Synchrony Financial (NYSE:SYF) shares dropped 3.1% in Monday midday trading after the credit card issuer posted lower Q4 earnings, though still beat the average analyst estimate.

Wolfe Research analyst Bill Carcache attributed the beat to lower than expected provision for credit losses. Q4 PCL came in at $1.20B vs. consensus of $1.28B, he noted. Meanwhile noninterest expense during the quarter rose 8% Y/Y to $1.15B vs. $1.10B consensus.

In its outlook, the company said it expects delinquencies to reach prepandemic levels in mid-2023. It doesn’t expect net charge-offs to reach prepandemic levels, on an annual basis, until 2024 “unless significant changes in macroeconomic environment develop,” it said in its Q4 earnings slides.

Net charge-offs are expected to be 4.75%-5.00% in 2023, up from 3.48% in Q4 2022.

In other guidance, Synchrony (SYF) expects loan receivables growth of 8%-10% in 2023. Purchase volume growth is expected across all sales platforms. Payment rate moderation is expected to continue, remaining above prepandemic levels during this year.

Net interest margin guidance, excluding certain items, for the year is 15.00%-15.25%.

The company expects to deliver positive operating leverage during the year, with expenses rising less than net interest income growth for the full year. It’s guiding for operating expenses of ~$1.125M per quarter in 2023, up from $1.15B in Q4 2022.

The outlook implies a mid-single digit preprovision net revenue upside to consensus, said Wolfe Research analyst Bill Carcache.

Earlier, Synchrony Financial (SYF) Q4 earnings decline as provision for credit losses climbs.