GE to spin off credit card business
GE wants out of the credit card business. The company issues more 55 million credit cards for stores like Wal-Mart and Banana Republic.
It’s profitable, earning more than $2 billion dollars last year. As recently as this May, a former GE executive bragged about the high return the company was getting through this arm of its operations.
But RBC Capital Market’s Gerard Cassidy says General Electric wants to invest more heavily in its core industrial work.“By pairing down the number of businesses they can have more focus on existing businesses which should and could lead to higher return for shareholders,” he says.
Karen Petrou with Federal Financial Analytics says there’s more to it than that. A few months ago GE Capital — whose assets rank it as the 5th largest bank in the nation — has fallen under new financial regulations. “GE is divesting this bank business to get out of those rules. The smaller it gets, the less like a bank it gets, the less regulation it gets. And that’s what this is about,” she says.
While the new regulatory environment may scare off GE, its credit card business is lucrative enough that JPMorgan Chase and Goldman Sachs are sniffing around
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