GE swears off credit cards

General Electric is getting out of the consumer credit business, according to media reports.

The company may be best known for washers and dryers, but retail lending has been a cash cow for GE for decades. If you’ve signed up for one of those store credit cards -- the ones that offer special deals -- there’s a good chance you’ve borrowed money from GE Capital.

But now, according to Daniel Holland, an equity analyst with Morningstar, GE wants to focus on its industrial products, like jet engines, wind turbines and health care equipment. He says it’s harder to be in the credit business in these days of financial reform.

“To the extent that GE can kind of just keep reducing the size of that business, it makes it less and less important for the Treasury to pay attention to,” he says.

And the federal government is paying attention. Industry analyst Brian Langenberg says GE’s finance arm is so big, it’s being regulated like a bank.

“It just means more rules and it has made the credit card business less attractive as a part of GE,” he says.

Heavy investment in credit seems like a riskier bet post-financial crisis, Langenberg says. And with the economy on the rebound, now is a good time to sell that part of the company.

GE has tried to move away from consumer credit since the downturn, says Steve Winoker, a research analyst with Sanford Bernstein.

"But it’s not so easy to get out of what was a $650 billion financial services business,” Winoker says.

Still, Langenberg says, stockholders want what he calls a “simpler story” about GE.

“Most investors either want to buy an industrial company or they want to buy a financial services company,” he says. “They don’t want to buy it in one piece.”

Investors may soon have a chance to buy a piece of GE Capital. Analysts expect the company to begin offloading parts of its credit business in an initial public offering, perhaps early next year.

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Sounds like a wise move on GE's part. We don't know why they should be singled out for scrutiny or criticism, they offered a service and people had the option to use them or go elsewhere. And anyone can be stock in the company as well --- and get a lot better yield (currently 3.5%) than they can get from Treasuries from the U.S. government.

p.s. Everyone "makes money on the consumer" --- including the state and federal governments!

NJ Grant

Like many large banks GE doesn't like financial regulations and they have decided to exit this business after making billions from the consumer. Its a shame congress doesn't set reasonable lending limits on credit cards. A max. rate should be 10% on lending. These financial institutions that charge close to 30% interest are no better than the mafia.

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