Global consumer lending giant GE Money is considering selling
part of its private-label card portfolio in a bid to shore up its
financial position amid an uncertain, but increasingly gloomy,
economic outlook for the US in 2008.
On 11 December, General Electric, the parent company of GE
Money, hosted a presentation on its outlook for 2008, saying that
it may sell or partner with other companies to combine costs for
its private-label credit card operations. “I think we could partner
or exit in private-label credit cards,” GE CEO Jeff Immelt
commented during the presentation.
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GE Money’s private-label programmes encompass several
large-scale US merchant card portfolios, such as Wal-Mart, eBay,
and Gap. GE Money, Citi and HSBC own just over 80 percent of US
private- label retail card receivables, up from 68 percent in
2003.
Worsening US economic outlook
The motivating factor behind the move is the
worsening economic outlook for the US in 2008. Many industry
analysts, including Morgan Stanley, predict the US economy will go
into recession next year. GE said that faltering consumer financial
health in the US will have a negative impact on GE Money’s
earnings. Immelt said that the division’s earnings will likely slow
to a 5 percent growth rate in 2008, in stark contrast to
2007.
“The US business is definitely going to be tougher in 2008 than
2007,” he continued. “Clearly, consumer delinquencies in the United
States are increasing. We think the earnings in the United States
are probably going to be down 20 percent in GE Money in
2008.”
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By GlobalDataImmelt pointed to GE Money’s strong presence outside the US as a
factor helping to offset tougher consumer conditions in the US
market. “On the consumer finance side, we are 75 percent outside
the United States. We’ve got some good positions in emerging
markets that we think are going to help GE Money as you look at
2008,” he said. “We think those [international markets] are very
well positioned to continue to grow about 10 percent in 2008. We’re
seeing good asset growth, we’ve got price and productivity, we’ve
got assets outside the US that we could monetise in 2008.”
