Synchrony says it lost Walmart card in battle with Capital One

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Synchrony Financial said its credit-card deal with Walmart won't be renewed and will expire next year.

The largest issuer of store cards said Thursday that it's evaluating whether to sell the $10 billion in balances or retain the portfolio and convert qualifying customers to general purpose credit cards. Capital One Financial will issue the retailer's store cards, according to people familiar with the matter.

Synchrony, based in Stamford, Connecticut, dropped 10 percent to $30 at 4 p.m. in New York, the most since April 2017 and the biggest drop in the 68-company S&P 500 Financials Index. That represented a slight rebound after the company confirmed it had lost the contract, as the shares had dropped as much as 12 percent after the Wall Street Journal reported that Capital One had prevailed. Capital One slipped 2.5 percent.

Co-brand and private label credit cards are a lucrative business for banks and retailers seeking to monetize a cardholder's loyalty to a certain brand or store. Synchrony's partnership with Walmart accounted for more than 10 percent of the interest and fees the bank earned on its loans last year, the company said in an annual regulatory filing. The lender has said its five largest programs — a group that includes Gap Inc., J.C. Penney Co., Lowe's Cos., Sam's Club and Walmart — made up the majority of such revenue.

"Although we pursued a renewal with Walmart, we were unable to reach terms that made economic sense for the company and our shareholders," said Sue Bishop, a spokeswoman for Synchrony. "We're going to focus in areas of our business where there's significant growth potential and attractive returns over time."

Bishop said the two strategic options — whether to sell the balances or convert the portfolio to credit cards — are both accretive to earnings relative to renewing the contract with Walmart.

Tatiana Stead, a spokeswoman for Capital One, declined to comment.

Capital One last week shuffled the senior managers in its credit-card partnership unit. Jimmy Cannon, executive vice president of the U.S. partnerships business, is leaving the bank in August and will be replaced by Buck Stinson, who currently leads the firm's small-business card efforts.

Capital One Chief Executive Officer Richard Fairbank said last week his firm is focused on finding co-brand partners who view their card offerings as a way to deepen customer relationships versus "a profit center."

"However important card partnerships were in the past, I think we should all understand: they're more important in the emerging digital world," Fairbank told analysts in a conference call. "Just because of the centrality of how payments play in the digital e-commerce environment."

Bloomberg News