General Electric Co's (GE.N) credit card unit, Synchrony Financial (SYF.N), made a muted debut on the New York Stock Exchange on Thursday as investors remained ambivalent about the chances of a consumer-led U.S. economic recovery.
Synchrony, the largest provider of private-label credit cards in the United States, raised $2.88 billion in the biggest U.S. initial public offering of the year so far.
The share sale is part of GE Chief Executive Jeffrey Immelt's plan to exit the North American retail finance sector and slim down GE Capital, whose problems during the financial crisis threatened to bring down the whole company.
GE retains a stake of about 85 percent in Synchrony.
"We continue to target completing our exit in late 2015," Immelt said in a statement.
Synchrony's shares touched a high of $23.22 before slipping to a low of $22.60, just below the offer price of $23 per share. At $23, the company is valued at about $19 billion.
"This is a credit company that is leveraged to retail spending and this season retailers were complaining about lackluster consumer activity," Jack Ablin, chief investment officer of BMO Private Bank in Chicago told Reuters.
"So I think it's a combination of tepid recovery in retail and investor temperament right now," he said. "From a macro-perspective there is no reason why a company like this can't thrive."
Almost a third of Synchrony's loans fall into the subprime category, compared with only about 18 percent in Discover Financial Services' (DFS.N) personal credit card business.
Receivables for private-label credit cards rebounded to pre-crisis levels of $100 billion in 2013, far outpacing the recovery of general-purpose credit cards.
Synchrony provides private-label credit cards and other credit products to partners including Wal-Mart Stores Inc (WMT.N), Amazon.com Inc (AMZN.O) and J.C.Penney Co Inc (JCP.N).
Synchrony CEO Margaret Keane said she was pleased despite the lackluster debut. "It is a tough day in the market to begin with," she told Reuters. "We are doing fine."
Dan Werner, an analyst with Morningstar Equity Research, said the stock was "deeply undervalued."
"Our fair value estimate is $36 per share," he said.
Synchrony generated two-thirds of its $9.42 billion revenue last year from its retail card business.
The company, formerly known as GE Capital Retail Bank, traces its roots to 1932 when GE began to provide financing to consumers to help them buy its appliances. Immelt wants GE's industrial businesses to contribute 75 percent of profit by 2016, up from 55 percent last year.
Synchrony accounted for about 6 percent of U.S. credit card receivables of more than $830 billion last year.
Prior to Synchrony's offering, the biggest U.S. IPO this year was that of bailed-out auto-lender Ally Financial Inc (ALLY.N), which raised $2.4 billion in April.
GE shares were down 1 percent in late morning trade.
(This story has been corrected to fix the figure in 17th paragraph to " ... 75 percent of profit", not " ... 75 percent of revenue")
(Additional reporting by David Henry in New York and Tanya Agrawal in Bangalore; Editing by Ted Kerr and Sriraj Kalluvila)