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.