GE sells Japanese consumer lending business for $5.4 billion to Shinsei Bank

12 July 2008

The current financial crisis has forced many financial institutions to prioritize their core competencies and shed some weaknesses. As a result of this juggling of portfolios and assets, a lot of businesses have been hived off. General Electric (GE) became the latest finance major to join this list yesterday when it announced the sale of its Japanese consumer finance arm to the country's Shinsei Bank for 580 billion yen ($5.4 billion).

Shinsei will buy GE's Tokyo-based Lake unit and its mortgage-loan and credit-card businesses, the bank said in a statement yesterday. The deal will add 779 billion yen to Shinsei's balance of outstanding loans to individuals in Japan, which stood at 1.2 trillion yen as of 31 March, the company said.

Shinsei Bank's forerunner, the Long Term Credit Bank, collapsed under a pile of bad debts in the late 1990s and was put under state control. It emerged from bankruptcy and was sold to a consortium of investors led by Ripplewood Holdings of the US in March 2000 for $1.1 billion.

Shinsei, whose name means "new life," said in November last year that the US private equity fund JC Flowers & Co. would pay up to 202 billion yen to become its top shareholder with a 32.6 per cent stake.

GE is not the only foreign group exiting the troubled sector. Citigroup, reeling from the sub-prime mortgage crisis, said last month it was closing down its remaining consumer lending outlets in Japan. (See: Citigroup shuts down consumer finance operations in Japan)

It also announced similar plans for Germany earlier this week. (See: Citigroup sells German unit to France's Credit Mutuel for $7.8 billion)

With this acquisition, the largest by a Japanese bank this year, Shinsei said it was aiming to benefit from having both traditional banking services and consumer loan operations.