Q1 2026 Earnings Call Transcript

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Your program is about to begin. Good morning, and welcome to the Synchrony Financial First Quarter 2026 Earnings Conference Call. Please refer to the company's Investor Relations site for access to the earnings materials. Please be advised that today's conference call is being recorded.

Currently, all callers have been placed in a listen-only mode. The call will open for your questions following the conclusion of management's prepared remarks. I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. You may begin.

Thank you and good morning, everyone. Welcome to our quarterly earnings conference call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules and presentation are available on our website, synchronyfinancial.com.

This information can be accessed by going to the Investor Relations section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website.

During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website.

On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Kathryn, and good morning, everyone. Synchrony started the year with strong momentum and delivered first quarter financial results that included record first quarter purchase volume of $43 billion, reflecting the enduring appeal of Synchrony's multiproduct suite. Customers engaged across our diversified portfolio, contributing to continued sequential improvement in average active account trends, higher spend per account across all five platforms, and 6% growth in total portfolio purchase volume compared to last year. At the platform level, Diversified & Value purchase volume grew 9%, primarily reflecting the impact of partner expansion.

Digital platform purchase volume increased 8%, driven by strong customer response to enhanced product offerings and refreshed value propositions. Purchase volume in Lifestyle increased 7%, primarily driven by other apparel and goods and luxury, partially offset by lower average active accounts. Health and Wellness purchase volume was 3% higher, primarily reflecting growth in Pet and Audiology. And purchase volume in Home and Auto was flat, generally reflecting partner expansion in Furniture and Electronics, offset by selective spend in home improvement and lower average active accounts.

Synchrony's co-branded credit cards, including our dual cards, accounted for 51% of our total purchase volume in the first quarter and increased 20% versus last year, driven by product upgrades, higher broad-based spend, and enhanced utility across these card programs. The mix of discretionary spend within our out-of-partner portfolio increased during the first quarter, marking the third consecutive quarter of year-on-year improvement. Additionally, the rate of discretionary spend growth continued to accelerate, outpacing nondiscretionary spend growth also for the third consecutive quarter, and even during the month of March when fuel prices began to rise.

This discretionary spend strength came particularly from categories like retail, entertainment, and electronics. And while spending on fuel was up significantly during March in our nondiscretionary spend, total portfolio spend-per-account growth remained strong as consumers navigated the higher costs. Meanwhile, payment rate increased approximately 50 basis points compared to last year. Collectively, we believe these spend and payment trends are a testament to the efficacy of our prior credit actions and consistent credit discipline, as well as resilient consumer health supported by some early benefit from increased tax refunds and lower tax withholdings.

Synchrony continued to execute across our key strategic priorities during the first quarter, adding or renewing more than 15 partners, including Indian Motorcycle, Harbor Freight, and Miracle-Ear. We renewed our partnership with Indian Motorcycle, America's first motorcycle company founded in 1901, to offer flexible financing solutions through their nationwide dealer network. We also extended our relationship with Harbor Freight, America's number one tool store with nearly 50 years in business and more than 1,600 locations nationwide, to provide private label credit card financing with the option of 5% back or zero-interest equal payment installment loans.

And our program with Miracle-Ear enables patients to pay for hearing devices and related services over time, leveraging practice management software that optimizes the financing experience for both consumers and staff. Synchrony also continued to broaden distribution of CareCredit financing during the first quarter through our expanded strategic partnerships with Planet DDS. As the preferred patient financing solution across all Planet DDS practice management platforms, CareCredit will be integrated across more than 2,500 Cloud9 orthodontic practices and more than 15,000 Denticon dental practices to improve patient access to treatment, also supporting practice growth, operational efficiency, and better patient outcomes.

We are also delivering streamlined CareCredit experiences for pet families through our new partnerships with both FIGO and Embrace Pet Insurance. Today, consumers can use CareCredit at approximately 85% of U.S. vet locations, and now approved pet insurance claims can be reimbursed directly as a credit to the consumer's CareCredit account after they pay for their pet care using their CareCredit card. These partnerships extend CareCredit's pet insurance reimbursement ecosystem to more than 1.7 million insured pets and underscore the larger opportunity we have through our strategic partnership with Independence Pet Holdings.

Together, we are making it easier for consumers to pay for and manage the cost of pet care. Lastly, we continued to enhance the utility of CareCredit by broadening its acceptance for eligible health and wellness purchases on walmart.com, complementing CareCredit's longstanding acceptance in-store across Walmart and Sam's Club locations nationwide. In addition to currently eligible health and wellness purchases, CareCredit cardholders can now use their card to make purchases across a wider selection of in-store and online product categories, including medical supplies and equipment, fitness products, and sleep essentials.

This expanded collaboration with Walmart will enable us to empower more consumers with financial flexibility to purchase health and wellness products and services whenever and however the need arises. As we look to the remainder of the year ahead, Synchrony is positioned to drive our momentum further as we grow our existing partner programs and win new ones, diversify our programs, products, and markets to reach and serve more consumers and more businesses across the country, and power best-in-class experiences for all those we serve. I am proud to say that we are doing all of this while also earning the privilege of being ranked the number one Best Company to Work For in the U.S. by Fortune Magazine and Great Place to Work in 2026. Together, all of our incredible people at Synchrony have built a high-trust culture that makes us faster, bolder, and better for the customers and partners who count on us every single day.

With that, I will turn the call over to Brian to discuss our financial performance in greater detail.

Thanks, Brian, and good morning, everyone. Synchrony's first quarter financial performance delivered record first quarter purchase volume, a positive inflection in loan receivables growth, strong credit performance, and higher return on average assets and tangible common equity compared to last year. These results reflected Synchrony's disciplined execution as we focus on delivering consistent risk-adjusted returns amid evolving market conditions. Turning to our performance in more detail, Synchrony generated $43 billion of purchase volume, a first quarter record and a 6% increase compared to last year.

Ending loan receivables were flat at $100 billion, though we did achieve a positive inflection in ending loan receivables with an increase of approximately $477 million at the end of the first quarter. This reflected the impact of higher purchase volume, generally offset by the effects of elevated payment rates. The payment rate of 16.3% was approximately 50 basis points higher than last year and approximately 110 basis points above the pre-pandemic first quarter average, primarily reflecting shifts in portfolio and product mix as well as the impacts of new portfolio seasoning, our previous credit actions, and higher average tax refunds.

Net interest income increased 4% to $4.6 billion, primarily driven by the combination of higher interest and fees and lower interest expense. Interest and fees increased 2%, primarily driven by the impact of our PPPCs, partially offset by lower benchmark rates. Interest expense decreased 11%, primarily due to lower benchmark rates. Our first quarter net interest margin increased 76 basis points versus last year to 15.5%, reflecting three key drivers: (1) a 47 basis point increase in our loan receivables yield, partially driven by the impact of our PPPCs, contributed approximately 39 basis points to our net interest margin; (2) a 44 basis point decline in our total interest-bearing liabilities cost, which reflected the impact of lower benchmark rates, contributed approximately 35 basis points to our net interest margin; and (3) a 76 basis point increase in the mix of loan receivables as a percent of interest-earning assets versus last year, which contributed approximately 14 basis points to our net interest margin.

These improvements were partially offset by a 69 basis point reduction in our liquidity portfolio yield, which reduced our net interest margin by 12 basis points. Turning to the remainder of our P&L, RSAs of $1.1 billion, or 4.31% of average loan receivables in the first quarter, increased $175 million versus the prior year, primarily reflecting program performance, which included lower net charge-offs and the impact of our PPPCs. Provision for credit losses decreased $156 million to $1.3 billion, primarily driven by a $242 million decrease in net charge-offs, partially offset by a $97 million reserve release in the prior year.

Other expense increased 6% to $1.3 billion, primarily driven by costs related to technology investments and higher operational losses. The first quarter efficiency ratio was 35.6%, approximately 220 basis points higher than last year, resulting from higher overall expenses and the impact of higher RSA as program performance improved. To summarize Synchrony's first quarter results, we generated net earnings of $805 million, or $2.27 per diluted share, a return on average assets of 2.7%, a return on tangible common equity of 24.5%, and an 8% increase in tangible book value per share. Shifting focus to our key credit trends, our portfolio's mix of below-min payers remained well below pre-pandemic levels across all credit cohorts during the first quarter, with the non-prime population outperforming relative to other credit cohorts since 2023. We believe this continued trend in non-prime is reflective of our previous credit actions.

We also continue to see normalization in the prime and super-prime cohorts, with some gradual shifting in the mix from above-minimum to minimum payments. At quarter end, both our 30+ and 90+ delinquency rates were generally in line with the prior year, and our net charge-off rate was 5.42% in the first quarter, a decrease of 96 basis points from 6.38% in the prior year. Collectively, these payment and credit trends underscore the efficacy of our previous credit actions and ongoing credit management strategies, as well as the resilience of our customers and portfolio amid an uncertain environment.

Finally, our allowance for credit losses as a percent of loan receivables was 10.42%, which increased approximately 36 basis points from 10.06% in the fourth quarter, in line with our seasonal trends, and decreased 45 basis points from 10.87% in the first quarter of 2025. Turning to funding, capital, and liquidity, Synchrony grew our direct deposits by $3.1 billion and reduced brokered deposits by $3.7 billion compared to last year. During the first quarter, we issued $750 million of senior unsecured debt at our tightest five-year credit spread to date and a final coupon of 4.95%, and a $500 million three-year secured public bond from the Synchrony Card Issuance Trust with a final coupon of 4.22%.

As of March 31, deposits represented 83% of our total funding, with secured debt representing 9% and unsecured debt representing 8%. Total liquid assets decreased 4% to $22.8 billion and represented 18.8% of total assets, 72 basis points lower than last year. Now focusing on our capital ratios, Synchrony ended the quarter with a CET1 ratio of 12.7%, a Tier 1 capital ratio of 13.9%, and a total capital ratio of 16%, each of which declined by approximately 50 basis points versus the prior year. Our Tier 1 capital plus reserve ratio decreased to 24.1% compared to 25.1% last year.

Synchrony returned $1 billion to shareholders during the first quarter, including $900 million in share repurchases and $104 million in common stock dividends. In addition, our Board of Directors approved a new share repurchase program of up to $6.5 billion of the company's common stock, which commenced in the second quarter of 2026 and, unchanged from our prior share repurchase programs, does not have an expiration date. The new share repurchase program replaces the company's prior program, which was scheduled to expire on 06/30/2026 and had approximately $300 million remaining. The pace and amount of share repurchases are flexible and will be executed from time to time, subject to various factors, including capital levels, financial performance, market conditions, and legal and regulatory requirements, in accordance with our capital plans.

Finally, our outlook: we continue to expect accelerated growth in purchase volume and average active accounts, without any further broad-based credit refinements as we move through the year. Those outcomes should more than offset the impact of elevated payment rates to drive mid-single-digit growth in ending loan receivables by year-end. The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year. This will be driven by growth in our core portfolio as well as a combination of both recently launched and similar OnePay, Bob's Discount Furniture, RH, and approximately $725 million of Lowe's commercial co-brand loan receivables, which was added in early April.

Net interest income is expected to grow in 2026 as a result of higher loan receivables, the impact of PPPCs continuing to build, and a reduction in our funding liabilities cost; these trends will partially offset the lower late fee incidence. We expect delinquency and losses to follow normal seasonality through the year, with net charge-offs peaking in the second quarter. We expect our net charge-offs to be less than 5.5% for the full year, and we remain focused on our disciplined approach to underwriting our business. As program performance strengthens due to higher net interest income and lower losses compared to last year, we continue to expect RSAs to increase but remain within our long-term range of 4% to 4.5% of average receivables.

Lastly, we remain focused on operating expense discipline while also investing in the long-term potential of our business. As a result, we continue to expect other expense growth to trend in line with loan receivables. Putting all these elements together, Synchrony remains on track to deliver between $9.10 and $9.50 in diluted earnings per share, while also executing across key strategic priorities to deliver consistent risk-adjusted growth and strong capital generation. We are well positioned to return excess capital in an aggressive but prudent way.

With that, I will turn the call back over to Brian.

Thanks, Brian. Before I turn the call over to Q&A, I would like to leave you with three key takeaways from today's discussion. First, the consumer remains resilient and the foundation of our portfolio is strong. Our consistent underwriting discipline, credit management strategies, and portfolio performance have positioned us well for both the near and long term.

Second, Synchrony's investments are driving impact across our business and for the millions of consumers and hundreds of thousands of small and midsized businesses we serve across the country. Third, because of the results we deliver, Synchrony is generating growth at strong risk-adjusted returns and robust capital, positioning us well to drive considerable long-term value for our stakeholders. With that, I will turn the call back to Kathryn to open the Q&A.

That concludes our prepared remarks. We will now begin the Q&A session. So that we can accommodate as many of you as possible, I would like to ask the participants to please limit yourself to one primary and one follow-up question. If you have additional questions, the Investor Relations team will be available after the call. Operator, please start the Q&A session.

Thank you. We will take our first question from Terry Ma with Barclays. Please go ahead.

Hi, thank you. Good morning. I just wanted to start off with the loan growth guide of mid-single digits. Can you give a little bit more color on what you are seeing in account acquisitions and borrower behavior to give you confidence in that second-half acceleration?

And as a follow-up, on the payment rate of 16.3% this quarter and it being over 100 basis points above your pre-pandemic average, has your product mix shift driven a permanent resetting of that payment rate higher? If that is the case, what does that mean for your long-term loss expectations and loan growth?

Yes. Thanks for the question, Terry. As we look at the first quarter and how we exited, you saw a clear acceleration of our purchase volume to a record high for the first quarter, up 6% year over year. Payment rates were up from a credit perspective by 50 basis points.

Some of that in the first quarter was a result of higher income tax refunds, which impacted the quarter by 14 basis points. We feel good about the purchase line coming through, and we feel good about some of the discretionary purchases that we see as we go through. As you step out into the quarters, we will start to see acquisition—whether it is Walmart, OnePay, Lowe's commercial—begin to build into the portfolio as we move into the back half of the year. We saw strong new account originations of 15% in the first quarter.

For the first couple of weeks in April, trends have been consistent with how we exited, maybe slightly stronger, from a purchase volume standpoint. So we feel good that the consumer is engaging with our products and wanting our products as we move forward. On payment rate, I do not think it is permanently resetting. Two fundamental elements have happened over the last couple of years, driven by our credit actions.

First, we have higher credit quality in the portfolio, particularly in the higher super-prime versus what we normally have. Non-prime has gone down, which has a higher revolve rate. Second, you see a mix in the portfolio as people pulled back in discretionary purchases the last couple of years, particularly in the Home and Auto space and Lifestyle. Larger promotional purchases generally have payment rates around 8%–9%.

When the percent of promotional financings is down, that artificially brings the payment rate up. Additionally, the acceleration of new accounts in the last year tend to pay off at a slightly higher level. So it is more a phenomenon of a shift inside the portfolio as it relates to credit actions and the return to growth.

Thank you. We will take our next question from Ryan Nash with Goldman Sachs.

Good morning, everyone. Brian, maybe to start on the EPS guide of $9.10 to $9.50. Can you help us with how some of the moving pieces have shifted? It is clear credit is better with the guide below 5.50% for net charge-offs, but what else has shifted, given we have seen rates moving? Where do you think we are tracking within the range after a quarter?

And then on the buyback, how should we think about pacing of the $6.5 billion, which is open-ended? Will it be done differently than under the prior process? And what are your expectations for capital relief under the Basel proposal, and how do you think about standardized versus ERBA?

Yes, thanks, Ryan. Starting with net charge-offs, as we guided at the start of the year, our loss rate would be in line with our long-term target range, and now it is slightly below, so there is a little bit of favorability. You do have some payment rate pressure that we saw in the first quarter. Thinking about the range and moving toward the higher end, there are a couple of things that can play into that equation: (1) a slowing in the payment rate, which would increase revolve, particularly on existing accounts, driving more revenue; and (2) delinquency formation and performance—if that continues to improve or stay steady—could lead to potential reserve release and net charge-off benefits.

Both of those have an RSA offset. We are not guiding inside the range, but there are cases where you can get to the higher end even if payment rates stay higher and charge-offs stay where they are from our first-quarter exit; in that case, you are toward the middle or lower end of the range. The key question is the macro environment. The consumer has been incredibly resilient, both from a purchasing behavior and a payment behavior pattern, but we will have to watch uncertainty as it relates to geopolitical risks.

On the $6.5 billion authorization, being open-ended, we do not give quarterly cadence. If you look back at recent history and that cadence, that is probably what we will end up doing, dependent upon business performance, macroeconomic environment, legal and regulatory considerations, and our capital plans. The plan was designed to align us, now that we have a 250 basis point stress capital buffer, with our Category IV peers. Regarding the Basel III proposal, under the standardized approach it is favorable to Synchrony.

We appreciate the Fed’s thoughtfulness in re-proposing the rules and their willingness to listen. Under standardized, we get a benefit on retail exposures around risk weighting of assets, and only a small negative from AOCI inclusion. If adopted exactly as proposed, our RWAs would go down and our capital would get relief of 125 to 150 basis points. Under the enhanced risk-based approach, it is more mixed: you get more risk weighting benefit with trading assets, but you introduce a capital charge for open-to-buy in the portfolio (treating all open-to-buys the same), introduce operational risk, and have an impact on the DTA.

Combined, that is a net negative if adopted exactly as is. We continue to study the rule and will provide comments, including ways to eliminate double counts in operational risk and to be more thoughtful on open-to-buy conversion to RWA.

Thank you. We will go next to Sanjay Sakhrani with KBW.

Maybe, Brian Wenzel, if we could follow up on the earnings guide. With credit doing better and loan growth remaining the same, and EPS remaining stable, has your expectation on yield changed lower? It would seem like you are moving toward the higher end of the range with credit coming in better. And then more broadly on consumer health: can you list how geopolitical events and fuel prices are impacting the consumer?

You mentioned early benefits of tax refunds—are there more to come in the second quarter?

Yes, thanks for the question, Sanjay. If you go back to what I said in January, our guidance was around being in line with 5.5% to 6% for net charge-offs. We were trying to give a position of stability, and now we see less than 5.5%. I do not think there is a material difference in how we thought about credit in January versus today, so you may be overweighting that change relative to our guide.

On consumer health, the consumer is still in pretty good shape and has been very consistent over the past few quarters. We are seeing strength in spending patterns, and credit continues to outperform our expectations. The macro environment is constructive—strong labor market and, yes, higher tax refunds. There are watch items like inflation and higher gas prices that create uncertainty, but we do not see it impacting spend.

Spend for us accelerated nicely this quarter. Across platforms, Diversified & Value was up 9%, Digital up 8%, and Lifestyle up 7%. That speaks to our product suite and a healthy, resilient consumer. There is noise we are watching closely, but whether you are looking at spend patterns or credit performance—early stage and late stage—everything points to a resilient consumer.

Adding color on taxes and gas: tax refunds are slightly lower than our expectations. Our low end of range was around $500; they are coming in around $350. While it has not had a material effect on our book, higher refunds added about 14 basis points to payment rate in the quarter. In the next couple of weeks, you tend to see higher refunds for people who file closer to the April 15 deadline, so the amount could creep up a little. We did not see any real change in purchasing behavior week-on-week.

On the depository side, we saw lower inflows and outflows, mirroring the trend of the last three years. For gas, average transaction value in March is up 17% sequentially from February and 10% year over year, but frequency is up slightly year over year, and we have not seen pullback related to gas. Consumers are probably annoyed, but have not changed behavioral patterns today.

Thank you. We will go next to Darrin Peller with Wolfe Research.

Could we start on expenses? Expenses grew 8% on an adjusted basis in the first quarter, and your guidance implies expense growth decelerates throughout the year even as receivables growth improves. How much of that is due to upfront investment in new program adds rolling off? Any other color on expenses would be great.

And as a follow-up, on AI and AgenTek: what incremental investments are you making, any early evidence of efficiencies, and on AgenTek, investments to ensure placement and choice at the point of sale stays high?

Thanks, Darrin. There are two items to point to in the quarter. First, slightly higher information technology expense. Two components there: association fees we pay to Mastercard and Visa—on a volume basis, with volume up, particularly in co-brand, we see slightly higher expense and that should continue for the year; and information technology investments we are making, including cloud, which will also continue.

Second, in "other," operational losses were higher; that is more idiosyncratic in the first quarter and should reduce as we move forward. The run-rate of expense dollars is probably about the same, and as assets come through we get leverage in the back half of the year.

On AgenTek Commerce, this is a big focus for us and we are moving quickly with a first-mover advantage. Agentic experiences will change how consumers discover, research, and purchase. It is still early, and we are working with top companies to ensure as purchasing paths change, our financing offers are embedded. One prevalent scenario is the consumer researches in the AI platform but completes the purchase on the merchant site—we are already embedded there.

The second scenario is purchase completion inside the AI platform. There, it is imperative our financing options are present at checkout. Our partners have a huge incentive to make sure that happens, so they are pulling us in as they work with AI companies. On Gen AI for productivity and efficiency, we have been at this for well over a year.

The near-term benefit is speed to market. Our coders are using it, and roughly 90% of the professional workforce is using it across functions. We are seeing real economies of scale—faster, more efficient work, and the ability to redeploy resources to more strategic work.

Thank you. We will take our next question from Rick Shane with JPMorgan.

You mentioned strength in luxury and discretionary, and a 17% increase at the pump on a ticket basis. Can you help us understand spending and credit performance based on income level and score? Are you seeing divergence based on borrower category?

Thanks, Rick. Looking at payment rate by credit cohort, you see the strongest increase at 780+; that is up the most. Next is non-prime, which is also up. The middle—650 to 720 and 720 to 780—is performing about equally.

So the top end continues to pull up, consistent with the mix shift discussed earlier. Behaviorally, you do see some shift between minimum pay and statement pay. By cohort, where you see more minimum pay is in the prime segment, roughly 650 to 780, while the bottom end is holding firm on min pay. Generationally, the higher-end cohorts are pulling spend with slightly higher payment rates, particularly at the high end.

Thank you. We will go next to Mihir Bhatia with UBS.

Thanks. On average accounts, they have been declining for six quarters. Some of that is a deliberate byproduct of previous credit restrictions. Are you seeing any shifts in consumer engagement with programs? Relatedly, we have seen an increase in loyalty costs—is that due to readjusting programs to drive more volume, or is it co-brand programs like Walmart picking up speed?

Thanks, Mihir. On average active accounts, that generally lags loan receivables. You should see that invert as we have accelerated new accounts and they begin to engage; that likely happens in the middle part of this year. On loyalty costs, we enhanced certain value propositions last year on some cards, which drives slightly higher loyalty costs.

When you launch new programs, you typically see higher loyalty costs as the most engaged customers take up the product and tend to spend in-store, which has a higher value proposition for our partners than in the "world" category. That is a natural byproduct of portfolio seasoning as you add new accounts. With 15% new account growth, you will drive more in-store value proposition versus world as you launch. With co-branded volume up 20%, you are going to drive more loyalty costs—which is a good thing.

Transactions and frequency are up; customers are engaging more year over year.

As a follow-up on buybacks, what factors impact the level of buyback? Is CET1 the binding constraint, or are there other considerations like rating agencies?

CET1 is not the binding constraint for us. The only thing left to fully develop is Tier 1, so there is a little bit more preferred to do, but that is not a binding constraint today—we still have plenty of room relative to our targets. Multiple factors determine pacing: business performance and visibility, expected RWA growth, regulatory environment, and rating agency considerations. We set cadence along with our capital plan and the Board.

We will be aggressive but prudent. We would not drop immediately to target levels—regulators and rating agencies would not be comfortable—but we have shown measured discipline. Our earnings power generates roughly 350 basis points of CET1 year over year, so we will use an appropriate cadence to get to our targets.

Thank you. We will go next to Erika Najarian from UBS.

First, based on the RSA math under Basel III Endgame that you gave, it would take your CET1 from 12.7% closer to 14%, if I am hearing you right on the 125–150 basis points. As you think about a higher CET1 relative to the 11% minimum, is that biased toward buybacks or more aggressive portfolio acquisition? And on pacing—over the past three quarters your buyback average has been about $900 million per quarter, which would suggest you would go through this authorization in under two years. What drove that pacing, and as receivables growth improves, is that an immediate offset to buyback pacing?

Also, is there reserve release in the EPS guide, or only at the mid to high point?

On Basel III, we do not know what the final rule will look like. If the rule is implemented as proposed and we get the capital relief, we would discuss with the Board what to do with incremental capital. We have shown we will invest in acquisitions—as with Ally Lending and Allegro—or return capital to shareholders. We are studying the proposal and evaluating positives and negatives, and where adjustments may be warranted for comment.

On cadence and pacing, we look at a longer horizon and lean in where we see opportunities and earnings power. If that shifts or if we allocate more to RWAs, we adjust. We will be aggressive but prudent; history is a better guide than any quarter or two. On reserves, we have not provided guidance on releases.

I was outlining potential pathways to the higher end of the EPS range. Credit has been a strength for us. We have qualitative overlays in case the macro worsens. If the environment plays out as we think, there could be some downward bias to reserves, but I would not plan on that today.

We evaluate quarter by quarter.

Thank you. We will take our next question from Mark DeVries with Deutsche Bank.

Could you comment on how the pipeline for new program acquisitions or signings looks relative to recent history and how meaningful those opportunities could be for growth over the next year? And how big of an opportunity do you think the new RH program could be?

We continue to have a very active pipeline, a combination of new startup de novo programs and existing programs. Existing programs coming to market in the next year or two are in the mid-sized range—nothing really significant in terms of portfolios we would acquire—but we have a great track record of buying portfolios, winning programs, and then driving penetration and strong growth. Across all five platforms, we have a robust pipeline of traditional programs and a nice pipeline of nontraditional opportunities, whether ISVs inside Health and Wellness or Home and Auto in more fragmented spaces. We are also seeing good price discipline in the market, consistent over the last two to three years.

There are occasional pockets of irrational behavior, but generally the industry is pricing appropriately for this environment, and we are winning the programs we want. We are very excited about RH—it is a great franchise—and we believe we can drive more penetration and grow that program.

Thank you. We will go next to Moshe Orenbuch from TD Cowen.

Four out of your five verticals had growth in purchase volumes, some with strong growth. Home and Auto was flat, although with down 6% accounts you had okay growth per account. Can you drill into that from an account perspective? Are there things you are doing to restart account growth in those programs?

And as a follow-up, you mentioned benefits of lower withholdings—has that been a driver in your credit and spend outlook?

For Home and Auto, this is a large portion of our promotional financing business. Average active accounts tend to stick when consumers are engaging in discretionary purchases. The home specialty space has been more challenged on bigger-ticket items, impacting average account growth. You have seen a positive trajectory in Home receivables, but it is a broad mix—from do-it-yourself at Lowe’s to home furnishings and furniture, and then Auto, which has different dynamics on average ticket and frequency.

It is more about the mix and the named-deliver strategy on that platform. We are moving into an important part of the year for that vertical—home projects in specialty and do-it-yourself tend to drive more volume acceleration. With the launch of new programs like Bob’s and RH, that should create a tailwind. On withholdings, it is harder to isolate.

You can see flow of dollars from refunds because they are lumpy, but withholdings flow throughout the year. Purchase volumes were relatively consistent through the quarter, aside from storms in January and early February. That consistency is a combination of withholdings, refunds, and the discretionary rotation Brian mentioned. The first three weeks of April continued to show strength; the last three weekends were the three strongest of the year, ahead of last year’s pace.

We are encouraged by consumer resilience and engagement with our products.

Thank you. We have time for one final question. We will take our final question from Saul Martinez with HSBC.

Thank you. On expenses, for 2026 you expect expenses to track loan growth. Beyond 2026, can you comment on your ability to deliver operating leverage as you exit 2026 and into 2027 as top-line growth accelerates? How do you weigh investment needs like AI and AgenTek versus letting revenue flow to the bottom line?

And as a follow-up on the consumer, you mentioned high payment rates persisting but also minimum payments having gone up in super-prime and higher end of prime. Is that just normalization from historically low levels?

Our intent is to run the company without adding headcount right now, driving productivity through tools Brian discussed—AI and simpler engineering efficiencies—across all aspects of the business, keeping headcount flat and getting leverage, with NII growth outpacing OpEx growth. We will increase OpEx in technology that differentiates us and gives first-mover advantage, particularly in AI and cloud, while being disciplined on core costs to bring core operating costs down and continue medium- to long-term investment in technology. On payments behavior, I do not see a divergence. It is more about how customers engage with auto-pay—some set it to minimum payment versus statement-in-full, and then make incremental payments.

At a higher level, we see strength in consumer spending and payment behavior, which has a little drag on NII but clear strength in maintaining credit. Sitting here in April with a good portion of the year covered, that is a good base for us to deliver through an evolving macro environment. We are pleased with the consumer’s performance inside our products.

This concludes Synchrony Financial's earnings conference call. You may disconnect your line at this time. Have a wonderful day. Thank you.