GE Puts Private Label Card Unit on the Block

 

General Electric Co. is taking a hard look at the private-label credit card unit of its GE Money division, with thoughts of either selling the unit or partnering with another investor, Jeffrey Immelt, GE chairman, told investors during a conference in New York on Tuesday.

 

The division was the leading store card issuer in 2006 with outstandings of $35.5 billion, charge volume of $63.2 billion, and 50 million active accounts, according to The Nilson Report a newsletter covering the payments industry. GE’s clients include Brooks Brothers and JCPenney, The Wall Street Journal reported.

 

Immelt said that the private label division could be attractive to a buyer or investors seeking scale in a business that has consolidated to just a few major issuers.

 

“It’s going to be a very attractive platform for certain people who want to use this time period to either build franchises in the U.S. or build more scale and leverage their base costs and their credit card business,” said Immelt. “You can use more scale from a marketing standpoint.”

 

GE also issues cobranded cards with retailers that carry either the MasterCard or Visa brand, though that portfolio didn’t appear to be on Immelt’s selling block.

 

There are only a few other large private label issuers, including JPMorgan Chase, HSBC and Citi, that are logical bidders for GE’s division, said David Robertson, Nilson publisher. “But HSBC and Citi are licking their wounds now (due to write offs in the subprime mortgage market.) There’s a finite number of buyers.”

 

Immelt’s announcement comes following an announcement in September by Target Corp. that it is shopping its $7.2 billion credit card division, that includes a cobranded Visa card and a store card (“Target Could Sell $7 Billion Card Portfolio: Report,” Sept. 9). Target issues cards through its Retailers National Bank division. Target is the one of the few large retailers that still issues its own card, with most selling off their card operations to third-party providers like GE to generate cash and to focus on their store sales.

 

The private label business last year generated $92.5 billion in outstandings and $130.1 billion in charge volume from nearly 131 million active accounts, Nilson reported. Citi followed GE with outstandings of $28 billion and charge volume of $25 billion.