My Credit Card Drives Me Nuts

Sat, Sep 13, 2008

GE Slides On Worries Over Credit Card Unit Sale

Shares of General Electric Co. fell more than 6 percent Friday, which an analyst attributed to nervousness at the conglomerate's inability to sell its private-label credit card business.

Analyst Nicholas Heymann of Sterne Agee in New York said in a phone interview that investors believed GE would sell its credit card business this summer.

"People are looking around, asking, 'Is GE going to get this done?'" he said.

GE's troubles coincided with hits on financial stocks. Shares of Lehman Brothers Holdings Inc. have spiraled lower this week, and worries about debt and weak cash positions have hit other financial stocks as well.

American International Group Inc. was the biggest decliner Friday among the 30 stocks that make up the Dow Jones industrial average.

GE's failure so far to sell the credit card unit should not overshadow GE's business, which is doing well, Heymann said.

"The fundamentals are OK. I think people are a little more nervous," he said. "Right now, there's obviously a belief they would get the transaction done by summer, and an inability to do that has probably drawn more focus on trouble in the marketplace, which could make it harder not easier to get rid of $30 billion in receivables," Heymann said.

GE has talked about selling parts of its commercial business since last year while also saying the private-label credit card business is strong.

Spokesman Russell Wilkerson said the business is a "world-class franchise," but GE would need to invest significantly or boost the business through acquisition to gain scale in the U.S. GE instead "decided to seek strategic alternatives," he said.

CEO Jeff Immelt told investor analysts this summer that GE hopes to complete a deal for the private-label credit card business before the end of the year. GE also is considering partnerships, a public offering, a phased sale and other possibilities.

Chief Financial Officer Keith Sherin told analysts in July when GE released its second-quarter earnings that GE was having trouble selling the business, describing it as a "tough time to go out and find someone with $30 billion of funding."

The Fairfield-based GE has announced that it will sell its Japanese consumer finance unit, which includes the Lake personal loan business, wholly owned credit cards and mortgages under GE Consumer Finance Co Ltd. and its subsidiaries.

Shares of GE fell to $26.41, down $1.75, or 6 percent in afternoon trading. Over the past year shares have traded between $25.60 and $42.15.

Source

http://www.businessweek.com/