WFC Wells Fargo and Company

By Ted Mann and Emily Glazer 

General Electric Co. agreed to sell a major chunk of its U.S. commercial lending business to Wells Fargo & Co., a milestone in the company's rapid exit from financial services that could allow it to shed a tough regulatory regime.

The deal, announced Tuesday, is the largest divestiture yet in GE's rapid dismantlement of its GE Capital lending unit that once contributed roughly half the parent company's annual profits and just last year had assets that would make it the country's seventh-largest bank.

Financial terms of the deal weren't disclosed.

The sale of a $32 billion portfolio of loans and leases to Wells Fargo brings the total value of deals GE has struck to more than $126 billion since announcing in April its intent to exit financial services. That is well over the halfway mark of GE's goal to sell roughly $260 billion in finance assets.

GE's move to largely exit its financial services arm comes after years of discontent from GE's investors, who didn't want their stakes in a leading industrial company to come attached to the risk associated with a giant lending business.

GE Chief Executive Jeff Immelt has said the company would prioritize the sales of its U.S. lending businesses this year, and that the company will apply in 2016 to be relieved of its designation as a "systemically important financial institution," a label GE Capital required after the financial crisis that subjected it to supervision by the Federal Reserve.

Tuesday's deal gives the bulk of the commercial lending business to Wells--an eager buyer that had first tried to snap up the business in the early days after GE announced it was for sale in April--and leaves small fragments of the company still to be sold this year, including a $5 billion unit that makes loans to buyers of franchises like fast-food restaurants. That franchise business was the last chunk of GE Capital to be placed on the market as the company churned through a huge volume of divestitures this summer. GE Capital expects it too to be sold by the end of the year.

In addition to a portfolio of loans and leases worth about $32 billion, the commercial finance unit employs about 3,000 workers, and is made up of GE Capital's global commercial distribution finance, North American vendor finance and corporate finance platforms. The sale is expected to be completed in the first quarter of next year.

Tim Sloan, head of wholesale banking at Wells Fargo, called the acquisition an "outstanding opportunity" for the lender to deepen relationships and strengthen its presence in key commercial lending markets.

Wells Fargo, with $1.73 trillion assets, remains the fourth-largest bank by assets behind Citigroup Inc.'s $1.83 trillion, according to the banks' most recently quarterly reports. It likely wouldn't be until early next year that Wells Fargo could surpass Citi by asset size, said Scott Siefers, regional bank analyst at Sandler O'Neill.

Wells has been an active buyer of GE Capital's assets. Mr. Siefers calculates Wells has either agreed to acquire or finance about $47.5 billion of the assets for sale.

Wells Fargo CEO John Stumpf had said publicly there were possibilities for more work with GE following its commercial real-estate loan portfolio acquisition earlier this year. The bank also acquired GE's railway leasing business in late September.

GE Capital executives have labored since April to sell off pieces of the business, starting with those most likely to lose their value and their most valuable employees if they languished on the market, like the company's Antares unit, which lends to private-equity firms.

But to achieve its goals of rapidly shrinking the lending business and finding a way out of the Fed's oversight, the deals team needed to find a buyer for its U.S. commercial lending and leasing business, the division sold to Wells on Tuesday.

When GE announced its plans in April, the company pegged a goal of $90 billion in announced sales by year's end, then quickly raised that target to $100 billion or more. Focus will now turn to include more of GE Capital's overseas operations, which are expected to be sold off over the coming year.

GE shares edged up 0.3% to $28.16 in midmorning trading, while Wells Fargo notched up 0.2% to $52.28.

--Lisa Beilfuss contributed to this article.

Write to Ted Mann at ted.mann@wsj.com, Emily Glazer at emily.glazer@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

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(END) Dow Jones Newswires

October 13, 2015 12:35 ET (16:35 GMT)

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