Healthy Relationships, High Returns
Spun off from GE, narrow-moat Synchrony Financial thrives by having strong ties with loyal retailers.
With most retail-focused financial institutions having fully rebounded from the 2008-2009 financial crisis, General Electric (GE) decided in July to spin off its consumer-credit operations in an initial public offering. Given the improvement in asset quality and profitability, the timing was right for GE to realize value in a division that was a distraction for its management during the crisis.
The newly named Synchrony Financial (SYF) was previously known as General Electric Capital Retail Bank, and it has its roots in the consumer-finance business tracing back to 1932. The company works with a diverse group of national and regional retailers, local merchants, manufacturers, industry associations, and health-care providers--all of which it refers to as partners. Through its partners' 329,000 locations in the United States and Canada, their websites and mobile applications, Synchrony offers a variety of credit options to finance the purchase of goods and services. The firm generated $11 billion in revenue and $2 billion in net profit in 2013, through three primary platforms: retail cards, payment solutions, and CareCredit.
Dan Werner does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.