BB&T agrees to sell factoring portfolio worth $2 billion
BB&T Corp. is exiting the domestic factoring business, agreeing to sell its $2 billion portfolio to Rosenthal & Rosenthal Inc. of New York, the companies said in a statement timed for release today.
Terms of the deal were not disclosed.
Factoring, which has been offered by BB&T Commercial Finance, involves accounts-receivable management services to replace most credit and collection functions within an organization. It also involves providing working capital secured by foreign or domestic accounts receivable and inventory.
Rosenthal gains 90 BB&T factoring clients and expands its factoring portfolio to $11 billion. Many of the factoring clients are involved in the furniture, casual living, fabrics and textiles industries.
“We believe this deal presents a tremendous long-term opportunity for our factoring clients,” BB&T spokesman Brian Davis said.
“Rosenthal & Rosenthal will be able to leverage their extensive capabilities in this space, along with the expertise of our professional teams based in Georgia and North Carolina.”
Tony Plath, a finance professor at UNC Charlotte, said factoring “is really industry-specific, and it’s common in both the textile and furniture industries.”
“Since these aren’t exactly booming these days, it’s not a growing line of business for banks. That likely explains BB&T’s motivation to exit the business.”
It is the first acquisition in Rosenthal’s 80-year history and expands its reach into the Southeast. Rosenthal’s focus has been on the fashion, apparel, accessories, manufacturing, food and beverage, and gift and home sectors,
About 25 BB&T employees will join Rosenthal. Rosenthal will add an office in Georgia and retain back-office support in High Point, supplementing its New York headquarters and California office with a combined nearly 200 employees.
“This acquisition is a logical step forward for our firm, significantly advancing our goal of establishing Rosenthal as the leading independent national finance company,” said Peter Rosenthal, the firm’s president.
The divestiture of the factoring portfolio represents a step in BB&T’s recent initiative to focus more on what executives consider as more core business.
That includes restructuring its auto and mortgage lending portfolios in what Kelly King, its chairman and chief executive, calls “making long-term strategic changes” projected to grow both portfolios beginning in the second half of 2018.
“We continue to have more emphasis on all of our national lending businesses, our corporate business, our leasing businesses, particularly around our equipment, our auto portfolio,” King told analysts during a fourth-quarter earnings conference call Jan. 18.
“We’re changing, but we’re also expanding it more broadly across the country. Our mortgage portfolio, we’re expanding in a lot of new markets and other places in terms of our brokerage business around the country. Our wealth business continues to grow and we invest substantially more assets in that.”
Plath said selling the portfolio makes sense given that King “has already chartered a strategic path for capital allocation across the bank’s core initiatives, such as expanding its reach in existing markets in the Midwest and Texas, small- and mid-sized corporate commercial and industrial lending, and becoming a leader in back- and front-office technology innovation and adoption in the industry.”
King said a heightened focus on expense control, such as the decision to close 147 branches in 2017 is helping the bank “optimize our structure.”
Branches in Denton, Lexington and Whitsett were affected by the decision.
The branch total was 2,049 as of Dec. 31.
King said the bank expects to close another 150 branches in 2018.
It has confirmed plans to close its branch in Valdese.
“We’ve still got a lot of small branches in a lot of rural areas, and we’re being much more aggressive in terms of rationalizing that structure,” King said. “You can expect to see that continue for a number of years.”
King stressed that management is “tightly focused on organic growth.”
“We are re-conceptualizing our business. We’re disrupting our businesses. We’re preparing for the future and we’re very excited about the future.”