GE acquisition

Regional banks like Bank of Queensland are among those likely to show interest in GE’s commercial lending book in Australia, according to analysts.

Over the weekend, the giant GE group said it was planning to significantly scale back its finance arm to concentrate on its industrial operations.

The US-based group said it would seek buyers for assets worth $US165 billion ($215bn) around the world, including its commercial lending and leasing businesses, as well as its mortgage and consumer finance operations.

One analyst commented that the major banks would probably have a look at the GE portfolio, but they were not short-priced favourites to do a deal because of the mounting capital requirements they faced.

“I’d have thought the regionals would be more likely, like BoQ which has said it wants to grow by acquisition,” he said.



A year ago, BoQ bought Investec Australia’s specialist finance and leasing business for $440 million, enabling it to diversify from its home state and take a leading position in the provision of finance to a professional niche.

The deal saw the bank’s commercial loan exposure in Queensland shrink from 59 per cent to 48 per cent, as it expanded its presence in NSW and Victoria. The strategy was to capitalise on Investec’s wealthy elite customer base, consisting primarily of medical, dental and accounting professionals.

GE group chief executive Jeff Immelt used the generous price paid last month by a Kohlberg Kravis Roberts consortium for the sale of GE’s consumer finance business to pump up the next transaction.

“If you just look at the evidence, take a look at Australia, the Australia/New Zealand consumer finance business, we put that into our auction and we sold that at two times book (value),” Mr Immelt told analyst.

The price, he said, showed “that our platforms may be worth more outside the company”.

Apart from BoQ, Macquarie Group and private equity are also thought to be contenders for the assets. Macquarie has surplus deposits and is considered a serious prospect, while private equity is cashed up, as well, and looking for deals.

After once looking like it would acquire an Australian banking licence about a decade ago, GE has progressively lost interest in the finance sector, particularly after the financial crisis exposed a weakness in its funding model.

The conglomerate has also been under pressure from investors to simplify its structure and focus on core businesses like power turbines, medical scanners and aircraft engines.

After GE disposes of its finance assets, the company aims to get 90 per cent of its earnings from its industrial operations, up from 58 per cent last year.

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