Synchrony Says Walmart to Drop Lawsuit Against Credit-Card Issuer -- 2nd Update
January 23 2019 - 1:32PM
Dow Jones News
By AnnaMaria Andriotis
Synchrony Financial said Wednesday Walmart Inc. has agreed to
drop a lawsuit against the bank that alleged it breached the terms
of their long-running credit-card deal.
In the lawsuit, filed late last year in the U.S. District Court
of the Western District of Arkansas, Walmart said that some of
Synchrony's underwriting standards financially harmed the retailer.
Walmart was seeking estimated damages of at least $800 million.
A Walmart spokesman confirmed that the retailer is dropping the
lawsuit.
Synchrony had been Walmart's exclusive credit-card issuer until
the merchant decided last year to replace it with Capital One
Financial Corp.
Synchrony announced that Walmart would drop the lawsuit when it
reported fourth-quarter earnings Wednesday. Synchrony reported
higher profit that exceeded analysts' expectations.
The bank's shares were up around 9% midday Wednesday.
Walmart filed the lawsuit last year as Synchrony was negotiating
the possible sale of its existing Walmart credit-card balances to
Capital One.
Capital One Chief Executive Richard Fairbank said Tuesday the
bank had agreed to buy the roughly $9 billion in card balances. On
a call with analysts to discuss the bank's fourth-quarter earnings,
he said the balances have "high credit losses," adding that Capital
One's share of credit losses on the acquired portfolio is fixed at
a low percentage throughout the partnership with Walmart.
Loan losses as of last spring were around 9% of outstanding
balances on Walmart credit cards, The Wall Street Journal
previously reported.
Synchrony wanted to sell the balances at a premium, according to
people familiar with the matter. In the end, Capital One agreed to
buy the portfolio at face value, the people said.
Synchrony Chief Financial Officer Brian Doubles declined to
comment on the pricing arrangement.
"We delivered the most profitable year in our history," Mr.
Doubles said in an interview. "We have the Walmart situation behind
us."
Synchrony Wednesday said it renewed and extended retail card
partnerships with Walmart unit Sam's Club and Amazon.com Inc.
Investors had been concerned about the future of the Sam's Club
partnership following Synchrony's loss of the Walmart deal.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
January 23, 2019 13:17 ET (18:17 GMT)
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