Synchrony Financial
Q2 2021 Earnings Call Transcript

Published: 20 Jul 2021

[Operator:]

Welcome to the Synchrony Financial Second quarter 2021 Earnings Conference Call. My name is Vanessa and I will 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 been recorded. I will now turn the call over to Kathryn Miller, Senior Vice President of Investor Relations, you may begin.

[Kathryn Miller:]

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.

[Brian Doubles:]

Thanks Kathryn and good morning, everyone. Synchrony delivered strong results during the second quarter reflecting the power of our technology enabled model, the durability of our partner-centered value proposition and the early indications of a consumer resurgence. With now more than a year of the COVID 19 pandemic moving into the rearview mirror I am proud of how our team has continued to execute on our strategic priorities. Our multiproduct, multi capability strategy has enabled us to nimbly adapt and deliver best-in-class products and services to address our partner’s evolving needs while also generating appropriate risk-adjusted returns for all our stakeholders. Let's get things started by reviewing some of the key financial highlights from the quarter, net earnings reached a record $1.2 billion or $2.12 per diluted share. This reflected an increase of $2.06 over last year, as we mark the anniversary of the pandemic's initial impact on our business and really the world. We are deeply grateful for all of the frontline workers, scientists and leaders have done to support our community and make progress toward eventual return to normalcy. Purchase volume grew 35% over last year reflecting a 33% increase in purchase volume per account. This increase spend was broad-based across our five business platforms. This strength in purchase volume was largely offset by the persistently elevated payment rate trends resulting from the government stimulus and industrywide forbearance actions, leading to a slight increase in the loan receivables which were $78.4 billion for the second quarter.

[Brian Wenzel:]

Thanks Brian and good morning, everyone. As Brian mentioned earlier the strong results we achieved during the second quarter reflected a number of factors. First healthy consumer with significant savings and pent-up demand for spending leading to broad-based purchase volume growth. Second continued strengthening credit quality across our portfolio. We continue to closely monitor our portfolio as industrywide forbearance begins to expire across the broader consumer finance landscape and for some customers as rental forbearance also expires.

[Brian Doubles:]

Thanks Brian. While the pandemic has presented our company in the world with never been before seen challenges. Synchrony has continued to arise to the occasion facilitating the evolution of many of our partners as the new operating environment has been ushered in. We have a truly unique understanding of the partners we serve and the customer needs they seek to address. We have an almost 90 year history in consumer financing. We have continued to invest in our comprehensive product suite, amass our propriety data, and leverage our advanced analytics to achieve targeted outcomes for each of the merchants we work with. We have been consistently investing in digital innovation for years and have demonstrated how effectively we can adapt to deliver the value of our partners have come to expect while also driving strong financial results and attractive returns for our shareholders. With that, I'll now turn the call back to Kathryn to open the Q&A.

[Kathryn Miller:]

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'd like to ask the participants to please limit yourselves 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:]

Thank you. We will now begin our question-and-answer session. And our first question is from Sanjay Sakhrani with KBW, please go ahead.

[Sanjay Sakhrani:]

Thanks, good morning. So Brian Doubles, you mentioned an early indication of consumer resurgence, I'm just curious which macro data points and micro ones give you the most encouragement and then I guess, the question I'm getting quite a bit is what the setup is for loan growth with us moving away from stimulus and there being other benefits coming from the government like the tax credits and obviously infrastructure, maybe you could just help us think through all of that. Thanks.

[Brian Doubles:]

Yeah hey Sanjay. So look, I think no matter where you look, we feel pretty bullish around what we're seeing in the economy. Consumer confidence continues to build the trends on retail sales and spending, all of that is translating into really good spend on our cards, so as we look across our five platforms, it really is broad based. 35% purchase volume growth year over year, really strong across all five platforms. The fact we're up 18% versus 2019, I think is a really good indications. So it’s not just that we’re complaining against the weak 2020, it really is broad based growth across the company. And then as you look at kind of per account purchase volume, per account was up 33%, so that’s another positive indicator. And then, this is a little more anecdotal but as we talked to our partners, no matter what segment we’re in, they’re seeing a lot of pent up demand to spend. The providers in CareCredit, they’re booking appointments now, 3, 4 months out, they’re opening the practices on Saturdays and Sundays to keep up with the volume. So, I know that's a little more anecdotal but as our teams are out every day talking to the partners, they’re in the stores, there's just seeing and feeling a lot of pent up demand to spend. And I don't know Brain, if you want to add to that a little bit on.

[Brian Wenzel:]

Yeah, the only thing I would add Sanjay to that is as we look at savings rates, you clearly see the consumer who increased their savings in the beginning part of the pandemic when stimulus happened. That came back down in line with historical averages towards the end of 2020, Egan saw that lift here in the end of the first quarter, into second quarter with the stimulus actions. We begin, we see now across between our largest banks that began to crowd down a little bit. So, some of those will come back in line clearly with the spending, behavior pattern as well as the increase in the financial obligations as mortgage forbearance, auto forbearances and the enhance on employment benefits began to fade here in the back half of the year.

[Brian Doubles:]

Yeah, I think Sanjay, you touched on receivables growth, that will absolutely come, we had four out of our five platforms had receivables growth. The payment rate is a little bit tough to predict, but we don't see anything that is permanent inside of the portfolio. So I do think we will see a reversion to the mean around payment rate. And based on the spend that we're seeing on our cards, receivables growth will absolutely come and we're starting to see some positive signs there in, like I said 4 out of our 5 platforms this quarter.

[Sanjay Sakhrani:]

Okay, great. That's a perfect, and just a follow up, there's a couple of portfolios that have been out there, mentioned to be far I’m just curious how you are seeing your pipeline develop in terms of deal, your portfolio acquisition except from maybe you just touched on that and just one want clarification Brian Wenzel, the framework for key drivers from last quarter I mean it sounds like most of them stand but I just wanted to clarify that they still stand? Thanks.

[Brian Doubles:]

Yeah, so let me start on the pipeline question Sanjay. So I would say across all five platforms we've got a good pipeline of new opportunities. One of the benefits of the reorganization is our teams are getting even deeper and aligned by industry. And we've got some fresh set of eyes on certain things and we're looking at opportunities for new programs and start ups that are a little bit unconventional, a little bit creative and I think that's a great sign and kind of part of what we are trying to achieve with the reorg. I would tell you most of the opportunities that we’re seeing in the pipeline are startups or new programs with a couple exceptions of things that are out there that we’re looking at that they have existing portfolios but again strong pipeline across all five platforms.

[Brian Wenzel:]

Yes Sanjay to your framework question so the lack of the page I wouldn't confuse with the fact that we’re changing that framework again. I think when you look at what we've put out in the first quarter. We highlighted the continued high payment rates that will impact loan growth in the first half of the year, that's going to continue. We do think it begins to abate in the back half of the year. So I think when the purchase volume and receivable growth standpoint it's the same clearly the elevated payment rate and persistency of that will provide a little bit of headwind and manages margin as we move into the back half of the year. From a credit perspective you know the higher payment rate really is given us what I’ll say almost pristine type credit so I think you’ll see in the back half of the year. Really for the full year for the company we’re going to be some 4% on a lost rate perspective which is remarkable for this business given high margins. And then the RSA following those trends will be a little bit more elevated in the back half of the year. Which again is working as it's designed to share the upside performance of the company, so that's how I think about it’s largely consistent with what we’ve said back in the first quarter so.

[Operator:]

Thank you our next question is from John Hecht with Jefferies.

[John Hecht:]

Hey good morning and thanks for taking my questions. Good new customer activity, maybe can you tell us how much of that was say from the New York channels like Venmo and Verizon. Maybe just give us kind of an update on call it the maturation of those two new programs?

[Brian Doubles:]

Yeah John so we obviously can’t break out any specific performance on the programs, but I can just talk generally about both Venmo is going really well. We're in full launch mode, the I would say performance is better than our expectations so far. We are getting really great feedback from the customers around just the profit and the fact that we maximize rewards in those spend categories. They love the card design, they love the QR code, the ability to split payments and share and so that program’s off to a great start it's still early but all of the key indicators that we look at are performing really well and similarly on Verizon this is another program for us that will be a 10 program in the future. Performing ahead of our expectations and a great feedback on the prop it's definitely behaving like a top of our card which is what we intended. That was the goal and so we’re seeing really good spend on Verizon products and even - and outside as well. So off to a great start on both and like I said I think these can both be top 10 programs for us in the future.

[John Hecht:]

Okay, very good thanks and then Brian, maybe you could give us a high-level kind of quick discussion at - the state of the market and really what I'm kind of interested in is you've got some new kind of emerging market purchase spends in the buy now pay later product and so forth. And so I'm kind of wondering what your senses for kind of underwriting quality across the spectrum and kind of competitive factors across the spectrum given the changing elements of the market?

[Brian Doubles:]

Yeah John, it's a great question I think. Obviously there are always new entrants in the buy now pay later space, I think it’s pretty clear at this point that every financial service provider out there will offer a buy now pay later product equal pay financing is a big part of our business already, we highlighted we do over $15 billion of balances currently on equal pay products we offer those products over 70,000 locations. So our goal at the end of the day is to have a multi product multi-capability solution. I think ultimately that's what's going to win. And that's what we're offering to our providers in terms of the competitive dynamics, it's hard to tell how others are underwriting. What I can tell you is we’ve been in this business a long time, it is really important to stay disciplined which means you don't go a lot deeper in really good times and you try not to contract too much in bad times. Because we know that our partners really value that stability, the consistency of our underwriting. And they get used to a certain approval rate. And we try to protect that in both the good times and bad times. And as we all know if you’ve been in this business a long time if you do take on substantially more risk and you’re winning business by lowering your underwriting standards that’s a losing strategy over the long-term. And so, that's not how we operate we’ve got a very experienced, disciplined credit team. And look we want to win business based on our products and capabilities, based on our technology, our partnership model we never want to win business based on just going deeper and taking on more risk.

[Operator:]

And we have our next question from Don Fandetti with Wells Fargo.

[Don Fandetti:]

Yes, Brian can you talk a little bit about the child tax credit digging a little bit more for example, do you think that will lead to higher payment rates in July versus June. And how do you think about the raw overall materiality of it versus prior stimulus?

[Brian Doubles:]

Yeah thanks Don. Obviously an influx of $15 billion of cash on top of what is really out there is clearly not going to be beneficial. That being said been targeted to folks unless $150,000 that's a pull forward really from 2022. I'm not necessarily sure it will have a material impact necessarily on our payment rates as we look in the beginning a part of July. We have not seen a real elevation of payment rates are more consistent with what we saw as we exited out of June. So I don't really see any data yet that says that that’s going to be a potential problem more certainly we’ll watch and see whether or not that becomes a permanent credit and a permanent pull forward as legislature gets inactive later on this year so we’ll continue to watch it, Don.

[Don Fandetti:]

Okay, thank you I’m all set.

[Brian Doubles:]

Thanks Don, have a good day.

[Operator:]

And we have our next question from Betsy Graseck with Morgan Stanley.

[Betsy Graseck:]

Hi couple of questions just the first one you talked through the NIM and the loan growth how it’s being impacted by the payment rates et cetera but could you speak to how much the loan growth and potentially NIM is impacted by some of these new entrants that we’ve been seeing and discussing here be it either BMPL or other kinds of payment schemes that enable people to really shift some of their spending away from what might have been their primary payment device. I'm just wondering if that's had any impact?

[Brian Doubles:]

Yeah Betsy I’ll let Brian chime in here but what we're seeing is really attributed to the higher payment rate just because consumers balance sheets are stronger than they have ever been and I think that is the primary driver I don’t think this is competitive - competitive pressure in any way but I’ll let Brian add some color to that.

[A -:]

Yes, I’ll just point back to a couple of things Betsy. First when you look at our new account origination just 6.3 million new accounts, up 1% versus 2019, so we’re not seeing and even when we look down at the providers that may have alternative type of products at least buy now pay later products. We're not seeing a real impact relative to new accounts. We also don't really see it in the payment rate where we’re kind of coming through it really is as Brian pointed out the accumulated savings rates that you see in a stimulus that has flowed through the consumer that's really driving the pressure against purchase volume and headwind which is producing tremendous credit which we sometimes put in the back mirror but the credit is really terrific right now. So we will continue to monitor it but we don't see an impact from the alternate players.

[Betsy Graseck:]

Great ok now I get it and clearly credit is a part of the mass here so it’s a little bit surprising when people only look at like a instead of including the credit I agree I guess the other question I have on this is, with regard to deposit products that you might be planning or thinking of offering because when you think about the BNPL the pay-in for the pure pay in for. I know there is different BNPL but the pure pay in for should be finance stirred or funded with a checking account right. I mean you shouldn’t be paying for your pay in for with a card balance, but I just wanted to understand how you're thinking about that when you're developing your own products. And whether or not we should be anticipating more in the way of deposit products coming out from you? thanks.

[Brian Doubles:]

Yeah, no, I mean Betsy's it’s a great question. And we agree you shouldn’t pay up one credit product with another credit product so, we agree with that. I think we're looking at some alternative kind of savings products as part of our broader product strategy. Buy now pay later is obviously top of mind right now across all issuers. Like I said I think everybody will have a version of it. We have 15 billion balances today as I said and we’re rolling out some new capabilities and features in the second half of the year. So nothing I can get too specific at this at this point but I would want to comment definitely part of our multiproduct strategy I touched on earlier. Operator Thank you our next question is from Rick Shane with JPMorgan.

[Rick Shane:]

Hey everybody, thanks for taking my question this morning. Brian you did a great job highlighting the impact of home and auto on the portfolio, I'm curious with the changes in the composition over the last several years. How important do you think back-to-school is particularly in light of the challenges for back-to-school spending last year?

[Brian Doubles:]

Yeah, back-to-school hasn’t been a big driver for us for a number of years Rick which is kind of surprising you know we just we don't see a ton of volume there and I think it's not as much of an event as it was probably when you and I were growing up, it was more then I know even for my girls they don’t there isn't a back-to-school event where they all go get new clothes and stuff for school. So we tend to see that spend space out over a longer period of time and it’s less of a spike for us so. I think that trend will continue even in the new paradigm.

[Rick Shane:]

Got it, I appreciate that and Kathryn because you know me well enough that my clothing budget is not that great either even when I was a kid.

[Operator:]

And we have our next question from Moshe Orenbuch with Credit Suisse.

[Moshe Orenbuch:]

Great, thanks. Brian I'm hoping that you could talk a little bit about the kinds of conversations that you have with your large retail partners about BNPL in other words I have to believe that they are quite invested in the success of your programs given they earn a significant amount of money whereas on BNPL they’re kind of paying a significant amount of money and so kind of maybe could you just obviously not asking about any specific partner but what are those conversations like?

[Brian Doubles:]

Yeah so it's a great question Moshe. I think a lot of our partners are still in kind of the evaluation phase where they look at the buy now pay later products and they obviously see a customer desire for that product right, and a customer demand for it but one of the big questions is as you pointed out it’s around economics. And it's still early there and I think some retailers are willing to pay what is a pretty steep merchant discount rate, if they believe that they are attracting new customers and they're getting sales that they wouldn't otherwise get, but when they look at that comparison they look at compared to some of our - some of our products where not only do we not charge interchange. We are also paying them quite a bit through the RSA and they look at that and they say, okay. Clearly, economically they would prefer that the purchase goes on the private label card or a co-brand card because it's much better for them financially. And so to the extent that they stop believing that they’re actually getting incremental purchases or new customers than the economic trial is very clear and so, I do think down the road there’s an economic reckoning that will happen as this plays out and it's still early in terms of these products and how they’re offered. The other thing I would mention is that the other advantage and the things that we hear from our partners is they like the lifetime relationship that a card provides, they can do lifecycle marketing, they can do promotions and offers over number of years. And one of the things that we talk a lot about with our partners is I think we measure across all of our partners is repeat purchases and we talked to you guys a lot about that as well because that has been a big focus for us over the last five years and one of the things that frankly our partners look to us for is that ongoing customer loyalty. We measure that, we look at by customer, when was the last time they made a purchase, okay, let’s send them a customized offer or promotion. So, they like that ability to do that lifecycle marketing. So, I think it’s a combination of economics and that’s still kind of TVD and how this is going to shake out. But the other thing that we hear across the board is they want to have a long term relationship with the customer. They really value the loyalty that a lot of our products provide.

[Moshe Orenbuch:]

Thank you. And my follow up question is for Brian Wenzel, you kind of highlighted the impact of I believe these along with the payment rate, could you just talk a little bit about how that comes back like what is the timeframe, is it kind of the early stage delinquencies? How should we think that… normalization of that factor?

[Brian Doubles:]

Yeah, great question Moshe, I think the way we’ve kind of think about credit outlook now, delinquencies built towards latter part of this year, adding into 2022. So late fees will begin to come back as you see the entry rate delinquency begin to rise. So, that will come first before you get into the charge off. So if you believe that, the latter part of this year, you'll begin to see the yield impact benefit coming from higher late fees in the portfolio.

[Operator:]

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

[Mark Devries:]

Yeah, thanks. I had the question about the NIM, can you help us think about the lift that you made yet from both the normalization of the payment rate to kind of the long-term historic average and also over the normalization of liquidity as a percentage of assets?

[Brian Doubles:]

Yeah, so the way I was thinking about let's take liquidity first, and the portfolio, so clearly we've been able to burn off sum of that liquidity here in the second quarter both through the $2 billion in asset growth that we've had as well as acceleration of some of the maturities in the funding profile. So, were running over $2 billion continued excess liquidity as we enter into the back half of the year. If you take out all the excess liquidity from here, that’s probably another 40 basis points out to the net interest margin that you'd you see a lift from. Again, we’ve highlighted before if I have 20 basis points to 30 basis points from benchmark rates, so put that off to the side, the residual comes in probably two dashes one is late fees which you probably 80 basis points to 90 basis points a lift going back to a normalized late fee relative to not even an about higher than 5.5 but their normal load and you have the residual which will be the revolve when payment rates come back in line. So, the one thing I’d say is we do not see anything in the portfolio today that gives us any indication that the measures margin in that 16% realm is not going to be the mean that we go back to and we’ll be continue to watch it but there’s nothing fundamentally or structurally that we think is different, it’s just really the time when we get there, given the excess liquidities that the consumer has and that they're going to deploy here in the short term.

[Mark Devries:]

Okay, great. That's helpful. And then just a follow up question on Brian on your comments about your partners really wanting to kind of stimulate the longer lifecycle with customers, do they find that using the revolving products what they've got, incentives on spend is the best way to do that as opposed to offering some type of maybe a lower rate kind of fixed loan product on balances?

[Brian Doubles:]

Yeah Mark, I mean, it really does vary by partner, but I would say the majority, particularly the larger partners, they see the value of the value prop. Right, the rewards, the loyalty that that drives when they go into one of our large partners and a lot of time they’re savings 5%, that is really meaningful. We do that at Amazon, we do at Lowe's, and we do at number of places now. And that is, that’s a great way to incent that repeat purchases. I think the other thing that we've been doing for a number of years now and most of partners we store, the card is the default payment type. And so you don't even have to think about it. It just goes right on the card you gave your 5% and that’s something that our partners have been very focused on as well to drive that. Again the lifetime relationship with the cardholder and the loyalty that comes with it.

[Mark Devries:]

Okay and I assume that they will get the fastest checkout using their revolving products, correct?

[Brian Doubles:]

Yeah, it’s just instant all right, the stores I know for Amazon for me the store is my default, I get my 5%, I don’t even think about it, it is just a lot, it goes on automatically on the card. So, it’s certainly the easiest and fastest way to check out for most of our partners.

[Operator:]

And thank you. Our next question is from Mihir Bhatia with Bank of America.

[Unidentified Analyst:]

Hi this is on for Mihir Bhatia, thanks for taking my question. I'm curious about how urban costs are trending but I made on emerging portfolios, while we have noticed or how many awards industries that’s additive or if you’re going to portfolio and try to get your customers.

[Brian Doubles:]

Yeah, your quality wasn't that clear you're asking about the loyalty cost trends.

[Unidentified Analyst:]

Right, is that increasing for the newer portfolio that has been done well like more promotions I wondering if it’s additive or representative portfolio for new customer acquisitions?

[Brian Doubles:]

Yeah, the way I would think about the loyalty cost you know first of high time was up significantly year of year over year versus 2019 so you’re going to see a general trend in loyalty cost because higher more certainly than new growth programs at Verizon and Venmo, we’ll have those cost and then set have to higher percent of the assets because the assets are just beginning to build, but it's not significantly different than our overall portfolio, not necessarily the drivers would really the increase purchase volume across the entire portfolio that's driving our value for the loyalty costs.

[Operator:]

And we have our next question from Dominick Gabriele with Oppenheimer.

[Dominick Gabriele:]

Hey, thanks so much for taking my questions. Can you -- we obviously have the new segments that you’ve broken up the new platforms. Can you talk about the differences in each of the platforms that have made you decide to break them up this way and as far as you know the marketing teams to go to market strategy and if they are actually running a software that's different among them? Thanks so much guys.

[Brian Doubles:]

Yeah, sure so the reason to reorganize you know in align more by industry was couple of all. First in terms of your point the products and capabilities that we offer tend to align better by industry and even more important than that how we integrate in the products and capabilities and how we integrate into the digital environment or the store footprint, tends to align as well by the industry. So, one example, for our purely digital of players pent up Venmo, Amazon we’re integrating through our API technology or through SyPI technology right inside of their house and that's different than what we would do in home and auto where for some of our larger partners were integrating both in their digital environment, mobile online and but we also have to tools and technologies to apply and buy in-store. And so, because of the product -- the products that we tend to be cared more towards the industry because of the types of products that they’re selling as well as whether or not they are purely digital or have a store footprint, it just made more sense to aligned by industry. And the second piece of this when we saw this in CareCredit over the last 30 years, it really is an advantage to get really deep domain expertise in an industry. And one of the things that I think has been a secret to our success in CareCredit is that domain expertise, our teams get -- they build lifetime relationships, they get really deep in the different domains that we support et cetera. And we're trying to replicate that in these other platforms, so those were the two primary reasons. I can tell you it's been great just a couple of months in having these teams in place, looking at these segments different way of seeing, kind of natural synergies and ideas for new products and capabilities, as they're out talking to partners and thinking about it, more with the industry than to itself. So, far the progress has been really great.

[Dominick Gabriele:]

Great, great, thank you for that detail and then you know this might be a longshot but can you talk about the tender share by each of those and if not specific numbers because I know that's unlikely may be just perhaps which one of the segments is you know at the average tender share below and above average of the whole company. And then we think about the RSA in the second quarter, is that the high what the market you think about? NCL rates stayed roughly -- fairly in line with where they are for the rest of this year with high watermark on a percentage basis for the RSA? Thank you very much, I really appreciate you guys.

[Brian Doubles:]

Yeah, let me start on the penetration question. I would say across each of those platforms we've got significant room to grow penetration -- inside of each of those platforms we’ve start up programs where were relatively small percentage of the payments inside of those programs and we have very mature programs where we can be 30%, 40% spend what I can tell you is we measure our teams on increasing that penetration rate regardless at where they are at. So, even for the more mature programs our teams that are embedded inside of our partners they get measured based on growth and driving that incremental tender share. So even in our mature programs we are very focused on that penetration rate. Now Brian if you want to take the second piece of that?

[Brian Wenzel:]

Yeah, so RSA yield if you just think about the RSA the back half, there are two factors really to focus on is, one the purchase volume rates as RSAs is not only sharing there is buying oriented purchases so the strength in purchases you have seen in the back half of the year h and then how the next charge off and provisional line continues to develop you know I mentioned earlier on the call we expect the NCL rate for the full year to be below 4%, but if you‘re already incremental -- ACL releases that could impact it. So, we’ll remain elevated in the back half of the year from where we are -- directly but it should be dramatically larger than what we saw in the second quarter.

[Kathryn Miller:]

Operator, we have time for one more question.

[Operator:]

And thank you, our last question is from Bill Carcache with Wolfe Research.

[Bill Carcache:]

Good morning as you look to further out, do see the normalization of the payment rates providing a tailwind to the normalization of your revolve rates, such as we can see a loan growth starts to outpace your spending growth, if you could speak to that dynamic?

[Brian Wenzel:]

Yeah, you know clearly we've reached that we said that we believe payment rate will move back to domain that will accelerate loan growth and more certainly if you had a slowing purchase buying in market that could push the loan growth ahead of the purchase volume growth began again with the way we’ve thought about the back half of the year and it hasn't really changed -- back half heading into 2020 that you are going to continue to see elevated purchase volumes -- one from the pent up demand that we see and as we talk to our partners, merchants and providers that you can see the consumers has well evolved with the savings to continue to spend. So, I think over the next 18 months you’re going to continue to see elevated purchase volumes Bill and then you’re going to combine that with a moderation payment rates in the over time. So, just the two will work in .

[Bill Carcache:]

Got it and then separately on capital there has been some step decisions on your ability to get down to your levels of capital. Can you speak to what is your confidence, you can get there and I might have missed this but any commentary on the potential for your increasing the authorization about your current plan?

[Brian Wenzel:]

Yeah, you know Bill I'm going through the first point to back to little bit of history right as we separated from GE we had an 18% capital levels, we’ve worked that down to 14% over a couple of years three, four years. So, we've demonstrated the ability -- we've demonstrated the ability just before the pandemic to take that capital I think to $3.3 billion in the nine months period before the pandemic happened. So, I think we have the ability and demonstrate capability to do that. So, I think we’re confident in our ability to get down there now. With regards to the current authorization right -- we talked about this a little bit in the first quarter that is a backwards looking authorization rates so the data which we used through our stress scenarios under our processes and governments mechanisms were based off December and early January assumptions, right. So that's where we had the capital plans put together and approved by our board. If things continue to change, we’ll evaluate whether or not there is a desire for the broad shifting to increase that authorization level and we'll revisit that but right now we have to $2.5 billion remaining, we've executed $593 million so far this year which were slightly regulated by the restrictions put on, as I said. And we will be aggressive with regards to our execution against the $2.5 million and again if the environment warrants, we will revisit that.

[Kathryn Miller:]

And thank all for joining us this morning. The Investor Relations team will be available to answer any further questions you have.

[Operator:]

And thank you, ladies and gentleman this concludes our earnings call. Thank you for your participation. You may now disconnect.