Consumer financial services company Synchrony Financial (SYF) in Stamford, Conn., provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations, and healthcare service providers. The COVID-19 pandemic hit the credit card issuer hard, forcing it to increase its reserve allowance, making large provisions for credit losses. Consequently, the company’s bottom line suffered. However, shares of SYF rebounded in 2021, with the company enhancing its capabilities with new partnerships and diversification strategies. SYF shares have gained 18.5% in price over the past year but have slumped 8% year-to-date. The stock declined marginally intraday to close yesterday’s trading session at $42.70.
Despite posting solid fourth-quarter earnings that matched expectations, the stock did not generate momentum. Its net interest income rose above forecasts, boosted by record purchase volume and loan growth across all sales platforms. For its 2022 outlook, the company expects continued strength in purchase volume across all sales platforms and anticipates moderation as consumer savings and payment rates decline. It also expects its net interest margin to be consistent with the second half of 2021, and proceeds from portfolio conveyance to create some excess liquidity in the second and third quarters. This could have a negative impact on its net interest margin (NIM).
