Here are some important facts that were left out of today’s Wall Street Journal article that provide context in understanding the strength and diversity of our funding model:
GE is an infrastructure, finance and media company, which funds its growth using diverse sources of relatively low-cost funding. GE’s long-term debt is ~60% of overall funding; its short-term debt is ~34%; and retail deposits make up ~6%. This funding model has successfully fueled the company’s long-term average earnings growth of 10%, and the company has taken significant actions to preserve its liquidity during this the current credit crisis.
GE is managing its long-term debt needs, in part, by slowing down origination of new loans. The company has been able to issue short-term debt, called commercial paper (CP), even during the recent financial crisis — without disruption — at favorable costs. With cash on hand, $62 billion in back-up bank lines and the recent $15 billion of raised equity, GE has the liquidity to more than cover its commercial paper exposure if needed. The company is also participating in the U.S. Government’s Commercial Paper Funding Facility, providing further liquidity options. GE is focused on growing its retail deposits. GE currently has deposits of over $33 billion, increasing the balance by $20 billion this year, primarily from certificates of deposits issued through its two US banks.
GE’s strategy for many years has been to match-fund our assets and liabilities in terms of duration, currency and rate, which means that we price our assets based on our funding costs. We expect to manage any change in our funding cost resulting from shifting our funding mix away from CP to term debt, deposits and other alternative funding sources through commensurate pricing changes. GE provides support to GE Capital, its financial subsidiary that issues the majority of the company’s debt. This support is in the form of a fixed charge coverage agreement under which GE is required to maintain GE Capital’s earnings at a specified level.
GE has a conservative financial services business originating mostly secured or asset-backed loans. That has resulted in lower loss rates and loan-loss reserve ratios than those of the largest U.S. banks. The company has made net income of $7 billion in financial services year to date, making it one of the most profitable financial services companies in the world. GE will continue to develop and strengthen its diverse source of funding, and pursue those options that support a strong competitive position.
Here is a link to a detailed liquidity discussion in GE’s third quarter 2008 10Q filing with the U.S. Securities and Exchange Commission.
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Good comments and a great idea to have this site; i think you should merge with and take over citicorp; they need risk mgm, thanks, shelby davis
Please don’t do the above. Stick with your plan, avoid acquisitions and grow organically.
I think you need to do something to raise the stock price.A lot ofpeople are loseing confidence in GE.You need To Keep the appliance Division,& get rid of some of the technology stuff. Also all employees especially the top 10%should take large pay cuts.& lose ALL bonus’s.Above all do not take over any company’s now.I have lost almost all of my savings in ge stock since January.At my age I can’t afford to wait years to recoup & it’s so cheap I can’t afford to sell what I have.Surely Jeff Imelt is smart enough to find a way to raise the stock price. People need confidence to buy & hold stock now so give us some.Also they need to put some kind of restriction onhow fast you can sell stock.Day traders are a big part of the stock market problem. GE needs to concentrate on making themselves strong & keep what they’ve got, instead og trying to save the world or get greedy & lose everything they’ve got. Virginia Ann
Dollar cost average – what a time to buy GE stock, 60% below its all time high it hasnt looked this cheap since 1932!!
Raising equity is one thing. I can understand this may be important for a company to safeguard its financial obligations. However, I strongly recommend dealing in Euro’s. Put the equity on a european account and save the money in european currency (the euro). Reason for this suggestion is that the Euro is much more stable and stronger than the US dollar. As the US government keeps printing money to finance worldly actions like the war in Iraq, and bailing out struggling financial institudes, the dollar will rapidly devaluate against foreign currency. Saving GE equity in Euro’s will not onlt guarantee the value of that equity, but could even increase it when payments in dollars are to be made. This puts the company in a much stronger position with its equity.
Since 1958, I have been collecting shares of GE and through the years the stock has been very good to me. It paid for a few homes, autos and 2 college educations. And for that I am eternally grateful. But to see GE shares at the level they currently are in, almost brings me to tears. Not because I am losing share value but to see a GrEat
company like GE being shredded apart by the media (Bill "miserable" O’Reilly, etc.) and for GE not taking a strong stand against the bullying, innuendos and lies. It’s time for GE to take the offensive. It’s time to take back the appliance division, the lighting division and to transform them once again into the creative and imaginative entities they once were. This is the company of Thomas Edison and Charles Steinmetz. For crying out loud, bring GE back to life and make it once again sustainable for new shareholders and to once again prosper as the golden company it should and always has been. It is a company of incredibly talented people. Utilize that talent to its maximum!!!
What a novel idea, GE having a blog! If this is to be anything other than more GE Hogwash real people not GE professional bloggers should post here. I have read some of the posts and people really don’t need complicated financial explanations why GE is coming apart. Let’s not make this a repeat of the Edelman / Wal-Mart crap that took place in the past. My challenge to GE would be this, pick some topics that truly concern the American people like GE and Iran or complaints about language / violence issues on NBC that concern teachers and families. If you want to win the hearts aand minds, try a little transparency.
You’re Pal,
Rob
Dear Rob (Pal),
GE is not a church, a temple nor a mosque. If you have issues with the "morality" of NBC then switch to another station, which probably exhibits even more violence, etc. than NBC. As to Iran, you will now have a new president who will actually reach out to Iran, Cuba, Venezuela!
What will you say then? What really bugs you is that indeed GE is still rock solid and will be making billions of dollars despite this economic downturn. My suggestion, dear pal Rob, is to add more GE to your portfolio and in a few short years reap the same success as thousands of other GE shareholders. Warm Regards…Jesse
Dear Pal Jesse,
Unfortunately your friends at GE redacted my reply so I will give it another try.
Thank you for educating me that GE has no ecumenical affiliations. You would think that I would have learned that fact after working for GE for over ten years. I am happy to have been of service to you in increasing your share values as an investor. In regards to NBC it seems that you are being a little one sided. Am I not allowed the same freedom of expression that you or NBC are allowed. As to your comment regarding Iran, I am hopeful that "my" new president will reach out to Iran, Cuba and Venezuela with intellect and open mindedness, rather than the method your president used in Iraq. In regards to your comment regarding GE being rock solid that is simply foolish thinking. GE would not be going to the public trough (the commercial paper window) if that were the case. As to your suggestion that I add some GE stock to my portfolio, perhaps I will when GE drops below USD 10 in the next few weeks. Thank you for the advise.
Dear youngins,
I started buyin GE back in 66 when I came home from Vietnam and went to work for them. Now plot a chart of GE for the last 42 years and make sure to include the dividend return each quarter.
Walla, lesson learned.
Buy the good stuff plow the div. back in and go fishin for a few years then retire early and sleep late.
Jim
how to make a copy of conversion table of ge cable and power supply
I bought my first block of shares of GE six months ago and my husband gave me my second block three months ago for a birthday present, I don’t work for GE (wish I did) great stock and if I had the cash I’d plow more into GE so my kids could retire early!!!