GE consumer finance unit gives up on U.S. consumer
Putrid economic growth at home has sparked a search for growth opportunities around the globe

GE Money, the consumer finance arm of U.S.- based based industrial stalwart General Electric, is pulling back from doing business in its homeland, where it sees scant growth opportunities, to further expand its global footprint.

The subsidiary, founded in the 1930s to finance home appliances during the Great Depression, already operates in more than 55 countries. But with growth in the U.S. at a standstill, it has been forced to refocus on other areas to boost returns.

GE Money sold its U.S. corporate payment services unit to American Express last month for $1.1 billion, illustrating its desire to exit from “markets where we have low growth opportunities or low sales,” said Robert Rendine, vice president of global communications at GE Money.

For instance, earnings growth at GE Money in the fourth quarter was around 7%, but that figure included double-digit growth in Europe and Asia and a 59% decline in the Americas, reflecting the challenges in the U.S. market.

Markets that GE Money expects to provide only limited opportunities include some Western European countries. For instance, last month it agreed to swap its units in Germany and the U.K. for Banco Santander’s Interbanca, an Italian commercial lender.

The main problem the company is encountering is that to spur growth in markets such as the U.S. and the U.K., it would need to make large investments that would yield disproportionately small returns.

Instead, GE Money is looking to build its presence in places where there’s potential for high growth in the long term. Those markets include emerging countries in Latin America and Asia, but also more established markets such as France and Australia.

The revamp was already under way in 2007, when GE Money put its private-label credit card portfolio, with $30 billion in receivables, up for sale. It intensified in February after William Cary, 48 years old and a 21-year veteran of GE, was named president and chief executive of the subsidiary. Mr. Cary had served as CEO of GE Money’s Europe, Middle East and Africa unit since February 2006. GE Money also announced in February that it had moved its headquarters from Connecticut to London, where Mr. Cary is based, to symbolize its shift away from the U.S.

In a press release announcing the promotion, GE chairman and CEO Jeffrey Immelt noted Mr. Cary’s “great eye for growth,” which will help him “drive change” at GE Money.

Mr. Cary wasn’t available to comment for this story. But in a Bloomberg interview earlier this year, he said the makeover “is a thoughtful effort to really, aggressively look at where we make money, where we don’t and where we should have capital redeployed.”

For instance, the private-label credit card business in the U.S. is very competitive. With consumer finance taking a hit from the mortgage crisis and potentially being affected further as consumer spending declines, GE Money would be looking at remaining a small player in a declining market.

“After selling their corporate card business, they are trying to sell their co-brand portfolio in the U.S.,” said Adil Moussa, analyst with Aite Group. “They want to focus on something that will get a much higher yield. The market has become so commoditized.”

Mr. Moussa noted that GE Money isn’t the only company trying to exit the U.S. credit card market. Target has been trying to unload its $7 billion credit card receivables portfolio and may end up selling it in two chunks.

But GE Money isn’t exiting the private label credit card business altogether. Instead, it will transfer its knowledge of the space to other markets, such as Latin America, Canada and Australia. Mr. Rendine noted that in Australia, for instance, “it’s a different dynamic for us,” because GE Money is one of only two or three players in the business there, while in the U.S. “we don’t have the scale and opportunities to grow that scale.”

“In the U.S., they have acquired a know-how, and that know-how can be better utilized elsewhere,” Mr. Moussa said. “It’s like exporting what has worked in the U.S. Once they have exhausted that, they’ll probably be shifting to mortgages.”

In some emerging markets, such as Central and Eastern Europe, GE Money is also planning to expand its banking business more broadly than just through consumer finance. It bought part of UniCredit’s Bank BPH last year for close to $900 million. Mr. Rendine said it has another $200 million to invest in 2008 in Central and Eastern Europe, some of which will be channeled through joint ventures.

GE Money will also continue to expand through partnerships and joint ventures in other parts of the world. For instance, it has a banking joint venture with Turkey’s Garanti Bank, which will help with a regional expansion in Romania and the Ukraine. Even in markets that are no longer emerging, such as South Korea and France, GE Money sees potential for growth.

“They are just about everywhere,” said Aite’s Mr. Moussa. But everywhere doesn’t seem to include the U.S. anymore. FW

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