All right. Good morning, everyone. Thank you for joining. First presentation of the day. My name's Terry Ma of Consumer Finance here at Barclays. I'm very pleased to have on stage Brian Wenzel, CFO of Synchrony Financial. So welcome, Brian.
Terry, thank you. Glad to be here today.
Great. Let's jump right into it. Maybe we'll start off with an update on the third quarter. How's the consumer spend been trending so far this quarter? You had noted improving momentum in the second quarter on purchase volumes. Has that persisted, and what sales platforms are you seeing the best growth in right now?
Yeah. Thanks for the question, Terry. So when we look at what we said back in July, right, we saw some green shoots, really in certain categories when I thought about world spend on our card, really in cosmetics, electronics, clothing. So we saw some positive. The sales trend in the first couple of weeks of July was positive year over year, which you'd expect a little bit from the lapping of some of the credit actions. As we have stepped through the quarter, let me give you some perspective. We've continued to see that momentum as we move through, right, which is positive. When you think about the transactions that are happening, our ATVs are actually up versus the first half of the year. Our average transaction frequency, which was up in the first half of the year, is up a little bit more here in the third quarter.
So on an ATV perspective, an ATF perspective, we're seeing some positive movement. When you kind of go down deeper, when you think about the five sales platforms, if you go back to the second quarter, right, we had three sales platforms that essentially were flat to slightly positive, right? When you think about the Digital platform, the Diversified Values platform, and then when you think about Health & Wellness, they were flat to up. And really where you saw the pressure being down more significantly was in the Home & Auto and Lifestyle, which are bigger ticket-type businesses. I think what you'd expect to see here in the third quarter is that same type of profile, but I think the three platforms that were flat to positive will be more positive from that perspective. So I think they're gaining traction.
I think in the areas where we had negative counts in home and auto and lifestyle, they'll be reduced as far as their performance from a year-over-year beat perspective. I think you're seeing that trend really kind of come through. Again, I think the one thing that's kind of continued to think about for us is the mix of the portfolio, right? Because what you are seeing is a little bit more super prime. Most certainly, the higher-income individuals are pulling a little bit more than I'd say some of the non-prime and prime segments. They are leading the kind of spend charge. Given the mix from the credit actions, we increased our super prime percentage 150 basis points, decreased our non-prime 150 basis points.
So that has, as we said in third quarter, that will indicate really a more elevated payment rate given that and the shift a little bit out of the promo from coming out of those two segments. So that has continued to persist, really, the payment rate being elevated, which, again, we highlighted back in July as our expectations for the remainder of the year. So all in all, from a sales perspective, we actually are encouraged with what we see and really positive for our business.
Got it. That's helpful color. So we've kind of taken a step back. How would you characterize the health of the consumer and any noticeable differences that you can maybe call out between the lower and the higher-income consumer?
Yeah. The consumer has been remarkably resilient. I think that's a term I'm sure I've read all the transcripts. I'm sure that's a term that everyone has used where they're going about their lives, whether it's smaller increases from tariffs flying or flowing through a slight increase in unemployment, which really hasn't had any effect whatsoever. So they're being relatively consistent with regard to that. Payment rates, as we look at it, again, what we're encouraged by is the non-prime payment rate is actually improving, which is really part of the credit actions that we see where we've kind of taken the position to try to control the net charged-off rate. So I think we're encouraged by that. I think we're encouraged by the spending behavior pattern. I think they're spending where they are. They're spending a little bit more, I'd say, in some of those discretionary bigger ticket purchases.
Again, I think you're lapping some periods where we had probably a little bit more falloff. So again, the consumer's hanging in there and fairly resilient across both generational and, I'd say, income lines.
Got it. Maybe just briefly update any trends you're seeing in consumers with student loans.
Yeah. Terry, as we talked about before, we have done a lot of work with the bureaus with regard to how do you look at student loans, who has student loans. All student loans are on a report to the bureaus, whether it's delinquent or not. So we really look at the balance. We look at the trends. And when we take a step back and pull out consumers that have student loans and cardholders that do not have student loans, when you look at those populations, we compare them to like populations with regard to credit attributes. When we look at that, the continued performance, at least through the early part of the quarter, had been consistent with the regular portfolio. So we're not seeing anything in our portfolio that indicates those that have student loans are performing worse than others.
And I just want to clarify when I say earlier in the quarter, we just haven't gotten the data yet for August. But again, this has been a consistent trend throughout the year. So I would not expect it based upon its performance to shift. But again, it's something that we watch closely but hasn't been an impact on our cardholders.
Got it. That's encouraging. So maybe we'll turn to credit. You obviously published a monthly update this morning.
You're welcome.
As usual.
Thank you for pulling it up for us.
Yeah. Thank you. Delinquency continued to trend down year over year. I think it's non-consecutive months now. Charge-offs obviously following that. Where do we stand on credit, and how much longer can we see the delinquency rate improve year over year?
Yeah. So this morning, we reported, I'd say, what looks to be kind of flat delinquency rate. If you went out another digit, we're probably five basis points different. So again, delinquency stabilized. And I think what we said is what you should expect from delinquency should really be more seasonal trends, I think, as they come through. When I think about delinquency even of itself, when I go back to 30-plus and 90-plus, 30-plus is still performing again better than that 2017-2019 historical average. I'd say low teens with regard to basis points improvement. And I think when you look at 90-plus, even though we didn't report that today, you're generally in the low single digits, negative to flat. So again, I think we're back to that period of time. 2017-2019, delinquencies are fairly consistent.
The loss rate, again, given where delinquency were, I think we're somewhat predictable with regard to where we're going to be. And again, we've made the very conscious choice to restrict credit, which has impacted sales. The majority of our sales decline has been credit-oriented in order to get the loss rate to get back into the more efficient 5.5%-6% long-term target through the cycle. So we feel good about credit. We feel good about the performance. And again, what we've now done is really kind of turned a little bit about how do we think about opening up a little bit and changing that credit aperture as we move forward.
Got it. And the guide for this year is 5.6%-5.8% charge-off, which is well within your target underwriting range of 5.5%-6%. So obviously, the guide looks good to me. How do you feel about that, and what does that mean for the reserve rate going forward?
Yeah. The way I think about credit, you have eight months in. You only have five months left, and the five months left are generally in delinquency. If you look at delinquency rates, it actually sets up fairly nicely, so I think mathematically, people can do the math and try to figure out where you're going to be relative to that guide. What gives me confidence, Terry, is I look at a couple of things. One, the credit actions have had the desired effect. It's created a shift in the book where we have a little bit more subprime, a little bit less non-prime. So I think we're positive about that. When I look at delinquency, entry into delinquency is still better than that pre-pandemic period, so that's positive.
When I think about early-stage collections, so two to four, and then late-stage collections, five to seven before write-off, two to four is fairly consistent. So it's not deteriorating, maybe improving slightly, but I call it consistent. When I look at the late-stage collections, that is improving, which I think is a positive trend. So I think when we look at positive entry rate and really pretty good factors inside the rates of delinquency, I think we feel good about how credit is. I think when you take a step back, the first thing when you bring up reserves, we're still in this really uncertain period of time, right? You have a lot of noise relative to the employment market, even though we don't see it. And to be honest with you, we think about more unemployment at a neutral rate of four and a half.
Whether you move from 4.2 to 4.3 or one to 4.2, it doesn't really have a discernible impact. But there is a little bit of pressure in that market, most certainly given the current state of affairs relative to immigration policy, relative to what we're doing on certain workers here in the U.S. So that noise is out there. You have the tariffs, which are partially in some of the prices that are in, but there's probably more to go depending upon what merchants and producers are going to do with those tariffs and where they actually ultimately settle. There's a lot of legal ambiguity around that. So you have that hanging out there. And then clearly, you have a ton of geopolitical risk. I mean, you wake up this morning with regard to what happened between Russia and Poland. There's just a lot of uncertainty.
I think as we think about it, we're not necessarily in the clear, I think, yet. We're not overly concerned about it, but I think it's one that's clear. I say that because as you think about the reserve, it really is going to have the indication to go lower, right? As the loss rate has come down, I think you'd see the reserve coverage come down, right? And especially as we've kind of set up into 2026 and what that loss rate will be. I expect it to have a negative being a downward bias relative to the rate that would occur here in the back half of the year, the time in which we have to just see how the macro environment plays out. But again, I would expect it to come down on a rate basis if credit continues to perform the way it is.
Got it. That's helpful. So everything you just laid out with credit sounds pretty encouraging to me. You mentioned you may open up the aperture a little bit. Maybe just expand on how you're thinking about underwriting. It seems like you laid the groundwork for growth with the Amazon renewal and obviously the Walmart partnership. The launch expected to occur later this year. Can you maybe just walk through your thinking on kind of underwriting and loan growth?
Yeah. Let me unpack that question a little bit. If you think about our credit posture for a second, I think we've always indicated you're not going to see some big aperture change overnight. I think we'd step into it. I talked about three phases. That's something more structurally how we think about it is stepping in incrementally. Back in July, we talked about we did step into some credit changes, right, with regard to the portfolio, particularly in our health and wellness business and one of our other more digital-oriented portfolios that the loss rate could sustain a wider credit aperture. So we did that. We're going through some analysis now. I expect us to do similar things in certain other pockets of the portfolio as we move forward to kind of step in.
Both the actions that we took in the remaining part of July and these actions won't really have an effect on 2025. They're more setting up for 2026 from a growth perspective, so I think we're going to be positive. Again, I think as you look at the 2026, even though we're not giving guidance, think about, there's going to be incremental changes, and I'm not sure exactly when we can target. We'll be back to the pre-tightening levels, but we feel good about where we are from a credit standpoint. Most certainly, we're happy from a new account standpoint. Active accounts are improving, so they're less negative but improving, so I think we feel good about where we are in credit and what we can do in front of us in order to optimize return.
Most certainly, given some of the pricing actions, I think we can take some more relief on credit. We're excited about what we're doing both with Amazon and Walmart. Amazon, if I stop there, the renewal itself is, again, part of what we do every day, trying to deliver value for the Amazon consumers and really provide the right products for them. Again, our launch of Pay Later there, I think, is pretty neat when you think about how it's in the checkout flow, and most certainly, we'll, over time, add to the growth as the consumer can choose either our private label product or the installment product, and again, I want to just be clear. Our installment product is not paying for. They are six-month and longer type of Pay Later installment loans. So good profile there. We worked a very long period of time with Amazon.
So we know how that works. And then Walmart, we are in the actual beginning phases of that launch, and we're excited about that. I think the one opportunity we have here, and I'm sure you'll probably delve a little bit deeper into Walmart, maybe in your questions, but the opportunity here is we're actually starting with a clean sheet of paper. So we set the credit aperture there. So what's good about that from a credit standpoint is, number one, that there's a value proposition that is strong and resonates, which generally gives you a better consumer that's willing to take that card, adopt that card, and bring that card closer to the top of the wallet. And then, number two, the placement both in the fleet of stores as well as digitally and in the One app most certainly will drive better credit. So we're anticipating that.
Got it. Maybe just to dig deeper a little bit on Walmart, obviously, not the first time you guys have issued a Walmart card. I mean, you talked a little bit about what you're doing differently this time. I think the launch is expected to occur later this year. First time you had the Walmart portfolio, it was $10 billion. How should investors think about the growth and sizing of the program over time, along with any kind of financial metrics that you can give us?
Yeah. First of all, we are really excited to partner with Walmart. I think a lot of folks would question that, but it is just an iconic retailer that has a tremendous place. We're excited to really work with OnePay. They've done some innovative stuff inside the app, which I think will make for just a really great customer experience. And it has done a lot with Walmart with regard to placement and where that card and how that card is accepted and used. So we're excited about the parties. I mean, Walmart, even on their last earnings call, talked about the credit card, which tells you a little bit about the focus. So when I think about what's different between 2018 and now, right, number one, I'll start with where I ended.
The C-suite engagement of Walmart, not only just talking about the earnings call, but being involved in driving this as a value proposition to their loyal customers, number one, when you have that type of engagement, it generally resonates in performance throughout the organization. Number two, the value proposition is stronger. So I think it attracts a broader array of customers, most certainly customers higher on the credit spectrum, which I think helps us. Number three, the revenue of the card looks different than it did before. So most certainly, it produces a greater revenue stream in which you can provide that value proposition and deliver value to the consumers. Four, I think about the tie-in with Walmart+ , which is a big initiative inside their company, but allows consumers to really take that Plus program and accelerate the value that kind of comes from it.
Lastly, we talked about credit. Credit, when you start with a clean sheet of paper, I expect that you'd see, as the portfolio matures, most certainly a lower loss content portfolio than the 10% loss content that we had pre-pandemic. I think it sets up nicely. We're excited to work with both OnePay and Walmart on this. We have begun the early stages. When you think about a de novo program, it just doesn't turn the light switch on. Most certainly, there's a lot of consumers that go through Walmart every day or Walmart.com every day. We are in the ramp phases. If you haven't been to a Walmart, they actually are in the process of putting signage up. The signage is terrific, and placement inside the retailer is terrific, both in the aisles and the parking lot on the end cap.
So really great. Not in all stores yet, but ramping. We're ramping digitally with them. So we're very encouraged about the progress and how it's rolling out. And again, we would expect and hope that we'd be at a full rollout before the end of the year. So exciting news. Your question about how big this could be, I mean, most certainly, I think I've said before, given the size and scale of Walmart, given the engagement, given the placement digitally in the store, clearly, I think we expect this could be a top 10 program. And most certainly, given that, given just the sheer volume that Walmart does, this, again, could be a top five program. But let us get launched and let us get moving on it. That said, Terry, I know there's a lot of speculation. We are in ramp mode.
I would not expect any meaningful impact on the growth rates in 2025 just because it's so late. I mean, if you think about a $100 billion portfolio, you're not going to move the growth that significantly. We'll be back, and I think provide a greater financial dimension in 2026, but one would expect that you would have a more meaningful impact in 2026 and 2027 with regard to how that program begins to mature.
Got it. That's helpful. Maybe one follow-up. You mentioned the revenue stream or revenue yield is higher. What's actually driving that this time around?
First of all, the way the product construct works, we're actually leading with dual card. But the APR structure is fundamentally different. I think in the prior program back in 2018, there was always a view that you want lower rates as you're trying to drive value every day to kind of fit into the brand. I think now with OnePay and Walmart as well, there's a broader perspective with regard to the rate you can charge, but delivering value back to the consumer through the value proposition. So I think it's really the construct of the revenue pool itself is a little different to really afford a more generous value proposition, which, again, should drive a better consumer.
Then when you're in the right placement digitally, when it's easier for the consumer to apply for the card, use the card, and this is where OnePay excels, we're trying to help us do that, and then Walmart do that. That's really where you can kind of get the acceleration and the good portfolio growth that we both desire.
Got it. That makes sense. Maybe just touch on the competitive environment for partnerships. Can you remind us of some of your major partnerships, how long they're tied up for, and then where some of the areas are seeing additional opportunities right now?
Yeah. Listen, I think competition continues to be consistent with the past, which has been a little bit more aggressive. We see people who are continuing to stay in this market. It's a very attractive market in the retail space, but we continue to compete. And I think what we do is we lean on our digital capabilities, our ability to demonstrate in this retail setting how we can execute through any cycle. And that resonates with merchant partners who want people who are there consistently whether times are good or times are bad. And most certainly, digitally, we think our tools are best in class, right, relative to the peers. That said, when we lose, we generally lose on price.
I think we're pretty open when we, particularly with new partners, when we talk about it, we're not going to be the lowest priced option when it comes to some of the competition because we do believe we bring a broader suite both of products. We can bring you anything from a secured card to PayLater to Private Label to Dual Card. We can do consumer. We can do commercial. So we bring a broader array of things. So in theory, the value that we bring, and then when you think about our advanced underwriting with PRISM, we just think that that package deserves a different price. So we feel really good about that. When you think about our existing partnerships, I think we said back in July, 98% of our top 25 relationships are locked up between 2027 and beyond.
So I think that we have a pretty good runway. And I think if you think of our top five or beyond, 2030 at this point. So we feel good about where we are. That said, we never take it for granted, and we continue to serve those partners, those merchants, those providers every day to continue to earn their business and deliver really value for the consumers. But the competitive market is consistent, and we look to compete at both on our capabilities and what we can provide them.
Got it. Maybe we shift to loan growth. You touched on it a little bit already. You had revised your four-year guide from low single digits to flat year-over-year. Obviously, you have Walmart coming online, more of a contribution in 2026. But still, the guide might strike some as being slightly conservative. What factors should we be mindful of regarding the guide?
Yeah. Again, I think when you look at purchase volume in the first part, we're negative 4% first quarter, negative 2% second quarter. Again, I think we've indicated that you should see a turn here in the back half of the year. So that's the first piece is how did credit sales perform, purchase volume perform throughout the year? The second thing, which has been, and we highlighted in the guide, an elevated payment rate. And that's really two factors driving that. Number one, the credit actions have shifted the credit composition of the portfolio where you see more super prime, which has a higher payment rate, a little bit less non-prime, number one. And then number two, the mixing of the portfolios.
When you think about home and auto and lifestyle, right, are really installment and promotional financing businesses. Those two have shrunk in assets about $2 billion because of that discretionary purchase. That has a generally lower payment rate. So when you take that out, the mix shift is up. So you have a higher payment rate. We expect that to be elevated throughout the year. So again, we don't necessarily view it differently. It's just really more the credit composition of the portfolio is a little bit better. So a little bit less growth, but I think you're going to see a little bit better credit when it comes to that. I think as we begin to open that credit aperture, I think things will start to normalize a little bit.
I don't think it was intentional for us to sit back and say, "We want 150 basis points higher Super Prime." It was just more controlling through this period, the loss content of the portfolio. So again, it's more payment rate oriented and not necessarily anything that I'd say is structural or something that we're concerned about. Obviously, we want to grow, but we want to grow in a prudent manner.
Got it. And when you think about your long-term guide, you had put out a 7%-10% receivables growth guide. What are some of the puts and takes there and any kind of time frame to kind of get back there?
Yeah. We historically have been in that mid- to high-single-digits growth rate. You look at the pandemic years, we were double digits, but I think that was more a reaction of what happened in 2020. When I think about getting back there, it's number one, you have to adjust the credit environment back to where we were pre-pandemic, which again, I think we'll get to over time. It's just really how the market certainty kind of comes through. I think when you think about the way in which you can get back to that 7%, if you have GDP kind of going at two to three times, we're going to grow with the retailers. We're going to do those things. So growing 2x GDP, which we historically done, shouldn't be that much of a challenge.
You think about something that's now in the mid single digits, and then you start to add penetration increases. This is where we go back to where we're investing strategically. Most certainly, health and wellness, we're in a lot of different verticals. We have a lot more that we can do in that space, whether it's in different verticals like fertility or other things, or just continuing to engage with providers who only provide us limited volume, right? That's number one. When you think about areas in which we're trying to engage more fulsomely to capture volume, I'll highlight again in the health and wellness business, getting involved in the practice management software. Our CareCredit card is accepted more broadly is a way in which you do that.
Across both health and wellness, home and auto, and lifestyle, what we're doing in the multi-source finance, so we kind of get more into that waterfall. We launched that last year with the program. I think you'll continue to see us engage more aggressively in that waterfall technology, so we control the point of sale and where that competition is going, so we can be the lender of choice primary, or if we can't fulfill the sale, how do we fulfill the sale for our merchants and our providers through secondary or tertiary lenders. I think that ability to kind of drive it, those types of things and investments really around that.
And then lastly, I think our strategic investment around our customer experience and broadening out, can we take some of our partners and say, "Hey, listen, can we offer a CareCredit card that doesn't compete with them?" So I think there's things around our strategic initiatives that will have the potential to accelerate the growth rate. The horizon in which we get back there, Terry, to be honest with you, is going to be a little bit determined about how the overall macroeconomic just settles down. I mean, we're at what we believe to be a slightly inflated interest rate environment, which is impacting consumers. You do have inflation that is impacting some. You have tariffs. Once that noise settles down, I think we can begin to get back to normal, but I don't think there's anything in the portfolio that says we can't.
Again, the two leading platforms for usd are health and wellness and digital. Just have tremendous opportunity with regard to market share.
Okay. That's helpful color. Maybe let's switch gears. You guided the second half of NIM to be approximately 15.6%. That compares to a first half of NIM of sub 15%. You had indicated some of the drivers were of improving margins or seasonality, growing PPPC impact, BD book repricing. I guess first question is, how do you feel about that second half of NIM guide today? And then maybe just any color you can give us on how to kind of quantify how much benefit each of those components actually drives the NIM.
Yeah. Yeah. We obviously were impacted in the first half of the year from a couple of different things. If delinquencies get better and losses get better, late fees kind of come down. You still had slightly higher charge-offs first half, like you're going to see in the second half in order to kind of get to the guide. So some of the reversals were higher. And then again, you think about it, we had a large amount of CDs that repriced really in the first half and mainly in the second quarter that you're going to see in the back half of the year. So I think structurally, there's not necessarily as much a change in behavior paths versus adjusting to where we are. I think we're in an environment where we talked about delinquency being more seasonally based now.
I think your late fee component of NIM is going to be relatively consistent. We continue to build the interest side of the PPPC. We said we were about 50% through the way as far as the second quarter of this year. That goes to 75. That's going to continue to grow. I think you get the benefit of that CD repricing. We were pricing things that had a high 4% interest rate in the second quarter. Again, you're probably 4.5% here in the third quarter, repricing down to something that's low fours. I think that gives you a benefit with regard to it. And then we had a lot of excess liquidity.
We weren't going to restrict the deposit growth in order to manage net interest margin, mainly because of the fact I was putting deposits out at 4% or less and getting 440 from the Fed. So it made EPS sense, maybe higher margin, but we had excess liquidity. We don't really run the company carrying such high liquidity. That market has mostly been competitive. So as that trails down and we start to grow here, I think you use some of that liquidity, which helps the percentage of ALR versus average earning assets. All those combined should give us that ability to produce in the back half of the year, 15-16 +. So again, you'll see it on the interest yield line. You'll see it on the variable liability line, really kind of coming through.
As well, the ALR mix should be positive in order to get us there.
Got it. As we look forward to 2026, any reason why NIM can't continue to expand?
Listen, Terry. I appreciate the question going to 2026. I like to get through the last two quarters of 2025. But again, structurally, what we said, if you kind of go back to a long-term framework, what we said 16%, that was predicated on a Fed funds rate probably around 2.5. It was a more normalized payment rate. So you need those two to get back to the base. And then in theory, you have the accelerant of the PPPCs, which were put in place. So we feel good about that. It's only going to be timing. But again, PPPCs are going to come in either way. How quickly the Fed fund rate and where it ultimately settles, whether it's 2.5 or is it going to be north, is to be determined. So again, we'll be back in January to give you 2026 in more color, so.
Fair enough. So you called out some modifications to the triple PCs on the last earnings call. I think in aggregate had a $50 million negative impact to revenue. Maybe just discuss why you rolled that back and then how are other triple PC discussions with partners progressing?
Yeah. The adjustment to our PPPCs were fairly, I'd say, narrow, right? They were in two buckets. In the promotional financing business, there were two changes we made. One, which was to add a promotional financing fee. And that was not uncommon in the business, but we increased it more significantly in contemplation of the late fee rule going in. When you think about bigger ticket purchases, when you're charging incremental 2% of the total value, we didn't want to dissuade customers and most certainly some of the industry to move with us. So we thought that it would be prudent to roll that back.
And as we did that, what we did is we went to our partners in those spaces and said, "Hey, listen, in contemplation of doing this, we'd like you to change the portfolio mix, change duration, etc.," which they're always managing from a cost perspective being the type of promo. And then there was an activation fee that was somewhat non-material that we adjusted back to where it was at the start. And then one partner from a brand perspective said, "Listen, we understand the impact from an RSA perspective. We understand that it hasn't really driven negative connotations, but we just prefer not to be in that situation." So from a brand perspective, we're going to roll back that APR for that partner. Other than that, I think as we said, Terry, we're not really in significant discussions with anyone to adjust that.
I think what you may see a little bit in 2026, again, as we continue to have dialogues with people, there could be some value prop refreshes as more things we invest in growth, given that the margin of the portfolio is better. But most certainly, I think where we stand on the PPCs has been generally positive for the company, positive for our partners who are sharing, and most certainly given tariffs and other things that kind of helps them on the other side. So again, nothing more coming, I think, this year we expect. And then again, we'll revisit a little bit in 2026, maybe with regard to some value propositions or other things. But again, shouldn't be material.
Got it. That's helpful. Just moving to capital, your CET1 ratio is about 13.6%, improved year over year by about 100 basis points. How are you thinking about capital allocation going forward, particularly as you start to grow the business again?
Yeah. First, Terry, we have been consistent, most certainly in my tenure and before my tenure. The capital priorities of the company have not changed, right? Organic RWA, the dividend growth, and then you get into either share repurchases or inorganic opportunities. I think where we are from a capital standpoint today is really the result of a slightly lower RWA growth, which we talked about a little bit at length here. And then second, the earnings performance of the company being highly profitable and the returns being high twos on ROA perspective, that threw off a lot of capital. That's the beauty of this business. It throws off a lot of capital each. We started dividend 20%. We had a $2 billion buyback. We had $2 billion left at the end of the second quarter. And we're going to continue to execute to bring down capital.
We realize we have surplus capital. It's a strength for us. I want to be clear that the capital has not been in anticipation of anything inorganic, has not been in anticipation of anything happening in the environment. That's why we run stress tests. It's just more a factor of RWA growth and the income profile of the business. And we always said we can revisit it if we wanted to, to accelerate more of our purchases given the performance of the business. The great thing about our business, and I'll just end on this point, is it generates a lot of capital each year. So even if we were to do something big, we can most certainly generate more capital. So we're not afraid to bring the rate down. It's just been a little bit more circumstances around that.
We would anticipate, again, trying to bring that capital ratio down close to our target.
Got it. Helpful. There's about two or three minutes left. I'll open it up to the audience for any Q&A. One question here.
There's a bit of a disconnect right now between the unemployment situation and credit quality, certainly for you and also your peers. Unemployment is feeling weak, and yet when it comes to credit metrics, you're killing it. How do you account for that disconnect?
Yeah. I mentioned earlier, so a neutral unemployment rate is probably, in our view, around 4.5, so I would not expect movements below 4.5, whether it's again 4.2 to 4.3, 4.1 to 4.3; it's not going to have any meaningful impact on our portfolio. I can't comment for others, but I assume it's probably similar, to be honest with you, and then you have to get underneath with regard to unemployment, what's driving unemployment, whether it's people actually losing their job, people coming out of the workforce, participation rate, so getting to that unemployment rate is really important when you look at the subcomponents, and the subcomponents are generally positive. They're not negative. They're not like there's mass layoffs and people are losing their jobs, and so that's number one. Number two, it does take time.
If people lost their job, they go through severance, they go through unemployment, then they go through the struggle. So there's always a lag with regard to unemployment and unemployment claims. Once you get above 4.5, I think there's a potential to have a greater impact on or have an impact on portfolios. And again, if you go from 4.5 to 4.6, I'm not sure it's that significant, but we'll begin to see if it's 4.5 or worse.
Okay. I think we're pretty much at time. I'll wrap it up there.
Terry, thank you for the opportunity today and look forward to our conversation with investors.
Yeah. Thank you for coming.