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DATE

Tuesday, Oct. 20, 2026

CALL PARTICIPANTS

• Senior Vice President of Investor Relations - Kathryn Harmon Miller
• President and Chief Executive Officer - Brian D. Doubles
• Executive Vice President and Chief Financial Officer - Brian J. Wenzel

TAKEAWAYS

• Net Interest Income -- $4.8 billion, representing a 2% increase driven by higher interest and fees and lower interest expense.
• Diluted EPS -- $2.68, compared to $2.86 in the prior year period.
• Purchase Volume -- $49.7 billion, a record third quarter level growing 8% year over year.
• Loan Receivables -- $103.3 billion, an increase of 3% as higher purchase volume was partially offset by elevated payment rates.
• Net Interest Margin -- 15.5%, a decrease of 12 basis points reflecting a 20 basis point decrease in loan receivable yield and lower liquidity portfolio yield.
• Efficiency Ratio -- 35.9%, an increase of 330 basis points due to higher overall expenses and retailer share arrangement impacts.
• Net Charge-off Rate -- 4.8%, a decrease of 37 basis points from 5.2% in the prior year.
• Allowance for Credit Losses -- 10% of loan receivables, a decrease from 10.4% in the prior year.
• Return on Average Assets -- 2.9%, a decrease from 3.6% in the prior year.
• Retailer Share Arrangements -- $1.1 billion, or 4.3% of average loan receivables, increasing 7% due to program performance.
• Other Expense -- $1.4 billion, a 10% increase driven by higher operational losses, technology investments, and marketing expenditures.
• Direct Deposits -- $2.4 billion growth year over year, with total deposits representing 83% of total funding.
• Share Repurchases -- $1.1 billion during the quarter, with $4.6 billion remaining under the current authorization.
• Common Equity Tier 1 Ratio -- 12.9%, a 140 basis point reduction compared to the prior year.
• Full Year 2026 EPS Guidance -- approximately $9.50, representing the high end of the company's original expectations.
• Diversified and Value Purchase Volume -- 13% growth, primarily reflecting partner expansion and higher gas prices.
• Digital Platform Purchase Volume -- 5% growth, driven by customer engagement across partners with diversified offerings.
• Home and Auto Purchase Volume -- 9% growth, reflecting new programs and performance of select furniture retailers.
• Lifestyle Purchase Volume -- 6% growth, driven by strength in luxury and apparel categories.
• Health and Wellness Purchase Volume -- 3% growth, primarily reflecting growth in the pet category.
• 30-Plus Day Delinquency Rate -- 4.3%, a decrease of 5 basis points from 4.4% in the prior year.
• Payment Rate -- 16.9%, which was 60 basis points higher than the prior year and 180 basis points above the pre-pandemic average.

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RISKS

• Wenzel stated, "betas will be higher than the pass rate hiking cycle given the competitive dynamics in the fight over deposits you are seeing today," regarding potential pressure on interest margins from deposit costs.
• Wenzel warned that higher operational losses have "a tail which has played through the entire year," following idiosyncratic events during new partner launches.
• Management indicated that macro factors, including higher gas prices and inflation, preceded the establishment of the current $9.50 earnings target.

SUMMARY

Synchrony Financial (SYF -1.19%) reported record third quarter purchase volume and established a full year 2026 earnings outlook at the high end of its initial guidance range. Management reported that spending growth was strongest among Generation Z and millennial customers, supported by the Prism data analytics and underwriting platform. The company stated that strategic initiatives were focused on integrating its financial ecosystem into emerging commerce channels, including agentic purchasing paths and digital wallets. Management also indicated that credit performance remained stable with delinquency rates in line with the prior year and net charge-offs at a seasonal low.

• CEO Doubles stated, "Synchrony and Venmo collaborated on a refreshed value proposition for the Venmo credit card... that rewards social spending offering cardholders more cash back for splitting purchases with friends on Venmo."
• The company announced a new integration with Stripe to embed CareCredit financing into online checkout experiences for more than 12 million existing cardholders.
• CEO Doubles noted the company is deploying GPT-4 and Astra models "to enable deeper engagement with advanced capabilities, more meaningful product development faster technology innovation."
• Management reported joining the Personal Agent Protocol, Poppy initiative, as a design partner to help define open standards for artificial intelligence agents in digital commerce.
• The company introduced CareCredit Pay Later, an installment loan product available at nearly 20,000 health and wellness locations including dental and vision care providers.
• CFO Wenzel noted that approximately 90% of the 60 basis point year-over-year increase in payment rates is driven by shifts in portfolio and product mix.

INDUSTRY GLOSSARY

• RSA: Retailer Share Arrangement, a contractual agreement where Synchrony shares a portion of program profits with its retail partners.
• CET1: Common Equity Tier 1 ratio, a key measure of a bank's capital strength and ability to withstand financial stress.
• Agentic Commerce: A form of digital commerce where autonomous artificial intelligence agents conduct product discovery and purchases on behalf of consumers.
• Prism: Synchrony's proprietary data analytics and underwriting platform that uses over 9,000 variables for credit decisioning.
• Poppy: The Personal Agent Protocol initiative led by Sierra and Meta to develop open standards for AI agents.
• Dual Card: A credit card that functions as both a private label card for a specific retailer and a general-purpose card on a major network like Visa or Mastercard.

Full Conference Call Transcript

Operator: Thank you for your continued patience. Your meeting will begin shortly. And a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of your team will be happy to help you. Please stand by. Your program is about to begin. Morning and welcome to the Synchrony Financial Third Quarter 26 Earnings Conference Call. Please refer to the company's Investor Relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. Currently, all callers have been placed in listen only mode.

The call will be opened up for your questions following the conclusion of management's prepared remarks. If at any time, you should need operator assistance, please press 0. If you wish to ask a question following the prepared remarks, please press 1. I will now turn the call over to Kathryn Harmon Miller, Senior Vice President of Investor Relations.

Kathryn Harmon Miller: Thank you.

Operator: You may begin.

Kathryn Harmon Miller: 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 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 D. Doubles, Synchrony's President and Chief Executive Officer; Brian J. Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian D. Doubles.

Brian D. Doubles: Thanks, Catherine, and good morning, everyone. Synchrony delivered strong third quarter results. Highlighted by broad based purchase volume growth across each of our 5 sales platforms. Spend within our Diversified and Value platform increased 13% compared to last year. Primarily reflecting the impact of partner expansion and higher gas prices. In Home and Auto, purchase volume increased 9% compared to last year, primarily reflecting the performance of new programs, select furniture retailers and the impact of higher gas prices. Purchase volume was 6% higher in our lifestyle platform. Primarily reflecting strength in categories like other apparel and luxury, as well as the impact from our new programs.

Meanwhile, digital platform sales grew 5%, driven by strong customer engagement across partners with broad diversified offerings and refreshed value propositions. And in Health and Wellness, purchase volume grew 3% primarily reflecting growth in Pet. Total purchase volume reached nearly $50 billion again this quarter, the highest third quarter level in our history. And an increase of 8% compared to last year. Approximately 53% of that spend occurred through Synchrony's co branded cards in the third quarter. Which increased 23% versus last year was driven by the combination of new programs and product upgrades, delivering enhanced value propositions and increased utility. And higher broad based spend across our card programs.

Both discretionary and nondiscretionary out of partner spend on our consumer co brand cards grew by double digits, Strength in discretionary spend came from categories like electronics and entertainment, while in nondiscretionary, gas station and discount store spend grew fastest. And as Slide 3 shows, spend across Synchrony's portfolio is growing fastest among Gen Z and millennials. Particularly in our diversified and value, digital and home and auto platforms. Where the strong value propositions and broad utility of our offerings resonate deeply. The significant growth across the younger age demographics has been enabled by our underwriting and data analytics platform, Prism.

Synchrony leverages over 9 thousand data variables and cash flow underwriting to responsibly deliver purchase power to credit ready customers. Even when they are earlier in their financial journeys and often overlooked by other traditional lenders. And because we can meet our customer wherever and however they want to be met, with the right product for that purchase, Synchrony is building relationships and delivering experiences that can unlock greater financial flexibility over time. To that end, we recently introduced CareCredit Pay Later, an enhanced and rebranded installment loan product that will supplement our existing credit card as another way for eligible customers to plan and pay for health and wellness related products and services.

It is now available at nearly 20 thousand health and wellness locations including dental, cosmetic, vision and audiology care providers. By providing tailored choices upfront after 1 seamless application, this multiproduct experience empowers customers with financing flexibility, and payment structure optionality that aligns their preferences. In addition, Synchrony and Venmo collaborated on a refreshed value proposition for the Venmo credit card. With an industry first feature that rewards social spending offering cardholders more cash back for splitting purchases with friends on Venmo. Venmo credit card issued by Synchrony delivers unlimited daily cash back deposited directly into the account and offers a simple way to manage money and rewards together. All within the Venmo app.

As we all know, the spending experience is constantly evolving. Digital wallets and agentic commerce are changing the way consumers discover, decide and buy. So Synchrony remains focused on the heart of what matters. Connecting our customers, partners, merchants and providers through seamless experiences and unmistakable value. Our new integration with Stripe, the programmable financial services company, will make it easier for both Synchrony's and Stripe's providers in health and wellness retailers to offer CareCredit financing as part of their online checkout experience. More than 12 million CareCredit cardholders, as well as new approved applicants will have opportunities to access trusted care credit financing for health and wellness purchases through participating Stripe providers.

Synchrony is also integrating with Vetspire, A leading cloud based veterinary practice management software provider to embed CareCredit financing options directly within Vetspire's AI enabled cloud based platform and gives veterinary practices a more modern way to offer real time payment solutions at the point of care. Vetspire is used by more than 1 thousand veterinary hospitals and clinics nationwide, and about 85% are already CareCredit enrolled providers. By operationalizing checkout workflows and making financial options easier to access, our collaboration aims to improve the experience for pet owners, reduce administrative friction for clinic teams and support timely care for pets.

Meanwhile, Synchrony's enterprise collaboration with OpenAI is designed to strengthen our positioning at the center of AI's next chapter in shopping and payments. We have launched our Synchrony Chat GPT plug in, which allows consumers to discover savings and offers within the Synchrony marketplace directly within ChatGPT, and browse promotional financing deals and everyday value from participating partners in a fast conversational experience. And from a corporate perspective, we are deploying the latest OpenAI models, like GPT-4, Astra, to enable deeper engagement with advanced capabilities, more meaningful product development faster technology innovation. Of course, Synchrony's AI strategy extends beyond adopting emerging technologies, to helping define how they will operate across the broader commerce ecosystem.

We have joined the Personal Agent Protocol, Poppy initiative, led by Sierra and Meta as a design partner reflecting our commitment to helping define the open standards that will underpin the future of Agentic Commerce. By contributing to the development of secure, transparent and permission based protocols, for AI agents, Synchrony is helping advance an ecosystem that can deliver greater customer choice, trust and scalability across digital commerce. So as we look to the remainder of this year and the years ahead, Synchrony is executing on what we set out to do. We are extending our reach, enhancing the experiences we deliver, and driving optionality for our customers and partners.

And as a result, we are delivering attractive growth and strong risk adjusted returns that position us to drive significant long term value for our stakeholders. With that, I will turn the call over to Brian to discuss our financial performance in greater detail.

Brian J. Wenzel: Thanks, Brian. Good morning, everyone. Synchrony continued our focused execution and delivered another strong financial performance in the third quarter. We achieved record third quarter purchase volume which grew across all 5 platforms. Ending loan receivables growth continued to accelerate, credit performance remained strong. Resulting in attractive returns for our shareholders. More specifically, we generated net earnings of $892 million or $2.68 per diluted share. Return on average assets of 2.9% a return on tangible common equity of 25.2% and a 6% increase in tangible book value per share. Focusing on our performance in more detail, purchase volume grew 8% versus last year and reached almost $50 billion.

The second consecutive quarter at this level while maintaining our disciplined approach to credit. Ending loan receivables increased 3% to $103 billion as higher purchase volume more than offset ongoing effects of elevated payment rates. The payment rate of 16.9% was approximately 60 basis points higher than last year and approximately 180 basis points above the pre pandemic third quarter average primarily reflecting the impacts of new portfolio seasoning shifts in portfolio and product mix and our previous credit actions. Net interest income increased 2% to $4.8 billion primarily driven by the combination of higher interest and fees, and lower interest expense partially offset by lower investment income. Interest and fees increased 1% primarily reflecting growth in average loan receivables.

Interest expense decreased 3%, primarily due to lower benchmark rates. Our third quarter net interest margin decreased 12 basis points versus last year to 15.5%, reflecting 3 key drivers. 1, a 20 basis point decrease in our loan receivable yield which was primarily driven by lower assessed late fee incidents resulting from our strong credit performance. Decline in loan receivables yield reduced our net interest margin by approximately 16 basis points. 2, a 62 basis point reduction in our liquidity portfolio yield primarily due to lower benchmark rates.

The decline in liquidity portfolio yield reduced our net interest margin by 10 basis points. and 3, a 22 basis point decrease in the mix of loan receivables as a percent of interest earning assets versus last year. This reduced our net interest margin by approximately 5 basis points. These factors were partially offset by a 27 basis point decline our total interest bearing liabilities cost. Primarily due to lower benchmark rates, which contributed approximately 19 basis points to our net interest margin. On a sequential basis, net interest margin increased by 42 basis points primarily due to 2 key factors.

1, the decline in earned income reversals as reversals net charge offs decreased from the seasonal high in the second quarter the seasonal low in the third quarter. This increased net interest margin by 20 basis points. and 2, the increase in the mix of loan receivables as a percent of interest earning assets which increased our net interest margin by approximately 17 basis points. This was generally due to accelerated receivables growth which utilized some of the excess liquidity we held for prefunding in the prior quarter. Next, turn to the remainder of our P and L. RSAs of $1.1 billion were 4.3% of average loan receivables in the third quarter, and increased $72 million versus the prior year.

Primarily reflecting program performance. Provision for credit losses increased $120 million to $1.3 billion primarily driven by a reserve build of $30 million versus a $152 million release in the prior year. Partially offset by a $62 million decrease in net charge offs. Other income decreased $22 million to $105 million primarily reflecting the impact of higher loyalty costs resulting in the growth of new programs and refreshed value propositions. Other expense increased 10% to $1.4 billion primarily driven by higher operational losses technology investments and increased marketing expenditures. The third quarter efficiency ratio was 35.9% approximately 33 basis points higher than last year. This resulted from higher overall expenses and the impact of higher RSA.

Turning to our portfolio credits on Slide 8. Both our 30 plus and 90 plus delinquency rates at the end of the third quarter were in line with the prior year. Our net charge off rate was 4.79%, reflecting a decrease of 37 basis points from 5.16% in the prior year. And our allowance for credit losses as a percent of loan receivables was 10.01%, a decrease of approximately 8 basis points from 10.09% the second quarter and a decrease of approximately 34 basis points from 10.35% last year. Slide 9 shows Synchrony's funding, capital and liquidity, which continues to be core strength of our business.

We grew our direct deposits by $2.4 billion versus last year, and our broker deposits by approximately $575 million. At quarter end, deposits represented 83% of our total funding while secured debt represented 9%, and unsecured debt representing 8%. Total liquid assets increased 7% to $19.5 billion and represented 15.9% of total assets, 33 basis points higher than last year. Turning to capital. Synchrony ended the quarter with a CET1 ratio of 12.9% reflecting a 140 basis point reduction versus last year. A Tier 1 capital ratio of 14.5% reflecting a 100 basis points reduction.

A total capital ratio of 16.5%, reflecting a 110 basis point reduction and a Tier 1 capital plus reserve ratio of 24.3% reflecting a 130 basis point reduction versus last year. Synchrony returned $1.2 billion to shareholders during the third quarter. Which included $1.1 billion in share repurchases and $110 million in common stock dividends, At quarter end, we had approximately $4.6 billion remaining of our share authorization. Finally, I would like to discuss our 2026 outlook on Slide 10. Given the performance of our business through the course of this year, now expect to deliver approximately $9.50 in diluted earnings per share for the full year the high end of our original expectations.

This reflects our continued full year expectations at year end loan receivables will grow by mid single digits, net interest income will increase, net charge offs will be less than 5.5% with delinquency and losses following normal seasonality. RSAs will be higher for the full year but remain within our long term target range of 4% to 4.5% of average receivables and other expense dollars in the fourth quarter will generally be in line with the third quarter as we continue investing in Synchrony's capabilities and future growth opportunities.

To conclude, Synchrony's core business drivers are strong and we remain focused on executing on our strategy Our disciplined approach to growth positions us to deliver consistent market leading returns and we are investing in our competitive differentiation to drive long term earnings power and intrinsic value while also returning significant capital to shareholders. With that, I will turn the call back over to Brian.

Brian D. Doubles: Thanks, Brian. Before I turn the call over to Q&A, I would like to leave you with 3 key takeaways from today's discussion. 1, Synchrony is delivering sustainable growth. Our products and experiences resonate across generations and spend categories. Amid a dynamic consumer landscape. Because we are constantly investing in innovation, and evolving with our customers and partners. 2, Synchrony is strengthening our competitive differentiation by positioning us at the forefront of digital commerce. We are prioritizing strategies that embed our financial ecosystem within the ever evolving frontier of commerce. Whether that be at the point of sale, through digital wallets payment processors or agentic purchasing paths.

By meeting people wherever they choose to transact, Synchrony is expanding our reach, deepening relationships, and enabling greater choice, trust, and scalability as a leader in the evolving retail ecosystem. and 3, Synchrony is delivering outcomes that matter. We are empowering more than 68 million customers with financial flexibility. We are powering loyalty and sales for the hundreds of thousands of merchants partners and providers we serve. And we are positioning our business to drive consistent market leading returns for our stakeholders. With that, I will turn the call back to Kathryn to open the Q&A.

Kathryn Harmon Miller: 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 1 primary and 1 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.

Operator: Thank you. And as just mentioned, it is star 1 to ask a question. Our first question will come from Ryan Nash with Goldman Sachs. Please go ahead.

Ryan Nash: Hey, good morning, guys.

Brian D. Doubles: Hey, Ryan.

Brian J. Wenzel: Good morning, Ryan.

Ryan Nash: So Brian, if you look at the implied Q4 EPS guide, I think it points to a little bit of downside versus Street expectation. So maybe can you just help us with a bridge for where you think the market's off, whether it is DPNR or allowance? And given how the market outlook has shifted, do you still see a path to double digit EPS growth next year? Thank you.

Brian J. Wenzel: Yes. Thanks for the question, Ryan. Let me just start with we began the year with the range of $9.10 to $9.50, right, which preceded a war in Iran, preceded the higher gas prices that Americans are feeling today, preceded inflation accelerating and preceded a rise in the Fed funds rate. So here sitting here today with a $9.50 full year rate, we actually feel good about the performance with that backdrop, right, which is ahead of again, depending upon which service you use in $9.38 to $9.40, consensus estimate for the full year. So when we look at it, we think that obviously this is a an increase rate relative to the performance of the business.

Again, we are pleased about it. I think consensus when you look at it between Q3 and Q4, the cadence on reserve was probably off. And I am not sure people thought through enough about how the loss trajectory was moving Q3 and Q4. So again, I think that is the biggest delta as you think about how what the estimates are for Q4 versus Q3. So again, we feel good about the year. When you think about next year, we are not going to get into 2027 guidance on this call, Ryan, so I can appreciate that for a second. But when you think about it, I guess the framework kind of remains the same, right?

We want to be able to grow NII, which hopefully will mirror loan growth I think you do get some benefit from the new portfolio seasoning. Year over year. And then again, I think next year, hope not to comp the operational losses and drive more operating leverage in there. Again, you will have some higher probably net charge offs. But again, taking all things equal, that combined with our capital return policy should give us a framework to get to double digit EPS growth next year.

Ryan Nash: Got you. And then if I look at the payment rate, you mentioned in your remarks Brian, it is up 60 bps year-over-year, it is almost up 200 versus the pre pandemic. So maybe just sort of talk through the impacts on loan growth margin and credit, if we continue to see an elevated payment rate. And are there any steps you can take to ease the pressure? Or do you think it will naturally adjust just given these portfolio's seasoning impacts? Thank you.

Brian J. Wenzel: Thanks, Ryan. So when I think about the 60 basis points year over year change, if you pull that apart for a second, over 90% of that or 56 basis points is really mix related. And inside that 56, you have 35, which are the new portfolios, and 8, which really comes from lower promotional balances. So it is really a mix issue when I think year over year. Your point about pre pandemic the challenge that we have today is we are sitting down a couple of 100 basis points lower on non prime. We have lower percent of promotional assets, which is really impacting stickiness and the conversion from sales into assets.

I think as we move forward, we would expect as credit probably more normalizes, right? So you slide up into the 5.5% to 6.0% we would expect to see a little bit more non prime in the book, not higher than pandemic period, but more normal for us. Think we want to see promotional balances begin to take hold, which really goes back to consumer confidences. Or consumer confidence, excuse me. When I look inside this quarter though, we did see green shoots When I look at dental, which had been flat through the second quarter, that was actually up year over year. Home specialty was up year over year. Select furniture is up year over year.

And then when you look at overall smaller discretionary purchases, they continue to increase. We are we do have some headwinds, right, in power and cosmetic. Audiology. But again, I think we see green shoots, which will help promotional asset percent rise. So those are some of the biggest factors, Ryan. And think we just got to be patient with how the portfolio returns back to what was the closer to the pre pandemic period Thank you.

Operator: Our next question will come from Sanjay Sakhrani with KBW. Please go ahead.

Sanjay Sakhrani: Hey, good morning.

Brian J. Wenzel: Brian Wenzel, you kind of walked through all the different, aspects of what is changed over the course of the year.

Sanjay Sakhrani: And I am just curious and this is probably even more question for Brian D. Doubles. But when we are thinking about the health of the consumer and the state of the consumer, the credit numbers look really strong. And obviously, provisions as such is there anything underneath it that you are seeing that is putting that is weighing on the consumer? Anything that concerns you given all these pressures? Just curious to get a sense of what is happening on the front lines. Thanks.

Brian D. Doubles: Yes, Sanjay. Look, I would say we still feel really good about the trends we are seeing at the moment. The consumer continues to show signs of strength. I think it is been a little bit surprising. Not only to us, but to the industry more broadly. I think higher gas prices fairly broad based inflation, And then you look at consumer confidence that has been weak all year, but it is not impacting. None of those factors are really impacting consumer behavior. So I think strong labor market, decent wage growth, there are some natural offsets there. Consumers continue to spend through it. As you mentioned, credit looks really good.

We started to open up a bit earlier in the year just given how good credit was looking. We think that will drive some nice growth for us as we get into next year. But yes, we are really happy with purchase volume up 8%. We gave you by credit cohorts. We gave you some data by generations, millennials, Gen Z looking really good. So we are really not seeing any signs of stress at the moment. And I think that is fairly consistent across the industry. Yes.

Brian J. Wenzel: Sanjay, what I would add in, just 2 points. To augment what Brian just said. First, when you look at payment rate and we look at payment rate by credit grade, when I look at the non prime the payment rate for non prime is up 40 basis points quarter on quarter. that is the same rate it is up on the 780-plus. So again, we are seeing very good payment rates and strength in the consumer. Alberto inside of our affordability issue for some. So that is number 1.

And I think number 2, you see it on spending behavior patterns, show on Page 3 of the deck that again, we see strength there and that is continued on And maybe I will just add, the fourth thing is or third thing is, when you look at entry rate, entry rate continues to be better than 2018. Into delinquency and better than a couple of years ago. A lot of that is our pre delinquency strategies as well as our credit action. So again, when you look at it spending, when you look at it from payment rate and you look at entrance delinquency, they all continue to show strength. Thank you.

Sanjay Sakhrani: And just my follow-up question. Obviously, a bunch of announcements you guys made around Agentic and working with a lot of the players that are involved. I am just curious because there is been just a lot of chatter on the back of the launch of Muse. Just how you guys see Agent e commerce sort of affecting private label because there is all this talk about gamification of rewards and optimization of financial products. I am just curious how you think it plays out for private label and Synchrony? And obviously, you guys are doing things. Beyond the offensive. Yes.

Brian D. Doubles: Obviously, that is a big area of focus for us. I think Agentic is going to fundamentally change how consumers discover products. Research, ultimately purchase I think we have got a jump start on this. it is still very early, but we are working with all the leading AI platforms. We need to make sure that as that purchasing path changes, that our products are embedded in that experience. And I think, look, frankly, our partners have been very helpful here. They are pulling us into those discussions.

They have got a big incentive to ensure that our cards are embedded in whatever that experience is because they wanna make sure that obviously, their customers get the benefit of the value prop they get the benefit of any discounts or offers that we have on our cards, they want to make sure that their RSA is protected. So obviously getting more complicated. But we are really excited about the longer term opportunity here. I think ultimately, it is going to make it easier for consumers to use our products. I think shopping agents will be able to program certain purchases to use our cards. I think that reduces some of the historical friction that we have had.

And I think that transparency overall benefits us. We think our products provide great value. Typically more savings, better discounts, better offers and general purpose cards. And so we think if we can remove that friction in the process, that ultimately advantages us over time. Thank you.

Brian J. Wenzel: Thanks, Sanjay.

Brian D. Doubles: Thanks, Sanjay.

Operator: Our next question will come from Moshe Orenbuch with TD Please go ahead.

Moshe Orenbuch: Great, thanks. Thanks for the incremental detail on volume growth by segment. And it is kind of interesting to see the acceleration in prime And I am just wondering if you could kind of talk about whether that is driven by product mix or by different types of marketing or activation? And what you think that means in terms of revolve rates or anything else that might happen as you do get to your balance growth targets?

Brian J. Wenzel: Yes, thanks for the question Moshe. You know, It is somewhat product related. When you think about dual card being a larger percentage of the book, they tend to be people who are going to be 86 plus Vantage score. So in the prime segment to super prime. So again, I think that is driving some of the behavioral patterns. But again, across the spectrum, 1 of the questions about our business is are you attracting Gen Z and millennials into the book? And we clearly are, but they are on the same type of band, albeit at a higher rate. Given the smaller balance than that.

So again, I think when you think about that payment behavior pattern, spending behavior pattern, the product is driving some of it. The more we push into pay later, for us, pay later is a higher ticket than most, what I would say, buy now, pay later providers offer. So it is a combination of product, really. Got it.

Moshe Orenbuch: And kind of shifting gears to the follow-up question. Combination of technology investments and operational losses and kind of pushed your efficiency ratio higher. Can you talk about each of those and how you see at what point do they sort of level off Or is it just a question of revenue growth rates accelerating to match them? Like how do you think about each of those in the context of efficiency over the course of the next year or so?

Brian J. Wenzel: Yes. Let's break it 2 pieces. When I think about the operational loss piece for a second, Moshe, we came off a year that was probably our best year ever as a company. This year, we expected some level of increase from that. We were impacted by a number of idiosyncratic events, which sometimes happen when you either launch new partners make changes, etcetera. But we feel we have that contained. Now unfortunately, with idiosyncratic events, you do have a tail which has played through the entire year. I would say that the team has implemented well over 100 strategies to mitigate operational losses going forward. So we expect that mitigation to happen in 2027 and kind of come down.

On the technology front, we were at a place where Moshe made a lot of sense for us to make investments given the acceleration, whether it is AI, cloud, our push into digital wallets, pay later product, it just made sense that we had to position the business for the long term value intrinsic value of the company. So we decided to make those investments. We think they are the right investments and will better service our area over the medium and long term. So, again, I would not expect that to continue to grow at an exponential rate, but it is going be a slightly elevated most certainly this year into next year.

And then I think you will begin to see a tail off beyond that. Tail off from a growth rate perspective, Moshe. Thank you.

Operator: Our next question will come from Terry Ma with Barclays. Please go ahead.

Terry Ma: Hi, thank you. Good morning.

Brian J. Wenzel: Just wanted to follow-up on the payment rate. You called out new program seasoning as 1 of the key drivers. Can you maybe just give us a sense of where we where you are the seasoning cycle for those new programs you had in the last year? And at what point that dynamic reverse and turn into a tailwind for receivables growth and earnings growth? Yes. Good morning, Terry. I think about obviously the largest 1 is our 1 Pay Walmart portfolio, and that really takes about 3 vintages in order to kind of get this to a more steady state. So this would be effectively the end of that first vintage at the end of 26.

So we are probably in that first third again, I think you see some of the effects mitigating in the P and L as you step through year 2 and year 3. The other portfolios that we have in there are much smaller. I mean, obviously, Raymour & Flanigan has a very different payment rate Lowe's commercial has a much more accelerated payment rate. So again, I think that they are going to vary a little bit. I still expect, we are very pleased with the growth that we have seen in Walmart. Given the number of customers they serve and their presence in the retail ecosystem.

So again, we continue that growth and then hopefully as you step through these vintages, the translation between sales and assets begins to narrow for those new portfolios.

Terry Ma: Got it. Thank you. And then just on agentic commerce, can you just talk about what the ultimate opportunity is for Synchrony? Is it primarily about protecting your existing position at checkout? Or is there an opportunity to expand and acquire customers outside traditional channels?

Brian D. Doubles: Yes. Look, I think it is a big opportunity for us. And touched on it briefly. But there is a couple things that I think naturally advantage us here. First, it is just going to make it easier to use our cards. You know, 1 of the go back over time. You know, 1 of the friction points just in co brand and private label has been the consumer forgets their card. Do not want to go through the process to look it up. Or they do not have it stored in a mobile wallet. This makes that easier.

If you could actually program an agent to say, hey, I am shopping at x partner And anytime I shop with that partner, use this card, so I get my 5% off. That makes that process so much easier than it is been historically. So I think that is 1 big advantage that we see going forward. I think the other thing is our products provide great value.

And I think you are going to have these personal agents doing the comparison for consumers in terms of which card they should use It will be a combination of factors, but 1 of those factors is going be what offers are available to me, what is the first purchase discount, or what is my everyday cashback, And we think all of our products are really advantaged in that comparison, if the agent is able to provide that level of transparency, we think that naturally advantages our business model our products and our partners. So I think those are the 2 big things that we see, at least in the short term. Thank you.

Operator: Our next question comes from Don Fandetti with Wells Fargo. Please go ahead.

Don Fandetti: Good morning.

Brian D. Doubles: Can you talk a little bit about the competitive environment from your sort of legacy lending or bank competitors and then also the digital side? And whether or not you feel like you need to make any bolt on acquisitions or is there any portfolio opportunities out there? Yes. I think, look, the competitive dynamics have been pretty consistent for the last 3 or 4 years, frankly, both in terms of the number of competitors who we see out there competing on RFPs in the traditional stuff that we do. If anything has changed, would say, over the last 2 years, it is in the, what I would call, nontraditional partner base.

So we just announced a relationship with Stripe. that is obviously, they are a payment processor. They are not a retailer. I think that is kind of the new frontier as we go out and seek the 1 to many distribution channels for our products. So I think that is probably the nuance I would say the competitive set, as we are out there competing for business with merchants and providers, that is been pretty consistent. I would say the competitive dynamics in terms of returns and price continues to be pretty rational. I think part of that is driven by just a little bit of uncertainty as you look out into 2027 and 2028.

So I think most issuers are being pretty disciplined around how we are bidding on stuff. I think, you know, we are clearly being successful. We renewed a ton of programs. We won a bunch of new programs this year. So I feel pretty good about that. Then on your second question, in terms of M&A, look, we continue to be really disciplined. You have seen that for the last decade, We like to buy companies that are relatively small that we think we can grow leveraging our scale. there is obviously there is been a lot more bad M&A done historically than good M&A. And we fully appreciate that and we are pretty disciplined buyers in that. Will continue.

Got it.

Don Fandetti: Thank you.

Brian J. Wenzel: Thanks. Thank you.

Operator: Our next question will come from Jeff Adelson with Morgan Stanley. Please go ahead.

Jeff Adelson: Hey, good morning. Thanks for taking my questions. Was just wondering I just wanted to focus on the RSA a bit. It did step down a bit more than we were expecting this quarter. Think in especially it was notable in light of the better operating and credit results you put up this quarter. I was just wondering, is there anything under the hood that maybe drove this quarter's stronger RSA? And maybe just help us how to think about that trajectory going forward from a quarterly cadence perspective.

Brian J. Wenzel: Yes. Good morning, Jeff. When I look at the RSA, traditionally, people try to look at it externally when you think about PPNR minus net charge offs minus the R RSA? And how does that percentage work? And generally speaking, it stays within a certain range. Now what drives it inside that range is really the mix of the portfolio. So while credit. You know, you look at credit at the top of the house, depending upon credit where credit sits in 1 partner versus another has a slightly different impact. That flows through.

So mix generally is the biggest driver. there is been no substantive changes to any of the agreements that would drive a structural change to the RSA. Etcetera. So it is really just more mix. Again, when I look at it, it operates in inside of what we think is a normal range. When you look at that metric, you can also look at it, Jeff, as a percentage of total purchase volume. Because again, there are portions of it that is driven by volume itself. And that has a more steadying effect. But again, consistent with typical ranges we see for the RSA.

Jeff Adelson: Okay. Thanks. And then just with rates stepping up here, can you just walk us through how you are thinking about the impact on your consumer at this point? I know from a NIM perspective, if you look at your 10 Q, you are slightly you are more neutral, but you are slightly seeing a benefit there to your NIM. But I know in the past, you have talked about above neutral rates as a reason to stay tighter on your underwriting box. With regards to the consumer. So just are you thinking about the impact of rates you are stepping up on your consumer in the credit quality into next year?

Brian J. Wenzel: Yes. When you think about it, Jeff, majority of the financial obligations for consumers are fixed obligations, right? What do think about autos, mortgages, even though there is some more we said, you know, mortgages that we set over the last couple of years. But again, that is certainly fixed. So you do not see a direct impact to a consumer that flows through more immediately. it is the effects over time that happen. And broadly speaking, the interest rate environment can have a bigger effect on employment when you think about small and medium sized businesses that may not have access to capital, etcetera.

Certainly, if mortgage rates stay elevated, the mortgage the home the home housing market kind of slows down, you are going to see inflationary pressures through the housing, through rental rates that will go up. So kind of have a circular benefit there. And obviously, we benefit when there is a good and vibrant home sale market because people are willing to invest in furniture and other things as that goes through. So again, there is more, I would say, ancillary effects to the consumer than direct effects to the consumer. From that rise in interest rates.

With regard to our positioning, right, we are generally neutral When I think about the interest rate, you think about what happens to our interest bearing liability costs, but then look at the primary changes, the investment and a merchant discount where rates get passed on to some of the providers or merchants. that is generally neutral. There are some lag effects when you are going up. That can impact you. But again, I think over long term, the bigger question becomes when you think about deposits, what is going to happen with betas.

And we probably think that given this competitive environment, betas will be higher than the pass rate hiking cycle given the competitive dynamics in the fight over deposits you are seeing today, particularly with a lot of promotional pricing. So that could have an effect. Again, we will be back in January to talk more about those assumptions. Thank you.

Operator: Our next question will come from Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller: Hey, guys. Thanks. Just a follow-up for 1 more minute on NIM. Mean, you think about fourth quarter, just if you could just give us a sense of how to frame some of the puts and takes the loan yield and funding costs. So obviously, lot questions around the path of future hikes that we just touched on, and you saw broader improvement this quarter. But again, deposit betas may shake out on the way up this time. Maybe a little more color in specifics on that would be helpful.

Brian J. Wenzel: Yes. Thanks for the question, Darrin. We do have 1 more rate increase in the back half of the year, but coming I am sorry, the remainder of the year coming in December, of this year. When I think about NIM generally for the fourth quarter, again, we have indicated that NIM will increase quarter on quarter. A good chunk of that is going to obviously be the AEA mix You are going see more loan receivables as part of the equation that you did in the third quarter.

So that will give you a benefit When I particularly think about the interest side of that, so thinking about that interest expense, the primary increase that flow through really in November and December merchant discount. there is a slight negative to NIM in the quarter, but it is not really material Where you are going to see some benefit is really on core lines of interest and fees. So again, with losses being a little bit more moderated, you should see a benefit. Again, we expect it sequentially to increase.

Darrin Peller: All right. that is great. And then just a quick follow-up. there is been elevated tech operational spend as you have ramped Walmart, 1 Pay and other new partners. Employee costs have been up only 1% to 2% over the past few quarters. So maybe just talk a little bit more about some of the internal efficiency initiatives, how they are continuing more broadly in the expense base now?

Brian J. Wenzel: Yes. You are right. When you think about the employee cost being up 1%, I think 1 of the things we have been focused on as a company is how do we introduce productivity into large portions of the business, some of which is very small portion is AI driven when you think about utilization of the call center for call taking or call summaries. At the end or driving efficiencies inside of that. So we have been generally headcount neutral to down as a company from an employee base perspective, which we think is a good place to be as we try to drive that productivity.

Technology spend, Darrin, though, I would sit back and say, it is not necessarily Walmart related. If you think about it, we are in we are closing out year 2 of a 3 year journey on cloud. We want to accelerate our investment in AI. We have invested more in some of the wild technology, some of the things like Brian referred to Stripe earlier. Being about these digital wildsets is a really important part of Agenza Commerce Our continued building out of the Pay Later product, things like that, that are driving in our pre qual process, things like that are driving more technology build than I would say the year integration a new partner.

So those are investments that we think pay off here. We hope in the short term, but more in the medium to long term that drive the intrinsic value of the company. And that is why we have to make those investments that they are prudent. And again, that should decelerate honestly next year, but as a growth rate, it will decelerate hopefully 2020 and beyond. But again, we want to invest technology we think by maintaining a flat headcount and driving some of that efficiency there, can we can fund those investments. Thank you.

Operator: Our next question will come from Mihir Bhatia with Bank of America.

Mihir Bhatia: Hi, good morning. Thank you for taking my question. Wanted to go back to, I think, earlier in the Q&A, mentioned, Brian, that reserve and loss cadence was the main difference. In the fourth quarter outlook. Can you talk a little bit more about that? Is that a step up in higher seasonal charge offs more for reserve build? And then just maybe if you can also just touch on allowance coverage in that. I think typically you get 30-40 bps of allowance coverage benefit in the fourth quarter. Should we expect something similar here Just give us a starting point we head into 2027 allowance coverage. Thanks.

Brian J. Wenzel: Yes. Good morning, Garen. Thanks for your question. My point earlier was really the reserve covers, not necessarily the charge off piece that I was referring to on a cadence between Q3 and Q4. So that is the first point. The second point, as you think about the coverage ratio, particularly in the fourth quarter, you are right, there is a seasonal element. And typically, you see a decline, probably not as wide as what you would say. You say it is probably more in that 25-basis-point range depending upon the more relevant time period about 25 basis points.

Again, given where we are at the end of the third quarter, and probably the maturation of some of the new portfolio seasoning, some of the credit action seasoning, you should not expect that same type of seasonal decline in coverage rate in the fourth quarter, be significantly less than that. But again, it will be a post for the quarter But again, not as low on the seasonal decline of the rate. that is not necessarily a negative thing. I think it just kind of goes into how the loss rate will begin to build between 2026 to 2027 as anticipated as Walmart losses begin to come online.

And again, the credit actions we took in the end part of last year begin to season and mature and come through the portfolio. So again, we are pleased with the coverage. And as I have indicated throughout the year, we generally thought that the rate had a downward bias to it. This is all taking to assumption that we do not have any deterioration in the macro or any significant improvement in the macro, it is kind of a steady state is kind of how we are thinking about it right now. Got it.

Mihir Bhatia: Thank you. And then just following up on the deposit data. Comment. I think you said you expect deposit beta to be higher this cycle. But it is with a lag. Just as we think about the double digit EPS framework, if you will, for next year, That assumes some expansion from portfolio seasoning. So how much of higher deposit betas were offset that? Or is that already in the framework, if you will?

Brian J. Wenzel: Yes. Right now, here we are going through our 2027 plan and formulating what we think the betas will be for finalizing what we think the betas will be for next year. And again, the extent that the banners are higher, we are going to have to figure out a way in which we can continue to drive. We are focused, Brian and I and the executive team on driving double digit EPS growth Most certainly, we try to do it annually, but that is going to be a focus on the find ways to potentially offset any headwinds that it comes from higher deposit competitive environment. Thank you.

Operator: Our next question will come from Rob Waldhack with Autonomous Research. Please go ahead.

Rob Wildhack: Hi, guys. Looking at some of the segment level data, purchase volume, loan growth, etcetera, in most of the segments actually accelerated from the second quarter. Except for digital. And from Q1 to Q2, the digital segment accelerated itself pretty nicely. So I am wondering if there is anything to call out respect to digital this quarter and why the slowdown there? Because if that had held in, I think the loan growth and especially purchase volume would have looked even better.

Brian J. Wenzel: Yes. As you think about the digital, there is time Brian talked about Venmo. there is timing when you have value property launches and when things happen. Occur from a marketing cadence perspective. So I do not think there is anything structural or different in there. We just have a tremendous opportunity inside of that sales platform when you think about partners like Amazon, when you think about partners like PayPal that is in there and other positions, Again, it is it is probably just more timing of some of those campaigns and value property pressures than it is something that is structural or fundamentally different.

Brian D. Doubles: And we did in the third quarter last year. We did a fairly substantial upgrade in the PayPal book to the co brand card. And I think that drives some growth. So that is in the comp year over year.

Rob Wildhack: So it is all value comp driven? Okay, great. And then I appreciate all the comments on AgenTek commerce, the friction and the value prop. The pushback that we get sometimes from clients is around the risk that agents have consumers optimizing to the point where they are squeezing every dollar from the card in of rewards, but also revolving less or managing credit better. Do you think that is a real risk too?

Brian D. Doubles: Yeah, look obviously we are spending time on it I think the first thing I would say is there is a lot of transparency around APRs today. There always has been. And I think there is a lot of factors that go into how consumers pay down their outstanding balances. So they are not just looking at credit card APRs, they are looking at all the fixed expenses that Brian mentioned, mortgage, rent, payments, car loans, And then when you look at just credit cards generally, consumers, they look at more than APR. They look at where do I wanna make a payment to create some utility in the short term. That tends to be on their top of wallet.

General purpose card, not necessarily on our products. So obviously, we are to stay very close to this as it evolves. But I still see Agentic broadly as a big opportunity for us. And transparency broadly benefits us just given the value that we provide on our card. So overall, I think we are positively biased on this and think it is an advantage for us over the long term. Thank you.

Operator: Our next question will come from John Pancari with Evercore. Please go ahead.

John Pancari: Hey. Good morning. This is Troy Sweeney on for John. Just wanted capital. Clearly, you remain active on the repurchase front. CET1 progressing lower, but still a sizable cushion between the 9 coming out of Q3 and 11% target. I know Unreal's losses are not really factored to report in CET1, but just given elevated yield backdrop, is there any change in how you are thinking about repurchase appetite and broader progress towards your 11% target?

Brian J. Wenzel: Good morning. No, I would say we do not have any changes in our conviction and the cadence in which we would we would get closer to target. I think we have consistently said we wanna be aggressive, but prudent given the macro environment. We got $4.6 million remaining under our current authorization, and we are going to continue to execute that The only thing I would say is I know we do not give quarterly guidance I would not read into the third quarter that is a new run rate. Think if you look at the more historical average, it is probably a better sense on what we will do.

But again, we and want to get down to it. I think we have made very meaningful progress from where, you go back, We are at 14.3% on CET1 A year ago, we are down 12.9% and we are growing assets. So again, we like to grow assets first, but to the extent that we have excess capital, we will deploy it again share repurchases on aggressive but prudent nature. Thank you very much.

John Pancari: Thank you. Thank you.

Operator: We will take our last question from Andrew Bauch with BMO Capital Markets. Please go ahead.

Andrew Bouch: Hey, thank you for taking the question. A lot of my questions have been asked so far, but maybe if I could ask you to paint with some broad strokes on how you kind of expect the holiday shopping season to shape up. Any behaviors that you are seeing from merchants that are different from prior years? Special promotions that may be going on, just whatever you are seeing in the market today?

Brian J. Wenzel: Yes. Thanks for the question, Andrew. I will start out and then if Brian has other comments. Obviously, the first thing that we watch is whether or not consumer behavior rate confidence as they go in, what they are spending pattern is going to be. I think NRF has a 4 percentage point increase in the in holiday sales that are kind of coming through. I think the first read for us is when we look at the first 3 weeks albeit a small sample size, sales have continued at generally the same rate as we have seen as we exited the third quarter. So I think the consumer continues to be strong.

I think the 1 positive for us is that we have a set of retail partners that are very attractive and offer strong offerings to consumers. And they are gearing up for what would be a slightly higher promotional activity level across the board here as they fight for dollars. We have seen the trend in last couple of years where things have moved a little bit earlier in the cycle. Into pre black Friday and pre Thanksgiving week. So again, we will continue to watch it. I think we feel cautiously optimistic about holiday growth rates. But again, early signs from the consumer is not tapering off. And again, some will begin to start spending here in October.

So we feel generally, again, cautiously optimistic with our partners and how they will develop.

Brian D. Doubles: Yes. I would not add much, other than say that our teams are embedded with all of our partners actively working on a pretty robust schedule of holiday offers, promotions, discounts. We are very focused. We do that hand in hand with them, with our teams that are embedded with them every day. To Brian's point, I do think I do think they are cautiously optimistic. They are looking at sales trends in October and probably weighting that a little bit more heavily than what they are seeing in terms of the headline on consumer confidence. As I mentioned earlier, for 1 of the first times that I can remember, those 2 things are pretty disconnected.

So if you are looking at consumer confidence, you do not feel great. But when you look at what the consumer is actually doing, you feel a lot better. So we are actively working with them on marketing calendar promotions and offers. And I think we are we also share their cautious optimism for holiday.

Andrew Bouch: Great. Thank you, Thanks.

Brian D. Doubles: Thank you.

Brian J. Wenzel: Have a good day.

Operator: Ladies and gentlemen, this concludes Synchrony's earnings conference call. You may disconnect your line at this time and have a wonderful day. Thank you.