Chase to Sell $2.2 Billion In Assets to GE and Others
Moving out of ancillary businesses, Chase Manhattan Corp. announced Monday that it has agreed to sell its $2.2 billion leasing businesses to General Electric Capital Corp. and other companies for an undisclosed loss.
The sales will shrink Chase's asset size by 2.2% and boost its capital-to-asset ratios, which are already above the regulatory minimum. The company said losses expected from the sales were included in a provision it took in the second quarter.
The sale "is a positive, more for its capital ratios than everything else," said Judah S. Kraushaar, banking analyst at Merrill Lynch. Shares of Chase's stock closed down 50 cents Monday, at $18.75.
The leasing businesses, which have been on the block for about a year are one of the largest asset sales Chase has announced since disclosing plans last year to shrink its business lines. The sale will reduce Chase's asset size to $96.3 billion, allowing it to be displaced by J.P. Morgan & Co. as the nation's third-largest banking company.
Chase's Tier one capital ratio was 4.9% at the end of the second quarter, up from 4.5% at the end of the first quarter. International guidelines call for a minimum 4.0% in Tier one capital by the end of 1992.
About 600 employees will be affected by the leasing sales, a source close to the company said. Most will move to the acquiring companies, a Chase spokesman said.
Analysts said it was unclear how profitable the leasing businesses are because Chase does not disclose separate figures for the units. But leasing experts said they were not surprised the assets were sold at a loss because of a glut of leasing assets for sale.
"Your best hope is to get book value," given the exit of Japanese leasing companies and other acquirers, said Charles Quatrochi, a partner at Fieldstone Private Capital, an investment banking boutique.
Leasing businesses are not only capital-intensive but also carry large operating costs. Moreover, leases are fairly risky because they mostly carry a fixed interest rate and long maturity.
A Rate Mismatch
"It's kind of risky to lend long and fund short," Mr. Quattrochi said.
While many superregional banks have been growing through acquisitions, large money-center banks have been paring assets and unloading business to improve their weak capital ratios.
Chase stressed Monday that it would still engage in big-ticket leasing to such industries as aircraft, railroads, and other "capital projects in the U.S. and overseas."
Chase said it sold the leasing businesses in four transactions:
* General Electric Capital Corp., the leasing industry's leader, agreed to buy $1.1 billion of the Chase Manhattan Leasing Co. portfolio.
* Associates Corp. of North America, a unit of Ford Motor Co., agreed in principle to buy the remaining assets of Chase Manhattan Leasing Co., consisting of $900 million in industrial-equipment leases.
* A unit of CIT Group bought $130 million in assets of Chase Aircraft Finance Co.
* Confederation Leasing Ltd., a subsidiary of Canada's largest life insurer, bought roughly $80 million in assets of Chase Manhattan Leasing Canada Ltd.