Brian J. Wenzel
Executive Vice President and Chief Financial Officer at Synchrony Financial
Thanks, Brian, and good morning, everyone. Synchrony's third quarter results reflected the strength of our financial model demonstrated through our consistent growth and strong risk adjusted returns. The compelling value propositions of our broad product suite continued to resonate with our 70 plus million customers and drove broad-based growth across our sales platforms and new loan receivables grew 14% versus last year benefiting from the combination of approximately 120 basis point decrease in payment rate versus last year and 5% growth in purchase volume.
Our third quarter payment rate was 16.3%, still remains approximately 130 basis points higher than our five year pre pandemic historical average. Net interest income increased 11% to $4.4 billion, reflecting 21% growth in interest and fees. The increase in interest and fees was due to client impact of higher loan receivables and benchmark rates as well as lower payment rate. Our net interest margin was 15.36%, declined 16 basis points compared to the prior year as higher funding costs more than offset the benefit of higher yields and favorable asset mix.
Specifically, loan receivable yield grew 114 basis points and contributed 95 basis points to net interest margin. Higher liquidity portfolio yield contributed an additional 46 basis points to net interest margin and our mix of interest earning assets improved net interest margin by approximately 28 basis points, reflecting our strong growth in loan receivables, but these gains were more than offset by higher interest-bearing liability costs, which increased 229 basis points to 4.34% and reduced net interest margin by 185 basis points.
RSAs of $979 million in the third quarter were 4.04% of average loan receivables, a $78 million decline from the prior year, reflecting higher net charge-offs, partially offset by higher net interest income. Our RSAs continue to perform as designed. They provide a critical alignment with our partners as we navigate the evolving environment together and support greater stability in our returns. Provision for credit losses increased to $1.5 billion, reflecting higher net charge-offs and a $372 million reserve build, which largely reflected the growth in loan receivables.
Other expenses grew 8% to $1.2 billion, primarily driven by the growth related items as well as technology investments and operational losses. Our efficiency ratio for the third quarter improved by approximately 330 basis points compared to last year to 33.2%. Summarizing our financial results, Synchrony generated net earnings of $628 million or $1.48 per diluted share, a return on average assets of 2.3% and return on tangible common equity of 22.9%.
Next, I'll cover our key credit trends on Slide 8. Our delinquency performance in the third quarter continued to reflect normalization towards pre pandemic behavior with both the 30 plus and 90 plus delinquency rates approaching 2019 levels. Our 30 plus delinquency rate was 4.40% compared to 3.28% last year and approximately 7 basis points lower than third quarter of 2019. Our 90 plus delinquency rate was 2.06% versus 1.43% in the prior year and approximately 1 basis point lower than our third quarter of 2019. Our net charge-off rate was 4.60% versus 3% last year. Synchrony remains approximately 115 basis points below the midpoint of our underwriting target of 5.5 to 6% where our risk adjusted returns are more fully optimized.
Overall, our credit performance remains within our expectations and has benefitted from investments in our advanced underwriting platform as we expect to continue on a path towards our long-term operating targets. Focusing on our more recent vintages, they continue to perform in line with those from 2019. While we're pleased with how these vintages are developing, we're continuously monitoring our portfolio to have implemented further credit actions including some tightening of our origination criteria. These proactive refiners are intended to position our business for 2024 and beyond.
Moving to reserves. Our allowance for credit losses as a percent of loan receivables was 10.4%, up 6 basis points from 10.34% in the second quarter. The reserve build of $372 million in the quarter was largely driven by receivables growth.
Turning to Slide 10. Our stable funding model and strong management of capital and liquidity continue to position Synchrony well for any environment. In the third quarter, customers continued to be attracted to our consumer bank offerings as we grew both direct and broker deposits to fund our anticipated receivables growth. Deposits represented 84% of our total funding at quarter end. The remainder of our funding stack is comprised of securitized and unsecured debt at 7% and 9% of refunding, respectively. We completed a $1 billion securitized issuance in the quarter and we'll continue to be active in both markets as conditions allow. Total liquidity including undrawn credit facilities was $20.5 billion, up $275 million from last year. At quarter end, liquidity represented 18.2% of total assets, down 190 basis points from last year as we manage our liquidity portfolio and fund strong loan receivables growth.
Moving onto 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 made this annual transition adjustment of approximately 60 basis points in January and will continue to make annual adjustments of approximately 60 basis points each year until January of 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 the CET1 ratio of 12.4%, 190 basis points lower than last year's level of 14.3%. The Tier 1 capital ratio was 13.2% under the CECL transition rules compared to 15.2% last year. The total capital ratio decreased 120 basis points to 15.3% and the Tier 1 capital plus reserve ratio on a fully phased in basis decreased to 22.5% compared to 24.1% last year.
During the third quarter, we returned $254 million to our shareholders consisting of $150 million of share repurchases and $104 million of common stock dividends. And at the end of the quarter, we had $850 million remaining in our share repurchase authorization. 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. We will also continue to seek opportunities to complete the development of our capital structure through the issuance of additional preferred stock as conditions allow.
Now please refer to Slide 11 of the presentation for more detail on our outlook for 2023. We expect our ending loan receivables to grow approximately 11% versus last year, reflecting the combined impact of payment rate moderation and slowing purchase volume growth. We expect the full year net interest margin of approximately 15.15%. The interest margin in the third quarter benefited from strong growth in interest and fees and receivables in addition to payment rate moderation and lower deposit betas. In the fourth quarter, we expect net interest margin to be impacted by higher average liquidity to pre-fund seasonal loan receivables growth impacting the mix of interest-earning assets, higher deposit betas driven by competition and movement in benchmark rates and interest and fee growth, partially offset by rising reversals.
From a credit standpoint, delinquency nearly reach 2019 levels at quarter end and should follow seasonal trends from this point. With the increased visibility into delinquency performance this year, we are tightening our forecasted net charge-off rate to approximately 48.5%. We continue to anticipate our loss rate reaching a fully normalized level between 5.5% and 6% on an annual basis in 2024 and as we noted, we will continue to monitor and position the portfolio for 2024 and beyond. We expect the RSA to trend at the low end of our prior outlook and be approximately 3.95% of average loan receivables for the full year.
This improved outlook reflects the impacts of the continued credit normalization, lower net interest margin and the mix of our loan receivables growth. And as we generate higher-than-anticipated growth, we are maintaining our expectation for operating expenses at approximately $1.15 billion per quarter. While we continue to make selective investments in our business, we're committed to delivering operating leverage for the full year and Synchrony continues to leverage our core strengths, our advanced data analytics, our disciplined approach to underwriting and credit management and our stable funding model. We're confident in our ability to execute on our key strategic priorities and deliver market leading returns over the long-term.
I'll now turn the call back over to Brian for his closing thoughts.
