Magazine article American Banker

GE Consumer Unit More Likely to Buy a Bank, Not Sell to One

Magazine article American Banker

GE Consumer Unit More Likely to Buy a Bank, Not Sell to One

Article excerpt

Byline: Robert Barba

Banks are hungry for earning assets, but General Electric is poised to offer up its consumer business to the masses.

GE Chief Executive Jeffrey Immelt said this week that the company is committed to shrinking its GE Capital unit and is mulling an initial public offering for some of its business lines. As Immelt sees it, the market is wide open, while banks are still closed up.

"The capital markets are very receptive to IPOs," Immelt said at the Electrical Products Group Conference in Florida on Wednesday. "Particularly in financial services, putting things for sale with the assumption that a bank would buy it has been a fool's journey. So the only way you have been able to think about this is by thinking about IPOs."

Immelt did not single out the consumer business in discussing spin-offs, but he said the company wanted to sharpen its focus on its commercial business. Its consumer business had $139 billion in assets at the end of 2012, with about $50 billion of that made up by private label credit cards.

Signaling an IPO of a business unit is often a semi-veiled attempt at hunting for a buyer. Such a move announces to the market that a company is looking to make some cash and announces to observers who may have long salivated over a business line that this is the chance to snag it.

For instance, several observers recently suggested Royal Bank of Scotland was posturing when it announced it would take 20% to 25% of its Citizens Financial Group public in the next couple of years.

The sentiment within the financial industry and on Wall Street is that GE is sincere in its claim that a bank buyer is unlikely. The deal could be huge -- $20 billion to $30 billion, by one estimate -- and only a handful of banks could afford it. However, it would take require a bruising fight with regulators.

"It would surprise me if Immelt were so brash to dismiss this time the possibility of a bank buyer without checking it out," one observer said

GE has been exploring the divestiture of its credit card business since 2007. …

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