Welcome to the Synchrony Financial Fourth Quarter 2016 Earnings Conference Call. My name is Vanessa, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. And I will now turn the call over to Mr. Greg Ketron, Director of Investor Relations. Sir, you may begin.

Thanks, operator. Good morning, everyone, and welcome to our quarterly earnings conference call. Thanks for joining us. In addition to today’s press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules and presentation are available on our website synchronyfinancial.com. This information can be accessed by going to the Investor Relations section of the website. Before we get started, I want to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company’s performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today’s call. Finally, Synchrony Financial is not responsible for, and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. Margaret Keane, President and Chief Executive Officer; and Brian Doubles, Executive Vice President and Chief Financial Officer, will present our results this morning. After we complete the presentation, we will open the call up for questions. Now, it’s my pleasure to turn the call over to Margaret.

Thanks, Greg. Good morning, everyone, and thanks for joining us. During the call today, I will provide a review of the quarter, and then Brian will give details on our financial results and a 2017 outlook. I’ll begin on Slide 3. Fourth quarter net earnings totaled $576 million or $0.70 per diluted share. We draw significant broad-based growth in each of our sales platforms, which resulted in double-digit growth in loan receivables and net interest income for the company. We also grew purchase volume 9% over the fourth quarter of last year. Looking at just our online and mobile purchase volume, sales grew 20%, far exceeding U.S. growth trends, which have been around 15%. And our Retail Card online sales penetration reached 25% in the fourth quarter. Looking at asset quality, 30-plus delinquencies were 4.32% compared to 4.06% last year, and our net charge-off rate was 4.62% compared to 4.23% in the fourth quarter of last year. Our strong revenue growth and expense discipline has yielded robust operating leverage, and put our efficiency ratio at 31.6% for the quarter, approximately 240 basis points lower than last year. Supporting our growth was another quarter of significant deposit generation, which increased $9 billion, or 20%, to $52 billion. Deposits now comprise 72% of our funding source. By focusing on competitive rates and exceptional customer service, we plan to continue to drive deposit growth. The longer term we expect for that growth to trend more in line with our receivables growth. Our balance sheet remain strong with the Common Equity Tier 1 ratio of 17.2% and liquid assets totaling $14 billion, or 15% of total assets at quarter end. And we were pleased to pay our quarterly common stock dividend payments of $0.13 and repurchased $238 million of our common stock during the…

Thanks, Margaret. I’ll start on Slide 6 of the presentation. In the fourth quarter, the business earned $576 million of net income, which translates to $0.70 per diluted share in the quarter. We continue to deliver strong growth this quarter with purchase volume up 9% and, both receivables and interest in fees on loans up 12%. Overall, we’re pleased with the growth we generated across the business in 2016. We had another strong quarter in average active accounts growth, which increased 6% year-over-year, driven by the strong value propositions and promotional offers on our cards, which continue to resonate with consumers. The positive trends continued in average balances and spend, with growth in average balance per average active account up 5% compared to last year, and purchase volume per average active account increasing 3% over the last year. The interest and fee income growth was driven primarily by the growth in receivables. The provision increased $253 million compared to last year. The increase was driven by higher reserve build and receivables growth. Regarding asset quality metrics, 30-plus delinquencies were 4.32% compared to 4.06% last year. And the net charge-off rate was 4.62% compared to 4.23% last year. The full-year net charge-off rate was 4.5% in line with the outlook of 4.3% to 4.5% we provided at the beginning of 2016. Our allowance for loan losses as a percent of receivables was 5.69%. Reserves were in line with the view we provided last quarter. Coverage typically declines in the fourth quarter due to the seasonal build in receivables and coverage came down 13 basis points compared to the third quarter as we expected. The asset quality metrics, which I’ll cover in more detail later, are in line with our expectations and reflect the gradual pace of normalization that we highlighted this…

Thanks, Brian. I’ll close with an overview of our strategic priorities. First, we will continue to execute across our three sales platforms. Building upon our capabilities in marketing, analytics, loyalty and mobile technology, we expect to continue increase in penetration at existing partners and we’ll add new partners and programs. Second, we will continue to expand our robust data, analytics and technology offerings, and will continue our innovative strategy on mobile wallet development for private-label credit cards. Third, we will broaden our banking product suite to help increase loyalty, further diversify our funding sources and drive profitability. We will also leverage our expertise to explore opportunities to expand our core business, such as expanding our small business capabilities and growing proprietary networks and acceptance. Fourth, we will continue to operate our business with a strong balance sheet and financial profile. We expect to support our business model with diverse and stable funding. We also expect to maintain strong capital and liquidity to support our operations, business growth, credit ratings and regulatory targets. Finally, we will continue to leverage our strong capital position. Our capital priorities are first and foremost organic growth and program acquisitions. Second, capital returns through dividends and share repurchases. And lastly, M&A that helps us enhance our capabilities to support growth. In closing, we accomplished a great deal this year and believe we are well positioned to continue to leverage our expertise, market position and innovative approach to digital platforms and analytics to grow our program, pursue opportunities and continue to deliver value to our partners, cardholders and shareholders. I’ll now turn the call back to Greg to open up the Q&A.

Thanks, Margaret. That concludes our comments on the quarter. We will now begin the Q&A session, so that we can accommodate as many of you as possible. I’d like to ask the participants to please limit yourself to one primary and one follow-up question. If you have additional questions, the investor relations team will be available after the call. Operator, please start the Q&A session.

Thank you. We will now begin the Q&A session. [Operator Instructions] and we have our first question from Sanjay Sakhrani with KBW.

Thanks and good morning. I guess the question I wanted to ask is around competition. Obviously, one of the key items that came out recently is the Chase’s Amazon Card product, the enhancement they made for rewards. Could you just talk about what kind of implications you expect to have on your own growth for that product? And just in general, I guess, I was getting a lot of questions from people asking if this means that the outside banks that aren’t in private-label are going to find their way into the space. Also, just maybe if you could clarify, the online sales growth number, Margaret, that you mentioned, it seemed to have slowed a little sequentially. Could you just talk about that as well? Thanks.

So there was lot of questions there. So let me start with Amazon and Chase. So, first of all, both of our programs have actually sat side-by-side for the last 9 years. We have the private label program and we have the opportunity to offer promotional financing. So these two programs have been out there together the whole time. It’s not surprising that Amazon wanted to match the value props. We knew that that was going to happen. We still believe that, given the growth of Amazon and our partnership with Amazon, that we have plenty of room to continue to grow. We see this as still a very big opportunity for us, particularly because of our partnership with them and the fact that we do have the promotional financing for big ticket it actually gives us some other opportunity. In terms of how we’re looking at it in our 2017, I’d just turn it over to Brian to kind of maybe comment on that.

Yes. I’d just reiterate what Margaret said, I mean, the two products have coexisted for a long period of time. And for the most part the products appeal to different consumers. And so, we’ve been able to grow the program very well over the years. That’s still our expectation going forward. Anything that we expect to see there has been obviously included in the guidance, so we just gave it on receivables.

And then your question on kind of mobile and online, let me just give you a little flavor. So overall, you saw we continue to invest in digital. We rolled out SyPi in the fourth quarter, which we feel really good about. Our online sales were up 20% versus last year, which is still above the industry average, which is about 16%. I think one important metric is in our sales penetration for Retail Card. It totaled 20% of our sales, while the national average is about 8%. And we’re now getting about 40% of our applications online. So if you think about where we’re going and particularly where mobile is going. We also see big growth in mobile, in that over 50 million of our apps have [come overly] [ph] since 2012. And that’s growing at above 42% year-over-year. So a little off of what we were running at, but certainly a very strong metric and one that we feel very good about. And see lots of opportunity in this space to continue to really outperform what the industry is performing at.

Thanks.

And thank you. Our next question comes from Don Fandetti with Citigroup.

Hi, good morning. Brian, I was wondering if you could talk a little bit about any potential portfolio acquisitions. And also on the Cabela’s deal Capital One ended up winning, it sounds like there is potentially some regulatory hurdles. They have to work through licenses. You guys were in there potentially as the cover bid. And I was just curious, if you think about a deal like that, I think one of the issues was that it was a bank. When you buy a retail portfolio, do you have any restrictions if there is a bank involved and like how quickly would you be able to get that type of approval? If you could just kind of talk about that a bit.

Yes. Sure, Don. So why don’t I start with the pipeline. I mean, we continue to see a very strong pipeline across all three of our platforms. As you know, we don’t build that into our guidance. So the outlook for 2017 of 7% to 9% on receivables is really organic growth. That’s really continuing to take tender share, grow penetration side of the existing retailers. But we always hope to add programs throughout the year. We had a really strong year on new deals, new program wins. We feel very good about our competitive position in all three platforms. And so that expectation is that will continue through 2017. I think Cabela’s, obviously - it’s our practice not to comment on potential transactions. So there is really not a lot that I can add there unfortunately.

Can you talk maybe a little bit about broadly when you look at a portfolio, if there is a bank, is that a consideration or is that a hurdle for you, I should say, even just generally?

Well, I think the - the consideration there is that if you’re acquiring another charter it usually requires a more, I guess, regulatory approval or a non-objection potentially depending on what the charter is and who the acquiring bank is. And so I think that’s certainly I think a consideration for anyone in the space as opposed to just if you’re buying a portfolio without a charter. Again not commenting specifically on any particular transaction, but acquiring charter tends to create a little bit more of a regulatory hurdle.

Got it. Thank you.

Yes.

And thank you. Our next question comes from Rick Shane with JP Morgan.

Thanks, guys, for taking my question. When we think about the consumer’s decision to use private-label versus general purpose, I think the decision is really driven by sort of balancing the utility of having available to borrow on a private-label that doesn’t reduce general purpose of borrowing and the incentives of rewards. And what we’ve seen in the last couple of years is reward incentive has gone up a ton. Are you guys seeing any shift in terms of how consumers are using the private-label card? Is that value proposition between utility and incentive changing in any meaningful way?

Well, I would say that what we’ve seen over the last couple of years is, obviously, greater penetration in our partners on private-label. And a lot of that is driven by the value props that we put out, the 5% on Amazon, the Walmart value prop, those types of value props are important to the consumer. I mean, I think one thing that consumers continuing to look for is either some form of cash back or reward points that they can go in and spend more. Most of our private-label rewards are really around driving that customer back into our partners. So I would say that consumers are paying a lot more attention to the type of rewards they are getting. And they’re really looking for some type of real financial benefit to really encourage them to spend more. And that something we continually research, we continually evaluate. We work with our partners to make sure we have fresh offers out there continually. And we continue to feel good about how we’re positioned here and the work we do with our partners on the types of research we do in rolling out those types of programs.

Well, it’s interesting because if you think about the distortion we’ve seen, it’s really between the consumer and the issuer. The retailers’ incentive to drive transactions toward private-label because of the lower transaction fee has been unchanged.

True. I’d also say from the retailer, because of our RSAs that’s a very important element in addition to the overall getting customers to use. But I think the other piece that’s important to note in all our research, we know that if a customers using a private-label credit card in one of our retailers, they tend to be the retailer’s best customer. So those are the customers that are much more loyal and spending more within that retailer. So it really is not just about saving interchange or cost, it’s really about growing sales for the retailer. And when a customer holds a private-label credit card, their basket tends to be bigger and they tend to make more trips to that particular retailer, whether it is in-store or online.

Terrific. Thanks, and sorry for the cell-phone ringtone in the background. That was the old Hartford Whalers’ theme song.

No problem, Rick.

And thank you. Our next question comes from John Hecht with Jefferies.

Thanks, guys. You commented a little bit on the efficiency ratio. And you mentioned, we should expect some operating leverage [with that] [ph] you’re making certain investments in the platform. Maybe you can give us a little bit more detail on the types of investments and the timing. And then a little deeper in that is, what part of the expense structure in terms of line items, where we will see those inflections?

Yeah, sure, John. So I think maybe just to frame it up, we should take a walk back through 2016. And in the last quarter’s call, I indicated that growing revenues 13%, expense is only growing 5%, and driving 240 basis points improvement in the efficiency ratio wasn’t exactly a reasonable expectation going forward. So I think there are a couple of things to think about in 2017. So first on the revenue side, our expectation is that revenue grows more closely in line with the three year average, so more in line with receivables growth than what we did in 2016. And then on 2016 in particular, we ended up spending a little less on the strategic investments than we originally planned. And so, that drove part of the efficiency ratio benefit that we had in 2016. And it really is just driven by timing of some of the spend related to the projects. And now some of that spend is going to slip into 2017. So that’s really the timing difference that we are talking about. In terms of the areas that we are investing it’s all the things that we talked about in the past. It’s digital capabilities, mobile, online, analytics, and it’s really investing in those things. It’s helping us deliver this very strong growth in what is a relatively weak retail environment. So when we look at the plan for 2017, we’re absolutely driving operating leverage in the core business. However, it is our expectation that it will be offset by the incremental spend on the strategic projects just giving the timing dynamic that I just mentioned. Does that make sense?

Okay. That’s helpful. Thanks. Yeah. And then with respect to the NIM guidance, maybe you could break it down, how much do you expect the kind of NIM trends to be related to the rate environment versus, I guess, the contract prices versus what you are doing with your excess liquidity portfolio?

Yeah, sure. So I’d say generally most of the drivers on NIM should be fairly stable. There is always a few puts and takes. First, we are slightly asset sensitive, so we would expect to see a modest improvement from the rate hike that we just got in December, and the increase in prime. But then we expect to have a couple of offsets. Last year, particularly in the second half of 2016, we had a pretty significant lift in receivable yields. We saw higher revolve, frankly came in better than we expected it to. And we think that that benefit will moderate a bit into 2017. And then, one of the dynamics that we had all year-in 2016 was the really strong growth of Payment Solutions. We do expect that to continue. And the fact that those receivables come on at a lower yield than the portfolio average, that will give us some slight downward pressure on the margins. And the last thing I would just point out is that just given where the yield curve is right now, any unsecure or secured issuance we do in 2017 is likely to be a little more expensive. So I would say, generally fairly stable on the margins for 2017 with some slight downward bias.

I appreciate the color. Thanks very much.

Yeah.

Thank you. Our next question comes from David Ho with Deutsche Bank.

Good morning. I just wanted to parse out some of the credit outlook commentary you provided. Specifically starting out with the charge-off rate guidance, how does that compare to your June guide of roughly 20 to 30 basis points kind of through the first-half of 2017. And now we’re kind of looking towards more of 25 to 50 basis points higher for all of 2017. Is that really the mix or do you see just a little bit on the margin, a little more credenalization [ph] on the back half of maybe higher or more aggressive kind of growth on the part of consumer? Thanks.

Yeah, sure, so no real change from what we previously indicated. We expect to continue to see credit normalize over time. The backdrop is still favorable. We still feel good about where unemployment is, where jobs are, so the consumer is generally healthy. As I mentioned in the comments earlier, our base plan has this a little below the midpoint of the range. So that’s right in line with kind of where we thought would be back in June for the full year 2017. We obviously look at other scenarios and other assumptions that could push us toward the higher end as well. We look at things like portfolio mix and expected mix changes. We look at consumer trends and payment behaviors. And that’s what really gave us that range of 4.75% to 5%. We’ve also assumed a relatively stable macro environment, so we didn’t include any lift from job growth, wage growth. It’s really based on more of a status quo economy. So I think importantly, look, overall we are still very comfortable operating at these levels. And we really like the risk adjusted returns on the accounts we’re booking.

Sure. And then, more specifically on the mix, are you still seeing some faster growth from stores with a slightly weaker customer mix? And maybe how much of that is being offset by kind of lower loss rate Dual Card growth?

Yeah. I mean, those are all included in the guidance obviously. As we talked about in the past, our underwriting is very customized and we underwrite differently based on platform, by program, but also by channel and by product. So for us is not a one size fits all approach. So you can maintain very consistent credit guidelines, which we have. But given that we underwrite to different loss rates across all those different dynamics, portfolio mix can play a factor. And we certainly included that in the guidance that we provided.

Thank you.

And thank you. Our next question comes from Betsy Graseck with Morgan Stanley.

Hi, good morning.

Good morning.

Good morning.

Could we talk a little bit about the Dual Card program and the expectations you have for expanding that? And how much of that is in the guidance that you provided in loan growth?

Sure. So we’re always looking to expand Dual Card. It’s been a great product for us in terms of where we are. We try to get it into all big programs. So we continue to look at ways to encourage our partners to deliver Dual Card. And, 19 of our 26 customers already - or partners already have a Dual Card. So it’s definitely part of our strategy. It’s definitely something we feel really good about. And we’ll continue to work with our partners to grow those programs.

Okay. And then, separately…

And then, talking specifically on your guidance question, we obviously build in the current trends that we’re seeing on growth related to Dual Card. What we don’t build in though typically are new Dual Card launches. So as Margaret said, we have Dual Card in 19 of the 26 programs. For the other seven we haven’t assumed that we do any big Dual Card launches there. So that would be incremental if we’re able to get one or two of those done this year.

Okay, got it. And then a follow-up question on just the outlook for tax reduction and how you would use that strategically in your business, you’re obviously a [full freight payer] [ph] right now. And if there were to be any tax changes that would reduce that for you, how would you think about that in your competitive position?

Yes, now, it’s a great question. Obviously, there are a lot of speculation going on right now. Typically, we don’t spend money that we don’t have. So I think we need to wait and see to see what kind of benefit we do realize on tax reform. Right now, we’re funding the majority of the strategic projects that we’ve identified. But obviously, we would take a look at that and see if there is maybe some more that we could do on that front to drive growth. I think, it would be the same things that we’re investing in now. But maybe it just is we do a little bit more that. We might invest a little bit more in promotions, value propositions. All things are going to continue to drive growth to make the business better. The key question I think is how does the competitive environment change under tax reform and we’ll obviously have to react to that as well.

And do your clients expect to get any of that tax improvement that you would generate for themselves? Would that be part of the discussion you think?

Well, I think that’s going to be part of the discussion on all of this. Like I said, I think we’re going to have to see how the competition reacts to this. And, I think to the extent that there is real savings here, we’re going to have to react to the competitive reality of that. But I think that’s we’re really speculating now. I think first we have to see what tax reform looks like and then I think we have to see what competitors end up doing.

Okay. Thank you.

Yes.

And thank you. Our next question comes from Mark DeVries with Barclays.

Yes, thanks. So it looks like the loan growth guidance for 2017, again, it was biased to be conservative than last year. You guys came in 300 basis points above the high-end of your guidance. I guess my question is what kind of headwinds do you see the loan growth that would justify kind of a midpoint that’s again kind of 400 basis points below your run rate for 2016.

Yes. Sure, Mark. So, look, obviously 2016 was a very strong year. We’re really pleased with the growth that we’re seeing across the portfolio. I think the headline growth numbers were good. When you break down and look at the customer level metrics, you see really good trends on purchase volume per active account was up 3%, the balances per account were up 5%. So these are all good indicators that the consumers are seeing real value on the cards. So I think generally we feel really good about how we’re positioned here. When we build the outlook for 2017, you have to remember that the 79% is an organic growth target. And if you go back over the past five years and you strip out the impact from new deals and portfolio acquisitions and new value props, organic growth tends to be in that 7% to 9% range. And that’s typically what we build the plan around. It also assumes that we’re still operating in this relatively weak retail environment that’s growing around 2% to 3%. So we didn’t include any lift from potential wage growth or we didn’t build in any material gains and consumer confidence. So given those dynamics and the growing balances at 7% to 9% with retail sales growing in the 2% range is a pretty good result. And, obviously, based on my earlier comments, we’ve got a really strong pipeline of new deals. And we’re working really hard to bring those on. Those would help us maybe be a little bit better than this. And obviously, that’s something that we’re trying to do, but we tend to build the plan around organic growth and don’t include things that are uncertain or that we don’t know about.

Okay. But just a follow-up on that point, I mean, I think BP - wasn’t VP like your biggest contributor in organic growth and didn’t that lap kind of in the first half of the year, so the 12% run rate you are at in the back half of the year is relatively close to a clean organic number, right?

Well, I don’t know if I’d call it, because again remember we strip out value proposition changes too when we think about that. So we had a very significant change to the value prop at Walmart, Amazon is largely in the comps now. But that’s certainly giving us some lift in 2016. So we don’t build those things in and then sometimes those can happen midyear and help the results quite a bit. But you’re right on BP. We also brought on Mattress Firm, Guitar Center and some others that are in the past couple years.

Okay. Got it. Thanks.

Yes.

And thank you. Our next question comes from Bill Carcache with Nomura.

Thanks. Good morning. Margaret, I had a follow-up question for you on your earlier comments around the competitive reward dynamics that we’re seeing. It seems to us like you guys are relatively more isolated from the rewards for dynamics that we’re seeing in the general purpose space. Do you agree with that characterization? And do you think that puts Synchrony on a relative damage in anyway?

Well, I think - I would say, yes. And I think part of that is driven by the fact that when we think about value prop and rewards. It’s really within the context of our partners. And if you really look at someone who would use our card consistently, they would save more money and get more benefits over time if they use their cards every time they go into our partner. So I think if you really looked at the richness of our rewards, they’re actually better and the consumer can really get some real advantages there. So I do think we are a bit outside of the big reward programs. And it really does come down to a consumer who has real brand loyalty to a particular partner, who sees the value that they’re getting on their card and continually use that card and feel like they’re really gaining some real advantage by the rewards that we put together for those particular programs.

That’s great. Thank you. Brian, I had a question for you on the - on your allowance for loan losses as a percentage of period-end receivables. Assuming that the credit environment remains unchanged from where it is today, would the year-over-year change in that ratio continue to rise gradually higher at the same trajectory that we’ve been seeing as credit continues to normalize or would it flatten out at some point? I’m not looking to kind of get you to commit to where the ratio is going to go, but we’d just love to hear your just brought thoughts on the mechanics of how that works at this point in the cycle.

Yes, sure. I mean, obviously as charge-offs are normalizing, you would expect the reserve percentage on receivable to continue to increase. And the best way for you to model that I think is we’d expect reserve coverage, and again, this is not how we book the reserve, but we would expect reserve coverage against future net charge-offs to be in that 14 to 15 months of coverage range. So I think if you take your charge-off forecast and you back into what the reserves will need to be to maintain that coverage ratio, that should give you a pretty good way to think about it. So more specific to your question, as charge-offs start to level off, and we do expect normalization will level off at some point, when that happens you would expect coverage increases to level off as well. And you get to more of a steady state. Now, I can’t give you a quarter as to when exactly that’s going to happen, but at some point in the future and certainly post 2017 at some point, we would expect that to happen, and so those two should level off together.

That’s exactly what I was looking for. Very helpful. Thank you.

And thank you. Our next question comes from Ryan Nash with Goldman Sachs.

Hey, good morning, guys. Thanks for taking my questions. Brian, I guess, just on that last point I do think historically you talked about something around 4.75% to 5% being normal for charge-offs. And clearly you said you don’t expect this to be the year where charge-offs inevitably level off. But do you still feel comfortable that that’s the range where we should expect charge-offs to begin to level off?

Yes, right. I don’t think we’ve given a normalized charge-off level. We’ve kind of given you annual guidance as we see things. And part of the reason for that is there is clearly a lot of variables that go into that. You kind of have to pick an economic scenario. You have to pick unemployment number, jobs, wage growth, confidence, all those things in order to provide that. So we give you our best outlook for the next 12 months. We feel like we have a pretty good visibility around that. We’ve done that for 2017. I think importantly, as you think about normalization, normalization assuming all else being equal, and you’re still in this favorable environment, credit should - the credit trend should level off at some point. But again it’s hard to pick a quarter in terms of when that is actually going to happen.

Got it. And maybe if I could ask a question on the RSA, clearly this past year was impacted by the large reserve builds. And now you’re talking about going back to 4.4% to 4.5%, which was similar to 2015 levels now. Now, I think you didn’t have any provision growth that year. So I’m just trying to marry a couple of different things. The efficiency ratio is going up. We are saying charge-offs are going up and there is a potential that loan growth is decelerating. So I’m just trying to understand like why would be RSA be going up under that environment. Couldn’t we infer that you can have - the provision growth is clearly going to slow or retailers getting a bigger share? And then I guess, you did comment that Payment Solutions could grow faster, which doesn’t have RSA attached to it. I’m just trying to think about all those different comments together and tying it to the RSA.

Yeah. So obviously, there is a lot of moving pieces here and we talked about it on the past. You have to factor in all aspects of the program. So to your point, margin, credit, operating expense, you’ve got program mix, the deal structures are all different and have different tiers and you also have growth. So all of those things have to be factored in. And again I recognize it’s difficult for you guys to model, that’s why we tell you what we think it’s going to be for the year. And maybe one way to think about it, Ryan, is that, you alluded to 2015, so if you take 2015 for a second, just drop 2016 from a minute, we reported a 4.4% RSA in 2015. And then if you do a comparison to what we are guiding to for 2017, you will see that for 2017 our efficiency ratio is planned to be much better than it was in 2015 and the margins will also be better. And so you have those two dynamics offset with higher provisions. And that gets you back to a similar kind of RSA rate.

Got it. Thanks for taking my questions.

Hey, Vanessa, we have time for one more question.

Thank you. Our final question will come from Moshe Orenbuch with Credit Suisse.

Great. Thanks. I guess, just a follow-up on the questions on Amazon. Would you be willing to just talk a little bit about what portion of the customers use that promotional financing, because I was interested by the comments, Brian, about the revolve rates going up, because I would imagine the customers that Chase might attract away would be people that might be more of convenience user type and perhaps not the ones that would be your core customer in any case?

Yes, I think, basically, we probably target different customer basis between the Chase program and ours. We don’t really disclose what the percentage of people who take the value prop. But if you think about the products that Amazon sells, big ticket TVs, whatever, that’s what you usually see us being offered as, as one of opportunities for the customer to go after. I think the other maybe people think of prime customers as prime customers, and they’re not necessarily all prime customers, right? So obviously, we’ll go little deeper than Chase would go. So I think our target markets are slightly different so that’s why in terms of how we think of the overall Amazon program, we still think that has plenty of opportunity for us to really sit side-by-side with Chase, what we’ve been doing over the years. I think the real different here is the value props are now matched. So we’ll continue to watch and then see what the impact is. We knew about program before it was launched. It was built into our 2017 guidance. So we still - I mean, listen, it’s a great program and we feel great about our partnership. And what we are doing with Amazon. There’s still tons of opportunity there.

Great. And just a follow-up, I think the definition of organic growth that you used kind of surprised me, because it’s actually more conservative than I would have thought. I mean most of - I think other companies generally would have considered value prop changes and other things like that as organic growth. Is there any way you could kind of just approximate what those value prop changes have benefited the growth rate in the last few years, like is it 1 point, is it 2 points?

So just to be clear on that, we absolutely build in any value props that we know about or that have been agreed to with our partners. So if we were sitting here today in January and we knew that in March or June we were going to rollout a new value prop on one of our programs, we would obviously build that into our plans and we’d build that into the outlook. What we don’t build in are things that are just being kind of discussed and are very preliminary at this point. It’s really hard to go back over time and we certainly tried internally. I am not going to give you percentage. But it’s hard to strip out and say, okay, here’s what purchase volume would have been if we were just doing weekly, monthly promotions versus an everyday value prop. We certainly have a view on that when we launched these things, but it’s hard to go back over the past two or three years, and strip that out entirely for you. What I can tell you though is there - go ahead.

I was just going to say, but there has been some upside to it over the last several…

Absolutely, I mean, if you look at - think about the three big value props that we launched in last two years, Walmart 3-2-1 the most recent one, the Sam’s Club value prop and Amazon. Those clearly helped our growth rates. And we’d be really excited to continue to do that. We are in discussions with all of our partners on beefing up the value propositions on the cards. We just don’t build in anything that we don’t know about at this point.

Great. Thanks so much.

Yes.

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