Synchrony (SYF) is BOFI without any hair

http://investors.synchronyfinancial.com/~/media/Files/S/Sync…

From what I gathered so far, SYF is a bigger and albeit slower growing cousin of BOFI, with one major difference. They have a one branch and only one branch in the whole country (as far as I know) in Bridgewater, NJ.

One friend recently who rejected BOFI for his high yield savings accounts needs (he has 3 kids in college and needs to hold large amounts of cash in a high yield savings account) recommended I look into Synchrony to park my excess cash. He had rejected BOFI before the news came out where they had allegedly manipulated their transcript sending the stock down. I had sold significant portions and then eventually all of BOFI because of the fear. To be fair, my friend has been wrong. Sure BOFI stock fell, but the earnings and book value per share have steadily risen. BOFI is a star with some hair on it.

SYF’s press release that I glanced today appeared awfully similar to BOFI. ROE over 19%, deposits grew by 10B or 29% in the first quarter, and the efficiency ratio was 30.4%. They have a much larger deposit base (hence less growth potential), but they appear to be BOFI’s elder brother with better grades and no lawsuits (though I haven’t confirmed that).

Book value per share was 15.84, and the stock is at 30.50.

I think if all the allegations on BOFI prove false, BOFI stock will perform better than SYF because they could potentially grow their deposits faster due to their small size. But SYF is an alternative and could be considered. They do have a 3.5 glass door rating and 91% CEO approval (https://www.glassdoor.com/Reviews/Synchrony-Financial-Review…) as opposed to BOFI at 2.8 and 55% CEO approval. I was the one who brought up Glassdoor first on this board and used that as one of my excuses to trim my positions, but the Glassdoor rating argument was rejected on this board (in case someone reading this is not aware).

I own a few shares of BOFI, but no position in Syncrhony. But I would like to read up their conference calls and learn a little more. It looks interesting. I would like to hear what anyone here thinks.

I read TMF1000’s arguments for BOFI (which gave me courage to hold my remaining shares) where he essentially argues that the allegations are just that, and unless proven he does not care. But I am sure he would care if he had a large position in it (e.g. 15% of his portfolio). It is just human psychology. You can’t ignore allegations, even if they eventually turn out to be false.

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Hubbaman,

Thanks for sharing. Overall it looks like a good bank that could be worth diving into a bit more. The key statistics look pretty positive overall going by my quick evaluation of their Q12016 numbers. The only yellow or red flag I see so far is the credit quality metrics and it looks like they might be moving a little bit in the wrong direction.

Credit Quality

Credit quality performance was relatively stable and in-line with expectations.
Loans 30+ days past due as a percentage of period-end loan receivables were 3.85% compared to 3.79% last year.
Net charge-offs as a percentage of total average loan receivables were 4.70% compared to 4.53% last year.
The allowance for loan losses as a percentage of total period-end loan receivables was 5.50% compared to 5.59% last year.

I was also a bit curious and glanced at the company’s history. It’s relatively short as a self-standing company, since it used to be known as “GE Capital Retail Finance Corporation” and was a division of GE. It IPO’d in 2014, so there is only a modest amount of financial data history available. Also, its focus seems to be on private label credit cards, even as it also has other businesses.

Interesting enough to merit a deeper look? Probably. But I’ll wait for somebody else to do that sort of digging because I don’t see that it is obviously “without any hair”. Instead, by my 5-minute search, the story doesn’t seem to be a quick and easy analysis.

as always, i am full of carp

huddaman: …and no lawsuits (though I haven’t confirmed that).

Quick Google search:

http://tcpablog.com/wp-content/uploads/2015/09/Aikens.pdf

https://search.rpxcorp.com/lit/flmdce-315074-nextcard-v-sync…

https://dockets.justia.com/docket/new-jersey/njdce/3:2016cv0…

http://www.law360.com/cases/56e31cf3a1717c0bb8000001

https://www.justice.gov/sites/default/files/crt/legacy/2014/…

But then, which bank isn’t being sued by someone?

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