General Electric To Increase Exposure To Australian Corporate Lending Market

Post by Sharat on April 15, 2009 · Under Australian Economy, banking, loans, mortgages · Comment 

General Electric (GE) says it intends to pick up some of the slack in the Australian corporate lending space which has been left by international banks who have retreated back to their core domestic banking markets in order to recuperate from the wounds inflicted by the global banking crisis.

GE will execute the strategy through its financial services unit GE Capital. The conglomerate says it intends to use its global balance sheet to pick up increased market share in the corporate lending market. Australia’s corporate loan market is a fragile one, and is expecting see a rash of major refinancing as existing loans reach maturity, with international lenders declining to roll them over.

GE Capital in Australia has not had a great year, having to cease its motor financing business and sell its mortgage business Wizard Home Loans to chief rival Aussie Home Loans. GE Capital despite being a unit of formerly triple A rated General Electric, was unable to raise funding on wholesale money markets when those markets froze last year, as a result it could not finance any new loans, and was forced to cease  retail lending businesses such as auto loans and sell its home loan business to rivals.

GE Capital’s Australian chief Steve Sargent, says that the non deposit taking financial services company now plans on targeting mid sized corporations that are due to refinance loans, in sectors where the big four Australian banks were not over represented.

“There’s a lot of refinancing out there. My guess is that we are going to be in an environment where there is a shortage of capital for quite some time. In Australia we have very little lending in real estate because it is an area that traditionally the banks play well in. In terms of the potential new lending for us, it is fairly broad. We are looking at some manufacturing and distribution companies, there are broad services companies. We have seen plenty of opportunities and we would look to play in these areas. Energy is one area where we have a lot of experience that we can leverage off.” Mr. Sargent told The Australian.

Last year, GE Capital’s local business increased revenue by 16.8 per cent, making Australia the third-largest market for the diversified financial services group. In February, the company revealed plans to combine GE Money and GE Commercial Finance under the broad capital structure in a bid to reduce costs across the main businesses.

The decision, however, will cost 400 jobs this year, in addition to the 335 job cuts the company announced last year.

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