GE Re-Considering Consumer Lending?
January 5, 2008 – Recent news and industry buzz is pointing to something possibly amiss in the consumer lending business. In the U.S., GE is reportedly seeking a buyer or partner for its private label card business citing slow growth. Internationally, rumors have been rife about GE exiting store cards in the UK and re-structuring GE Money in India. From our perspective a sale or partnership for the U.S. business is tough (for the time being) given overall credit issues and a paucity of buyers—Chase is one possible acquirer given that it has largely escaped unscathed from the recent mortgage implosion and has aspirations of building a private label card business. The UK market will similarly be rough if indeed GE is looking for a buyer. However, neither of these moves would surprise us as GE has historically shed off slow growing businesses in an effort to maximize return on capital.
India is puzzling given attractive market size, growth and other fundamentals but GE is reporting profitability challenges and credit quality issues and may not be ready to slog it for the long haul. Is GE being naive in looking at short term returns and are Mexico and Brazil on the skids as well? The larger question is what this says about GE Money and its long term place in emerging markets. On the other hand GE may find some partners, re-gear the Indian business, re-deploy capital from the sale of the U.S. and UK card businesses and step on the accelerator.
Posted by Ali Raza on Monday, January 14, 2008