Aug. 30 - General Electric reportedly plans to separate its credit card business through an IPO early next year as the conglomerate focuses on its industrial businesses. Fred Katayama reports.
The company that finances those Wal-Mart and Gap-branded credit cards you have is leaving the business. The Wall Street Journal reports that General Electric plans to spin off its U.S. consumer lending unit. The highly profitable business, which issues store credit cards for 55 million Americans, earned $2.2 billion last year. It's one of GE's key assets. It's so big that GE Capital would rank as the fifth largest U.S. commercial bank according to the Journal. But GE is divesting it because it wants to focus on its core industrial businesses, especially infrastructure such as jet engines and power generators. Investors place higher value on industrial than financial earnings. Since Jeff Immelt replaced Jack Welch as CEO in 2001, GE's shares have fallen 43 percent, vastly underperforming the stocks of rivals Honeywell and Untied Technologies. Last month, William Blair analyst Nick Heymann wrote, "Senior management's ability to optimally recast the company's business portfolio to favor a rising portion of the company's operations from its industrial businesses ... should ultimately enable a significant improvement in the valuation of GE's overall earnings." GE plans to separate the credit card business through an initial public offering. The Journal says that could take place early next year.