Synchrony (SYF) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, January 27, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Brian Doubles
• Executive Vice President and Chief Financial Officer — Brian Wenzel
• Senior Vice President, Investor Relations — Kathryn Miller

TAKEAWAYS

• Net Earnings -- $751 million for the quarter, or $2.40 per diluted share, inclusive of a $0.14 restructuring charge.
• Return on Average Assets -- 2.5% in the quarter, directly stated by management.
• Return on Tangible Common Equity -- 21.8% for the quarter, as reported in prepared remarks.
• Purchase Volume -- $49 billion, a quarterly record and up 3%, with digital platform purchase volume up 6%.
• Dual and Co-branded Card Volume -- 50% of total purchase volume, up 16% over last year.
• Net Interest Income -- $4.8 billion, an increase of 4%, primarily due to product pricing and policy changes and reduced funding liabilities costs.
• Net Interest Margin -- 15.83%, up 82 basis points, with principal drivers including higher receivables yield and lower liability costs.
• Efficiency Ratio -- 36.9%, up about 360 basis points, mainly reflecting higher expenses and RSA impact on net revenue; would have been about 180 basis points lower excluding restructuring charge.
• Net Charge-off Rate -- 5.37%, down 108 basis points, with stated long-term target range of 5.5%-6% reaffirmed for guidance.
• 30+ Day Delinquency Rate -- 4.49%, down 21 basis points, while 90+ day rate fell 23 basis points to 2.17%, all below 2017-2019 historical average.
• Ending Loan Receivables -- $104 billion, a decrease of 1%, attributed to higher payment rates, lower average active accounts, and lower first-half purchase volume.
• Payment Rate -- 16.3%, up 45 basis points, and 155 basis points above pre-pandemic Q4 average.
• Net Revenue -- $3.8 billion, flat year over year as higher net interest income was offset by increased RSAs.
• RSAs (Retailer Share Arrangements) -- $1.1 billion, or 4.3% of average loan receivables, up $175 million on improved program performance.
• Provision for Credit Losses -- $1.4 billion, down $118 million, mainly due to a $294 million drop in net charge-offs, partially offset by a $76 million reserve build.
• Other Expenses -- $1.4 billion, up 10%, driven by higher employee costs and technology investment, including a $67 million restructuring charge from a voluntary early retirement program.
• Allowance for Credit Losses -- 10.06% of loan receivables, down 29 basis points sequentially and 38 basis points year over year.
• Capital Return -- $1.1 billion in Q4, split between $952 million in share repurchases and $106 million in cash dividends; full-year capital return totaled $3.3 billion.
• Capital Ratios -- CET1 at 12.6%, Tier One Capital at 13.8%, Total Capital at 15.8%; all declined about 70 basis points compared to a year ago.
• Full-Year Earnings -- $3.6 billion, or $9.28 per diluted share; return on average assets 3% and return on tangible common equity 25.8%.
• Deposit Funding -- Deposits at 84% of total funding; direct deposits up $2.9 billion and broker deposits down $3.8 billion, with secured debt at 9% and unsecured debt at 7%.
• Liquid Assets -- $16.6 billion, representing 13.9% of total assets, a 3% decline and 45 basis points lower than the prior year.
• Guidance for 2026 -- Projected net earnings per diluted share of $9.10 to $9.50, with mid-single-digit ending receivables growth and net charge-off rate aligned to the 5.5%-6% long-term target.
• Program Developments -- Added or renewed over 25 partners in the quarter, with more than 75 in 2025; 97% of interest and fees from top 25 partners renewed through 2028, and top five partners renewed through 2030 and beyond.
• Digital and Multi-Product Strategy -- Digital wallet sales and unique provisioned accounts more than doubled, an 18% rise in visits, and a 17% increase in 2025 sales attributed to channel enhancements.
• Pay Later Product -- Now at more than 6,200 merchants, with cited data showing "at least a 10% average increase in sales" when offered alongside revolving products.

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RISKS

• Chief Executive Officer Brian Doubles stated, "any price controls like an APR cap would not make credit more affordable. It would eliminate credit for those that need it. A cap would require issuers to significantly reduce the amount of credit they're able to provide. That disproportionately impacts the consumers at the lower income level."
• Chief Executive Officer Brian Doubles said, "this would be a huge hit for them. When you look at, like, the severe impact on both the consumers and businesses, there's no question this would be very bad for the economy."

SUMMARY

Synchrony Financial (NYSE:SYF) reported record purchase volume in the quarter, with strengthening in co-brand, digital, and diversified purchase segments.

Management disclosed that 97% of top 25 partner interest and fees are contractually renewed through 2028, and described substantial progress in scaling digital wallet initiatives. Outlook for 2026 targets mid-single-digit ending receivable growth and net charge-off ratios matching long-term targets, while the earnings guidance range incorporates EPS impact from new growth programs, reserves for asset expansion, and technology investment. Capital ratios, though reduced, remain robust by management’s own benchmarks, and the company’s funding mix continues to heavily favor direct deposits over brokered alternatives. Multi-product deployment, especially the incremental impact of Pay Later and digital wallet strategies, is expected to drive both incremental customer acquisition and deepen partner engagement.

• Chief Financial Officer Brian Wenzel confirmed net interest margin rose 82 basis points, attributing 44 basis points to higher loan receivables yield from product pricing and policy changes.
• Management expects Retailer Share Arrangements to remain within the 4%-4.5% range of average receivables, with further increases tied to stronger program performance.
• Significant investments cited include AI, cloud infrastructure, and expansion of the health and wellness platform; accompanying reserve requirements comprise the largest component of growth-related expenses.
• Pay Later product uptake across the portfolio is being tracked as incremental — with "any cannibalization" of legacy card flows and clear confirmation that these accounts comprise net new customer acquisition.

INDUSTRY GLOSSARY

• RSAs (Retailer Share Arrangements): Partner profit-sharing agreements in which a portion of program income is contractually paid to retail partners, typically as a percentage of loan receivables or revenue.
• PPPCs (Product Pricing and Policy Changes): Company-initiated adjustments to product terms (such as APR, late fees, or pricing structures), designed to optimize yield and manage risk in the loan portfolio.
• CECL (Current Expected Credit Loss): An accounting standard requiring recognition of expected lifetime credit losses on financial assets at the time of origination, impacting loan loss reserve calculations.
• Pay Later: Installment-based financing product—offered alongside revolving credit—which provides consumers with short- to medium-term, fixed payment options at the point of sale.

Full Conference Call Transcript

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 ended the year with a strong fourth quarter performance, highlighted by net earnings of $751 million or $2.40 per diluted share, which included a $0.14 restructuring charge related to a voluntary employee early retirement program. A return on average assets of 2.5% and a return on tangible common equity of 21.8%. During the quarter, we connected nearly 70 million customers to our partners and generated more than $49 billion of purchase volume, a fourth-quarter record and a year-over-year increase of 3%. As average active account and spend trends continue to sequentially strengthen across almost all of our platforms.

Purchase volume across our digital platform increased 6%, driven by higher spend per account, strong customer response to enhanced product offerings, and refreshed value propositions. Diversified and value purchase volume grew 4%, primarily reflecting the impact of partner expansion this year. Purchase volume in Health and Wellness also grew 4%, reflecting growth in Pet and Audiology, partially offset by lower spend in cosmetic. In addition, higher spend per account exceeded the impact of lower average active accounts. Purchase volume in our Lifestyle platform increased 3%, reflecting higher broad-based spend per account partially offset by lower average active accounts.

And purchase volume in Home and Auto was down 2%, generally reflecting selective spend in Home improvement, lower average active accounts partially offset by strong growth in spend per account. Synchrony's dual and co-branded cards accounted for 50% of our total purchase volume in the fourth quarter and increased 16% versus last year. Driven by product upgrades, higher broad-based spend, and expanded utility across these card programs. We also continue to see year-over-year improvement in the mix of discretionary spend within our out-of-partner purchase volume with strength coming from categories like electronics, entertainment, and travel. In addition, both average transaction values and average transaction frequency continue to grow across the portfolio.

Average transaction values rose about 30 basis points compared to last year, reflecting growth from non-prime and super-prime customers. Average transaction frequency increased across all credit cohorts, up about 3.7% versus last year. Collectively, these strengthening core trends across our portfolio are a reflection of Synchrony's focus and disciplined execution throughout the year. We delivered strong credit results while also advancing our key strategic priorities to enhance the value utility of our financing solutions, broaden our reach, and deliver more powerful experiences for our customers and partners alike.

And as a result, Synchrony added more than 20 million new accounts, drove engagement with nearly 70 million existing customers, and generated more than $182 billion of sales for our partners, merchants, and providers in 2025. This is the kind of proven success that has established Synchrony as a trusted partner. In the fourth quarter, we added or renewed more than 25 partners, including Bob's Discount Furniture, RH, and Polaris. We're excited to announce our exclusive multiyear agreement with Bob's Discount Furniture to offer short and long-term promotional financing options to customers at more than 200 Bob's locations.

This partnership is expected to launch midyear and strengthen Synchrony's leadership in the home furnishings industry partnerships across more than half of Furniture Today's top 100 retailers. In addition, our renewed partnership with Polaris, a leading manufacturer of off-road vehicles, builds on a nearly two-decade-long relationship of collaboration to provide financing for vehicles, parts, accessories, gear, as well as vehicle service and protection products with customized promotional financing and loan options. Throughout the past year, Synchrony expanded our portfolio across both national and local businesses, bringing our total added or renewed partners to more than 75, including two of our top five partners and seven of our top 20.

Approximately 97% of our total interest and fees from our top 25 partners are renewed through 2028, and our top five partners are renewed through 2030 and beyond. Reflecting the deep trust our partners have in Synchrony and our ability to deliver for their businesses. Synchrony also continued to diversify our programs, products, and markets over the past year, providing greater flexibility and broader access for our customers and partners as their needs evolve and priorities shift. We entered into more than 10 merchant and practice management platform partnerships, including Weave, one of the largest patient relationship management software providers in the health and wellness space, that supports over 35,000 small and medium-sized practices across dental, cosmetic, vision, and vet.

Together, we're focused on eliminating the friction between patient communication and payment experiences and empowering customers with access and financial flexibility, so we're excited to develop a best-in-class patient engagement and payment solution that will seamlessly integrate CareCredit across critical moments that matter in the patient journey, from appointment scheduling and reminders to bill pay. Synchrony now partners with over 50 merchant and practice management platforms like Weave, both in the health and wellness and home and auto markets, so that we can enable seamless access to our financing solution suite while converting more sales for hundreds of thousands of small and mid-sized businesses that utilize these technology platforms to operate their businesses.

Similarly, our acquisition of Versatile is expected to accelerate our multi-source financing strategy, reaching and empowering more customers with smarter financing options across online, in-store, and mobile points of sale. Driving seamless integrations, higher approval rates, and detailed reporting to drive sales across home, auto, and elective medical merchants and providers. And our continued launch of new products across our portfolio is delivering enhanced utility and value for our customers while driving loyalty and sales for our partners. For example, Synchrony Pay Later is now offered to more than 6,200 merchants, and thus far, our data shows that when we offer a pay later and revolving products together, we experience at least a 10% average increase in sales.

Pointing to the expansive purchase power Synchrony can deliver through our multiproduct strategy. In today's world, where purchases are often decided and financing approved before checkout, Synchrony is increasingly wherever our customer is, on the product page, in search results, in digital shopping carts, and even in their inbox, providing effortless access to flexible financing options. The investments we've been making are driving these and other innovations at Synchrony, as we seek to expand and deepen the role we play across the consumer finance and payments ecosystem.

Over the last year, we have enriched the experiences we deliver while empowering our customers with more dynamic access and choice through the combination of Synchrony's marketplace, features our AI search capability called Joy Hunt, and Synchrony's website and native app. Together, the enhancements we made across these channels contributed to an 18% increase in total visits and 17% more in sales in 2025. Our digital wallet strategy also continued to accelerate, having more than doubled the number of unique provisioned accounts and digital wallet sales compared to last year.

This growth also supported a 400 basis point gain in our dual and co-branded cards wallet penetration rate, which should enhance the stickiness of these products and provide natural tailwinds to Synchrony's mobile wallet share as we continue to invest in this strategy and aim to ensure that our products are anywhere our customers want them to be. So no matter how our customers come to Synchrony, the hundreds of thousands of partners, providers, and small and midsized businesses we serve, our digital ecosystem is designed to connect them with the compelling value propositions, broad utility, and flexible payment structures that best align with their needs in that moment.

By almost any account, we believe the ways in which Synchrony has executed throughout 2025 have positioned us well for the future. We have invested in our products and digital capabilities to drive greater reach, deeper penetration, and broader utility. And we have built enduring relationships with a diverse range of partners who are primed to deliver strong risk-adjusted growth as conditions allow. And with that, I'll turn the call over to Brian to discuss our financial performance in greater detail.

Brian Wenzel: Thanks, Brian, and good morning, everyone. Synchrony's fourth quarter and full-year financial performance delivered strong risk-adjusted returns amidst evolving market conditions. The combination of our underwriting discipline and the efficacy of our prior credit actions enabled the return of our full-year net charge-off rate within our long-term target range of 5.5% to 6%. We achieved strong new account and purchase line growth across the portfolio despite maintaining our net credit restrictive position. And despite the associated effects of an elevated payment rate, ending loan receivables grew across three of our five platforms, and net interest income increased, reflecting the building impact of our product pricing and policy changes or PPPCs, and the reduction of our funding liabilities costs.

The combination of these trends drove enhanced program performance, which was shared through our RSAs, maintaining economic alignment with our partners, enabling them to reinvest in our mutual customers and drive loyalty amidst a backdrop of more discerning spend behavior. To summarize Synchrony's fourth quarter results, we generated net earnings of $751 million or $2.40 per diluted share, which included the impact of a $0.14 restructuring charge related to a voluntary employee early retirement program. A return on average assets of 2.5%, a return on tangible common equity of 21.8%, and a 9% increase in tangible book value per share. And for the full year, Synchrony delivered net earnings of $3.6 billion or $9.28 per diluted share.

A return on average assets of 3% and a return on tangible common equity of 25.8%. We look forward to building on this momentum across our business in both the short and medium term. Focusing on our fourth quarter results in more detail, we generated $49 billion of purchase volume, a fourth-quarter record and a 3% year-over-year increase despite the ongoing effects of net credit restrictive actions we took between mid-2023 and early 2024 and continued selectivity in customer spend behavior. Ending loan receivables decreased 1% to $104 billion in the fourth quarter, reflecting the combination of higher payment rates, lower average active accounts, and the effects of lower purchase volume in the first half of this year.

The payment rate increased by approximately 45 basis points versus last year to 16.3% and was approximately 155 basis points above the pre-pandemic fourth-quarter average. Net revenue of $3.8 billion was flat versus last year, as higher net interest income was offset by higher RSAs driven by program performance. Net interest income increased 4% to $4.8 billion, primarily driven by higher loan receivables yield and the impact of our PPPCs and lower interest-bearing liabilities costs associated with lower benchmark rates, partially offset by lower liquidity portfolio yield. Our fourth-quarter net interest margin increased 82 basis points versus last year to 15.83%, reflecting three key drivers.

One, a 53 basis point increase in our loan receivables yield contributed approximately 44 basis points to our net interest margin. This increase was primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates and lower assessed late fees. Two, a 51 basis point decline in our total interest-bearing liabilities cost versus last year contributed approximately 41 basis points to our net interest margin. And three, a 46 basis point increase in the mix of loan receivables as a percent of interest-earning assets, which increased our net interest margin by approximately eight basis points.

These improvements were partially offset by a 73 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 11 basis points. The decline generally reflected the impact of lower benchmark rates. Moving on. RSAs of $1.1 billion or 4.3% of average loan receivables in the fourth quarter increased $175 million versus the prior year, primarily reflecting program performance, which included lower net charge-offs and the impact of our PPPCs. Provision for credit losses decreased $118 million to $1.4 billion, driven by a $294 million decrease in net charge-offs, and partially offset by a reserve build of $76 million versus a $100 million release in the prior year.

Other expenses increased 10% to $1.4 billion, generally reflecting higher employee costs and technology investments. Employee costs increased primarily due to a $67 million restructuring charge associated with the voluntary employee early retirement program as well as a shift in headcount mix. The fourth-quarter efficiency ratio was 36.9%, approximately 360 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA on net revenue as program performance improved. Excluding the impacts of the restructuring charge, the fourth-quarter efficiency ratio would have been approximately 180 basis points lower.

Shifting focus to our key credit trends on Slide nine, which shows that our thirty plus ninety plus delinquency rates as well as our net charge-off rate are all below our historical average for the 2017 to 2019. At quarter end, our 30 plus delinquency rate was 4.49%, a decrease of 21 basis points from 4.7% the prior year. Our 90 plus delinquency rate was 2.17%, a decrease of 23 basis points from 2.4% in the prior year. And our net charge-off rate was 5.37% in the fourth quarter, a decrease of 108 basis points from 6.45% in the prior year.

When evaluating our credit performance, our portfolio delinquency and net charge-off trends reflect both the efficacy of our credit actions and the power of our disciplined underwriting and credit management strategies. These trends reinforce our confidence in our portfolio's credit positioning as we move forward and provide a strong foundation for us to execute our business strategy. Finally, our allowance for credit losses as a percent of loan receivables was 10.06%, which decreased approximately 29 basis points from 10.35% in the third quarter and declined 38 basis points from the 10.44% in 2024. Turning to Slide 10. Synchrony's funding, capital, and liquidity continue to provide a strong foundation for our business as we exited 2025.

Six ks grew our direct deposits by $2.9 billion versus last year. As we reduced broker deposits by $3.8 billion. Also during the fourth quarter, we issued a $750 million three-year secured public bond from the Synchrony Card Issuance Trust with the tightest benchmark adjusted spread we've had in the past seven years and a final coupon of 4.06%. At December 31, deposits represented 84% of our total funding, with secured debt representing 9% and unsecured debt representing 7%. Total liquid assets decreased 3% to $16.6 billion and represented 13.9% of total assets, 45 basis points lower than last year. Moving to our capital ratios.

Synchrony ended the quarter with a CET1 ratio of 12.6%, a Tier one capital ratio of 13.8%, and a total capital ratio of 15.8%. Each declined approximately 70 basis points versus the prior year. In our Tier one capital, plus reserves ratio decreased to 23.7% compared to 24.3% last year. During the fourth quarter, Synchrony returned $1.1 billion to shareholders, consisting of $952 million in share repurchases and $106 million in common stock dividends. And for the full year, returned $3.3 billion, including $2.9 billion in share repurchases and $427 million in common stock dividends. Synchrony remains well-positioned to return capital to shareholders subject to our business performance, market conditions, regulatory restrictions or expectations, and our capital plan.

Turning to our outlook for 2026 on Slide 11. We increased high-level execution throughout the past year, coupled with our ongoing investments, has positioned us well to grow our portfolio in a prudent risk-adjusted manner should conditions allow. Our baseline assumptions include no regulatory or legislative changes, a stable macroeconomic environment, with no significant reduction in inflation rates, full-year GDP growth of 2%, a year-end unemployment rate of 4.8%, a year-end fed funds rate of 3.25%, and a full-year deposit base of approximately 65%. For 2026, we expect average active account and purchase volume growth to drive mid-single-digit ending receivables growth even while payment rates remain elevated.

The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year as recently launched programs grow and the Lowe's commercial co-brand credit card program transfers to our portfolio in the second quarter. This growth outlook also assumes no additional broad-based credit refinements. We currently also expect our portfolio net charge-off rate to be in line with our long-term target of 5.5% to 6%. We will continue to monitor our portfolio performance and the broader macroeconomic conditions closely. To the extent we see notable changes in the portfolio trends, or macroeconomic conditions, we will consider making further adjustments to our credit positioning.

We expect net interest income to continue to grow in 2026 as the impact of PPPCs continues to build as we reduce our funding liabilities cost. These trends will be partially offset by lower late fee incidents and the yield dilutive effect of accelerating new account growth. RSAs are expected to increase, reflecting stronger program performance, but remain within our target of 4% to 4.5% of average receivables. Other expenses, excluding the impact of the $98 million of notable items in 2025, should grow in line with loan receivables, reflecting continued investment in our growth and innovation as we look to drive our momentum forward.

We remain focused on delivering operating leverage in our business, balancing the opportunities we see to power leading-edge experiences and portfolio expansion. Altogether, these financial drivers are expected to deliver net earnings per diluted share between $9.10 and $9.50 for the full year 2026. This range includes the impact of growth-related initiatives like Walmart One Pay, Lowe's commercial co-brand, and Versatile Credit, as well as investments in other key technology initiatives. These combined investments will impact loan receivables yield, provision for credit losses, other income, and other expenses to varying degrees. Synchrony's model is designed to generate double-digit earnings per share growth on average over time and through cycles.

This reflects our disciplined approach to underwriting credit management as well as our expense base, and the economic alignment we achieved through our RSAs. As we look to 2026 and beyond, these core drivers have set the stage as conditions allow Synchrony to drive strong earnings and continued progress towards our long-term financial targets while generating incremental excess capital.

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

Brian Wenzel: 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, Synchrony is executing on our key strategic priorities to grow and win new partners, diversify our programs, products, and markets, and deliver best-in-class experiences for all those we serve. We are doing this while also earning the honor of being ranked second among the top best companies to work for in The U.S. by Fortune Magazine and Great Place to Work in 2025. I am incredibly proud of the great work we are doing together and the great strides we are making as we seek to solidify Synchrony at the heart of American commerce.

Second, Synchrony's past, present, and future are grounded in our ability to drive sustainable growth at appropriate risk-adjusted returns through cycles and the evolving consumer landscape. Our expertise, discipline, and consistent innovation have made this possible. Allowing us to deliver products and experiences with enduring appeal and compelling value for both our customers and partners alike. Since exiting the pandemic in 2021, Synchrony has added or renewed more than 300 partners, including 16 of our top 20, while also growing ending receivables at an average rate of approximately 7% and delivering an average return on assets of approximately 3% and an average return on tangible common equity of approximately 25%.

And third, Synchrony's robust capital generation capacity positions us well to continue to invest in our business and growth opportunities while also returning capital as conditions allow. As we look to 2026 and beyond, we are confident in the momentum we've built to drive considerable long-term value for our many stakeholders. And 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. To 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.

Operator: Thank you. We will take our first question from Sanjay Sakhrani with KBW. Please go ahead. Your line is open.

Sanjay Sakhrani: Good morning. Good job on 2025. I know you guys had a lot to deal with. Maybe just starting on the mid-single-digit growth guide for receivables growth, I think that's quite encouraging. Brian, can you just talk about sort of the building blocks for that? I saw the co-brand volume growth accelerated. Is that partly due to Walmart? Or how are the early views of Walmart looking? And then Brian Wenzel, you talked a little bit about not necessarily assuming any changes to sort of the underwriting stance for the year, but is that something you're considering inside the guide?

Brian Doubles: Sanjay, why don't I start on that? So look, overall, we're pretty encouraged by what we're seeing in terms of the consumer. I think the consumer has been resilient all year, I think better than we expected. We're not really seeing any signs of weakness. We're actually seeing strength as we look at the spending patterns and credit continues to outperform our expectations, as you mentioned. So I think the macro environment is still pretty constructive. Bigger tax refunds could potentially help us a little bit here in the short term as well. But if you look at our business more specifically, I think purchase volume turned the corner, nice trajectory, up 3% versus last year.

We've got four out of five platforms improving sequentially. We're seeing really nice growth in co-brand purchase volume up 16% versus prior year, as you mentioned. So we're kind of firing on all cylinders, and we feel pretty good about that mid-single loan guide. If you look at the components, Walmart's obviously a big part of that. We launched in September. It's the fastest-growing program we've ever launched, so we feel great about that. We're making continued investments in health and wellness. That's a platform that continues to outperform, and we expect it to continue to outperform next year.

So Lowe's commercial program, there's just a lot of things as you tick down the list that we're really optimistic about as we look forward to 2026. I don't know, Brian, if you want to add to that.

Brian Wenzel: Yes. Sanjay, so a couple of things I'd just add on to what Brian said. I mean, first, look at the trajectory as you step through 2025, we're minus four, minus two, and you get through the end part of 2025, you were plus 3% on purchase volume. If you take that and extrapolate that into the first several weeks of 2026, we have accelerated the purchase volume beyond that rate. Now again, we'll see what happens this weekend after the snowstorm and ice storm came through, but we were encouraged by that increased spending.

Even when you look at the holiday inside of the fourth quarter, our holiday partners, which make up about two-thirds of our portfolio, grew above a 4% rate. It's really the non-holiday parties, you get in with about a third was growing significantly less than that, which is how you got to the three. And even you see green shoots in the portfolio, one of the biggest things that you think about guide, Sanjay, is where is consumer confidence? You saw it tick up. Most certainly, trails a lot of times what we're starting to see in our portfolio.

And if you look at like home specialty, here's something that was comping down every single quarter was kind of flattish in the fourth. So if you can get that bigger ticket to turn and consumer confidence to turn, I think that gives you momentum. I think if you pull up for a second, the growth rate as you think about it for moving forward, we were just slightly down 1% to mid-single digits is really put in three buckets, right? Number one, the core book, which we just talked about some of the momentum you highlighted co-brand. The other things we're seeing in some of the green shoots and the consumer confidence.

Two goes into the credit aperture changes we made in 2025 that will contribute to the portfolio. We don't have incremental credit aperture changes in the guide here. That's something obviously at our discretion depending on how credit performs. And then third, it's really Walmart and Lowe's they kind of come into the portfolio. And again, the opportunity with Walmart is obviously significant given their customer base. So I think there's many different levers.

Sanjay Sakhrani: And even when you look at the consumer behavior, both on a frequency and average transaction value basis, we're showing improvement in both of those as we exit out of 2025. So really, strong performance by the consumer in an uncertain environment.

Brian Doubles: Thank you. Just my follow-up question is on the news on the 10% APR caps. I'm just curious if you guys obviously, views on it, but if you guys have any had chances to talk to some of your partners about sort of how they're thinking about it because it definitely affects both you and them as well. So just curious to hear your views. Your feedback.

Brian Doubles: Yes. Sure, Sanjay. So look, I think the administration is focused on affordability, which we completely agree is important for consumers and the economy. And as you know, we pride ourselves on offering credit to a very broad cross-section of The U.S. Consumer. We approve more customers at that low to mid-income level than many other issuers. And I think that availability of credit is critical to the economy. As you know, this is a highly competitive industry. Credit cards are one of the most competitive spaces in banking. Our products have to be competitively priced, and we also have to offer significant value to the consumer.

So any price controls like an APR cap would not make credit more affordable. It would eliminate credit for those that need it. A cap would require issuers to significantly reduce the amount of credit they're able to provide. And again, that disproportionately impacts the consumers at the lower income level. And then you mentioned our partners. I mean, this is very bad for merchants that depend on those credit programs. We support 400,000 small- to medium-sized businesses who depend on those credit programs. In some cases, we can be over 40% of their sales. So this would be a huge hit for them.

So when you look at, like, the severe impact on both the consumers and businesses, there's no question this would be very bad for the economy. And we're out there talking to our partners every day, the big partners, small to medium-sized businesses, and they're very concerned. When they think about what this would do to their businesses.

Sanjay Sakhrani: Thank you. Thanks,

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

Ryan Nash: Good morning, guys. Good morning, Ryan. Hey, Ryan. Maybe just start on credit.

Brian Doubles: The guide, I think, would imply losses increasing slightly at the midpoint despite strong delinquency performance. And if I'm doing the math correct, if I use the 2017 to 2019 seasonality, that would put losses on the low end, although I guess losses were rising in 'seventeen, so that overstates the seasonality. So maybe can you unpack the credit guide a bit? Do you expect to be at the low end of that or potentially lower? And maybe just talk about any benefit that is baked in from the elevated tax refund. Thank you.

Brian Wenzel: Yes. Let me unpack that a little bit, Ryan. Thanks for the question. First, we have started on the performance, right, and where delinquency is as we enter into 2026. I mean, obviously, when you look at net charge-offs of $537 million for the fourth quarter and how that kind of steps out and the favorability that you have versus the historical loss rate in 2017 to 2019 to 12 basis points better. Obviously, 30 plus being 13 basis points better than that historical period and a little bit narrower on 90 plus at two seventeen, but seven basis points better. So the formation as we enter into 2026 is strong, right, number one.

The full year, obviously, for this year was May. The way to think about it, Ryan, a little bit is you got a strong foundation bringing you into the year, but you're also bringing into a new portfolio. We talked quite a bit about Walmart kind of coming in, you have early losses associated with that. So there's an upward bias, right, relative to the One Pay Walmart program. You also have a little bit of upper bias, relative to I'd say, the credit aperture changes that we made during the middle part of the fourth quarter of this year, they begin to bleed in the back half of the year. So they do factor into losses.

To some degree as you kind of come through here. So there are some moving pieces here. We don't really kind of give you a point within the guide. Obviously, the biggest thing is going to be, has the macro developed? And there are our models and the software reserves, we have unemployment rising a little bit in the back half of the year from a model standpoint that obviously produces higher net charge-offs. So the extent that unemployment remains in a check position, it plays out I think you're going to have some favorability as it comes to that. So we're going to see how as we step through the year again.

I think we're really proud of what we've done. It sets us up nicely for the year.

Ryan Nash: Got you. Maybe as my follow-up, Brian, can you maybe just talk about what kind of net interest margin is embedded within the guidance? Should we assume continued improvement given the PPP fees and the benefits from lower rates? Or are there other headwinds that we should be considering? Thank you.

Brian Wenzel: Yes. Obviously, refer on outlook page, you should see NII increase, right? And obviously, there's probably a greater bias for the margin to increase. I think when you look at the pieces Ryan, there's probably different gives and takes, right? So number one, when you think about the interest in interest and fee line, clearly, that's going to continue to benefit, albeit at a slower pace as you kind of move through 2026 from the PPPCs. They continue to build both on the APR piece and then as delinquent pricing piece kind of comes in. So that's actually favorable.

If you kind of think about that line again, you're going to have part of the interest rate environment kind of coming down. So you're going to have prime rate going down. Against that. As you step through. Depending upon how where you come out on losses, you obviously have a late fee impact that's going to either be neutral, high or lower depending upon where you sit that charge-offs in your model. I think then when you kind of continue on, and think about the different pieces, the interest rates obviously will be favorable. Year over year again.

That should be offset, I would say, by both prime rate, number one, investment portfolio yield, number two, and the MDR number three. So that should probably be a little bit more neutral you kind of step through it. So as you kind of look at it, the biggest thing is going to be obviously payment rate, and we have payment rate to remain elevated here, which is a combination of the credit mix of the portfolio being one of its best periods of time, number one. And then number two, having a lower percentage of promotional financing assets, which carry a lower payment rate.

The extent that we get some of that big ticket that I talked about and some of the bigger items. credit mix can slow down the payment rate to give you That will effectively slow down the payment rate as well as the give you an upward bias. So I think when you put the piece together, again, NII should go up, NIM should go up. But again, it's how you factor those different moving parts together.

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

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. Maybe just a follow-up on the triple BCs. Can you maybe just talk about how those are kind of tracking relative to your expectations? I think you had indicated about 75% should be kind of priced in by June. And then kind of going forward, like how much more lift can we expect from them kind of after 2026?

Brian Wenzel: Yes. Good morning, Terry. Thanks for the question. I think when you take a step back to the and look at the BPPCs, I think is what we've said is we're slightly ahead of the burn-in of the APR changes to date because of the fact that the payment rate has been elevated. So the protected balance has paid down a little bit quicker. So again, you're probably a little bit ahead of that pace towards the 75% in the middle part of this year. Again, the back end of that curve it's not as steep, right? So the growth can will continue to bleed through.

So I think that's developed other than paying other than coming a little bit quicker, developed as we thought, right, relative to the various assumptions on attrition rates, etcetera. So we feel good about the PPP on the APR line. When you think about on the paper statement fee line, I think that has settled in. And to some degree has been relatively flat.

And I think the combination of that is even as you see the average actives pick up in the fourth quarter, it's the really growth in our e-bill percentage of people who are electing digitally, which I think is a better thing for us as a company, not only for them to avoid the fee, but engage with us digitally. So we're seeing the benefit that's going to come through the expense line there. So when I look at that in combination, most certainly, I think we're pleased the way the PPBCs have performed and it's generally in line with our expectations.

Terry Ma: Got it. Helpful. And then as my follow-up on the expense growth guide that's in line with receivables. Maybe just talk about what sort of investment related to growth you're making? And then after 2026, should we kind of expect kind of more positive operating leverage going forward? Thank you.

Brian Wenzel: Yes. So let me pull up and maybe address one broader point here, which is really the significant investments in growth we kind of highlighted here, which affect all the lines really in the P and L. The largest line when we talk about significant investments is going to be on the reserve line, right, really for the asset growth as you think about growing not only the Walmart portfolio, but obviously Lowe's that comes in, in the first half. But also the new programs when you think about BOBS and RH etcetera, kind of coming in. But the biggest piece is reserves.

I think when you think about the expense component of that, right, there's a couple of things that happen, right? You have launch costs associated with new programs. You invest in some of the early month on books and marketing programs associated with kind of getting a lot of new accounts up and running and engaged as you think about that. So there's the launch cost, there's the conversion cost for certain portfolios. Then you have most certainly the investment in marketing. Also from an expense standpoint, you really want to make sure you're investing and we have to add the staffing and head up. This is more of a nonexempt standpoint. To take the calls that come with it.

All in all, those are really positive investments for growth and we'll certainly will pay back and we'll get that operating leverage. The one thing I'd say is we have increased our capital spend a bit. And that's really around, I'd say, three key areas. Number one, it's around increased investment in AI and driving AI in various areas of business, not only that drive productivity, but also drive growth for us. Which is our focus and we can most certainly chat about that more. The second area is around our cloud journey and accelerating expenditures related to getting that done a little bit faster so we can the productivity and efficiency benefits that it comes through that.

And then third, Brian's talked quite a bit about our desire to continue to grow health and wellness at a faster pace. So investments in that health and wellness business. Those are the big pieces. But again, if I go back to where I started on the significant investments, the biggest piece is reserves. Again, as you think about all the lines in the P and they're going to be impacted by growth. You're going to have as you think about the J curve, you're going have assets in there at a lower yielding as they go to maturity and seasoning.

You're going to see it on the other income line when it comes into loyalty, maybe in advance of again, some of the income coming off the assets and then expense line. When I think about the various pieces on the individual lines, they're less than 10 basis points, but they're on each of the lines. So that's why we kind of try to call it out as you guys model it. Again, are all investments that we believe across the business really set us up for the longer term to be a much better company.

Brian Doubles: Great. Thanks, Gary.

Operator: Our next question comes from Moshe Orenbuch with TD Cowen. Please go ahead. Your line is open.

Moshe Orenbuch: Great. Thanks. Going back to kind of loan growth and opportunities, you mentioned adding the pay later gives you a lift. Can you talk a little bit about are there other areas, whether they're verticals or partners and how much of the portfolio kind of could that impact over the course of 2026?

Brian Doubles: Yes. I think Moshe, I'll start just by talking a little bit about the multi-product strategy because I think this has been very successful, I think, over the last couple of years. And pay later is an important part of that. It's resonating with our partners. We now have it at some of our largest partners, Lowe's, Amazon, Pennies, Belk, Sleep Number. And the accounts that we're seeing come through on that product are incremental. And I think that's great news. Right? So we still have kind of the same flow of new customers coming into private label co-brand. And the pay later customers are incremental. Which means our partners are getting incremental sales. So they love that, obviously.

So our partners are not looking at this as like an either-or. They're really now seeing the power of having these products kind of work in concert with one another. And given customers have different financing needs, sometimes we're evolving products the right product for them. Some may prefer fixed payments or installment product. And the strength of our franchises, we offer all of the above. So we really like how this is working. Like I said, it's resonating with our partners. It's helping us win new programs as well. And we can show them that kind of migration strategy.

So we might be starting off a customer with a pay later account, getting comfortable with them and their payment behavior, and then upgrading them to a private label card, ultimately, a co-brand card with a larger line. So that's I said, really resonating with our partners, and we think that's the right strategy for the long term.

Moshe Orenbuch: Great. And maybe give me Brian, you did just reference kind of new programs. Can you talk a little bit about state of play? I mean, are some startups that are in the space, but I think a lot of others have kind of pulled back. What are the areas you think that are most ripe kind of for new programs? And talk a little bit about what you're seeing in the market.

Brian Doubles: Yes. Look, we've got a great pipeline across all of our platforms. If you just look at last year, we added or renewed seventy-five partners. We renewed seven of our top 20. I think and it's broad. It's across every industry. Both existing programs, start-up programs, so we feel really good about our ability to compete. We're winning the deals that we want to win. And I think this is back to a little bit of what Brian talked about. The investments that we're making are helping us stay out of the competition.

Every RFP that we go into, we're told that our tech is best in the industry, our ability to integrate, our the investments we've made in our proprietary underwriting model, Prism, those are all helping us win and compete in business. We are never going to be a low-cost provider. We're very clear on that upfront. We've made big investments in the business and the platform. And we need to earn a return commensurate with that. And we think that we're the best in the partner-based financing business. And we're proving that out every day with the deals that we're that we're renewing, the partner base that we have. And where we're adding new partnerships.

Moshe Orenbuch: Thanks very much.

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

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

Mihir Bhatia: Hi. Thank you for taking my question. Maybe just first, to start on the reserve rate. You're approaching day one CECL levels here. So just wondering, I mean, I know obviously you've tightened credit and it's gotten better, just how are you thinking about the reserve rate level from here? And any thoughts into 2026 on how that would trend? As you widen the credit aperture again?

Brian Wenzel: Yeah. Thanks, Mihir. You know, honestly, as we look at the reserve rate clearly, it's come down and most certainly, it's come down relative to the loss rate we've experienced. As you think as you look out into 2026, most certainly, we've given you the guide where we see unemployment rate rising here towards the end of the year, which is really the Moody's forecast. Most certainly, we maintained the qualitative overlays where you have an unemployment rate consistent with past quarter. So we have not eased off of that.

I think as you look forward, the question becomes, you believe the macro environment becomes stable, at what point can the qualitative reserves kind of come down, which would end up giving you a little bit of on a rate basis, a downward bias to the reserve rate. When that actually happens, it's a little bit unclear. I think we're the closest to we've been to day one, not that's necessarily the greatest anchor, but it's most certainly the first mile marker you look at of where your rate should be. So I think we're encouraged around that, but obviously, lot's going to depend upon how our number one, how our delinquency formation develops.

And then number two, the macro environment. So again, I would assume a little more downward bias on a rate basis. Obviously, as I talked about the significant investments you're going to see on a dollar basis, increase with the growth going back to the mid-single digits.

Mihir Bhatia: And then maybe just going back to the pay later conversation, that you're just having. Can you just comment like on how the has been? I think you've made you gave an impressive start about 10% increase where it's offered side by side. Is that across all your platforms? And just, you know, maybe just comment if you would on Lowe's, Amazon, some of the big ones, any learnings from those rollouts? That you can share and where you are with that process currently?

Brian Doubles: Yes. I think look, generally, we're very pleased with the performance so far across all of the partners where we've launched it. I think going back to the multiproduct strategy, we believe that, that's the right one. We're anchored in that strategy. The one question for us, as we started to roll this down, I think the question for our partners, was would there be any cannibalization of the private label card and the dual card and co-brand cards that we offer? And the good news is, there hasn't been. So we try that very closely across all of our partners where we have the multiproduct strategy in place.

And we can clearly see that the volume flowing through private label and co-brand is very consistent and that the pay later accounts that we're getting are net new. And I think that's great news. That allows us to attract a new customer base that ultimately we want to offer other products to. And so that was as we embarked on this a number of years ago, that was kind of the question that we were getting from our partners. We were pretty confident that this was going to attract a new customer base. That's been the case so far. So we're very pleased across the board. Thank you.

Mihir Bhatia: Thanks, Mihir. Thanks, Mihir. Have a good day.

Operator: Thank you. Our next question comes from Erika Najarian with UBS. Please go ahead. Your line is open.

Erika Najarian: Hi, good morning. Just wanted to clarify your response to Mihir's questions. Within the 09:10 to 09:50, we should assume that the ALLL ratio is going to come down due to qualitative reserves coming down, and that offsets perhaps the higher reserves from Walmart growth?

Brian Wenzel: Yes. Good morning, Erica. So again, I was more giving the trajectory of the reserve. We haven't given guidance or what you actually should think about relative to or anything, to be honest with you, to the nine ten to nine fifty. It's over time that you have a downward bias to it. Again, on a dollar basis, most certainly, we would hope that the rate comes down to offset some of the growth, but we'll have to see how that plays out. But again, again, we have a very stable outlook here. Which I think as you think about the reserve, I was just more talking about the trajectory over time.

If you believe that the environment gets better which again we haven't on the assumptions we put on our outlook side haven't getting better. They're staying the same, Erica.

Erika Najarian: Got it. And just as a follow-up you've talked about the tax refund as a potential tailwind for purchase volume. I'm wondering as we think about the inflection point in growth and your assumption that payment rates stay high, one of your peers have talked about the tax refund in context more of better credit rather than better spend. And I'm wondering how have you sort of thought about the different scenarios in terms of how the tax refund dynamic could impact the payment rate.

Brian Wenzel: Yeah. It's a great question. It's gonna be interesting to see how it plays out. Most certainly, I think this tax refund season will be the one of the largest, if not the largest that we've seen that's really a factor of the retroactive nature of some of the benefits that were passed in legislation in the middle of last year, number one. And number two, the withholding rates, which were not adjusted for 2025 will produce some people say between $500,000 refunds off of an average refund of call it, between 3,000 and $4,000. So a significant amount of cash that flows in.

That cash generally flows in if you look at historical refunds 50% to 60% comes by mid-March, 80% to 90% come by May. You're going to see a large influx of cash into the economy. I think when you take a step back, Erica, and you look at where the benefits associated with the tax law changes, who do they affect when you think about whether it's a soft deduction, the childcare deduction, things like that? They're going to affect a certain part of the population that probably income skews a little bit higher. So when you think about it a little bit higher, the higher generally will sit back and say, okay.

Let me either save that or pay down debt. When you think about a more moderate income consumer, that consumer probably is either going to spend that money as it kind of comes through or not. So our impact on the payment really kind of goes back to our view on the consumer and what they're going to do. We're going to obviously tracking very closely. There's going to be a large influx of cash again in that end part of the first quarter into the second quarter that we'll look to see what it's doing. And I think the good news, look, both of those are positive outcomes for us.

You go back to a few years, the stimulus payments, some consumers spent, and we saw an increase in purchase fines, some paid down debt, and we saw record low losses. So any kind of boost like that is a good result for us and will drive a little tailwind as we get into next year.

Erika Najarian: Thank you.

Brian Wenzel: Thanks, Erica. Good day.

Operator: Thank you. We will move next with Rick Shane with JPMorgan. Please go ahead. Your line is open.

Rick Shane: Hey, guys. Thanks for taking my questions this morning. Look, you're calling for mid-single-digit loan growth and some degree of NII growth in 2026. Midpoint of EPS is flat despite the expectations of continued buybacks. And again, we're this is sort of revisiting Terry's question. RSA is up pretty significantly. Basically takes you back to pre-pandemic levels, which is consistent with pre-pandemic, credit expectations. Implication is obviously that the efficiency ratio was higher in 2026. I'm trying to understand, I think, part is the RSA of function of sort of a pull forward, pay it forward on the new programs? And should we revert start to revert to normalized efficiency ratios in 2027 as that sort of pull forward anniversaries?

How do we look at this going forward?

Brian Wenzel: Yes. Thanks for the question, Rick, and good morning. I think as you look at the model, as you try to put the pieces together, this is why we kind of called out some of the significant investments because what you are seeing is some of the early growth in some of the programs where you have the heavy reserve rate when you have assets that are not yielding as much because they're just in the early stage of the J curve. It's just the nature of the businesses when you think about these vintages. And when you go from a flat growth rate to an accelerating growth rate, you see that, that vintage slowdown on some of the lines.

The RSA moving to a large degree, we have newer programs. They're not necessarily an RSA perspective, right, because of the early J curve dynamics. So I think that ultimately normalizes. I think as you step out and what we expect as we go beyond 2026, obviously, would be moving closer back to the long-term framework on all the lines we hope. And most certainly, our goal is to grow business at a double-digit EPS. I think the investments this year in moving from a flattish to down 1% to a mid-single digits gives you an EPS profile this year that's a little bit different.

But again, we think that sets us up nicely for the medium to long term, and that's what our focus is on creating that value.

Rick Shane: Got it. Brian, that's helpful. And so I think what you're steering me to understand is, yes, it's a little bit RSA, but it's really the timing differential associated in part with the CECL reserving of the loan growth. Is that the best way to distill it?

Brian Wenzel: Yes. I mean, yeah. Yeah, Eureka, don't want to get into my tirade around my views on CECL and whether or that's good accounting or bad I think we'll take up another hour, but most certainly, when you have to book those losses upfront, before you get any earnings off the asset to me is not necessarily the right way to look at the business per se. That's why we kind of look at things without reserves first and then with reserves, obviously, because it's a GAAP basis. So but yes, CECL does dwarf the true reality a little bit.

Brian Doubles: Brian, it could be a short tirade. You'd be preaching to the choir on that one.

Rick Shane: Thank you.

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

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

Rob Wildhack: Good morning, guys. One more on the pay later discussion. You sound quite positive on the uptake and conversion there. But I guess what I'm wondering is, is the translation from the top of the funnel and pay later to loan growth any way different than the more legacy Synchrony product? I'm thinking that maybe pay later might be more of a onetime purchase versus a larger open to buy amount, maybe a smaller ticket on a per transaction basis. Any early indications you could share there?

Brian Doubles: Look, I would say that it does tend to be a little bit more onetime, although we're seeing good repeat usage in pay later across the partners where we have it, which is encouraging. Ultimately, our goal and kind of where our partners want to be is to get them into that revolving product because I think that allows you to do life cycle marketing push promotions, push offers, but we like look, the customers that are take out a pay later loan, we're going to be front and center with them offering another pay later loan. To buy whatever it is they're buying next. So it's not that you can't do the life cycle marketing.

It's just a little bit more natural in terms of how our partners think about it in the PLCC and co-brand space. But we like all three products. They're working really well in concert together. That was the thesis we were trying to prove out. And so far, we've proven it.

Brian Wenzel: Yes. The one thing, Rob, let me just add a little bit of financial dimension to it, right? If you look at our entire portfolio, our entire portfolio turns just under two, right? One plus billion of receivables on the purchase volume. I think when you tear that apart into pieces, obviously, the dual card and co-branded turn faster private label turns a little bit slower. When you think about the pay later that we originate, we generally originate majority in the six to twelve months. You go really is probably the biggest part. You then see eighteen to twenty-four months. So the turn is a little bit more consistent when I think private label.

We do not do a lot of volume and don't really push anything below six months. We just it's hard to make money. It's really to make money most certainly in the pay it for and stuff like that. But think about it, it's going to be the bulk is going to be in the six to twelve month variety of installments.

Rob Wildhack: Okay. Very interesting. Thank you.

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

Operator: Thank you. Our next question comes from Jeff Adelson with Morgan Stanley. Please go ahead. Your line is open.

Jeff Adelson: Hey, good morning. Thanks for taking my questions. Maybe just a follow-up on the credit actions or refinements. Can you maybe just update us on your current posture at this point? Are you kind of continuing to lift off the prior tightening actions as you go along? Has that trend accelerated or maybe slowed it off from where you were earlier last year? And then, Brian Wenzel, you mentioned the guide doesn't really include the additional broad-based credit refinements and that this would really depend on credit performance as it comes through. I guess, my question is, what maybe holds you back from opening up a bit more given that you're already within that historical charge-off range you target?

You're perhaps getting a little bit of a positive bias and short order with tax refunds. Is this maybe just, you know, conservatism you prefer to see the delinquency improvement to continue to come through? Before you maybe make it more definitive commitment there on the credit actions?

Brian Wenzel: Yes. Thanks for the question, Jeff. Let me unpack that a little bit. First, let me remind you, the credit actions that we took in 2023 and 2024 were around very specific types of items. So you think about student loans, think about personal loans, things like that, that we thought about ability to pay. So some of the actions that we've taken in 2025 in the third and fourth quarter, we're not necessarily lifting of those because we think those are good strategies to have in place, but there are other strategies that have had the effect of adding sales or expanding your credit aperture.

So I wouldn't necessarily refer to it we're just unwinding those because I think those do stay. The reason why we haven't done incremental, think, and just to be clear in our guide, actions that we took in the end part of 2025 are in the guide. No incremental broad-based changes are assumed for 2026 as we enter the year. The reason why, if you're asking me why aren't we taking more and more because we have five sixty-five loss rate delinquency looks good. I think when you look across the credit cohorts, the one thing that you'd see across all issuers, this is in the Synchrony issue, probability of default across credit grades is higher than historical norms.

So we benefit a little bit more because of our line structures. And our ability to maintain a lower line structure and control that exposure at default. But most certainly, we're continuing to watch that probability of fall again across all the crack rates. It's not into one part. So it's how it normalizes. And most certainly, there's a focus we've been tighter at the bottom end, which you've seen our shift a little bit less into non-prime is in that kind of right at the prime level. So that kind of advantage six fifty million to 700 and see what that customer who is feeling the effects of affordability for a number of years.

So we're watching that probability to fall across not only us but across the industry.

Jeff Adelson: Okay, great. And as my follow-up, it's nice to hear of the success you're having in pay later and I think you mentioned that 6,200 merchants, so I guess maybe a different way of asking some of the other questions that have been asked. Is there a way to think about how you're you know, how material that pay later offering can be for your forward loan growth either the mid-single-digit growth you're looking for in the near term or the 7% to 10% long term you talk about? Is that something that could be 100 basis points or more of a pickup?

And maybe just, you know, we've gotten some questions on progress of the pay later offering at Amazon you launched earlier last year. I think we did notice that it's not available the checkout anymore. Is there maybe just an update on how that program is going? Thanks.

Brian Doubles: Yeah. Sure, Josh. Look, we can't get specific on any of our individual programs. But I would again just say we're very happy with the results on the product so far across all of our partners. We're seeing really strong growth in new accounts. Obviously, that's included in the loan guide. Again, it's a little bit about what pay later can deliver, but it's also that vehicle to bring in new customers and then migrate them over time. So it's obviously a big part of the strategy. It's included in the mid-single digits. And I don't know, Brian, if you want to give a little more color.

Brian Wenzel: Yes. I think the one thing, Jeff, to understand about that product in and of itself is the average ticket size and what that product is meant to do. And where Brian highlights the multiproduct strategy, the product fits a certain purchase type and a certain thing. You do not see as much a large ticket going into that six and twelve month with installment on a closed end. You generally see a smaller ticket size.

So when you see a smaller ticket size, the relative contribution when I think about the a company that's got over $100 billion receivable it's not going to be as a meaningful driver to move the company's overall growth rate, but an important part for us to continue to expand penetration at our partners. So it's important to have that. Today, we have a bigger ticket offering, right, relative to equal pay installments. It just sits inside our revolving account, which is what you see primarily in our home and auto business, little bit our lifestyle business and health and wellness.

So again, from a growth rate standpoint, again, the denominator I'd sit back and say the smaller ticket move the growth rate as fast right now. Again, it's important to have it as part of a holistic offering to our partners.

Jeff Adelson: Great. Thank you.

Brian Wenzel: Thanks, Jeff. Thanks, Jeff.

Operator: Thank you. Our next question comes from Brian Foran with Truist. Please go ahead. Your line is open.

Brian Foran: Hi. You've kind of touched on this throughout your comments, but just the decision on the guide to move from kind of the and I know there's no standard the way you've done it, but generally over time you've given line items and now you're giving an EPS range. With a little bit less line item detail. Is the conclusion you're happy with where consensus is on an EPS basis, but you're flagging some of the line items might need to change as people think through these investments for growth? Or I don't want to leave the witness, maybe you could just say, why switch to an EPS range this year?

Brian Wenzel: Yes. Thanks for you. Good morning, Brian, and thanks for the question. This is an interesting it's an interesting question on how we try to help analysts know, understand the results of our company. And I think to a large degree, Brian, to be honest with you, with a large number of analysts, there's quite a diversity in even though we provided line item guidance, the outcomes on line items. Relative to the guidance, how people built their models.

So effectively, we said, listen, the best way for you to understand and value our company, ultimately, at the end of the day was to provide as I sometimes call it the cheat code on the test, which is what we think the EPS amount will be on the different line items. So it was more a factor of how do we try to get people to the best way to think about the performance of the company for 2020 and trying to get five line items right?

Brian Foran: That's helpful. And I think you mentioned the mid-single-digit loan growth is going to be a little bit more evident in the back half of the year. If that's right, what would you say are the one or two key markers we should watch for in the front half of the year that would show whether you're on track above or below tracking above or below, that kind of trajectory.

Brian Wenzel: Yes. It's a great question, Brian. I think the first thing you have to look at is what's purchase volume and what's that flow of volume that's coming into the system, number one. I think number two, you got to watch your average actives and whether or you see average active growth. And you think about sequential whether it's purchase volume for average active, etcetera. So you can kind of step through and say, does the growth make sense, right? Again, we're optimistic about what we saw here in the first three weeks of January, but those are the kind of two big mile markers I'd be looking at. As you kind of come through.

I mean, the payment rate will manifest itself all its way in the turn of the portfolio. And the receivables. But that's really you won't really see that until the end of period. Again, each of the monthly delinquency reporting, Craig, you'll get a snapshot of what average loans do. And then most certainly what end of period is.

Brian Foran: If I could sneak in one last one, just on the tax refund thing. So is the conclusion that your best guess of the impacts is included in the guide? Or to the extent there are benefits to your business from elevated tax refunds that would be incremental to the guide?

Brian Wenzel: Brian, I'm going let you deal with Catherine for going up beyond one extra question, but it is included in the guide.

Brian Foran: Okay. Thank you so much.

Brian Wenzel: Have a good day, Brian.

Operator: Thank you. And we have time for one more question. That question comes from Don Fandetti with Wells Fargo. Please go ahead. Your line is open.

Don Fandetti: Hi. Can you maybe just dig in a little bit on the Walmart partnership? I mean, obviously, that's going very well. Like, is this going to be just a steady ramp up in loan growth? Any milestones or can you just maybe talk about how the rollout is going?

Brian Doubles: Yes. Look, Don, it's going incredibly well. The program is fully launched in market, really strong early results. I mentioned fastest growth that we've ever seen in the de novo program. There's a couple of things that I would highlight as you think about it. First, it is a leading-edge program from a tech perspective. So we're fully leveraging the One Pay app. Which is a great app. We're leveraging our API stack. So we're completely embedded with a digital experience. The entire experience is inside the application all the way through when you apply for credit, all the way through servicing. The second thing I'd highlight is it's got a very strong valprop on the car.

So Walmart plus members get unlimited 5% cash back at Walmart, 1.5% cash back everywhere else. That's a big improvement and a big lift compared to how we're running the program when we last had it. And we're seeing it convert a lot of Walmart Plus members, which is really great. We've got really good digital in-store placements. You'll see that if you're on walmart.com. You'll see it if you're in the stores. And overall, I'd say we just have really good alignment. Alignment for the deal structure, we're both incented to grow the program.

So we couldn't be off to a better start, and we're really encouraged about what this is going to do for growth, not just in 2026, but in the future.

Don Fandetti: Okay. Thanks. I'm all set.

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

Operator: Thank you. And this concludes our Q&A session. As well as Synchrony's earnings conference call. You may disconnect your line at this time. Have a wonderful day.

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