Synchrony Financial (SYF) 2021 Q1 法說會逐字稿

Welcome to the Synchrony Financial First Quarter 2021 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Jennifer Church, Vice President of Investor Relations, 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 nor guarantee the accuracy of our earnings teleconference transcripts provided by third-parties. The only authorized webcast are located on our website.

On the call this morning are Brian Doubles and Brian Wenzel. I will now turn the call over to Brian Doubles.

Thanks, Jennifer, and good morning, everyone. It is truly an honor and a privilege to talk to you today for the first time as the CEO of Synchrony. Building on our strong foundation, I believe Synchrony is exceptionally well positioned for this next chapter of our growth journey. There is strong momentum in the business, driven by the ongoing implementation of our strategy and the unwavering hard work and commitment of our people.

While this past year has been challenging and unprecedented in many ways, we are starting to see positive signs of recovery. And we are seeing the benefits of the strategic initiatives that we accelerated in the new programs that we launched last year. I am very optimistic and excited about the opportunities ahead, and I'm honored to lead Synchrony into the future.

And with that, I'd like to get into some of the highlights of our first quarter results. Earnings were $1 billion or $1.73 per diluted share, an increase of $1.28 over last year. The resilience of our business has been evident as we navigated the pandemic. From the underlying fundamentals of our business, including diverse programs and networks and solid underwriting to our ability to quickly adapt to meet the moment with easily integrated seamless digital solutions, we have demonstrated that our business is structured to execute even in the most challenging operating environments.

And as we begin to emerge from this challenging period, we have seen many of our growth drivers outperformed pre-pandemic levels experienced during the first quarter of last year. Importantly, purchase volume increased a strong 8% over last year, with a substantial increase in purchase volume per account of 18%. While we're seeing strong trends on purchase volume, loan receivables were down 7% to $76.9 billion, given elevated payment rates with the infusion of additional stimulus this quarter, though average balances per account have rebounded, increasing 1% over the first quarter of last year as have new accounts, which were up 3%.

Net interest margin was down 117 basis points to 13.98% as further stimulus continue to elevate payment rates, which lowered our receivable mix and yield. The efficiency ratio was 36.1% for the quarter. We are on track with our strategic plans to reduce our expense base, removing $210 million of expenses by the end of the year.

Credit continued to perform exceedingly well with net charge-offs of 3.62% this quarter, compared to 5.36% last year. As a result of our liquidity and funding strategy in response to the COVID-19 impact on our balance sheet, deposits were down $1.9 billion or 3% versus last year. Given our excess liquidity, we have been slowing our overall deposit growth. Total deposits comprised 81% of our funding as our direct deposit platform remains an important funding source. Our ability to service and provide digital tools to customers makes our bank attractive to depositors, and we will continue to build out additional capabilities.

During the quarter, we returned $328 million in capital through share repurchases of $200 million and $128 million in common stock dividends. We continue to have a solid pipeline of new opportunities across our platforms, but we are being very disciplined around risk and returns, and it is critical to ensure that our partnerships are structured with strong alignment that benefits both parties. Having said that, as we previously announced, we will not renew our partnership with the GAAP as we were not able to reach terms that made sense for our company. We expect that exiting this partnership and redeploying the capital will be EPS neutral relative to current program economics and accretive to proposed renewal terms.

We have been on a journey to grow with partners who leverage our digital capabilities to help them drive sales and meet the rapidly changing needs of their customers. Our ability to win programs with transformational digital innovation has been demonstrated with a number of recent wins. These capabilities are also integral to the success of all of our programs as consumers are rapidly adopting technologies that enable contactless commerce and expect engagement along their digital purchase journeys. We are leveraging our vast digital assets as well as our strong data analytics capabilities to make the entire consumer experience more personalized and meaningful.

We have continued to expand our digital penetration across the customer journey from apply, to buy, to servicing. Approximately 60% of our applications were done digitally during the first quarter, and we grew 14% in mobile channel applications. In retail card, 50% of our sales occurred online and approximately 65% of payments were made digitally.

The investments we are making in digital and data analytics continue to pay off. During the quarter, we renewed 10 programs, including American Eagle, Ashley Homestore, CITGO and Phillips 66. We also added 10 new programs, including Prime Healthcare, Mercy Health and Emory Healthcare, which furthers our penetration of health systems. And we are also expanding the utility of our CareCredit card. Our patient financing app is now available on the Epic's App Orchard. This makes CareCredit available to hundreds of health care organizations using Epic's MyChart and enabling cardholders to use CareCredit to take co-pays, deductibles and medical expenses not covered by insurance. Not only does this technology integration provide a way to increase the usage and acceptance of CareCredit, but also helps health services and hospital providers to run efficient, financially healthy organizations by helping to improve revenue cycle management and reduce debt risk. We are excited by the prospects to support patients beyond elective care as we expand to offer payment options for nonelective medical expenses and routine care.

I'll spend a few minutes today outlining our CareCredit strategy and providing a framework to think about the opportunities that lie ahead. Over the last several years, we've been transforming CareCredit to become a more comprehensive solution for consumer financing and payments in health care, pet care and wellness by expanding our relationships with providers, retailers, payers and pharmacies. We have unparalleled scale and depth in this space. With $9.3 billion of receivables and acceptance of approximately 250,000 enrolled provider, health and wellness retail locations. The card is used by more than 8 million cardholders. We are in more than 80% of dental offices nationwide and over 40 health care specialties, 13 of which we entered into since 2018. We see big opportunity in health systems and hospitals and have rapidly expanded our reach by launching 8 new programs in 2020, bringing our total to 13.

With the growth in our pet vertical, we are now in over 85% of vet practices and have grown pets in force by 174% since our acquisition of the Pets Best insurance business 2 years ago.

A big part of our success is the engagement we have with our cardholders. Our cardholders give us high marks as we have increased our customer satisfaction score to 92% from 78% back in 2009. Our Net Promoter Score is nearly double the credit card industry average. And as proof of the value our cardholders place on the card, we've been able to increase our repeat sales to nearly 60%. That is a testament to the hard work that we put into creating a strong value proposition for the card and for increasing utility as we build our network, 1 office and provider at a time. And our growth numbers reflect these efforts and the position we hold in this space. Our receivables have increased 44% in 7 years. We have also increased the breadth of our business with an increase in provider locations of 41% in that time frame, and active accounts currently stand at 5.7 million, another double-digit increase in 7 years. We have built an incredible platform for growth and we are in an enviable position as we chart the course forward, continuing to evolve to capture further opportunity.

There is still tremendous opportunity to continue to unlock growth in dental, veterinary and specialty industries. We are making investments to simplify the customer and provider experience and leveraging technology to support more consumer-driven, self-service capabilities. We have ample room for growth with increased penetration among our existing partners and through innovation to make it increasingly easy to engage with our network. Just recently, we acquired Allegro Credit, which has both deepened our penetration in audiology and other industries while also enabling new products and capabilities.

With a steady increase in out-of-pocket health care costs and the popularity of high deductible health care plans, consumers are assuming more of the financial responsibility for their health care. This translates to a significant opportunity of more than $405 billion in out-of-pocket health expenditures in the U.S. but flexible and extended financing is only a small component of overall health care payments, so there is significant runway for growth.

We're also expanding beyond the traditional care credit industries and capitalizing on the evolving health care landscape that has increased focus on overall wellness. We have moved beyond elective care financing and now support patients by enabling them to pay for nonelective medical bills, planned procedures and routine medical care as we expand into health systems and more health care specialties. This will be enhanced by ongoing integrations with practice management software and the recent news about CareCredit becoming available through Epic's App Orchard.

Further, we have expanded our utility, creating more ways to access health care services by partnering with pharmacies. CareCredit is already accepted at more than 17,000 pharmacies nationwide, and we recently announced that we will become the issuer of the Walgreens co-branded credit card program in the U.S., the first such credit program in the retail health sector, and expect to launch the new program in the second half of 2021.

We are also transforming our pet business to be a more comprehensive financial solution provider and to meet the needs of pet parents throughout their pet care journey. Now more than ever, Americans are invested in their pets. With both pet ownership and cost increasing significantly over the past several years and that trend grew even more during the pandemic, Americans spend more than $100 billion on pet expenditures. There is a large market outside of that practices with significant opportunity to provide new products, financing alternatives and services.

CareCredit supports a lifetime of care for pets and with the acquisition of Pets Best insurance, we currently offer a complementary solution with veterinary care to support pet owners with simple, flexible financial options. We continue to integrate the Pets Best insurance offering to capitalize on the payment and customer experience synergies. We're also looking for ways to expand into other pet adjacencies through products and services in retail.

By focusing on the needs of our partners and customers and bringing substantial scale and expertise, we believe we will drive loyalty to the CareCredit network and as a result, should see outsized growth in the future.

With that, I'll turn the call over to Brian.

Thanks, Brian, and good morning, everyone. This is an important period of time for our company and the world as we continue to emerge from the pandemic. Our business and the actions we have taken over the past year leave us well positioned to take advantage of the opportunities which lie ahead of us. I share Brian's sentiment of appreciation on the unwavering commitment of our people. I want to thank all those involved in development, delivery and administration of vaccines to help us emerge from this highly difficult period of time.

I'll now provide an update on our first quarter results. The pandemic and resultant government stimulus actions have impacted several key areas of our business over the past year. However, our business mix has helped us to mitigate some impact from the pandemic as certain areas have performed very well, including digital, home-related products and services, veterinary services, electronics and appliances. Performance in these areas have provided support against the overall effects of the economic downturn. As we exit the first quarter, we are starting to see greater signs of economic recovery more broadly.

Purchase volume increased 8% versus last year and exceeded our expectations for the quarter. From a macroeconomic perspective, we have seen consumer confidence reach a 1-year high in March, unemployment continued to improve and easing of some of the remaining local restrictions. This is evident in the increase in purchase volume per account, which is up 18% over last year. Average active accounts were down 8%, which marks a slowing in the rate of decline that remains impacted by the macroeconomic effects of the pandemic in 2020 and uneven recovery in the first quarter.

We did originate over 5 million new accounts, an increase of 3% versus first quarter 2020, which is a positive sign and reflective of improved consumer sentiment. Loan receivables declined 7%, which was worse than our expectations. The driver was higher-than-expected elevation in payment rates, which resulted primarily from the recently enacted stimulus.

Interest and fees on loans were down 14% from last year, driven by the elevated payment rate in addition to lower delinquencies. Dual and co-branded cards accounted for 38% of the purchase volume in the first quarter and increased 6% than the prior year. On loan receivable basis, they accounted for 23% of the portfolio and declined 10% from the prior year.

Overall, we saw positive momentum in several of our growth metrics this quarter, the higher payment rates is impacting loan receivable growth. However, we're still cautious about the state of the pandemic with the recent rise of confirmed cases. We are encouraged by the progress made with the national rollout of the vaccine and lifting of some of the remaining restrictions. We remain optimistic of the positive momentum and continued improvement as we progress through 2021.

RSAs increased $63 million or 7% from last year. RSAs as a percentage of average receivables was 5.1% for the quarter. This was elevated from the historical average, primarily due to the significant improvement in net charge-offs. We reduced our loan loss reserves this quarter due to an improved macroeconomic outlook, combined with the decline in loan receivables. This, coupled with lower net charge-offs, resulted in significant decrease in the provision for credit losses of $1.3 billion or 80% from last year.

Other income increased $34 million, mainly due to investment income. Other expense decreased $70 million or 7% from last year due to lower operational losses and lower marketing costs, partially offset by an increase in employee costs.

Moving to our platform results on Slide 9. Our sales platforms continue to be impacted in varying degrees due to the pandemic restrictions and elevated payment rates. Their trajectories have been different based on factors such as business and partner mix, digital concentration, provider access and availability of hard line goods. We have seen broad-based momentum in purchase volume as consumers become increasingly confident as we begin to exit the pandemic. In retail card, loan receivables declined 9% but showed momentum with purchase volume increasing 11% versus last year. Average active accounts were down 7% and interest and fees were down 16% due to the impact from the pandemic.

We're excited with our new American Eagle program and continue to see significant opportunity with our recently launched programs with Verizon and Venmo as those programs begin to build. The strength of our powersports and home and specialty and payment solutions continue to help offset some of the impact from pandemic shutdowns and higher payment rates. During the quarter, loan receivables declined 1%, and average active accounts were down 9%; interest and fees were down 11%, which was driven primarily by lower late fees, finance charges and merchant discount, all the result of the reduction in loan receivables. We did see positive momentum in purchase volume, which was up 3% over last year.

Our focus on growing this platform resulted in several new programs being signed and renewing key partnerships, including Ashley Home Furniture during the quarter. We continue to drive organic growth through our partnerships and networks and added over 3,900 new merchants during the quarter. We also continue to drive higher card reuse, which now stands at approximately 34% of purchase volume, excluding oil and gas. Although CareCredit sustained the largest overall impact from the pandemic restrictions, improvement in this platform has continued into 2021 as providers have increased elective and planned services from the trough in the second quarter of last year. This improvement is evident in our purchase volume being flat to last year. Loan receivables were down 8% this quarter and drove a decrease in interest and fees on loans of 7% as we recorded lower late fees and merchant discounts.

During the quarter, we continue to grow our CareCredit network and enhance the utility of our card. The expansion of our network and acceptance strategies helped us drive the reuse rate to 59% of purchase volume in the first quarter. This is a powerful growth platform for our business, and we remain excited about the opportunities to drive future growth as the impact from the pandemic subsides.

I'll move to Slide 10 and cover our net interest income and margin trends. During the quarter, recently enacted stimulus contributed to an elevation of payment rates, which were up about 2 percentage points on average compared to the average payment rates we experienced pre pandemic. The difference was as high as 3.5 percentage points in March when the most recent stimulus plan was enacted. This has resulted in a reduction in loan receivables, which has had an impact on net interest income and net interest margin in the first quarter.

Net interest income decreased 12% from last year, driven by lower finance charges and lease fees. The net interest margin was 13.98% compared to last year's margin of 15.15%, largely driven by the impact of the pandemic on loan receivables and increase in liquidity and lower benchmark rates. Specifically, the loan receivables yield of 19.32% was down 135 basis points versus last year and was the primary driver of 117 basis point reduction in our net interest margin. The mix of loan receivables as a percent of total earning assets declined over 3 percentage points from 81.7% and to 78.6%, driven by the higher liquidity held during the quarter. This accounted for 61 basis points of the net interest margin decline.

The liquidity yield declined as a result of lower benchmark rates and accounted for 23 basis points reduction in our net interest margin. These impacts were partially offset by a 93 basis point decrease in the total interest-bearing liabilities cost to 1.57%, primarily due to lower benchmark rates. This provided a 78 basis point increase in our net interest margin. We continue to believe that in the second half of the year, excess liquidity will begin to be deployed into asset growth and slowing payment rates should result in higher interest and fee yields, leading to increasing net interest margin.

Next, I'll cover our key credit trends on Slide 11. In terms of specific dynamics for the quarter, I'll start with delinquency trends. Our 30-plus delinquency rate was 2.83% compared to 4.24% last year. Our 90-plus delinquency rate was 1.52%, compared to 2.10% last year. Higher payment rates continue to drive delinquency improvements. Focusing on net charge-off trends. Our net charge-off rate was 3.62% compared to 5.36% last year. Our reduction in net charge-off rate was primarily driven by the improving delinquency trends as customer payment behavior improved over the last several quarters. Our allowance for credit losses as a percent of loan receivables was 12.88%.

Moving to Slide 12, I'll cover our expenses for the quarter. Overall, expenses were down $70 million or 7% from last year to $932 million as we continue to execute on our strategic plan to reduce costs. Specifically, the decrease was driven by lower operational losses and lower marketing and business development costs, partially offset by higher employee costs. The efficiency ratio for the first quarter was 36.1%, compared to 32.7% last year. The ratio was negatively impacted by lower revenue that resulted from lower receivables and lower interest and fee yield, which was partially offset by a reduction in expenses.

Moving to Slide 13. Given the reduction in our loan receivables and strength in our deposit platform, we continue to carry a higher level of liquidity. While we believe it's prudent to maintain a higher liquidity level during uncertain and volatile periods, we are actively managing our funding profile to mitigate excess liquidity where appropriate. As a result of this strategy, there is a shift in the mix of our funding during the quarter. Our deposits declined by $1.9 billion from last year. Our securitized and unsecured funding sources declined by $2.1 billion. This resulted in deposits being 81% of our funding, compared to 79% last year, with securitized funding comprising 9% and unsecured funding comprising 10% of our funding sources at quarter end. Total liquidity, including undrawn credit facilities, was $28 billion, which equated to 29.2% of our total assets, up from 25.3% 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 2 primary benefits. First, it delays the effect of the CECL transition adjustment for an incremental 2 years; and second, it allows for proportionate current period provisioning to be deferred and amortized with the transition adjustment. With this framework, we ended the quarter at 17.4% CET1 under the CECL transition rules, 310 basis points above last year's level of 14.3%. The Tier 1 capital ratio was 18.3% under the CECL transition rules, compared to 15.2% last year. The total capital ratio increased 320 basis points to 19.7%. And the Tier 1 capital plus reserves ratio on a fully phased-in basis increased to 28.7%, compared to 24.1% last year, reflecting the increase in the reserves as a result of implementing CECL.

During the quarter, we returned $328 million to shareholders, which included $200 million in share repurchases and paid a common stock dividend of $0.22 per share.

Given the continued uncertainty in the operating environment, I thought it would be helpful to provide color on our current view on the key earnings drivers for 2021, which we've laid out on Slide 14. Our views assume that the pressure from the pandemic and a slower economic recovery continues into the second quarter, with the second half seeing the pandemic largely under control and the acceleration of the economic recovery.

First quarter purchase volume was stronger than we anticipated as we entered the year as local restrictions are lifted, with consumer confidence improving, so the consumers' willingness to spend. We currently believe these trends will hold and purchase volume will continue to recover across our platforms. In the second quarter, we will be comparing against a period of widespread shutdowns. In the second half, we anticipate improving growth trends as the pandemic impact moderates and macroeconomic growth accelerates.

Regarding loan receivable growth. We expect that stimulus will continue to have an impact on payment rates and therefore, loan receivables into the next quarter. In the second half of 2021, we assume payment rates will moderate as the effects of the stimulus abates and we will return to more normalized consumer payment behavior patterns. Combining this with the expected increase in purchase volume from an improving macroeconomic environment, this should contribute to loan receivable growth.

For net interest margin, we expect the higher payment rates will continue to pressure loan receivables and generate excess liquidity, impacting interest and fee yield and asset mix. We continue to believe that excess liquidity will be reduced through asset growth and slowing payment rates in the second half of the year, which will drive improving interest and fee yields and asset mix leading to increasing net interest margin.

With respect to credit, delinquencies are expected to increase from their current levels, but we now believe the peak will occur later than we anticipated, likely in early 2022. While current delinquencies will result in lower net charge-offs in the second quarter, we expect net charge-offs to rise resulting from the increases in delinquencies as we move through 2021. Given the magnitude of stimulus that was deployed during the pandemic, we believe the overall loss curve will be flatter than we initially thought, but it remains volatile and difficult to forecast as to the effects of the stimulus and industry forbearance has abated. We expect reserves to be largely driven by asset growth, impact from any changes in credit and in our macroeconomic assumptions and certain combinations of these factors could result in further reserve releases this year.

We expect RSAs to remain elevated into the second quarter, primarily reflecting strong program performance, including an improvement in net charge-offs, partially offset by lower revenue. In the second half of the year, we continue to expect lower RSAs generally, reflecting higher net charge-offs, partially offset by higher revenue.

As we outlined previously, we've implemented cost reductions across the organization, and I'm pleased to report that we are on a pace to achieve our expense savings target of $210 million for the full year. Partially offsetting these cost reductions will be the expense increases related to growth in addition to anticipated increase in delinquent accounts. We will continue to closely monitor how the pandemic develops and its impact to the macroeconomic environment. At the foundation, it is our belief that we position ourselves well for the opportunities that will develop as the economic recovery takes firmer hold. Further, we've made the investments to support our partners as they've been required to rapidly transform their businesses to meet the new digital realities. And we'll continue to make investments in our people, products, technology and platforms to drive long-term value and continue to ensure the safety of our employees while meeting the needs of our partners, merchants, providers and cardholders.

I'll now turn the call back over to Brian for his final thoughts.

Thanks, Brian. I'll provide a quick overview of key themes for the quarter and then turn it over so we can begin Q&A.

Clearly, the pandemic has had significant impacts and has, in many ways, changed the way we do business. This quarter made it evident that we are beginning to emerge on the other side of this period. Consumer sentiment has improved, the unemployment rate has dropped and U.S. retail posted the largest gain in 10 months.

Our business is showing its resilience as growth has accelerated with purchase volume up 8% and 5 million new accounts opened this quarter. And although these solid growth metrics were tamped down by higher payment rates, which impacted loan receivables and NIM, these are headwinds that we anticipate will soon abate. Credit performance has continued to outperform and we continue to expand our CareCredit network, delivering new products, financing alternatives and experiences with a focus on overall wellness and pet. The bottom line is that we demonstrated that we were able to rapidly adapt to operate in a new environment while continuing to keep our eye on the long term, positioning ourselves well for the future. And in my opinion, we have never been in a stronger position.

I'll now turn the call back to Jennifer to open the Q&A.

That concludes our comments for the quarter. 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 yourself to 1 primary and 1 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) And our first question comes from Moshe Orenbuch with Crédit Suisse.

Great. Brian, I was hoping that you could talk just a little bit about this return to normalcy with respect to things like late fees and how that's impacted the net interest margin and the timing as well as perhaps the prepay speeds, like what are the actual -- besides the injections of stimulus, the ongoing effects, like how should we think about the time frame for both of those to get back to something approximating normal?

Thanks, Moshe. So yes, clearly, we've seen the headwind relative to stimulus. We saw the cash flow really start back in mid-March around the fourth week itself since stimulus started to hit. So from there, we continue to see elevated payments. They are starting to trend down a little bit now as we get into latter part of April. Obviously, we have a converging factor with tax returns. So stimulus clearly is the #1 factor. When you think about the late fee yield, if you went back and looked at our number of delinquent accounts, they're down over 30% from the '19 period, so pre pandemic.

So again, as you think about a rising net charge-off or even just a return to normalcy when you think about the charge-off environment, that late fee yield will come back into the book. And come in advance of when the charge-offs actually hit. So we would expect to see that yield begin to increase in the back half of the year.

What I'd say, Moshe, as a lot of people focus on the margin of the business, we're at 14% today. We've kind of guided people to, call it, the 16% range in a normalized environment. If you break down the components of that for a second, the first piece is really the excess liquidity, which I started with, with the stimulus factors, right? So if you went back and looked at excess liquidity pre pandemic, apply that to the book today, you'll probably pick up about 90 basis points on net interest margin from there. We previously talked about there's probably 25 or so basis points, 30 basis points in the benchmark rates, which we'll see how prime comes. And the residual amount, right, which is the mainly late fee yield and interest yield will come back into the book and that will arise. So I think you can see a trajectory where this begins to accelerate in the back half of the year and begins to approach normalcy for us as we move into '22.

Great. And as a follow-up, you mentioned the 5 million new accounts. I'm assuming that's still with kind of sluggish retail openings, can that number get better? And any update that you can give us on the Verizon and Venmo programs specifically?

Yes. Moshe, this is Brian Doubles. I think we would certainly expect that number to continue to grow. We're not in a fully open economy right now. As you know, I think there's -- look, there's a lot of reasons to be bullish. When you look at the consumer, you look at the trends on jobs, unemployment back to 6% and then consumer balance sheets are strong and they're starting to spend again. I think the fact that we saw 8% purchase volume growth and 11% of retail card is a really positive indicator. But that's not where it should be in a fully functioning open economy. And so I think there's still room across all the growth metrics to go further from here. We're still in the early innings in terms of a recovery. But most of the trends that we're seeing are pretty positive.

The fact that we grew purchase volumes per account up 18% is a really good indicator that consumers are spending again. And I do think that will turn into more revolving behavior over time. I mean, the effects of the stimulus, as Brian said, are going to -- they're going to wane over time. I think you're going to start to see that pretty soon as the confidence gets better, you tend to see consumers take on more debt and revolve a little bit more, which will help on balances and margins as well.

The other thing I'd add, Brian, as you think about the new account originations, we haven't touched the credit box. I do think as we begin to continue to move through the year, we are making credit refinements to expand credit, but we haven't done any acquisition. So that will also provide a tailwind as we go throughout the year, Moshe.

And then Moshe, just on Venmo and Verizon, a lot to be excited about on both of those programs. Venmo, it's still early, but we're ahead of our expectation in terms of new accounts and spend. The feedback from customers on a card has just been phenomenal. They love the val prop and the fact that it automatically optimizes the rewards for the spend categories where you're spending the most. They love the card design, the QR code. So the feedback has just been terrific.

And then Verizon, which is a little bit further along, I'd say, we're seeing really good purchase volume. It's definitely behaving like a top-of-wallet card, which is what we wanted. So far so good on both. And I continue to believe that both can be top 10 programs for us in the future.

We have our next question from Sanjay Sakhrani with KBW.

I just want to follow up on the comments on loan growth. I guess when I think about your framework and outlook for the year, do you feel like you're more constructive on loan growth as we look out for the rest of the year? And then just specifically to that off-line recovery, are you guys anticipating an offline recovery because it would seem like it would impact that loan growth more significantly than others?

Yes, Sanjay. Yes, as we think about loan growth here, we entered the quarter optimistic on the positioning. As we exit the quarter, we're probably a bit more optimistic than that. So we've seen broad-based recovery when you look at retail card, up 11%. That is both the expansion of digital as well as some of the, as you call them, off-line. Retailers kind of coming into play. I think from a receivable standpoint, we are seeing strong volumes. Some of that is obviously buoyed by the stimulus dollars that came in, in March. But we saw strength across each of the months in the quarter. So it outperformed what our expectations are.

And as I think about loan growth, I think you probably will see an inflection point here in the second quarter, an acceleration into the back part of the year. So I do think you'll see positivity comes through the portfolio. And again, we have the tailwinds that are still existent in the CareCredit platform, right, as you have dental implant services opening up and you still have the supply chain issues in the payment solutions platform. So there's a lot of tailwinds that are in place besides what we've already seen. So again, we're optimistic about where we are and how the second quarter will play out and what we've seen to date in the quarter and then how the back half of the year looks.

Great. And just to follow up, Brian Doubles, maybe you could just talk a little bit more about the GAAP relationship loss and sort of how you see it affecting the industry as a whole with newer players coming in and possibly doing some aggressive pricing type stuff. I mean, how do you think that affects the future pipeline? And are you seeing deals in your pipeline that look interesting?

Yes. Thanks, Sanjay. Look, I think this was a bit of a unique situation. I'd say, we had a really good partnership for a number of years. We had great feedback actually from the client on our partnership model, our products, our capabilities. I think at the end of the day, this one just came down to terms and price. And our competition was just a lot more aggressive on both. There were some, I would call them really out of market terms where they were looking for guaranteed revenue that increased annually regardless of how the program performed. And for context, just given the turnaround that they've been working through, the program had been shrinking. And so there's really only so far you could go to guarantee those types of payments on a program like that.

So look, we tried to reach an agreement. At the end of the day, there just wasn't a way for us to get our interest aligned. But I do think this is a pretty unique situation. I look at the pipeline today across all 3 platforms. We've got really attractive opportunities with very strong partners at attractive returns, where our interests are aligned. And I think that is so important. We talked about this for a number of years. We want programs where our interests are aligned in growing the program. We're doing that in a way that benefits both parties. So I still feel really good about the pipeline as I look across all 3 platforms.

Our next question is from Ryan Nash with Goldman Sachs.

So Brian, you're running at 17.4% CET1. If I look at this quarter, you earned over $1 billion. Reserves are likely coming down. And even with the return of growth, you're likely to accrete quarter -- capital in the coming quarters, even using the existing $1.6 billion buyback. So I was wondering, maybe could you just talk about the strategy for getting CET1 back towards peer levels? And is there the potential for you to revisit your capital return as for the coming quarters?

Yes. Thanks, Ryan. So obviously, in the first quarter, we repurchased $200 million of shares in the quarter, that was part of the $1.6 billion we announced in the early part of January. And just to put that frame of reference, obviously, when we went to the Board and discussed with the Board, that authorization, that was in the December time frame off the models. As we move through the quarter, clearly, we have more information. We've updated our scenarios. We submitted our capital plan to the Fed in March and look forward to their feedback later this quarter.

So obviously, we'll see what the results of that come back, but we're optimistic with regard to their support for our capital plan. It's not lost on us that we have the excess capital, Ryan, in the second quarter will again be subject to the limitations by the Fed, which will cap us out around $390 million for the current quarter with regard to the amount of repurchases that we can do. I would make the presumption we will be depending upon market conditions at that maximum. And then we'll be back to you and talk about the capital plan that we submitted back to the Fed.

That being said, to the extent that the income profile of the business changes, we have not in that capital plan, dealt anything with GAAP and if that portfolio conveys that we would potentially revisit that and go back to the Fed if it's warranted. So we'll continue those discussions and dialogues with the Board and most certainly with our regulators. So there is an opportunity.

With regard to your cadence question, clearly, we want to get back to our long-term, our long-term goal of being in line with peers, and we'll do that as prudently as possible. But obviously, we want to do it with support of all our constituents. They're not barriers to doing it. We just want to do it in a prudent fashion. And most certainly, we're not totally done with the pandemic care, but we'll move as prudently as possible to execute that.

Got it. And maybe just as a sanity check to follow up to Moshe's question. How should we think about the pacing of NII improvement relative to the pacing of loan growth given all the dynamics on margin and the normalization of credit over time. As we see these factors abating, should we see NII materially outpacing loan growth as we normalize?

Yes. I would probably think the more moving in sequence as of -- in the early part of this quarter. As you get to the back part of the year, when you start seeing the late fee yield come in, you may see the NII accelerate a little bit faster, but it will really depend upon that delinquency formation, Ryan.

Our next question is from Betsy Graseck with Morgan Stanley.

A couple of questions. Just on the capital targets, could you just give us a sense as to where you think optimized is for you over the next cycle here? And part of the reason for the question is I'm trying to understand how you're going to be thinking about your capital to fund loan growth? Or on the flip side, do you feel like your loan growth can be fully funded by the liquidity mix shift? So just give us some color there would be helpful.

Yes. Let me start with the latter part of your question. Clearly, the excess liquidity we have, we believe sustains us with the loan growth that we see coming in the portfolio, which again gets back to more normalized level back half of the year. We've talked about a potential acceleration into 2022 as there's pent-up demand. And we believe the excess liquidity is ample enough to support that. And most certainly, with the earnings power of the business that we expect this year from a capital standpoint, we should be able to support it.

With regard to the first part of your question, with regard to those targets. I mean, we talk about peer targets, so you think about the Cap One's, this covers down in that 11 to 12, maybe 10.5 range. We'll see how the portfolio develops. We're optimistic we can get there in a reasonable period of time. I think if you go back we exited GE with 18%. We made it down to 14% before the pandemic hit. And we think we can get back in a fairly reasonable period of time. And if you remember right before the pandemic hit, we were on a path to execute a $3.6 billion capital plan. We're $3.3 billion into it. So we think we can employ it fairly rapidly once we feel comfortable.

Okay. And then, Brian, you're talking at the beginning of the call about CareCredit. And maybe you could help us understand the impact of the Walgreens portfolio over time? I think you mentioned that you could see Verizon and Venmo getting to top 10 program, maybe you can give us a sense as to how you're thinking about Walgreens? And then also, how should we think about CareCredit impact on RSAs? Is it similar to the way that the retail program is run or is there any differences that we should be aware of?

Yes, sure, Betsy. I think -- look, CareCredit, I think, is probably the most exciting growth opportunity that we've got in the company today. And we try to lay that out for you in a couple of slides. I think first, just going after a market of this size that's growing as fast as it is. Obviously, health care costs are rising, high deductible plans are increasing in popularity. So less and less is being covered by insurance, and that's really where CareCredit comes in. We're a big player in the space today, but financing options in this space is still a very small fraction of the potential spend that's out there.

So there is just a ton of room for growth. And I think about the growth in really 3 components. One is growing the core wherein CareCredit is accepted in about 250,000 locations today. We're in 40 different specialties. We just entered into 10 new specialties just over the last 2 years. And we're in 80% at dental offices, 85% of that. So we've got a lot of scale. But with that said, there's still a lot of room to grow penetration inside of those providers because third-party financing options is still a relatively small percentage. So a lot of room for growth there.

And then we talked a little bit about both health systems. We're in 13 large health systems today. That's a growing part of our business. We're paired up with big players like Kaiser Permanente, Cleveland Clinic. And then we talked about pets as really that third leg of the strategy. We're seeing just unbelievable growth in our pet insurance business that we bought a couple of years ago, up 174% since we bought it. So just a lot to be excited about.

And then you touched on Walgreens. We had -- our CareCredit cards were accepted at Walgreens. We expanded that relationship to launch a new program and I think similar to Venmo and Verizon, this can be a top 10 program for us. And we're tapping into 90 million myWalgreens customers. So the opportunity is just huge. And we're actively working to get that launched in the second half of the year.

Okay. And the RSA -- sorry, go ahead, Brian.

As you see -- Betsy, the RSA will operate similar to how you see things operate in the retail card platform. So it would be a similar type of alignment for Walgreens.

Got it. And would you ever go after the opportunity with individual doctor practices for their personal needs? Or is this going to stay at the business level, just wondering?

Yes. No. In terms of financing the actual practice, Betsy?

Yes, exactly.

Yes. Yes, that's an adjacency we've looked at in the past. It's on the screen. We don't have any immediate plans to go there, but definitely something to consider in the future.

Our next question is from John Hecht with Jefferies.

I guess, just going a little bit more. It's clear you did emphasize CareCredit in the prepared remarks. I'm wondering -- and you talked about the scale. Maybe can you give us an update -- I think from a competitive positioning perspective, you're dramatically larger than the next largest, I mean, but maybe you talk about the competitive framework. And just given the growth momentum there, how much bigger as a percentage of, call it, loans receivables might CareCredit be over the next few years?

Yes, John, we're certainly probably the biggest player in this space that does what we do. But we have seen competition come and go into the space over time. I love the fact that we have the scale that we have. It's taken us decades to build this kind of scale and get embedded in 250,000 locations. So I would expect going forward to see outsized growth in CareCredit relative to the rest of the business. So I definitely think this becomes a bigger part of the business going forward.

We're also increasing the level of investment that we're making in CareCredit. We've invested quite a bit, obviously, over the last 10 years. But I'd say just recently with acquisitions and pet insurance, we just recently acquired Allegro Credit, we're definitely seeing a lot of opportunities to invest both organically and inorganically, which I think will just accelerate the growth rate here relative to the rest of the business.

Okay. And then you guys, you cited some good trends with respect to your account adds recently. But clearly, there's been some churn as there always is in the portfolio. Is there any change in characteristics of where you're seeing some of the churn come from?

Yes, John, I don't think we see anything different. Clearly, the opening up of more traditional retail, we see an influx there and a little bit through the door population, but there's no real fundamental shifts.

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

Brian, obviously, there's been a big proliferation of fintech companies. And I was just curious, as you look at your 3 businesses, is there, one -- or how would you rank them in terms of where you're watching closer? And I'd be curious on CareCredit. It seems like that could be susceptible to fintech players maybe more so than other areas, but I could be wrong on that. Just want to get your thoughts.

Yes. No, look, I think you can't limit it to just one of the platforms. Obviously, it's a very competitive space right now. The fintech landscape is changing every minute, and we have to stay all over it across all 3 of our businesses. And I think the team is doing a really good job of doing that. So I don't think that we feel it more acutely in one area than another. I think what we tend to feel from fintechs is they tend to do one thing really well. And that's a luxury that they have. And we are -- given our scale, we have to do a lot of things really well to compete with them. But I feel like we're doing that across all 3 of our platforms.

So look, competition is good at the end of the day. It makes us better. I don't feel like we're losing -- I don't feel like we're losing share in any of our 3 platforms. We still got a lot of opportunity for growth, but it's something we got to stay all over. Our teams watch this. They are talking to our partners. And when they see people come into the space, we're doing our best to keep them out and solidify our relationships. So I feel really good about how we're positioned competitively. But you can never let your guard down, you got to stay all over this.

Yes. And then in terms of not really touching credit underwriting standards, it seems like some of the peers have started to loosen up. Are you just being cautious or do you still need to see something to get comfortable?

No. So Don, the way I would think about it is we have started to make refinements in our credit underwriting. If you remember, when we started back in the pandemic, we did tightening more on proactive type of credit extension. So we shifted the cutoff down on our private label and dual card product mix. We reduced the number of proactive credit line increases. We reduced the number of invitation to apply and prescreen type offers on new accounts.

As we move through into 2021, what we started to do, in places where we obviously have known customers, we've begun to unwind a lot of those credit refinement. So we are shifting the cutoffs so more people will get a dual card, which would be a slightly higher line, but it most certainly stimulate some spend in the world. We have begun a number of credit line increase type programs, which are customers that we've known and seeing credit behavior and payment behavior patterns. And then we've also begun to upgrade accounts from private label to dual card that would have qualified for dual card a year ago.

So we're doing a number of things proactively. We just have not touched at the point of acquisition, changed any cutoffs, things like that. But again, we didn't do a lot of that last year. So I don't really expect us to do a lot of it changes now, but we have begun proactive increases. And the good news is, given our portfolio, we're able to do that with customers we know, and we're not taking incremental risk in our eyes.

Our next question is from Rick Shane with JPMorgan.

Look, when we think about the nature of private label, there is more by category concentrated behavior than you would expect to see with, for example, general purpose. When you look forward to where there are opportunities for further recovery, how do you think the portfolio and the opportunity indexes against that?

Yes, Rick, I think probably the best way to think about it is you have to look at -- I know there's obviously, T&E has a big pullback. We're a little bit less concentrated there. But certainly, our dual cards will benefit from that, and our general purpose card will benefit from that. I think the fact that brick-and-mortar stores are opening again, I think we're certainly well positioned to benefit from that. And then I think, frankly, the digital trends that we saw over last year, while we're going to have some tough comps, they're coming up over the next few quarters. I feel like some of that shift was certainly permanent and will stay and we'll benefit there as well.

So look, if you look across the portfolio, the one thing that I think about quite a bit, and we hear this from all of our partners, including all the providers in CareCredit, is there is a real pent-up demand, right, for pretty much everything. This pent-up desire to spend and get back to normal. We're talking to our providers in CareCredit, and they can't keep up with the appointments. Because so many people over the last year, they postponed things that weren't critical, they didn't want to go into the practices. And now you're seeing all of that start to flush through. So I think regardless of the category, there's a ton of pent-up desire to spend. And I think if travel, entertainment, dining, those things come back, I think that also spurs other types of spend that we'll see both on our dual cards but also in some of our adjacencies.

I think it's also, Brian, as you kind of pointed out, we're so broad-based. When you think about inside retail card, which is up 11% in the first quarter, I mean, think about the breadth of lifestyle/specialty groups are in there, think about the -- not only the American Eagles, but the DICK'S Sporting Goods. When you go to value-oriented retailers such as Sam's Club, et cetera, TJX that are in there. We have such a wide breadth of coverage with regard to where spend happens. It actually is a fairly nice tailwind as we come out of this period.

Got it. That's very helpful. And Brian, you bring up a really interesting point in terms of CareCredit, and it leads to my follow-up question, which is, do you think that there are certain categories of spend that translate naturally into a higher percentage of borrow?

A higher percentage of borrow, is that what you said, Rick?

Yes. So for example, people may be more inclined not to borrow on a gas card. But certainly, if it's a larger transaction like you might see through CareCredit, there would be more revolved.

Yes. No, certainly, we would expect to see that in CareCredit with some of the bigger ticket purchases. We tend to see really good revolve rates there. And I do think it does depend a little bit on the size of the ticket. I mean if somebody is getting braces for their kids, that's a big ticket item. They typically don't want to tie up their general purpose card utility with that purchase, and that's where CareCredit comes in. And that can be done on an equal pay installment loan, it can be done on a promotional financing product and we tend to see really good revolve rates there as well.

And we have our next question from Mihir Bhatia with Bank of America.

Maybe just to start, I was hoping you could share some color on how you're currently thinking about just buy now, pay later. And I'm thinking more in terms of the Pay in 4 type program versus some of the larger ticket things where you, like in Payment Solutions, where you basically have a buy now, pay later solution. I'm thinking more just the smaller ticket Pay in 4. Just how are you thinking about it? Is that something you're considering? Should we be expecting you to be in the market with something like that? Any time frames that you can share there?

Yes. Look, I can tell you, it's definitely going to be a product that we offer. We're going to have something to market with a couple of partners later this year. Just to take a step back more broadly, our strategy is really to provide a full suite of products. We have such a diverse array of partners that we really can't have a one-size-fits-all strategy. We've got to be able to offer revolving products; short-dated installment; longer-term installment; equal pay products; buy now, pay later products. And we want to do that in a way that we can bring that full suite of products to our partners and basically allow them to choose which products are best for their customers based on not only their customer, but what types of products are they selling.

So not surprisingly, bigger ticket items tend to steer more towards a longer-term installment, that can be on a revolving product or closed end. And then smaller ticket, it tends to be shorter term, either through a product like SetPay or a Pay in 4 type product. So that's really the strategy to provide that comprehensive suite of products and then take that to our partners and really allow them to select from that menu in terms of what meets their customer needs based on the products that they're selling in their strategy.

Okay. And any time lines or anything more -- I guess, I'll move on from that. I just wanted to clarify. In terms of just your comments on loan balances, I just wanted to make sure I understood that right. Do you think loan balances have troughed or pretty close to troughing at this point? I guess what I'm asking is, do you see more pressure from payment rates in 2Q? Or do you think that those balances start increasing from here? And if you've seen anything in April that you'd be willing to share, that would be great.

Yes. Thanks, Mihir. So I think as you think about the beginning part of April, we continue to see elevated payment rates from historical average that has tended to trough down a little bit. We expect that to burn off during this quarter. So with regard to a loan receivable trough, my expectation would be that we are going to trough here. Most certainly, we have seen very strong sales in the first 20 or so days of April. So our hope would be that we trough here in the second quarter and begin that acceleration up.

We have our next question from David Scharf with JMP Securities.

Thanks for squeezing me in here. Brian, I just had 1 follow-up on CareCredit. Most questions have been addressed. Can you just provide a little more maybe granularity or specificity around just how the payment product is marketed, awareness is created for the transitional -- transition to more kind of nonelective procedures? I'm just -- I've seen CareCredit displays at vets, the countertops of vets and other elective outlets, but I'm trying to understand how as a member myself of a large health care system, how I would even become aware of this as a payment option, how it's going to be marketed to me?

Yes. A lot of it is -- again, we built this business over decades, and a lot of it is awareness at the point of sale. So when you're sitting in the waiting room of a vet appointment or dental appointment, you see the promotional financing offer, you see CareCredit. We actually talk about it in the providers and talk about the benefits of it. And so that's the primary channel and at least has been historically. We also have a provider locator. And what we're trying to do is move up funnel a bit so that at the time that you're booking your appointment, because a lot of that is now happening online, you're actually getting -- you're seeing the promotional financing offer so that, that becomes kind of part of how you're thinking about your treatment.

So it's not once you actually get to your appointment, that you become aware of it, you can actually go through the whole process well in advance of your appointment and think about how you're going to pay for whether it's braces or whatever your treatment is going to be. And we found that to be really successful. So we've been building that brand awareness over time. It originated largely inside of the provider's office, but has certainly expanded to be more digital in nature through direct marketing and other channels.

I see -- and I believe you may have mentioned MyChart at one point. I mean, once again, just reflecting on -- particularly with the pandemic, the -- my experiences over the last...

Yes, getting integrated into the practice management software system is huge for us. That is a really important aspect of the growth strategy here and for health systems or integration with Epic, inside of the dentists and the vets, their practice management software, regardless of what they use, we want to be completely integrated there so that it becomes part of the process for the office manager that's working there. And you can imagine, we -- with 250,000 providers, we have a wide range of big providers, small providers and keeping CareCredit top of mind as a payment option is really critical to the future growth of that business.

Got it. And just 1 last follow-up. More program-specific on Venmo, I know you had mentioned it, it's still very early stages. And I think you had commented it's modestly kind of exceeding kind of expectations at this time. Can you give us a little color, though, on perhaps what percentage of the Venmo user base is initially being targeted? Just trying to get -- it's obviously a very younger skewing demographic. I got to believe a lot of Venmo users have very thin credit files. Just trying to get a sense for how we should think about the opportunity there in terms of the mix of current users?

Yes. I mean, nothing I can provide specifically, but I mean, this is a huge opportunity to tap into 70 million Venmo customers. I mean, obviously, they have to meet our underwriting criteria in our screen. But that's just -- it's a huge opportunity for us. Again, no doubt this is going to be a top 10 program. And the early returns in terms of what we're seeing on spend and accounts is ahead of what we thought it would be. And we had -- we were pretty aspirational in terms of our expectations. So very positive, even though it's only been in full launch mode for a couple of months.

The only other thing I'd add here, this is another point of the strength that we have, Brian, right, which is the ability to get data from our providers. So when you think about where Venmo may know a customer for a period of time, watch the payment velocity, see how long they have been affiliated, they can pass us that information. So it actually helps us even though they may have a same credit bureau, the richness of the data that they have with PayPal, Venmo may be a help for us as we underwrite.

Vanessa, we have time for 1 more question.

Our last question comes from Dominick Gabriele with Oppenheimer.

If you think about -- I just want to go back to the total business, and I really appreciate all the color on CareCredit. But if we think about the CET1 and where that can go versus the general purpose players, I think historically, there's been a buffer between private label and general purpose CET1s. And -- so do you expect that spread to close? And have you had conversations with the regulators of them feeling comfortable with that closure? And then I just have a follow-up.

Yes. Thanks, Dominick. I don't think we've had a conversation with regard to the product, private label versus general purpose, I think they look at the loss scenarios that we run, right, stress scenarios that we run. We are having a very unique feature in the RSAs, which provide a buffer against some of the outlays. So I think when you look at the output of those, we don't really view it differently than some of our competitors when you think about Capital One for argument sake with regard to how their stress capital buffer comes out. So we're in line with those. It's not really products oriented. And most certainly, for us, as we have those conversations, really demonstrating to them the resiliency of this business and this customer because of the point of origination, we actually get stronger yields and risk-adjusted returns off. And again, when you combine that with the RSA buffer, it provides particular strength when it comes to having a lower capital ratio. Those are the conversations we're having with them.

Makes a lot of sense. I would argue you should be below the general purpose players to some extent because of all those factors on a risk-adjusted basis. And then if you think about the efficiency of the business as we move forward. There's obviously going to be some pressure from multiple factors on the loan book. And obviously, you could see some good cycle growth given some of the tailwinds of the overall economy. But when we think of GAAP, when we think about all the various factors of just the size of your loan book, how do you think about the long-term efficiency of the business moving forward over the next few years? Is there some pressure on efficiency until you get back to maybe your more traditional average loan book size? And is there some dynamics between the credit -- CareCredit and the retail card there? I really appreciate being on the call.

Thanks, Dominick. So I think the way to think about efficiency is when we went through last year, we underwent a strategic outlook. That said, if I look out to 2025, think about the mix of business I'm going to have, think about trying to be a top ROA profile company. And I look at the revenue characteristics, the lost content characteristics, the RSA characteristics, what is my expense and efficiency ratio have to be in order to be a top-tier ROA and ahead of all of our peers to really generate that investment thesis. We then roll that back into the plans that we put in place in the latter part of 2020.

So I think we've engaged upon that, part of that is delivering over $210 million of benefit this year from a cost-out perspective. I think the greater pressure on the efficiency ratio in the short term, to be honest with you, is the revenue headwind that we have with the net interest margin and NII have been a little bit impacted or being impacted by stimulus and really terrific credit and late fee impact that comes from that. That's a little bit of headwind. I do think you're going to see this. This business model, right, we were built off a foundation of running expenses at a very manageable level given the loan balance size.

I think as you see CareCredit and these other business grow, you should be able to get operating leverage because they run at higher average balances if you think about the bigger ticket size associated with those accounts. And then what can't be lost is the fact that we don't have to spend as much on marketing as our peers relative to generate those new accounts. So we are industry, probably, best or very attractive cost to acquire customers, which really puts us at a competitive advantage versus our peers.

So we will tightly manage the efficiency. And while we're doing this, we're going to continue to invest in the future of the digital assets that we put in play over the last several years. We're going to continue to invest for our long-term future. So it's a combination of investing and really having a business model and set of partners where we can leverage it and generate that operating efficiency as we probably grow above-average with peers and have a higher return than average peers is how I would think about it, Dominick.

And thank you, ladies and gentlemen, this concludes our question-and-answer session. Our call has now concluded, and we thank you for your participation. You may now disconnect.