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Synchrony shed 5.4M accounts in Q2

Regular Contributor

Synchrony shed 5.4M accounts in Q2

Synchrony just released its Q2 financial results: the lender had 68.85M open accounts as of March 31st. As of June 30th, the open accounts total was down to 63.43M.
4M new accounts were opened, which means 9.4M were closed either by voluntary customer choice or adverse action.


The Company was still profitable, albeit slightly. Net earnings were $48M in the quarter vs. $853M in Q2 2019. Most of the profitability is lost to increased provisions for credit losses while purchase volume and interest fees continued to be depressed over the previous year (they say retail volume was very low and only partially offset by digital channels). So profitability is very low, but the bank is not in financial trouble -- the allowance for losses is now $9.8B (compare to $5.8B a year ago) bringing the coverage ratio to 12.52%, up from 7.10% a year ago and 11.13% at the end of Q1 (this means the lender can stomach losing 12.52% of loan receivables -- the current charge off rate is 5.35%, which is still pretty healthy).

The stock might open slightly higher later: the earnings per share (EPS) of $0.06 is actually a bit higher than the average expectations of $0.04 that analysts had put in the field. But clearly store card lending isn't exactly a gold mine right now.

Mega Contributor

Re: Synchrony shed 5.4M accounts in Q2

Wow. Over 13% of their accounts closed.

Total revolving limits 741200 (620700 reporting) FICO 8: EQ 703 TU 704 EX 687

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Regular Contributor

Re: Synchrony shed 5.4M accounts in Q2

And as a followup:

Credit card CEO warns of dark times when the $600 unemployment benefit expires

Message 3 of 4
Regular Contributor

Re: Synchrony shed 5.4M accounts in Q2

There is a lot going on:

- Discover just released their Q2 earnings: they missed the EPS consensus by a lot -- their stock will take a hit tomorrow. The company has shored up its reserve capital (reserve rate is now 9.2% for credit card loans) to increase its tolerance for chargeoffs, but all that money sitting unutilized in reserve is certainly not making them money. Interestingly, their Direct-to-Consumer deposits have increased by over $4B (7.8%) since Q1.
- Comparecards ran a survey and reported that 1 in 3 credit card holders have seen their limits reduced on at least one card over the last two months. 1 in 4 cardholders had a card involuntarily closed.
Interestingly, it was high income Americans (earning more than $100,000 per year) who were most likely to have been the target of a card closures or limit reductions. I do find that the survey results are a bit confusing: 81% of cards closed had credit limits under $5,000... which isn't necessarily a sign of high income. This type of survey is non-scientific and is typically  part of a content marketing strategy, so the  numbers could be off by a mile. 1,003 responses were collected -- which really isn't that much to get an accurate sample.

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