First Horizon to Buy Loans Worth $637M from GE Capital

With an aim of expanding in restaurant franchise finance business, First Tennessee Bank, the regional bank of First Horizon National Corp. FHN will acquire restaurant franchise loans from GE Capital worth $637 million. GE Capital Franchise Finance is a subsidiary of General Electric Co. GE.

The Southeast and Southwest regional loan portfolios from GE Capital’s restaurant franchise finance business will be purchased by First Tennessee. Terms of the all-cash deal remain undisclosed.

The business deal will be accretive to First Horizon’s earnings per share immediately. Once the deal closes in the third quarter of 2016 as anticipated, First Tennessee will combine the acquired loans with its existing loans and will initiate a restaurant franchise finance specialty lending business. Notably, the new business will have $800 million worth of outstanding loans.

“Our bankers are very good at understanding businesses, building relationships and offering products to meet the unique needs of customers in our specialty lines of business,” said David Popwell, president of banking for First Horizon. “We already have several commercial bankers who work closely with restaurant franchise customers. As we build out our new restaurant franchise finance specialty line of business, we will be better able to meet customer needs and court new customers based on the strength of our expanding expertise.”

Notably, apart from First Horizon, GE entered into separate transactions with Wintrust Financial Corp. WTFC and Sterling National Bank to sell most of GE Capital’s U.S. restaurant franchise financing loans. The move is in line with GE’s efforts to trim down its financial wing and focus more on its core industrial business.

Though the constant winding up of businesses might hurt earnings, First Horizon’s focus on strengthening its profitable Tennessee banking franchise and exiting the non-strategic segment should bode well for the long term. At the same time, appreciable growth in loans and deposits is likely to supplement its financial strength.

First Horizon currently carries a Zacks Rank #2 (Buy). Other finance stock worth considering includes First Niagara Financial Group Inc. FNFG which also holds a Zacks Rank #2.

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