GE Prepares Spinoff of Massive Consumer Lending Business

General Electric(GE) is the prototypical conglomerate. It is welll known for its turbines, its locomotives, its jet engines, and its finance division. Chastened by the financial crisis which GE entered as a finance company with some industrial assets attached, CEO Jeff Immelt has been on a multiyear mission to shift the company’s focus back to its industrial operations.

Immelt has scaled back GE Capital and sold off the company’s stake in NBCUniversal. In late August, the WSJ reported that the company is preparing to spin off its massive consumer lending business. The business, which has over $50 billion in credit card loans made a profit of over $3 billion last year. Despite the healthy profits, GE management now sees the division as a pool of risk that no longer fits well with the company’s core industrial business. The company is exploring various alternatives, but no announcement is seen until December. Given the division’s great size, a sale is unlikely, so the separation will likely include either an IPO of the entire division, or an IPO of part of it, with the rest being retained or distributed to GE shareholders. We eagerly wait details on what could be a very significant transaction.

Disclosure: The author holds shares in GE