Synchrony Deal Added $0.25 to PayPal’s Earnings


Nov. 20 2020, Updated 5:30 p.m. ET

PayPal seeking to free up cash

PayPal (PYPL) is on track to close the sale of a large portion of its credit business to Synchrony Financial (SYF) in 3Q18. It’s eyeing a July 1 closing date, if all goes well.

In November 2017, PayPal announced that it decided to sell its US consumer loan business to Synchrony, saying that the move would help it free up funds it could invest in businesses that it deems more crucial to its future. PayPal closed 4Q17 with cash holdings of $5.7 billion, representing an increase of 12.3% YoY (year-over-year). Amazon’s (AMZN) cash holdings increased 19.2% YoY in 4Q17, while Fiserv’s (FISV) cash holdings increased 8.3% YoY that same quarter.

Article continues below advertisement

A boost to earnings

PayPal’s loan transaction deal with Synchrony resulted in a boost to its earnings in 4Q17 due to one-time adjustments related to held-for-sale accounting, according to the company. PayPal recognized a $0.25 boost to its GAAP (generally accepted accounting principles) EPS (earnings per share) in 4Q17 as a result of the loan transaction deal. At the same time, PayPal recognized a loss of $0.15 per share due to changes to the US tax law. As a result, PayPal posted EPS of $0.50 in 4Q17.

PayPal not ditching credit business

Something important to note about PayPal’s sale of its loan business to Synchrony is that the company is actually not getting out of the credit business. It’s only selling its US loan business for strategic reasons while keeping its international credit business intact.

PayPal, Square (SQ), Amazon, and Alibaba (BABA), which are all e-commerce and payment providers, have come to view providing loans to customers as crucial to their core operations. Loans seem to be helping them nurture a loyal base of customers.


More From Market Realist

  • A "now hiring" sign outside a Popeyes restaurant, one sign that employers are having trouble finding employees willing to work for current wages.
    Why Employers Are Struggling To Fill Jobs Despite High Unemployment
  • Beyond Meat patties in a grocery cart
    Buying the Dip on Beyond Meat (BYND) Stock Is a Risky Move
  • People looking at data on a laptop
    Is Driven Brands (DRVN) a Good Stock to Buy? A Look at the Year Ahead
  • A Moscow Mule drink made with Reed's
    Is Reed's (REED) a Good Stock to Buy? A Look at the Year Ahead
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.