GE Set to Spin Off Synchrony As Consumer Finances Rebound

by Shelton on August 11th, 2014

filed under Finances

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Synchrony Financial is set Wednesday afternoon to price the largest initial public offering by a US-based company in two years, the latest sign of the recovery in consumers’ finances.

Stamford, Conn.-based Synchrony is being spun off from General Electric Co., the latest in a series of moves by the conglomerate to shrink its finance business. The company is the largest issuer of store-branded credit cards, lending to the customers of retailers like Wal-Mart Stores Inc. and Inc.

Synchrony plans to sell 125 million shares for $23 to $26 apiece late Wednesday, raising up to $3.25 billion before the potential sale of additional shares to underwriters. That would mark the largest IPO by a US company since Facebook Inc.’s in May 2012, which raised $16 billion.

In issuing store-branded credit cards, Synchrony competes with the like of Citigroup Inc., Alliance Data Systems Corp. and Wells Fargo amp; Co. Outstanding balances on US private-label store credit cards stood at $93.7 billion in 2013, up 6% from a year earlier, according to the Nilson Report. Over the same period, outstanding balances for general-purpose cards rose just 3%.

Because Synchrony’s closest rivals are units of big companies like Citi and ADS, investors say they’re comparing it instead to firms such as Capital One Financial Corp. and Discover Financial Services . Both have substantial card businesses, though Capital One in particular has diversified into retail banking, auto lending and other areas.

These companies have benefited from widespread loan growth and improved credit performance. Capital One’s shares are up 6.2% this year, just shy of the Samp;P 500’s 6.5% advance, while Discover has gained 11%.

Other consumer-finance companies hitting the IPO market in recent months have had a rougher ride. In recent months, auto lenders Ally Financial Inc. and Santander Consumer USA Holdings Inc. raised $2.56 billion and $2.04 billion in their respective debuts, the two largest so far in 2014. But both stocks are now trading below their IPO prices.

Synchrony’s profit fell 6.6% to $2 billion last year, as higher costs and an increase in funds set aside to cover bad loans offset an increase in net interest income.

The decline in profits and investor perception that “private-label” cards carry more credit risk represent potential headwinds for the stock, said Evan Staples, who covers financial companies as a senior research analyst at Nuveen Investment Management, which oversees $122 billion. Reveals The Three Best Online Debt …

by Shelton on August 11th, 2014

filed under Debt Consolidation Reveals The Three Best Online Debt Consolidation Companies For Utah Residents