WMT Walmart Inc

By AnnaMaria Andriotis 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 24, 2019).

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 24, 2019 02:47 ET (07:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.