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July 11, 2008 – GE Money announced that it has reached agreement with Shinsei Bank for the sale of its Japanese consumer finance business, including credit cards, mortgages and the personal loan business ‘Lake’ for US$5.4 billion—the sale is expected to close in the third quarter. This divestiture is part of GE’s exit from the consumer finance business particularly in challenging markets; U.S. consumer finance is looking for a strategic partner, the Indian business has been for sale for sometime although no takers. There is also talk of exits in the UK as well as parts of South America. Globally, GE’s strategy seems to have shifted from consumer finance to commercial finance with an overall corporate focus on fast growing emerging markets. In Japan, GE will continue to operate GE Nissen Credit Co. Ltd., the credit card JV with Nissen, a shopping catalogue as well as the commercial finance business which reportedly is strong in Japan and consists of leasing, fleet services, healthcare finance and commercial real estate.
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July 12, 2008 – As part of its worldwide business trimming Citibank sold its German banking operation to Credit Mutuel of France for US$7.7 billion. Citibank Deutschland, a profitable retail and lending enterprise with an expansive distribution of 340 branches and 3.3 million customers enjoyed relatively strong market share and its sale came as a surprise in some quarters. However, given Citibank’s focus on fast growing emerging markets the Bank decided to exit the German retail business – watch for more divestitures especially in small markets where Citi has a small presence. As it has in many countries where it has exited the retail business Citibank is maintaining its corporate and investment banking activities. The deal provides Credit Mutuel a solid foothold in Europe’s largest banking market while providing Citibank with much needed cash. According to analysts the sale is worth about US$4 billion in after-tax gains to Citibank.
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February 07, 2008 – Discover Financial Services has agreed to sell its Goldfish credit card business in the UK to Barclays for US$70 million cutting loose a business it bought two years ago for US$1.7 billion. Barclays will acquire 1.7 million Goldfish and affinity card accounts with about US$4 billion of receivables, and take on Goldfish’s brand, staff and facilities. The card business includes MasterCard and Visa. Discover will take a first-quarter charge of US$190 million to US$210 million and said the sale should improve earnings for the rest of the year. The sale underscores the difficulties of managing an international credit card business and continued credit challenges in the UK consumer sector.
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February 06, 2008 – HSBC and Citigroup are reportedly reviewing their consumer finance operations in the UK and may sell the branch-based businesses. According to the industry press, HSBC is re-examining the HFC business it acquired with the Household purchase in 2003 – the business operates under the Beneficial brand and has 140 branches. In Citi’s case the company is looking at the closure of 50 CitiFinancial branches. It is not clear if this is part of a broader exit from non-prime lending or merely a reaction to softening credit in the UK (Citi is also shedding unprofitable Egg customers). It appears that certain structural changes are afoot and we may see the overall complexion of global consumer finance change. In light of rumors swirling around GE’s retreat from UK private label cards and the stated sourcing of a strategic partner in India, we will be closely following developments around HSBC and Citi’s consumer finance businesses in Mexico, India and other markets.
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January 30, 2008 – Alliance Data has filed a lawsuit against the Blackstone Group to force it to complete its proposed US$6.8 billion acquisition. The deal seems to have run into trouble with Blackstone claiming regulatory challenges due to conditions imposed by the OCC although there may be more than meets the eye. Current credit sector issues have possibly impacted Blackstone’s ability to do the deal on its original terms as well as Alliance’s financial performance in turn impacting the original valuation. According to Alliance financial results announced today the company earned US$2.3 billion in 2007, up 15 percent from 2006 but net income decreased 13 percent to US$164.1 million. The real question is what the long-term future of Alliance is if the Blackstone deal is indeed scuttled.
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