Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - Synchrony Financial | jointpressrelease111317.htm |
| 8-K - 8-K - Synchrony Financial | form8-kxpaypalx111617.htm |
PayPal & Synchrony Financial
Expanded Strategic Credit Relationship
November 16, 2017
Exhibit 99.1
2
Disclaimers
Cautionary Statement Regarding Forward-Looking Statements
This presentation contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified
by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar
meaning, but these words are not the exclusive means of identifying forward-looking statements. Such forward-looking statements include, but are not limited
to, statements about the projected impact and benefits of our acquisition of the PayPal Credit U.S. Consumer Receivables Portfolio, including our plans,
objectives, expectations and intentions and other statements that are not historical facts. Forward-looking statements are based on management's current
expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual
results could differ materially from those indicated in these forward-looking statements. Other factors that could cause actual results to differ materially include
global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether
industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small
number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; cyber-attacks or other
security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings;
our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized
loans, and lower payment rates on our securitized loans; our ability to grow our deposits in the future; changes in market interest rates and the impact of any
margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our
ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our
financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in
the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value
of strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our
operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs
associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation
and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to
our tax positions and state sales tax rules and regulations; a material indemnification obligation to GE under the tax sharing and separation agreement with GE
if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our
stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank
Wall Street Reform and Consumer Protection Act and the impact of the Consumer Financial Protection Bureau's regulation of our business; impact of capital
adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit
Synchrony Bank's ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing
third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other
cautionary statements that are included elsewhere in this presentation and in our public filings, including under the heading “Risk Factors” in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed on February 23, 2017. You should not consider any list of such factors to be
an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change.
Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking
statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as
otherwise may be required by law.
3
Credit Partnership Advantages
Consumer Credit
at PayPal
• Important flywheel
product
• Lower funding cost
• Higher average order
value and TPV per
customer
• New customers activated
on PayPal Credit have
50% higher engagement
than average new
activated1
• Higher merchant
adoption rates
PayPal’s Advantages
• PayPal retains credit
branding
• Fully integrated in-wallet
customer experience
• No impact to existing
merchant integrations
• Partnership will enable
faster development of new
product features and
experiences
Synchrony’s Advantages
• Strong digital capabilities
• Multi-product portfolio
• Best-in-class portfolio
management
• Proven history in credit
partnerships
• Robust balance sheet for
credit funding
PayPal & Synchrony Partnership will Enable Growth
1. PayPal analysis, November 2017.
4
Extending a Long-Term, Value-Creating Relationship
Driving exceptional
consumer & merchant
product experiences
Best of joint
capabilities across
the value chain
Successful partnership
for 13+ years
PayPal’s fully integrated
front end & superior
transaction data
Uniquely positioned to
grow through superior
decisioning and
product graduation
Synchrony’s extensive
product suite, lower cost
to serve, strong balance
sheet
Partners Since 2004
5
Powerful Partnership Structure
• Shared data will enable
superior underwriting, fraud
and risk management
• Governed by a joint Strategic
Operating Committee, with
PayPal retaining decision-
making authority on core
PayPal matters, such as
marketing, branding, and
merchant selection
• Marketing, including
maintaining and controlling
the customer acquisition
and checkout experiences
• Supplemental risk
management, model
development, and
enhanced underwriting
capabilities
PayPal ControlsJoint Ownership and
Governance
• Program management
functions, including
transaction authorization,
fraud management, and
payment processing
• Compliance – all items
related to legal compliance
• Risk management policies
• Final underwriting decision
rights
Synchrony Controls
6
Transaction Summary
Receivables Purchased Synchrony Financial will acquire $6.8 billion in receivables,
including PayPal’s U.S. consumer credit receivables portfolio,
which totaled approximately $5.8 billion in receivables as of
October 31, 2017, and approximately $1 billion in participation
interests in receivables held by certain investors and a chartered
financial institution
Third Quarter 2018
Pre-closing EPS impact
• 4Q17 ~$0.03 dilutive due to pre-funding and deal-related expenses
• 1H18 ~$0.05 dilutive due to pre-funding and onboarding costs
Post-closing EPS impact (assuming July 1, 2018 close)
• 2H18 ~$0.20 dilutive primarily due to allowance build
EPS accretive in 2019
Return on Assets
• Generally consistent with existing SYF return profile beyond early
impacts from allowance build, pre-funding, and onboarding costs
Transaction is not expected to impact current capital plan
announced May 17, 2017
Expected Closing
Financial Implications
Capital Implications
7
Expanded Strategic Credit Relationship with PayPal
Strategic
Economic
• Expands 13+ year successful partnership with leading global digital payments company
‒ Acquiring PayPal Credit elevates PayPal to Top 5 partner status at SYF
• Core program acquisition, ability to deliver significant value to the partnership
• Extends reach into attractive, rapidly growing digital payments channel
• Enhances competitive position and leverages our digital capabilities and expertise
• Significant opportunity for growth
• EPS accretive in 2019, with opportunity for significant growth
• ROA generally consistent with overall business after initial up-front costs and allowance build
• Opportunity to effectively deploy capital at attractive risk-adjusted returns
• Provides opportunity to leverage scale and realize synergies