Why Synchrony Financial Stocks Fall 10% Friday – The Fool Motley

What happened

Actions of Synchrony Financial (NYSE: SYF) dive today, down about 10% at 3:10 pm. EDT, on the news that Walmart (NYSE: WMT) continues the company for $ 800 million. The lawsuit concerns the partnership between the card issuer and the retail giant, which ended earlier this year.

So what

For its part, Walmart claims $ 800 million in damages that it would have suffered because Synchrony had violated their agreement. In response, Synchrony issued a press release in which it was stated that "Walmart is attempting to avoid paying the fair market value of the portfolio, as required by our contract."

Synchrony then defended its position and manner of servicing the portfolio, claiming that it "applied the same underwriting and decision-making processes to the Walmart portfolio as in all portfolios." Portfolio credit performance was simply a breakdown of candidates , the relative performance of Walmart cardholders and Walmart's failure to promote the program. "

The real problem can go well beyond Walmart. Stephens analyst Vincent Caintic downgraded Synchrony's shares, noting in a note to his clients that the complaint suggested that the card issuer had also lost its partnership with Sam & # 39; s Club, one of the five largest retail card partnerships at the end of last year. (Sam's Club is counted separately from Walmart in its deposits.)

Now what

At the time of the split, Walmart's relationship represented approximately 19% of Synchrony's card portfolio and 13% of its total loan portfolio.

Losing Sam's Club would be another blow for the store card issuer. Analysts had previously estimated Sam's book at about $ 8 billion, about 13 percent of total credit card loans and 9 percent of total loans at the end of the third quarter.

Jordan Wathen does not own any of the shares mentioned. The Motley Fool has no position in the mentioned actions. Motley Fool has a disclosure policy.