16 December 2015 – Expansión
GE Capital Bank is finalising its exit from Spain. The financial subsidiary of the US multi-national is holding negotiations with several investors to sell its entire loan business in the country. According to various financial sources, the business is primarily mortgage based and has a volume of almost €600 million.
The multi-national company has engaged PwC to manage this operation, known as Project Zágato.
There are three key candidates on the list to take over GE Capital’s portfolio, namely: Blackstone, which has experience in the management of banking mortgages after its acquisition of Catalunya Banc’s loans; Oaktree, which closed a similar operation with Bankia earlier in the year; and Evo Banco, owned by Apollo, which is looking to grow its assets through this type of portfolio, like it did with a portfolio from Citi in April.
The mortgages that GE Capital has put up for sale have a default ratio of 30% and the majority come from loans that the US entity granted through APIs (real estate agents).
The Australian fund Pepper Group is currently managing the portfolio. The other businesses that the Group has in Spain, mainly consumer financing, have been maturing in recent months.
GE Capital’s exit from Spain comes in response to a change in the multi-national company’s strategy at the global level. At the beginning of the year, the US group decided to divest the majority of its financial activity to focus on its industrial business involving turbines, aircraft engines and medical equipment, amongst others. At the time, the group had financial assets amounting to $500,000 million (€455,000 million).
The multi-national took this decision due to the commercial risk that the financial arm of its business represented when the financial crisis hit in 2008, despite the fact that it generated half of the group’s profits.
Since then, GE Capital has been selling off parts of its business through agreements such as the one reached with Wells Fargo in October, for the transfer of assets amounting to $32,000 million. Just over a year ago, when its financial unit had not yet been dismantled, it sold part of its consumer business in Sweden, Norway and Denmark to Santander, for €700 million.
The group began to withdraw from Spain at the beginning of 2015, when it delisted itself from the Spanish banking register. At the time, it had negative reserves of €220 million as a result of the losses accumulated over several years, due to its high default rate.
The entity first started recording losses in 2008 with €13.6 million and did not manage to emerge from the red until 2014, when it recorded profits of €53 million.
At the end of 2014, GE Capital Bank held assets worth €524 million, according to data from the AEB.
Before the outbreak of the crisis, GE Capital had partnerships in Spain with CAM and BBK.
Original story: Expansión (by J. Zuloaga)
Translation: Carmel Drake