Synchrony CFO Sees Consumers Spending Through Inflation Pressure

Synchrony’s purchase volume rose 8% to $49.8 billion, while loan receivables grew 2% to $102.2 billion. Consumers are spending more often rather than spending bigger. Transaction frequency, not ticket size, is driving the volume, CFO Brian Wenzel told PYMNTS. Credit held firm, with net charge-offs at 5.43% and 30-plus-day delinquencies at 4.16%.

The prevailing narrative says the consumer, squeezed by inflation, higher gas prices and a steady sense of uncertainty, is ready to pull back. Synchrony’s second-quarter results point in a more optimistic direction. People are still using their cards, and much of the growth is coming from how often they spend rather than from bigger individual purchases.

The results, reported Tuesday (July 21), put purchase volume at $49.8 billion, up 8% from $46.1 billion a year earlier. Average active accounts were roughly flat at 68.3 million, compared with 68.1 million a year ago. Co-branded cards did much of the work, accounting for $25.8 billion of purchase volume, a 23% increase.

Those figures describe a consumer that Brian Wenzel, executive vice president and chief financial officer at Synchrony, described in an interview with PYMNTS CEO Karen Webster as more durable than sentiment measures might suggest. “There’s this perception given gas prices and inflation that the consumer is going to bend or come under a lot of duress,” Wenzel said. “Sales accelerated, even though gas prices are up, inflation was up, but [consumers] continue to spend,” and they continue to spend in discretionary categories, he added.

The company’s data support that view. Discretionary spending as a share of out-of-partner co-branded spend held relatively steady through the first half of the year across super-prime, prime and non-prime customers. Asked whether that reflected broad consumer health or simply a shift in Synchrony’s portfolio toward prime and super-prime borrowers, Wenzel said mix plays a role, though not in the way conventional assumptions might suggest. “Our non-prime is down 130 basis points quarter on quarter. So yes, mix does help,” he said. “But when you look at that non-prime category, we still see resiliency.” The more noticeable softness, he noted, is among middle-prime consumers, who may be seeing less wage growth while facing affordability pressures.

On whether shoppers are buying more or simply paying more for a bigger basket, Wenzel said the answer came down to frequency rather than ticket size. Average transaction values were down on a reported basis because of portfolio mix, he said, and would have risen just under 2% excluding that effect. Transaction frequency, by contrast, was up roughly 6% to 9%. “So, really, the consumers that we see are engaging and spending more on a frequent basis,” he said.

The strength was broad based across Synchrony’s businesses. Diversified & Value rose 12% to $17.2 billion, Digital increased 9% to $14.9 billion, Home & Auto advanced 6% to $12.1 billion, Lifestyle gained 6% to $1.5 billion and Health & Wellness increased 2% to $4.1 billion.

Credit Holds as Walmart Adds Volume The growth in spending has not, so far, come at the expense of credit quality. The net charge-off rate was 5.43%, down from 5.70% a year earlier. The 30-plus-day delinquency rate stood at 4.16%, and 90-plus-day delinquencies were 2.01%. The allowance for credit losses eased to 10.09% of pe...