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.

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