Synchrony Now On BMO's Best Event-Driven Trades List

• Shares of Synchrony Financial SYF were volatile in 2015 and are up 5 percent year-to-date.
• BMO Capital Markets’ James Fotheringham upgraded the rating on the company from Market Perform to Outperform, while maintaining a price target of $36.
• The company is poised to benefit from reduced technical pressures and robust fundamentals, Fotheringham stated.

Synchrony Financial, a leading consumer financial services company, has recently split off from General Electric Company GE. Analyst James Fotheringham expects the successful split to result in the subsiding of technical pressures on Synchrony Financial’s shares from arbitrage trading and flow-back from General Electric shareholders.

“As the market’s assessment of SYF shares shifts away from “technicals”, our fundamental analyses imply +14% upside for SYF shares,” Fotheringham added.

The analyst expects Synchrony Financial to return excess capital to its shareholders in 2016 in the form of dividends and share buybacks. Such capital returns were prohibited by the Federal Reserve prior to the company’s split from General Electric.

Synchrony Financial is poised to attain a strong capital position, expand market share and record superior profits in the near future, Fotheringham mentioned, while adding, “[W]e expect SYF shares to be catalyzed by sooner-than-expected capital return” and dividend and share buybacks starting from 1Q16.”