Electronic Data Systems Ltd. is expected to announce today that it has formed a joint venture with Abbey National PLC, the United Kingdoms second-largest mortgage lender, to service Abbeys mortgage and personal loans.
Officials said the deal, signed early Wednesday, will create the largest loan servicer in the United Kingdom and eventually the largest in Europe. The joint venture went live Wednesday as a loan servicer. It does not have an official name yet but is being marketed by EDS Credit Services Ltd.
Abbey National has close to 400,000 personal loans and 1.5 million mortgages worth $93.2 billion, or 13% of the U.K. market. It is to pay EDS of Plano, Tex., $390 million over the next 10 years to operate the venture.
This is a huge step for several reasons, Michael A. Hyman, EDS business development director for Europe, the Middle East, and Africa, said in an interview. We instantly become the largest third-party loan administrator in the United Kingdom. We now manage more than 1,500 Abbey National people through the joint venture who have long-standing experience in the U.K. market.
EDS, which sent Mr. Hyman to England last July to help it gain share in the U.K. mortgage market, is one of the few U.S. companies to try an invasion of that market.
Global Home Loans, a joint venture between Countrywide Credit Industries and Woolwich PLC; Alltel Mortgage Solutions Ltd., a joint venture between Alltel and Bradford & Bingley; and HomeSide Lending are also trying to become major outsourcers in U.K. home lending.
Mr. Hyman said the deal will help EDS increase its presence in Britain. The venture will offer its services to other lenders in England and eventually in the rest of Europe, he said.
Were using this as a base of business, he said. We can provide very attractive economic and capabilities-driven propositions to other lenders.
The mortgage process in England is challenging because of its fledgling secondary market the country has no equivalent of Fannie Mae or Freddie Mac and because lenders there are offering much more personalized service, Mr. Hyman said. As a result, hundreds of products are available there, he said.
As Europes second-largest mortgage market, just behind Germany, the United Kingdom is an attractive market to enter, he said. Its a mature mortgage market with a high rate of homeownership. Language and culture aside, EDS already has a substantial presence across a number of industries in the U.K.
The company, which employs almost 16,000 people in several business lines in England, can take advantage of its established activities there, he said.
Greg Gieber, vice president at A.G. Edwards & Sons, said EDS has been operational in the U.K. for a long time, and they are well familiar with the local characteristics of the market. While this is not necessarily breaking any new ground, with the weaker economy, profits are harder to come by, and more companies are looking into this to cut costs.
Mr. Hyman said the deal gives EDS a great deal of visibility in the United Kingdom. The company will perfect its operations there before moving into continental Europe, he said.
While we do have aspirations to continue to grow and expand into other parts of Europe, we are going to build this carefully and ensure that we are following our vision to create a global credit utility, he said.