1 Billion Euro Business Swap Deal For Santander And GE

Mon, 31 Mar 2008

Spain's largest bank Banco Santander has agreed to buy finance companies in the UK and Germany as part of an asset swap deal with General Electric (GE) worth £796 million.

Santander will take over GE Money's units in Germany, Austria and Finland, in addition to the credit card and auto-finance divisions in the UK .

Santander is reportedly taking on £7.16 billion in loans to expand its consumer finance unit, which accounted for 9 per cent of group profit in 2007.

The expansion comes as slowing economies in Spain, Europe and the US threaten to drive up loan defaults, according to Alejandro Ruyra, an analyst at Madrid-based Landsbanki Kepler.

"It's more efficient to leverage this business as much as they can," Ruyra said. "In the short-term it's true this business doesn't have the greatest outlook."

Santander Consumer Finance earned £133 million in the fourth quarter of 2007, an increase of 18 per cent from the same period the previous year.

Loan defaults as a proportion of total loans for the business stood at 2.84 per cent in December, up from 2.57 per cent in 2006.

Shares in the company rose 1.7 per cent to 12.76 Euros at close in Madrid, giving the bank a total value of £63.5 billion.
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