In March 2024, Synchrony acquired Ally Lending for cash consideration of $2.0 billion. The assets and liabilities of Ally Lending primarily included loan receivables with an unpaid principal balance of $2.2 billion.

In March 2024, Synchrony sold its wholly-owned subsidiary, Pets Best, for consideration comprising a combination of cash and an equity interest in Independence Pet Holdings, Inc. The sale resulted in the recognition of a gain on sale of $1.1 billion, or $802 million net of tax.

During the six months ended June 30, 2024, Synchrony continued to expand and diversify its portfolio with the addition or renewal of more than 40 partners, which included the partnerships mentioned in the headline.

Retailer share arrangements decreased 8.7% to $810 million and 12.7% to $1.6 billion for the three and six months ended June 30, 2024, respectively, primarily due to higher net charge-offs, partially offset by higher net interest income.

Other expense increased by $8 million, or 0.7% and by $95 million, or 4.2%, for the three and six months ended June 30, 2024, respectively. The increase in the three months ended June 30, 2024 was primarily driven by technology investments, preparatory expenses related to the late fee rule change and servicing costs related to the newly acquired business.

During the six months ended June 30, 2024, Synchrony declared and paid cash dividends totaling $30 million on its Series A 5.625% fixed rate non-cumulative perpetual preferred stock and its Series B 8.250% fixed rate reset non-cumulative perpetual preferred stock.

The final rule, when effective, will result in a significant reduction in interest and fees on loan receivables. While the company continues to believe that the strategies it has identified and started to implement will fully offset the decline in late fee income over time, it will take time for such product, policy and pricing changes to offset the reduction in the late fees. Therefore the company expects the final rule, if effective in 2024, will have an adverse effect on its results of operations in 2024.

Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 63 basis points to 4.47% at June 30, 2024 compared to June 30, 2023. The net charge-off rate increased 167 basis points to 6.42% and increased 175 basis points to 6.37% for the three and six months ended June 30, 2024, respectively.

During the three months ended June 30, 2024, Synchrony experienced a decrease in purchase volume of 0.9% primarily driven by lower consumer spending and the impacts from credit actions it has taken across its portfolio where it has seen indications of higher probability of default.

During the six months ended June 30, 2024, Synchrony continued to expand and diversify its portfolio with the addition or renewal of more than 40 partners, which included the partnerships mentioned in the Growth & Strategy section.

Synchrony continued to experience a decrease in payment rates and total delinquent balances as a percentage of total loan receivables from the prior quarter. It also experienced an increase in net charge-offs during the six months ended June 30, 2024 and expect net charge-offs as a percentage of loan receivables to reduce in the second half of 2024.

Within these constraints, Synchrony is focused on deploying capital in a manner that will provide attractive returns to its stockholders. Beginning in 2024, Synchrony is now subject to the Federal Reserve Board's formal capital plan submission requirements and has submitted its capital plan to the Federal Reserve Board.

Efficiency ratio increased from 31.7% to 35.5% for the three months ended June 30, 2024. Efficiency ratio increased from 28.0% to 35.2% for the six months ended June 30, 2024.

At June 30, 2024, deposits represented 84% of total funding sources. Total deposits increased by 2.4% to $83.1 billion at June 30, 2024, compared to December 31, 2023.

Retailer share arrangements decreased by $77 million, or 8.7%, and $230 million, or 12.7%, for the three and six months ended June 30, 2024, respectively, primarily due to higher net charge-offs, partially offset by higher net interest income.

The increase in other expense was primarily driven by technology investments, preparatory expenses related to the late fee rule change and servicing costs related to the newly acquired business, partially offset by lower operational losses and cost discipline resulting in lower employee and marketing costs.

Synchrony added two new strategic technology partnerships with Adit Practice Management Software and ServiceTitan, both of which expand access for customers to its suite of credit products.

During the six months ended June 30, 2024, Synchrony continued to expand and diversify its portfolio with the addition or renewal of more than 40 partners, which included the partnerships mentioned in the Growth & Strategy section.

During the six months ended June 30, 2024, Synchrony repurchased $600 million of its outstanding common stock, and declared and paid cash dividends of $0.50 per share, or $202 million in the aggregate.

In April 2024, the Board of Directors approved an incremental share repurchase program of up to $1.0 billion, through June 30, 2025, and maintained the quarterly dividend at its current amount of $0.25 per common share.

Capital amounts and ratios in the above table all reflect the applicable CECL regulatory capital transition adjustment for each period. The increase in our common equity Tier 1 capital ratio compared to December 31, 2023 was primarily due to the retention of net earnings during the six months ended June 30, 2024 and the net impact of the Pets Best disposition and Ally Lending acquisition, partially offset by the third year phase-in of the impact of CECL on our regulatory capital.

The provided 10-Q filing does not contain any specific information regarding ESG initiatives. Therefore, it is not possible to generate any headlines related to this theme.

We expect these same factors to now result in flat or a low single digit decrease in purchase volume for the second half of 2024.

All of the factors discussed above and in our 2023 Form 10-K, such as customer payment behavior and the CFPB final rule on credit card late fees, will continue to have an effect on our loan receivables and interest income.

We continued to experience a decrease in payment rates and total delinquent balances as a percentage of total loan receivables from the prior quarter. We also experienced an increase in net charge-offs during the six months ended June 30, 2024 and expect net charge-offs as a percentage of loan receivables to reduce in the second half of 2024.