By Charles Penty (Bloomberg)
Banco Santander SA, Spain's largest bank, agreed to buy finance companies in Germany and the U.K. as part of an asset swap valued at 1 billion euros ($1.58 billion) with General Electric Co.
GE is buying Italian wholesale lender Interbanca, a unit that Santander retained after selling Banca Antonveneta SpA to Banca Monte dei Paschi di Siena SpA, the Santander-based lender said in a statement today. Santander will take over GE Money's units in Germany, Austria and Finland and credit-card and auto-finance divisions in the U.K.
Santander is taking on 9 billion euros in loans to expand its consumer-finance unit, which accounted for 9 percent of group profit last year. The expansion comes as slowing economies in Spain, Europe and the U.S. threaten to drive up loan defaults, said Alejandro Ruyra, an analyst at Landsbanki Kepler in Madrid.
``It's more efficient to leverage this business as much as they can,'' said Ruyra in an interview today. ``In the short-term it's true this business doesn't have the greatest outlook.''
Santander Consumer Finance earned 168 million euros in the fourth quarter, up 18 percent from a year earlier. Loan defaults as a proportion of total loans for the business stood at 2.84 percent in December, up from 2.57 percent a year earlier. The loan-loss ratio for the group as a whole was 0.95 percent.
Santander shares climbed 0.9 percent to 12.66 euros at 12:40 p.m. in Madrid, valuing the bank at 79.2 billion euros. The shares are down 14 percent this year.
GE is seeking partners or buyers for credit card, mortgage and loan units outside the U.S. to reduce riskier financial assets, three people with knowledge of the plan said last month.
The sale of GE's consumer-loan units in Europe expands on CEO Jeffrey Immelt's announcement in December to do the same for the U.S. card unit. He wants to shift as much as $50 billion in assets to commercial-finance businesses that have higher returns and lower risks of default.