Abbey puts US retail finance division on the market

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Abbey National, which saw off a takeover bid from Lloyds TSB in June, is in talks to sell its retail financing arm, which is the market leader in providing loans for consumer goods.

The business, called First National Retail Finance, could be worth between £250m and £300m. It was part of a stable of businesses formerly branded Lombard, which Abbey bought from National Westminster Bank in 1998.

Abbey would not comment on the negotiations but it is understood to be talking to several interested parties, including GE Capital, the financial services arm of General Electric, and America's HFC Bank.

Abbey denied suggestions it had put the business up for sale when rumours first surfaced two months ago, but it is understood to have had a number of approaches since then. The talks with potential bidders are believed to be just at an early stage.

First National Retail Finance wrote 1.5 million loans last year with a value of £1.5bn. The loans mainly provide funding to retailers which allow customers to pay for expensive goods, like computers, over a period of months on an interest-free basis.

Clients of the business include 10 of the 15 largest retailers in the UK, including Allied Carpets, DFS, the furniture retailer, Powerhouse, the electrical stores group, and Tiny Computers.

Abbey is thought to have a 37 per cent share of the purchase financing market and around 2.7m customers. First National Retail Finance has a total loan book of more than £2bn.

Abbey bought all of the Lombard businesses from NatWest for £347m and has invested a substantial amount in integrating them into its business. But earlier this year it decided to offload divisions which it deemed to be non-core. This included its credit cards business, which it sold to MBNA, the US card-processing giant, for £289m in March.