Brian Wenzel
Senior Executive Vice President and Chief Financial Officer at Synchrony Financial
Thanks, Brian, and good morning, everyone. Synchrony delivered another quarter of strong financial results, reflecting our differentiated business model and the strong partner and customer value propositions, which have been made possible as we execute on our strategic priorities.
Our net earnings were $813 million or $1.48 per diluted share. We generated a return on average assets of 3.4% and a return on tangible common equity of 28.7%. These strong net earnings and returns demonstrate the power and efficiency of our digitally enabled model, combined with the compelling value of our financial products and services we offer through our ecosystem. Not only were we able to support the strong seasonal customer-end with our diverse range of products, but we were able to do so while maintaining cost discipline and strong risk-adjusted returns. We achieved record purchase volume of $47 million in the fourth quarter, an increase of 18% compared to both last year and 2019, excluding Walmart.
Purchase volume was up double digits across four of our five platforms demonstrating clear broad-based strength through the range of diverse industry verticals we serve. Purchase volume per account also increased during the quarter, up 13% compared to last year and 22% compared to the fourth quarter of 2019, excluding Walmart. Dual and co-branded cards accounted for 42% of the purchase volume in the fourth quarter and increased 30% from the prior year.
On a loan receivable basis, including the loans receivable held for sale, dual and co-branded cards accounted for 25% of the portfolio and increased 10% from the prior year. Average active accounts increased 5% compared to last year and new accounts increased 20%, totaling more than 7 million new accounts in the fourth quarter and almost 25 million new accounts originated for the year. As you may recall, we reached an agreement for the sale of our GAAP portfolio, which represented $3.9 billion of loan receivables in our held-for-sale portfolio at year end. Continuing our commitment to achieving appropriate risk-adjusted returns, we are discontinuing our partnership with BPAY, which resulted in the reclassification of approximately $500 million of loan receivables to held-for-sale in December.
Excluding the impact of our held-for-sale portfolios, loan receivables would have increased by 4% versus the prior year as the period strong purchase volume growth was largely offset by a persistently elevated payment rate. RSCs were $1.3 billion in the fourth quarter and 6.15% of average receivables. The $220 million year-over-year increase primarily reflected the impact of lower provision for credit losses and continued strong program performance, including receivables and purchase volume growth as well as the improvement in net interest income.
Focusing on our credit performance, provision for credit losses was $561 million. Included in this quarter's provision was a reserve build of $72 million, net of the reserve reductions from our held-for-sale portfolios of $98 million. Excluding the impact of our held-for-sale portfolios, the $170 million reserve build reflected the impact of loan receivable growth within the context of our unchanged set of macroeconomic assumptions and credit normalization outlook, which includes peak loss in the first half of 2023.
Other income increased $85 million, driven by a $93 million gain in a venture investment. While I will provide more details later on in our discussion, I want to highlight that the majority of the fourth quarter EPS benefit from this gain was offset by unrelated asset impairments and certain opportunistic marketing investments we executed in the fourth quarter. Moving to slide 8 and our platform results, our home and auto, diversified and value, digital and health and wellness platforms each continue to experience double-digit year-over-year growth in purchase volume, reflecting strong diversified demand.
Our lifestyle platform also experienced robust demand as purchase volume increased 6% year-over-year, but faced a tough comparison to last year's strength in powersports volume. Loan receivable growth trends by platform generally reflected the more modest growth versus the prior year as higher purchase volume was partially offset by continued elevation in payment rates. Average active accounts trends range on a platform basis, up by as much as 9% in both diversified and value in digital. Home & Auto, Lifestyle and Health & Wellness average active accounts grew in the low single digits or relatively flat.
The average active account growth in diversified value largely reflected the stronger retailer performance. Digital active accounts were up versus the prior year due to greater engagement across our existing customer base and new programs. Interest of fee trends, while generally improved across the platforms, continue to be impacted by elevated payment rate.
I'll move to slide 9 to discuss net interest income and margin trends. The accumulated savings by consumers, combined with seasonally higher holiday transactor behavior, impacted payment rate during the fourth quarter. As we progress through the period, payment rate moderated somewhat from the third quarter levels but increased with the seasonal holiday spend we typically see in December.
Payment rate for the period was about 180 basis points higher than last year and 290 basis points higher than our five-year historical average. When tracking the account payment trends from the third to the fourth quarter, we see a slight mix shift away from above and full statement balance payments towards more minimum and below minimum payments. More specifically, the percent of account balance is paying their full saving balance decreased sequentially by approximately 20 basis points and the percent of accounts paying between their minimum payment and their full statement balance decreased sequentially by approximately 70 basis points.
The percentage of accounts paying their minimum payment or less than their minimum payment increased sequentially by approximately 90 basis points. We continue to expect payment rate to gradually normalize as customer spend remains robust, the consumer savings read is declining and industry-wide forbearance expires. While it is difficult to predict elevated consumer spending, lower consumer savings, inflationary pressures and return to full financial obligations has begun to impact accumulated savings levels by consumers, which we believe will lead to a moderation in payment rate.
Fourth quarter interest and fees were up approximately 2%, reflecting average loan receivable growth. Net interest income increased 5% from last year, reflecting the year-over-year improvement in interest and fees as well as lower interest expense for the period. The net interest margin was 15.77% compared to last year's margin of 14.64%, a 113 basis point improvement year-over-year driven by the mix of interest-earning assets and favorable interest-bearing liabilities costs.
More specifically, the mix of loan receivables as a percent of total earning assets increased by 500 basis points from 79.9% to 84.9%, driven by average receivables growth and lower liquidity held during the quarter. This accounted for a 96 basis point increase in our net interest margin. Interest-bearing liabilities costs were 1.18%, a year-over-year improvement of 51 basis points, primarily due to lower benchmark rates. This provided a 42 basis point increase in our net interest margin. The loan receivable yield was 19.61%, a year-over-year reduction of 32 basis points. This resulted in a 26 basis point reduction in our net interest margin.
Next, I'll cover our key credit trends on slide 10. Elevated payment rates continue to drive year-over-year improvement in our delinquency metrics. Our 30-plus delinquency rate was 2.62% compared to 3.07% last year, and our 90-plus delinquency rate was 1.17% compared to 1.40% last year. When removing the impact of the held-for-sale portfolios on our delinquency measures for the fourth quarter of this year and last year, the 30-plus delinquency metric would have been down approximately 60 basis points versus 45 and the 90-plus metric will be down approximately 30 basis points instead of 23.
Our portfolio of strong delinquency trends have continued to drive strong year-over-year improvement we've seen in our net charge-off rate, which was 2.37% compared to 3.16% last year, a 79 basis point improvement. Our allowance for credit losses as a percent of loan receivables was 10.76%, down 52 basis points from 11.28% in the third quarter.
Let's move to slide 11 and focus on expenses. Other expenses of $1.1 billion included the impact of $46 million of asset impairments and $29 million of certain incremental marketing investments. Excluding these impacts, other expenses increased 5% compared to the prior year. Focusing on employee compensation, fourth quarter was impacted by two key factors, one, higher hourly wages as we raised the minimum wage to $20 during the third quarter; and second, higher incentive compensation as 2020 levels were negatively impacted by the pandemic. The efficiency ratio for the fourth quarter was 41.1% compared to 37.1% last year.
Excluding the impacts of the gain on our venture investment, the asset impairments and the incremental marketing investments, the efficiency ratio would be 39.7%. Even with these adjustments, our efficiency ratio remains elevated compared to our historical average due to lower revenue, which has resulted from the impact of higher paying rate and lower average receivables.
We will continue to take a disciplined approach to expense management while also maintaining the pace of strategic investments in the business. This continues to be a clear point of differentiation for Synchrony. As we demonstrated through our Investor Day, Symphony leverages our legacy of operating smaller dollar balances to acquire, originate and service our accounts more efficiently than other general-purpose issuers. Our cost to acquire is half that of private label peers and a quarter of the broader industry's average.
It's also important to remember that throughout the course of the pandemic, we have maintained a relatively steady level of marketing spend to stay engaged with our customers, much of which is largely contemplated within the RSA. As a result, Synchrony generally does not ramp up our marketing expenses in order to compete for new customers.
Similarly, we consistently prioritize investment in our business and technological innovation. The digitally-enabled products and services that we offer and the seamless omnichannel experience a power for some of the most sophisticated technology partners in the world would not be possible without our tireless focus and steady investment in innovation year after year. So while the return of our operating efficiency ratio to approximately 32% will primarily be driven by the normalization of payment rate and thus the recovery of revenue, we are confident in our ability to continue to achieve market-leading operating leverage as loan growth continues.
Now let's move to slide 12 and discuss another core strength of Synchrony's, our funding, capital and liquidity. Given the reduction in loan receivables in 2020 and early 2021, coupled with the stickiness of our deposit base, we have generally been carrying a higher level of liquidity during the year. While we believe it's prudent to maintain a higher liquidity level during periods of uncertainty, we've been actively managing our funding profile to mitigate excess liquidity and optimize our funding profile.
As a result of this strategy, there was a slight shift in our funding mix compared to last year. Our deposits declined by $512 million from last year, and our securitized and unsecured funding sources declined by $1.3 billion. This resulted in deposits being 81% of our funding compared to 80% last year with securitized funding comprising 10% of our funding sources and unsecured funding comprising 9% at quarter end. Total liquidity, including undrawn credit facilities, was $15.7 billion, which equated to 16.4% of our total assets, down from 24.7% last year.
Before I provide details on our capital position, it should be noted that we elected to take the benefit of the transition rules issued by the joint federal banking agencies, which has two primary benefits. First, it delayed the effects of CECL transition adjustment for an incremental two years, and second, it allows for a portion of the current period provisioning to be deferred and amortized with the transition adjustment.
With this framework, we ended the quarter with 15.6% CET1 under the CECL transition rules, 30 basis points lower than last year's level of 15.9%. The Tier 1 capital ratio was 16.5% under the CECL transition rules compared to 16.8% last year. The total capital ratio decreased 30 basis points to 17.8% and the Tier 1 capital plus reserves ratio on a fully phased-in basis decreased to 24.4% compared to 27% last year.
During the first quarter of 2022, we will recognize the first portion of the CECL transition adjustment, which reduced our CET1 ratio by approximately 60 basis points. As a reminder, the impact of CECL has already been recognized in our income statement and balance sheet. This transitional adjustment pertains strictly to our regulatory capital metrics.
We continue to execute on our commitment of strong capital return to shareholders by returning $1.1 billion to shareholders in the fourth quarter through $982 million in share repurchases and $120 million in common stock dividends. For the year, we returned $3.4 billion, including $2.9 billion in share repurchases and $500 million in common stock dividends.
Given the strong performance of our business during the year, our Board approved an increase in our share repurchase authorization through June 2022 by an incremental $1 billion. As of December 31, we had $1.2 billion remaining in our share for purchase authorization. We have begun our normal capital planning process, and we'll provide an update to our planned capital actions once approved.
Our business generates strong returns and considerable capital, reflecting our commitment to drive consistent growth and attractive risk-adjusted returns, the scalability of our technology platform and our continued cost discipline. We have considerable excess capital on our balance sheet to deploy either through growth or returns to shareholders. Accordingly, we will continue to take an aggressive but prudent approach to returning capital to our shareholders, guided by our business performance, market conditions and subject to our capital plan and any regulatory considerations.
Finally, let me focus on our outlook, which is summarized on slide 13 of our presentation, assumes a stable to improving macroeconomic environment and a well-controlled pandemic. For the upcoming year, we expect consumer demand to remain robust, supporting broad-based purchase volume growth across the various industries and markets we serve.
As consumer savings begins to decline and payment rate moderates, we'd expect purchase volume growth to moderate somewhat. We expect our net interest margin to reflect the trends consistent with those during the second half of 2021 and should follow historical seasonality. With the advance of our held-for-sale portfolios in late Q2, we anticipate some excess liquidity, creating a modest headwind to NIM in both the second and third quarters. And as we've done in the past, we will work to reduce this excess liquidity quickly.
As payment rates moderate and credit trends normalize through the gradual rise delinquency and loss, we expect higher interest and fee yields to be offset by higher reversals. Our current expectation is that delinquency will peak in the fourth quarter. Given our reserve levels at year end, we'd expect reserve builds in 2022 to be generally asset-driven and partially offset by the approximate $130 million of final reserve reductions associated with our held-for-sale portfolios. RSA expense will continue to reflect the strength of our program performance and purchase volume growth but should begin to moderate as net charge-offs rise.
In terms of operating expense, we generally expect quarterly expense to run in line with the fourth quarter 2021 levels, excluding the impact of asset impairments and certain marketing items we discussed earlier. And lastly, with regard to our held-for-sale portfolios, we anticipate conveyance to occur in the second quarter, producing a non-recurring gain on sale of approximately $130 million. We expect to redeploy this gain through completely offsetting incremental investment in our business, thus the EPS neutral for the full year.
So putting it all together, Synchrony's differentiated model is powering strong growth at attractive risk-adjusted returns through changing market conditions, and we're emerging from the pandemic with considerable momentum.
As we continue to leverage our core strengths, our diversified portfolio, which provides resiliency and sustainable growth, our deep industry expertise, advanced data analytics and digitally enabled product suite, the combination of which enables strong risk-adjusted returns and our scalable technology platform, which powers efficient customer acquisition and servicing as well as swift partner integrations.
Synchrony will continue to engage more customers, drive greater lifetime value and deliver sustainable growth at peer-leading risk-adjusted returns. So as operating conditions continue to normalize, we remain confident in our ability to achieve the long-term operating metrics we laid out at Investor Day to continue to drive considerable value for all of our stakeholders.
I will now turn the call back over to Brian for his concluding thoughts.