Berkshire reports Synchrony stake, building credit card bet

Register now

Warren Buffett’s Berkshire Hathaway Inc. added a stake in Synchrony Financial during the second quarter, extending its bet on the credit card industry.

Berkshire had 17.5 million shares as of June 30, valued at about $520 million at the time, according to a regulatory filing Monday from the billionaire’s Omaha, Nebraska-based company.

Buffett is the biggest investor in American Express Co., which makes loans to credit card borrowers and also runs a payments network. Stamford, Connecticut-based Synchrony, which is known for issuing credit cards under the brand of retail partners, serves in the same two roles.
“That’s something that’s difficult to replicate,” Arren Cyganovich, an analyst at DA Davidson & Co., said in a phone interview. “So if you’re thinking about the competitors in the retail and private-label card space, there aren’t too many that have the capabilities that Synchrony has.”

Synchrony slumped 18 percent in New York trading this year through Monday’s close amid concerns that borrowers would struggle to repay their obligations at a time when credit card debt is at a record high in the U.S. That decline probably made the shares more attractive to Berkshire, Cyganovich said.

Synchrony completed its spinoff in 2015 from General Electric Co., a company that Buffett helped prop up in the financial crisis. Berkshire also said in the filing that it exited its investment in Boston-based GE. He previously sold a large portion of his GE stake in 2012.

“The outlook for GE has certainly soured,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, citing the recent departure of Jeff Immelt as chief executive officer. “The CEO essentially was forced to resign.”

Berkshire trimmed its stakes in American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc., while also exiting most of its investment in Wabco Holdings Inc. Buffett’s company increased its investment in General Motors Co. to 60 million shares from 50 million and again added to its holding of Bank of New York Mellon Corp.

Bloomberg News