Synchrony Financial said Tuesday that it is expecting loan losses to rise over the next year as more consumers struggle to pay off their credit card balances.

The announcement seemed to surprise investors, who responded by quickly selling off shares in the Stamford, Conn., company. The stock price was down 14.4% in midday trading, to $26.07 a share.

Synchrony had previously projected that its net chargeoffs would range from 4.3% to 4.5% of total average loan receivables. Now the company expects its net chargeoff rate to range from 4.5% to 4.8% by 2017, and to remain at that level.

For the first quarter Synchrony reported a net chargeoff rate of 4.7%, up from 4.53% in the year-earlier period.

Synchrony, which recently completed its spinoff from General Electric, is one of the nation's leading issuers of private-label cards. Those cards, which can be used only at specific merchants, generally have higher loss rates than general-purpose credit cards. The loss rates on private-label cards tend to spike during economic downturns. Synchrony, which also issues cobranded credit cards that can be used at multiple retailers, has been enjoying stronger than average loan growth in recent quarters. During the first quarter, its loan receivables grew by 13% from a year earlier.

Synchrony has not loosened its credit standards, Chief Financial Officer Brian Doubles said Tuesday. He attributed the rise in chargeoffs to outside factors, suggesting that some borrowers may be taking on bigger obligations on other loans.

"It appears to be a general kind of softening in the consumer's ability to pay," Doubles said during remarks at a conference in New York.

"I think you have to put this in perspective," he added. "We're operating over the last two years at historic lows on credit. We've indicated for a number of quarters now that we didn't think credit would get better from here."


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