April 21 - Synchrony Financial said its profit rose in the first quarter, helped by continued consumer spending at the start of the year.
Consumer outlays held up through the opening months of the year, driven mainly by households with higher incomes, according to reporting cited by the company. A Commerce Department report noted the economy was on solid footing before the U.S.-Israeli war on Iran - a conflict that pushed gasoline prices higher in March and renewed concerns about inflation.
For Synchrony, which generates much of its revenue from the co-branded credit cards and other financial products it issues and services, a robust spending backdrop supports both transaction volumes and interest earnings.
Earnings and credit metrics
Net interest income - the spread between interest earned on loans and interest paid on deposits - increased 4% to $4.6 billion in the first quarter for the consumer lender. The company benefited from the fact that U.S. credit card rates remain markedly higher than those on mortgages or auto loans, a dynamic that helps card issuers capture stronger interest income.
Provisions for credit losses declined by $156 million to $1.3 billion in the quarter, a reduction the company attributed to lower net charge-offs. Provisions are the reserves lenders set aside to cover potential loan losses and are viewed as a gauge of how firms assess future credit risk.
Synchrony recorded net income of $805 million, or $2.27 per share, for the three months ended March 31, up from $757 million, or $1.89 per share, in the same period a year earlier.
Policy and market context
In January, U.S. President Donald Trump proposed a one-year cap of 10% on credit card interest rates. That proposal drew sharp criticism from the banking industry, including remarks from Synchrony Financial CEO Brian Doubles.
Shares of Synchrony were up marginally in trading before the bell following the results. The company also unveiled a new share repurchase program authorizing up to $6.5 billion in buybacks.
What this means
The combination of steady consumer spending and a shift lower in credit-loss provisions supported Synchrony's quarterly performance. At the same time, higher fuel costs in March and political debate over card-rate regulation are among factors that could influence future performance.