Safe and Sound

Synchrony Bank

Draper, UT
5
Star Rating
Founded in 1988, Synchrony Bank is an FDIC-insured bank based in Draper, UT. Regulatory filings show the bank having equity of $10.61 billion on assets of $79.17 billion, as of December 31, 2017.

Thanks to the efforts of 10,243 full-time employees in 5 offices in multiple states, the bank holds loans and leases worth $63.19 billion, including $405,000 worth of real estate loans. U.S. bank customers currently have $57.81 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Synchrony Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Synchrony Bank racked up 16 out of a possible 30 points, beating out the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Synchrony Bank's Tier 1 capital ratio was 14.92 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Synchrony Bank held equity amounting to 13.40 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these types of assets means a bank could have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Synchrony Bank fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.43 percent of Synchrony Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Synchrony Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Synchrony Bank scored 24 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Synchrony Bank was 15.44 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.56 billion on total equity of $10.61 billion. The bank reported an annualized return on average assets, or ROA, of 2.10 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.