Good morning, and welcome to the Synchrony Financial Fourth Quarter 2022 Earnings Conference Call. Please refer to the company's Investor Relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. [Operator Instructions] I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. Welcome to our quarterly earnings conference call. 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 wanted 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 or guarantee, the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer; and Brian Wenzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Kathryn, and good morning, everyone. Synchrony closed the year on a very strong note with fourth quarter net earnings of $577 million, or $1.26 per diluted share, a return on average assets of 2.2% and a return on tangible common equity of 22.1%. These financial results contributed to full year 2022 net earnings of over $3 billion or $6.15 per diluted share, our second highest in company history; a return on average assets of 3.1% and a return on tangible common equity of 28.5%. This performance was driven by continued strength across the fundamental drivers of our business and a high level of execution across our key strategic priorities throughout the year. We achieved record purchase volume of $180 billion for the full year, which surpassed our prior year's record and was 15% higher on a core basis. Spend per active account was 7% higher for the year, reflecting robust consumer demand across the broad range of products and services for which Synchrony offers flexible financing. We also acquired 23.6 million new accounts and grew average active accounts by 8% on a core basis. The combination of strong consumer spend and some moderation in payment rate contributed to ending receivables growth of 15%. As expected, credit continued to normalize across our portfolio with full year losses of 3%, still more than 250 basis points below our underwriting target of 5.5% to 6%, which is generally the level at which our risk-adjusted margin is more fully optimized. And finally, Synchrony continued to drive progress toward our long-term operating efficiency target, reflecting the combined impacts of our cost discipline, the inherent operating leverage in our highly scalable model and strong revenue growth. Synchrony's ability to deliver consistent growth and strong returns is a testament to our well-diversified portfolio, our balanced approach…

Thanks, Brian, and good morning, everyone. Synchrony's strong fourth quarter results demonstrate the power of Synchrony's purpose-built business model at work. The diversification of our portfolio across industries and spend categories supported by sophisticated underwriting and disciplined credit management enabled continued purchase volume growth that surpassed last year's record level. In addition, the alignment of economic interest between Synchrony and our partners through our retailer share arrangements is performing as intended. Excluding the impact of portfolio sales, our RSA declined as credit losses continue to normalize and funding costs began to rise, enabling Synchrony's delivery of consistent, attractive risk-adjusted returns as we have done for many years. The scalability and efficiency of our dynamic technology platform is enabling operating leverage even as we invest in our business. And Synchrony's strong balance sheet continue to support our customers and partners as their own needs evolve. In combination, these business drivers have continued to uniquely position Synchrony in our ability to deliver sustainable outcomes for our customers and our partners and consistent returns to our shareholders even as market conditions change. Let's now discuss Synchrony's fourth quarter financial results in greater detail. Purchase volume grew 2% to $47.9 billion, reflecting a 3% higher spend per account versus last year. On a core basis, purchase volume grew 11%. This continued strength in purchase volume was broad-based across our portfolio, demonstrating the breadth and depth of our five sales platforms, the compelling value propositions we offer and continued consumer demand. At the platform level, Synchrony achieved double-digit growth in our Diversified & Value, Health & Wellness and Digital platforms and single-digit growth in our Home & Auto and Lifestyle platforms. More specifically, in Diversified & Value, purchase volume increased 15% driven by higher out-of-partner spend in addition to partner performance and penetration growth. The…

Thanks, Brian. Looking to 2023 and beyond, Synchrony is well positioned to navigate the uncertainties of the operating environment that lies ahead. As we continue to leverage our differentiated business model to add new and deepen existing customer and partner relationships, further scale our comprehensive product suite, enhance our programs and expand our markets and deliver best-in-class experiences centered around each customer's individual financing needs. Synchrony will increasingly attract new customers and forge more expansive relationships, support our partners' ability to grow through evolving market conditions and solidify our leadership position as the digital ecosystem of choice, all while driving consistent, high-quality growth at strong risk-adjusted returns for all stakeholders. With that, I'll turn the call back to Kathryn to open the Q&A.

That concludes our prepared remarks. We will now begin the Q&A session. So that we can accommodate as many of you as possible, I would 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.

[Operator Instructions] We will take our first question from Moshe Orenbuch from Credit Suisse.

Great. Thanks very much. And thanks for all of the detail around the guidance and the performance. I think the -- Brian -- I guess, Brian Doubles, you talked a lot about some of the enhancements to your products. Maybe could you just amplify a little bit as to how you're thinking about Synchrony's role with your partners in this current environment? I mean, it seems like this is an environment in which you're -- and what I hear from the retailers that they're going to need your help more. Just talk a little bit about how to think about the things that you talked about that you're doing and how that's going to help Synchrony and the shareholders?

Yes. Sure, Moshe. Thanks for the question. You're absolutely right. I think our partners, in an environment like this, tend to lean on us even more heavily. It's -- there's a lot of uncertainty out there that we've all talked about in terms of consumer trends and behavior and what we can expect from inflation and just kind of the broad uncertainty around the macro environment. And so our partners look at us and they say, okay, what are we doing to drive sales? What are we doing to drive new accounts? And this is when they lean even more heavily on the rewards programs and the credit customers, we've talked about in the past, always is their best most loyal customer. And so in this kind of environment, this is where they really double down and have really constructive discussions around, should we be refreshing the valve prop, should we be doing more promotions, more offers, are there new capabilities and new products that we should be introducing? And we've had really great discussions with our partners, particularly around the multiproduct strategy. So the combination of being able to offer a revolving credit product and installment buy now pay later loan and how those products work together. And one of the things that, as you know, we've been very focused on in that multiproduct journey is creating an easy experience for the customer, but also a really easy experience for a partner. So how do you offer multiple products and use our data-driven analytics to make sure that the customer, their customer is getting the right product, the right offer at the right time. And I think in an environment that we're heading into, that becomes even more important. So going all the way back to our Investor Day, we talked about that strategy. We spent a lot of time on it, and I do believe still to this day that the multiproduct strategy is the winning one. And we're hearing that from our partners. They're highly engaged in it. And I think, over time, it's going to pay big dividends for Synchrony and all of our stakeholders. So thanks for the question.

Great. And maybe just to flip this over to Brian Wenzel. As you kind of factor all of that into the financial aspects, where are the areas you think that this could kind of help either already embedded in that guidance or where it could -- things could be better as we go through 2023?

Yes. Thanks, Moshe, for the question. As I think about it, that engagement really to drive the compelling value proposition and linkage to the customer can really drive, what I would say, spend probably above what you'd see either in retail sales or in the general economy. So that would help fuel a lower payment rate as well. So I think you can see upside to the asset of 8 to 10, if that gained a lot of traction in 2023.

We'll take our next question from Ryan Nash with Goldman Sachs.

Brian, maybe to just start on the loan growth guidance, can you maybe just unpack some of the drivers behind it. I think you mentioned 30 new business wins. Brian Wenzel, you talked about solving payment rates and also maybe expectations for purchase volume growth. And then I guess any color across which platforms you expect to drive the growth just given the robust growth you've seen along with shifting views on inflation?

Yes. So thanks for the question, Ryan. So I think as you think about our asset growth, there's two dynamics that come into play. One is, you will see a slowing payment rate. Now, again, we don't expect the payment rate for the entire business to get back to historical levels during 2023. So that is one that will help you from an asset perspective. But if you believe that the economy is going to get a little tougher, the headwind then becomes, will the consumer pull back on spending a little bit? So I think those two dynamics kind of play with each other and how we think about it. Again, if the economy doesn't -- is stronger than we think, again, I think -- I still think you'll see slowing payment rate, but you'll see stronger sales kind of going in and you could have upside in that scenario to the outlook.

Got it. And maybe as my follow-up, Brian, your comments on the RSA dependent on the trajectory of credit. So maybe just to clarify, so we're talking about 4% to 4.5% this year, which is lower than the 4% to 4.5%. I think you talked about it in Investor Day, yet, we're still not back to normalized levels of credit until '24. So my question is, have the goalposts for the RSA move down? What are some of the moving pieces that would have driven that? And is it possible that we could be operating below the 4% level at some point?

Yes. Thanks. First, Ryan, just to make sure we're on the same page. The guidance for full year 2023 is 4% to 4.25%. And again, I think you have a couple of things. One, you do have a little bit of the net interest margin coming down that plays through the RSA, #1, with the interest-bearing liabilities cost going up. Two, you have the increase in that charge-off rate kind of coming through. Three, you have a little bit of the OpEx piece coming through. And four, you have growth in the denominator with really receivables. So I think that plays through -- to the extent your question, can it operate below a 4% level? Yes, it can operate at 4% level, but that would be more dependent upon trajectory of net charge-offs and how much of that is offset through net interest margin. Again, given the timing of losses, we're sitting here mid-January, which we have pretty good visibility really through mid-July now. So there is an opportunity for it. Again, we've given you the guidance we think is the best estimate for 2023 as we sit here today.

We'll take our next question from Don Fandetti with Wells Fargo.

Can you talk a little bit about regulatory risk specifically around what the CFPB might do on late fees, any timing or kind of your updated thoughts?

Yes, sure. So look, I think the timing that's been kind of speculated upon out there is pretty much in line with what we assume, which is we might know something here in the first quarter, but I think probably won't have an effective rule until late this year or early next year. So again, pretty much in line with our expectations. We're prepared for that. I think we've talked about in the past that about 60% or a little over 60% of our late fees sit in programs that have an RSA, so that's an offset. Obviously, we'll work with our partners on that. They have an incentive to help us offset the impact if there is one. So we're ready for it. We're preparing internally. We'll see what comes out. But I think we'll have some time between when we have some clarity and probably an effective rule, like I said, late this year or early next year.

Got it. And can you talk a little bit about the relative health of the low-end consumer versus prime, what you're seeing?

Yes. Look, I think internally, we certainly talk about a K-shaped recovery. I think we're certainly seeing that out. I think, broadly, the consumer is still healthy. I think they still have savings. We're seeing really good spend patterns, great spend on our products, in particular. Last year was a record year in terms of purchase volume. So generally, we feel pretty good about the operating environment. With that said, clearly, there's uncertainty as we move throughout the year depending on inflation and where rates go. So we're watching that very carefully. Our credit teams are highly engaged, and they're monitoring the portfolio to see where we need to make some tweaks and adjustments along the way. I don't know, Brian, if you'd add anything to that?

I think you covered it.

We'll take our next question from Sanjay Sakhrani with KBW.

Brian Wenzel, I wanted to dig into some of the commentary on credit quality. You mentioned you're assuming 4.2% unemployment rate, but the qualitative assumption is in the 5% range for the reserve rate. I'm just curious what kind of impact would there be to the charge-off rate if the unemployment rate reaches 5%? And then you mentioned -- or I guess, does this mean that there's no impact to the reserve rate if we migrate to the 5% unemployment?

Yes. Thanks for the question, Sanjay. So the qualitative portion, which brings the unemployment, effective unemployment rate up to that, call it, 5% level, again, we look at claims. But that essentially says that in that environment, there probably wouldn't be any form of significant rate-related reserve increases. Again, for the impact in net charge-offs, there is a timing issue here that happens. So the unemployment rate have to move up pretty rapidly in the beginning part of the year to have a factor in the back half of the year, which would impact the net charge-off rate. So if that happens, you're probably more looking at some headwinds towards 2024 from a net charge-off basis, but again, you should have that reserve for in the short term.

Okay. So really no change to the reserve rate, just timing on the charge-off rate?

Yes. I mean, obviously, we were most sensitive to unemployment claims. Obviously, there are other things in the economy that we are sensitive to, but that would be the biggest factor for us to have to relook at reserves. And again, I know there's a lot of questions on reserve rate dipping down. That's a seasonal factor that happens every fourth quarter because of the denominator. I mean we're up in absolute dollars from third quarter to fourth quarter. And again, you'd expect as your receivables come down in the first quarter, that rate to rise.

Okay. And just a follow-up question for Brian Doubles. Maybe you could just help us think about how you're managing the business as you're thinking about loan growth, obviously, very undecided on where the economy is going as a whole, I think. And then any flexibility you might have on expenses to the extent that we have a more adverse scenario?

Yes, sure. I mean, look, we've talked about this in the past that we try and manage the business really well through cycles. And we try and provide a level of consistency to our partners in terms of how we underwrite. And so if you look at the last couple of years, we're coming out of the absolute best credit environment we've ever seen in the history of the business. And we didn't take an opportunity to underwrite a lot deeper. And I think that's why you saw, again, I think, more consistent loan growth from us than maybe some others, and that's really important to our business. Because if we take an opportunity to really underwrite deeper and take approval rates up, then we know, at some point in the future, we're going to have to pull back on that. And we try really hard not to do that. Again, consistency is really important to our partners. So we feel pretty good about the guide for next year, the 8% to 10% growth. And we think that that's prudent. That's not -- that doesn't assume significant changes in how we're underwriting. Now clearly, if things change, and we see the macro environment play out differently than we're contemplating right now, then we'll go in, and we'll make some tweaks, and we'll make some adjustments. But we feel pretty good about the 8% to 10%. And look, I think the one thing on expenses, you've seen us be pretty disciplined over the years. We had some opportunity last year to make some incremental investments. We did that. Really happy with the return and the payback on those investments, but we stay really disciplined there. And if we head into a tougher environment in '23 or '24, then certainly that's an area that we'll look to pull back on if we have to.

We'll take our next question from Erika Najarian with UBS.

My question is relating to capital and capital distribution for 2023. As we think about ending the year at 12.8%, I guess this is a two-part question. #1, does your buyback trajectory get impacted by the macroeconomic uncertainty, even though your receivables growth is set to slow in '23? And secondarily, is this -- is there an amount of cushion that management wants to hold against that 11% target, not necessarily for macro uncertainty, but for potential opportunity use in terms of purchases in case those arise, portfolio purchases in case those arise?

Yes. Thanks, Erika. So to your first question on the macroeconomic environment, right now, we're going through the early stages of developing our capital plan that we'll submit to the Federal Reserve in the latter part of March. So we go through that. With that capital plan, we run a number of different loss stresses and severe loss stresses in the idiosyncratic stresses in order to inform us really of what the range of outcomes are and how comfortable we feel with the environment. And again, as we said, throughout 2022, we feel very comfortable in the environment continuing on the capital plan that we laid out and submitted to the Fed last March and got approved in April. So we will use that to inform it. Again, during the year, we go through multiple stress scenarios. So we continue to feel good even under a stress scenario that the targets and the environment that we will continue to operate with a very good capital plan. So we'll do that to inform us. With regard to the level of capital, 11% is our target. Now the first thing to remind you and others of is we have to continue to fully develop our capital stack right through incremental Tier 1 through a preferred or -- and then obviously through Tier 2, whether that be sub debt or incremental preferred. So we have to continue to develop the capital stack to even be able to achieve the Tier -- the CET1 target. And then secondarily, I think every company operates with a little bit of operating range. The real positive part of our business, Erika, is that we generate a lot of capital each year, which we employ back in. And obviously getting down to 12.8%, the growth that we've anticipated when we talked to you back in October, 12%, we came in at 15%. So we're able to fund that growth, and that's really, we think, very attractive returns that will continue to generate capital as we move into '23 and beyond. So yes, there is some type of operating range. But again, the target also has a buffer to it, so you can most certainly go through that buffer a little bit if you wanted to do an acquisition. So that's not a floor, it's just a range in which we operate with, and we'll continue to try to deploy capital in a manner that's in the best interest of our stakeholders.

And my second question is a follow-up to an earlier question about the reserve. I just wanted to clarify, fully understand the comments on the trajectory of losses from here. However, on the reserve, if we did end up with an unemployment rate at the end of the year that is closer to 5% versus 4.2%, I just wanted to make sure I understood this correctly, will there be an increase in the reserve rate or -- that's more significant? Or does the qualitative take care of any potential increases from that 4.2% baseline?

Yes. Yes, thanks for the question, Erika, and I'll try to be clear here. The 4.2% is the baseline, which we take from Moody's. Effectively, when we run through the model, you're probably more like 4.5%. There are qualitative overlays that bring it effectively to 5% right? Or closer to 5%? So in theory, if you were to hit that, there should not be rate related provisioning. It should just be growth-related provisioning at that point. It's only if your outlook changed above 5%, which you would anticipate more rate-related increases.

We'll take our next question from Arren Cyganovich with Citi.

In your press release, you noted that you had added or renewed 25 programs, including Lowe's, which has historically been one of the largest partners that you have. Can you just talk a little bit about, are you starting to push some of these renewals past 2025, which I know you had a lot of them locked in through 2025? And what's the competitive environment for these renewals today?

Yes. So look, first, I would say that we're always looking to renew where we can at attractive terms for us and the partner. So the teams that we have on the ground sitting with our partners every day, you come across things where it makes sense to add some years to the deal investments we want to make, changes in valve prop, et cetera. So our teams are out there every day, finding ways to renew in ways that benefit our partners and benefit us. So we're thrilled to extend with Lowe's. They're one of our oldest clients. I think this extension will take us over 50 years, which is pretty incredible when you think about it. I would say, competitively, just more broadly, it's still competitive, very competitive environment. But I do think, as you start to head into periods of uncertainty like we're heading into now, you do start to see the competition get even more disciplined. And we all know and appreciate that we're not going to be operating at half of our targeted loss rate like we saw in the last couple of years, and you start to see that discipline work its way into the competitive dynamics. So I think that's good. We're a very disciplined bidder in these processes, and it's nice to see that kind of happen across the industry. So we feel really good about how we're positioned. I think in times like this, back to the earlier conversation, you're really competing on capabilities. And that, combined with good price discipline across the industry, is a good thing for us.

We'll go next to Betsy Graseck with Morgan Stanley.

One question to follow-up on something you mentioned in the prepared remarks. Normalization, you're seeing migrate into prime and super prime, I think I heard you right there. And I just wanted to understand if you were just talking there about the payment rate normalization? Or are you also talking about normalization in delinquencies and your net charge-off outlook? Maybe you could unpack what you meant a little bit more, if you don't mind?

Yes. So as Brian mentioned earlier, not many will talk about it, but there is, what I would say, a more K-shape recovery or we're seeing it, where the lower end consumer has been normalizing at a faster rate both, I'd say, from a payment rate behavior standpoint as well as a delinquency and charge-off standpoint. And as you continue to move away from the pandemic and stimulus, you begin to see the other cohorts, which is the prime and super prime, which had already started to normalize, continue to add normalization trends. I think the important part for us, Betsy, is as we take a step back and think about the entire portfolio for a second, if you looked at historical 30-plus and 90-plus-day delinquencies to pre-pandemic levels and applied it to our balances as you step through this year, what you'd see is a very linear normalization of delinquencies for us. And again, that's really the bottom end normalizing a little bit quicker. And now you're starting to see the top end. So -- but if you look at that linear pace beginning in the first quarter last year, I mean, we're about 80% of our pre-pandemic delinquencies and it's moved about 10 percentage points each quarter. So we're not seeing an acceleration in normalization. It just kind of is flowing through and that's on top of a larger balance, but it is normalizing in a manner in which we expected. But again, there is a little bit of a K-shaped recovery where we're starting to feel -- again, moving back, all our vintages from '20 on are performing better than our vintages in 2018. So we feel good that the normalization that we're expecting is happening on a path that we expect.

Yes. And that was -- part of the follow-up was around the vintages. So your vintages '20, '21, '22, pretty similar. And I guess the underlying question here is, as the performance is coming in relative to what you had pre-pandemic, how much more room is there for opening up the credit box or pulling in incremental loan growth?

Yes. I mean, if you break it apart for a second, Betsy, the '20 vintage and obviously, the early part of 2021, that's performing the best, right, because that's when we put in refinements at start of the pandemic because no one knows what's going to happen. Latter part of '21 and '22 performing between that vintage and 2018. So I think, in all cases, they're doing better, but again, they're slightly different under different underwriting standards. I don't envision, and Brian talked about this, the consistency that we have both in underwriting for origination, but account management that we're going to use that as a growth lever. I think we have a really diverse and attractive set of partners, so we get spend across a multitude of different verticals and categories. And then when you look at the fact that we're really having -- have compelling value propositions and are aligning to our most loyal customers at our partners, we don't have to use credit or growth engine as opposed to others. So I don't envision us using credit and opening up the credit box from here forward. Right now, what we're doing is we're making modest refinements when we see things that concern us, but we're not doing anything across the board because we don't see it across the board in our portfolio.

We'll take our next question from Kevin Barker with Piper Sandler.

I just wanted to follow up on some of the capital questions. If we did see a rapid increase in unemployment from a base rate of 3.5% to roughly 5% or maybe somewhere around that level as we approach year-end '23, I mean would you start to consider your capital levels to have already embedded that type of unemployment rate or those types of assumptions of economic deterioration just given the stress test? Or do you feel like you need to be a little bit more cautious given the outlook could change rapidly in that type of environment?

Yes. So first of all, thanks for the question, Kevin. When we think about our capital plan and the stress test we run, the unemployment rates that we use in those stress tests are significantly higher than 5%. So the 5% isn't concerning on its face value relative to capital and our capital levels. What really we would look at and our risk committee and the Board would look at is, is there a reduced visibility into the macroeconomic environment where you're concerned, or in the case -- or in the case where you're concerned about the level of net income being generated. That's where you would come back to saying, "Hey, listen, should I think about capital differently?" But remember, these stress test models are built under a very severe scenario. And as long as you're inside of that, you should be able to -- you continue on your capital plans and be able to weather it. That's why it is. There's a lot of buffers on top of the minimum requirements. So again, it'd be well north of 5% before we get concerned.

Okay. And then in regards to -- maybe a follow-up to that on M&A. I think you've mentioned that the valuations are finally normalizing. Are you seeing any attractive opportunities start to develop, whether it's portfolios or other acquisition potential targets given what we see out there today?

Yes. Look, I think you're right. I mean we're finally seeing valuations check up pretty significantly in some areas that we're interested in. Our business development team has a very active M&A screen, so that's certainly something that we look at. You've seen us do small acquisitions where we can kind of leverage our scale, Allegro is a great example of that, pets Best is a great example of that, and we've grown those businesses very significantly since we acquired them. But we're a very disciplined buyer as well. Those were very modest in terms of the capital outlay, but we saw a lot of future growth and earnings potential. Those are the things that we like to do. And so if we can do more acquisitions like that, we'd certainly look to do that, but we're a very disciplined buyer when it comes to allocating capital to M&A.

We'll take our next question from John Hecht with Jefferies.

I guess first one is just on the NIM. You talked about deposit durations changing and so forth. Maybe can you just detail to us, is the shift in deposit prices mostly over what your outlook is there? And any characteristic of kind of the duration of deposits now versus where it has been?

Yes, thanks for the question, John. So I will deal with the latter part of the question first. So yes, we have seen an extension of the duration a little bit. People have rotated into CDs and we see people into, call it, that 18 month, 19 month duration. So it’s split out a little bit, I wouldn’t say materially. With regard to pricing as we move forward, I mean obviously when we gave the NIM guidance here, what we saw in 2022 was really a change in the landscape, right? You had a lot of people trying to manage betas in the beginning part of 2022 and then when they fell at the outflow of deposits during the year, got more aggressive with regard to price. I think you saw a lot of that happen in the latter part of the year. It's been very stable now. So our outlook includes deposit betas getting a little bit worse than they have been from here, particularly on the CDs. So again, this is going to be something that we're really going to watch relative to the Fed's actions at the next couple of meetings and what their guidance is with regard to the terminal rate that they have out there. But we plan for in this guidance to have betas deteriorate in 2023.

Okay. That's helpful. And then a second question, maybe can you characterize -- you have some traditional partners, traditional retail partners like Lowe's and so forth and then digital platforms like Amazon and PayPal. Is there anything worth noting about the general trends in the different types of platforms and how that might manifest itself over the course of '23?

Yes. Well, so obviously, we serve a very broad range of partners, as you indicated. And clearly, you saw really strong growth in Digital, strong growth in Health & Wellness. We would expect that to continue. I'll tell you where you see the biggest differences, John, is actually in how we engage with those partners. And our solutions inside of those partners differ quite a bit. Venmo and PayPal is a great example where we're completely integrated through our API architecture. And if you're inside of the PayPal or Venmo app, you don't know if it's something that we built or something that PayPal built. It is really seamless to the customer. And that's really important. And I think that really helps make that experience a good one for the customer and helps us drive growth over the long term. And you compare and contrast that with what we're trying to do in the one-to-many space like with Clover and other solutions where we want to make it really easy for our smaller partners to leverage the financial products that we have, and we have to do that by building it once and then scaling it across the enterprise. So you really run the gamut from highly customized, fully integrated API architecture to a one-to-many solution, which just makes it really easy for our partners to offer our financing products. So that's where you see the biggest difference between our partners and the partner set that we have today. I'll tell you, at any given time, you're going to have some partners that are doing really well and just crushing it, and you're going to have some partners that are maybe struggling a little bit. As I said earlier, heading into uncertain times like this, the credit program becomes even more important, and that's consistent across the board. So heading into an environment like this, we feel like we're really well positioned to help our partners succeed.

We'll take our final question today from Rick Shane with JPMorgan.

I just want to talk a little bit more about the reserve rate outlook. End of the quarter, 10.3%, day 1 was 9.9% There was a suggestion that it will sort of trend back towards 10% over time, roughly in line with day 1 levels. I think what that implies to me is that as we've gone through the learning process on the CECL models versus day 1, that there has not been a material evolution in terms of sort of loss expectations that the reserve rates will sort of, on an apples-to-apples basis, be consistent with day 1. Is that the right way to think about things? And can we just put that in the context of the normalization over the next 18 months?

Yes. Thanks for the question, Rick. So I think if you looked at the assumptions that went into the day 1 CECL model versus the assumptions that are in the model today, they're very close to each other. So I do think that you're in a position where there's not a significant difference right now. Where there is a difference is the macroeconomic overlays that we have in here that are much more significant than what they were on day 1. So as that macroeconomic environment clears, right, either through the losses or through the fact that we were more conservative or things didn't play out the way we thought, you're going to begin to migrate back towards that day 1 level. Now remember, in CECL, at the end of the day, you forecast out for a reasonable and supportable period, right, that you have losses, and then you migrate to your mean. So at the end of the day, that mean hasn't changed for us and our expectations. I mean, obviously, I'd like to say we had a normal period during CECL, but unfortunately, over the last two-plus years, we have not. So again, we'll revisit at some point in the future what the mean loss rate is. But again, that does play into the fact that you will ultimately migrate and they should come back in line absent mix.

Got it. Okay. That's very helpful. And I think, like everybody, we're all exhausted of living through unprecedented times and returning to normal would be nice.

I 100% agree with you, Kevin.

Agree with that.

Rick, sorry, Rick.

This concludes Synchrony's earnings conference call. You may disconnect your line at this time, and have a wonderful day. Thank you.