Synchrony's Q2 2026 net earnings fell 8.5% to $885M as a smaller reserve release and higher costs outweighed record $49.8B purchase volume, but diluted EPS rose 3.6% to $2.59 on an 11.9% lower share count, with net charge-offs down to 5.43%.
Net interest income
$4.6B
+1.9% YoY
Net interest margin
15.08%
Net income
$885M
-8.5% YoY
Diluted EPS
$2.59
+3.6% YoY
Efficiency ratio
35.8%
Net charge-off ratio
5.43%
CET1 capital ratio
13.2%
Return on tangible common equity
25.2%
Net interest margin (NIM): what a bank earns on its loans and securities minus what it pays for deposits and borrowing, as a share of those assets. Efficiency ratio: operating costs per dollar of revenue (lower is better). Net charge-off (NCO) ratio: loans written off as unrecoverable, net of recoveries, as a share of average loans. CET1: the bank's core capital cushion against losses, as a share of risk-weighted assets.
Overview: profit fell 8%, earnings per share rose 4%
Synchrony Financial earned $885 million in the second quarter of 2026 (April–June), down 8.5% from $967 million a year earlier. Yet diluted earnings per share (EPS) rose 3.6%, from $2.50 to $2.59. The gap comes from share buybacks: the average diluted share count fell 11.9%, from 379.1 million to 334.1 million, so a smaller profit was split among far fewer shares.
The business itself was steady. Customers spent a record $49.8 billion on Synchrony cards (+8%), net interest income rose 2%, and credit losses fell. Profit dropped for two reasons that have little to do with how the loan book performed this quarter:
A smaller reserve release. Synchrony released $163 million from its loan-loss reserve, against $265 million a year earlier. A reserve release adds to profit when a lender expects fewer future losses, so a smaller one cuts into this year's figure.
Higher costs and taxes. Operating expenses rose $86 million (+6.9%), and the effective tax rate went from 23.0% to 25.4%.
Some background on the company: Synchrony is mainly a private-label card issuer. That means store-branded credit cards (Lowe's, Amazon, CareCredit for medical and pet bills) that usually work only at that retailer or within its network. It also issues "Dual Cards" and other co-branded cards, which carry the store's brand but work anywhere on a card network. Consumer co-branded cards made up 34% of loans at June 30, 2026. Many of these customers have weaker credit than the average general-purpose cardholder, so loan yields and loss rates run well above those of a typical bank.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net revenue (NII + other income − retailer share)
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Synchrony does not report a single "revenue" line. "Net revenue" here is net interest income plus other income, minus retailer share arrangements (4,608 + 137 − 1,027 = 3,718). This is the denominator Synchrony uses for its efficiency ratio. The Q2 2025 CET1 and ROTCE figures are as recast in the Q2 2026 supplement.
Margin: cheaper funding offset lower loan yields
Net interest margin (NIM) measures how much a lender earns on its loans and investments after paying for its funding, as a share of its interest-earning assets. Synchrony's NIM rose 30 basis points (0.30 of a percentage point) to 15.08%. Nearly all of the gain came from the funding side.
Interest expense fell $90 million (−8.5%), "primarily due to lower interest-bearing liabilities cost associated with lower benchmark rates." Cost of funds dropped from 4.35% to 3.96%. Deposit interest alone fell $88 million, to $767 million. The earnings presentation puts this effect at +29 bps of NIM.
Loan yield slipped 11 bps to 21.43%. The 10-Q attributes this to "lower benchmark rates and lower assessed late fees, partially offset by the impacts of our product, pricing and policy changes." Late-fee income fell from $560 million to $508 million. The "product, pricing and policy changes" (PPPCs) are the higher APRs and new fees Synchrony introduced from 2024 onward. They are still holding up yield.
Income on the cash and securities portfolio fell 21% ($258M to $203M) as rates declined. Synchrony also held less cash: total liquid assets fell from $21.8B to $19.8B. Because a larger share of assets now sits in high-yield card loans rather than low-yield cash, the margin gained another +23 bps.
Interest and fees on loans rose only 1% ($52 million), in line with average loan growth of 1.5%. The margin gain came from cheaper deposits, not from growing the loan book faster.
Spending up 8%, balances up 2%
Purchase volume grew 8.1% to $49.8 billion. Management called it an all-time high. Spending rose on all five sales platforms:
Platform
Purchase volume
YoY
Loan receivables
YoY
Diversified & Value (Sam's Club, TJX, JCPenney, OnePay)
$17.2B
+12%
$20.8B
+6%
Digital (Amazon, PayPal/Venmo, Verizon)
$14.9B
+9%
$29.0B
+4%
Home & Auto (Lowe's, Ashley, Discount Tire)
$12.1B
+6%
$30.4B
flat
Health & Wellness (CareCredit)
$4.1B
+2%
$15.4B
+1%
Lifestyle (Polaris, DICK'S, Guitar Center)
$1.5B
+6%
$6.6B
−1%
Loan balances grew much more slowly than spending because customers are paying their bills off faster. The monthly payment rate was 17.0%, about 70 bps higher than a year earlier and about 170 bps above the 2015–2019 average. Synchrony attributes this to "new portfolios seasoning, shifts in portfolio/product mix, and the impact of our previous credit actions." Faster repayment is good for credit quality. It also means less interest income from each dollar of spending.
Part of the 2.4% loan growth came from an acquisition. In April 2026 Synchrony bought $0.7 billion of loans in the Lowe's commercial co-branded card portfolio. That is why commercial credit products jumped 35% to $2.7 billion. Without the deal, underlying loan growth was closer to 1.7%. Average active accounts were essentially flat at 68.3 million (+0.4%).
Credit quality kept improving
The net charge-off rate is the share of loans a lender writes off as uncollectible over a year, after any money it later recovers. Synchrony's fell 27 bps to 5.43%, and net charge-offs dropped $47 million to $1.36 billion. Loans 30+ days past due improved slightly, to 4.16% from 4.18%. Loans 90+ days past due fell to 2.01% from 2.06%.
With fewer expected losses, Synchrony released reserves again. The allowance for credit losses (money set aside for expected future losses) fell to 10.09% of loans from 10.59% a year ago. In dollars it went from $10.56 billion to $10.31 billion. The 10-Q says the decline was "primarily driven by continued asset quality trends that reflect the impact of prior credit actions and elevated customer payment rates."
The first month after the quarter kept this trend. Synchrony's monthly statistics for July 2026 (8-K filed 17 August) show a 30+ delinquency rate of 4.2%, the same as July 2025, and a net charge-off rate of 4.7%, down from 5.1%.
Takeaway: EPS growth this quarter came from buybacks, not higher profit. Net earnings fell 8.5% while the diluted share count shrank 11.9%. What makes that sustainable is that credit held up at the same time: charge-offs fell to 5.43% and delinquencies stayed flat while spending hit a record. Synchrony can therefore keep releasing reserves and returning capital. The trade-off is that CET1 has come down a full point to 13.2%.
Costs and other income
Other expense +$86 million (+6.9%) to $1.33 billion, driven by "higher operational losses and costs related to technology investments." The "other" expense line rose 33% ($158M to $210M), mostly from operational losses such as fraud. Information processing rose 15%. The efficiency ratio (operating expense divided by net revenue, where lower is better) worsened to 35.8% from 34.1%.
Retailer share arrangements +$35 million (+3.5%) to $1.03 billion. These are the profit-sharing payments Synchrony makes to partners like Lowe's and Amazon. When a program performs better, with lower losses and higher spending, the partner receives more, which limits how much of the credit improvement Synchrony keeps. RSA equaled 4.1% of average loans.
Other income +$19 million to $137 million. This includes a one-off $30 million gain on exchanging Visa Class B-2 shares. Without it, other income would have fallen, because loyalty-program costs rose $76 million (+21%) and outpaced higher interchange revenue (+12%) and protection-product revenue (+12%).
Capital return
Synchrony returned $950 million to shareholders in the quarter: $850 million in buybacks (11.7 million shares) and $100 million in dividends. It has $5.7 billion of buyback authorization left. It raised the quarterly dividend from $0.30 to $0.34 starting in Q3 2026, and issued $500 million of 7.25% preferred stock. The CET1 ratio (core capital as a share of risk-weighted assets, the main measure of a bank's loss-absorbing cushion) fell to 13.2% from 14.2%. Synchrony's walk shows buybacks alone took off 3.6 points, while earnings added back 3.5. Deposits of $82.8 billion supplied 83% of funding.
Outlook
Management's guidance (updated 2026 outlook in the Q2 earnings presentation):
Diluted EPS of $9.25–$9.50 for FY2026. First-half EPS was $4.85, so the range implies $4.40–$4.65 for the second half. That is below the first-half pace, partly because Q3 2025's $2.86 included a larger reserve benefit.
Mid-single-digit growth in ending loan receivables, with growth "expected to accelerate through second half of 2026" and payment rates "expected to remain elevated."
Net charge-off rate below 5.5%, with "relative stability" following normal seasonal patterns.
RSA/average loans rising but staying within 4.0%–4.5%; other expense in the second half "relatively consistent" with the first half.
Our read: Credit is the variable that matters most for a lender serving weaker borrowers, and on that front Synchrony looks solid. Charge-offs and delinquencies were flat to better year-on-year, July data continued the trend, and the reserve still covers 10.1% of loans. The weaker spots are elsewhere:
Loan growth is lagging spending. Balances grew 2.4% (about 1.7% without the Lowe's purchase) while spending grew 8%. Reaching mid-single-digit growth by year-end requires a clear acceleration while payment rates stay high.
Revenue per loan is under pressure. Loan yield and late-fee income both fell. Most of the NIM gain came from cheaper deposits, which depends on further rate cuts.
Reserve releases are shrinking. With coverage already down about 50 bps year-on-year, releases are unlikely to contribute as much as they did in 2025. Earnings growth will have to come more from loan growth and buybacks.
Management's July commentary cited "elevated fuel prices" and a "geopolitical crisis" affecting spending. If those pressures persist into the fourth-quarter holiday season, the first place to look is the 30+ delinquency rate. It usually rises seasonally in Q3–Q4, so the question is whether it rises faster than usual.
Source: Synchrony Financial Form 10-Q for the quarter ended June 30, 2026 (filed July 23, 2026), with figures cross-checked against the Q2 2026 earnings release, financial supplement and earnings presentation (8-K, July 21, 2026) and the monthly credit statistics 8-K (August 17, 2026).