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LETTER FROM
BRIAN DOUBLES

President and Chief Executive Officer

DEAR SYNCHRONY STAKEHOLDERS,

Last year, a pair of humanitarian crises—a global pandemic and the struggle for social justice and racial equality—tested American society and its institutions like few periods in our history. In a time demanding action, our company responded swiftly and purposefully. We were able to do so for two reasons:

First, Synchrony’s strategy is built for good times and challenging ones. With an eye on delivering on our long-term goals, we’ve remained focused on:

  • Winning and growing large partner programs
  • Diversifying and expanding with new products and markets
  • Delivering best-in-class customer experiences
  • All while continuing to operate with a strong balance sheet and financial profile to deliver attractive total shareholder returns. During the past seven years, we have made substantial progress against each of these pillars.

The second reason we were able to respond so quickly this year is Synchrony’s unique culture. As Margaret discussed in her letter to you, culture is at the heart of who we are and how we do business. It is the single most important competitive advantage we have, and it continues to fuel our success. We believe that if we lead with our values and deliver for our employees, partners and customers we will create a more valuable company.

SYNCHRONY’S PERFORMANCE IN 2020

As with most businesses in financial services, the pandemic impacted Synchrony’s financial results. Loan receivables were $81.9 billion, net interest income was $14.4 billion and net earnings were $1.4 billion.

Despite this, we showed how fundamentally sound and well-managed our company is. Unlike many others in our industry that saw at least one quarter of net earnings losses, Synchrony maintained positive earnings throughout each quarter of 2020. In fact, we have never had a negative earnings quarter in our history, which we attribute to our deep partnership model and strict underwriting standards. In 2020, we ranked first in net charge off year-to-year improvement and efficiency ratio, and second in return on equity and return on assets, as compared to our direct peers.3

In addition, we operated with a very strong balance sheet; our liquid assets as a percentage of total assets were 19.1%, CETI Capital Ratio was 15.9%, and our reserve coverage rose to 12.5%. All signs of a healthy business poised to grow in a post-pandemic rebound.

We also saw several bright spots across the company. In 2020, we renewed 41 key relationships, signed 25 new partnerships and launched promising new programs with Verizon and Venmo. We continued to grow and diversify with small and medium businesses; our Payment Solutions business expanded our Synchrony-branded networks in home and auto.

In CareCredit, we continued to drive broader acceptance and further expansion of the network, now with 13 relationships with health systems across the country. We acquired Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services; extended Pets Best’s relationship with Progressive; and, in January 2021, announced a new program agreement with Walgreens to become the issuer of the first co-branded credit card program for a national health retailer in the United States.

Our digital innovations—supported by the technology investments we’ve made over the last seven years—drove growth across our digital channels through new digital and mobile features and experiences. Our customers increasingly want to interact digital first: 60% of our total applications and 65% of our total payments came through our digital channel. Our digital partners like Amazon, eBay and PayPal were up 22.1% in purchase volume.

We believe these investments are critical to driving growth in our existing programs, supporting our partners as they adapt to the rapidly evolving environment resulting from the COVID-19 pandemic, and securing renewals and winning new programs.

However, to fully tell the story of Synchrony’s response to the challenges of 2020, we need to go further. Here are five milestones from last year that demonstrate who we are and the resiliency that’s at our core.

STRATEGIC PRIORITIES

Win and grow large partner programs

  • Drive growth for our partners and continue to strengthen our relationships by delivering new products and capabilities.
  • Launch new programs with a focus on fast- growing partners where we can leverage our technology capabilities.

Diversify and expand with new products and markets

  • Grow Payment Solutions through point-of-sale capabilities and innovative product offerings.
  • Grow CareCredit through broader acceptance and further expansion of health systems networks and pets.
  • Continue to invest in and expand Synchrony-branded products including auto and home networks.
  • Leverage acquisitions to integrate digital technologies and develop new revenue sources.

Deliver best-in-class customer experiences

  • Rapidly scale industry-leading new products and expand acceptance.
  • Continue to advance digital, contactless solutions to further deliver a frictionless customer experience.
  • Continue expansion of advanced analytics, leveraging customer level performance dynamics.
  • Leverage alternative data and machine learning to further drive innovation (e.g. underwriting and authentication).

Operate with a strong balance sheet and financial profile to deliver total shareholder return

  • Follow disciplined capital allocation approach to drive growth, launch new programs and invest in new products and capabilities, while continuing to return capital to shareholders.*

* Subject to board and regulatory approvals

01. WE TRANSFORMED HOW AND WHERE WE WORK

In March 2020, as COVID-19 quickly spread, protecting our employees and their families became our top priority. We moved decisively on their behalf—putting global plans and protocols in place to support their health, wellness and safety.

We knew we had to get every member of our team to work from home. This meant making sure each Synchrony employee—including thousands of contact center employees who had never worked from home—was equipped with the technology and tools they needed.

For many employees, working from home presented new challenges. Many home offices had become home daycares and classrooms. To help ease the strain, we expanded childcare benefits for all employees and provided additional flexibility and backup childcare reimbursement for contact center associates. We added benefits in financial planning, mental health and tips on keeping children healthy and active. We even launched a Synchrony virtual summer camp and after-school program for our employees’ children.

When we took a breath and evaluated our progress, we were pleasantly surprised. It was apparent that nearly every job could be done—and done well—from home.

Remote work is here to stay in a meaningful way. We believe we’ll be a stronger business because of it. We’ve seen this new model accelerate decision-making and innovation while keeping employees more engaged and more productive. As a result, we’ve scaled our approach to work at home, allowing most employees to choose whether they want to continue to work remotely even after the pandemic. We are proud of the increased flexibility this provides.

We believe that this new way of working will allow us to attract and retain the best talent by offering the flexibility people need to be successful—both personally and professionally.

02. WE SUPPORTED OUR PARTNERS, CUSTOMERS AND COMMUNITIES IN THE FACE OF ECONOMIC CRISIS

Synchrony worked hard to develop programs to provide relief during the pandemic. This meant taking an individualized approach to offering customers assistance—such as through interest and fee adjustments, deferred payments, extending existing credit card promotions, and reevaluating credit limits.

Similarly, helping America’s small businesses was an urgent priority. Synchrony supports more than one million small businesses across our platforms—partners that sit at the heart of our economy. We provided them financial support, advice and intellectual capital for managing their businesses, including information on how to create marketing campaigns and reopen safely.

We made contributions to the communities we serve including $5 million for hunger-relief organizations and local communities, a separate $5 million contribution for small businesses, and $1 million for the World Central Kitchen. We tripled employee giving power, offering a 2-for-1 match for qualifying local and national non-profits.

03. WE ACCELERATED ACTION IN THE FACE OF SOCIAL AND RACIAL INJUSTICE

In May 2020, we hosted a “Week of Solidarity,” standing with and learning from our Black colleagues. We provided support and learning resources to all employees. To help Synchrony parents talk to their children about race, we facilitated open discussions with medical and psychology professionals. We also established a senior-level diversity and inclusion task force dedicated to increasing diverse employee talent at all levels of the workforce, growing diverse business partnerships and addressing deeply rooted gender and racial inequality in the communities in which we live and serve. The committee has already donated time, money and resources to community programs that promote diversity and inclusion.

04. WE RESPONDED TO NEW BUSINESS REALITIES FOR SYNCHRONY’S SHORT- AND LONG-TERM HEALTH

We are confident in the fundamental resilience of our company and our ability to manage through this cycle—just as we have managed through other cycles for nearly 90 years. With the pandemic hurting the economy, we adapted by managing costs and resizing the business. We transformed how we work and reduced our physical site footprint, implemented a hiring and promotion freeze as well as travel and expense restrictions, insourced certain work at a lower cost, and reduced or eliminated other work.

We believe we made the right decisions during 2020 to position Synchrony for growth and the post-pandemic recovery. Collectively, these targeted cost actions will drive approximately $210 million in savings in 2021.

05. WE ENHANCED PARTNER AND CUSTOMER EXPERIENCE THROUGH ACCELERATED TECHNOLOGY INNOVATION

In the early days of the pandemic, we strategically and quickly reprioritized key business imperatives, as we sought to respond to the quickly unfolding pandemic. This empowered us to deepen our commitment to innovation on behalf of our customers and partners, and we responded by doing some of the most important and creative work in our company’s history.

Soon after the pandemic began, we accelerated our business and technology roadmaps to emphasize helping partners transform their operations in response to the pandemic and aid in their long-term digital transformations. For example, we added additional resources to accelerate contactless payments for partners, adapting to the contactless shopping that was occurring around the country.

Drawing on our deep technology expertise, we created new features our partners and customers demanded and delivered them through our library of APIs (building blocks of the digital world): such as direct to device, prefill, text to apply, alerts, contactless payments and more. We also continued to scale Agile, as a way to deliver technology solutions and a new way to work, across the company.

OPTIMISM FOR 2021 AND BEYOND

I want to thank our employees, Board of Directors, partners and customers who have supported Synchrony in 2020.

I also want to thank our shareholders for their confidence in Synchrony and for embracing our long-term strategy.

On behalf of all Synchrony stakeholders, I want to thank Margaret, our first president and CEO, for her vision and leadership. As Margaret assumes her new role of executive chair of our Board of Directors, she has our gratitude, respect and admiration. I look forward to being able to call on her for guidance and counsel, just as I have for the last decade.

Earlier, Margaret talked about her hope for the future. From the moment she was named CEO, Margaret made bold decisions and pushed everyone at Synchrony to approach challenges and opportunities with creative thinking. With passion. With drive. She ensured our company had the foundations needed to reach its fullest potential.

I am optimistic for what lies ahead. Our accomplishments in 2020 have prepared our company to emerge from the pandemic stronger and better able to serve all stakeholders.

Our unique, differentiated and enduring culture, along with our new way of working sets us up to drive innovation and attract and retain the best talent.

Our technology investments, API ecosystem and agile innovation allows us to bring digital innovations to all our partners and help them grow.

New challenges and disruptions will always be on the horizon, but we have proven that our strengths—our culture, our technology, our people—allow us to anticipate and adapt at the speed of change.

Our business is special because it is powered by incredible people. Humbled, I am ready to lead Synchrony and our great team to new heights. Committed to our strong, unique culture and our great employees, I am excited about what’s to come. We are ready for this moment.

BRIAN DOUBLES
President and Chief Executive Office

3Direct peers include American Express Company, Capital One Financial Corporation and Discover Financial Services.