Synchrony Sounds Notes of Cautious Optimism As the Pandemic Takes Its Toll

The nation’s largest issuer of store cards sounded a note of optimism Tuesday as the Covid-19 crisis continued to ravage consumer spending. “Believe it or not, there are deals in the pipeline [with merchants],” said Margaret Keane, chief executive of Synchrony Financial. “We’re not sitting back. We’re highly engaged.” Keane spoke during the company’s presentation of first-quarter results.

The Covid-19 pandemic, which has gripped the country since at least February, is pounding Stamford, Conn.-based Synchrony, which issues branded cards on behalf of more than 100 major merchants. The outbreak comes at a time when Synchrony is adjusting to the loss of the Walmart credit card portfolio, which the retailing giant switched to Capital One in October.

Another card, cobranded with PayPal Holdings Inc.’s Venmo peer-to-peer payment service as well as with Visa, is on schedule to launch during the second half on the year, Keane said. And a cobranded credit card with telecommunications giant Verizon is also on track to launch before July. “Those teams are full-speed ahead,” Keane said, referring to both launches. “We maybe accelerated things there.”

While total first-quarter purchase volume for Synchrony, at $32 billion, was down only slightly from the year-ago quarter, executives noted significant slippage starting the second half of March.

“The back half of March was down 26%, then it accelerated, and was down 30% to 35% the first part of April,” noted Brian Doubles, Synchrony’s president, who also spoke during the earnings call. The company is offering cardholders who have lost jobs or income because of the outbreak waivers of late fees and interest charges, Doubles said. He added “a small percentage” of consumers have taken advantage of the offer so far. 

Still, Synchrony is assuming the unemployment rate, caused as businesses close or let people go in response to stay-at-home orders, ultimately will level off at 10%, Doubles said. “What’s really unclear is when the [stay-at-home] mandates lift and what the retail landscape will look like,” he noted, adding that the federal government’s CARES Act, passed at the end of March to help consumers and businesses, will play in important role. The $2.2 trillion package provided more than $600 billion in relief for consumers. “How the stimulus bridges people through this period is going to be critical,” said Doubles.

But while coping with the pandemic, the company hasn’t taken its eye off of possible acquisitions. “There are things out there that are of interest to us,” Keane told the analysts, without adding specifics. “We’ll have to see wait to see how valuations play out.”

For the quarter, purchase volume in the company’s Retail Card division, one of three Synchrony operates, came to just over $24 billion, down $652 million, or 2.6%, from the year-ago period. The Payment Solutions unit recorded a 2.4% increase in volume, to $5.38 billion, while the Care Credit division, at $2.66 billion, was up 2.1%. Care Credit serves the payments needs of veterinarians, dentists, and other medical professionals.

Overall, interest income came to $4.4 billion, down 8%. interchange revenue totaled $161 million, down 2.4%.