Back in March, GE Capital provided an unprecedented deep-dive into its business for investors and analysts in a 5 ½ hour, 174-slide marathon meeting. This morning, GE Capital Chairman and CEO Mike Neal kicked off the latest update, saying “There’s good news — unlike the 19th of March, we’ll only have 60 pages today and we’ll get through it in a couple of hours.”
Jet set: GE Capital’s estimated U.S. market position in aircraft financing is No. 1 and its emerging markets capabilities in aviation is driving a strong 2nd half pipeline.
Mike’s primary message was that GE Capital has been well run through the recession and will provide attractive long-term returns. In terms of funding and liquidity, the Capital team sees the situation as having dramatically improved, calling its future profile “very manageable,” but still operating in a challenging environment. Mike said there’s no need for external capital — even under adverse scenarios — and that he expects GE Capital to be profitable for 2009, including $1.7 billion in earnings in the first half.
Of key interest to investors has been how GE Capital’s various portfolios have been performing relative to the Fed’s expectations about the economy. When it comes to GE Capital’s U.S. consumer business, Mike said it is performing “much better’ than the Fed’s base case and that he is “quite pleased” with the performance thus far. Although he called it “early in the cycle,” he said that GE Capital’s U.K. mortgage business, its commercial loans and leases and its global banking businesses were all performing okay relative to the base case. However, the commercial real estate business continues to be “challenging,” he said. In terms of GE Capital’s losses in the first half of the year, he said that they are “trending slightly better than the base case” — noting the business’ focus on strong risk management.
On the issue of how newly proposed financial regulations might impact GE Capital, the team noted that there are dozens of proposals currently circulating in Washington and that GE supports systemic regulation and is already planning for increased regulation. However, GE is opposed to one proposal that might force the separation of GE Capital from GE. He added that “historically, new regulation has included grandfathering” and that he believes there’s strong support for GE Capital’s current business model and structure.
Mike also took a moment to underscore the important role that GE Capital plays as a source of liquidity for U.S. businesses and consumers. GE Capital’s estimated U.S. market position was “No. 1″ in a long list of critical lending areas such as: middle market commercial lending; middle market corporate finance; equipment lending and leasing; aircraft and healthcare financing; energy financing and project financing; fleet leasing; commercial real estate lending; dealer financing; and private label credit cards. GE Capital, he said, has more than 330,000 commercial customers and 145,000 small business supported by its retail programs. He noted that in the current tough economy, GE Capital has supported virtually all U.S. airlines and has been a leader in bankruptcy financing, which is of critical importance to helping solid businesses get back on their feet and weather the current storm. In the first half of 2009, GE Capital extended $69 billion in U.S. loans already.
Mike sees GE Capital becoming a smaller, more focused company with a goal of ending net investment of about $400 billion. And after the current cycle ends, he said the company will emerge as a “comparatively advantaged” business with “attractive returns.”
The slides accompanying today’s business update are available at http://www.ge.com/investors. A replay of the webcast will be available at the same link later today.
* Read about GE Capital and TLGP
* Read about GE Capital’s investments in the Middle East with Mubadala
* Read “Dallas keeps on truckin’ with GE Capital” on GE Reports
* Watch a video about GE Capital’s work with Boscov’s department stores
Tagged as: GE Capital, Investors
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Why wouldn’t GE Cap make the numbers by 2010?
Some of the reasons are below:
1. No Bonus for 2009.
2. No raises for 2009.
3. Laid off 11,000 employees 2008-09 and still not finished with lay offs.
4. Saved $85M in tax credits.
5. Eliminating business at GE Cap that don’t produce $.
Did I forget something else?
Did anyone else hear Mike Neal say GE Capital has earned $1.7 billion so far this year. Talk about putting a spin on numbers. Close to $1.5 billion of those so called "earnings" were tax credits so pardon me if I find his remarks pure BS. And of course, no one in the business media challenged him on that remark.
That’s how you can run a business into the ground and still keep your job. Wonder how long that clown would have lasted if Jack was at the helm?
Cheers
To: Bill James
Yes, I and the entire world heard that. It was nice and clear!
Something is cooking in the oven at GE Cap since Jeff I do NOT want to spin off GE Cap. The World does NOT have all true facts with Mike Neal’s…the MAN detail meeting.
We can tell something is NOT adding up correct!
Please NO MORE BS and state the true…and watch GE Stock hit up to $40 per share!
The Entire World does NOT believe Jeff I and it’s Executives Officers.
When you don’t have to write down the value of the loans on your book like banks have to, you obviously have better "earnings" relative to other financial companies. That is why GE Capital is reluctant to get spin off and regulated – GE knows GE Capital won’t meet regulatory requirements and will be foreced to raise capital as a standalone entities.
Investors and Analysts do not seem to have been impressed by Mike Neal’s presentation as evidenced by almost 2% drop in GE’s share price today. I wonder whether it’s time for a new leader at GE Capital who can regain the confidence of Investors and Analysts.
Smmes to me that the last 8 years should be enough of a sign of things to come – The whole-lot of the management team need to go now.
To: Green Shooter -
This is the reason I/we said that something is cooking in that GE oven at GE Capital. Something about Mike Neal’s speech did not add up correct!
To: Worldwide Audience -
Jeff Immelt stated in March 2008 to the entire world and employees that GE Capital was in good hands and GE Capital will weather this storm. We do not need to worry. In June 2008 lay offs started and until today…GE Capital is not finished.
At the end of the day…
How does GE and GE Capital expects "US" to trust anything they say about the Company!
I STRONGLY BELIEVE WE NEED A COMPLETE NEW MANAGEMENT TEAM AT GE CAPITAL FROM TOP TO BOTTOM! MEANING A NEW 901 EXECUTIVE FLOOR(S). REAL PEOPLE THAT HAVE A FLAIR OF INTEGRITY AND ARE TRUSTWORTHY.
LET’S ALL PRAY FOR THE BEST OUTCOME OF GE
This sounds increasingly like "the fundamentals of our economy is strong"
I live in Everett,WA. This is the home of BOEING with GE, where many famous planes have been made. I hope the
new 787 and other planes, because GE will be very active. Also, my community has COMCAST located here, who do very good work. Lastly, I have GE Common Srock,
since I started my retirement in local Bank Trust near
1980. Is that imagination with eco ?