According to an April 20th article in the Wall Street Journal, GE Capital is in relatively advanced negotiations with financial institutions including Wells Fargo regarding the sale of its middle-market lending unit. The WSJ sources would not offer any further details except to say the company is in talks to sell all or part of the $74 billion business to megabank Wells Fargo, but is is also working with other bidders.
General Electric moving ahead rapidly with GE Capital asset sales
Obviously, an agreement to part with the U.S. commercial lending division would be another big move forward in GE’s plan to get out of banking given widespread investor discontent and increased regulatory burdens.
GE announced last year it was planning to sell off $200 billion in assets over the next two years. If this Wells Fargo deal goes through, it would mean the firm has already made arrangements to part with about half of that amount. It would also make it clear that GE’s exit from finance will happen a lot more quickly than originally anticipated. The company had said it might take two years to finalize the GE Capital wind down process.
GE Capital represented close to half of the firm’s annual profit only a few years ago, but returns from GE Capital have dropped below the cost of capital as the given a slew of new federal regulations that have limit both leverage and profitability.
Analysts point out a swift sale of the middle-tier lending operation would help GE get out from all the arduous regulations that come with being designated a “systemically important financial institution.” Of note, GE CFO Jeff Bornstein commented a swift sale process would also minimize any departure of top talent following GE’s announcement it was selling off the businesses.
Bornstein highlighted that the firm has received significant interest in the GE Capital assets. “At the moment it gives us real confidence that we’re going to get a lot if not most of this done domestically in the U.S. in, I think, short order,” he noted in an interview on Friday.
The WSJ sources also noted that GE is working with potential buyers for its $16 billion private-equity lending business.