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GE Sells Japanese Consumer Finance Business

Sun, 27 Jul 2008 10:34:00 GMT

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.

Citi Sells German Bank

Tue, 22 Jul 2008 20:41:00 GMT

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.

Discover sells Goldfish to Barclays

Thu, 07 Feb 2008 16:00:15 GMT

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.

HSBC & Citi Reviewing UK Consumer Finance

Thu, 07 Feb 2008 15:31:02 GMT

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.

Alliance Blackstone Deal on the Skids

Wed, 30 Jan 2008 16:31:15 GMT

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.

PayPal buys Fraud Sciences

Wed, 30 Jan 2008 15:50:54 GMT

January 30, 2008 – PayPal is bolstering its fraud management capabilities with the US$169 million purchase of Fraud Sciences, a specialist online risk management company. We view this as a solid move by PayPal as it continues to expand its online payments business and transaction security continues to be a major concern for consumers globally. Fraud Sciences claim to fame is a technology that differentiates between real and fraudulent online transactions with significant accuracy. Using this technology, Fraud Sciences offers a transaction verification service to manage online fraud. Fraud Sciences is funded by BRM Capital, Redpoint Ventures and other U.S. and Israeli investors.

GE Money Partnership

Wed, 30 Jan 2008 15:29:12 GMT

January 30, 2008 – GE Money is reportedly looking for a partner for its personal loans and mortgage business in India. According to the newly appointed CEO and President, the company is looking for a “strategic partner” and not exiting the market. It remains to be seen what shape the strategic partnership will take and what assets GE is willing to give up. Reliance Capital and Indiabulls are both believed to be interested, although according to industry observers Reliance may be more interested in all of GE Money than a partnership deal. Morgan Stanley has been appointed adviser for GE.

GE Re-Considering Consumer Lending?

Mon, 14 Jan 2008 15:16:22 GMT

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.

Update - 12/11/07

Mon, 14 Jan 2008 14:22:38 GMT

December 11, 2007 – While we are not declaring a winner, we do want to note Amazon’s investment in Bill Me Later and the addition of Bill Me Later as a payment option on Amazon’s website. This event is symbolic in a couple of ways; adds more legitimacy to Bill Me Later and re-affirms Amazon’s entry to online payments (Amazon Payments, Amazon Flexible Payments Service).

Update - 01/14/08

Mon, 14 Jan 2008 14:01:58 GMT

January 14, 2008 – Back in 2007 we commented on First Data and it’s growing international merchant business. We have recently learned that the European Commission has cleared the JV alliance with Allied Irish Bank—the new venture called, AIB Merchant Services will handle merchant acquiring and payment card processing. In addition to Ireland, the JV will serve UK, Netherlands and Italy.