Synchrony Financial: Reducing Our Fair Value Estimate as We Incorporate New Late Fee Rules

We are reducing our fair value estimate for Synchrony Financial from $47 per share to $46, as we incorporate a higher chance that the Consumer Financial Protection Bureau's new rules on credit card late fee limits are implemented as proposed. These new rules would limit late fees to $8 dollars per violation from the current $30 for first-time offenses and $41 for additional missed payments. While these rules will impact all the card issuers in our coverage, private label card issuers like Synchrony are more exposed to these changes due to the weaker credit quality of their card business and higher reliance on late fee income.