Credit Card Giant Synchrony's Earnings Show U.S. Consumer 'In Pretty Good Shape'–As Long As Inflation Doesn't Spike

Forbes

22-07-2025

Synchrony, which has 68 million active accounts, saw more consumers paying back their loans in the second quarter of 2025 versus last year. Jaque Silva/NurPhoto via Getty Images
A mericans have more debt than they've ever had, making them vulnerable to defaulting on their loans if the economy turns south. New financial results from credit card issuer Synchrony show that U.S. borrowers are holding up fine, but if inflation rises sharply again, all bets are off.
Synchrony is a Stamford, Connecticut-based bank that offers co-branded credit cards and point-of-sale loans for customers like Sam's Club, Lowe's and PayPal. One in every four American adults has a Synchrony card, the company says, so its financial performance gives us an inside look into consumers' financial health. The bank manages a book of $100 billion in loans and has a stock market value of $27 billion.
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During the first two years of the pandemic, U.S. consumers became financially healthier than ever thanks to government stimulus checks and increased saving. But after inflation rose quickly in the years that followed, consumers strained to meet rising expenses, with lower-income consumers being particularly hard-hit.
Default rates hit alarmingly high levels. In November 2024, nearly 8% of people with credit scores of 660 or below were at least 30 days late on their credit card payments. It was the highest delinquency rate seen among that group since January 2011, according to Moody's and Equifax.
Synchrony saw a similar trend among its customers. The bank's charge-off rates, or the dollar amount of its loans it considers gone for good because consumers probably won't pay them back, went from 4.75% in the second quarter of 2023 to 6.42% a year later, sailing past the 6% maximum charge-off rate the company aims for. 'Since we hadn't experienced inflation for so long, lenders didn't have a large and modern set of data to react to it with a scientific or surgical approach,' says John Hecht, an analyst at Jefferies.
In Synchrony's second quarter of 2025 earnings call on Tuesday, CEO Brian Doubles said more consumers are now paying back their loans than the company expected. 'They're still in pretty good shape. We're not seeing signs of weakness,' he said, adding that consumer spending is 'pretty strong.' Charge-offs fell from 6.4% in the first quarter of this year to 5.7%, and the number of people who were at least 30 days late on their payments fell, too.
Synchrony's total book of loans shrank 2% in the second quarter of 2025 compared with a year ago. But Doubles has recently led Synchrony to start 'opening up the credit box,' or loosening its standards for doling out money. He expects faster growth in the second half of this year and next year.
Doubles is optimistic, but his predictions 'exclude any potential impacts from the deteriorating macroeconomic environment, or from the implementation of tariffs or potential retaliatory tariffs, as their effects remain unknown,' Synchrony chief financial officer Brian Wenzel said on the call. In other words, if inflation jumps up, borrowers' plight will worsen quickly.
An analyst from JPMorgan asked Doubles how he'll keep borrower defaults under control while relaxing lending standards. The CEO responded that lending 'has always been an art and a science.' He said he likes the credit trends he's seeing and is being selective in where to expand. Yet he also added, 'The most important part here now is what's going to happen with the economy and essentially a tariff situation.'
Synchrony's customers are especially vulnerable to getting hurt by inflation, says TD Cowen analyst Moshe Orenbuch, because many have below-average credit scores. According to Synchrony, 28% of its credit card customers had FICO scores below 650 as of March 2025.
The company touted a few new products and customers that it expects will drive higher growth. That included a new buy-now, pay-later product for Amazon users, a physical PayPal credit card and two credit cards for Walmart's digital bank, OnePay. Walmart was a long-time Synchrony customer until 2018, when the retail giant switched to Capital One. Back then, Synchrony managed $10 billion in loans for Walmart. Doubles said Walmart will eventually become one of Synchrony's top five customers now that it has won back that credit card business.
After the earnings call, Synchrony's stock closed up 1.8% for the day. So far in 2025, its stock has risen 8.7%, according to FactSet, compared with 7.3% for the S&P 500.