Synchrony Financial’s (NYSE:SYF) second-quarter 2019 earnings per share of 97 cents beat the Zacks Consensus Estimate by 1%. The bottom line also improved 5.4% year over year on the back of higher net interest income and the PayPal Credit Program purchase. This excludes the impact of Walmart (NYSE:WMT) portfolio.
Results in Detail
The company’s net interest income increased 11% to $4.2 billion in the second quarter, primarily owing to the PayPal Credit program acquisition and loan receivables growth.
However, other income rose 42.9% to $90 million.
In the quarter under review, loan receivables inched up 4% year over year to $81.8 billion.
Deposits were $65.6 billion, up 11% from the year-ago quarter.
Purchase volume expanded 12% from the second quarter of 2018 to $38.3 billion.
Provision for loan loss decreased 6% year over year to $1.2 billion due to the reserve release related to the reclassification of the Walmart portfolio to loans held for sale.
Total other expenses climbed 8.6% to $1 billion, primarily due to higher professional fees, marketing and business development and other.
Sales Platforms Update
Retail Card
The company’s interest and fees on loans grew 16% year over year.
Loan receivables inched up 2% while the average active accounts ascended 11%, all driven by the company’s consolidation of the PayPal Credit program.
Payment Solutions
Interest and fees on loans rose 6% year over year on the back of loan receivables growth. Loan receivables augmented 8%, led by home furnishings and power products.
Purchase volume expanded 4% while average active account rose 3%.
CareCredit
Interest and fees on loans increased 7% year over year, attributable to dental and veterinary.
While purchase volume registered 7% growth, the average active account reported a 5% rise.
Financial Position
Total assets as of Jun 30, 2019 were $106.4 billion, up 7.3% year over year.
Total borrowings as of second-quarter 2019 end were $21.2 billion, down 2.2% year over year.
The company’s balance sheet was consistently strong during the reported quarter with a total liquidity of $23.7 billion, reflecting 22.3% of the total assets.
While return on assets was 3.3%, the return on equity was 23.1%.
Efficiency ratio was 31.3% in the second quarter of 2019.
Capital Deployment
During the quarter under consideration, the company announced a new capital plan, which includes share buyback worth $4 billion. Moreover, it announced a quarterly dividend of 22 cents per share beginning the third quarter.
In the second quarter, it purchased shares worth $725 million and paid a dividend of 21 cents per share.
Rank
Synchrony Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases From Finance Sector
Brown & Brown, Inc. (NYSE:BRO) is slated to announce second-quarter earnings on Jul 22. The consensus estimate for earnings is pegged at 28 cents, implying growth from 26 cents reported in the prior-year quarter. The stock carries a Zacks Rank of 3.
Discover Financial Services (NYSE:DFS) is scheduled to release second-quarter earnings on Jul 23. The Zacks Consensus Estimate for the same stands at $2.11, indicating growth of 10.5% from the year-ago reported figure. The stock is a Zacks #3 Ranked player.
Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is set to report second-quarter earnings on Jul 31. The consensus mark for earnings is pinned at $1.76, suggesting 3.5% growth from the year-earlier reported figure. The company has a Zacks Rank #2 (Buy).
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Discover Financial Services (DFS): Free Stock Analysis Report
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