Hey, good morning, everybody. My name is Jeff Adelson, the consumer finance analyst here at Morgan Stanley. On behalf of the entire Morgan Stanley Financials team, I'd like to welcome you all to the 15th Annual Morgan Stanley Financials Conference. We have a great lineup over the next three days, 161 companies in attendance. To start here today, kicking off our conference, I'm delighted to have with us today Synchrony's Chief Financial Officer, Brian Wenzel. Brian, welcome back.
Jeff, thank you. Good morning, and thanks for the invitation.
Yep, and before we get started, I'm gonna quickly read some disclosures. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. So, Brian, maybe we could just start. Looks like you put out your May credit 8-K this morning. You did talk about how the credit was gonna peak this month or last month rather, and you saw that sequential improvement. It looks like delinquencies did slow this month as well. Anything else you wanna talk about, or just dive into anything else you wanna give us on the quarter as well?
Yeah, you know, first of all, you know, thanks for having this conference a little earlier in the 15th, so we got our 8-K out. But it did show a reduction in the net charge-off rate of 30 basis points. Delinquencies are declining, which is in line with the narrative that we've shared with folks, where losses in the back half of the year will be lower than the front half of the year. And you've kind of seen that peak really in April. And if you look at delinquency trend for the last three months, I think people should get, you know, more comfort, the trajectory of net charge-offs as we move forward.
You know, what are you seeing from the consumer? You know, you spoke about consumer resilience before, how they're managing spend, trading down a bit. You also, last week, did note that retail traffic's trending lower, spend is more flattish. What do you, what do you think is driving this at this point?
Yeah. So let me back up and lay out the frame, and I'll go into that question. So for the quarter, you know, we've talked about already, during the quarter, you're gonna see purchase volume that's generally flat to last year. Now, I hate to sound like a retailer, where I look at last year and that's a record quarter for the second quarter we're competing against, but it is flattish. Payment rate is slowing with the consumer. So you know, receivables are coming in line with expectations, which generally is a good thing.
When you think about net interest margin, I kind of said it's gonna be down probably 10 or 15 basis points, more a factor of having more liquidity than we anticipated, which is really a good thing when you think about funding for the second half, and seasonality is really the driver there. We talked a little bit about charge-offs and expenses. Generally, you'll see a little bit of bump more related to the CIT efforts in the second quarter and kind of flat sequentially. So that's generally the framework. As you dive into the consumer, you know, Jeff, I moved away from this term resilient to managing, right? When you look at the trends that you see in the consumer, they are not struggling.
So the traditional factors you'd see, either on a spending side or a payment side, we do not see those today in the data that we look at. But what we do see is a consumer who is shifting from discretionary goods to more non-discretionary items, even pulling back on services. Travel is one for us, 'cause we actually deal with more Main Street travel. I think a lot of people talk about high-end travel, but Main Street travel is down, you know, a little bit. You know, it's down probably 10% on a ticket size. And then where you see the spending behavioral patterns really diverge, you know, I look at the top end, so 800+ and the higher end of the prime segment is doing well and pulling.
We continue to see, month-on-month, the non-prime one struggles a little bit more on average transaction value. So, I'd sit there and say it's a little bit, little bit mixed relative to where you are on the income/credit grade.
You know, what metrics as you think about this normalization that's happening here, this slowing, what metrics do you think are most relevant when you're trying to assess the health of, of the consumer? And at what point would you become more concerned that these patterns we're seeing of sort of consolidation are shifting more towards deterioration if that happens?
Yeah. So the metrics we generally look at are metrics where you're going to think about: Is the consumer struggling? So when you look at purchase behavior pattern, are you seeing things where they're trying to make dollars go further, keep dollars in their pocket? I always talk about gasoline or groceries are two, you know, predominant ways you see that. Trading down in MCC codes into more discount-related retailers. You do see a more dramatic shift in payment rates, as well. So you see those, you know, particular things, and then you begin to see entry rate go, and entry rate continues to be, you know, parallel back to 2019 and very consistent. So those are a lot of the trends.
Where you would get concerned, Jeff, to be honest with you, is whether or not you see the more a little bit above the midpoint of prime, do you see that consumer really pulling back? Right now, they are pulling the economy forward. If they begin to wobble or, you know, struggle, then I think you're gonna, you're gonna see some pressure. We have seen no signs, either even on the lower end, we don't, we don't really see signs of it. We just see, you know, the phone delinquency a little lower, 2Ds a little tougher, and we see general stability in their delinquency stages.
I think you recently mentioned that you're seeing the middle-income consumer or household and even businesses starting to maybe struggle a little bit. Are you seeing that spread from low income more recently, or is that more of a consistent trend with what you've seen this past year?
Yeah, you know, I like to watch edges. I wouldn't say struggle, they're managing, right? So, you know, so I don't think we've seen it move. I think it's been very contained in the non-prime. You know, deep subprime is obviously clearly the worst, but that's not new news for the last couple of years. So we haven't seen it spread, we haven't seen it move, but they're managing. You know, I looked yesterday in preparation for this. You know, you look at gas and grocery, the average transaction value for us year-over-year is flat. So that tells you is that the consumer has been managing, you know, throughout this.
So when inflation went up, they kept the same ticket size, they took things out of the basket. Now, as you get inflation, a little bit of ease coming, not fully. But let's be clear, the weight of inflation, and generally it's the cost of goods. People don't think about inflation. It's the cost of living is just generally higher, and some of the things that are a little bit more stickier when you think about the housing and rent and auto insurance and things like that, those are sticky and take longer to reset than you'd see in grocery and gasoline and things like that.
You know, sort of related to today's result was better, obviously, for your credit story. You saw the peak last month, but I think the, you know, delinquencies more recently had not been slowing as much as maybe your peers had been seeing. You were starting to underperform seasonality. Obviously, this morning's result is different, but what do you think was driving some of that? What were you maybe seeing from your borrowers, or can you just kind of high level, give us some insight there?
Yeah. So, I think the first thing, Jeff, is we probably don't agree with the characterization a little bit, you know, no offense to you or your firm. But really, when you think about it, we lagged the industry kinda coming up. And when you look at where people peaked, they peaked significantly higher than their historical norms, right? We didn't want to accordion the credit box. We didn't change our underwriting standards to try to create growth. So as we came out of the pandemic, right, let me go. When we start in the beginning of the pandemic, we didn't go down as much as others, then we didn't come out as fast. And people said, "Well, you're not as fast as others." Well, we didn't go down as much.
I think now, as you look at credit normalization, I think we were the second to last of the pure credit card issuers to actually reach peak normalization. So I think our path has been slower. So I don't think it's one where I look at it and say, "Hey, listen, you know, we're underperforming versus that." We're on a different type of curve, and I don't think you can compare everyone else's curve. You know, obviously, the outlier is, you know, one particular issuer. You put them aside, I think we performed better than them through that entire window, and that's where I think people need to look at. I know a lot of folks were concerned about credit.
Hopefully, they look the last couple of months, I think we've, you know, given you a number of different reasons why we're you know, we have faith in where the net charge-offs are going, and people get more comfortable looking at this morning's results.
Got it. And, you know, I think you also noted more recently that you're thinking the reserve ratio should be more flat this quarter, maybe not decline as much in the back half of the year either, but you're still looking towards day one as you know, an ultimate goal here. So what is baked into that flattish reserve over the next six to 12 months? And then, you know, what would have to happen in either the delinquency formation or the loss formation for you to actually grow more confident in a sharper decline from here?
Yeah. So, I know I made some comments recently about flattish, flattish for the quarter, and then, you know, really flattish towards the end of the year. It's really more the interplay of when do you see your quantitative models produce results and trends? And then how does that interplay with your QA, your qualitative reserves? And I think as we, you know, as we look a little bit more, having that visibility, I mean, clearly the Fed, I presume this week is not gonna move. We don't think they were gonna move anyway. We think it's generally a fourth quarter item for them to move, but, you know, inflation's been a little bit more stubborn. So I think it's really more the timing of how those two interplay, more than anything else.
You know, to the latter part of your question, as you think about your reserve coverage rate, right? The question becomes, okay, over the next 12 months, do you see that rate going up or down, generally speaking? If the rate's generally gonna be going down, you should be seeing a declining rate environment for the reserves. So I think as we get towards the end of the year, the question will be: What does the 2025 trajectory look like? Now, there's a lot. I'm sure at some point you'll ask me about late fees. There is an intersection with what happens there, but it's really, how does that loss rate perform? And that's what we'll look to as we get to the fourth quarter. As credit improves, you should see that come down.
We don't see anything that exists in the portfolio today that says, I cannot get back to that day one CECL, which really we never had a normal day one CECL. It lasted maybe 12 minutes before the pandemic happened, but other than the mix, there's nothing really that's nothing changing our assumptions.
And just one last one for me on credit. So, you know, losses lower in the back half of the year, peaked this past month. What about the vintage data? Is there anything, way of thinking about the stock rank of the various vintages and what that tells you, about, you know, how we're heading into 2025? Is it support more of a stabilization or maybe more outright improvement, you think, at this point?
Yeah. So, you know, obviously, we don't have a vintage look for the part of this year, and it's a little bit tougher at this point to get second half of 2023. Generally speaking, the industry, let me start with the industry, and to be clear, this is the industry. We look at TransUnion, the vintages are underperforming. So which is, you know, part of the reason why you see, for some issuers, significantly higher net charge-offs in those periods. Ours, generally speaking, are a little bit worse, but not as worse as the industry. So... Again, it's a shared consumer, so we we're impacted by that. That delta doesn't necessarily trouble us as much 'cause, you know, we have a 5.5-6 range.
So it's one that we look at and say, it's not going to, generally speaking, over a period of time, put us outside that range. But clearly there's a little bit different mix because of the credit that was put out in the post-pandemic period. So again, we like the vintages we're putting on, a little bit worse than pre-pandemic, but nothing dramatic.
In the underperforming vintage comment, that's relative to what period? Sorry.
So going back to pre-pandemic.
Okay, got it. Maybe switching gears here a bit, and, you know, if anyone has any questions, feel free to raise your hand at any point in time. Happy to ask your questions, and if you want to also email me, as well, I'll try to get to your question if I can see it on my phone. But maybe switching to everybody's favorite topic, late fees. Lots of drama in the courts recently. We don't need to re-litigate that, no pun intended, but maybe just a quick overview of your latest on where you see things at this point, how they're shaking out. And maybe just a quick update on, you know, the $650 million-$700 million of offsets you've put out there. How much of that is actually in the numbers yet?
I know you said the bulk of that's going to hit in the fourth quarter, but just maybe give us an update on how you see that cadence sort of playing out over the rest of the year?
Well, that's a big question. So let me attack it in pieces. So for those that are not familiar, the chamber continues to argue with the CFPB about what the right venue is and whether or not an injunction is in place. Where it stands today, the CFPB provided a response to the mandamus petition to the Fifth Circuit in Texas, and now it's up to the Fifth Circuit to rule on the mandamus petition, which really was, does the case stay in Texas or does it transfer to the District of Columbia? Right. You know, obviously, we probably are supportive of the chamber's view, but there's more customers in Texas than there are in DC, but you know, we'll let them figure that out.
So, the next step in that process is for them to rule whether it stays in Texas or not. Put aside venue for a second. The next step in the process will be will the CFPB, the defendants in the case, actually ask for the injunction to be lifted? At that point, most certainly the chamber will counter and say they oppose the lifting, A, and B, they would like the court to rule on the other elements of the late fee, which the district court in Texas ruled as compelling, right? And that's the heart of whether or not the rule change was in fact legal and compliant with the CARD Act. So those are the steps that will happen.
Most certainly, those are the things that are going to have to happen to determine, first of all, whether or not the impact of the late fee rule change will happen in any period of time here. And there's a number of different outcomes. Unfortunately, I can't even in our 19 minutes left here even go through the number of options. So that's kind of where the case is a little bit. So I think you'll see some actions here over the next couple of weeks as that moves through the process. With regard to the changes in our pricing product and policies, you know, we're pleased with the efforts to get those out.
You know, we indicated a large number of that, you know, north of 60% has already been completed. Now, you won't see really the effects of that. You'll see really in the third quarter and into the fourth quarter as they build, because it takes effectively 90 days from the time which you mail it to the time which it gets realized in your financial statement. So, but we do have a very rigorous tracking mechanism, so we look at, on a daily basis, closure rates, complaint rates, call rates, purchase active, sales app, sales per active. So we have a number of different things. And there's you know, just under 80 metrics that we look at daily, and we can look at it by platform, by portfolio.
So we're actively monitoring whether or not, you know, what the consumer's, you know, reaction to them are, because it's not just Synchrony. The whole industry has begun to change pricing, or a lot of people have changed pricing throughout this. So we're pleased with the progress. We've executed the way we thought we'd execute. Unfortunately, we're just early in the game here to understand the exact implications, so there's no reason for us to sit back and say what we've indicated before is going to be anything different. I know you asked the question, we really haven't broken out the pieces, it's fair to say, and again, you'll start to see those materialize in the back half of this year.
So you're pleased with the progress, you're monitoring the complaints. What has the initial customer response been so far? Could you maybe give us examples or how you're thinking about that so far?
You know, first, let me talk about APR for a second. You know, before the changes relative to the potential late fee rule change, you know, we had a significant increase in APR due to the regulatory rate environment, right? So you saw, you know, prime rate go up 500 basis points. The consumer continued to move on. The important part with our card, different than others, is when you look at the average balance of our cards being $1,400, it's really not a lot to the consumer each month. So the consumer doesn't feel it as much as, you know, other cards where there's a higher balance. And even some of the people who thought they had, you know, an APR in the teens, they're in the twenties now.
So there's no reaction there. That's a base. So the APR moves that we had, which you know again are meaningful, but not terribly meaningful. A couple of dollars a month, I think, to the average consumer for us will go through. I think one of the reactions we are seeing, which we're pleasantly surprised with is the adoption of e-bill, right? We put a fee in for paper statements. You know, most certainly we've gotten consumers to call in and say, "I like that." We say, "I know, but we need to do this, and you know, here are the terms changes." And we've gotten you know pretty good adoption in helping people move to the eChat, which you know for us is great.
You know, not only from a cost standpoint, but just engaging with the consumer in a different channel. You can also get them in auto pay and things like that. So we're pleasantly surprised there. Those are the, I think, the two biggest things. I think when we look at all the metrics I talked about and really that entire dashboard, I think taken as a whole, you know, it's in line with expectations or probably a little bit better.
If the late fee rule does go through, you know, obviously, there's underwriting changes in play here. How meaningful of a cut would you take to your standards there, or how dramatically would you increase those standards, raise those? Is this something like cutting off the bottom 20%? Do you think about shifting the long-term target NCO from something like below the 5.5%-6% you have today? Or walk us through how you think about that.
Yeah. So first of all, you know, our statement of objective was twofold. Number one, we wanted to be ROA neutral. I think underpinning that with a sense of urgency, given the RSA model that we have, which is uniquely different than you know, probably every other issuer, given the magnitude of it. And number two, we want to do that at the same level of sales, right? So the way in which we constructed our PP&C changes, we did that in a way so that we didn't have to make drastic underwriting cuts. So now it's gonna come back into performance and whether or not the changes that we have, the industry changes, does that change our expectations, and will we have to go back and do more broad-based actions?
You know, in your scenario, where you just indicated 20, I don't see any scenario where you probably get to 20, maybe. Maybe a real edge case, but I wouldn't, I wouldn't put that in the possibility. But again, as of now, we have not restricted the, the lower income bands because we think we've dealt with it in pricing. But we're gonna have to look at what it asks. You know, one of the big, you know, debates between the CFPB and the industry has been, you know, where's the returns and how will the returns play through, and will you get more delinquency as you have an $8 late fee that's, you know, fairly low relative to decision to make a payment or not make a payment?
So that's gonna be interesting to watch, but right now, we don't have significant credit modifications in just about late fees.
Just maybe thinking about the other side of that, late fee rule doesn't go through, maybe a little bit more of a bull case for you. How much of these offsets you've run through do you think actually stay in the run rate, or do you pull anything back or?
Yeah. So the way I, the framework I think about it, Jeff, is, there's two buckets, right? Bucket A is where you have partners who have a RSA component to it, and then bucket B is cards and programs where we control the pricing and we control the economics. So think about CareCredit there, Synchrony Mastercard, Synchrony HOME, et cetera. Bucket A, you're gonna go have a conversation with the partner and talk about if the rule, if we're certain the rule is not gonna come back in play, or it's not gonna come back in play in a different way, which always could be the case, you know, how comfortable are they to leave those in place?
Some of the things, you know, most certainly like, like the one we talked quite, quite a bit about, the way in which we assess interest, and we moved to an industry standard from where we were, that probably stays, right? Other things, you know, may roll back. That's gonna be a partner-led decision. In bucket B, we control that. Now, obviously, I can't sit back and say to our partners, "Hey, you can do whatever you want, but I'm rolling everything back." And so that probably wouldn't be the case. But really it's gonna be the discussion among those two big groups. That being said, Jeff, we have not spent any real time on this concept. Right now, we believe that the rule is wrong.
We believe that the injunction will be held. We believe the litigation will go on, and that will take a while, but we, you know, our actions are out there in advance and, you know, we'll deal with it, you know, when the result of the litigation or the injunction comes through. So if we cross that bridge, which would be interesting, you know, we'll deal with it in those two buckets.
Okay, so the changes go through and then sort of in the retailer's hands is what I'm hearing about?
No, it's a, Jeff, it's a joint decision, right? So we go back into, you know, we're gonna present them with data about what's the consumer's reaction to it.
Okay.
Is there a reaction to it? So we don't in any scenario, I don't think a retailer controls, in that case, unilaterally the rights. We don't control the unilateral rights. It's a partnership decision. That is the way in which our company philosophically operates, so it will be discussion. I think some may want to stay exactly where they are once they have the economics. Some may say, "We want to change certain elements of it." You know, again, we all didn't want to do some of the things we did, but we had to react in order to maintain the ROA and the same level of sales.
I'm just gonna pause to see if there's any questions from the audience. Looks like not. If not, I'll move on. So speaking of the partnerships, you know, you've got the renewals out there, every so often. Are you noticing any sort of increased or lower competitive intensity in RFPs out there? And then as I think about your book, I think the last big one we saw renewed was Lowe's in 2022, but the other big four, maybe five to five years ago. Maybe just a quick update on how your conversations have been going broadly.
Yeah. So, the first part of your question on competition, we don't really see anything dramatically different, right? You know, you don't see everyone consistently in every opportunity. People are focused on different types of programs and where they are. You know, for the most part, there's been a couple of times where a particular institution may have been irrational. You know, but that's been the same for the last- you know, I've been in this business over 25 years. You know, you've always had someone at, maybe at one point, come in and be a little irrational for different reasons. But, generally speaking, it's been consistent. And, listen, you know, we're very disciplined on our pricing. We want, and we'll achieve the right risk-adjusted return, or we'll walk away.
If it's not the right program and the partner's not engaged for the right reasons, we'll walk away. If it's not supported by the partner, we'll walk away. Now, again, we believe we have the best capabilities, so we're not the cheapest, unfortunately, for them. But, you know, we think that there's value that we bring to the table. So competition on balance is probably consistent and really depends upon the opportunity. You know, the second part of your question on renewals. First of all, you know, Lowe's has been a tremendous partner for us for over 40 years. Trusted brand. We love the value prop relaunch that they did, the card program relaunch. I'm sure you probably saw some of the advertising that they put out around the card.
You know, there's a great example where the card is integral to the customer strategy, and those programs can be successful. And we're very pleased with that partnership and look forward to work with them on not only our card, but installments as well. So that's great. And on the other four, you know, we continue to try to renew these every day. You know, this is a relationship business. You have to continue to, you know, serve them. You know, the market's changing every day for the retailer. So, you know, the ability for us to continue to provide the best level of service, the best capabilities to them, that's what gets us the renewals, and we're gonna continue to do that.
You know, you saw in our 10-K, we have, you know, well over 90%, 2026 and out, I should say, we have over 90%, revenue secured through 2026. So we'll continue to work through those. But again, we're, we're optimistic if we continue to do the things that we need to do every day, that we have a great track record, and, you know, we, we love all our partners.
And then I think we have a couple of, you know, large retailers out there, maybe with some portfolios in flux. Any sort of interest from Synchrony, always in the mix or thoughts there?
You know, Jeff, the way I think about those are, you know, what's the program, what's the program's purpose for the retailers, right? So if a retailer or partner or wants to use it to engage either their, you know, a certain part of their customer base and drive it as real value add, and it's critical to their operations and it has support from the C-suite, then that's a great opportunity for us. And we'll look at that opportunity and, you know, price it to get the right risk-adjusted return. You know, we price through the cycle, because these are longer-term arrangements. So in that case, you know, we would be, we'd be inclined to engage in a process. If that's not the case, or if the partner that says, you know, listen, you know, there is one,
You know, we've been in the automotive business, for argument's sake, and we had a card with Nissan. You know, that card, as we learned, you know, it was really difficult. You're trying to sell cars, you're trying to sell maintenance programs, you're trying to sell, you know, extended warranty. Car's way down the list. It's probably difficult to do. You know, so it's one where we said, "Hey, listen, we're probably not in the automotive space." And that's where we understand the industries, but again, it goes back to the right risk-adjusted return, and you know, we'll participate where we think it makes sense. If it doesn't, then we'll focus our attention in other areas. We love the current business that we have and the opportunities to grow our existing partners.
And speaking of, you know, newer business verticals, I don't know if we'd characterize it as a new vertical per se, but, there's been a little bit more of a focus on BNPL out there from the media, the regulators on, on risks in that space. You've got an offering, more of a feature and a part of your multi-product approach than a, you know, leading product, I would say. But, you know, are you noticing any sort of pockets of difficulty from those users, whether it be your own or what you're seeing from your own cardholders with BNPL loans elsewhere? Any high-level thoughts there?
Yeah. So first of all, about the BNPL, you know, it is getting the attention of regulators and others. And first of all, we think that's a great thing because all we want is regardless of the product you have or the regulatory body you have, the same rules should apply to everyone. And clearly, they don't apply, and it's different for those people who offer those products, which I think in the long term is problematic for consumers. You know, the ability to pay and things like that, because they are. You know, regardless of what label you have, they are, you know, lending institutions or credit cards, right? Or, you know, best I know, we started in the 1930s. Everything for us is buy now, pay later, right?
Because no one pays me at the time. That being said, you know, your question about overlap and impact from buy now, pay later. What we've seen in data, and we've used you know, outside people to help us, we don't really have a tremendous overlap. So the people who are generally taking out buy now, pay later that were cash payers, debit transactions, things like that that are out there, you know, are offering. We offer the same things that now that they have. We had the same products before. They were just inside of a revolving account. So now, if you want to put in a standalone account, we can do that.
You know, the Pay in four, which, you know, people think buy now, pay later, is really not a big, not a big offering. I think for even those players labeled buy now, pay later, it's not a big offering for us, and they've moved up the spectrum into, you know, bigger or longer term installment loans, and now they're moving into credit cards. So, they realized that the strategy that we have, which is being multi-product, so you allow the consumer to say: What product do you want? What's the type of purchase you want? What's the best financing you have?
That's why a multi-product setting and our ability to potentially try to engage with the customer and say, "Okay, after you have one product, is there another product that meets your buying and consuming decisions?" So, again, buy now, pay later, you know, probably talked about a lot more a couple of years ago, not a big influence on our results or our volumes.
So part of the multi-product approach, but doesn't sound like it's a leading part of the conversation. Doesn't come up much in the conversations, or is it always a part of the conversation, you'd say?
You know, well, our partners don't talk to us about buy now, pay later. They say, "Do you have an installment product?" And we say, "Yeah, you know, listen, we can give you an installment product that stands alone.
Right.
That's closed," and most of the partners want products that have continuing relationships with people. So they say, "If you want to offer that product, we have that product. If you want a pure private label, a secured product, a dual card that has utility" So I think the conversation's more about the whole product suite and where you offer those products in the consumer buying journey, and how would you offer it? So that's more the conversations with us. I think when you only have one product or two products, and your product may be pricey to a merchant, it becomes more difficult to sell.
Maybe just switching to capital here. You submitted your capital plan to the Fed earlier this year, and I think you're now at the lowest level of CET1 you've ever been, but you're still in an excess position at this point. You've built up some prep in the stock as well. How are you thinking about the excess capital position here? Is that something maybe where you want to wait until we get more clarity on the capital rules from the regulators, more clarity on the credit picture, or maybe until you officially hit that CCAR bucket in 2026?
Yeah. So I think it's first important for investors or potential investors to understand we've been on a capital journey, right? So our first goal was to have a higher capital position so we could secure our exit from our former parent. I think at one point we reached, you know, as high 17s, maybe 18% capital back in 2015 or 2016, and then we began on a journey to reduce that to a target level. I think in 2021, we provided that target level being, you know, 11%. You know, you got to remember, as you go towards 11%, you have a lot of stakeholders to bring along with us, rating agencies, your regulators, investors.
You know, you can't, in any given period, just say, "Okay, I'm going to target," because for whatever reason, they're gonna get anxious. So we've had a planned journey to get there, and we're gonna continue on that journey. You know, a couple of items that you kind of brought up, you know, in theory, are encapsulated inside our capital plan. We do scenarios in there that have late fees. We do scenarios in there that have, you know, obviously, credit stresses. So we incorporate a lot of those. You know, with regard to Basel III and whether or not the rule changes come out, whether they're gonna be proposed or just, you know, enacted, we think we're going to be dramatically different than what was proposed under whatever path they choose going forward.
That is outside of our, I think, our capital plan. Most certainly, the transition period would allow us to deal with that implications. But I think when it goes to late fees or credit, it's already incorporated into our capital plan today, and we're gonna continue to execute it, you know, as we move forward here, and we feel very comfortable. It's in a great position to have excess capital and be...
You know, have the ability to either you know, reduce the share count or do things like we did in the first quarter, which is acquire a very attractive business from Ally Lending that built on the scale that we had, that makes us, you know, the only issuer that has an installment product and a revolving product for the home specialty business, and brought a whole bunch of new verticals inside it. That was a you know, we hope to be a great acquisition for the company in the long term.
All right. Well, I think we're just about out of time. Thank you, Brian, for coming today, and it was a pleasure to have you.
Jeff, thank you, and good luck with your conference.