In our series that takes a second look at key facts from GE Capital’s recent investor meeting, we’re asking some of the presenters which slide from the lengthy presentation would they most want with them when making their case to critics. Next up: GE’s U.S. Consumer and Global Mortgage businesses.
Bank on it: In GE’s U.S. consumer business, which includes private label credit cards, GE Capital has been tightening consumer credit over the last two years. As a result, the average consumer credit score of people with bank cards are comparable to those holding GE private label cards.
Mark Begor, CEO of GE Retail Finance and Restructuring Operations, said: “As outlined on slides 105 and 106, GE took significant underwriting actions leading into the current economic crisis that are now helping our U.S. consumer and private-label credit card business weather the storm. Early in 2007, when we saw the U.S. Consumer start to weaken, that’s when we started to tighten up credit lines and tighten up our exposures,” he said.
“We’ve been in this business for a long time so we’ve seen a lot of cycles in the U.S. Consumer business. We have multiple levers in this business. The ability to raise prices with our consumers as well as profit-sharing arrangements we have with our retail partners helps dampen some of the loss pressure. And at year-end 2009, the group will have $1.6 billion of reserves on our balance sheet, which is about twice our non-earning assets, providing a good cushion in a challenging economy.”
Fundamental differences between the U.S. mortgage businesses (in which GE does not participate, having sold that part of the business in 2007) and the UK home-lending business (in which GE has $22 billion in assets, almost 90% of which are first mortgages) are also important to understand, Begor said. Some have asked, “Isn’t the U.K. like the US subprime business? And the answer is no.” Slide 120 compares the two, highlighting key differences in business models, degree of regulation, consumer dynamics and credit terms.
* Read Part 1 of My Favorite Slide
* Read Part 2 of My Favorite Slide
* View the full slide deck on GE.com
* Read GE Reports coverage of the presentation
