On Wednesday, Synchrony Financial (NYSE: SYF) posted a nearly 12% rise in second-quarter net profit, driven by higher income from loans that offset an increase in the consumer banking firm’s loan loss reserves.
Credit card-focused lenders have outperformed the broader industry this year, benefiting from gains in interest income – the difference between what a bank earns on loans and pays out on deposits.
Customers typically pay the highest interest on credit card debt, shielding companies like Synchrony from the volatility of the market and rate-sensitive lending products such as mortgages.
Synchrony’s quarterly net interest income rose to $4.41 billion up from $4.12 billion last year.
The Stamford, Connecticut-based company’s net income available to common stockholders came in at $624 million or $1.55 per share in the three months ended June 30, compared to $559 million or $1.32 per share last year.
Meanwhile, interest rates, which have been at a multi-decadal high, have heightened the risk of possible loan defaults, prompting companies like Synchrony to increase their loan loss provisions.
The lender’s provision for credit losses increased to $1.69 billion, up from $1.38 billion in the year-ago period.
Synchrony’s (NYSE: SYF) purchase volume decreased by 1% to $46.8 billion, reflecting a dip in spending on the company’s credit cards amid high interest rates, as customers put off large purchases.
The company’s shares gained over 9% in the reported quarter compared to a little over 2% gain in the S&P 500 financial index during the same period.
(Source: Reuters)
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