Big Banks: Is A Synchrony Financial Sympathy Sell-Off Unwarranted?

Shares of Synchrony Financial SYF lost 13.11 percent on Tuesday trading, after warning about an anticipated 20 to 30 basis point surge in its net charge-off rates over the next year. The higher guidance impacted some other banks' stocks as well.

Related Link: Barclays Bullish On Synchrony Finance, But Guidance Highlights Risks

However, Buckingham Research’s James Mitchell said in a report, this looks more like a “company specific issue, rather than any material change in the outlook for consumer credit.” In fact, all of the large banks that Buckingham covers have recently assured at several industry conferences that the forecast for consumer credit trends remains stable, mirroring the overall promising economic and employment backdrop.

Related Link: Jefferies Cuts Synchrony Financial Estimates After NCO Guidance Change

Therefore, analysts at Buckingham believe Synchrony’s outsized growth at almost three times its industry’s average, “and a lower quality loan book than the money center banks is driving the increased NCO forecast.”

Finally, the note pointed out, Synchrony is anticipating an increase in the loss rate of just 4 percent to 6 percent.

In conclusion, the experts believe “any ‘sympathy’ sell off in the large banks is unwarranted.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.