Brian Doubles came out of Michigan State University with an engineering degree in 1997 and slid into General Electric’s leadership training program. And at GE he stayed. He expected to never have another employer, and he didn’t — until July 31 of this year.
That’s when the conglomerate completed a split-off of its retail lending arm, which was part of GE Capital, as an element of a broad strategy to reduce its dependence on the financial-services division following the financial crisis and focus more on its core industrial and health-care businesses. The new company, now called Synchrony Financial, is the country’s biggest provider of store-branded credit cards. With annual revenue of more than $9 billion (the majority of it from credit-card interest and fees), it was a Fortune 500-sized company on its first day of business.
Doubles had been CFO of the retail finance unit at GE since January 2009 and remained in that role following the initial public offering of Synchrony shares. So far, with GE still holding 85% of the shares, Synchrony isn’t quite out of its former parent’s large shadow. But that will happen soon enough, since GE plans to distribute all of its shares in the retail finance company to its own shareholders in an exchange offer slated to wind up by the end of 2015.
CFO spoke with Doubles last week about the new company, his role there and his departure from GE. An edited transcript of the conversation follows.
The first time you ever heard of this plan to spin off the retail finance unit, what was your reaction?
My very first reaction was, how does this play out for me and my team? Are people going to be excited about this? A lot of them built their careers at GE. Then I thought about the business considerations. Can we fund the business standing alone from GE Capital? Can the business garner enough of a valuation to make it really attractive for GE to split it off? How are our [retail] partners going to view it? And how about investors? As a stand-alone company we were still going to be investment grade, but not rated as highly as GE or GE Capital.
So you go through a 360-degree view of the business. It really required taking a completely different look at the business we’ve been operating for the past 80 years.
Given GE’s broad strategy, did you see the writing on the wall even before there was specific talk about it?
Part of the business was actually up for sale back in 2008. And for that reason, coupled with the fact that GE had been very clear about its desire to make GE Capital a smaller part of the overall GE, it was not surprising.
A lot of pieces came together in 2013. Valuations for credit-card companies had improved over the previous 12 months. We also acquired the MetLife deposit business, which improved our funding profile and allowed us funding away from GE and GE Capital. [The MetLife deposits were transferred to Synchrony Bank, a federal savings bank in which a majority of deposits are made online, via phone or by mail. Currently, 54% of Synchrony’s funding comes from deposits, which total almost $33 billion, and the rest from secured and unsecured debt.] So when the phone call came in April of last year and we started evaluating whether an IPO would be viable, the pieces had come together and it looked like full steam ahead.
What was that evaluation process like?
Margaret [Keane, Synchrony’s CEO] and I began the evaluation without engaging anyone else in the business, because we didn’t know if [the split-off] was going to work. That really required me to draw on my skills, because we were working almost without a team. After being a CFO for a few years, you get used to saying, “OK, I’m going to bring in this person because he’s an expert in this, and that person because she’s an expert in that,” and you get the team together that way and move forward. That wasn’t available to me in this case. I needed to be an expert in all of those areas, using some of our banking advisers and other outside parties to pull the modeling together. That’s a very different mindset.
As a leader, it takes you back to what it was like to be in other roles and gives you a good appreciation for just how hard the people on your team work. After about 30 days we broadened the group of people that were working on the IPO, and that was a very happy day for me.
GE has a unique culture. How do you feel about not being an employee anymore?
It was something I spent a lot of time thinking about. I’d certainly envisioned ending my career with GE. The great thing about GE is that it’s such a big company, you can really envision a path that is 30 years, and there are so many great opportunities and great leaders to work for.
But I viewed this as a once-in-a-lifetime opportunity, to take a company I know very well public and get the opportunity to be a public-company CFO. While it was hard to leave GE, this really checked all the boxes for me from a career perspective.
With GE holding 85% of the stock, how independent are you?
We have an established board with three external directors and five GE people. Although we are a controlled company, we do operate largely independently. And existing GE shareholders will have the option to exchange their shares for shares in Synchrony, an offer that’s planned to be complete by the end of 2015. It will reduce the share count for GE, which is why the transaction was structured as it was, as opposed to a spinoff, which is just a distribution to shareholders.
Are there any branding issues for Synchrony, now that you’re not part of GE Capital anymore?
Not really. We’re a business-to-business company first and foremost. That does come into play with our deposit platform, where we are direct to consumer. We acquired the MetLife platform in January 2013 and rebranded it to GE Capital Retail Finance, and we’ve just completed another rebranding to Synchrony Bank. That’s gone very well.
What does being the CFO at this company entail for you? What do you do when you go to work?
Over the last 18 months I’ve been heavily focused on the IPO process. Obviously there are all the traditional CFO activities. Two areas have probably changed the most from what I was doing pre-IPO. We spent a lot of time working on how to fund the business. We rely on GE Capital for a very small slice of the funding now. And we had to build out the investor relations function. I hired an IR leader about six months before the IPO. We devoted a lot of time to looking at who our peers were going to be, how they were reporting financials and what changes we needed to make to things we had done historically.
Since the financial crisis, growth in the use of credit cards has moderated. Is that a concern?
The private-label card business has a significantly higher rate of growth than the general-purpose card business. Consumers today are still cautious. They’re spending again, but they’re looking for a deal. When you open an account for one of our cards, you save 10% to 20% [on your initial purchase], and you earn rewards that are much greater than the 1% or 1.5% cash back you get with a general-purpose card.
How big an issue is it that people may not want to have a lot of plastic in their wallets or purses?
A fairly significant portion of our transactions are now “card-not-present,” where you’re at a store and want to put a purchase on your private-label card, but you don’t have it, so they look it up.
I also think mobile is really going to help us. You’re right, people don’t want to carry around 15 different credit cards. But if they can load them all on their phone, it would be seamless. We’ve signed an agreement with Apple to allow cardholders of participating retailers to add their co-branded Dual Cards to the Apple Pay wallet. [A Dual Card has both a retailer’s logo and that of a general-purpose card network; it can be used at any merchant where that network is accepted, but when used at the retailer it brings additional benefits.]
We are working through timing for when this feature will be available. We’re also supporting our retailers through other payment options. Currently, our customers can use mobile devices to apply for credit, check rewards and redeem them in-store, pay their bills and retrieve a mobile version of their cards.
We’ve also been working for a few years on e-strategies to give consumers the ability to service their account without having to talk to someone in a call center. Some people naturally default to wanting to talk to an individual, but we’re seeing that start to go away. People are getting more comfortable with online and chat. The new generation wants to service their accounts on their phones.