General Electric Co (GE.N) plans to spin off the U.S. consumer lending operations of its finance arm GE Capital, as the conglomerate moves to focus on its core industrial operations, a person familiar with the matter said.
GE Capital nearly sank the whole company during the 2007-2009 financial crisis, and the company has been trying to shrink the division's portfolio ever since.
An initial public offering of the consumer lending division, which issues store credit cards for 55 million Americans, could come early next year, but its size has not yet been determined, according to the Wall Street Journal. (link.reuters.com/sug72v)
"A spin-off of GE's consumer business would be a significant positive for the company, as it would expedite its shift to industrial earnings solidly outgrowing GE Capital," said William Blair & Co analyst Nicholas Heymann, in a note.
GE declined to comment.
A sale might help GE Capital escape some of the most burdensome new regulations after it was named a systemically important financial institution by the U.S. financial risk council in July.
The council reviews the status of these institutions - which are so large their demise could threaten the safety of the entire financial system - annually, taking into account "any material changes" to the business.
The consumer division earned $3.24 billion last year and had assets of $139 billion. GE Capital's total assets at the end of 2012 were $539 billion.
Chief Executive Jeffrey Immelt at a conference in May said the company aimed to trim GE Capital's assets to $300 billion to $350 billion by the end of 2014 through "staged exits" of some non-core assets.
Bankers from JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N) are working on a possible public offering, while alternatives include smaller spin-offs or asset sales, the Wall Street Journal said. Goldman Sachs and JPMorgan declined to comment.
William Blair analysts said the consumer division could potentially be valued at $35 billion, or about $3 to $4 per GE share.
(Reporting by Patricia Kranz and Jessica Toonkel in New York, Douwe Miedema in Washington, and Sakthi Prasad in Bangalore; Editing by Steve Orlofsky and Tim Dobbyn)