STAMFORD — Walmart is dropping its lawsuit against Synchrony, while the consumer financial-services firm said Wednesday it would sell the loan portfolio it manages for the retailing giant and continue a longstanding agreement with the Walmart-owned Sam’s Club chain.
The country’s largest brick-and-mortar retailer’s decision resolves a breach-of-contract complaint it filed last November, following its move last July to end the Stamford company’s two-decade run as its credit-card provider in favor of a new deal with Capital One. But the companies are maintaining their ties by extending a separate, 25-year partnership that provides cards to Sam’s Club members.
“We’ve been able to renew Sam’s (Club), resolve where the Walmart (loan) book is going and not have the lawsuit hanging over our head,” Synchrony CEO and President Margaret Keane said on an earnings call Wednesday. “The overall result of where we ended is really great for the company.”
Bentonville, Ark.-based Walmart declined to comment on its reasons for withdrawing the lawsuit, which was heavily redacted in court documents.
At the same time, Synchrony confirmed it would sell to Capital One its package of Walmart customer loans, which are expected to be worth about $9 billion when they are transferred in the third or fourth quarter of this year. Capital One is set to become later this year the exclusive issuer of Walmart’s private label and co-branded credit card program.
Company officials have said the sale could generate about $2.5 billion for share buybacks.
Synchrony also announced Wednesday renewed deals with Amazon and Google. The company said it had renewed more than 50 partnerships and signed more than 35 new deals in 2018.
In arguably its largest transaction of the past year, Synchrony closed last July on the acquisition of PayPal’s $7.6 billion consumer-credit portfolio.
With that pact, Synchrony and PayPal extended their 14-year co-branded credit card program agreement. Synchrony will serve as the exclusive U.S. issuer of PayPal Credit’s online consumer-financing program through 2028, supporting its goal of becoming a major digital-payments player.
Also Wednesday, Synchrony announced rising earnings for the past quarter and year.
Quarterly revenues totaled about $4.3 billion, an 11 percent increase from the same period in 2017. Profits totaled $783 million, nearly double the bottom line a year ago. Fourth-quarter 2017 profits were reduced by charges incurred from the implementation of the 2017 U.S. tax reform.
Among other key indicators, quarterly loan receivables grew 14 percent to $93 billion. Purchase volume increased 10 percent to $40 billion. Deposits rose 13 percent to $64 billion.
Net charge-offs — which refer to debts the company does not expect to recoup — comprised 5.54 percent of loan receivables in the past quarter, compared with 5.78 percent in the same period of 2017.Read Full Article
Meanwhile, the company increased its reserve for loan losses by 7 percent — a move that reflected the addition of the PayPal portfolio.
The net charge-off rate and reserve growth were “in line with our expectations,” Chief Financial Officer Brian Doubles said on the call.
For all of 2018, Synchrony finished with about $16 billion in revenues, up 7 percent from 2017. Its full-year profits totaled about $2.8 billion, up 44 percent from the previous year.
Synchrony shares closed Wednesday at $29.40, up 10.8 percent from their Tuesday finish.
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