Grade: A — Strong Financial Health
Framework: Bank/credit card-specific analysis + Schilit principles (traditional manufacturing checks partially N/A)
Data: SEC EDGAR 10-K (Filed 2026-02-06, FY ended December 31, 2025) + Yahoo Finance
Auditor: KPMG LLP — Unqualified opinion
One-line verdict: Synchrony Financial is a private-label credit card bank with clean screening results. Net earnings of $3.55B (up 1.5%), ROE of 21.2%, CFFO/NI of 2.77x — strong cash conversion typical of credit card banks. The provision for credit losses declined $1.5B to $5.23B, driven by lower net charge-offs and a reserve release. Net charge-off rate declined from prior year peaks. Total assets of $182.3B. One watch item: cash of $15.0B covers 99% of $15.2B debt — adequate but tight. Goodwill of $2.6B is only 16% of equity and includes a 23% increase from acquisitions. The M-Score and Z-Score are not applicable to financial institutions.
| Metric | Result |
|---|---|
| Red Flags | **0** |
| Watch Items | **1** (cash-to-debt coverage 99%) |
| Checks Completed | **9/18** (9 N/A — standard checks inapplicable to card banks) |
| Beneish M-Score | **N/A** (model does not apply to financial institutions) |
| F-Score (Fraud Probability) | **1.56** (0.58% probability — low) |
| Altman Z-Score | **N/A** (not applicable to banks) |
| Auditor | KPMG LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
A Private-Label Credit Card Bank
Per the 10-K, Synchrony provides private-label credit cards, co-branded cards, and other credit products through retail partners. The bank generates revenue primarily from net interest income on credit card receivables.
| Metric | 2022 | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|---|
| Revenue | $11.7B | $13.6B | $16.1B | **$15.0B** | -7.1% |
| Net Income | $3.02B | $2.24B | $3.50B | **$3.55B** | +1.5% |
| Net Margin | 25.8% | 16.4% | 21.7% | **23.7%** | Improving |
| ROE | 23.4% | 16.1% | 21.1% | **21.2%** | Strong |
| CFFO | $6.69B | $8.59B | $9.85B | **$9.85B** | Flat |
| CFFO/NI | 2.22x | 3.84x | 2.81x | **2.77x** | Stable |
| Diluted EPS | — | $5.19 | $8.55 | **$9.28** | +8.5% |
| Total Debt | $14.2B | $16.0B | $15.5B | **$15.2B** | -1.6% |
Per the filing, the key drivers of FY2025 performance:
Revenue declined 7.1% primarily because the prior year included $1.52B in other income (vs $520M in 2025) — one-time items.
Credit Quality — The Key Metric
For a credit card bank, the provision for credit losses and net charge-off rate are the most important metrics:
| Credit Metric | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|
| Net Interest Income | $17.0B | $18.0B | **$18.5B** | +2.5% |
| Provision for Credit Losses | $5.97B | $6.73B | **$5.23B** | -22.4% |
| Net Charge-off Rate | — | — | **11.26%** | Monitor |
The provision declining from $6.73B to $5.23B is a significant positive signal — lower charge-offs suggest the credit cycle may be peaking. However, the net charge-off rate of 11.26% is elevated for credit card portfolios and warrants monitoring through economic slowdowns.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | N/A | Bank |
| A2 | AR vs Revenue Growth | N/A | Bank |
| A3 | Revenue vs CFFO | PASS | CFFO stable |
| B1 | Inventory vs COGS | PASS | No inventory |
| B2 | CapEx vs Revenue | N/A | Bank |
| B3 | SG&A Ratio | N/A | Bank |
| B4 | Gross Margin | N/A | Bank |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 2.77 |
| C2 | Free Cash Flow | PASS | FCF $9.85B |
| C3 | Accruals Ratio | PASS | -5.3% — very clean |
| C4 | Cash vs Debt | WATCH | Cash $15.0B covers 99% of $15.2B debt |
| D1 | Goodwill + Intangibles | PASS | $2.6B = 16% of equity |
| D2 | Leverage | N/A | Bank |
| D3 | Soft Asset Growth | N/A | Bank |
| D4 | Asset Impairment | N/A | No data |
| E1 | Serial Acquirer FCF | PASS | Positive |
| E2 | Goodwill Surge | PASS | +23% YoY — from acquisitions but manageable absolute level |
| F1 | Beneish M-Score | N/A | Bank |
Key Risks from the 10-K
1. Consumer Credit Deterioration
The net charge-off rate of 11.26% is elevated. While provisions are declining, a recession would drive charge-offs higher. Synchrony's portfolio consists primarily of unsecured consumer credit — the highest-risk category in a downturn.
2. Retailer Concentration and Share Arrangements
Per the filing, retailer share arrangements totaled $4.0B in 2025 (up from $3.4B). Synchrony shares economics with its retail partners, and loss of a major partner would significantly impact revenue.
3. CFPB Late Fee Rule
Regulatory changes to late fee structures could materially impact revenue. The filing discusses the evolving regulatory landscape for consumer credit products.
4. Funding Risk
Synchrony funds its credit card portfolio through deposits and securitization. Per the filing, deposits represent the majority of funding liabilities. Changes in deposit availability or cost would affect profitability.
Summary
Grade: A. Strong financial health. A well-capitalized credit card bank with declining provisions, strong cash generation, and no accounting red flags.
Synchrony passes all applicable screening checks. CFFO/NI of 2.77x shows exceptional cash conversion. The provision for credit losses declined $1.5B — a positive credit signal. ROE of 21.2% and EPS growing 8.5%. The risks are credit cycle-related (11.26% NCO rate, consumer sensitivity) and regulatory (late fee rules). Watch the charge-off rate through economic stress — if NCOs spike above 12%, reassess.
**Disclaimer**: This report is based on Synchrony Financial's fiscal year 2025 10-K filed with the SEC on February 6, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade A means strong financial health with no significant concerns.