GE Capital to sell unit to Spanish firm

Published 4:00 am Saturday, December 25, 2010

General Electric’s finance unit, GE Capital, agreed Friday to sell its Mexican consumer mortgage division to Santander of Spain for 2 billion pesos, or $162 million, part of the industrial giant’s strategy to sell off noncore financial assets.

Under the terms of the deal, Santander will take over GE Capital’s consumer mortgage unit in Mexico, which includes a $2 billion loan portfolio. GE Capital has provided mortgages in the country since 2002.

Santander disclosed the price of the transaction in a regulatory filing with the Mexican stock exchange. The deal is expected to close in the first half of next year.

Before the financial crisis, GE had relied on GE Capital for years to bolster its profits. The unit provided handsome revenue from commercial lending, and eventually provided nearly half of the parent company’s profits.

But the market turmoil of 2007 and 2008 revealed weaknesses in the unit, including its heavy exposure to commercial real estate and subprime mortgages, the latter of which arose from an ill-timed 2004 purchase of WMC Mortgage of California.

Since the crisis, GE has sold off assets to refocus the division on safer industrial finance operations. (It sold WMC in 2007 for a $1 billion loss.)

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