July 11 (Bloomberg) -- General Electric Co. plans to sell its Japan consumer lending operations to Shinsei Bank Ltd. for about $5.5 billion, two people familiar with the matter said.

GE, the second-largest U.S. company by market value, will sell its Tokyo-based Lake unit and two smaller consumer finance businesses to Shinsei in a deal that may be announced as soon as today, the people said. They declined to be identified as the talks are private.

Chief Executive Officer Jeffrey Immelt, under pressure to revive GE shares after announcing a surprise first-quarter profit drop in April, is disposing of as much as $100 billion of financial assets. Japan's consumer lending industry has been in decline since a 2006 crackdown on interest rates and collection practices by the country's government and courts.

``Japanese banks are nervous as the consumer finance industry's outlook is increasingly uncertain, and that creates a good opportunity for acquisitions,'' said Shinichi Tamura, a Tokyo-based analyst at Deutsche Bank AG. ``The deal is positive for the non-bank lenders as it shows there are still acquirers.''

Shinsei fell 3 percent to close at 358 yen in Tokyo trading while the 84-company Topix Banks Index was unchanged. Reuters reported earlier that Shinsei may buy Lake, citing people it didn't identify.

A GE spokeswoman in Tokyo, who declined to be identified, said she had no comment. Robert Luton, Shinsei's head of consumer finance, didn't respond to a message left on his cell phone.

Shinsei's Chief Executive Officer Thierry Porte will give a press briefing on ``plans for new business development'' at 5:15 p.m. in Tokyo, the company said in a statement.

Trailing Acom

Lake, which makes unsecured personal loans to individuals, has about 650 billion yen ($6 billion) in outstanding credits, according to estimates released by Promise Co., Japan's second- largest consumer lender by market value.

Shinsei would have about 800 billion yen in such loans outstanding after the acquisition, including its Shinki Co. subsidiary. Acom Co. is the industry leader with 1.3 trillion yen at March 31, according to the Promise estimates.

Fairfield, Connecticut-based GE reports results today and has forecast earnings of 53 cents to 55 cents a share in the second quarter, reflecting the reduced 2008 earnings target Immelt announced in April. The average of 15 analysts' estimates in a Bloomberg survey is 54 cents a share, unchanged from a year earlier. GE shares have dropped 25 percent this year.

Industry Woes

Shinsei, the first Japanese lender controlled by overseas investors, is expanding into an industry that has been shrinking since Japan approved legislation in 2006 capping the interest rates consumer lenders can charge at 20 percent, down from 29 percent previously.

The nation's four biggest consumer finance companies posted losses totaling 1.7 trillion yen in the year ended March 2007 after making provisions for potential refund claims by borrowers who paid excessive fees and interest.

Three of the four lenders have sold convertible bonds this year to raise capital. Promise fell the most in six years on July 9 after scaling back a convertible bond sale by 30 percent, citing ``unstable'' markets.

Aiful Corp., Japan's biggest consumer lender by assets, plunged 11 percent on June 25 after Lehman Brothers Holdings Inc. said in a report the lender's parent may be insolvent. Aiful denied it has funding difficulties and later said it may sue Lehman.

Shinsei's existing consumer-finance units Shinki and Aplus Co. returned to profit in the year ended March 31 after both posted losses the previous year.

Shedding Assets

Since the beginning of the year, GE has agreed to sell its corporate charge card unit to American Express Co. for $1.1 billion. It agreed to swap GE Money units in Germany and the U.K. to Spain's Banco Santander SA in exchange for Italian commercial lender Interbanca SpA, which is valued at 1 billion euros ($1.58 billion). GE last year sold U.S. subprime unit WMC Mortgage and put its Japanese consumer business on the block.

In May, the company said it may divest its Australian home mortgage unit Wizard as loan growth slows after four interest- rate increases since August. The unit may be sold or moved into a joint venture or take on a partner, Mike Cutter, GE Money's chief executive officer for Australia, said at the time.

In April, GE posted a 12 percent decline in first-quarter profit from continuing operations to $4.36 billion. The company cited financial market turmoil that cut the value of investments and thwarted end-of-quarter dealmaking.

GE has done business in Japan since 1886, when it provided electric generators to a government printing factory. It entered the local consumer finance market by acquiring Minebea Shinpan Co. in 1994. Four years later, the unit bought Lake's personal loan business.

GE sold its Japanese life insurance unit to American International Group Inc. in 2003.

To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net; Rachel Layne in Boston at rlayne@bloomberg.net

Last Updated: July 11, 2008 03:34 EDT