* Marks exit from Australian mortgages
* To focus on consumer and corporate finance
* Equity value of deal seen at around $100 mln-analysts
* Pepper Homeloans funded by consortium of banks (Recasts with GE confirmation of sale)
By Narayanan Somasundaram
SYDNEY, May 25 (Reuters) - GE Capital is selling its A$5 billion ($5.3 billion) Australia and New Zealand mortgages books to Pepper Homeloans as concerns rise over a softening of the Australian housing market and rising cost of funds.
GE Capital, which shed part of its Australian home loans portfolio in 2008 when global conglomerates were restructuring their lending arms, said on Wednesday it will sell the rest of the portfolio for a small discount to non-bank Australian lender Pepper Homeloans.
GE Capital Australia's Chief Executive Skander Malcolm declined to specify the discount but said GE Capital would now focus on its other eight lines of business that span consumer and corporate finance.
"We can now focus on those businesses where we believe we have sustainable competitive advantage," he told reporters in a conference call.
GE is streamlining its GE Capital finance unit to focus on funding purchases of heavy equipment, lend money to mid-sized companies and to invest in commercial real estate.
"It looks like it is just time for GE to pass it on. Part of the global strategy to exit some areas," Simon Burge, Chief Investment Officer at ATI Funds Management, said, ahead of the confirmation of the sale. ATI owns shares in Australian lenders.
EQUITY VALUE SEEN AT AROUND $100 MILLION
Analysts said the equity value of the deal could be around $100 million assuming the risk weighted assets were 25 percent of the portfolio and the equity on them was about a tenth of that.
Pepper, which was formerly part of Oakwood Global Finance that counts Merrill Lynch as its key shareholder, will fund the deal via a consortium of banks and mezzanine debt.
It said it would also look at raising funds by securitising the mortgages in the "not too distant future."
The deal adds some bulk to non-bank lenders in a market dominated by the big four Australian banks -- National Australia Bank , Commonwealth Bank of Australia , Westpac and Australia and New Zealand Banking Group .
The banks have a big branch network and access to cheaper funding. GE Capital had previously said it was paying 50-70 basis points above the big-four banks for wholesale funding.
Global volatility exacerbated by Europe debt woes and an uncertain U.S recovery are also pushing up wholesale debt funding costs. Offshore wholesale funding costs are 10 times costlier than before the crisis for Australian lenders.
GE Capital's move comes amid some concerns over the Australian housing market, which has seen a strong run up in prices, but has recently seen some softening after hikes in interest rates.
Australian house prices have risen by an average of 7.8 percent annually over the past 10 years, according to research firm RP Data.
($1 = 0.947 Australian Dollars) (Additional reporting by Amy Pyett; Editing by Ed Davies and Anshuman Daga)
* Marks exit from Australian mortgages
* To focus on consumer and corporate finance
* Equity value of deal seen at around $100 mln-analysts
* Pepper Homeloans funded by consortium of banks (Recasts with GE confirmation of sale)
By Narayanan Somasundaram
SYDNEY, May 25 (Reuters) - GE Capital is selling its A$5 billion ($5.3 billion) Australia and New Zealand mortgages books to Pepper Homeloans as concerns rise over a softening of the Australian housing market and rising cost of funds.
GE Capital, which shed part of its Australian home loans portfolio in 2008 when global conglomerates were restructuring their lending arms, said on Wednesday it will sell the rest of the portfolio for a small discount to non-bank Australian lender Pepper Homeloans.
GE Capital Australia's Chief Executive Skander Malcolm declined to specify the discount but said GE Capital would now focus on its other eight lines of business that span consumer and corporate finance.
"We can now focus on those businesses where we believe we have sustainable competitive advantage," he told reporters in a conference call.
GE is streamlining its GE Capital finance unit to focus on funding purchases of heavy equipment, lend money to mid-sized companies and to invest in commercial real estate.
"It looks like it is just time for GE to pass it on. Part of the global strategy to exit some areas," Simon Burge, Chief Investment Officer at ATI Funds Management, said, ahead of the confirmation of the sale. ATI owns shares in Australian lenders.
EQUITY VALUE SEEN AT AROUND $100 MILLION
Analysts said the equity value of the deal could be around $100 million assuming the risk weighted assets were 25 percent of the portfolio and the equity on them was about a tenth of that.
Pepper, which was formerly part of Oakwood Global Finance that counts Merrill Lynch as its key shareholder, will fund the deal via a consortium of banks and mezzanine debt.
It said it would also look at raising funds by securitising the mortgages in the "not too distant future."
The deal adds some bulk to non-bank lenders in a market dominated by the big four Australian banks -- National Australia Bank , Commonwealth Bank of Australia , Westpac and Australia and New Zealand Banking Group .
The banks have a big branch network and access to cheaper funding. GE Capital had previously said it was paying 50-70 basis points above the big-four banks for wholesale funding.
Global volatility exacerbated by Europe debt woes and an uncertain U.S recovery are also pushing up wholesale debt funding costs. Offshore wholesale funding costs are 10 times costlier than before the crisis for Australian lenders.
GE Capital's move comes amid some concerns over the Australian housing market, which has seen a strong run up in prices, but has recently seen some softening after hikes in interest rates.
Australian house prices have risen by an average of 7.8 percent annually over the past 10 years, according to research firm RP Data.
($1 = 0.947 Australian Dollars) (Additional reporting by Amy Pyett; Editing by Ed Davies and Anshuman Daga)
* Marks exit from Australian mortgages
* To focus on consumer and corporate finance
* Equity value of deal seen at around $100 mln-analysts
* Pepper Homeloans funded by consortium of banks (Recasts with GE confirmation of sale)
By Narayanan Somasundaram
SYDNEY, May 25 (Reuters) - GE Capital is selling its A$5 billion ($5.3 billion) Australia and New Zealand mortgages books to Pepper Homeloans as concerns rise over a softening of the Australian housing market and rising cost of funds.
GE Capital, which shed part of its Australian home loans portfolio in 2008 when global conglomerates were restructuring their lending arms, said on Wednesday it will sell the rest of the portfolio for a small discount to non-bank Australian lender Pepper Homeloans.
GE Capital Australia's Chief Executive Skander Malcolm declined to specify the discount but said GE Capital would now focus on its other eight lines of business that span consumer and corporate finance.
"We can now focus on those businesses where we believe we have sustainable competitive advantage," he told reporters in a conference call.
GE is streamlining its GE Capital finance unit to focus on funding purchases of heavy equipment, lend money to mid-sized companies and to invest in commercial real estate.
"It looks like it is just time for GE to pass it on. Part of the global strategy to exit some areas," Simon Burge, Chief Investment Officer at ATI Funds Management, said, ahead of the confirmation of the sale. ATI owns shares in Australian lenders.
EQUITY VALUE SEEN AT AROUND $100 MILLION
Analysts said the equity value of the deal could be around $100 million assuming the risk weighted assets were 25 percent of the portfolio and the equity on them was about a tenth of that.
Pepper, which was formerly part of Oakwood Global Finance that counts Merrill Lynch as its key shareholder, will fund the deal via a consortium of banks and mezzanine debt.
It said it would also look at raising funds by securitising the mortgages in the "not too distant future."
The deal adds some bulk to non-bank lenders in a market dominated by the big four Australian banks -- National Australia Bank , Commonwealth Bank of Australia , Westpac and Australia and New Zealand Banking Group .
The banks have a big branch network and access to cheaper funding. GE Capital had previously said it was paying 50-70 basis points above the big-four banks for wholesale funding.
Global volatility exacerbated by Europe debt woes and an uncertain U.S recovery are also pushing up wholesale debt funding costs. Offshore wholesale funding costs are 10 times costlier than before the crisis for Australian lenders.
GE Capital's move comes amid some concerns over the Australian housing market, which has seen a strong run up in prices, but has recently seen some softening after hikes in interest rates.
Australian house prices have risen by an average of 7.8 percent annually over the past 10 years, according to research firm RP Data.
($1 = 0.947 Australian Dollars) (Additional reporting by Amy Pyett; Editing by Ed Davies and Anshuman Daga)
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