General Electric Company (NYSE: GE) has announced recently that it is planning to sell its Czech banking unit. This move will be done through an initial public offering, and GE anticipates that the market players’ demand for the stock will edge up amid the improved economic growth. The sale of the finance unit is anticipated to be complete before the end of the current quarter. Yet, General Electric would require the anti-trust authorities’ approval in order to close the transaction.
The Czech banking unit of General Electric will then operate as an independent unit, unlike the majority of the financial assets of the multinational conglomerate, which were purchased by firms related to the industry. GE is anticipated to hold a minority stake in the unit for 180 days or more, in order to support Czech lenders for the next 2 years.
According to GE Money Bank AS CEO Mr. Tomas Spurny, “The IPO has been evaluated as the most favorable option.”
“As a local Czech bank, we will continue to be successful. Perhaps more successful by opening additional degrees of freedom for the bank to make tactical and strategic decisions as a standalone bank rather than a bank owned by a global entity,” the CEO further added.
This push is part of the larger plan of the corporation to sell financial assets amounting to $200 billion, by the end of 2016. General Electric has revealed this strategy during the previous year, and it was able to bolster the stock price in the short term. Yet, according to industry analysts, the bullish trend line support has been violated. Because of this, the stock price of General Electric may plunge below $30 in the next months.
The US conglomerate has been focusing on different industrial projects, in order to ramp up its revenue as part of its long term strategy. One of the most recent achievements is the accomplishment of the Banha power plant upgrades. This power plant is in Egypt, and the completion of the upgrades boosted the presence of General Electric in the country.
GE is still currently facing some obstacles, as its international business is at risk because of non-working of the Export-Import Bank. General Electric battled with the Congress in order to get a reapproval for the bank, and was successful during the previous year. Yet, regardless of the approval, the bank is still not in a good position to offer financial support to the firms. This in turn adversely affects the business of the multinational conglomerate.
The Export-Import Bank backed the different deals of General Electric, related to energy and transportation segments. Because of the unavailability of financial support, clients in the mentioned segments are in an indeterminate state. If these clients move on to other sources, GE would stand to lose a substantial part of its revenue.
The consolidated revenue of the multinational conglomerate took a hit from the sale of the financial assets, as the numbers dropped since the announcement of this strategy. For the first quarter of the current fiscal year, General Electric is forecasted to report a slump in revenue. Regardless of these headwinds, industry analysts are optimistic that GE will post revenue growth in the long run, once the company fully expands its industrial business segment.