Synchrony Financial, a leading financial-services company based in Stamford, Conn., has reported lower earnings for the fourth quarter. The decline comes as the company experienced a rise in charge-offs, prompting it to make higher provisions for credit losses.
Decrease in Profit
The profit attributable to common shareholders for the fourth quarter amounted to $429 million, or $1.03 per share. This is a decrease from $567 million, or $1.26 per share, in the same period the previous year. Despite the decline, the company’s earnings still exceeded analysts’ expectations of 93 cents per share.
Increase in Net Interest Income and Active Accounts
Synchrony Financial saw a growth in net interest income, which rose by almost 9% to reach $4.47 billion. Additionally, the company’s average active accounts increased by 5% to reach a total of 71.5 million.
Surge in Provision for Credit Losses
One of the primary reasons for the lower earnings was the company’s provision for credit losses, which saw a notable increase of $603 million, reaching $1.8 billion. This escalation was driven by higher net charge-offs.
Rise in Net Charge-Offs
Net charge-offs as a percentage of total average loan receivables surged from 3.48% in the prior year to 5.58% in the current year. However, Synchrony Financial stated that this increase still falls within the company’s expectations and aligns with its underwriting target of 5.5% to 6.0%.
