NEW YORK ( TheStreet) -- Dealmakers are reporting an increase in the size of specialty finance deals but warn regulatory resistance remains a crimp on activity, as several large firms -- including GE Capital and Banco Santander (SAN) -- prepare an initial public offering for their consumer finance arms.
Total deal value of $38.9 billion for the year to date in the specialty finance sector is far above $11.8 billion for the prior period, according to SNL Financial. This is despite a lower number of deals this year: 120 against 128 for the prior period.
Specialty finance comprises lending to a range of sectors such as airlines, shipping, technology, auto finance, credit cards and mortgage servicing rights. These companies typically serve consumers who fall outside the criteria of major banks and as such, charge higher interest rates.
Macquarie Capital senior managing director head of specialty finance Eric Hanson said the thesis that banks would seek higher margins through the acquisition of specialty finance companies had not come to full fruition."These businesses have outsized returns that banks would like to buy and while