Banco Santander SA (SAN), Spain’s biggest bank, agreed to buy GE Money Bank AB, the consumer finance business of GE Capital in Sweden, Denmark and Norway, for about 700 million euros ($953 million).
Santander expects to complete the purchase in the second half of the year, it said in a statement today from Madrid. GE Money Bank has loans of 2.35 billion euros, including direct loans and credit cards, it said.
“The acquisition of GE Capital’s business in the Scandinavian countries is an important step in Santander Consumer’s growth strategy,” Santander Chairman Emilio Botin said. “It’ll increase its geographical diversification and strengthen its position as the leading consumer finance provider in Europe.”
European banks including Santander are seeking to increase returns from lending to take advantage of economic recovery, while the European Central Bank, which takes over as regulator in November, is requiring them to bolster capital under an asset quality review and stress test.
The deal will impact Grupo Santander’s core capital by eight basis points, the bank said. GE Capital is the financial services unit of U.S. firm General Electric Co. (GE:US)
Santander fell 0.6 percent to 7.80 euros at 11:16 a.m. in Madrid, reducing its market value to 91.9 billion euros. Gains this year were 20 percent. The Bloomberg Europe Banks & Financial Services Index dropped 0.8 percent today.
“After some big purchases over the past few years they are now focusing on small deals in the areas where the bank wants to grow and consumer finance is one of them,” Nuria Alvarez, analyst at Spanish bank Renta 4 in Madrid, said by telephone. “The deal is positive since it allows Santander to diversify both geographically and in terms of the type of business lines they buy.”
The bank agreed to buy 51 percent of the finance unit of El Corte Ingles SA, Spain’s largest retailer, for about 140 million euros in October. It is also in negotiations with PSA Peugeot Citroen (UG) to sell loans and create a joint venture to strengthen the carmaker’s financing network.
Santander’s net interest income, the difference between earnings from lending and deposit costs, rose to 6.99 billion euros in the first quarter from 6.93 billion euros in the fourth quarter of 2013 as loans expanded 1.4 percent, led by consumer loans. Non-performing loans fell for the first time since the financial crisis. The bank’s core Tier 1 capital ratio was 10.6 percent compared with an ECB minimum of 8 percent.
Some European banks are exiting consumer finance as they seek to strengthen their balance sheets. Banca Monte dei Paschi di Siena SpA, the bailed-out Italian lender, is in advanced talks with at least three potential bidders to sell its consumer finance unit Consum.it, which has more than 5 billion euros of loans, people familiar with the talks said this month.
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