GE Capital CEO Keith Sherin said: “The closing is progressing well. A number of regulatory approvals have been received, and the teams are working through the final steps in this process. We expect the deal to now close in the fourth quarter.
“This sale is part of our overall strategy to focus GE Capital on our commercial portfolio with a goal of becoming 25% of GE’s overall earnings.”
GE Capital estimates the timing of the close, and the associated gain, will lower third quarter 2014 earnings by approximately $.02 per share and increase fourth quarter 2014 earnings by the same amount. There is no change to the full year outlook for GE or GE Capital.
From strength to strength
Meanwhile SCF goes from strength to strength. In Q2 2014 the company achieved an attributable profit of €237 million, some 8.6% more than the first quarter due principally to higher net operating income and lower provisions.
The company’s attributable profit for the first half rose 21.0% year-on-year, spurred by:
• Gross income (+4.9%) mainly driven by fee income (+10.5%);
• Lower loan-loss provisions (-16.5%) as a result of maintaining the high credit quality;
• A solid business model that produced further rises in profitable market share; and
• the agreement in the second quarter to acquire GE Capital’s consumer finance business in Sweden, Norway and Denmark.
In the post-recessionary environment SCF continued to gain market share, backed by a business model that has strengthened since the crisis.
Its main planks are a high degree of geographic diversification and with critical mass in key products, greater efficiency than the majority of its peers and a common system of risk control and recoveries, providing the company with high credit quality.
The focus in 2014 is currently on:
• Boosting new lending and crossed-selling, tailored to each market and backed by brand agreements and penetration in the used car market; and
• Exploiting its competitive advantages in the European consumer finance market.
The agreement in the second quarter to acquire GE Capital’s consumer finance business in Sweden, Norway and Denmark aims to complement SCF’s leadership in the region in auto finance.
SCF’s gross lending was around €61,000 million in June (+4% y-o-y). Growth in all the main units in central and northern Europe and declines in countries on the periphery, on a like-for-like basis, although there are signs of slight improvement in Spain.
New loans rose 12% in the last 12 months, driven by direct credit and cards (+29%) and new auto finance (+10%), which rose at double the rate of car sales. All units increased their business in local currency (Poland: +36% and Nordic countries: +12%). Peripheral countries grew faster than the area’s average but on low volumes, while the growth of Germany (+4%) was double that of the sector in new auto finance.
On the funding side, stable customer deposits (around €31,000 million), served to differentiate SCF from its competitors.
There was greater recourse to wholesale funds (€4,600 million captured in the first half via senior issues and securitizations). At the end of June, customer deposits and medium- and long-term issuances and securitisations financed 74% of the area's net lending.
Attributable profit of €237 million in Q2 2014 was 8.6% higher than in the first quarter. Faster pace in gross income (+3.4%), due to net interest income, and lower costs (-2.4%) pushed up net operating income by 8.3%. Provisions remained stable at low levels (cost of credit below 1%), reflecting the high credit quality for the standards of the business (NPL ratio of 4.07% and coverage of 105%).
The UK (included in Santander UK for accounting purposes) posted an attributable profit for the first half of €61 million (+5.7% in sterling year-on-year)
