration in the back half of the year. Turning to the remainder of our P&L, RSAs of $1 billion were 4% of average loan receivables in the second quarter, an increase of $35 million versus the prior year, primarily reflecting program performance and higher purchase volume.

Brian Wenzel: This was generally due to seasonal pre-funding ahead of our expected loan acceleration in the H2 of the year. Turning to the remainder of our P&L. RSAs of $1 billion, or 4% of average loan receivables in the Q2, and increased $35 million versus the prior year, primarily reflecting program performance and higher purchase volume. Provision for credit losses increased $55 million to $1.2 billion, primarily driven by a reserve release of $163 million versus a $265 million release in the prior year, partially offset by a $47 million decrease in net charge-offs. Other income increased $19 million to $137 million, primarily reflecting the impact of a $30 million gain related to the exchange of our Visa B-2 shares, partially offset by higher loyalty costs. Other expense increased 7% to $1.3 billion, primarily driven by higher operational losses and technology investments.

Speaker #5: Other expense increased 7% to $1.3 billion, primarily driven by higher operational losses and technology investments. The Q2 efficiency ratio was 35.8%, approximately 170 basis points higher than last year.

Speaker #4: Provision for credit losses increased $55 million, to $1.2 billion, primarily driven by the reserve release of $163 million, versus a $265 million release in the prior year.

Speaker #5: This resulted from higher overall expenses and the impact of higher RSA. Turning to our portfolio credit trends on slide 8, both our 30-plus and 90-plus delinquency rates at the end of the Q2 were generally in line with the prior year.

Speaker #4: Partially offset by a $47 million decrease in net charges. Other income increased $19 million to $137 million, primarily reflecting the impact of a $30 million gain related to the exchange or release of B2 shares, partially offset by higher loyalty costs.

Speaker #5: Our net charge-off rate was 5.43%, reflecting a decrease of 27 basis points from 5.7% in the prior year. And our allowance for credit losses as a percent of loan receivables was 10.09%, a decrease of approximately 33 basis points from 10.42% in the Q1, and a decrease of approximately 50 basis points from 10.59% last year.

Speaker #4: Other expense increased 7% to $1.3 billion, primarily driven by higher operational losses and technology investments. The second quarter efficiency ratio was 35.8%, approximately 170 basis points higher than last year.

Brian Wenzel: The Q2 efficiency ratio was 35.8%, approximately 170 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA. Turning to our portfolio credit trends on slide eight. Both our 30-plus and 90-plus delinquency rates at the end of the Q2 were generally in line with the prior year. Our net charge-off rate was 5.43%, reflecting a decrease of 27 basis points from 5.7% in the prior year. Our Allowance for Credit Losses as a percent of loan receivables was 10.09%, a decrease of approximately 33 basis points from 10.42% in the Q1, and a decrease of approximately 50 basis points from 10.59% last year. Slide nine shows Synchrony's funding, capital, and liquidity ratios, which remain a core strength of our business.

Speaker #4: This resulted from higher overall expenses and the impact of higher RSA. Turning to our portfolio credit trends on slide 8, both our 30-plus and 90-plus delinquency rates at the end of the second quarter were generally in line with the prior year.

Speaker #5: Slide 9 shows Synchrony's funding, capital, and liquidity ratios. Which remain a core strength of our business. We grew our direct deposits by 2.9 billion dollars versus last year, and reduced broker deposits by 2.4 billion dollars.

Speaker #4: Our net charge-off rate was 5.43%, reflecting a decrease of 27 basis points from 5.7% in the prior year. Our allowance for credit losses as a percent of loan receivables was 10.09%, a decrease of approximately 33 basis points from 10.42% in the first quarter, and a decrease of approximately 50 basis points from 10.59% last year.

Speaker #5: At Q2 end, deposits represented 83% of our total funding, with secured debt representing 9%, and unsecured debt representing 8%. Total liquid assets decreased 9%, to 19.8 billion dollars, and represented 16.2% of total assets, 186 basis points lower than last year.

Speaker #4: Slide 9 shows Synchrony's funding, capital, and liquidity ratios, which remained a core strength of our business. We grew our direct deposits by $2.9 billion versus last year and reduced broker deposits by $2.4 billion.

Speaker #5: Turning to capital, during the Q2, we issued $500 million of preferred stock, with a final dividend of 7.25%, a full 100 basis points lower than our previous resettable preferred deal, that was priced in February 2024.

Brian Wenzel: We grew our direct deposits by $2.9 billion versus last year and reduced broker deposits by $2.4 billion. At quarter end, deposits represented 83% of our total funding, with secured debt representing 9% and unsecured debt representing 8%. Total liquid assets decreased 9% to $19.8 billion and represented 16.2% of total assets, 186 basis points lower than last year. Turning to capital. During the Q2, we issued $500 million of preferred stock with a final dividend of 7.25%, a full 100 basis points lower than our previous resettable preferred deal that was priced in February 2024. With this issuance, our capital stack is now fully developed. Synchrony remains focused on returning capital to shareholders and making further progress towards our CET1 target of 11%.

Speaker #4: At quarter end, deposits represented 83% of our total funding, with secured debt representing 9% and unsecured debt representing 8%. Total liquid assets decreased 9% to $19.8 billion and represented 16.2% of total assets, 186 basis points lower than last year.

Speaker #5: With this issuance, our capital stack is now fully developed. Synchrony remains focused on returning capital to shareholders and making further progress towards our CET-1 target of 11%.

Speaker #5: At the end of the Q2, we changed the presentation of our internal-use capitalized software costs on our balance sheet and reclassified prior periods to conform to this presentation.

Speaker #4: Turning to capital, during the second quarter, we issued $500 million of preferred stock, with a final dividend of 7.25%. This was a full 100 basis points lower than our previous resettable preferred deal that was priced in February 2024.

Speaker #5: This change is reflected in our capital ratios for both the current and prior year. Accordingly, Synchrony ended the Q2 with a CET-1 ratio of 13.2%, reflecting 100 basis point reduction versus last year.

Speaker #4: With this issuance, our capital stack is now fully developed. Synchrony remains focused on returning capital to shareholders and making further progress toward our CET-1 target of 11%.

Speaker #5: A Tier 1 capital ratio of 14.9%, reflecting a 50 basis point reduction. A total capital ratio of 16.9%, reflecting a 60 basis point reduction.

Speaker #4: At the end of the second quarter, we changed the presentation of our internal-use capitalized software costs on our balance sheet and reclassified prior periods to conform to this presentation. This change is reflected in our capital ratios for both the current and prior year.

Speaker #5: And a Tier 1 capital plus reserves ratio of 24.7%, reflecting a 100 basis point reduction versus last year. Synchrony returned $950 million to shareholders during the Q2.

Brian Wenzel: At the end of Q2, we changed the presentation of our internal use capitalized software costs on our balance sheet and reclassified prior periods to conform to this presentation. This change is reflected in our capital ratios for both the current and prior year. Accordingly, Synchrony ended the quarter with a CET1 ratio of 13.2%, reflecting 100 basis point reduction versus last year, a Tier 1 capital ratio of 14.9%, reflecting a 50 basis point reduction, a total capital ratio of 16.9%, reflecting a 60 basis point reduction, and a Tier 1 capital plus reserves ratio of 24.7%, reflecting a 100 basis point reduction versus last year. Synchrony returned $950 million to shareholders during Q2, which included $850 million in share repurchases and $100 million in common stock dividends. At quarter end, we had approximately $5.7 billion remaining of our share repurchase authorization.

Speaker #5: Which included $850 million in share repurchases and $100 million in common stock dividends. At Q2 end, we had approximately 5.7 billion dollars remaining of our share repurchase authorization.

Speaker #4: Accordingly, Synchrony ended the quarter with a CET1 ratio of 13.2%, reflecting a 100 basis point reduction versus last year, and a Tier 1 capital ratio of 14.9%, reflecting a 50 basis point reduction.

Speaker #5: Finally, I'd like to discuss our outlook on slide 10. We continue to expect average active account acceleration and strong growth in purchase volume in the back half of this year, while maintaining our credit discipline.

Speaker #4: A total capital ratio of 16.9%, reflecting a 60 basis point reduction, and a Tier 1 capital plus reserves ratio of 24.7%, reflecting a 100 basis point reduction versus last year.

Speaker #5: This growth should more than offset the impact of elevated payment rates, to deliver mid-single-digit growth in any loan receivables by year-end. Net interest income is expected to grow in 2026 as a result of higher average loan receivables, the building impact of PPPCs, and lower funding liabilities compared to last year.

Speaker #4: Synchrony returned $950 million to shareholders during the second quarter, which included $850 million in share repurchases and $100 million in common stock dividends.

Speaker #4: At quarter end, we had approximately $5.7 billion remaining of our share repurchase authorization. Finally, I'd like to discuss our outlook on slide 10.

Speaker #5: These trends will be partially offset by the impacts of lower late fee incidents and new account growth acceleration. We continue to expect net charge-offs to be less than 5.5% for the full year, with delinquency and losses following seasonality, as strong program performance contributes to higher net interest income and lower losses compared to last year, RSAs should increase but remain within our long-term target range of 4 to 4.5% of average receivables.

Speaker #4: We continue to expect average active account acceleration and strong growth in purchase volume in the back half of the year, while maintaining our credit discipline.

Brian Wenzel: Finally, I'd like to discuss our outlook on slide 10. We continue to expect average active account acceleration and strong growth in purchase volume in H2 of this year while maintaining our credit discipline. This growth should more than offset the impact of elevated payment rates to deliver mid-single-digit growth in ending loan receivables by year end. Net interest income is expected to grow in 2026 as a result of higher average loan receivables, the building impact of PPPCs, and lower funding liabilities compared to last year. These trends will be partially offset by the impacts of lower late fee incidence and new account growth acceleration. We continue to expect net charge-offs to be less than 5.5% for the full year, with delinquency and losses following seasonality.

Speaker #4: This growth should more than offset the impact of elevated payment rates, to deliver mid-single-digit growth in ending loan receivables by year-end. Net interest income is expected to grow in 2026 as a result of higher average loan receivables, the building impact of PPPCs, and lower funding liabilities compared to last year.

Speaker #5: Lastly, we expect other expense dollars in the second half of this year to be relatively consistent with the first half, as we maintain our focus on driving operating leverage while also investing in Synchrony's capabilities and future growth opportunities.

Speaker #4: These trends will be partially offset by the impacts of lower late fee incidents and new account growth acceleration. We continue to expect net charge-offs to be less than 5.5% for the full year, with delinquency and losses following seasonality. As strong program performance contributes to higher net interest income and lower losses compared to last year, RSAs should increase but remain within our long-term target range of receivables.

Speaker #5: Given the performance of our business so far this year and the expectations for the remainder of 2026, we now expect to deliver between $9.25 and $9.50 in diluted earnings per share.

Brian Wenzel: As strong program performance contributes to higher net interest income and lower losses compared to last year, RSAs should increase but remain within our long-term target range of receivables. Lastly, we expect other expense dollars in H2 of this year to be relatively consistent with H1 as we maintain our focus on driving operating leverage while also investing in Synchrony's capabilities and future growth opportunities. Given the performance of our business so far this year and the expectations for the remainder of 2026, we now expect to deliver between $9.25 and $9.50 in diluted earnings per share. In summary, we're confident in our path forward as we execute on our strategic imperatives. We remain focused on enhancing our resilient foundation and generating strong profitability to drive intrinsic value over both the short and long term, while also returning significant capital to shareholders.

Speaker #5: In summary, we're confident in our path forward as we execute on our strategic imperatives. We remain focused on enhancing our resilient foundation and generating strong profitability to drive intrinsic value over both the short and long term, while also returning significant capital to shareholders.

Speaker #4: Lastly, we expect other expense dollars in the second half of this year to be relatively consistent with the first half, as we maintain our focus on driving operating leverage while also investing in Synchrony's capabilities and future growth opportunities.

Speaker #5: With that, I'll turn the call back to Brian.

Speaker #1: 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, demand remains strong.

Speaker #4: Given the performance of our business so far this year, and the expectations for the remainder of 2026, we now expect to deliver between $9.25 and $9.50 in diluted earnings per share.

Speaker #1: Synchrony delivers everyday value and utility for millions of consumers and compelling outcomes for hundreds of thousands of small and mid-sized businesses and providers across the country.

Speaker #4: In summary, we're confident in our path forward as we execute on our strategic imperatives. We remain focused on enhancing our resilient foundation and generating strong profitability to drive intrinsic value over both the short and long term, while also returning significant capital to shareholders.

Speaker #1: Second, Synchrony continues to raise the bar. Through consistent investment in our innovation and evolution, we are driving outcomes that position Synchrony at the heart of what matters to customers and partners alike.

Speaker #4: With that, I'll turn the call back to Brian.

Speaker #1: And third, the power of our differentiated business model is evident through our financial performance. Synchrony is growing while maintaining our credit discipline, generating strong returns, and building significant long-term value for our stakeholders, with that, I'll turn the call back to Catherine to open the Q&A.

Speaker #1: Thanks, Brian. Before I turn the call over to Kieran, I'd like to leave you with three key takeaways from today's discussion. First, demand remains strong.

Brian Wenzel: With that, I'll turn the call back to Brian.

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, demand remains strong. Synchrony delivers everyday value and utility for millions of consumers and compelling outcomes for hundreds of thousands of small and mid-sized businesses and providers across the country.

Speaker #1: Synchrony delivers everyday value and utility for millions of consumers, and compelling outcomes for hundreds of thousands of small and mid-sized businesses and providers across the country.

Speaker #2: That concludes our prepared remarks. We will now begin the Q&A session. So that we can accommodate as many of you as possible, I'd like to ask the participants to please limit yourselves to one primary and one follow-up question.

Brian Doubles: Second, Synchrony continues to raise the bar. Through consistent investment in our innovation and evolution, we are driving outcomes that position Synchrony at the heart of what matters to customers and partners alike. Third, the power of our differentiated business model is evident through our financial performance. Synchrony is growing while maintaining our credit discipline, generating strong returns, and building significant long-term value for our stakeholders. With that, I'll turn the call back to Kathryn to open the Q&A.

Speaker #2: If you have additional questions, the investor relations team will be available after the call. Operator, please start the Q&A session.

Speaker #3: At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2.

Speaker #1: With that, I'll turn the call back to Kathryn to open the Q&A.

Speaker #3: Please limit yourself to one question and one follow-up question. Our first question comes from Ryan Nash with Goldman Sachs. Please go ahead. Your line is open.

Speaker #2: That concludes our prepared remarks. We will now begin the Q&A session. So that we can accommodate as many of you as possible, I’d like to ask the participants to please limit yourselves to one primary and one follow-up question.

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 #2: If you have additional questions, the Investor Relations team will be available after the call. Operator, please start the Q&A session.

Speaker #4: Hey, good morning, everyone.

Speaker #5: Hey, Ryan.

Speaker #6: Good morning, Ryan.

Speaker #4: So Brian, if I look at the EPS in the second half relative to street expectations, it implies some downside. I know that there's color on some of the moving pieces of the guidance on slide 10, but maybe just walk us through some of the things that are embedded for the second half in NII and credit, and where do you think expectations may be off from here?

Speaker #3: At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2.

Operator: 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. Our first question comes from Ryan Nash with Goldman Sachs. Please go ahead. Your line is open.

Speaker #3: Please limit yourself to one question and one follow-up question. Our first question comes from Ryan Nash with Goldman Sachs. Please go ahead, your line is open.

Speaker #4: Thank you, and I have a follow-up.

Speaker #6: Yeah. Thanks for the question, Ryan. I think when you look externally and what people have modeled, right, when you think about the reserve coverage ratio, I think the ending point, how they got there, was a little bit more peanut buttered across quarters, right?

Speaker #4: Hey, good morning, everyone.

Speaker #5: Hey, Ryan.

Speaker #6: Good morning, Ryan.

Ryan Nash: Hey, good morning, everyone.

Brian Wenzel: Hey, Ryan. Good morning, Ryan.

Brian Doubles: Hey, Ryan.

Brian Wenzel: Good morning, Ryan.

Ryan Nash: Brian, if I look at the EPS in the H2 relative to street expectations, it implies some downside. I know that there's color on some of the moving pieces of guidance on slide 10, but maybe just walk us through some of the things that are embedded for the H2 in NII and credit, and where do you think expectations may be off from here? Thank you, and I have a follow-up.

Speaker #6: So when you look at the first half for us, the rate came down, even though we had growth and offset the provisions against that growth.

Speaker #6: I think as you start thinking about the back half of the year, the reserve rate probably doesn't really moderate from here. Over the medium term, it probably can.

Speaker #4: Thank you, and I have a follow-up.

Speaker #6: Yeah. Thanks for the question, Ryan. I would have modeled right when you think about the reserve coverage ratio. I think the ending point—how they got there—was a little bit more peanut-buttered across quarters, right?

Speaker #6: But you're going to see more growth-driven provisions in the back half. So I think you get to the ending point. It's just how people model the quarters, number one.

Brian Wenzel: Yeah. Thanks for the question, Ryan. I think people have modeled. When you think about the reserve coverage ratio, I think the ending point, how they got there was a little bit more peanut buttered across quarters. The rate came down even though we had growth and offset the provisions against that growth. I think as you start thinking about the H2 of the year, the reserve rate probably doesn't really moderate from here. Over the medium term, it probably can, but you're going to see more growth-driven provisions in the H2. I think you get to the ending point. It's just how people model the quarter is number one. I think when you think about the EPS guide, net interest margin was really at the lowest point here in the Q2. That's going to begin to build.

Speaker #6: I think when you think about the EPS guide, right, net interest margin, was really at the lowest point here in the second quarter. That's going to begin to build.

Speaker #6: The rate came down, even though we had growth and offset the provisions against that growth. I think if you start thinking about the back half of the year, the reserve rate probably doesn't really moderate from here.

Speaker #6: And again, what we tried to say to folks is, number one, as much as you have that charge-off declines, you're going to have a significant impact relative to late fees.

Speaker #6: Over the medium term, it probably can. But you're going to see more growth-driven provisions in the back half. So I think you get to the ending point.

Speaker #6: And when you look at it, walking from the first quarter to second quarter, you had 18 basis points that just reduction related to late fees, put aside the AEA piece and the ALR piece.

Speaker #6: It's just how people model the quarters, number one. I think when you think about the EPS guide, right, net interest margin was really at the lowest point here in the second quarter.

Speaker #6: So I think as people try to model this, I think they have to take into better account, number one, the effects of late fees that are kind of coming from the better charge-off position, and two, kind of have to get the reserve trends probably right over the quarters as it kind of builds with growth.

Speaker #6: That's going to begin to build. And again, what we tried to say to folks is, number one, as much as you have a charge-off decline, you're going to have a significant impact relative to late fees.

Brian Wenzel: Again, what we tried to say to folks is, number one, as much as you have a charge-off decline, you're going to have a significant impact relative to late fees. When you look at it walking from Q1 to Q2, you had 18 basis points of just reduction related to late fees, put aside the AEA. I think as people try to model this, I think they have to take into better account, number one, the effects of late fees are kind of coming from the better charge-off position. Two, kind of have to get the reserve transpired right over the quarters as it kind of builds with growth. The last thing I'd leave you with, and we try to be clear with this, is put aside the operational losses. Operating Expenses are down or down year-over-year versus our expectations.

Speaker #6: And when you look at it, walking from the first quarter to the second quarter, you had 18 basis points of just reduction related to late fees, putting aside the AEA.

Speaker #6: The last thing I'd leave you with, and we try to be clear with this, is put aside the operational losses. Operating expenses are down, or down year over year versus our expectations.

Speaker #6: So, I think as people try to model this, they have to take into better account, number one, the effects of late fees, which are kind of coming from a better charge-off position.

Speaker #6: And again, that's something we're dealing with and dealt with in the first half of the year. But that's really going to be consistent. I think people still model a little bit higher I'm sorry, a little bit lower opex because they're using efficiency ratio.

Speaker #6: And two, you kind of have to get the reserve trends probably right over the quarters as it builds with growth. The last thing I'd leave you with, and we try to be clear with this, is to put aside the operational losses.

Speaker #6: Again, we're trying to help you with dollars. So those are the bigger pieces I think, Ryan, as you think about the back half. It's just how you got there quarter by quarter versus the full year number.

Speaker #6: Operating expenses are down, or down year over year versus our expectations. And again, that's something we're dealing with and dealt with in the first half of the year.

Speaker #4: Got you. And I appreciate the color. And Brian, you had flagged that the margin could be lower in the quarter, and that came through.

Speaker #6: But that's really going to be consistent. I think people still model a little bit higher—I'm sorry, a little bit lower. Experts are using efficiency ratio.

Speaker #4: And I know that you just noted the margin began to build from here, but maybe just talk about some of the drivers and the key assumptions embedded in that.

Brian Wenzel: Again, that's something we're dealing with and dealt with in H1, but that's really going to be consistent. I think people still model a little bit higher, I'm sorry, a little bit lower OpEx because they're using efficiency ratio. Again, we're trying to help you with dollars. Those are the bigger pieces I think, Ryan, as you think about H2. It's just how you got there quarter-by-quarter versus the full year number.

Speaker #6: Again, we're trying to help you with dollars. So those are the bigger pieces, I think, Ryan, as you think about the back half. It's just how you got there quarter by quarter versus the full-year number.

Speaker #4: And do these elevated payment rates they're going to impede your ability to expand the margin further over time? Thank you.

Speaker #6: Yeah. Let me start with where you ended, Ryan. I know there's probably a lot of questions with regard to the 73 basis point increase, from the first quarter to the second quarter, and the payment rate.

Speaker #4: Gotcha. No, I appreciate the color. And Brian, you had flagged that the margin could be lower in the quarter, and that came through. I know that you just noted the margin begins to build from here, but maybe just talk about some of the drivers and the key assumptions embedded in that.

Speaker #6: 85% of that, or 62 basis points, were really driven by two factors. Number one, new portfolios were accounted for probably half that miss. Which related to not only Walmart, but you had Bob's, you had some other portfolios that kind of come through.

Ryan Nash: Got you. No, I appreciate the color. Brian, you had flagged that the margin could be lower in the quarter, and that came through. I know that you just noted the margin will begin to build from here, but maybe just talk about some of the drivers and the key assumptions embedded in that. Do these elevated payment rates, are they going to impede your ability to expand the margin further over time? Thank you.

Speaker #4: And do these elevated payment rates—are they going to impede your ability to expand the margin further over time? Thank you.

Speaker #6: Yeah, let me start with where you ended, Ryan. I know there's probably a lot of questions with regard to the 73-basis-point increase from the first quarter to the second quarter, and the payment rate.

Speaker #6: So the amalgamation of a bunch of new programs drove a significant increase in the payment rate quarter on quarter. And then second, promo mix, contributed a factor as well, that's in there.

Brian Wenzel: Yeah, let me start with where you ended, Ryan. I know there's probably a lot of questions with regard to the 73 basis point increase from Q1 to Q2 in the payment rate. 85% of that or 62 basis points were really driven by two factors. Number one, new portfolios accounted for probably half that mix, which related to not only Walmart, but you have Bob's, you got some other portfolios that kind of come through. The amalgamation of a bunch of new programs drove a significant increase in the payment rate quarter-on-quarter. Then second, promo mix contributed a factor as well that's in there. Those two combined were 85% of the mix. Payment rate was relatively stable quarter-on-quarter as you think about it.

Speaker #6: Eighty-five percent of that, or 62 basis points, was really driven by two factors. Number one, new portfolios accounted for probably half that miss, which related to not only Walmart, but you had Bob's, you had some other portfolios that kind of came through.

Speaker #6: So those two combined were 85% of the mix. So payment rate was relatively stable quarter on quarter. As you think about it, as you think about the net interest margin, as you move to the back half of the year, you should see as a framework to think about it, you are going to get a benefit on ALR, as you step out, and that builds between the third quarter and the fourth quarter.

Speaker #6: So, the amalgamation of a bunch of new programs drove a significant increase in the payment rate quarter on quarter. And then, second, promo mix contributed as a factor as well—that's in there.

Speaker #6: Late fees probably have hit what I'd say is a trough, to some degree. So you won't see as much impact really as you kind of move into the back half of the year.

Speaker #6: So that headwind that you experienced being 19 basis points this quarter, that kind of abates. And swings quarter on quarter. So those are probably some of the bigger pieces.

Speaker #6: And again, that late fee component is overwhelming the benefit that we got from the PPPCs. So I think as you kind of try to model through the late fee impact and the new account impact on them, again, that stems a little bit in the back half of the year.

Brian Wenzel: As you think about the net interest margin as you move to H2, you should see, as a framework to think about it, you are going to get a benefit on ALR as you step out, and that builds between Q3 and Q4. Late fees probably have hit what I'd say is a trough to some degree. You won't see as much impact really as you kind of move into H2. That headwind that you experienced being 19 basis points this quarter, that kind of abates and swings quarter-on-quarter. Those are probably some of the bigger pieces. Again, that late fees component is overwhelming the benefit that we got from the PPPCs.

Speaker #6: Late fees probably have hit what I'd say is a trough, to some degree, so you won't see as much impact really as you move into the back half of the year.

Speaker #6: So, that headwind that you experienced, being 19 basis points this quarter, kind of abates and swings quarter on quarter. So, those are probably some of the bigger pieces.

Speaker #3: Thank you.

Speaker #6: Thanks, Ryan.

Speaker #3: We've gone off next with Sanjay Sakhrani with KPW. Please go ahead. Your line is open.

Speaker #5: Thank you. Good morning. Just building on what Ryan was talking to you about, Brian Wenzel, as I think about the RSAs, those also came in sort of at the low end of the range that you guys are targeting.

Brian Wenzel: I think as you kind of try to model through the late fee impact and the new account impact on them, again, that stems a little bit in H2.

Speaker #3: Thank you.

Speaker #5: As we think about the second half of the year, do those then elevate? I mean, I'm just trying to think about where we land in that wide range that you have for the RSAs.

Speaker #6: Thanks, Ryan.

Speaker #3: We've gone off next with Sanjay Sakhrani with KBW. Please go ahead, your line's open.

Speaker #5: Thank you. Good morning. Just building on what Ryan was talking to you about, Brian Wenzel. As I think about the RSAs, those also came in sort of at the low end of the range that you guys are targeting.

Operator: Thank you.

Speaker #6: Yeah. Thanks, good morning, Ryan. Thank you for the question. So RSAs, there's a number of things that factor through there. I think when you take a step back and look at the relative percent relative to PPWR minus net charge-offs exclusive RSA, it's generally in line with prior quarters.

Brian Wenzel: Thanks, Ryan.

Operator: We will move next with Sanjay Sakhrani with KBW. Please go ahead. Your line is open.

Sanjay Sakhrani: Thank you. Good morning. Just building on what Ryan was talking to you about, Brian Wenzel. As I think about the RSAs, those also came in sort of at the low end of the range that you guys are targeting. As we think about the H2 of the year, do those then elevate? I'm just trying to think about where we land in that wide range that you have for the RSAs.

Speaker #5: As we think about the second half of the year, do those then elevate? I'm just trying to think about where we land in that wide range that you have for the RSAs.

Speaker #6: So it's not significantly different. The one thing I'd say, though, Sanjay, in this particular quarter, as well as some effects in the first quarter, the way in which operational losses sometimes flow through is they go directly through RSA versus being an offset as a chargeback through operational losses.

Speaker #6: Yeah. Thanks. Good morning, Ryan. Thank you for the question. So, RSAs—there are a number of things that factor through there. I think when you take a step back and look at the relative percent, relative to PP&R minus net charge-offs, exclusive of RSA, it's generally in line with prior quarters.

Speaker #6: So when I think about that piece of it for a second, a good bulk, I want to say 70-plus percent of the operational losses are covered by RSA.

Brian Wenzel: Yeah. Thanks. Good morning, Ryan. Thank you for the question. RSAs, there's a number of things that factor through there. I think when you take a step back and look at the relative percent relative to PPNR minus net charge-offs exclusive of RSA, it's generally in line with prior quarters, so it's not significantly different. The one thing I'd say, though, Sanjay, in this particular quarter, as well as some effects in the Q1, the way in which operational losses sometimes flow through is they go directly through RSA versus being an offset. It's a charge back through operational losses. When I think about that piece of it for a second, a good bulk, I want to say 70+% of the operational losses are covered by RSA.

Speaker #6: It's not significantly different. The one thing I'd say, though, Sanjay, in this particular quarter, as well as some effects in the first quarter, is that the way in which operational losses sometimes flow through is they go directly through RSA versus being an offset.

Speaker #6: And in particular, over $20 million this quarter was covered directly through the RSA and not through that offset on the operational losses line. So as I take a step back, again, some of the idiosyncratic things that we saw in operational losses and some of the things maybe caused by partners who made modifications that had an unintended impact, that hopefully is behind us.

Speaker #6: It's a chargeback through operational losses. So when I think about that piece of it for a second, a good bulk—I want to say 70-plus percent—of the operational losses are covered by RSA.

Speaker #6: And in particular, over $20 million this quarter was covered directly through the RSA and not through that offset on the operational losses line. So, as I take a step back, again, some of the idiosyncratic things that we saw in operational losses and some of the things maybe caused by partners who made modifications that had an unintended impact—that hopefully is behind us.

Speaker #6: Now, again, we're coming off of historic lows relative to operational losses in 2025. So while we expected it to elevate, we think that the acceleration here should flatten out in the back half of the year.

Speaker #6: But we'll certainly mix and I'd say that item drove a little bit of the RSA movement. And you'll see RSAs generally move up a little bit from here, but stay within the range.

Brian Wenzel: In particular, over $20 million this quarter was covered directly through the RSA and not through that offset on the operational losses line. As I take a step back, again, some of the idiosyncratic things that we saw in operational losses and some of the things may be caused by partners that made modifications that had an unintended impact, that hopefully is behind us now. Again, we're coming off of historic lows relative to operational losses in 2025. While we expect it to elevate, we think that the deceleration here should flatten out in the H2 of the year. We'll certainly mix, and I'd say that item drove a little bit of the RSA movement. You'll see RSAs generally move up a little bit from here but stay within the range.

Speaker #6: Now, again, we're coming off of historic lows relative to operational losses in 2025. So, while we expected it to elevate, we think that the acceleration here should flatten out in the back half of the year.

Speaker #5: Okay. And then maybe if we pull up a little bit more, just thinking about the business model, because a lot has changed over the course of the late fees and then Walmart and obviously you guys have moved the mix to, I think, a higher credit quality consumer.

Speaker #6: But we'll certainly mix, and I'd say that item drove a little bit of the RSA movement. And you'll see RSAs generally move up a little bit from here, but stay within the range.

Speaker #5: Maybe this is the question for Brian Doubles. When we think about the ROA of the business and the portfolio, does that still intact at like two and a half percent or so?

Speaker #5: Okay. And then maybe if we pull up a little bit more, just thinking about the business model, because a lot has changed over the course of the late fees, and then Walmart, and obviously you guys have moved the mix to, I think, a higher credit quality consumer.

Speaker #5: I'm just trying to think about the overall implications of all the different moves and what it means for the ROA. Thanks.

Speaker #4: Yeah. I'll start on that, Sanjay. Look, I think to your point, a lot has changed in the last five years. I think we've brought in new partners.

Sanjay Sakhrani: Okay. Maybe if we pull up a little bit more, just thinking about the business model, because a lot has changed over the course of the late fees and then Walmart, obviously you guys have moved the mix to, I think, a higher credit quality consumer. Maybe this is a question for Brian Doubles. When we think about the ROA of the business and the portfolio, is that still intact at like 2.5% or so? I'm just trying to think about the overall implications of all the different moves and what it means for the ROA. Thanks.

Speaker #5: Maybe this is a question for Brian Doubles. When we think about the ROA of the business and the portfolio, is that still intact at around 2.5% or so?

Speaker #4: Obviously, we've renewed a number of our top 10 partners. But the one thing that the lens we look at all of those things through is the long-term guidance of two and a half percent plus ROA.

Speaker #5: I'm just trying to think about the overall implications of all the different moves and what it means for the ROA. Thanks.

Speaker #4: Yeah, I'll start on that, Sanjay. Look, I think to your point, a lot has changed in the last five years. I think we've brought in new partners.

Speaker #4: And so I think when you do all the puts and takes, everything we brought on, even smaller programs that we've exited because they were below our return threshold, they all kind of steer you back to that same range in terms of return.

Speaker #4: Obviously, we've renewed a number of our top 10 partners. But the one thing—the lens we look at all of those things through—is the long-term guidance of 2.5% plus ROA.

Brian Wenzel: Yeah, I'll start on that, Sanjay. Look, I think to your point, a lot has changed in the last five years. I think we've brought in new partners. Obviously, we've renewed a number of our top 10 partners. The one thing that the lens we look at all of those things through is the long-term guidance of 2.5% plus ROA. I think when you do all the puts and takes, everything we've brought on, even smaller programs that we've exited because they were below our return threshold, is they all kind of steer you back to that same range in terms of returns.

Brian Doubles: Yeah, I'll start on that, Sanjay. Look, I think to your point, a lot has changed in the last five years. I think we've brought in new partners. Obviously, we've renewed a number of our top 10 partners. The one thing that the lens we look at all of those things through is the long-term guidance of 2.5% plus ROA. I think when you do all the puts and takes, everything we've brought on, even smaller programs that we've exited because they were below our return threshold, is they all kind of steer you back to that same range in terms of returns.

Speaker #5: Okay. Great. Thank you.

Speaker #4: Yep. Thanks, Sanjay.

Speaker #6: Thanks, Sanjay.

Speaker #4: And so I think when you do all the puts and takes, everything we brought on—even smaller programs that we've exited because they were below our return threshold—they all kind of steer you back to that same range in terms of return.

Speaker #3: Thank you. Our next question comes from Terry Ma with Barclays. Please go ahead. Your line is open.

Speaker #5: Hey. Thank you. Good morning. So you called out some of the impact on the overall consolidated yield for the book. But if I look at kind of platform results, it looks like digital and diversified in value showed the most market decline in yields year over year.

Speaker #5: Okay. Great. Thank you.

Speaker #4: Yep. Thanks, Sanjay.

Speaker #6: Thanks, Sanjay.

Speaker #3: Thank you. Our next question comes from Terry Ma with Barclays. Please go ahead, your line is open.

Speaker #5: So any color on kind of what's going on with those two segments, is it just more kind of promo usage, or is it more late fees there?

Speaker #5: Hey, thank you. Good morning. So, you called out some of the impact on the overall consolidated yield for the book. But if I look at the platform results, it looks like Digital and Diversified & Value showed the most marked decline in yields year over year.

Sanjay Sakhrani: Okay. Great. Thank you.

Speaker #5: Any color on that, please.

Brian Wenzel: Yep. Thanks, Sanjay. Thanks, Sanjay.

Brian Doubles: Yep. Thanks, Sanjay.

Speaker #4: Yeah. Thanks for the question, Terry. When you think about those two particular platforms, obviously, diversified value has seen really strong growth. That's across all the partners.

Brian Wenzel: Thanks, Sanjay.

Operator: Thank you. Our next question comes from Terry Ma with Barclays. Please go ahead. Your line is open.

Terry Ma: Hey, thank you. Good morning. You called out some of the impact on the overall consolidated yield for the book. If I look at kind of platform results, it looks like Digital and Diversified Value showed the most market decline in yields year-over-year. Any color on kind of what's going on with those two segments? Is it just more kind of promo usage, or is it more late fee there? Any color on that, please?

Speaker #4: When you think about some of the value orientation you have there, whether it's a TJX or a Sam's, but clearly the yield gets impacted when you begin to introduce a new program like the Walmart one-pay program that's in there that has an impact in there.

Speaker #5: So, any color on what's going on with those two segments? Is it just more promo usage, or is it more late fees there?

Speaker #5: Any color on that, please.

Speaker #4: Yeah. Thanks for the question, Terry. When you think about those two platforms, obviously, Diversified and Value have seen really strong growth. That's across all the partners.

Speaker #4: So there's nothing fundamental I would say in diversified in value. As you slide up to digital, again, we have a couple of just amazing partners that are up there when you think about an Amazon and a PayPal and the refresh value propositions which have drawn significant growth in purchase volume and asset growth there.

Speaker #4: When you think about some of the value orientation you have there, whether it's a TJX or a Sam's, but clearly the yield gets impacted when you begin to introduce a new program like the Walmart One-Pay program that's in there, that has an impact in there.

Brian Wenzel: Yeah. Thanks for the question, Terry. When you think about those two particular platforms, obviously Diversified Value has seen really strong growth, and that's across all the partners. When you think about some of the value orientation you have there, whether it's a TJX or a Sam's. Clearly the yield gets impacted when you begin to introduce a new program like the Walmart OnePay program that's in there that has an impact in there. There's nothing fundamental, I would say, in Diversified Value. As you slide up to Digital, again, we have a couple of just amazing partners that are up there when you think about an Amazon and a PayPal and the refreshed value propositions, which has drawn significant growth in purchase volume and asset growth there. That has an impact.

Speaker #4: So there's nothing fundamental, I would say, in diversified and value. As you slide up to digital, again, we have a couple of just amazing partners that are up there.

Speaker #4: That has an impact. Again, when you change the trajectory of the company, we were down last year in assets. Now we're plus 2%. When you do that, there are implications, and I try to outline this back in January, throughout the P&L, including in the net interest margin as you have these new accounts.

Speaker #4: When you think about an Amazon and a PayPal and the refresh value propositions, which have driven significant growth in purchase volume and asset growth there, that has an impact.

Speaker #4: That begins to subside as you have a more consistent growth rate stepping out of 2026. So again, it's really a factor of the growth, whether it be a new partner or really a value prop that's resonating with consumers.

Speaker #4: Again, when you change the trajectory of the company—we were down last year in assets, now we're up 2%. When you do that, there are implications.

Speaker #4: And I tried to outline this back in January, throughout the P&L, including in the net interest margin, as you have these items that begin to subside and as you have a more consistent growth rate stepping out of 2026.

Speaker #5: Got it. That's helpful. Thank you. And then maybe just talking about home and auto, it looks like Lowe's was in there this quarter. Maybe just talk about the underlying trends that you're seeing ex-Lowe's.

Brian Wenzel: Again, when you change the trajectory of the company, we were down last year in assets. Now we're +2%. When you do that, there are implications, and I tried to outline this back in January throughout the P&L, including in the net interest margin as you have these. That begins to subside as you have a more consistent growth rate stepping out of 2026. Again, it's really a factor of the growth, whether it be a new partner or really a value prop that's resonating with consumers.

Speaker #4: So again, it's really a factor of the growth, whether it be a new partner or really a value prop that's resonating with consumers.

Speaker #5: I think you called out some green shoots last quarter. Thank you.

Speaker #4: Yeah. We're actually encouraged by home and auto. You think about that business, there were green shoots that we saw in the quarter. Furniture was up nicely.

Speaker #5: Got it. That's helpful. Thank you. And then maybe just talking about Home and Auto, it looks like Lowe's was in there this quarter. Maybe just talk about the underlying trends that you're seeing ex-Lowe's.

Speaker #4: In the quarter, home specialty was up mid-single digits, which had been more of a challenge for us as consumers wanted to maybe hold back on larger ticket-type purchases.

Speaker #5: I think you called out some green shoots last quarter. Thank you.

Speaker #4: Yeah, we're actually encouraged by Home and Auto. If you think about that business, there were green shoots that we saw in the quarter. Furniture was up nicely in the quarter.

Terry Ma: Got it. That's helpful. Thank you. Maybe just talking about home and auto. It looks like Lowe's was in there this quarter. Just talk about the underlying trends that you're seeing ex Lowe's. I think you called out some green shoots last quarter. Thank you.

Speaker #4: So real bright spots that are in there. That we feel good about. And obviously, we're excited about expanding the relationship with Lowe's and bringing that commercial co-branded portfolio in.

Speaker #4: Home specialty was up mid-single digits, which had been more of a challenge for us, as consumers wanted to maybe hold back on larger ticket-type purchases.

Speaker #4: It does have a very different type of payment and volume turn to it, but again, we're excited about expanding that relationship. And what we haven't really talked about is when you add that co-branded relationship on top of what was our private label relationship, all the accounts that maybe apply for co-brand that would get nothing now will get offered at least a private label card.

Brian Wenzel: Yeah. We're actually encouraged by home and auto. You think about that business. There were green shoots that we saw in the quarter. Furniture was up nicely in the quarter. Home specialty was up mid-single digits, which had been more of a challenge for us as consumers wanted to maybe hold back on larger ticket-type purchases. Real bright spots that are in there that we feel good about. Obviously, we're excited about expanding the relationship with Lowe's and bringing that commercial co-branded portfolio in. That does have a very different type of payment and volume turn to it. Again, we're excited about expanding that relationship.

Speaker #4: So, real bright spots that are in there, that we feel good about. And obviously, we're excited about expanding the relationship with Lowe's and bringing that commercial co-branded portfolio in.

Speaker #4: It does have a very different type of payment and volume turn to it, but again, we're excited about expanding that relationship. And what we haven't really talked about is, when you add that co-branded relationship on top of what was our private label relationship, all the accounts that maybe apply for co-brand that would get nothing, now will get offered at least a private label card.

Speaker #4: So hopefully, it should expand growth as we move forward. So again, we're encouraged by some of the trends that are in there. It seems doing a very nice job, particularly in the home specialty and furniture area, which again, goes back to the consumers being a little bit more resilient and willing to spend on certain discretionary items.

Speaker #4: So hopefully, it should expand growth as we move forward. So again, we're encouraged by some of the trends that are in there. Team's doing a very nice job, particularly in the home specialty and furniture area, which again, goes back to the consumers being a little bit more resilient and willing to spend on certain discretionary items.

Speaker #4: Thanks, Terry.

Brian Wenzel: What we haven't really talked about is when you add that co-branded relationship on top of what was our private label relationship, all the accounts that maybe apply for co-brand that would get nothing now will get offered at least a private label card. Hopefully it should expand growth as we move forward. Again, we're encouraged by some of the trends that are in there. The team's doing a very nice job, particularly in the home specialty and furniture area, which again, goes back to the consumers being a little bit more resilient and willing to spend on certain discretionary items.

Speaker #3: Thank you. We will move next with Darren Teller with Wolf Research. Please go ahead.

Speaker #5: Hey, guys. Thanks. With much of the recent increase in expense from tech investments and just some early operational losses as a large de novo program is built, can you just give us some color on your expectation for similar second-half expense dollars versus first half?

Speaker #4: Thanks, Terry.

Speaker #3: Thank you. We will move next to Darren Teller with Wolfe Research. Please go ahead.

Speaker #7: Hey, guys. Thanks. With much of the recent increase in expense from tech investments and just some early operational losses as a large deal program is built, can you just give us a color on your expectation for similar second-half expense dollars versus first half?

Speaker #6: Yeah. Hey, good morning, Darren. And thanks. As we think about it, you would our expectation is that operational losses here again, flatten out to trend downward as you think about it.

Brian Doubles: Thanks, Terry.

Brian Wenzel: Thanks, Terry.

Operator: Thank you. We will move next with Darrin Peller with Wolfe Research. Please go ahead.

Speaker #6: The tech investment will kind of continue at the same pace. But I think we're showing discipline relative to employee costs and other things. When you think about the back half generally has more volume associated than the first half particularly when you think about the fourth quarter.

Speaker #6: Yeah. Hey, good morning, Darren, and thanks. As we think about it, our expectation is that operational losses, again, flatten out the trend downward as you think about it.

Darrin Peller: Hey, guys. Thanks. With much of the recent increase in expense from tech investments and just some early operational losses as you launch the Nova program this build, can you just give us some color on your expectation for similar H2 expense dollars versus H1?

Speaker #6: So when you think about volume-oriented expenses, whether it's active accounts going increasing or whether it's some of the fees associated with the networks that are volume-oriented, you see a little bit more of those dollars coming through.

Brian Wenzel: Well, good morning, Darrin, and thanks. As we think about it, our expectation is that operational losses here again, flatten out to trend downward as you think about it. The tech investment will kind of continue at the same pace, but I think we're showing discipline relative to employee costs and other things. When you think about it, the H2 generally has more volume associated than the H1, particularly when you think about the Q4. When you think about volume-oriented expenses, whether it's active accounts increasing, or whether it's some of the fees associated with the networks that are volume oriented, you see a little bit more of those dollars coming through. But again, those dollars in totality in the H2 will approximate the H1.

Speaker #6: Particularly when you think about the fourth quarter. So when you think about volume-oriented expenses, whether it's active accounts increasing, or whether it's some of the fees associated with the networks that are volume-oriented, you see a little bit more of those dollars coming through.

Speaker #6: But again, those dollars in totality in the back half will approximate the first half, which brings you back into if you pull out operational losses, our expense that we're laying out for you on a dollar basis will align directly with the asset growth.

Speaker #6: But again, those dollars in totality in the back half will approximate the first half, which brings you back to, if you pull out operational losses, our expense that we're laying out for you on a dollar basis will align directly with the asset growth.

Speaker #6: So we feel good about that. As we move forward. So again, I think we're showing a lot of discipline around expenses, but making sure that we invest will certainly in technology so that we can ensure that we can hit medium and longer-term goals for growth of the company, driving intrinsic value.

Speaker #6: So we feel good about that as we move forward. Again, I think we're showing a lot of discipline around expenses, but making sure that we invest well—certainly in technology—so that we can hit medium- and longer-term goals for growth of the company and drive the intrinsic value.

Speaker #5: Right. Okay. Thanks, Brian. Just for a quick follow-up, the chart we saw on slide three, we found that really helpful. It just shows at least among your co-branded cards, there appears to be pretty little discretionary spend impacts despite higher gas prices, I suppose.

Brian Wenzel: Which brings you back into, if you pull out operational losses, our expense that we're laying out for you on a dollar basis will align directly with the asset growth. We feel good about that as we move forward. Again, I think we're showing a lot of discipline around expenses, but making sure that we invest well, certainly in technology, that we can hit medium- and longer-term goals for growth of the company driving intrinsic value.

Speaker #7: Right. Okay, thanks. Just a quick follow-up: the chart we saw on slide three—we found that really helpful. It just shows, at least among your co-branded cards, there appears to be pretty little discretionary spend impact, despite higher gas prices, I suppose.

Speaker #5: I mean, is this the case from what you're seeing? Is it more the seasoning of the new programs or anything else that you just touch on in terms of the drivers?

Speaker #5: Thanks.

Speaker #4: Yeah. When you look at the consumer, again, people are expecting higher gasoline prices, which have evaded recently, but hit a peak here in May as well as the accelerated inflation would cause that consumer to pull back and put a greater burden.

Speaker #7: I mean, is this the case from what you're seeing? Is it more the seasoning of the new programs, or anything else that you just touched on in terms of the drivers?

Speaker #7: Thanks.

Speaker #4: Yeah. When you look at the consumer, again, people are expecting higher gasoline prices, which have evaded recently, but hit a peak here in May.

Darrin Peller: Right. Okay. Thanks, Brian. Just for a quick follow-up, the chart we saw on slide three, we found that really helpful. Just shows, at least among your co-branding cards, there appears to be pretty little discretionary spend impacts despite higher gas prices, I suppose. Is this the case from what you're seeing? Is it more the seasoning of the new programs or anything else that you just touch on in terms of the drivers? Thanks.

Speaker #4: While the consumers don't like it and they will certainly are showing that in what they say about consumer confidence, it hasn't really reflected in the action.

Speaker #4: As well as the accelerated consumer to pull back and put a greater burden. While the consumers don't like it, and they are certainly showing that in what they say about consumer confidence, it hasn't really reflected in their actions.

Speaker #4: And when you look at that trend, it was solid to accelerate throughout the quarter. So I think it goes back to having the right product set and a multi-product set with value props that resonate.

Speaker #4: And when you look at that solid to accelerate throughout the quarter. So I think it goes back to having the right product set and a multi-product set with value props that resonate across the portfolio when it comes to discretionary.

Speaker #4: But again, we saw green shoots across the portfolio when it comes to discretionary. If you go out to health and wellness, dental had been a little bit of a headwind when people think about some of the discretionary procedures there.

Brian Wenzel: Yeah. When you look at the consumer, again, people are expecting higher gasoline prices, which have abated recently, but hit a peak here in May, as well as the accelerate that consumer to pull back and put a greater burden. While the consumers don't like it, and they most certainly are showing that in what they say about consumer confidence, it hasn't really reflected in the action. When you look at that trend, it was solid to accelerating throughout the quarter. I think it goes back to having the right product set and multi-product set with value props that resonate across the portfolio when it comes to discretionary. If you go out to health and wellness, dental had been a little bit of a headwind when people think about some of the discretionary procedures there. That turned positive during the quarter.

Speaker #4: If you go out to health and wellness, dental had been a little bit of a headwind when people think about some of the discretionary procedures there.

Speaker #4: That turned positive during the quarter. Cosmetic continues to be a little bit under pressure in that segment. But you go down to our lifestyle segment, we saw strength in luxury.

Speaker #4: That turned positive during the quarter. Cosmetics continues to be a little bit under pressure in that segment. But if you look down to our Lifestyle segment, we saw strength in Luxury.

Speaker #4: And in other areas, specialty retailer down there. Again, a little bit of headwind when it comes to the outdoor side. And again, already hit on home and auto where we saw furniture and home specialty pulling the value segment has a lot of just tremendous opportunities for consumers to spend.

Speaker #4: So again, the consumer is showing tremendous discipline. And then you combine that, Darren, with the charge-off perspective where entry rates are still as strong as or better than 2019.

Brian Wenzel: Cosmetic continues to be a little bit under pressure in that segment. You go down to our lifestyle segment, we saw strength in luxury and in other areas, specialty retailer down there. Again, a little bit of headwind when it comes to the outdoor side. Again, I already hit on home and auto where we saw furniture and home specialty pulling. The value segment has a lot of just tremendous opportunities for consumers to spend. Again, the consumer is showing tremendous discipline. Then you combine that, Darrin, with the charge-off perspective where entry rates are still as strong as or better than 2019. Late stage is stable to improving, and a little bit of pressure on to-do, but really solid credit trends.

Speaker #4: So again, the consumer is showing tremendous discipline. And then you combine that, Darren, with the charge-off perspective, where entry rates are still as strong as, or better than, 2019.

Speaker #4: Late-stage is stable to improving. And a little bit of pressure on to-do, but really solid credit rate. So the consumer is being very disciplined with regard to how they manage their own balance sheet.

Speaker #4: Late stage is stable to improving, and there is a little bit of pressure on to-do, but really solid credit ratings. So, the consumer is being very disciplined with regard to how they manage their own balance sheet.

Speaker #4: But they're willing to step in and spend in certain areas.

Speaker #5: All right. That's good to hear. Thanks, Brian.

Speaker #4: Great. Thanks, Darren.

Speaker #3: Thank you. Our next question comes from Rick Shane with JPMorgan. Please go ahead.

Speaker #4: But they're willing to step in and spend in certain areas.

Speaker #7: All right. It's good to hear. Thanks, Brian.

Speaker #4: Great. Thanks, Darren.

Speaker #6: Hey, guys. Thanks for taking my question. I'd like to talk about something a little bit more strategic in terms of your AI strategy and investment.

Speaker #3: Thank you. Our next question comes from Rick Shane with J.P. Morgan. Please go ahead.

Speaker #8: Hey, guys. Thanks for taking my question. I'd like to talk about something a little bit more strategic in terms of your AI strategy and investment.

Speaker #6: We're sort of now through this period of rapid deployment and probably not an enormous amount of focus on token costs, etc. I'm curious, as you look at the opportunity now, how you are managing compute expense and more importantly, as you move forward, how you implement strategies to balance or give at a managerial level the decision of tokens versus employees?

Brian Wenzel: The consumer is being very disciplined with regard to how they manage their own balance sheet, but they're willing to step in and spend in certain areas.

Speaker #8: We're sort of now through this period of rapid deployment and probably not an enormous amount of focus on token costs, etc. I'm curious, as you look at the opportunity now, how you are managing expense and, more more importantly, as you move forward, how you implement strategies to balance or give at a managerial level the decision of tokens versus employees?

Darrin Peller: All right. That's good to hear. Thanks, Brian.

Brian Wenzel: Great. Thanks, Darrin.

Operator: Thank you. Our next question comes from Rick Shane with JPMorgan. Please go ahead.

Rick Shane: Hey, guys. Thanks for taking my question. I'd like to talk about something a little bit more strategic in terms of your AI strategy and investment. We're sort of now through this period of rapid deployment and probably not an enormous amount of focus on token costs, et cetera. I'm curious, as you look at the opportunity now, how you are managing expense, and more importantly, as you move forward, how you implement strategies to balance or give at a managerial level the decision of tokens versus employees.

Speaker #4: Yeah, Rick. I'll start on this one. I think, look, this is obviously a huge opportunity for us as it is with every company. We are investing I think it's going to transform how we work.

Speaker #4: Yeah, Rick, I'll start on this one. I think, look, this is obviously a huge opportunity for us, as it is with every company. We are investing—I think it's going to transform how we work.

Speaker #4: It's going to transform every function, every platform in the business. It's a big opportunity to increase capacity, deliver productivity, we're seeing nice efficiency gains already.

Speaker #4: It's going to transform every function, every platform, and the opportunity to increase capacity and deliver productivity. We're seeing nice efficiency gains already, and speed to market is improving.

Speaker #4: Speed to market is improving. So I'm really bullish on it. I'm very excited about it. 90% of our exempt employees are actively using the tools.

Speaker #4: So I'm really bullish on it. I'm very excited about it. 90% of our exempt employees are actively using the tools. I think that's fantastic.

Speaker #4: I think that's fantastic. So we've done this in a way where we're just we're in the stage of just encouraging as much usage as possible.

Brian Wenzel: Yeah, Rick. I'll start on this one. I think, look, this is obviously a huge opportunity for us as it is with every company.

Brian Doubles: Yeah, Rick. I'll start on this one. I think, look, this is obviously a huge opportunity for us as it is with every company.

Speaker #4: So, we've done this in a way where we're just—we're in the state of just encouraging as much usage as possible. Now, with that said, obviously, we're going to be disciplined around the costs associated with that.

Brian Doubles: We are investing. I think it's going to transform how we work. It's going to transform every function, every platform. There's an opportunity to increase capacity, deliver productivity. We're seeing nice efficiency gains already. Speed to market is improving. I'm really bullish on it. I'm very excited about it. 90% of our exempt employees are actively using the tools. I think that's fantastic. We've done this in a way where we're in the stage of just encouraging as much usage as possible. Now with that said, obviously we're going to be disciplined around the cost associated with that. If we've got a good use case that drives productivity, drives speed to market, better answer for our partners and our customers, we're going to invest there. We've got great use cases across our tech teams, contact centers, collections, fraud, credit. It really is comprehensive.

Speaker #4: Now, with that said, obviously, we're going to be disciplined around the cost associated with that. But if we've got a good use case that drives productivity, drives speed to market, better answer for our partners and our customers, we're going to invest there.

Speaker #4: But if we've got a good use case that drives productivity, drives speed to market, better answers for our partners and our customers, we're going to invest there.

Speaker #4: We've got great use cases across our tech teams, contact centers, collections. Fraud, credit, it really is comprehensive. And those I don't even think of those as costs.

Speaker #4: We've got great use cases across our tech teams, contact centers, and selections—fraud, credit—it really is comprehensive. And I don't even think of those as costs.

Speaker #4: Those are investments. We're going to make sure that we're getting a good return on those costs. But this is an area where we're going to invest.

Speaker #4: Those are investments. We're going to make sure that we're getting a good return on those costs, but this is an area where we're going to invest.

Speaker #4: I don't know, Brian, if you want to add anything to that.

Speaker #2: Yeah.

Speaker #6: Go ahead, Brian. Sorry.

Speaker #4: I don't know, Brian, if you want to add anything to that.

Speaker #4: That's okay, Rick. Just to unpack that a little bit more, when you ask about the token cost, the token costs are not material to us.

Speaker #8: Yeah. Go ahead, Brian. Sorry.

Speaker #4: Just to back that up a little bit more, when you ask about the token costs, the token costs are not material to us. It's not something that we spend a lot of money trying to control at this point.

Speaker #4: And it's not something that we spend a lot of money trying to control at this point. What I'd say is we have a framework around looking at the cost of AI, whether it's the license cost, the token or credits, and how those kind of come in and how they're consumed.

Speaker #4: What I'd say is we have been looking at the cost of AI, whether it's the license cost, the token or credits, and how those come in and how they're consumed.

Brian Doubles: I don't even think of those as costs. Those are investments. We're going to make sure that we're getting a good return on those costs. This is an area where we're going to invest. I don't know, Brian, if you want to add anything to that.

Speaker #4: We have a whole FinOps team that has been part of how we manage the cloud costs that are managing this. So right now, we're trying to get to adoption and figure out the right levels.

Speaker #4: We have a whole FinOps team that has been part of how we manage the cloud costs and are managing this. So, right now, we're trying to get to adoption and figure out the right levels.

Brian Wenzel: Yes.

Rick Shane: Brian. Go ahead, Brian. Sorry.

Brian Wenzel: Just to unpack that a little bit more. When you ask about the token cost, the token costs are not material to us, and it's not something that we spend a lot of money trying to control at this point. What I'd say is we have looking at the cost of AI, whether it's the license cost, the token or credits, and how those kind of come in and how they're consumed. We have a whole FinOps team that has been part of how we manage the cloud cost that are managing this. Right now we're trying to get to adoption and figure out the right levels. I think where we think about it is probably longer term, Rick.

Speaker #4: I think where we think about it is probably a longer term, Rick. You have a lot of these companies that are investing billions of dollars in technology.

Speaker #4: I think where we think about it is probably longer-term, Rick. You have a lot of these companies that are investing billions of dollars in technology, and how that cost is going to get—if it's going to get—passed through, back through all the end users here, whether it's the license fees or token costs. That's where we're also trying to consider and work with people to understand the trajectory.

Speaker #4: And how that cost is going to get if it's going to get passed through back through all the end users here, whether it's the license fees or token costs, that's where we're also trying to consider and work with people to understand the trajectory.

Speaker #4: But again, it's not something that's driving our results today. And we'll certainly I want to be really clear. It's not driving the technology costs here.

Speaker #4: But again, it's not something that's driving our results today. And I want to be really clear, it's not driving the technology cost here.

Speaker #4: This is really more investments in some of the core things like PayLater and other initiatives that we have in technology, in product.

Speaker #4: This is really more investments in some of the core things, like PayLater and other initiatives that we have in technology and product.

Brian Wenzel: You have a lot of these companies that are investing billions of dollars in technology, if it's going to get passed through, back through all the end users here, whether it's the license fees or token costs. That's what we're also trying to consider and work with people to understand the trajectory. Again, it's not something that's driving our results today. We'll certainly, I want to be really clear, it's not driving the technology costs here. This is really more investments in some of the core things like pay later and other initiatives that we have in technology and product.

Speaker #6: Understood. That's actually really helpful. I'm just curious, at some point, do you think we get to a world where we look at token costs the same way we look at T&E, where their budgets and its constraint?

Speaker #8: Understood. That's actually really helpful. I'm just curious—at some point, do you think we get to a world where we look at token costs the same way we look at T&E, where there are budgets and it's a constraint?

Speaker #6: It feels right now like it's sort of, to your point, encourage 90% of your employees to use it as aggressively as possible. And I think that's very much the norm.

Speaker #8: It feels right now like it's sort of, to your point, encourage 90% of your employees to use it as best as possible. And I think that's very much the norm.

Speaker #6: But I do wonder, at some point, if that transforms to the way we look at other forms of expense and ROIC on that.

Speaker #8: But I do wonder at some point if that transforms to the way we look at other forms of expense and ROIC on that.

Speaker #4: Yeah. I think you're going to look at it differently inside the company. I think if you go into our technology group, there's most certainly going to be a different way in which we look at the engineers and how they deploy the tools and token utilization there than you'd say someone that sits in a support function like finance or even resources.

Rick Shane: Understood. That's actually really helpful. I'm just curious, at some point, do you think we get to a world where we look at token costs the same way we look at T&E where their budgets and it's constrained? It feels right now like it's sort of, to your point, encourage 90% of your employees to use it as aggressively as possible. I think that's very much the norm, I do wonder at some point if that transforms to the way we look at other forms of expense and the ROIC on that.

Speaker #4: So there will be a different model. I think we've developed through RSAs and activity-based costing system I think we have to think about how we look at that in certain processes.

Speaker #4: So you may say, "Hey, I'm going to use AI to run a process today." But you understand what that cost is, right, when you think about the human capital and any other direct dollars.

Speaker #4: So you may say, "Hey, I'm going to use AI to run a process today." But you understand what that cost is, right? When you think about the human capital and any other direct dollars.

Brian Wenzel: Yeah. I think you're going to look at it differently inside the company. I think if you go into our technology group, there's most certainly going to be a different way in which we look at the engineers and how they deploy the tools and token utilization there than you'd say someone that sits in a support function like finance or even resources. There will be a different model. I think we've developed through RSAs an activity-based costing system. I think we have to think about how we look at that in certain processes. You may say, "Hey, I'm going to use AI to run a process today." You understand what that cost is, right? When you think about the human capital and any other direct dollars.

Speaker #4: We're going to have to figure out if you do AI, what's that token consumption and what's the cost of that process moving forward? That's something that's going to develop.

Speaker #4: We have to figure out if you do AI, what's that token consumption and what's the cost of that process moving forward? That's something that's going to develop.

Speaker #4: I'd say very early innings there. For everyone. But that is something we're going to have to build a framework around as we step out.

Speaker #4: I'd say those are very early things there—for everyone. But that is something we're going to have to build a framework around as we step out.

Speaker #4: And it becomes more utilized throughout the company.

Speaker #6: Rick, I think it becomes just how you look at return on investment, just like how we look at it today. We've got a very rigorous process where you're putting together a budget for a new product.

Speaker #8: Rick, I think it just comes down to how you look at return on investment, just like how we look at it today. We've got a very rigorous process where you're putting together a budget for a new product, and that includes all the expenses—people, maybe consultants, T&E, that kind of stuff.

Speaker #6: And that includes all the expenses, people, maybe consultants, T&E, that kind of stuff. This will be one of those costs that goes into the overall investment.

Brian Wenzel: We're going to have to figure out if you do AI, what's that token consumption and what's the cost of that process moving forward? That's something that's going to develop. I'd say very early innings there for everyone. That is something we're going to have to build a framework around as we step out and it becomes more utilized throughout the company. Rick, I think it becomes just how you look at return on investment, just like how we look at it today. We've got a very rigorous process where you're putting together a budget for a new product, and that includes all the expenses, people, maybe consultants, T&E, that kind of stuff. This will be one of those costs that goes into the overall investment, and we're very disciplined around the return that we expect to get on that investment and measuring it going forward.

Speaker #6: And we're very disciplined around the return that we expect to get on that investment and measuring it going forward. Got it. Very helpful, guys.

Speaker #8: This will be one of those costs that goes into the overall investment. And we're very disciplined around the return that we expect to get on that investment and measuring it going forward.

Speaker #6: Thank you so much.

Speaker #4: Thanks, Rick. Have a good day, Rick.

Speaker #8: Got it. Very helpful, guys. Thank you so much.

Speaker #1: Thank you. We will move next with Rob Wildhack with Autonomous Research. Please go ahead.

Speaker #4: Thanks, Rick. Have a good day, Rick.

Speaker #1: Thank you. We will move next to Rob Wildhack with Autonomous Research. Please go ahead.

Speaker #5: Morning, guys. I wanted to go back to slide three and zoom in on June a little bit. You have purchase volume in June spiking to 11% growth, which is great.

Speaker #5: Morning, guys. I wanted to go back a little bit. You have purchase volume in June spiking to 11% growth, which is great. I think loan growth in June, though, was still a little slower than seasonality.

Speaker #5: I think loan growth in June, though, was still a little slower than seasonality. So I guess first, what were the drivers? Anything to call out on June volume growth?

Speaker #5: So I guess first, what were the drivers? Anything to call out on June volume growth? And then second, appreciate all the color on payment rate.

Speaker #5: And then second, appreciate all the color on payment rate. And in light of that commentary, what are the purchase volume assumptions that kind of underpin the loan growth guide from here?

Rick Shane: Got it. Very helpful, guys. Thank you so much.

Speaker #5: And in light of that commentary, what are the purchase volume assumptions that kind of underpin the loan growth guide from here?

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

Brian Wenzel: Thanks, Rick.

Brian Doubles: Have a good day, Rick.

Operator: Thank you. We will move next with Rob Wildhack with Autonomous Research. Please go ahead.

Speaker #4: Yeah. Thanks, Rob, for the question. As you think about the quarter, we'll certainly you have an impact of some of the new programs that kind of came in that accelerated in the back half of that.

Speaker #8: Yeah, thanks, Rob, for the question. As you think about the quarter, we'll certainly have an impact from some of the new programs that came in, which accelerated in the back half of that.

Rob Wildhack: Morning, guys. I wanted to go back to a little bit. You have purchase volume in June spiking to 11% growth, which is great. I think loan growth in June, though, was still a little slower than seasonality. I guess first, what were the drivers? Anything to call out on June volume growth? Then second, appreciate all the color on payment rate. In light of that commentary, what are the purchase volume assumptions that kind of underpin the loan growth guide from here?

Speaker #4: Whenever you go through a portfolio conversion, there's a little bit of lag time with regard to when new accounts start up and really people activating and using a new product versus a product that has gone away.

Speaker #8: Whenever you go through a portfolio conversion, there's a little bit of lag time with regard to when people are actually activating and using a new product versus a product that has gone away.

Speaker #4: And then we'll certainly have building levels, right? You think about Bob's that came on in the middle part of the quarter. Walmart continues to grow as well as a program we launched, I think, late first quarter, Chicos and things like that.

Speaker #8: And then we'll certainly have building levels, right? You think about ops that came on in the middle part of the quarter—Walmart continues to grow—as well as a program we launched, I think, late first quarter, Chico's and things like that.

Brian Wenzel: Yeah. Thanks, Rob, for the question. As you think about the quarter, most certainly you have an impact of some of the new programs that kind of came in that accelerated in the back half of that. Whenever you go through a portfolio conversion, there's a little bit of lag time with regard to when really, people activating and using a new product versus a product that has gone away. Most certainly you have building levels, right? You think about POP that came on in the middle part of the quarter. Walmart continues to grow as well as a program we launched, I think late Q1, Chico's and things like that. A lot of it's new program-oriented in advance of that. Again, as you think about payment rates, it's going to remain elevated.

Speaker #4: So a lot of it's new program oriented. In advance of that, again, as you think about payment rate, it's going to remain elevated. And again, we tried to help people here in the second quarter think about it relative to net interest margin.

Speaker #8: So a lot of it's new program-oriented. In advance of that, again, as you think about payment rate, it's going to remain elevated. And again, we tried to help people here in the second quarter think about it relative to net interest margin.

Speaker #4: It's going to remain elevated as you go through the back half of the year. But again, margins should expand. What that's left us with was a higher payment rate you are going to have a slightly higher turn and most certainly the mix of the portfolio when you think about new programs and the commercial program that's come in.

Speaker #8: It's going to remain elevated as you go through the back half of the year. But again, margins should expand. What that's left us with was a higher payment rate you are going to have a slightly higher turn and most certainly the mix of the portfolio when you think about new programs and the commercial program that come in.

Speaker #4: You would see a little bit of elevation, but the historical turn will be a little bit higher as you think about the back half of the year.

Speaker #8: You would see a little bit of elevation, but the historical trend will be a little bit higher as you think about the back half of the year.

Speaker #5: Okay. Thank you.

Speaker #4: Thanks, Rob.

Brian Wenzel: Again, we try to help people here in the Q2 think about it relative to net interest margin. It's going to remain elevated as you go through the H2, again, margins should expand. What that's left us with a higher payment rate, you are going to have a slightly higher turn. Most certainly the mix of the portfolio when you think about new programs and the commercial program that's come in, you would see a little bit of elevation, but the historical turn will be a little bit higher as you think about the H2. Okay. Thank you. Thanks, Rob.

Speaker #8: Thanks, Rob.

Speaker #1: Thank you. We will move next with Mahir Bhatia with Bank of America. Please go ahead.

Speaker #1: Thank you. We will move next to Mahir Bhatia with Bank of America. Please go ahead.

Speaker #7: Hi. Good morning. Thank you for taking my question. First question I wanted to ask is just about capital. Can you talk a little bit more about the change in presentation?

Speaker #6: Good morning. Thank you for taking my question. The first question I wanted to ask is about capital. Can you talk a little bit more about the change in presentation?

Speaker #7: I think it would be internal use capitalized software. What happened there? What's driving the change? And then just more generally on capital levels and CEP1 targets now that the capital stack is, I think, a little bit more built out.

Speaker #6: I think it was the internal-use capitalized software. What happened there? What's driving the change? And then, just more generally, on capital levels and CEP-1 targets now that the capital stack is, I think, a little bit more built out.

Speaker #7: Is the current buyback cadence of 850, 900 million sustainable given the growth outlook you have for the next few quarters?

Speaker #6: Is the current buyback, paid at $5.9 billion, sustainable given the growth outlook you have for the next few quarters?

Rob Wildhack: Okay. Thank you.

Brian Wenzel: Thanks, Rob.

Operator: Thank you. We will move next with Mihir Bhatia with Bank of America. Please go ahead.

Speaker #4: Yeah. Thanks for the question, Mahir. Let me start a little bit where you ended. I mean, we have significant amounts of capital both surplus capital and again, I think one of the strengths of the business models that we generate large amounts of capital each quarter.

Speaker #8: Yeah. Thanks for the question, Mahir. Let me start a little bit where you ended. I mean, we have significant amounts of capital surplus capital and, again, I think one of the strengths of the business models that we generate large amounts of capital each quarter.

Mihir Bhatia: Sorry, good morning. Thank you for taking my question. First question I want to ask is just about capital. Can you talk a little bit more about the change in presentation for the, I think it's the internal use capitalized software. What happened there? What's driving the change? Just more generally on capital levels and CET1 targets now that the capital stack is, I think, a little bit more built out. Is the current buyback cadence of $850 to 900 million sustainable given the growth outlook you have for the next few quarters?

Speaker #4: So I think that's a real strength. And that allows us to grow RWAs as well as return capital to shareholders. We don't really comment on cadence by quarters, but again, you can look at history and what we've historically have done.

Speaker #8: So I think that's a real strength, and that allows us to grow RWAs as well as return capital to shareholders. We don't really comment on cadence by quarters, but again, you can look at history and what we've historically done.

Speaker #4: So capital is a real strength of the company. It's something that we want to continue to leverage as we move forward, including the 13% dividend increase that we announced earlier this morning that takes effect this quarter.

Speaker #8: So capital is a real strength of the company. It's something that we want to continue to leverage as we move forward, including the 13% dividend increase that we announced earlier this morning, which takes effect this quarter.

Brian Wenzel: Yeah. Thanks for the question, Mihir. Let me start a little bit where you ended. We have significant amounts of capital, both surplus capital and again, I think one of the strengths of the business model is that we generate large amounts of capital each quarter. I think that's a real strength, and that allows us to grow RWAs, as well as return capital to shareholders. We don't really comment on cadence by quarters, but again, you can look at history and what we've historically have done. Capital is a real strength of the company. It's something that we want to continue to leverage as we move forward, including the 13% dividend increase that we announced earlier this morning that takes effect this quarter. If you take a step back, your initial question was with regard to the treatment around the software.

Speaker #4: If you take a step back, your initial question with regard to the treatment around the internally developed software, there was a new counting standard that happened last year and as part of that, we go back and we evaluate that standard.

Speaker #8: If you take a step back, your initial question with regard to the treatment around the software—there was a new counting standard that happened last year.

Speaker #8: And as part of that, why that didn't have anything to do with it, we also did benchmarking with how we treated that software cost.

Speaker #4: Why that didn't have anything to do with it. We also did benchmarking with how we treated that software cost and those capitalized costs relative to our peer set.

Speaker #8: Those capitalized costs relative to our peer set—and we realized that we had a difference in presentation relative to others. So, we obviously had discussions both with our external accountants as well as regulators, and we decided to reclassify the capitalized software from intangibles to other assets.

Speaker #4: And we realized that we had a difference in presentation relative to others. So we obviously had discussions both with our external accountants as well as regulators and we decided to reclassify the capitalized software from intangibles to other assets.

Brian Wenzel: There was a new accounting standard that happened last year. As part of that, while that didn't have anything to do with it, we also did benchmarking with how we treated that software cost, those capitalized costs relative to our peer set. We realized that we had a difference in presentation relative to others. We obviously had discussions both with our external accountants as well as our regulators, and we decided to reclassify the capitalized software from intangibles to other assets. What that has the effect of is it both bolsters or reduces the reduction to capital and then puts it in as an RWA that had a corresponding impact of about 80 basis points of CET1 that was recast both in the prior periods and the current period.

Speaker #8: What that has the effect of is it both bolsters the or reduces the reduction to capital. And then putting it as an RWA that had a corresponding impact of about 80 basis points of CEP-1 that was recast both in the prior periods and the current period.

Speaker #4: But that has the effect of is it bolsters the or reduces the reduction to capital and then puts it in as an RWA that had a corresponding impact of about 80 basis points of CEP1 that was recast both in the prior periods and the current period.

Speaker #4: So again, it just gives us more room to operate whether we want to expand RWAs or again, have it available as we think about our capital return strategy.

Speaker #8: So again, it just gives us more room to operate, whether we want to expand RWAs or, again, have it available as we think about our capital return strategy.

Speaker #7: Got it. Thank you. And then just switching gears a little bit, let's see a little bit back in the news a few weeks ago.

Speaker #6: Got it, thank you. And then, just switching gears a little bit—maybe we'll go back in the news from a few weeks ago. I just wanted to check in with you all.

Speaker #7: I guess just wanted to check in with you all. Just any incremental read you have on that situation, what's going on there, and the potential for that to come back?

Speaker #6: Just any incremental read you have on that situation—what's going on there, and the potential for that to come back? What does the toolkit look like if people start talking about that again and implementing it?

Speaker #7: I guess what does the toolkit look like if people start talking about that again and implementing it? Thanks.

Speaker #6: Thanks.

Speaker #4: Yeah. I mean, not a lot that we can add. I mean, nothing's been formalized at this point. So it's a little tough to speculate.

Brian Wenzel: Again, it just gives us more room to operate, whether we want to expand RWAs or again, have it available as we think about our capital return strategy.

Speaker #8: Yeah. I mean, not a lot that we can add. I mean, nothing's been formalized at this point. So it's a little tough to speculate.

Speaker #4: I would just reiterate that as we said in the past, it's very competitive industry. I think price controls generally are bad, whether it's fees or APRs.

Speaker #8: I would just reiterate that, as we said in the past, it's a very competitive industry. I think price control is generally bad, whether it's fees or APRs.

Mihir Bhatia: Got it. Thank you. Then just switching gears a little bit. Late fees were a little bit back in the news a few weeks ago. I guess just wanted to check in with you all, just any incremental read you have on that situation, what's going on there and the potential for that to come back. I guess, what does the toolkit look like if people start talking about that again and implementing it? Thanks.

Speaker #4: You have serious unintended consequences. I also think late fees are an important incentive for customers to pay on time. And I think if you take that ability for the industry to price for the risk that they're taking, you will have unintended consequences.

Speaker #8: You have serious unintended consequences. I also think late fees are an important incentive for customers to pay on time. And I think if you take that ability for the industry to price for the risk that they're taking, you will have I'm hearing a restrict credit the industry is going to close accounts.

Speaker #4: I'm hearing a restrict credit the industry is going to close accounts. I think that's not good for the consumer. Obviously, not good for the economy.

Speaker #8: I think that's not good for the consumer—obviously, not good for the economy. So we're staying very close to it. In terms of the toolkit, obviously there are things that the industry and we would potentially do, but we're clearly not there yet.

Brian Wenzel: Yeah, not a lot that we can add. Nothing's been formalized at this point, it's a little tough to speculate. I would just reiterate that, as we've said in the past, it's a very competitive industry. I think price controls generally are bad. Whether it's fees or APRs, you have serious unintended consequences. I also think late fees are an important incentive for customers to pay on time. I think if you take that ability for the industry to price for the risk that they're taking, you will have instances where you're going to restrict credit. The industry's going to close accounts. I think that's not good for the consumer, obviously not good for the economy. We're staying very close to it. In terms of the toolkit, obviously there are things that the industry and we would potentially do, but we're clearly not there yet.

Speaker #4: So we're staying very close to it. In terms of the toolkit, obviously, there are things that the industry and we would potentially do, but we're clearly not there yet.

Speaker #8: This is very early. We don't know the intent of any potential RFI, but we're obviously staying very close to it.

Speaker #4: This is very early. We don't know the intent of any potential RFI, but we're obviously staying very close to it.

Speaker #6: Got it. Thank you.

Speaker #7: Got it. Thank you.

Speaker #8: Thanks. Thanks, Peter. Have a good day.

Speaker #4: Thanks. Thanks, Peter. Have a good day.

Speaker #1: Thank you. We will move next to John Hecht with Jefferies. Please go ahead.

Speaker #1: Thank you. We will move next with John Hecht with Jefferies. Please go ahead.

Speaker #7: Morning, guys. Thanks for taking my questions. The first one is, hey, good morning. Hey, long year of customer acquisition. How is that looking thus far this year?

Speaker #6: Morning, guys. Thanks for taking my questions.

Speaker #7: Hey, John.

Speaker #6: The first one is hey, good morning. Hey, you last year, I think you guys had a really strong year of customer acquisition. How are how is that looking thus far this year?

Speaker #7: And where are customers coming from? And are there any notable trends there?

Brian Wenzel: This is very early. We don't know the intent of any potential RFI, we're obviously staying very close to it.

Speaker #6: And where are customers coming from? And are there any kind of notable trends there?

Speaker #8: Yeah. Good morning, John. Listen, I think we have seen really strong new account growth. If you look at the second quarter, we generated over 5.1 million new accounts during the quarter.

Speaker #4: Yeah. Good morning, John. Listen, I think we have seen really strong new account growth. I think if you look at the second quarter, we generated over 5.1 million new accounts.

Mihir Bhatia: Got it. Thank you.

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

Brian Wenzel: Thanks.

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

Operator: Thank you. We will move next with John Hecht with Jefferies. Please go ahead.

Speaker #8: And probably just under 10 million, I think between 9.5 and 10. Million new accounts for the first half of the year, which is strong.

Speaker #4: During the quarter and probably just under 10 million, I think between 9.5 and 10 million new accounts for the first half of the year, which is strong.

John Hecht: Morning, guys. Thanks for taking my questions.

Brian Wenzel: Hey, John.

John Hecht: Good morning. Hey, long year of customer acquisition. How is that looking thus far this year, where are customers coming from and are there any kind of notable trends there?

Speaker #8: We, and to be honest with you, it's obviously some benefit from new programs, but it's going to be across the board. Again, when you have products that resonate and value propositions that are compelling for people, you're going to see that growth.

Speaker #4: We view it. And to be honest with you, it's obviously some benefit from new programs, but it's going to be across the board when again, when you have products that resonate and value propositions that are compelling for people, you're going to see that growth.

Speaker #8: And again, a lot of our partners are in very attractive segments. When you think about a TJX or a Sam's, when you think about a Lowe's, when the housing market's a little bit soft, you have things like that that are in there.

Brian Wenzel: Yeah. Good morning, John. Listen, I think we have seen really strong new account growth. If you look at Q2, we generated over 5.1 million new accounts during the quarter and probably just under 10 million, I think between nine and a half and 10 million new accounts for H1, which is strong. We view it, to be honest with you, obviously some benefit from new programs. It's going to be across the board. Again, when you have products that resonate and value propositions that are compelling for people, you're going to see that growth. Again, a lot of our partners are in very attractive segments. When you think about a TJX or a Sam's, when you think about Lowe's, when the housing market's a little bit soft, you have things like that that are in there.

Speaker #4: And again, a lot of our partners are in very attractive segments. When you think about a TGX or a SAMS, when you think about a Lowe's, when the housing market's a little bit soft, you have things like that that are in there.

Speaker #8: So the diversity we have in the verticals and the sales platform really kind of drives that growth. I mean, there are a lot of people who like to say, "I generated between 9.5 and 10 million new accounts for the first half of the year." So again, a little bit broader base, but we feel good about the acquisition, that accounts kind of coming in.

Speaker #4: So the diversity we have in the verticals and the sales platform really kind of drives that growth. I mean, there are a lot of people who like to say, "I generated between 9.5 and 10 million new accounts for the first half of the year." So again, a little bit broader base, but we feel good about the acquisition, the accounts kind of coming in.

Speaker #8: And I think again, it goes back to where we were putting on 20 million new accounts a year, we're on that trajectory.

Speaker #4: And I think again, it goes back to years where we were putting on 20 million new accounts a year. We're on that trajectory.

Speaker #6: All right, John. You know this about our business: we've got big commercial teams that sit every day with our partners, and they work the marketing calendar.

Speaker #7: I think, John, you know this about our business. We've got big commercial teams that sit every day with our partners and they work the marketing calendar.

Speaker #6: They got new accounts closed. So that's so embedded in our DNA throughout the company. That is a big, important metric for us. And our partners, obviously, are very aligned to the deal structure—they are there to help us drive those new accounts.

Speaker #7: They work promotions and offers to drive that new account flow. So that's so embedded in our DNA throughout the company. That is a big important metric for us.

Brian Wenzel: The diversity we have in the verticals and the sales platform really drives that growth. There are a lot of people who would like to say, I generated between nine and a half and 10 million new accounts for a H1. Again, a little bit broader base, but we feel good about the acquisition, the accounts coming in. I think, again, it goes back to years where we were putting on 20 million new accounts a year. We're on that trajectory.

Speaker #7: And our partners obviously are very aligned to the deal structure in the RSA to help us drive those new accounts. It's good for them.

Speaker #6: It's good for them, it's good for the program, and obviously, it's good for us as well.

Speaker #7: It's good for the program. Obviously, it's good for us as well.

Speaker #7: Okay. That's helpful. And then any comments on how the Walmart the latest Walmart programs ramping and anything you've noticed about the behavior of that customer versus the, call it, the book you had before?

Speaker #6: Okay. That's helpful. And then any comments on how the Walmart the latest Walmart programs ramping and anything you've noticed about the behavior of that customer versus the call it the book you had before?

Brian Doubles: John, you know this about our business. We've got big commercial teams that sit every day with our partners, they work the marketing calendar. They got new account flow. That's so embedded in our DNA throughout the company. That's a big, important metric for us. Our partners obviously are very aligned to the deal structure and the RSA to help us drive those new accounts. It's good for them. It's good for the program. Obviously, it's good for us as well.

Speaker #6: Yeah, so look, we continue to be really excited about the trends that we're seeing on the Walmart program. It's our fastest growing program—I've mentioned this before—in our history.

Speaker #7: Yeah. So look, we continue to be really excited about the trends that we're seeing on the Walmart program. It's our fastest growing program. I've mentioned this before in our history.

Speaker #6: Across multiple metrics, it's definitely a leading edge program from a tech perspective. So it's different in a lot of ways from what we did in the past with Walmart.

Speaker #7: Across multiple metrics, it's definitely a leading edge program from a tech perspective. So it's different in a lot of ways from what we did in the past with Walmart.

Brian Wenzel: Okay. That's helpful. Any comments on how the latest Walmart program is ramping and anything you've noticed about the behavior that customer versus the, call it the book you had before?

Speaker #6: Everything runs through the one-pay app. They've been a great partner to us. It has a very strong value prop. Both if you're a Walmart Plus member, but even if you're not.

Speaker #7: Everything runs through the one-pay app. They've been a great partner. To us, it has a very strong value prop. Both if you're a Walmart Plus member, but even if you're not.

Speaker #6: And so that loyalty program is much stronger in this program than it's been in the past. So there's just a lot of reasons to be excited about this.

Speaker #7: And so that loyalty program is much stronger in this program than it's been in the past. So there's just a lot of reasons to be excited about this.

Brian Doubles: Yeah. Look, we continue to be really excited about the trends that we're seeing on the Walmart program. It's our fastest-growing program, I've mentioned this before, in our history across multiple metrics. It's definitely a leading-edge program from a tech perspective. It's different in a lot of ways from what we did in the past with Walmart. Everything runs through the OnePay app. They've been a great partner to us. It has a very strong value prop, both if you're a Walmart+ member, but even if you're not. That loyalty program is much stronger in this program than it's been in the past. There's just a lot of reasons to be excited about this. This will be a top five program for us, I'm certain of that.

Speaker #6: This will be a top five program for us. I'm certain of that. And Walmart has been incredibly supportive in terms of the digital placement and how they're supporting the program.

Speaker #7: This will be a top five program for us. I'm certain of that. And Walmart has been incredibly supportive in terms of the digital placement and how they're supporting the program.

Speaker #8: The one thing I'd add, John—Brian just highlighted the value proposition, and particularly Walmart Plus. That was not around back in 2018 and 2019.

Speaker #4: Yeah. The one thing I'd add, John, Brian just highlighted the value proposition, particularly Walmart Plus. That was not around back in 2018 and 2019.

Speaker #8: And over half our accounts on Walmart Plus, which are highly engaged with the brand, are buying multiple SKUs. So, those are people that really engage with the retailer.

Speaker #4: And over half our accounts on Walmart Plus, which are highly engaged with the brand, they're buying multiple SKUs. So those are people that really engage with the retailer.

Speaker #8: So those are, again, kind of what we expect early adopters of, because they're so connected to the retailer.

Speaker #4: So those are kind of folks that, again, you'd expect early adopters of because they're so connected to the retailer.

Speaker #7: Wonderful. Thanks, guys.

Speaker #6: Thanks, John.

Speaker #8: Thanks, John. Have a good day.

Speaker #1: Thank you. Our next question comes from Mark DeVries with Deutsche Bank. Please go ahead. Mark, your line is open.

Brian Doubles: Walmart has been incredibly supportive in terms of the digital placement and how they're supporting the program.

Speaker #6: Wonderful. Thanks, guys.

Speaker #7: Thanks, John.

Speaker #4: Thanks, John. Have a good day.

Speaker #1: Thank you. Our next question comes from Mark DeVries with Deutsche Bank. Please go ahead. Mark, your line is open.

Brian Wenzel: Yeah. The one thing I'd add, John, Brian just highlighted the value proposition, particularly Walmart+. That was not around back in 2018 and 2019, and over half our accounts are Walmart+, which are highly engaged with the brand. They're buying multiple SKUs. Those are people that really engage with the retailer. Those are the kind of folks that, again, you'd expect early adopters of because they're so connected to the retailer.

Speaker #6: Well, I can hear it.

Speaker #8: I can hear you now, Mark.

Speaker #6: Yeah. I hear you great. Thanks.

Speaker #8: Good morning.

Speaker #7: Well, I can hear it.

Speaker #6: First question for Brian Doubles. Brian, can you just talk about where you see the best in the longer-term growth opportunities, whether it's existing customers, more organic kind of TAM expansion, through retailers or that haven't provided financing or inorganic?

Speaker #4: I can hear you now, Mark.

Speaker #7: Yeah.

Speaker #4: Good morning. Good morning.

Speaker #7: Last question from Brian Doubles. Brian, can you just talk about where you see the best kind of longer-term growth opportunities, whether it's existing customers, more organic kind of TAM or is it haven't provided financing or inorganic?

Brian Doubles: Wonderful. Thanks, guys.

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

Speaker #6: And as you think about that broader opportunity set, just talk about your confidence in getting back to kind of longer-term growth aspirations.

Operator: Thank you. Our next question comes from Mark DeVries with Deutsche Bank. Please go ahead. Mark, your line is open.

Speaker #8: Yeah. Sure. So I'll highlight a couple of things. I mean, first, look, our strategy is largely going to be an organic growth strategy. We're pretty disciplined around MA.

Speaker #7: And as you think about that broader opportunity set, just talk about your confidence in getting back to kind of longer-term growth aspirations.

Speaker #8: I think we've demonstrated that over the last decade or so. Look, one of the big areas where we're investing heavily is in our product suite and our capabilities.

Speaker #4: Yeah, sure. So I'll highlight a couple of things. I mean, first, look, our strategy is largely going to be an organic growth strategy. We're pretty disciplined around M&A.

Mark DeVries: Hello, can you hear me?

Brian Doubles: We can hear you now, Mark. Good morning.

Mark DeVries: Hi, guys. Thanks. Good morning. I have a growth question for Brian Doubles. Brian, can you just talk about where you see the best kind of longer-term growth opportunities, whether it's existing customers, more organic kind of TAM expansion through retailers or providers that haven't provided financing or inorganic? As you think about that broader opportunity set, just talk about your confidence in getting back to kind of longer-term growth aspirations.

Speaker #4: I think we've demonstrated that over the last decade or so. Look, one of the big areas where we're investing heavily is in our product suite and our capabilities.

Speaker #8: We've got a very comprehensive set of products now—I think more than anybody else in the industry. We've got starter products like secured cards, SetPay.

Speaker #4: We've got a very comprehensive set of products now. I think more than anybody else in the industry. We've got starter products like secured cards, set pay, and that allows us to graduate customers into the more traditional products, revolving PLCC co-brand, etc.

Speaker #8: And that allows us to graduate customers into the more traditional products—revolving, PLCC, co-brand, etc. And I feel like that strategy is winning. So if you think about the partner base, they are highly engaged in offering that multi-product set.

Brian Doubles: Yeah, sure. I'll highlight a couple things. First, our strategy is largely going to be an organic growth strategy. We're pretty disciplined around M&A. I think we've demonstrated that over the last decade or so. Look, one of the big areas where we're investing heavily is in our product suite and our capabilities. We've got a very comprehensive set of products now, I think more than anybody else in the industry. We've got starter products like secured cards, SetPay. That allows us to graduate customers into the more traditional products, revolving, TLC, co-brand, et cetera. I feel like that strategy is winning. If you think about the partner base, they are highly engaged in offering that multi-product set, and it allows us to serve more of their customers, drive sales, drive loyalty, et cetera. I think that's one big pillar I would highlight.

Speaker #4: And I feel like that strategy is winning. So if you think about the partner base, they are highly engaged in offering that multi-product set.

Speaker #8: And it allows us to serve more of their customers, drive sales, drive loyalty, etc. So I think that's one big kind of pillar I would highlight.

Speaker #8: The other one, frankly, is that customer experience has never been more important than it is today. I mean, customers have a lot of choices these days in terms of how they pay and how they finance purchases.

Speaker #4: And it allows us to serve more of their customers, drive sales, drive loyalty, etc. So I think that's one big kind of pillar I would highlight.

Speaker #4: The other one frankly, customer experience has never been more important than it is today. I mean, customers have a lot of choices these days in terms of how they pay, how they finance for purchases.

Speaker #8: And it's got to be a great experience through that lifecycle—making it easy for our customers to apply for credit, use them immediately. You have to be everywhere that customer wants to be.

Speaker #4: And it's got to be a great experience through that lifecycle. Making it easy for our customers to apply for credit, use immediately, you have to be everywhere that customer wants to be.

Speaker #8: So we've been investing in integrating into ISVs and software platforms and payment providers. Those are, as I think about the future, a big part of it.

Speaker #4: So we've been investing in integrating into ISVs and software platforms and payment providers those are as I think about the future, that's a big part of it.

Speaker #8: So we call them kind of non-traditional partners because they're not a merchant, they're not a provider. They're allowing us to serve many merchants, many providers by integrating one into a software platform or an ISV.

Speaker #4: So we call them kind of non-traditional partners because they're not a merchant. They're not a provider. They're allowing us to serve many merchants, many providers by integrating once into a software platform or an ISV.

Brian Doubles: The other one, frankly, customer experience has never been more important than it is today. Customers have a lot of choices these days in terms of how they pay, how they finance for purchases, and it's got to be a great experience through that life cycle. Making it easy for our customers to apply for credit, use immediately. You have to be everywhere that customer wants to be. We've been investing in integrating into ISPs and software platforms and payment providers. As I think about the future, that's a big part of it. We call them nontraditional partners because they're not a merchant, they're not a provider. They're allowing us to serve many merchants, many providers by integrating once into a software platform or an ISP. I think that'll be a big wave of the future for us, and we're well ahead on that strategy.

Speaker #8: I think that will be a big wave of the future for us, and we're well ahead on that strategy. Particularly in our health and wellness business, we're integrated in more ISVs than anybody.

Speaker #4: I think that is a bit that'll be a big wave of the future for us. And we're well ahead on that strategy. Particularly in our health and wellness business, we're integrated in more ISVs than anybody.

Speaker #8: And I think that is going to be really helpful as we look to drive growth in the future. It allows us to connect once and immediately get some scale.

Speaker #8: And if you go back a decade, that was always a little bit of a challenge. Great once, and with one partner. And now you're able to do that at scale.

Speaker #4: And I think that is going to be really helpful as we look to drive growth into the future. It allows us to connect once and immediately get some scale.

Speaker #8: So, very excited about that as well. And the last thing I'll just touch on quickly—I think our proprietary underwriting platform, Prism, is a competitive advantage.

Speaker #4: And if you go back a decade, that was always a little bit of a challenge as you'd connect and integrate once and with one partner.

Speaker #8: We're out there competing for new business. We've made big investments there. I think we do this better than anybody. And we're hearing that feedback from prospects.

Speaker #4: And now you're able to do that at scale. So very excited about that as well. And the last thing I'll just touch on quickly.

Speaker #4: I think our underwriting our proprietary underwriting platform, Prism, is a competitive advantage. We're out there competing for new business. We've made big investments there.

Speaker #8: We're hearing it in renewal discussions, and so that's just a third area that I would highlight in terms of excitement going forward.

Brian Doubles: Particularly in our health and wellness business, we're integrated in more ISPs than anybody. I think that is going to be really helpful as we look to drive growth into the future. It allows us to connect once and immediately get some scale. If you go back a decade, that was always a little bit of a challenge, integrate once with one partner, and now you're able to do that at scale. Very excited about that as well. The last thing I'll just touch on quickly, I think our proprietary underwriting platform, PRISM, is a competitive advantage. We're out there competing for new business. We've made big investments there. I think we do this better than anybody. We're hearing that feedback from prospects. We're hearing it in renewal discussions.

Speaker #4: I think we do this better than anybody. And we're hearing that feedback from prospects. We're hearing it in renewal discussions. And so that's just a third area that I would highlight in terms of excitement going forward.

Speaker #6: Okay, great. And just as you think about all those opportunities, could you discuss your confidence in getting back to the longer-term growth aspirations?

Speaker #8: Yeah. Look, I'm confident that we'll get there. I'm confident we'll get there. You have to remember that a little bit of the damping and growth was intentional.

Speaker #7: Okay. Great. And just as you think about all those opportunities, just discuss your confidence in kind of getting back to the longer-term growth aspirations.

Speaker #8: We had a credit-restrictive posture, and frankly, I think our credit team did a great job. If you think about drifting above the long-term target, quickly bringing it back down below the lower end of our long-term target.

Speaker #4: Yeah. Look, I'm confident that we'll get there. I'm confident we'll get there. I think you have to remember that a little bit of the damping and growth was intentional.

Speaker #4: We had a credit restricted posture. And frankly, I think our credit team did a great job. If you think about drifting above the long-term target quickly bringing it back down below the lower end of our long-term target.

Speaker #8: And dialing in and putting us in a position where we can open up a little bit to hopefully get back in that 5.5% to 6% range longer term.

Speaker #8: I think as you do that, you'll see the growth come back to where it's been historically.

Brian Doubles: That's just a third area that I would highlight in terms of excitement going forward.

Speaker #4: And dialing in and putting us in a position where we can open up a little bit to hopefully get back in that five and a half to six percent range longer term, I think as you do that, you'll see the growth come back to where it's been historically.

Speaker #6: Okay. Great. Thank you.

Mark DeVries: Okay, great. Just as you think about all those opportunities, just discuss your confidence in kind of getting back to the longer-term growth aspirations.

Speaker #8: Thanks.

Speaker #7: Thanks, Mark. Have a good day.

Speaker #1: Thank you. We will move next with John Fankari with Evercore. Please go ahead.

Brian Doubles: Yeah, look, I'm confident that we'll get there. I think you have to remember that a little bit of the damping in growth was intentional. We had a credit-restrictive posture. Frankly, I think our credit team did a great job. If you think about drifting above the long-term target, quickly bringing it back down below the lower end of our long-term target and dialing in and putting us in a position where we can open up a little bit to hopefully get back in that 5.5% to 6% range longer term. I think as you do that, you'll see the growth come back to where it's been historically.

Speaker #7: Okay. Great. Thank you.

Speaker #8: Good morning.

Speaker #4: Thanks.

Speaker #6: Thanks, Mark. Have a good day.

Speaker #7: Good morning.

Speaker #6: I'll just ask one question here. Just on the I appreciate the color around the margin and the drivers of the pressure this quarter and that it bottomed and you expect improvement from here.

Speaker #1: Thank you. We will move next with John Pankari with Evercore. Please go ahead.

Speaker #5: Good morning. Given the just given the time, I'll just ask one question here. Just on the I appreciate the color around the margin and the drivers of the pressure this quarter and that it bottomed and you expect improvement from here.

Speaker #6: Any way to help us kind of frame that pace of improvement and possibly think of what Q-exit NIM could look like as we take a look at '27?

Speaker #6: And how should we think about the pace of ventures to become growth that goes along with that, when you consider the mid-single-digit receivable expectation?

Speaker #5: Any way to help us kind of frame that pace of improvement and possibly think of what work you exit NIM could look like as we take a look at '27 and how should we think about the pace of ventures income growth that goes along with that when you consider the mid-single digit receivable expectation?

Speaker #6: Thanks.

Speaker #8: Yeah, I'll try to help you again with the framework, John. We're not providing specific guidance on, most certainly, any quarter. But again, I would build off of the second quarter, $15.08.

Mark DeVries: Okay, great. Thank you.

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

Operator: Thank you. We will move next with John Pancari with Evercore. Please go ahead.

Speaker #8: Again, the drivers behind you—you're going to see the seasonal nature of ALR, right? So we're at peak liquidity now. That abates in the third quarter and the fourth quarter.

Speaker #5: Thanks.

John Pancari: Morning.

Speaker #4: Yeah. I'll try to help you again with the framework, John. We're not providing specific guidance on we'll certainly any quarter, but again, I would expect your net interest margin to build off of the second quarter 15.08.

Brian Doubles: Morning, John.

John Pancari: I'll just ask one question here. I appreciate the color around the margin and the drivers of the pressure this quarter and that it bottomed and you expect improvement from here. Any way to help us kind of frame that pace of improvements and possibly think of what a Q4 exit NIM could look like as we take a look at 2027? How should we think about the pace of net interest income growth that goes along with that when you consider the mid-single digit receivable expectation? Thanks.

Speaker #8: We're in the fourth and the third, right? The late fees, which effectively, if you have a peak kind of fee charge, you'll see a little bit of pressure, but again, it should build off here, not necessarily be a drag both in the third quarter and the fourth quarter.

Speaker #4: Again, the drivers behind it, you're going to see seasonal nature of ALR, right? So we're at peak kind of liquidity now. That abates in the third quarter and the fourth quarter, more in the fourth and the third, right?

Speaker #8: You'll see a little bit of continued build on the PPPCs as you move into the back half. That should factor in. So, you should see rising interest margins sequentially as we move through the back half of the year as we step through, again.

Speaker #4: The late fees, which effectively if you have peak kind of peak charge up, you'll see a little bit of pressure, but again, it should build off here, not necessarily be a drag both in the third quarter and the fourth quarter.

Brian Wenzel: Yeah. I'll try to help you again with the framework, John. We're not providing specific guidance on most certainly any quarter, but again, I would build off of the Q2 15.08. Again, the drivers behind it, you're going to see seasonal nature of ACL, right? We're at peak kind of liquidity now that abates in Q3 and Q4, more in the Q4 than the Q3, right? Late fees, which effectively if you have peak charge-offs, you'll see a little bit of pressure, but again, it should build off here and not necessarily be a drag both in Q3 and Q4. You'll see a little bit of continued build on the PPPC as you move in the H2. That should factor in.

Speaker #8: Assumes no changes in Fed funds rates or interest rates as we move into the back half of the year.

Speaker #4: You'll see a little bit of continued build on the PPPCs as you move in the back half. That should factor in. So you should see rising net interest margins sequentially as we move through the back half of the year as we step through.

Speaker #6: Thanks, Brian. They're going to go for it.

Speaker #8: Well, it was a good try to talk with Kathryn and the IR team later today. And you can continue your efforts. Have a good day.

Speaker #4: Again, that assumes no changes in Fed funds rates or interest rates as we move in the back half of the year.

Speaker #6: Well, I appreciate it.

Speaker #8: Thank you. Thank you.

Speaker #1: Thank you. Our last question comes from Moshe Orenbach with TD Cowen. Please go ahead.

Speaker #5: Thanks, Brian. Figured I'd go for it.

Speaker #4: Well, it was a good try, but I'm sure you'll have an opportunity to talk with Catherine in the IR team later today and you can continue your efforts.

Speaker #6: Great. Maybe just another

Speaker #7: You shot at a similar idea, not in terms of a forecast, but you, Brian Wenzel—you did talk about the impact of lower late fees in the first half of this year.

Speaker #4: Have a good day.

Speaker #5: Well, I appreciate it.

Speaker #4: Thank you.

Speaker #1: Thank you. Our last question comes from Moshe Orenbach with TD Cowan. Please go ahead.

Brian Wenzel: You should see rising net interest margin sequentially as we move through the H2 of the year. As we step through again, that assumes no changes in Fed funds rates or interest rates as we move in the H2 of the year.

Speaker #7: But as we go into next year, will that still be a factor? And can you also talk about the impact of what you had in terms of in '26 from the accelerating account growth and that impact on the loan yield and will that be something that moderates in '27 and gives you better growth in that interest income versus the loan balances and other metrics?

Speaker #7: Great. Maybe just another shot at a similar idea not in terms of a forecast, but you, Brian, Wenzel, you did talk about the impact of lower late fees in the first half of this year.

John Pancari: Thanks, Brian. Figured I'd go for it.

Brian Wenzel: Well, listen, it was a good try. Maybe talk with Kathryn and the IR team later today, and you can continue your efforts. Have a good day.

Speaker #7: But as we go into next year, will that still be a factor? And can you also talk about the impact of what you've had in terms of in '26 from the accelerating account growth and that impact on the loan yield and will that be something that moderates in '27 and gives you better growth in net interest income versus the loan balances and other metrics?

John Pancari: Will do. Appreciate it. Thank you.

Speaker #8: Yeah. Good morning, Moshe, and great question. I think if you think about '26, right, we are targeting to moderate to a charge-off rate between 5.5% and 7% through the cycle.

Brian Wenzel: Thank you.

Operator: Thank you. Our last question comes from Moshe Orenbuch with TD Cowen. Please go ahead.

Moshe Orenbuch: Great. Maybe just another shot at a similar idea, not in terms of a forecast, but you, Brian Wenzel, you did talk about the impact of lower late fees in the H1 of this year. As we go into 2025, will that still be a factor? Can you also talk about both the impact of what you've had in terms of in 2026 from the accelerating account growth and that impact on the loan yield? Will that be something that moderates in 2027 and gives you better growth in net interest income versus the loan balances and other metrics?

Speaker #8: Sometimes you may be lower than five-and-a-half—sorry, five-and-a-half to six. Don't worry. Anyone nervous? Five-and-a-half. I scared myself, Moshe. I scared myself. Anyway, in that five-and-a-half to six.

Speaker #4: Yeah. Good morning, Moshe. And great question. I think if you think about '26, right, we are targeting. To underwrite to a charge-off rate between five and a half and seven.

Speaker #8: So again, where you see it below five and a half, we would expect it to migrate back up. When that migrates back up, you should see a tailwind when it comes to late fees that comes through the net interest margin, right?

Speaker #4: The entry of the cycle. Sometimes you may be lower than five and a half sorry, five and a half to six. I don't want to get anyone nervous.

Speaker #4: Five and a half.

Speaker #8: Historically, that's what I would generally expect. I think the challenge—and you probably know this as well as anyone else, right—is that whenever you shift the trajectory, most certainly under most circumstances, when you think about the reserve, but when you just think about the yield side of the equation, when you shift the trajectory of growth upwards or downwards, there are effects that happen on NII and net interest margin.

Speaker #7: Excuse me, Brian.

Speaker #4: I scared myself, Moshe. I scared myself. But anyway, in that five and a half to six. So again, where you see it below five and a half, we would expect it to migrate back up.

Speaker #4: When that migrates back up, you should see a tailwind when it comes to late fees that comes through the net interest margin, right? Historically.

Brian Wenzel: Good morning, Moshe, and great question. I think if you think about 2026, right? We are targeting to underwrite to a charge-off rate between 5.5% and 7% again through the cycle. Sometimes you may be lower than 5.5%. I'm sorry, 5.5% to 6%. Don't want to get anyone nervous.

Speaker #4: So that's what I would generally expect. I think the challenge and you probably know this as well as anyone else, right, whenever you shift the trajectory, most certainly under most certainly under CISA when you think about the reserve, but when you just think about the yield side of the equation, when you shift the upwards or downwards, there are effects that happen on NII and net interest margin.

Speaker #8: We're going from a year before where assets went down; we're now going to growth. You presume there's going to be growth next year, but that growth is going to be—I'm not going to give you an indication—but it's going to be not dramatically different.

Moshe Orenbuch: Excuse me

Brian Wenzel: I scared myself, Moshe. I scared myself. Anyway, in that 5.5 to 6. Again, where you see it below 5.5, we would expect it to migrate back up. When that migrates back up, you should see a tailwind when it comes to late fees that comes through net interest margin, right? Historically. That's what I would generally expect. I think the challenge, and you probably know this as well as anyone else, right? Whenever you shift the trajectory, most certainly under CECL when you think about the reserve, but when you just think about the yield side of the equation. When you shift the trajectory of growth upwards or downwards, there are effects that happen on NII and net interest margin. We're going from a year before where assets went down. We're now going to a growth.

Speaker #8: Maybe it will be slightly higher than what we've seen this quarter or this year, but you're going to be in a flatter growth trajectory as you move through that.

Speaker #4: We're going from a year before where assets went down, we're now going to a growth. You presume there's going to be growth next year, but that growth is going to be I'm not going to give you an indication, but it's going to be not dramatically different.

Speaker #8: If you're moving a point or two versus moving seven points or so year on year, you're going to see a tailwind that comes as that net interest margin matures.

Speaker #8: So, most certainly, a growth profile that's more consistent, number one. And two, a net charge-off rate that probably moderates a little bit up, to give you two tailwinds as it relates to margin for next year.

Speaker #4: Maybe it will slightly higher than what we've seen this quarter or this year, but you're going to be in a flatter growth trajectory as you move through that.

Speaker #4: If you're moving a point or two versus moving seven points or so year on year, you're going to see a tailwind that comes as that net interest margin matures.

Speaker #7: Great, thanks. And maybe a follow-up for Brian Doubles. You did say that the key driver of growth will be kind of internal growth, but we have seen a number of your major competitors kind of pulling back in terms of their approach and their desire to expand in private label.

Speaker #4: So most certainly a growth profile that's more consistent number one and two, a net charge-off rate that probably moderates a little bit up should give you two tailwinds as it relates to margin for next year.

Brian Wenzel: You presume there's going to be growth next year, that growth is going to be, I'm not going to give you an indication, it's going to be not dramatically different. Maybe a little slightly higher than what we've seen this quarter or this year. You're going to be in a flatter growth trajectory as you move through that. If you're moving a point or two versus moving 7 points or so year-on-year, you're going to see a tailwind that comes as that net interest margin matures. Most certainly a growth profile that's more consistent, number one. Two, a net charge-off rate that probably moderates a little bit up should give you two tailwinds as it relates to margin for next year.

Speaker #7: Do you think there could be opportunities for larger portfolios, either de novo or taking one over from another player?

Speaker #7: Great. Thanks. And maybe a follow-up for Brian Devils. You did say that the key driver of growth will be kind of internal growth, but we have seen a number of your major competitors kind of pulling back in terms of their approach and their desire to expand in private label.

Speaker #8: Yeah, yeah, absolutely. Moshe, I mean, that's a big—when I think of organic, that's all part of the engine. So we're actively—we're always looking at portfolios that come to market.

Speaker #8: We're the biggest in this space. So we pretty much every RFP comes across our desk. We take a look at it. We're obviously very disciplined around how we price those opportunities and the firms that we seek.

Speaker #7: Do you think there could be opportunities for larger portfolios either de novo or taking one over from another player?

Speaker #4: Yeah. Yeah. Absolutely, Moshe. I mean, that's a big when I think of organic, that's all part of the engine. So we're actively we're always looking at portfolios that come to market.

Speaker #8: But that's been a big part of our growth strategy over the years, and we'll continue to be. So when I made my reference to M&A, that was more traditional M&A buying a company as opposed to a portfolio.

Moshe Orenbuch: Great. Thanks. Maybe a follow-up for Brian Doubles. You did say that the key driver of growth will be internal growth, but we have seen a number of your major competitors kind of pulling back in terms of their approach and their desire to expand in private label. Do you think there could be opportunities for larger portfolios, either on a de novo or taking one over from another player?

Speaker #4: We're the biggest in this space. So we pretty much every RFP comes across our desk. We take a look at it. We're obviously very disciplined around how we price those opportunities and the terms that we seek.

Speaker #8: The engine that we have that's actively out there in the market, looking at new opportunities—de novos—but also looking at bringing on existing portfolios.

Speaker #8: It's a very active team, and we've got a really good pipeline at the moment.

Speaker #4: But that's been a big part of our growth strategy over the years, and we'll continue to be. So when I made my reference to M&A, that was more traditional M&A buying a company as opposed to a portfolio.

Speaker #7: Thanks very much.

Speaker #8: Thanks, Moshe.

Speaker #7: Great, Moshe. Have a good day.

Brian Doubles: Yeah, absolutely, Moshe. When I think of organic, that's all part of the engine. We're always looking at portfolios that come to market. We're the biggest in this space, pretty much every RFP comes across our desk, we take a look at it. We're obviously very disciplined around how we price those opportunities and the terms that we seek. That's been a big part of our growth strategy over the years and will continue to be. When I made my reference to M&A, that was more traditional M&A, buying a company as opposed to a portfolio. The engine that we have that's actively out there in the market looking at new opportunities, de novos, also looking at bringing on existing portfolios. It's a very active team, and we've got a really good pipeline at the moment.

Speaker #4: The engine that we have that's actively out there in the market looking at new opportunities de novos, but also looking at bringing on existing portfolios.

Speaker #4: It's a very active team, and we've got a really good pipeline at the moment.

Speaker #7: Thanks very much.

Speaker #4: Thanks, Moshe. good day.

Moshe Orenbuch: Thanks very much.

Brian Doubles: Thanks, Moshe. Great, Moshe. Have a good day.

Brian Wenzel: Thanks, Moshe.

Brian Doubles: Great, Moshe. Have a good day.

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

Q2 2026 Synchrony Financial Earnings Call

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