Credit-Card Warning Sends Synchrony Shares Dropping
June 14 2016 - 2:12PM
Dow Jones News
By AnnaMaria Adriotis
Storm clouds are gathering on the consumer-credit horizon.
Lenders and ratings firms are sounding alarms over weakening
performance of three major areas of consumer credit -- credit
cards, auto loans and student loans -- suggesting that a new round
of borrower delinquencies and losses for financial institutions
could be on the way.
Synchrony Financial, the largest retail-store card issuer by
purchase volume and balances, on Tuesday increased its forecast for
losses over the next 12 months and said it was building up reserves
for future losses, according to a company filing. The lender said
it expected net charge-off rates over that period to increase by
0.20 to 0.30 percentage points.
That sent tremors through a variety of financial stocks with
exposure to the consumer. While Synchrony's stock was down about
12% by midday Tuesday, Capital One Financial Corp. fell about 6%
and Ally Financial Inc. was down nearly 4%.
In detailing the company's changed outlook at a Morgan Stanley
financial-services conference Tuesday, Brian Doubles, Synchrony
chief financial officer, cited challenges in late-stage
delinquencies as the main reason. "We expected to see some
softening," he said. "We weren't sure when it was going to come and
I think we're starting to see some of that."
Mr. Doubles added that the ability of card holders to get back
on track with payments after falling behind has been "challenged
all year."
Granted, any increase in delinquency or charge-off rates comes
at a time when these measures of stress are near record lows. Yet
that also has many within financial services expecting that a turn
in the credit cycle will eventually have to occur. So they are
watching any signs of stress, particularly among more stretched
consumers.
(END) Dow Jones Newswires
June 14, 2016 13:57 ET (17:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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