GE in talks to offload $74 billion lending and leasing portfolio

General Electric Co is at an early stage in talks with Wells Fargo & Co about selling its entire $74 billion US commercial lending and leasing (CLL) portfolio to the bank, according to reports from Reuters.

The news agency says the discussions with Wells Fargo started about a week ago. Indications are that other parties may also be interested in exploring options to buy the portfolio from GE. GE might also consider breaking the business up and selling the CLL portfolio piecemeal. A separate sale of the equipment and vendor finance business is considered a possibility.

Neither GE nor Wells Fargo have issued comments on the developments, saying discussions are confidential, and any deal would need to go through regulatory approval.

GE’s CLL business offers secured commercial loans and equipment financing to primarily midsized companies, dealers, and franchisees with $10 million to $1 billion in annual revenue. Wells Fargo is also active in this sector with a business called Wells Fargo Capital Finance.

Earlier this month GE announced it intended to divest itself of most of its GE Capital business, citing its intention to re-focus on its heritage in industrial manufacturing, and also highlighting a desire to free itself from the pressures of meeting increasingly burdensome financial regulations.

GE Capital’s size and the potential risks in its lending portfolio made it subject to government regulation as a systemically important financial institution. GE said it would apply to escape that oversight in 2016 as it reduces the financial business’ size.

Under the plan as announced, GE expects that by 2018 more than 90% of its earnings will be generated by its high-return industrial businesses, up from 58% in 2014.

GE’s board has said it intend to offload most GE Capital assets over the next 24 months, with the exception of the financing “verticals” that relate to GE’s industrial businesses, namely GE Capital Aviation Services, Energy Financial Services and Healthcare Equipment Finance.

However, the sell-off of GE Capital units will include GE Capital Fleet Services, which is part of the US CLL portfolio, and which contributed $9 billion in ending net investment for the fourth quarter of 2014.

Chief financial officer Jeff Bornstein told analysts on the company’s quarterly conference call last week that GE was seeing “incredible” interest in the $165 billion GE Capital assets which are on the table. Most of the real estate assets already been sold to Blackstone Group LP and Wells Fargo for $23 billion in a deal which was agreed in under four weeks of negotiation.