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Synchrony Financial Reports Fourth Quarter Net Earnings of $531 Million or $0.64 Per Diluted Share

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Synchrony Financial (NYSE:SYF) today announced fourth quarter 2014 net earnings of $531 million, or $0.64 per diluted share. Net earnings for the full year 2014 totaled $2.1 billion, or $2.78 per diluted share.

  • Total platform revenue increased 9% from the fourth quarter of 2013 to $2.7 billion
  • Loan receivables grew $4 billion, or 7%, from the fourth quarter of 2013 to $61 billion
  • Purchase volume increased 11% from the fourth quarter of 2013
  • Announced a new top 20 partnership with BP
  • Extended two top 40 partnerships-Rooms To Go and Yamaha
  • Strong deposit growth continued, up $9 billion, or 36%, over the fourth quarter of 2013

“The fourth quarter successfully concluded an eventful year for Synchrony Financial. We continued the strong momentum across business platforms as our differentiated business model delivered significant value to our partners and customers and helped drive strong receivables, deposit, and revenue growth,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “We continue to leverage our substantial experience, scale, and data analytics capabilities as we collaborate with our new and existing partners. In addition, we are employing innovative mobile and digital technologies to deepen integration with our partners’ mobile commerce platforms, forming strategic alliances with market leaders, such as GPShopper, to further extend our mobile offerings and capabilities.”

“We concluded 2014 with healthy business activity levels and strong fundamentals. As we enter 2015, we are excited about our future growth prospects and the opportunity to expand our market-leading position in the private label credit card space,” stated Ms. Keane.

Business and Financial Highlights for the Fourth Quarter of 2014

All comparisons below are for the fourth quarter of 2014 compared to the fourth quarter of 2013, unless otherwise noted.

Earnings

  • Net interest income increased $129 million, or 5%, to $3.0 billion, driven by strong loan receivables growth, partially offset by higher interest expense from funding completed to increase liquidity in 2014.
  • Total platform revenue increased $216 million, or 9% ($170 million, or 7%, excluding the pre-tax gain associated with portfolio sales).
  • Provision for loan losses decreased $21 million, or 3%, to $797 million.
  • Other income increased $32 million driven primarily by a $46 million gain associated with portfolio sales in the fourth quarter of 2014. The gain was partially offset by increased loyalty and rewards costs associated with program initiatives.
  • Other expense decreased $15 million, or 2%, to $792 million due to charges in the fourth quarter of 2013 related to certain regulatory matters, partially offset by increased investments in growth and infrastructure build in preparation for separation from General Electric Company (GE).
  • Net earnings totaled $531 million for the quarter compared to $443 million, including a $29 million after-tax gain associated with the portfolio sales.

Balance Sheet

  • Period-end loan receivables growth remained strong at 7% driven by purchase volume growth of 11% and average active account growth of 6%.
  • The composition of loan receivables growth remained broad-based across all sales platforms.
  • Deposits grew to $35 billion, up $9 billion, or 36%, from the fourth quarter of 2013, and now comprise 56% of funding sources compared to 51% at the end of 2013.
  • The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) at $19 billion, or 25%, of total assets.
  • The estimated Tier 1 Common Equity ratio under Basel I was 14.9% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 14.5%.

Key Financial Metrics

  • Return on assets was 2.7% and return on equity was 20.2%.
  • Net interest margin declined 370 basis points to 15.60% primarily due to the impact from the significant increase in liquidity versus the prior year.
  • Efficiency ratio decreased to 32.4% this quarter from 34.8% in the prior year mainly due to charges in the fourth quarter of 2013 related to regulatory matters, partially offset by increased investments in growth and infrastructure build in preparation for separation from GE.

Credit Quality

  • Loans 30+ days past due as a percentage of period-end loan receivables improved 21 basis points to 4.14%.
  • Net charge-offs as a percentage of total average loan receivables decreased 37 basis points to 4.32% (excluding net charge-offs related to the disposition of non-core receivables in the fourth quarter of 2013).
  • The allowance for loan losses as a percentage of total period-end receivables was 5.28%.

Sales Platforms

  • Retail Card platform revenue increased 10% (7% excluding the pre-tax gain associated with portfolio sales), driven primarily by period-end loan receivables growth of 6%, with broad-based growth across partner programs.
  • Payment Solutions platform revenue increased 8%, driven by period-end loan receivables growth of 11%, with solid growth across industry segments led by home furnishings, automotive products, and power equipment.
  • CareCredit platform revenue increased 5%, driven by 5% period-end loan receivables growth, with growth led by dental and veterinary specialties.

Corresponding Financial Tables and Information

No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial’s earnings and financial condition in conjunction with the detailed financial tables and information that follow and the forthcoming Form 10-K. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.

Conference Call and Webcast Information

On Friday, January 23, 2015, at 10:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page of our website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 42014, and can be accessed beginning approximately two hours after the event through February 6, 2015.

About Synchrony Financial

Formerly GE Capital Retail Finance, Synchrony Financial (NYSE:SYF) is one of the premier consumer financial services companies in the United States. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables*. We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ more than 300,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Our offerings include private label credit cards and co-branded dual cards, promotional financing and installment lending, loyalty programs and Optimizer+plus branded FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com and twitter.com/SYFNews.

*The Nilson Report (April 2014, Issue # 1039)

Cautionary Statement Regarding Forward-Looking Statements

This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our platform revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; our need for additional financing, higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our reliance on dividends, distributions and other payments from Synchrony Bank; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; catastrophic events; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; significant and extensive regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Act and the impact of the CFPB’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules; restrictions that limit Synchrony Bank’s ability to pay dividends; regulations relating to privacy, information security and data protection as well as anti-money laundering and anti-terrorism financing laws; use of third-party vendors and ongoing third-party business relationships; effect of General Electric Capital Corporation (GECC) being subject to regulation by the Federal Reserve Board both as a savings and loan holding company and as a systemically important financial institution; GE not completing the separation from us as planned or at all, GE’s inability to obtain savings and loan holding company deregistration (GE SLHC Deregistration) and GE continuing to have significant control over us; completion by the Federal Reserve Board of a review (with satisfactory results) of our preparedness to operate on a standalone basis, independently of GE, and Federal Reserve Board approval required for us to continue to be a savings and loan holding company, including the timing of the approval and the imposition of any significant additional capital or liquidity requirements; our need to establish and significantly expand many aspects of our operations and infrastructure; delays in receiving or failure to receive Federal Reserve Board agreement required for us to be treated as a financial holding company after the GE SLHC Deregistration; loss of association with GE’s strong brand and reputation; limited right to use the GE brand name and logo and need to establish a new brand; GE’s significant control over us; terms of our arrangements with GE may be more favorable than we will be able to obtain from unaffiliated third parties; obligations associated with being a public company; our incremental cost of operating as a standalone public company could be substantially more than anticipated; GE could engage in businesses that compete with us, and conflicts of interest may arise between us and GE; and failure caused by us of GE’s distribution of our common stock to its stockholders in exchange for its common stock to qualify for tax-free treatment, which may result in significant tax liabilities to GE for which we may be required to indemnify GE.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Current Report on Form 8-K, as filed on November 19, 2014. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP Measures

The information provided herein includes measures we refer to as “platform revenue”, “platform revenue excluding retailer share arrangements” and “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.

SYNCHRONY FINANCIAL
FINANCIAL SUMMARY
(unaudited, in millions, except per share statistics)
Quarter Ended Twelve months ended

Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

4Q’14 vs. 4Q’13 Dec 31,

2014

Dec 31,

2013

YTD’14 vs. YTD’13

EARNINGS

Net interest income $2,978 $2,879 $2,720 $2,743 $2,849 $129 4.5 % $11,320 $10,571 $749 7.1 %
Retailer share arrangements (698 ) (693 ) (590 ) (594 ) (662 ) (36 ) 5.4 % (2,575 ) (2,373 ) (202 ) 8.5 %
Net interest income, after retailer share arrangements 2,280 2,186 2,130 2,149 2,187 93 4.3 % 8,745 8,198 547 6.7 %
Provision for loan losses 797 675 681 764 818 (21 ) (2.6 )% 2,917 3,072 (155 ) (5.0 )%
Net interest income, after retailer share arrangements and provision for loan losses 1,483 1,511 1,449 1,385 1,369 114 8.3 % 5,828 5,126 702 13.7 %
Other income 162 96 112 115 130 32 24.6 % 485 500 (15 ) (3.0 )%
Other expense 792 728 797 610 807 (15 ) (1.9 )% 2,927 2,484 443 17.8 %
Earnings before provision for income taxes 853 879 764 890 692 161 23.3 % 3,386 3,142 244 7.8 %
Provision for income taxes 322 331 292 332 249 73 29.3 % 1,277 1,163 114 9.8 %
Net earnings $531 $548 $472 $558 $443 $88 19.9 % $2,109 $1,979 $130 6.6 %
Net earnings attributable to common stockholders $531 $548 $472 $558 $443 $88 19.9 % $2,109 $1,979 $130 6.6 %

COMMON SHARE STATISTICS

Basic EPS $0.64 $0.70 $0.67 $0.79 $0.63 $0.01 1.6 % $2.78 $2.81 ($0.03 ) (1.1 )%
Diluted EPS $0.64 $0.70 $0.67 $0.79 $0.63 $0.01 1.6 % $2.78 $2.81 ($0.03 ) (1.1 )%
Common stock price $29.75 $24.55 n/a n/a n/a $29.75 n/a $29.75 n/a $29.75 n/a
Book value per share $12.57 $11.92 $9.06 $8.57 $8.45 $4.12 48.8 % $12.57 $8.45 $4.12 48.8 %
Tangible book value per share(1) $10.81 $10.25 $7.06 $6.56 $6.68 $4.13 61.8 % $10.81 $6.68 $4.13 61.8 %
Beginning common shares outstanding 833.8 705.3 705.3 705.3 705.3 128.5 18.2 % 705.3 705.3 %
Issuance of common shares through initial public offering 128.5 NM 128.5 128.5 NM
Shares repurchased NM NM
Ending common shares outstanding 833.8 833.8 705.3 705.3 705.3 128.5 18.2 % 833.8 705.3 128.5 18.2 %
Weighted average common shares outstanding 833.8 781.8 705.3 705.3 705.3 128.5 18.2 % 757.4 705.3 52.1 7.4 %
Weighted average common shares outstanding (fully diluted) 834.3 781.9 705.3 705.3 705.3 129.0 18.3 % 757.6 705.3 52.3 7.4 %

(1) Tangible Common Equity (“TCE”) is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

SYNCHRONY FINANCIAL
SELECTED METRICS
(unaudited, $ in millions, except account data)
Quarter Ended Twelve months ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

4Q’14 vs. 4Q’13 Dec 31,

2014

Dec 31,

2013

YTD’14 vs. YTD’13

PERFORMANCE METRICS

Return on assets(1) 2.7 % 3.2 % 3.1 % 3.9 % 3.0 % (0.3 )% 3.2 % 3.5 % (0.3 )%
Return on equity(2) 20.2 % 26.8 % 29.9 % 35.3 % 31.1 % (10.9 )% 26.7 % 38.6 % (11.9 )%
Return on tangible common equity(3) 23.4 % 32.4 % 38.5 % 44.2 % 40.0 % (16.6 )% 32.4 % 51.1 % (18.7 )%
Net interest margin(4) 15.60 % 17.11 % 17.84 % 18.83 % 19.30 % (3.70 )% 17.20 % 18.78 % (1.58 )%
Efficiency ratio(5) 32.4 % 31.9 % 35.5 % 26.9 % 34.8 % (2.4 )% 31.7 % 28.6 % 3.1 %
Other expense as a % of average loan receivables, including held for sale 5.16 % 5.09 % 5.77 % 4.51 % 5.77 % (0.61 )% 5.13 % 4.74 % 0.39 %
Effective income tax rate 37.7 % 37.7 % 38.2 % 37.3 % 36.0 % 1.7 % 37.7 % 37.0 % 0.7 %

CREDIT QUALITY METRICS

Net charge-offs as a % of average loan receivables, including held for sale 4.32 % 4.05 % 4.88 % 4.86 % 5.13 % (0.81 )% 4.51 % 4.68 % (0.17 )%
30+ days past due as a % of period-end loan receivables 4.14 % 4.26 % 3.82 % 4.09 % 4.35 % (0.21 )% 4.14 % 4.35 % (0.21 )%
90+ days past due as a % of period-end loan receivables 1.90 % 1.85 % 1.65 % 1.93 % 1.96 % (0.06 )% 1.90 % 1.96 % (0.06 )%
Net charge-offs $663 $579 $673 $658 $718 ($55 ) (7.7 )% $2,573 $2,454 $119 4.8 %
Loan receivables delinquent over 30 days $2,536 $2,416 $2,097 $2,220 $2,488 $48 1.9 % $2,536 $2,488 $48 1.9 %
Loan receivables delinquent over 90 days $1,162 $1,051 $908 $1,046 $1,121 $41 3.7 % $1,162 $1,121 $41 3.7 %
Allowance for loan losses (period-end) $3,236 $3,102 $3,006 $2,998 $2,892 $344 11.9 % $3,236 $2,892 $344 11.9 %
Allowance coverage ratio(6) 5.28 % 5.46 % 5.48 % 5.52 % 5.05 % 0.23 % 5.28 % 5.05 % 0.23 %

BUSINESS METRICS

Purchase volume(7) $30,081 $26,004 $25,978 $21,086 $27,002 $3,079 11.4 % $103,149 $93,858 $9,291 9.9 %
Period-end loan receivables $61,286 $56,767 $54,873 $54,285 $57,254 $4,032 7.0 % $61,286 $57,254 $4,032 7.0 %
Credit cards $58,880 $54,263 $52,406 $52,008 $54,958 $3,922 7.1 % $58,880 $54,958 $3,922 7.1 %
Consumer installment loans $1,063 $1,081 $1,047 $963 $965 $98 10.2 % $1,063 $965 $98 10.2 %
Commercial credit products $1,320 $1,404 $1,405 $1,299 $1,317 $3 0.2 % $1,320 $1,317 $3 0.2 %
Other $23 $19 $15 $15 $14 $9 64.3 % $23 $14 $9 64.3 %
Average loan receivables, including held for sale $59,547 $57,391 $55,363 $55,495 $54,895 $4,652 8.5 % $57,101 $52,407 $4,694 9.0 %
Period-end active accounts (in thousands)(8) 64,286 60,489 59,248 57,349 61,957 2,329 3.8 % 64,286 61,957 2,329 3.8 %
Average active accounts (in thousands)(8) 61,667 59,907 58,386 59,342 58,402 3,265 5.6 % 60,009 56,253 3,756 6.7 %

LIQUIDITY

Liquid assets
Cash and equivalents $11,828 $14,808 $6,782 $5,331 $2,319 $9,509 NM $11,828 $2,319 $9,509 NM
Total liquid assets $12,942 $14,077 $6,119 $4,806 $2,058 $10,884 NM $12,942 $2,058 $10,884 NM
Undrawn credit facilities
Undrawn committed securitization financings $6,100 $5,650 $5,650 $450 $6,100 NM $6,100 $6,100 NM
Total liquid assets and undrawn credit facilities $19,042 $19,727 $11,769 $5,256 $2,058 $16,984 NM $19,042 $2,058 $16,984 NM
Liquid assets % of total assets 17.09 % 19.16 % 9.69 % 8.11 % 3.48 % 13.61 % 17.09 % 3.48 % 13.61 %
Liquid assets including undrawn committed securitization financings % of total assets 25.15 % 26.85 % 18.63 % 8.87 % 3.48 % 21.67 % 25.15 % 3.48 % 21.67 %
(1) Return on assets represents net earnings as a percentage of average total assets.
(2) Return on equity represents net earnings as a percentage of average total equity.

(3) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible Common Equity (“TCE”) is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(4) Net interest margin represents net interest income divided by average interest earning assets.
(5) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.
(6) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.
(7) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(8) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
SYNCHRONY FINANCIAL
STATEMENTS OF EARNINGS

(unaudited, $ in millions)

Quarter Ended Twelve months ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

4Q’14 vs. 4Q’13 Dec 31,

2014

Dec 31,

2013

YTD’14 vs. YTD’13
Interest income:
Interest and fees on loans $3,252 $3,116 $2,920 $2,928 $3,032 $220 7.3 % $12,216 $11,295 $921 8.2 %
Interest on investment securities 8 7 6 5 5 3 60.0 % 26 18 8 44.4 %
Total interest income 3,260 3,123 2,926 2,933 3,037 223 7.3 % 12,242 11,313 929 8.2 %
Interest expense:
Interest on deposits 139 126 109 96 93 46 49.5 % 470 374 96 25.7 %
Interest on borrowings of consolidated securitization entities 57 57 54 47 49 8 16.3 % 215 211 4 1.9 %
Interest on third party debt 78 46 78 NM 124 124 NM
Interest on related party debt 8 15 43 47 46 (38 ) (82.6 )% 113 157 (44 ) (28.0 )%
Total interest expense 282 244 206 190 188 94 50.0 % 922 742 180 24.3 %
Net interest income 2,978 2,879 2,720 2,743 2,849 129 4.5 % 11,320 10,571 749 7.1 %
Retailer share arrangements (698 ) (693 ) (590 ) (594 ) (662 ) (36 ) 5.4 % (2,575 ) (2,373 ) (202 ) 8.5 %
Net interest income, after retailer share arrangements 2,280 2,186 2,130 2,149 2,187 93 4.3 % 8,745 8,198 547 6.7 %
Provision for loan losses 797 675 681 764 818 (21 ) (2.6 )% 2,917 3,072 (155 ) (5.0 )%
Net interest income, after retailer share arrangements and provision for loan losses 1,483 1,511 1,449 1,385 1,369 114 8.3 % 5,828 5,126 702 13.7 %
Other income:
Interchange revenue 120 101 92 76 89 31 34.8 % 389 324 65 20.1 %
Debt cancellation fees 67 68 70 70 88 (21 ) (23.9 )% 275 324 (49 ) (15.1 )%
Loyalty programs (91 ) (84 ) (63 ) (43 ) (57 ) (34 ) 59.6 % (281 ) (213 ) (68 ) 31.9 %
Other 66 11 13 12 10 56 NM 102 65 37 56.9 %
Total other income 162 96 112 115 130 32 24.6 % 485 500 (15 ) (3.0 )%
Other expense:
Employee costs 227 239 207 193 190 37 19.5 % 866 698 168 24.1 %
Professional fees 152 159 155 141 157 (5 ) (3.2 )% 607 486 121 24.9 %
Marketing and business development 165 115 97 83 117 48 41.0 % 460 269 191 71.0 %
Information processing 60 47 53 52 52 8 15.4 % 212 193 19 9.8 %
Other 188 168 285 141 291 (103 ) (35.4 )% 782 838 (56 ) (6.7 )%
Total other expense 792 728 797 610 807 (15 ) (1.9 )% 2,927 2,484 443 17.8 %
Earnings before provision for income taxes 853 879 764 890 692 161 23.3 % 3,386 3,142 244 7.8 %
Provision for income taxes 322 331 292 332 249 73 29.3 % 1,277 1,163 114 9.8 %
Net earnings attributable to common shareholders $531 $548 $472 $558 $443 $88 19.9 % $2,109 $1,979 $130 6.6 %
SYNCHRONY FINANCIAL
STATEMENTS OF FINANCIAL POSITION
(unaudited, $ in millions)
Quarter Ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

Dec 31, 2014 vs.

Dec 31, 2013

Assets
Cash and equivalents $11,828 $14,808 $6,782 $5,331 $2,319 $9,509 NM
Investment securities 1,598 325 298 265 236 1,362 NM
Loan receivables:
Unsecuritized loans held for investment 34,335 30,474 28,280 29,101 31,183 3,152 10.1 %
Restricted loans of consolidated securitization entities 26,951 26,293 26,593 25,184 26,071 880 3.4 %
Total loan receivables 61,286 56,767 54,873 54,285 57,254 4,032 7.0 %
Less: Allowance for loan losses (3,236 ) (3,102 ) (3,006 ) (2,998 ) (2,892 ) (344 ) 11.9 %
Loan receivables, net 58,050 53,665 51,867 51,287 54,362 3,688 6.8 %
Loan receivables held for sale 332 1,493 1,458 332 NM
Goodwill 949 949 949 949 949 %
Intangible assets, net 519 449 463 464 300 219 73.0 %
Other assets 2,431 1,780 1,358 949 919 1,512 164.5 %
Total assets $75,707 $73,469 $63,175 $59,245 $59,085 $16,622 28.1 %
Liabilities and Equity
Deposits:
Interest-bearing deposit accounts $34,847 $32,480 $30,258 $27,123 $25,360 $9,487 37.4 %
Non-interest-bearing deposit accounts 108 209 204 235 359 (251 ) (69.9 )%
Total deposits 34,955 32,689 30,462 27,358 25,719 9,236 35.9 %
Borrowings:
Borrowings of consolidated securitization entities 14,967 15,091 15,114 14,642 15,362 (395 ) (2.6 )%
Bank term loan facility 8,245 7,495 8,245 NM
Senior unsecured notes 3,593 3,593 3,593 NM
Related party debt 655 1,405 7,859 8,062 8,959 (8,304 ) (92.7 )%
Total borrowings 27,460 27,584 22,973 22,704 24,321 3,139 12.9 %
Accrued expenses and other liabilities 2,814 3,255 3,347 3,141 3,085 (271 ) (8.8 )%
Total liabilities 65,229 63,528 56,782 53,203 53,125 12,104 22.8 %
Equity:
Parent’s net investment 6,052 5,973 (5,973 ) (100.0 )%
Common stock 1 1 1 1 NM
Additional paid-in-capital 9,408 9,401 6,399 9,408 NM
Retained earnings 1,079 548 1,079 NM
Accumulated other comprehensive income: (10 ) (9 ) (7 ) (10 ) (13 ) 3 (23.1 )%
Total equity 10,478 9,941 6,393 6,042 5,960 4,518 75.8 %
Total liabilities and equity $75,707 $73,469 $63,175 $59,245 $59,085 $16,622 28.1 %
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
(unaudited, $ in millions)
Quarter Ended
Dec 31, 2014 Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013
Interest Average Interest Average Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:

Interest-earning cash and equivalents

$13,631 $7 0.20 % $9,793 $4 0.16 % $5,489 $3 0.22 % $4,001 $2 0.21 % $2,792 $2 0.28 %
Securities available for sale 962 1 0.40 % 309 3 3.89 % 285 3 4.22 % 250 3 4.92 % 237 3 4.97 %

Loan receivables:

Credit cards, including held for sale 57,075 3,186 21.68 % 54,891 3,054 22.32 % 52,957 2,860 21.66 % 53,211 2,867 22.10 % 52,271 2,963 22.25 %
Consumer installment loans 1,072 27 9.78 % 1,070 25 9.37 % 1,004 24 9.59 % 959 23 9.84 % 1,249 29 9.11 %
Commercial credit products 1,379 38 10.70 % 1,412 37 10.51 % 1,387 36 10.41 % 1,311 38 11.89 % 1,362 39 11.24 %
Other 21 1 NM 18 % 15 % 14 % 13 1 NM
Total loan receivables, including held for sale 59,547 3,252 21.21 % 57,391 3,116 21.78 % 55,363 2,920 21.16 % 55,495 2,928 21.64 % 54,895 3,032 21.68 %
Total interest-earning assets 74,140 3,260 17.07 % 67,493 3,123 18.56 % 61,137 2,926 19.20 % 59,746 2,933 20.13 % 57,924 3,037 20.58 %
Non-interest-earning assets:
Cash and due from banks 1,220 1,260 637 561 533
Allowance for loans losses (3,160 ) (3,058 ) (3,005 ) (2,931 ) (2,823 )
Other assets 2,831 2,605 2,446 2,045 2,072
Total non-interest-earning assets 891 807 78 (325 ) (218 )
Total assets $75,031 $68,300 $61,215 $59,421 $57,706
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $33,980 $139 1.59 % $31,459 $126 1.61 % $28,568 $109 1.53 % $26,317 $96 1.50 % $23,857 $93 1.53 %
Borrowings of consolidated securitization entities 14,766 57 1.50 % 15,102 57 1.51 % 14,727 54 1.47 % 14,830 47 1.30 % 15,378 49 1.25 %
Bank term loan facility(1) 8,057 46 2.22 % 3,747 28 3.00 % % % %
Senior unsecured notes(1) 3,593 32 3.46 % 1,797 18 4.02 % % % %
Related party debt(1) 843 8 3.68 % 4,582 15 1.31 % 7,959 43 2.17 % 8,286 47 2.33 % 9,037 46 2.00 %
Total interest-bearing liabilities 61,239 282 1.79 % 56,687 244 1.73 % 51,254 206 1.61 % 49,433 190 1.58 % 48,272 188 1.53 %
Non-interest-bearing liabilities
Non-interest bearing deposit accounts 182 206 221 331 450
Other liabilities 3,382 3,208 3,412 3,182 3,391
Total non-interest-bearing liabilities 3,564 3,414 3,633 3,513 3,841
Total liabilities 64,803 60,101 54,887 52,946 52,113
Equity
Total equity 10,228 8,199 6,328 6,475 5,593
Total liabilities and equity $75,031 $68,300 $61,215 $59,421 $57,706
Net interest income $2,978 $2,879 $2,720 $2,743 $2,849
Interest rate spread(2) 15.28 % 16.83 % 17.59 % 18.55 % 19.05 %
Net interest margin(3) 15.60 % 17.11 % 17.84 % 18.83 % 19.30 %
(1) Interest on liabilities calculated above utilizes monthly average balances. The effective interest rates for the quarters ended December 31, 2014 and September 30, 2014, were as follows: GECC loan 4.21% and 4.21%, Bank term loan facility 2.19% and 2.21%, Senior unsecured notes 3.52% and 3.62% respectively. The Bank term loan facility effective rate for the quarter ended September 30, 2014 excludes the impact of a one time charge incurred in connection with the prepayment of the loan facility.
(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
SYNCHRONY FINANCIAL
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
(unaudited, $ in millions)
Twelve months ended

Dec 31, 2014

Twelve months ended

Dec 31, 2013

Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Interest-earning cash and equivalents $8,230 $16 0.19 % $3,651 $10 0.27 %
Securities available for sale 487 10 2.05 % 217 8 3.69 %
Loan receivables:
Credit cards, including held for sale 54,686 11,967 21.88 % 49,704 11,015 22.16 %
Consumer installment loans 1,025 99 9.66 % 1,336 129 9.66 %
Commercial credit products 1,373 149 10.85 % 1,355 150 11.07 %
Other 17 1 5.88 % 12 1 8.33 %
Total loan receivables, including held for sale 57,101 12,216 21.39 % 52,407 11,295 21.55 %
Total interest-earning assets 65,818 12,242 18.60 % 56,275 11,313 20.10 %
Non-interest-earning assets:
Cash and due from banks 881 552
Allowance for loans losses (3,039 ) (2,693 )
Other assets 2,492 2,050
Total non-interest-earning assets 334 (91 )
Total assets 66,152 56,184
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts $30,110 $470 1.56 % $22,405 $374 1.67 %
Borrowings of consolidated securitization entities 14,835 215 1.45 % 16,209 211 1.30 %
Bank term loan facility(1) 3,056 74 2.42 % %
Senior unsecured notes(1) 1,382 50 3.62 % %
Related party debt(1) 5,335 113 2.12 % 9,000 157 1.74 %
Total interest-bearing liabilities 54,718 922 1.69 % 47,614 742 1.56 %
Non-interest-bearing liabilities
Non-interest bearing deposit accounts 240 506
Other liabilities 3,306 2,943
Total non-interest-bearing liabilities 3,546 3,449
Total liabilities 58,264 51,063
Equity
Total equity 7,888 5,121
Total liabilities and equity 66,152 56,184
Net interest income 11,320 10,571
Interest rate spread(2) 16.91 % 18.54 %
Net interest margin(3) 17.20 % 18.78 %
(1) Interest on liabilities calculated above utilizes monthly average balances. The effective interest rates, from the date of issuance through December 31, 2014, were as follows: GECC loan 4.21%, Bank term loan facility 2.20%, Senior unsecured notes 3.55%. The Bank term loan facility effective rate excludes the impact of a one time charge incurred in connection with the prepayment of the loan facility.
(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
SYNCHRONY FINANCIAL
BALANCE SHEET STATISTICS
(unaudited, $ in millions, except per share statistics)
Quarter Ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

Dec 31, 2014 vs.

Dec 31, 2013

BALANCE SHEET STATISTICS

Total common equity $10,478 $9,941 $6,393 $6,042 $5,960 $4,518 75.8 %
Total common equity as a % of total assets 13.84 % 13.53 % 10.12 % 10.20 % 10.09 % 3.75 %
Tangible assets $74,239 $72,071 $61,763 $57,832 $57,836 $16,403 28.4 %
Tangible common equity(1) $9,010 $8,543 $4,981 $4,629 $4,711 $4,299 91.3 %
Tangible common equity as a % of tangible assets(1) 12.14 % 11.85 % 8.06 % 8.00 % 8.15 % 3.99 %
Tangible common equity per share (1) $10.81 $10.24 $7.07 $6.57 $6.68 $4.13 61.8 %

REGULATORY CAPITAL RATIOS(2)

Basel I
Total risk-based capital ratio(3) 16.2 % 16.4 %
Tier 1 risk-based capital ratio(4) 14.9 % 15.1 %
Tier 1 common ratio(5) 14.9 % 15.1 %
Tier 1 leverage ratio(6) 12.5 % 12.2 %
Basel III
Tier 1 common ratio(7) 14.5 % 14.6 %
(1) Tangible Common Equity (“TCE”) is a non-GAAP measure. We believe TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding

reconciliation of TCE to a GAAP financial measure see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

(2) Regulatory capital metrics as of the end of 3Q 2014 are preliminary and therefore subject to change. As a new savings and loan holding company, the Company historically has not

been required by regulators to disclose capital ratios, and therefore these ratios are non-GAAP measures. See Reconciliation of Non-GAAP Measures and Calculation of Regulatory

Measures for components of capital ratio calculations.

(3) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.
(4) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.
(5) Tier 1 common ratio is the ratio of common equity Tier 1 capital divided by risk-weighted assets.
(6) Tier 1 leverage ratio is calculated based on Tier 1 capital divided by total assets, after certain adjustments.
(7) Our Basel III Tier 1 common ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated in accordance with the U.S. Basel III capital rules (on a fully

phased-in basis). Our Basel III Tier 1 common ratio is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal

Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.

SYNCHRONY FINANCIAL
PLATFORM RESULTS AND RECONCILIATION OF NON-GAAP MEASURES
(unaudited, $ in millions)
Quarter Ended Twelve months ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

4Q’14 vs. 4Q’13 Dec 31,

2014

Dec 31,

2013

YTD’14 vs. YTD’13

RETAIL CARD

Purchase volume(1),(2) $24,855 $20,991 $21,032 $16,713 $22,199 $2,656 12.0 % $83,591 $75,739 $7,852 10.4 %
Period-end loan receivables $42,308 $38,466 $37,238 $37,175 $39,834 $2,474 6.2 % $42,308 $39,834 $2,474 6.2 %
Average loan receivables, including held for sale $40,929 $39,411 $38,047 $38,223 $37,576 $3,353 8.9 % $39,278 $35,716 $3,562 10.0 %
Average active accounts (in thousands)(2),(3) 49,871 48,433 47,248 48,168 47,455 2,416 5.1 % 48,599 45,690 2,909 6.4 %
Interest and fees on loans(2) $2,405 $2,299 $2,158 $2,178 $2,234 $171 7.7 % $9,040 $8,317 $723 8.7 %
Other income(2) 141 78 92 96 113 28 24.8 % 407 419 (12 ) (2.9 )%
Platform revenue, excluding retailer share arrangements(2) 2,546 2,377 2,250 2,274 2,347 199 8.5 % 9,447 8,736 711 8.1 %
Retailer share arrangements(2) (686 ) (683 ) (577 ) (584 ) (651 ) (35 ) 5.4 % (2,530 ) (2,331 ) (199 ) 8.5 %
Platform revenue(2) $1,860 $1,694 $1,673 $1,690 $1,696 $164 9.7 % $6,917 $6,405 $512 8.0 %

PAYMENT SOLUTIONS

Purchase volume(1) $3,419 $3,226 $3,115 $2,687 $3,111 $308 9.9 % $12,447 $11,360 $1,087 9.6 %
Period-end loan receivables $12,095 $11,514 $11,014 $10,647 $10,893 $1,202 11.0 % $12,095 $10,893 $1,202 11.0 %
Average loan receivables $11,772 $11,267 $10,785 $10,775 $10,844 $928 8.6 % $11,171 $10,469 $702 6.7 %
Average active accounts (in thousands)(3) 7,113 6,892 6,692 6,737 6,566 547 8.3 % 6,869 6,330 539 8.5 %
Interest and fees on loans $426 $405 $379 $372 $399 $27 6.8 % $1,582 $1,506 $76 5.0 %
Other income 9 7 8 8 4 5 125.0 % 32 36 (4 ) (11.1 )%
Platform revenue, excluding retailer share arrangements 435 412 387 380 403 32 7.9 % 1,614 1,542 72 4.7 %
Retailer share arrangements (11 ) (9 ) (12 ) (9 ) (9 ) (2 ) 22.2 % (41 ) (36 ) (5 ) 13.9 %
Platform revenue $424 $403 $375 $371 $394 $30 7.6 % $1,573 $1,506 $67 4.4 %

CARECREDIT

Purchase volume(1) $1,807 $1,787 $1,831 $1,686 $1,692 $115 6.8 % $7,111 $6,759 $352 5.2 %
Period-end loan receivables $6,883 $6,787 $6,621 $6,463 $6,527 $356 5.5 % $6,883 $6,527 $356 5.5 %
Average loan receivables $6,846 $6,713 $6,531 $6,497 $6,475 $371 5.7 % $6,652 $6,222 $430 6.9 %
Average active accounts (in thousands)(3) 4,683 4,582 4,446 4,437 4,381 302 6.9 % 4,541 4,233 308 7.3 %
Interest and fees on loans $421 $412 $383 $378 $399 $22 5.5 % $1,594 $1,472 $122 8.3 %
Other income 12 11 12 11 13 (1 ) (7.7 )% 46 45 1 2.2 %
Platform revenue, excluding retailer share arrangements 433 423 395 389 412 21 5.1 % 1,640 1,517 123 8.1 %
Retailer share arrangements (1 ) (1 ) (1 ) (1 ) (2 ) 1 (50.0 )% (4 ) (6 ) 2 (33.3 )%
Platform revenue $432 $422 $394 $388 $410 $22 5.4 % $1,636 $1,511 $125 8.3 %

TOTAL SYF

Purchase volume(1),(2) $30,081 $26,004 $25,978 $21,086 $27,002 $3,079 11.4 % $103,149 $93,858 $9,291 9.9 %
Period-end loan receivables $61,286 $56,767 $54,873 $54,285 $57,254 $4,032 7.0 % $61,286 $57,254 $4,032 7.0 %
Average loan receivables, including held for sale $59,547 $57,391 $55,363 $55,495 $54,895 $4,652 8.5 % $57,101 $52,407 $4,694 9.0 %
Average active accounts (in thousands)(2),(3) 61,667 59,907 58,386 59,342 58,402 3,265 5.6 % 60,009 56,253 3,756 6.7 %
Interest and fees on loans(2) $3,252 $3,116 $2,920 $2,928 $3,032 $220 7.3 % $12,216 $11,295 $921 8.2 %
Other income(2) 162 96 112 115 130 32 24.6 % 485 500 (15 ) (3.0 )%
Platform revenue, excluding retailer share arrangements(2) 3,414 3,212 3,032 3,043 3,162 252 8.0 % 12,701 11,795 906 7.7 %
Retailer share arrangements(2) (698 ) (693 ) (590 ) (594 ) (662 ) (36 ) 5.4 % (2,575 ) (2,373 ) (202 ) 8.5 %
Platform revenue(2) $2,716 $2,519 $2,442 $2,449 $2,500 $216 8.6 % $10,126 $9,422 $704 7.5 %
(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(2) Includes activity and balances associated with loan receivables held for sale.
(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
SYNCHRONY FINANCIAL
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES
(unaudited, $ in millions, except per share statistics)
Quarter Ended
Dec 31,

2014

Sep 30,

2014

Jun 30,

2014

Mar 31,

2014

Dec 31,

2013

COMMON EQUITY MEASURES

GAAP Total common equity $10,478 $9,941 $6,393 $6,042 $5,960
Less: Goodwill (949 ) (949 ) (949 ) (949 ) (949 )
Less: Intangible assets, net (519 ) (449 ) (463 ) (464 ) (300 )
Tangible common equity $9,010 $8,543 $4,981 $4,629 $4,711
Adjustments for certain other intangible assets, deferred tax liabilities

and certain items in accumulated comprehensive income (loss)

287 292
Basel I – Tier 1 capital and Tier 1 common equity $9,297 $8,835
Adjustments for certain other intangible assets and deferred tax liabilities (20 ) (24 )
Basel III – Tier I common equity $9,277 $8,811

RISK-BASED CAPITAL

Basel I – Tier 1 capital and Tier 1 common equity $9,297 $8,835
Add: Allowance for loan losses includible in risk-based capital 808 760
Basel I – Risk-based capital $10,105 $9,595

ASSET MEASURES

Total assets $75,707 $73,469
Adjustments for:
Disallowed goodwill and other disallowed intangible assets, net of

related deferred tax liabilities

(1,181 ) (1,110 )
Other 79 4
Total assets for leverage purposes – Basel I $74,605 $72,363
Risk-weighted assets – Basel I $62,250 $58,457
Additional risk weighting adjustments related to:
Deferred taxes 1,321 1,319
Loan receivables delinquent over 90 days 581 526
Other (11 ) (2 )
Risk-weighted assets – Basel III (fully phased in) $64,141 $60,300

TANGIBLE COMMON EQUITY PER SHARE

GAAP book value per share $12.57 $11.92 $9.06 $8.57 $8.45
Less: Goodwill (1.14 ) (1.14 ) (1.34 ) (1.34 ) (1.34 )
Less: Intangible assets, net (0.62 ) (0.53 ) (0.66 ) (0.67 ) (0.43 )
Tangible common equity per share $10.81 $10.25 $7.06 $6.56 $6.68

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