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Is Synchrony Bank Safe?

Is Synchrony Bank Safe?

Let’s take a look at this American banking giant! Is everything ok over at the firm? Is Synchrony Bank Safe?

Things sound rosy from the recent earnings release!

“Synchrony’s strong fourth quarter performance reflected the strength of our differentiated business model: our diversified portfolio across industries, our scalable technology platform, our deep industry expertise and sophisticated underwriting, and the flexibility and choice of our digitally-powered product suite,”
said Brian Doubles, Synchrony’s President and Chief Executive Officer. Earnings Releases | Synchrony Financial

Now, let’s take a look at the broader US Banking industry as well and their health!

And yes we all know about the FDIC: Federal Deposit Insurance Corporation‘s guarantee of $250,000 per US bank account and President Biden’s guarantee of all accounts. However, knowing your bank is safe still allows us all to sleep at night much better. That’s for sure!

Below we have a chart showing unrealized depreciation on Hold to Maturity Securities (HTM) for top 100 banks versus equity. 

These unrealized losses are NOT reflected in profits or a deduct to equity via Other Comprehensive Income (OCI) – only in the footnotes! Moreover, we don’t find these losses reflected in stress tests or measures of capital adequacy. 

Furthermore a 25 bp (1/4 of 1 percent) increase in rates for a 10-year security causes approximately 2 points in losses (100 par to 98 to reflect yield discount). 

So something we don’t like from the earnings release here:

“Return on assets decreased 120 basis points to 2.2%” Earnings Releases | Synchrony Financial

In addition, “Provision for credit losses increased $640 million to $1.2 billion, driven by a
higher reserve build and higher net charge-offs.”

YUCK!

However, this is a good piece of data:

“The allowance for credit losses as a percentage of total period-end loan receivables was 10.30% compared to 10.58% in the third quarter 2022.”

Synchrony Financial logo.svg
This is the logotype for Synchrony Financial.
Synchrony Financial – Synchrony Brochure

Unfortunately, provision for credit loss jumped almost every quarter recently:

Many find themselves worried about their bank accounts these days. Banks are dropping like flies it seems, now, Silicon Valley, Signature Bank, who is next?

Lately all we can read about these days are banks failing everywhere! Are we in a financial crisis? Now some worry Will Bank of America Collapse? And many others worry whether or not there is a Hawaii Bank Run? And of course, many others worry about the more local establishments. Will First Republic Bank Fail ?

Synchrony Bank is a leading provider of consumer financial services in the United States.

Firstly, Synchrony Bank was founded in 1932 as General Electric Capital Corporation (GE Capital), a subsidiary of General Electric. The company initially focused on providing financing for industrial equipment and later expanded its operations to include a range of financial services, including retail banking and credit cards.

Throughout the 20th century, GE Capital continued to grow and expand its operations. The company became one of the largest providers of consumer credit in the United States, offering credit cards and financing for a range of consumer goods, including home appliances, electronics, and automobiles.

In 2014, GE Capital announced that it would spin off its retail finance unit and launch it as a separate company called Synchrony Financial.

For more on Ge Capital see our piece: Downfall of GE Capital : How did GE go from Dow Jones King to Exiled?

The new company would focus exclusively on consumer financial services, including retail banking, credit cards, and financing for consumer goods.

Since launch, Synchrony Bank became one of the most innovative and customer-focused financial services companies in the United States. Furthermore, the company embraced digital banking technology and has launched several initiatives aimed at improving customer experience and providing innovative banking solutions.

Furthermore, Synchrony Bank also played a significant role in promoting financial literacy and education. Additionally, he company launched several initiatives aimed at helping consumers better understand their finances. Moreover, including financial education programs. In addition, tools to help consumers manage their money more effectively.

Lastly, today, Synchrony Bank is one of the largest providers of consumer financial services in the United States.

Is Synchrony Bank Safe?