Leasing Life broke the news online last month that GE Capital would retain its UK leasing arm, while planning to re-route European leasing business through the UK platform.
It’s a big U-turn considering the April announcement from General Electric chief executive Jeff Immelt, which made specific mention of its lending and leasing arms being sold off.
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The last five months have been worrying times for GE’s equipment finance staff, as covered in our June interview with leading UK recruiter The Oakland Partnership, one of no doubt several recruiters who were fielding calls from unsettled staff over the past six months.
No doubt it unsettled the commercial customers and brokers dispensing the giant’s finance too.
This announcement looks part of a strategy to allay fears and give some certainty beyond the two-year corporate transformation that GE is undergoing by selling off the lion’s share of its finance business.
Externally, GE needed to assure its new customers of its future in order to maintain loans it had made and to continue making new loans, so that its business didn’t become a modern legacy platform.
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By GlobalDataIt looks as though the equipment finance arm of GE’s financial business has a strong enough affinity to the manufacturing base ‘verticals’ that the business is retreating to, that it has been earmarked for keeping.
There’s also the possibility that with the sales of the various parts of GE Capital’s portfolios, including its European fleet wing to Arval and the US fleet operation to Element for around $7bn, that the US government could remove GE’s systemic importance tag as the finance giant shrinks.
With the regulatory burden lifted, there will be room for GE to keep finance businesses that closely align to the industrial and manufacturing business on which GE wants to focus.
It’s as yet unclear whether this intention to retain the business marks a lean towards a captive or vendor finance model for the big American company, even though GE are to incorporate the equipment finance arm into its UK bank.
It might have been the UK’s distinctive broker model that clinched the decision. Once a funder pulls out of the UK market it makes it very hard to regain the trust of the broking community, as has been proved in the past with Wells Fargo, ING Lease and others.
However GE Equipment Finance’s employees, customers and brokers would probably have been more comfortable with clarity on GE Equipment Finance’s retention back in April when the original announcement was made.
Large funders and businesses are liable under the regulatory burdens because of their size, as GE was assigned with three other non-bank businesses in the US under Dodd-Frank regulation, with insurers MetLife, American International and Prudential Financial.
European legislation Basel III outlines a longer list of banks, including Italian bank UniCredit, French giant Société Générale and UK bank RBS as examples, which all have leasing and asset finance interests.
As a last thought, there may be other manufacturers in the market with finance houses and large manufacturers with equipment finance arms which may be watching the rationalisation of GE with some interest.
