GE’s sale of commercial lending arm to attract banks, private equity

A slew of private equity players and major banks are expected to circle GE’s Australian commercial lending book.

A slew of private equity players and major banks are expected to circle GE’s Australian commercial lending book, with the US industrial giant seeking to offload commercial financing businesses around the world.

The expected sale of the Australian business comes on the heels of GE last month selling its Australian consumer lending arm to a consortium led by private ­equity giant KKR for $8.2 billion.

Over the weekend GE said it was planning to significantly scale back its finance arm to focus on its industrial operations. The US company said it would seek buyers for assets worth $US165bn ($215bn) around the world, comprising most of its giant commercial lending and leasing segments and all its mortgage and other consumer-finance businesses.

GE global boss Jeff Immelt seized on the high price tag generated from the sale of its Australian consumer business as a factor to sell more financial assets. The price received for the lending ­assets showed “that our platforms may be worth more outside the company”, Mr Immelt said.

“If you just look at the evidence, take a look at Australia, the Australia/New Zealand consumer fin­ance business, we put that into an auction and we sold that at two times book (value),” he said.

Last month the KKR-led consortium including Deutsche Bank emerged with GE Capital’s Australia and NZ consumer lending business, a leading financial ser­vices provider with more than three million customers.

Businesses marked for sale over the next 12 months include GE’s acquisition finance business, its healthcare assets unrelated to GE Industrial healthcare, commercial business in Australia, a global fleet leasing businesses and a British inventory finance business.

In total, those businesses represent $US45bn of assets.

National Australia Bank, Westpac and Macquarie Group are among the banks believed to be keen to expand their commercial lending books, according to banking analysts.

At the same time private equity firms have shown a renewed appetite for lending assets and GE’s consumer financing book is highly sought after. Firms including TPG and Blackstone lodged a joint bid, while private equity firm Apollo was also a serious contender.

As a non-bank financier, GE specialises in loans to small and mid-sized businesses. It also provides equipment finance. Local customers include Jayco, Hardys Wines and telecommunications interest Polycom.

Though the financing businesses have fallen out of favour with GE investors, they still generate steady interest income and represent a solid core of GE’s client base. The move by GE to exit fin­ance follows global ­efforts by the conglomerate to shrink its risky banking business.

Just last decade GE had started down on the path to securing an Australian banking licence, which would have given it a business here to rival players such as HSBC. However, since the global financial crisis, GE has been steadily scaling back its finance business.

Investors have pressured the US conglomerate to reduce the size of its massive banking business and return to a more industrial focus, such as aircraft engines, power turbines and medical scanners. GE is expected to sell the ­assets as large units, such as North American assets as a group, but will entertain offers for smaller parts. GE estimates selling the ­assets could generate $US35bn of fresh capital, the company told analysts and investors.

GE Capital chief executive Keith Sherin said on a conference call that the company was already in talks for “several” of the assets.

Additional reporting: Agencies