Brian J. Wenzel Sr.
Executive Vice President and Chief Financial Officer at Synchrony Financial
Thanks, Brian and good morning, everyone.
Synchrony delivered another quarter of strong financial results, demonstrating the resilience of our differentiated business model and our ability to execute across our key strategic priorities to deliver consistently compelling outcome for our stakeholders. Ending loan receivables reached $102 billion in the third quarter, reflecting growth of 4% compared to last year as the benefit of approximately 60 basis point decrease in payment rate more than offset the 4% decline in purchase volume. Net revenue grew 10% to $3.8 billion due to the combined impact of higher interest and fees, lower RSA and higher other income. Net interest income increased 6% to $4.6 billion as interest and fees grew 7%, primarily reflecting growth in average loan receivables and a higher loan receivable yield. Our loan receivable yield grew 30 basis points due to the combined impact of our product, pricing and policy changes or PPPCs and lower payment rate, partially offset by higher reversals. Total interest-bearing liabilities cost was 4.78%, 44 basis points higher year-over-year due to higher benchmark rates.
RSAs of $914 million were 3.57% of average loan receivables in the third quarter and declined $65 million versus the prior year, primarily driven by higher net charge-offs. And other income increased to $119 million, primarily related to the impact of our PPPC-related fees, which were partially offset by the impact of our Pets Best disposition and venture investment gains and losses. Provision for credit losses increased to $1.6 billion, reflecting higher net charge-offs and a $47 million reserve build. Other expenses grew 3% to $1.2 billion, which was driven by costs related to the Ally Lending acquisition, technology investments and preparatory expenses related to the late fee rule change, partially offset by lower operational losses. The preparatory expenses related to late fee rule change reflected $11 million of incremental costs related to both the execution of our PPPCs and the implementation costs of the rule itself should become effective. Even with these incremental costs, the efficiency ratio was 31.2% for the third quarter, an improvement of approximately 200 basis points versus last year, reflecting Synchrony's continued cost discipline and commitment to driving operational leverage in our business. Taken together, Synchrony generated net earnings of $789 million or $1.94 per diluted share. This produced a return on average assets of 2.6% and a return on tangible common equity of 24.3%.
Next, I'll cover our key credit trends on slide nine. At quarter-end, our 30-plus delinquency rate was 4.78% versus 4.40% in the prior year and 16 basis points above our historical average from the third quarters of 2017 to 2019. Our 90-plus delinquency rate was 2.33% versus 2.06% in the prior year and 20 basis points above our historical average from the third quarters of 2017 to 2019. And our net charge-off rate was 6.06% in the third quarter versus 4.60% in the prior year and 97 basis points above our historical average from the third quarters of 2017 to 2019. Our allowance for credit losses as a percent of loan receivables was 10.79%, which was generally consistent with the second quarter coverage ratio of 10.74%.
As shown on slide 10, the credit actions we've taken from mid-2023 through early 2024 are improving our delinquency trajectory as the rate of year-over-year growth in both 30-plus and 90-plus delinquency rates continue to decelerate. We'll continue to closely monitor our portfolio performance as well as credit trends for the broader industry, given our shared consumer and will take additional credit actions if necessary. While the actions we have taken since last year have reduced new account and purchase volume growth in the short-term, we expect it will strengthen our portfolio's position as we exit 2024 and support our ability to deliver our targeted risk-adjusted returns over the long-term.
Turning to slide 11, Synchrony's funding, capital and liquidity continued to provide a strong foundation for our business. During the third quarter, Synchrony grew our direct deposits by approximately $780 million, reduced our broker deposits by $1.5 billion and issued $750 million of senior unsecured fixed-to-floating rate notes due in 2030. At quarter-end, deposits represented 84% of our total funding, while secured and unsecured debt each representing 8% of our total funding respectively. Total liquid assets and undrawn credit facilities were $22.4 billion, a $1.9 billion increase versus last year and represented 18.8% of total assets, a 60 basis point increase from last year. Focusing on our capital ratios. As a reminder, we elected to take the benefit of the CECL transition rules issued by the joint Federal Banking Agencies, Synchrony will make a final transition adjustment to our regulatory capital metrics of approximately 50 basis points in January 2025. The impact of CECL has already been recognized in our income statement and balance sheet. Under the CECL transition rules, we ended the third quarter with a CET1 ratio at 13.1%, 30 basis points higher than last year's 12.8%. Our Tier 1 capital ratio was 14.3%, 70 basis points above last year. Our total capital ratio increased 70 basis points to 16.4%. And our Tier 1 capital plus reserves ratio on a fully phased-in basis increased to 24.5% compared to 22.9% last year.
Synchrony returned $399 million to shareholders during the third quarter, which consisted of $300 million in share repurchases and $99 million in common stock dividends. As of quarter-end, we had $700 million remaining in our share repurchase authorization for the period ending June 30, 2025. Synchrony remains well-positioned to return capital to shareholders as guided by our business performance, market conditions, regulatory restrictions and subject to our capital plan.
Turning to our outlook. Synchrony remains focused on executing our key strategic priorities and taking the appropriate actions to reinforce our business performance for years to come, particularly our ability to deliver our long-term financial targets on average over-time. We have been closely monitoring our portfolio and believe that both our credit actions and the PPPCs are performing in-line with our expectations. With the first quarter of our PPPCs in effect, we are experiencing slightly lower paper statement fee income than expected with strong enrollment in e-bill. We're also experiencing less customer attrition than expected, which is a testament to the value propositions of the products we offer. We will continue to attract the financial and operational impact on our customers, partners and portfolios to determine alongside our partners whether any refinements to our strategies are warranted to achieve our shared objectives of sustainable risk-adjusted growth at our targeted long-term returns.
As a reminder, specifically related to the framework around the pending late fee rule change and our PPPCs, there continues to be uncertainty regarding the timing and outcome of late fee-related litigation that was filed in March, the potential changes in consumer behavior that could occur as a result of late fee rule change and any potential changes in consumer behavior in response to the PPPCs and the broader industry have implemented as a result of the new rule. Outcomes and actual performance related to any of these uncertainties could impact our outlook.
With that framework, let's turn to our outlook for the remainder of 2024. We expect the consumer to continue to manage their spending, which when combined with our credit actions should result in low single-digit decline in purchase volume for the fourth quarter. We continue to expect payment rates to moderate, which when combined with the purchase volume expectations should contribute to low single-digit growth in ending loan receivables compared to last year. Given that the late fee rule was not implemented on October 1, as assumed in our previous outlook and the continued uncertainty with regard to late fee litigation, we assume the late fee rule will not become effective in 2024. As a result, we expect net interest income to remain sequentially flat as the impacts of our PPPCs are offset by seasonally higher reversals. Other income is expected to remain consistent with the third quarter level. RSA will continue to align program and company performance and should decrease sequentially on a dollar basis and as a percentage of average loan receivables, reflecting the net impact of seasonally higher net charge-offs on flat revenue. Other expenses expect to increase sequentially with the seasonally higher growth. And from a credit perspective, we expect delinquencies to follow seasonality in the fourth quarter. We also continue to expect the second half 2024 net charge-off rate will be lower than the first half.
Lastly, we continue to expect our year-end 2024 reserve rate to be generally in-line with the year-end 2023 rate. Given these assumptions, Synchrony expects to deliver fully diluted earnings per share between $8.45 and $8.55 for the full year 2024. The approximate $0.80 improvement from the midpoint of our prior full-year EPS outlook reflects a combination of factors. First, [Indecipherable] assumption that the late fee rule be implemented on October 1, 2024, and therefore also the removal of the related benefit from the RSA offset. Second, the impact of our PPPCs and the increase in RSA associated with those changes. And finally, strong performance of our core business as we enter the fourth quarter.
In summary, Synchrony has continued to deliver on key strategic priorities that matter most to our stakeholders. We remain confident in the measures we've taken thus far to strengthen our business in an evolving environment and believe we're well-positioned to drive resilient risk-adjusted returns over the long-term.
With that, I will now turn the call back over to Brian for his closing thoughts.
