SYFSynchrony Financial

Synchrony issues store-branded credit cards — the retailer's card with a bank behind it.

A retailer wants the customer to carry its card: it ties the shopper to the chain and lifts the average basket. The bank takes on issuance, servicing and default risk, and shares the profit with the retail partner. Contracts run long, and losing a major partner shows in the book at once.

The economics are harsh and transparent: rates on such cards are high, but so is the charge-off rate, noticeably above that of major network cards, because these borrowers are less reliable. The result turns on whether delinquencies grow faster than interest income. Risks: employment, regulation of late fees and a partner defecting to a competitor. The company pays a dividend and buys back heavily.