Profits at Synchrony Financial took a hit in the third quarter as the COVID-19 pandemic hastened the ongoing migration toward online shopping.
The Stamford, Conn.-based credit card issuer reported net earnings of $313 million in the quarter, down from $1.05 billion in the same period last year. Quarterly purchase volume across the company fell by 6.2% to $36.01 billion, and period-end loan receivables declined by 5.6% to $78.5 billion.
“The ultimate impact from this crisis remains difficult to quantify right now,” CEO Margaret Keane said Tuesday during a call with analysts.
Synchrony, which specializes in store-branded cards, partners with traditional brick-and-mortar retailers and providers of elective medical services, as well as online merchants such as Amazon. The two former categories have suffered this year as many U.S. consumers, wary of catching the virus, have spent less money in-person.
Synchrony executives said Tuesday that the company is rapidly adapting to the new environment, including through the use of contactless payment technology.
“Quickly recognizing in the early days of the pandemic that we needed to accelerate many of our efforts to support our partners,” said Synchrony President Brian Doubles, “we have reallocated resources and agile teams to fast-track key digital initiatives for our partners.”
The pandemic is also reshaping how Synchrony runs its own business. The company said Tuesday that all of its U.S. employees can now work from home permanently. In addition, all new job openings will be posted without geographic requirements. Those new policies factored into Synchrony’s decision to close certain work sites and reduce the size of others. The company took an $89 million restructuring charge in the third quarter.
“We believe this work-at-home-for-all strategy provides more flexibility for employees, and more flexibility for the company,” Keane and Doubles wrote in a Sept. 8 memo to employees. “Importantly, it will help save a significant amount of money and preserve more jobs as we are able to reduce our site footprint.”
The economic damage from the coronavirus crisis has yet to hurt credit quality at Synchrony. Only 2.67% of the company’s period-end loan receivables were at least 30 days past due on Sept. 30, compared with 4.47% a year earlier.
But Synchrony expects late payments to increase as government relief aid to consumers hard hit by the coronavirus pandemic expires. The firm’s allowance for credit losses was $10.15 billion as of Sept. 30, or 12.9% of period-end loan receivables.
Shares in the $96 billion-asset company fell by 4.2% to $27.86 in midday trading Tuesday.
Synchrony is the first U.S. bank that specializes in the credit card business to report its third-quarter earnings. American Express, Discover Financial Services and Capital One Financial are all scheduled to report their results later this week.
