GE Money, the financial services arm of General Electric, is betting on partnerships to expand its presence in central and eastern Europe.
With partners in Turkey, Poland and Russia, a joint venture planned in Romania and another proposed for Ukraine, the US group is not interested in going it alone in the region. “Partnerships have evolved for GE Money over the past four or five years. But it’s not a new strategy for GE. We have had partnerships in industrial activities for a long time,” says Dmitri Stockton, chief executive of GE Money CEE – the central and east European operations. “Partnerships are a way of life at GE.”
GE Money is one of GE’s six business units, with $211bn in assets in 2007, largely concentrated in consumer, retail and car finance in 52 countries. GE Money CEE is the largest unit within GE Money, with $26bn in assets at the end of last year spread across 10 countries, including Germany, Austria and Turkey, and seven ex-Communist states.
Unlike GE Money elsewhere, it has developed from its base in consumer finance into a broader range of banking, including services for small and mid-sized companies and asset management units.
It ranks alongside leading west European banks among the top 10 international banks in the region in terms of assets. But its consumer focus stands out. Mr Stockton says: “We are a universal bank with a special focus on consumer finance. This is a distinctive difference between us and our competitors.”
GE Money is expanding fast, boosting net profits from $230m in 2004 to $944m last year, with a further increase planned for 2008. Mr Stockton says plans for profits of $2bn in three to five years are “realistic”.
Partnerships will play a big role. Mr Stockton regards as particularly important the company’s agreement in Turkey, where in 2005 it bought a 25.5 per cent stake in Garanti Bank from Dogus Group, a conglomerate, for $1.8bn. After adjustments, GE Money now has 20 per cent of Garanti and agreements with Garanti and Dogus to collaborate abroad.
The three partners are planning a three-way investment in Romania to turn GE’s three consumer finance companies into a fully-fledged bank. They are also looking at acquiring a bank in Ukraine but Mr Stockton says they have so far not struck a deal because “price expectations are too high” among would-be sellers.
In Poland, GE last year brought a partner into Expander, its fast-growing mortgage business, selling a 60 per cent stake to Innova Capital, a local private equity investment fund. The partners plan to roll out Expander in Bulgaria, Romania and, possibly, Russia.
At the same time, GE expects to win approval this month for its €625m acquisition of 66 per cent of New BPH from Italy’s Unicredit. Unicredit is selling the business, part of the former BPH bank it acquired previously, to comply with regulatory requirements. Mr Stockton says GE will merge its existing bank with BPH to create a new universal bank. The two banks, which will together form the fifth largest in Poland, will have 330 branches, with plans to add 200 more over three years. “We like the Polish market,” says Mr Stockton.
In Russia, GE Money acquired Deltabank, largely a credit card business, and turned it into a consumer finance company with a co-operation deal with Ramstor, a big Turkish-owned supermarket chain.
Mr Stockton is looking for other partners and for a bank to buy: although as in Ukraine he is wary of over-paying. “We would look at bigger deals in Russia but this is a market where you have to be careful,” he says.
GE Money plans to continue investing $200m a year in organic growth in the region and profiting from the economies of scale that will be generated. “There’s a lot of one plus one equals five in this business,” says Mr Stockton.
The company expects a modest slowdown in economic growth in the region following the international credit squeeze. But it does not anticipate any difficulties. Mr Stockton says: “With GE’s AAA [credit] rating we are well-positioned to operate in this environment.”
