Synchrony Financial (NYSE:SYF) Q4 2022 Earnings Call Transcript

Synchrony Financial (NYSE:SYF) Q4 2022 Earnings Call Transcript January 23, 2023

Operator: Good morning, and welcome to the Synchrony Financial Fourth Quarter 2022 Earnings Conference Call. Please refer to the company’s Investor Relations website for access to their earnings materials. Please be advised that today’s conference call is being recorded. I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Kathryn Miller: Thank you, and good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today’s press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the Investor Relations section of the website. 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. Finally, Synchrony Financial is not responsible for, and does not edit or guarantee, the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Brian Doubles, Synchrony’s President and Chief Executive Officer; and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Brian Doubles : Thanks, Kathryn, and good morning, everyone. Synchrony closed the year on a very strong note with fourth quarter net earnings of $577 million, or $1.26 per diluted share, a return on average assets of 2.2% and a return on tangible common equity of 22.1%. These financial results contributed to full year 2022 net earnings of over $3 billion or $6.15 per diluted share, our second highest in company history; a return on average assets of 3.1% and a return on tangible common equity of 28.5%. This performance was driven by continued strength across the fundamental drivers of our business and a high level of execution across our key strategic priorities throughout the year. We achieved record purchase volume of $180 billion for the full year, which surpassed our prior year’s record and was 15% higher on a core basis.

Spend per active account was 7% higher for the year, reflecting robust consumer demand across the broad range of products and services for which Synchrony offers flexible financing. We also acquired 23.6 million new accounts and grew average active accounts by 8% on a core basis. The combination of strong consumer spend and some moderation in payment rate contributed to ending receivables growth of 15%. As expected, credit continued to normalize across our portfolio with full year losses of 3%, still more than 250 basis points below our underwriting target of 5.5% to 6%, which is generally the level at which our risk-adjusted margin is more fully optimized. And finally, Synchrony continued to drive progress toward our long-term operating efficiency target, reflecting the combined impacts of our cost discipline, the inherent operating leverage in our highly scalable model and strong revenue growth.

Synchrony’s ability to deliver consistent growth and strong returns is a testament to our well-diversified portfolio, our balanced approach to product and credit strategies, our compelling value propositions and the strength of our business model. As a result, Synchrony was able to return more than $3.8 billion of capital to shareholders during 2022, $3.3 billion of which was through share repurchase, a 17% reduction in our shares outstanding. When we look back on 2022 and the caliber results we were able to deliver for our customers, our partners and providers and our shareholders, it really all comes back to the dedication shared by the Synchrony team as we realize our ultimate goal: to power commerce by delivering a leading digital ecosystem, connecting our partners and customers through world-class technology, products and capabilities.

Over the last year, Synchrony has built upon the core strengths of our differentiated business model by executing on the key strategic priorities that are driving progress towards that collective goal. We continue to expand and enhance our partner programs, including the addition of more than 30 partners and the renewal of more than 50 relationships, including most recently Lowe’s, with whom we’ve partnered for over four decades to drive innovation and value to both their do-it-yourself and pro customers. Synchrony also continued to diversify our products, programs and markets during 2022, deepening our reach and expanding the utility and value we offer to our customers and partners alike. We continue to scale our diverse product suite with the launch of Synchrony’s Installment and Pay in 4 products at a number of retailers and providers, including Belk and Discount Tire.

These six pay offerings represent another financial tool that we can offer to qualifying customers while also driving incremental sales to our partners and providers. And whether it’s delivering flexible financing offers in a dental practice, connecting a customer with a large partner through a seamless mobile transaction are driving incremental sales at small and midsized businesses. Synchrony meets our customers, partners and providers wherever they are in their digital or retail journey and deliver the right product at the right time. For this reason, we launched a number of strategic partnerships over the last year to expand our distribution channels and broaden customer access to our comprehensive product suite. Through integrations with point-of-sale and business management platforms like Clover, and practice management solutions like Sycle, Synchrony has added hundreds of thousands of small business locations and several thousand provider locations through whom we can seamlessly and responsibly offer access to flexible financing.

At year-end, Synchrony had more than 460,000 merchant provider locations and 71 million active customers. So when you think about the sheer size and scale of the constituencies we serve, and the wide range of financing needs we deliver through omnichannel experiences, it should come as no surprise that our dynamic technology platform is at the center of it all. During the last year, Synchrony continued to innovate and scale our digital capabilities to ensure that we can remain at the forefront of the ever-evolving consumer financing landscape. We drove greater mobile customer engagement through a number of initiatives, including both our digital wallet provisioning and the Synchrony app. Accounts provision for digital use in 2022 increased 75% compared to last year contributing to 85% of mobile wallet sales growth.

And in terms of our mobile app, we upgraded our site pipelines to the latest version, which delivers new features, including a new user experience, freeze my card, e-statements, autopay, apply and Apple Pay push provisioning. As a result, unique visitors and payments within the SyPi channel each grew by more than 20% compared to last year. In today’s tech forward world, a best-in-class customer experience is characterized by seamless, intuitive and hyper-personalized engagement. This, in turn, requires a more comprehensive understanding of each customer as we connect them with partners and providers and anticipate which products and services will optimize the experience. For that reason, we are constantly driving deeper integrations, leveraging more predictive and actionable insights throughout our digital ecosystem and developing solutions that are grounded in our customer experience insights.

Over the last year, Synchrony achieved over 70% growth in the number of applications using our APIs and more than 80% growth in API transactions, including from our clients and partners leveraging Synchrony APIs to power their digital experience. Our partnership with PayPal is a great example of how together we continue to leverage more APIs to enhance our offerings and drive an even more seamless experience for their customer. In Q1, we launched PayPal Savings, which enabled instantaneous movement of funds between PayPal balances, no withdrawal limits and a savings goal feature to empower customers to set and reach their financial goals. In addition, existing PayPal customers are able to quickly and easily open their PayPal savings account inside PayPal’s Super App.

In Q2, we launched our new and refreshed co-branded PayPal Cashback credit card with a best-in-class cash-back offering and a fully integrated experience within the PayPal app, powered by native APIs. And in Q4, we enhanced our everyday value proposition on the Venmo co-branded card by introducing free person-to-person payments, the 3% fee is waived for the consumer when they use their Venmo Visa. We are really pleased with what the PayPal and Synchrony teams have been able to execute as we grow and evolve in new and unique ways, empower top of wallet products and best-in-class experiences for our customers. Synchrony also launched our new cardholder service platform across many of our largest portfolios in 2022. This new platform offers customers the ability to service their accounts in one dashboard, and enables a broad suite of account notifications across every aspect of the credit life cycle.

These notifications include a range of instant transaction alerts, all enhanced within rich merchant data and a completely redesigned digital service experience. In addition to text and e-mail alerts, we are able to deliver these notifications and alerts directly within our partners’ iOS and Android apps by leveraging our patented SyPi platform, continuing to enhance the customers’ experience within our partners’ brands. While this new account manager is still in its early stages, we observed some strong trends in response to the launch. 60% of those logging in have more than one account, and 80% of our users stated that their experience was easy or very easy to use and a top driver of their satisfaction. In fact, this more dynamic interface has achieved a double-digit improvement in our transactional Net Promoter Score compared to our previous account management site.

This new platform will span the broad set of financial products that Synchrony offers and will enable intuitive, self-service and highly customized and personalized experiences, increased speed to market of features and solutions for our partners and a more effective way for Synchrony to engage and power and deepen our relationships. Accordingly, as we continue to scale and integrate more of our products in the coming year, we believe this enhanced account manager will become an increasingly powerful tool to drive higher quality engagement and deeper value for our customers, partners and Synchrony alike. To that end, we also remain focused on driving greater connectivity across our vast customer and partner basis with the expansion of our Synchrony marketplace.

Mysynchrony.com connects customers with information and relevant offers from brands that they trust. These offers are powered by proprietary insights that Synchrony has gleaned through a variety of resources, including online search activity within their shopping category and location to provide personalized offers to the right audience at the right time. As we continue to enhance this level of personalization and launch capabilities, like prequalification within our marketplace over the last year, mysynchrony.com achieved a 25% increase in both new accounts and sales as well as 11% growth in referrals to our partners. This is a testament to the deep customer relationships that our network products foster. Synchrony’s ability to leverage our marketplaces like mysynchrony.com or carecredit.com to drive new and existing customer traffic as well as incremental and repeat sales to our partners has been and will continue to be a meaningful competitive differentiator and an important growth driver for our business longer term.

In summary, Synchrony is increasingly anywhere our customers looking to make a purchase or a payment. Big or small, in-person or digitally, we can meet them whenever and however they want to be met with a broad range of products and services to meet their needs in any given moment. This ability to deliver the versatility of our financial ecosystem seamlessly across channels, industries, partners and providers alike is what positions Synchrony so well to sustainably grow particularly as customer needs and market conditions evolve. And with that, I’ll turn the call over to Brian to discuss fourth quarter financial performance in greater detail.

Brian Wenzel : Thanks, Brian, and good morning, everyone. Synchrony’s strong fourth quarter results demonstrate the power of Synchrony’s purpose-built business model at work. The diversification of our portfolio across industries and spend categories supported by sophisticated underwriting and disciplined credit management enabled continued purchase volume growth that surpassed last year’s record level. In addition, the alignment of economic interest between Synchrony and our partners through our retailer share arrangements is performing as intended. Excluding the impact of portfolio sales, our RSA declined as credit losses continue to normalize and funding costs began to rise, enabling Synchrony’s delivery of consistent, attractive risk-adjusted returns as we have done for many years.

The scalability and efficiency of our dynamic technology platform is enabling operating leverage even as we invest in our business. And Synchrony’s strong balance sheet continue to support our customers and partners as their own needs evolve. In combination, these business drivers have continued to uniquely position Synchrony in our ability to deliver sustainable outcomes for our customers and our partners and consistent returns to our shareholders even as market conditions change. Let’s now discuss Synchrony’s fourth quarter financial results in greater detail. Purchase volume grew 2% to $47.9 billion, reflecting a 3% higher spend per account versus last year. On a core basis, purchase volume grew 11%. This continued strength in purchase volume was broad-based across our portfolio, demonstrating the breadth and depth of our five sales platforms, the compelling value propositions we offer and continued consumer demand.

At the platform level, Synchrony achieved double-digit growth in our Diversified & Value, Health & Wellness and Digital platforms and single-digit growth in our Home & Auto and Lifestyle platforms. More specifically, in Diversified & Value, purchase volume increased 15% driven by higher out-of-partner spend in addition to partner performance and penetration growth. The 10% year-over-year increase in digital purchase volume reflected the growth in average active accounts and greater customer engagement. Health & Wellness purchase volume grew 15% compared to last year as we experienced broad-based growth in active accounts as well as higher spend per active account. In Home & Auto, purchase volume increased 9%, generally reflecting strong spend in home and higher prices in furniture.

And in Lifestyle, purchase volume was 2% higher, driven by higher out-of-partner spend. Turning to Synchrony’s dual and co-branded cards where we continue to experience strong growth. Core purchase volume on these products grew 21% versus last year and represented approximately 40% of our total purchase volume for the quarter. As we discussed in the past, our customers derive great value from our dual and co-branded cards because they combine best-in-class rewards with broad utility. Generally speaking, approximately half of our out-of-partner spend is comprised of nondiscretionary spend by billpay, discount store, drugstore, healthcare, grocery, and auto and gas. And while we observed some minor category shifts during December, for example, from T&E related spend towards more clothing and other retail as well as a reduction in auto and gas-related spend towards more grocery and discount spend, Synchrony’s relative mix of discretionary and nondiscretionary out-of-partner spend has remained essentially unchanged.

Consistently strong consumer spend, coupled with some moderation in payment rate contributed to 10% higher average balances per account versus last year and 15% growth in ending receivables. Our dual and co-branded cards accounted for 24% of core receivables and increased 28% from the prior year. Net interest income increased 7% to $4.1 billion, primarily reflecting a 13% increase in interest and fees due to higher average loan receivables and higher loan receivable yields, partially offset by the impacts of the portfolio sold during the second quarter of 2022. On a core basis, interest and fees increased 21%. Payment rate for the fourth quarter, when normalizing for the prior year impact of the portfolios recently sold, was 17%, approximately 75 basis points lower than last year and approximately 160 basis points higher than our five-year historical average.

The net interest margin was 15.58% in the fourth quarter, a year-over-year decrease of 19 basis points. The primary driver of the decrease was higher interest-bearing liability costs, which increased 168 basis points to 2.86% and reduced net interest margin by 136 basis points. The mix of interest-earning assets also reduced net interest margin by roughly 6 basis points. These headwinds were partially offset by a 92 basis point improvement in loan yields, which contributed 79 basis points to net interest margin, and our liquidity portfolio yields, which contributed 44 basis points. RSAs were $1 billion in the fourth quarter and 4.68% of average loan receivables. The $224 million year-over-year decrease was primarily driven by the impact of portfolios sold in the second quarter of 2022 and higher net charge-offs, partially offset by higher net interest income.

Provision for credit losses were $1.2 billion for the quarter. The year-over-year increase reflected the impact of a growth-driven $425 million reserve build and higher net charge-offs. Other income decreased $137 million, primarily reflecting the impacts of the prior year’s venture investment gain and the current quarter’s higher loyalty costs driven by our strong purchase volume. Other expenses increased 3% to $1.2 billion, primarily driven by higher employee costs, technology investments and transaction volume, partially offset by $75 million of asset impairments and certain incremental marketing investments recognized in the prior period. The fourth quarter employee cost included certain additional compensation items of $21 million, higher stock-based compensation and higher headcount driven by growth and in-sourcing.

Total other expense included $12 million of additional marketing and growth reinvestment from second quarter’s $120 million gain on sale proceeds. As detailed in the appendix of our presentation, the $120 million gain on sale and reinvestment made in the second, third and fourth quarters of this year were EPS neutral for the full year 2022. Our efficiency ratio for the fourth quarter was 37.2% compared to 41.1% last year. Putting it all together, Synchrony generated fourth quarter net earnings of $577 million or $1.26 per diluted shares. We also generated a return on average assets of 2.2% and return on tangible common equity of 22.1%. Next, I’ll cover our key credit trends on Slide 10. The external deposit data we monitor continues to reflect a slow reduction in consumer savings.

Average deposit balances at the end of December were down approximately 5% from their peak in March of 2022, but still approximately 1% higher than 2021’s average and 12% higher than 2020’s average. On an annualized trend basis, the savings decline that began around that March 2022 peak appears to have started to slow in December, primarily in terms of its intensity. Turning to Synchrony’s portfolio, credit normalization continued as expected during the fourth quarter. These digits are still performing better than 2018. And delinquency entry rates remain lower than the historical average at approximately 80% of their pre-pandemic levels. That said, as consumer savings rates has decreased, borrower payment behavior is reverting towards pre-pandemic levels with normalizing entry rates into delinquency and higher roll rates in early delinquency stages following the charge-offs.

This trend continued in the fourth quarter as payment rate normalization trends expanded from the nonprime segments of our portfolio into the prime and super prime segments, where the average outstanding balances tend to be larger. Relative to period end receivables, our 30-plus delinquency rate was 3.65% compared to 2.62% last year and our 90-plus delinquency rate was 1.69% versus 1.17% in the prior year. And our fourth quarter net charge-off rate increased to 3.48% from 2.37% last year, still remaining well below our underwriting target of 5.5% to 6%, at which point portfolio credit risk is better optimized relative to profitability. Our allowance for credit losses as a percent of loan receivables was 10.30%, down 28 basis points from the 10.58% in the third quarter, primarily reflecting the impact of an asset growth-driven reserve builds, which was more than offset by the impact of receivables growth in the denominator.

Moving to another source of Synchrony’s strength, our capital, liquidity and funding. Deposits at the end of the fourth quarter reached $71.7 billion, an increase of $9.4 billion compared to last year. Our securitized and unsecured funding sources decreased by $316 million. Altogether, deposits represented 84% of our funding, while securitized and unsecured debt represented 7% and 9%, respectively, at quarter end. Total liquidity, including undrawn credit facilities, was $17.2 billion or 16.4% of our total assets, consistent with last year. We maintain a diversified approach to both our deposit base and our secured and unsecured debt issuances and prioritize a strong and efficient funding foundation of at least 80% deposits. We expect to continue to grow our deposits to fund our growth, and we’ll maintain an opportunistic approach to secured and unsecured issuances when market conditions are supportive of efficient funding.

We manage our balance sheet to be interest rate neutral. That said, as we continue to grow our deposit base, and given the level of interest rates, consumers are actively rotating from savings to CDs. This has had the effect of extending our deposit duration while making our balance sheet slightly liability sensitive. We will continue to manage interest rate risk through term maturities. It’s also important to note through its mutual alignment of economic interest and delivery of a minimum return on assets at the partner program level, Synchrony’s RSA will provide some offsetting support to the impact of rising interest rates on our business. Moving on to discuss Synchrony’s capital position. Note that we previously elected to take the benefit of the CECL transition rules issued by the joint federal banking agencies.

As a result, starting this past January of 2022, and continuing in January of 2023, Synchrony makes an annual transition adjustment of approximately 60 basis points to our regulatory capital metrics until January of 2025. The impact of CECL has already been recognized in our income statement and balance sheet. It should also be noted that the FASB CECL update for the accounting of TDRs becomes effective for Synchrony as of January 2023. This accounting standard update eliminates the separate recognition and measurement guidance for TDRs, which previously followed a separate process using a discounted cash flow methodology to quantify the TDR-specific reserve requirement. Synchrony is adopting this update on a modified retrospective basis as of January 1, 2023.

Based on our current estimate, the adoption will result in approximately $300 million reduction to our reserve balance, which we recognize net of tax and equity. The netted impact of the adoption will contribute approximately 25 basis point increase to our capital ratios. From a capital metric perspective, we ended the quarter at 12.8% CET1 under the CECL transition rules, 280 basis points lower than last year’s level of 15.6%. The Tier 1 capital ratio was 13.6% under the CECL transition rules compared to 16.5% last year. The total capital ratio decreased 280 basis points to 15%. And the Tier 1 capital plus reserve ratio on a fully phased-in basis decreased to 22.4% compared to 24.4% last year. Synchrony continued our track record of robust capital returns in the fourth quarter.

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In total, we returned $803 million to shareholders through $700 million of share repurchases and $103 million of common stock dividends. As of quarter end, our total remaining share repurchase authorization for the period ending June 2023 was $700 million. Synchrony remains well positioned to continue to return capital to shareholders as guided by our business performance, market conditions, regulatory restrictions and subject to our capital plan. As we make further progress toward our targeted capital levels, we look to develop our capital structure through the issuance of additional preferred stock and the issuance of subordinated debt. Finally, let’s turn to our 2023 outlook for the full year, which is summarized on Slide 13 of our presentation.

We expect strong consumer demand for the wide variety of products and services we finance to support continued broad-based purchase volume growth. As excess consumer savings continue to decline, year-over-year purchase volume growth rate should slow. Payment rates should also continue to moderate but we’re still expected to remain above pre-pandemic levels throughout 2023. Together, these dynamics should contribute to ending receivables growth between 8% and 10%. We expect our net interest margin to be between 15% and 15.25% for the full year and follow typical seasonal trends. This outlook is based on a peak Fed funds rate of 5.25% and incorporates the following five impacts during 2023. One, the increase in interest-bearing liabilities cost due to higher benchmark rates and the potential competitive pressures or higher retail deposit betas to address funding needs; two, higher interest and fee yields, partially offset by higher income reversals as delinquency and charge-offs continue to normalize; three, an increase in our liquidity portfolio yields, primarily reflecting the higher benchmark rates; four, the fluctuation of mix of average loan receivables relative to average interest-earning assets as driven by the seasonal growth trends and timing of our funding; and five, the full year impact of the portfolios sold during second quarter 2022.

Before we turn to our credit outlook, it’s important to note there are a number of uncertainties that could change our expectations and the trajectory of credit normalization. We have greater visibility for the first half of this year and any significant changes in the medium-term macroeconomic backdrop would more likely impact portfolio credit trends in 2024. With regard to our portfolio’s credit trajectory in 2023, we expect most of the portfolio delinquency metrics to have reached normalized levels or equivalent to pre-pandemic levels by midyear. Accordingly, the associated charge-offs will reach pre-pandemic levels approximately six months later. The seasonal impact of tax refunds and bonuses in the first half, and the third quarter’s acceleration of receivables growth will likely lead to a decline in net charge-off rate for Q3 before credit losses rise and continue the normalization path through the fourth quarter.

Given our expectation that delinquency metrics will reach their pre-pandemic levels by midyear, we expect net charge-offs to be between 4.75% to 5% for the full year, still considerably below our pre-pandemic annual loss rate target of 5.5% to 6%. We run multiple economic scenarios to inform our credit outlook as part of our normal business process. Our baseline reserve assumptions include an unemployment rate of approximately 4.2% by year-end. We have qualitative overlays for the current uncertainty and possibility of a mild recession. In this scenario, we’d expect the unemployment level closer to 5%. This is reflected in our fourth quarter 2022 reserve rate, which is still higher than our day 1 CECL rate. Barring any significant changes in the macroeconomic environment, we do not expect our portfolio to reflect our fully normalized annual loss rate target until 2024.

Accordingly, we continue to expect reserve builds in 2023 to be generally asset-driven and that the reserve rate will gradually migrate towards approximately 10% as credit normalization brings our portfolio net charge-offs back to that mean annual loss rate to which we’ve been underwriting. RSA expense will continue to serve as a functional alignment of economic interest with our partners, reflecting the strength of our program performance and purchase volume growth, offset by rising net charge-offs. As a result, we expect RSA as a percent of average loan receivables to be between 4% and 4.25%. Should credit normalize at a slower rate than we expect, RSAs will likely come closer into the high end of that range. And the extent that funding costs or net charge-off rise to the high end or beyond of our current assumptions, we expect the RSA to come in to the low end or lower than this range.

In terms of other expense, we remain committed to delivering operating leverage, such that expenses grow at a slower rate than net interest income. Our full year expectation that expenses will run approximately $1.125 billion per quarter to the extent that receivables or revenue growth is not tracking ahead of expense growth for the full year will moderate our spending where appropriate while still prioritizing the best long-term prospects for our business. As we demonstrated throughout this past year, Synchrony’s business and financial models are performing as it’s designed to do. Our proprietary data and analytics, diversified product suite and dynamic tech stack allow us to reach and improve more customers for the same level of risk while leveraging low customer acquisition costs and driving greater customer lifetime value.

Our retailer share ranges are effectively aligning our partners’ economic interest with our own, and in doing so, enabling Synchrony to deliver consistent risk-adjusted returns through changing market conditions. And our robust balance sheet is providing funding flexibility as we seek to provide continuity to our customers and partners when they need it most. In short, Synchrony is uniquely positioned to deliver sustainable growth and resilient risk-adjusted returns even as market conditions change and the needs of our customers and partners evolve. We remain on track to achieve our long-term financial operating targets as market conditions stabilize. I’ll now turn the call back over to Brian for his closing thoughts.

Brian Doubles : Thanks, Brian. Looking to 2023 and beyond, Synchrony is well positioned to navigate the uncertainties of the operating environment that lies ahead. As we continue to leverage our differentiated business model to add new and deepen existing customer and partner relationships, further scale our comprehensive product suite, enhance our programs and expand our markets and deliver best-in-class experiences centered around each customer’s individual financing needs. Synchrony will increasingly attract new customers and forge more expansive relationships, support our partners’ ability to grow through evolving market conditions and solidify our leadership position as the digital ecosystem of choice, all while driving consistent, high-quality growth at strong risk-adjusted returns for all stakeholders. With that, I’ll turn the call back to Kathryn to open the Q&A.

Kathryn Miller : That concludes our prepared remarks. We will now begin the Q&A session. So that we can accommodate as many of you as possible, I would 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.

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Q&A Session

Operator: We will take our first question from Moshe Orenbuch from Credit Suisse.

Moshe Orenbuch : Great. Thanks very much. And thanks for all of the detail around the guidance and the performance. I think the — Brian — I guess, Brian Doubles, you talked a lot about some of the enhancements to your products. Maybe could you just amplify a little bit as to how you’re thinking about Synchrony’s role with your partners in this current environment? I mean, it seems like this is an environment in which you’re — and what I hear from the retailers that they’re going to need your help more. Just talk a little bit about how to think about the things that you talked about that you’re doing and how that’s going to help Synchrony and the shareholders?

Brian Doubles : Yes. Sure, Moshe. Thanks for the question. You’re absolutely right. I think our partners, in an environment like this, tend to lean on us even more heavily. It’s — there’s a lot of uncertainty out there that we’ve all talked about in terms of consumer trends and behavior and what we can expect from inflation and just kind of the broad uncertainty around the macro environment. And so our partners look at us and they say, okay, what are we doing to drive sales? What are we doing to drive new accounts? And this is when they lean even more heavily on the rewards programs and the credit customers, we’ve talked about in the past, always is their best most loyal customer. And so in this kind of environment, this is where they really double down and have really constructive discussions around, should we be refreshing the valve prop, should we be doing more promotions, more offers, are there new capabilities and new products that we should be introducing?

And we’ve had really great discussions with our partners, particularly around the multiproduct strategy. So the combination of being able to offer a revolving credit product and installment buy now pay later loan and how those products work together. And one of the things that, as you know, we’ve been very focused on in that multiproduct journey is creating an easy experience for the customer, but also a really easy experience for a partner. So how do you offer multiple products and use our data-driven analytics to make sure that the customer, their customer is getting the right product, the right offer at the right time. And I think in an environment that we’re heading into, that becomes even more important. So going all the way back to our Investor Day, we talked about that strategy.

We spent a lot of time on it, and I do believe still to this day that the multiproduct strategy is the winning one. And we’re hearing that from our partners. They’re highly engaged in it. And I think, over time, it’s going to pay big dividends for Synchrony and all of our stakeholders. So thanks for the question.

Moshe Orenbuch : Great. And maybe just to flip this over to Brian Wenzel. As you kind of factor all of that into the financial aspects, where are the areas you think that this could kind of help either already embedded in that guidance or where it could — things could be better as we go through 2023?

Brian Wenzel : Yes. Thanks, Moshe, for the question. As I think about it, that engagement really to drive the compelling value proposition and linkage to the customer can really drive, what I would say, spend probably above what you’d see either in retail sales or in the general economy. So that would help fuel a lower payment rate as well. So I think you can see upside to the asset of 8 to 10, if that gained a lot of traction in 2023.

Operator: We’ll take our next question from Ryan Nash with Goldman Sachs.

Ryan Nash : Brian, maybe to just start on the loan growth guidance, can you maybe just unpack some of the drivers behind it. I think you mentioned 30 new business wins. Brian Wenzel, you talked about solving payment rates and also maybe expectations for purchase volume growth. And then I guess any color across which platforms you expect to drive the growth just given the robust growth you’ve seen along with shifting views on inflation?