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Synchrony expects 54% increase in allowance for loan losses under CECL

Synchrony Financial estimates it will increase its allowance for loan losses by about $3.0 billion, or 54% from current levels, due to the adoption of the current expected credit loss model.

The company said the increase in allowance for loan losses will "result in a corresponding significant increase" to its allowance coverage ratio. Synchrony will record a net decrease of about $2.3 billion to its retained earnings upon CECL adoption in the first quarter, the company disclosed in its Form 10-K.

The decrease in retained earnings will reduce the company's common equity Tier 1 ratio by about 60 basis points per year during the phase-in period, which runs through 2023.