Banking isn't generally known as a fertile sector for young, hungry companies. It's dominated by big incumbents, with a host of regional and local peers operating in their various corners of the country. One upstart still relatively new to the market is Synchrony Financial (NYSE:SYF), a recent spinoff of General Electric's once-mighty GE Capital.


Although begun in mid-2014, the spinoff was only completed this past November. So the company's just-reported Q4 and fiscal 2015 figures were the first ones it's released as a stand-alone entity. How did it do?

Swipe and profit
Not badly at all, as it turns out. For the year, Synchrony Financial reaped just over $12 billion in net interest income, a 7% increase over the 2014 tally. Net profit rose by 5% to $2.1 billion.

That was on the back of an encouraging quarter that saw the bank grow net interest income by 8% on a year-over-year basis to $3.2 billion and improve the bottom line by 3% to $547 million ($0.65 per diluted share). The latter beat the average analyst estimate of $0.63 per share.

In its days under the General Electric umbrella, Synchrony Financial was GE Capital's retail finance arm. Thanks to that, it's the nation's top provider of private-label credit cards these days, managing a strong portfolio of store cards from the likes of Wal-Mart, Gap, and Lowe's, among numerous others.

Happily, consumers have been spending more at those shops. Total purchase volume for the products the bank manages advanced by 10% to total nearly $114 billion -- a key reason for the improvements in net interest income and profit.

If the economy continues to motor ahead, this momentum should continue. Also driving growth will be the company's expansion -- in its breakdown of the Q4 and 2015 results, it said that it renewed five "key relationships" and inked a (not specified) number of deals with new partners. The five renewals include PC Richard & Son, a big electronics retailer, and wheel purveyor Discount Tire.

This Fool's take
Perhaps because of its position as a specialist in relatively high-interest store credit products, Synchrony Financial's stock has fared better than that of its incumbent peers so far this year. It's declined only 6% in price year to date, compared to JPMorgan Chase's 13% and Bank of America's 21% slide. (By the way, Synchrony is also beating former parent General Electric, which is down around 10% so far this year.)

And both of those banks are doing well on a fundamental basis -- for fiscal 2015, JPMorgan Chase netted its highest-ever profit, while Bank of America's bottom line was one of its best over the past 10 years.

As a relatively streamlined and focused financial services company, Synchrony Financial has plenty of appeal for investors who might be uncomfortable with the sprawl of a JPMorgan Chase or a Bank of America. What also likely helps is that the company is a bit cheaper on a price-earnings basis, trading at 9.3 times trailing 12-month EPS compared with JPMorgan's 10.8, and 10.8 for Bank of America.

As long as consumer spending stays buoyant, Synchrony Financial should keep growing. The company turned in a decent Q4 and fiscal 2015, and if the macroeconomic factors remain on its side, it'll probably continue to do well going forward.

Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.