NEW YORK (Reuters) - Popular Inc (BPOP.O), the parent of Banco Popular, agreed to sell much of its U.S. consumer finance business Equity One to a unit of American International Group Inc (AIG.N) for about $1.5 billion, the companies said on Wednesday.
The sale to American General Finance Inc includes about $1.47 billion of Equity One’s mortgage and consumer loan portfolio, Popular spokesman Enrique Martel said.
AIG may retain 24 of Marlton, New Jersey-based Equity One’s 130 branches, and 250 of its 512 employees, Martel said. The other branches would be closed, he said. Equity One operates in 15 U.S. states.
Richard Carrion, Popular’s chief executive, said the sale will allow his company to focus on its core banking franchise, reducing its dependence on mortgages.
Frederick Geissinger, chief executive of American General, said Equity One’s portfolio complements its existing business.
American General operates more than 1,550 offices and has $27 billion of assets. Spokesman Peter Tulupman declined to comment. American General is based in Evansville, Indiana, and AIG in New York.
Carrion had in October said San Juan-based Popular was evaluating strategic alternatives for non-core businesses, after a surge in losses from subprime mortgages and other loans caused third-quarter profit to slide 56 percent.
Moody’s Investors Service raised its outlook for Popular to “stable” from “negative.” Fitch Ratings assigned a “negative” outlook, after previously threatening a downgrade. Popular has medium investment-grade credit ratings from both agencies.
“In shoring up its holding company liquidity, management can turn its full attention to improving the weak profitability performance of its U.S. operations,” wrote Allen Tischler, a Moody’s senior credit officer.
Popular expects a $19.5 million charge for the transaction, largely for severance and to end leases. It expects the transaction to close in the first quarter, pending regulatory approval.
Popular operates more than 300 banking offices in Puerto Rico and more than 140 in California, Florida, Illinois, New Jersey, New York and Texas.
Shares of Popular rose 85 cents, or 9.3 percent, to $10.03 in morning trading on the Nasdaq. They closed one year ago at $17.83. AIG shares fell 30 cents to $52.11 in morning trading on the New York Stock Exchange.
Editing by Gerald E. McCormick and Dave Zimmerman