Synchrony Financial reported solid earnings growth in the first quarter thanks to increased use of its credit cards, but the firm's credit performance was slightly weaker.

Synchrony, which recently completed its split from longtime parent General Electric, reported earnings per share of 70 cents in the quarter, or a penny better than the consensus estimate of analysts. Net earnings totaled $582 million, up 5.4% from the same period a year earlier.

Synchrony specializes in retail-branded credit cards, a market segment that grew quickly in the wake of the Great Recession. But in January the company advised shareholders to expect a slowdown, issuing guidance for loan growth of between 7% and 9% in 2016.

In that context, the Stamford, Conn., company's 13% growth in loan receivables during the first quarter pleased investors. Shares in Synchrony were up by 1.2% in midday trading Friday.

The company also reported that consumer spending on its credit cards rose by 17% compared with the first quarter of 2015.

Synchrony's loan portfolio performed somewhat worse during the first quarter. The percentage of loans that were at least 30 days past due rose to 3.85%, up from 3.79% a year earlier. Net chargeoffs rose nearly 17%, to $780 million.

Synchrony also increased its provision for loan losses by 31%, to $903 million, from a year earlier.

Mark Palmer, an analyst at BTIG Partners, said that the rise in chargeoffs should not set off alarm bells.

"Credit remained benign in general, which may help to quell investor concerns about potential deterioration," he wrote in a research note. Palmer has a "buy" rating on Synchrony's stock.

During a conference call with analysts, Chief Executive Officer Margaret Keane maintained that Synchrony is not feeling pressure to loosen its lending standards.

"Our partners are not asking us to go deeper on credit," she said, adding that the average credit score for the company's card holders was unchanged from a year earlier.

Synchrony's first-quarter earnings also got a boost from strong growth in deposits at its online banking franchise. During the quarter, deposits at Synchrony Bank grew by $10.2 billion to $45.0 billion, compared with the same period a year earlier.

As a result, deposits accounted for 69% of Synchrony's funding during the quarter, up from 59% a year earlier.

Chief Financial Officer Brian Doubles noted during Friday's conference call that Synchrony has been aiming to fund 60% to 70% of its loans with deposits, but said he expects it to exceed that target range slightly in the coming quarters.

"We are also looking at additional ways to increase the stickiness of this deposit base, including the rollout of new products later this year, such as checking and online bill pay," Doubles added.

On Friday, Synchrony Bank was offering an annual percentage yield of 1.05% on its savings account, which was among the best deals available at Bankrate.com. Despite those relatively high yields, deposits give Synchrony a comparatively cheap way to fund its loans.

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