CitiGroup to GE: Get Out
General Electric is considering partnering with other companies to stay in the private-label credit card market, or perhaps exiting that market altogether. Nothing is certain yet, but at least one CitiGroup analyst has already advised investors that “a complete exit of consumer (GE Money)… would be constructive in our view.”
CitiGroup analyst Jeffrey Sprague said, “Problems in consumer finance could prove to be a distraction in 2008, undermining the attractiveness of GE’s infrastructure exposure.” GE CEO Jeff Immelt commented via conference call: “I think we could partner or exit in private-label credit cards.”
Why all the trouble? Projections of slow growth for GE’s consumer-finance branch, GE Money, in 2008. Their U.S. business is to blame; it has a higher delinquency rate than their out-of-country business, and U.S. earnings are predicted to drop 20% next year. But GE is known for its ability to switch around its portfolio and to drop divisions that aren’t profitable. Right now, they issue credit cards through private labels such as Wal Mart. Only time will tell if this branch of the business will stay alive.
