General Electric Co. is considering spinning off parts of its finance unit through an initial public offering as Chief Executive Officer Jeffrey Immelt works to shrink the business.
“In financial services, putting things up for sale with the assumption that a bank would buy it has been a fool’s journey,” Immelt said today at the Electrical Products Group conference in Longboat Key, Florida. “So the only way you’ve been able to think about this is by thinking about IPOs.”
The move will help shrink GE Capital’s ending net investment, a measure of its balance sheet, which will fall by more than 25 percent to as little as $300 billion by the end of 2014, Immelt said, without specifying which units could be divested. Businesses already jettisoned include U.S. residential mortgages, a leasing business in South Korea and consumer banks in Argentina and Brazil.
GE has been slashing the size of its financial arm since its access to capital evaporated when credit markets froze in the wake of Lehman Brothers Holdings Inc.’s 2008 bankruptcy, endangering the entire company. Immelt has turned his focus to boosting earnings from units that manufacture jet engines, electrical turbines and medical scanners.
Scott Davis of Barclays Capital and William Blair & Co.’s Nick Heymann are among analysts who have speculated that GE may exit its private-label credit card business through a sale or IPO.
The businesses that GE may exit “are great assets, fantastic, but we think our commercial finance assets are very strong and very consistent with our competitive advantage,” Immelt said. “The capital markets are very receptive to IPOs and a lot of different technologies today, so you basically have as good a setting as you could possibly have.”
Seth Martin, a spokesman for the Fairfield, Connecticut-based company, declined to comment on which businesses might be included.
GE climbed 0.8 percent to $23.86 at the market close in New York. The shares earlier reached $24.13, the highest on an intraday basis since October 2008.