(Reuters) – Credit card company Synchrony Financial beat second-quarter profit estimates on Tuesday, as the U.S. Federal Reserve’s rapid rate hikes helped boost interest earned from borrowers, offsetting a hit from bigger rainy-day funds.
Lenders have benefited from the Fed’s aggressive monetary policy tightening, but also had to earmark bigger provisions for potential defaults as higher borrowing costs squeezed consumers’ financial health.
Synchrony reported a profit of $1.32 per share in the reported quarter, compared with analysts’ average estimate of $1.24, according to Refinitiv IBES data.
Net interest income (NII) increased 8.4% to $4.1 billion, helping soften the hit from larger credit loss provisions at $1.38 billion, up from $724 million a year earlier.
Last week, the largest U.S. banks too reported profits on higher interest rates, but also warned of risks ahead, with U.S. consumers pulling back on spending and losses building up on credit cards and office real estate.
Total deposits for Synchrony Financial increased 1.8% to $75.77 billion from the first quarter and rose 17% from a year earlier.
Investors have been scrutinizing deposit trends at banks and other financial companies after an uncontrolled flight of deposits led to the collapse of three lenders earlier this year.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Shinjini Ganguli)
