Analysis of Synchrony Financial During the Recession

Analysis of Synchrony Financial During the Recession

Margaret Keane has been in the credit card business for forty years. She now sees something she never forecasted. There is mass unemployment, but nevertheless, Americans pay their bills on time. That would be a good sign of financial responsibility at regular times. Nonetheless, this may just be the calm before the storm in the pandemic era. Keane works at Synchrony Financial, as the CEO.

Moreover, Synchrony Financial is the nation’s biggest store credit card company. She told CNN Business that Americans will have trouble to stay in the current on their credit card bills. This will happen when a $600 boost to unemployment benefits and generous forbearance programs will fade away.

Keane said that people got forbearance on auto loans, credit cards, and mortgages. So, everything got pushed out. As stimulus and restraint wear off, they will be in a rockier place. In other words, the financial pain got delayed, not canceled. Brian Wenzel also works in Synchrony Financial. He is the chief financial officer there. He told CNN Business that it would almost certainly get darker from thereon.

This week will be the last for the $600 weekly enhanced unemployment benefit, which was part of the $2 trillion stimulus package, unless Congress acts. Synchrony (SYF) provides cards for businesses, including TJ Maxx, Amazon (AMZN), and Lowe’s (LOW). So, SYF offered customers three months of forbearance and waived interest charges and late fees. Nevertheless, that relief will not last forever.


Synchrony is formerly part of GE (General Electric). It is currently “cautious” ahead of what could be a challenging next few quarters. That is what Keane said. This year, Synchrony’s share price is down by 37%. Nevertheless, the company is reining in consumers’ ability to rack up credit card debt by lowering credit card limits.

Moreover, the credit company revealed that, on Tuesday, it raised its provision for bad loans by 40% or $475 million during the second quarter. In Synchrony’s bottom line, the surging credit costs drove a staggering 94% drop. Yet, Synchrony’s credit metrics hardly look like the United States is mired in a deep recession.

Just 3.1% of the loans from the company are 30-plus days past due. That is down from 4.4% a year ago. The rate was down nearly one percentage point, excluding the impact of Synchrony losing the WMT (Walmart) portfolio last year.

Synchrony is not suffering a spike in losses on credit card defaults, likewise. At least not yet. The percentage of total average loans, for net charge-offs, stood at 5.4%, down from 6% a year ago. Nevertheless, those numbers are a bit of a mirage.

The Forbearance program from Synchrony is masking its financial pain. Customers enrolled in the relief program do not have a minimum to pay. Thus, this means they are viewed as ‘current’ whether they choose to make a payment or not. Nearly one-third of those customers have not paid off their credit card debt at all.

Since it launched earlier this year, Synchrony has enrolled 1.7 million customers, with $3.2 billion of balances in the forbearance program.

Let us see what happens.