In yet another significant step to reduce credit risks, General Electric Company (GE) is planning to divest its ownership stake in Polish Bank BPH SA. The diversified conglomerate has about 89% stake in Bank BPH, which is currently valued at $906 million.
General Electric acquired Bank BPH in 2007 from UniCredit SpA. The bank has currently been under strict regulatory control by Polish financial markets supervisor KNF. With the divestiture, General Electric intends to focus more on its industrial businesses.
Earlier, General Electric spun off its consumer-lending arm Synchrony Financial (SYF) in an initial public offering (IPO) in July as the first concrete step to shrink its finance business by 2015. The strategic move is arguably the biggest step in restructuring GE Capital’s portfolio to shield the parent company from intense market volatilities that plagued the market during the 2008-09 financial crisis. The spin-off realigned the corporate strategy of General Electric to a manufacturing-based entity with emphasis on big-ticket items such as medical equipment and scanners.
General Electric is also actively pursuing the sale of its GE Money Bank AB (Nordics) consumer finance business to Spain’s Banco Santander, S.A. (SAN). The biggest bank of Spain agreed to acquire GE Capital's consumer finance business in Sweden, Norway and Denmark, for about $953 million. The transaction, announced in late June, is making good headway in terms of regulatory approvals.
With such strategic moves, General Electric expects operating earnings from its industrial business to aggregate 75% of the corporate operating earnings by 2016. We remain impressed with the focused attempts of the company to restructure its portfolio.
General Electric is one of the largest and the most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content, and industrial products, the company serves over 100 million customers worldwide. Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital.
General Electric currently has a Zacks Rank #3 (Hold). Another stock worth considering in the industry is Carlisle Companies Inc. (CSL), which currently has a Zacks Rank #2 (Buy).
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