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GE Capital
Investor Meeting
December 8, 2009
"Results are preliminary and unaudited. This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking
statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,”
“seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual
results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility
in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national
and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels as
planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating
and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash
flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major
industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory,
investigative and legal proceedings and legal compliance risks, including the impact of proposed financial services regulation; strategic actions, including acquisitions and dispositions and
our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature.
These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forwardlooking statements.”
“This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative
to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP
measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at www.ge.com.”
“In this document, “GE Capital” refers to GE Capital Finance, unless otherwise noted. “GE” refers to the Industrial businesses of the Company including GECS on an equity basis.
“GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.”
Key messages
1 GE Capital has a strong and advantaged business model
2 Cautiously optimistic about the form and implications of regulatory reform
3 GE Capital’s long-term debt plan is fully funded through 2010. Cost of funds
have significantly improved; liquidity position has strengthened
4 Balance sheet reduced by ~$40B 3Q’09 YTD … well ahead of plan
5 Real Estate risk is manageable within our framework
6 Expect losses and impairments to peak in 2010
7 Margins are improving
8 Earnings ~flat in 2010, should improve in 2011+
CFPA1478 Security Analysts_December 2009_TUES a.m. 2
GE Capital business model
Advantage
Today
Pre-crisis
1• Substantial origination capability
• Largest direct
origination team
• Still largest direct
origination team
2• Deep domain expertise
– Healthcare, Energy, Media, Aircraft
• Advantaged in key
verticals
• Growing advantage
3• Experts at collateral/asset management
• Strong residual
realization
• Strong collateral and
residual realization
4• Experienced, disciplined risk management
and capital allocation
• On balance sheet
underwriting
– Spread of risk, secured
• Core to business model
5• GE operational headset & tools
• Scale focus
• >25% lower costs
6• Match funded
• Core value
• Important differentiator
Well positioned to compete
CFPA1478 Security Analysts_December 2009_TUES a.m. 3
U.S. landscape
2008
2010
Banks, Fincos, Captives, Monolines, Other
Primarily Banks
Fewer players on the field
CFPA1478 Security Analysts_December 2009_TUES a.m. 4
Regulatory update
House Bill
Senate Bill
• No divestiture required
• Grandfathers ILC/FSB
• Restrictions by regulation TBD
Activity restrictions
• No divestiture required
• Grandfathers ILC/FSB
• Current non-finance
activities grandfathered
Oversight
• Treasury-led Oversight
Council
• Fed would become GECC
supervisor
• New Agency for Financial
Stability
• Fed authority moves to new
“super” bank regulator
Affiliate transactions
• “Captive financing” permitted
• Some limits on other affiliate
transactions
• Restrictions by regulation TBD
• Still early …
• GE supportive of systemic regulation …
engaged in legislative process
• GE committed to GE Capital … preparing
for heightened regulation
CFPA1478 Security Analysts_December 2009_TUES a.m. 5
Lending environment has changed
Non-banks and capital markets: ~2/3 of credit
Focus shifting towards alternative sources
Assets created since beginning of credit crunch – ’07
U.S. credit market debt outstanding
Asset growth ’07-’09
Non-Banks &
Capital Markets
66%
67%
~$600B
67%
~$500B
~$39T
Banks
32%
31%
29%
2000
2006
2Q’09
~$250B
~$180B
Monetary Authority
Source: Fed Reserve Flow of Funds Report
NBFIs play larger role in small bus. lending
Lease equip. finance credit supplied – by size, 2008
~$35B
Ins./
Retirement
Capital
Non-bank
Markets Financial Inst.
Source: Fed Reserve Flow of Funds Report
~$37B
~$39B
52%
58%
NBFI share of lending to small
businesses 5.1%, banks 4.2%
~20% of ’09 GE Capital
commercial loans <$1MM
Non-Banks
47%
Banks
53%
48%
42%
>$5MM
$250,000$5MM
<$250,000
Source: Equipment Leasing
and Finance Association
Banking
Non-bank credit very important to U.S. economy
CFPA1478 Security Analysts_December 2009_TUES a.m. 6
Attractive new business lending
GE Capital total volume ($ in billions)a)
Global
Over 1.2MM small and medium business
customers … committed credit over $60B
$221B
International
Providing liquidity to critical areas of U.S.
economy. Since 1/1/08:
– $172B new U.S. commercial financing
– $146B credit ~50MM U.S. consumers
116
Small and Medium Leading Sales Finance/PLCC franchise in the U.S.
businesses b)
Key wins/renewals:
U.S.
$31B
105
3Q’09YTD
a) - Total volume = on-book plus flow; b) - Businesses with annual revenues <$50MM
Volume 10%+ 2H vs. 1H … providing critical
liquidity to customers in our markets
CFPA1478 Security Analysts_December 2009_TUES a.m. 7
Volume and returns
($ in billions)
2009E on-book
Volume/collections
~$191
2009E
Commercial marginb)
~4.7%
$42
~2.9%
~$149
Portfolio
margin trendb)
5.7%
Run-off
a)
Collections/others
Volume
• Repositioning portfolio to higher
yielding core businesses:
Business
Americas
Asia
Europe
Banking
Retail Finance
Aviation
Energy
’09E new bus. ROI
~3.3%
~3.6%
~2.2%
~2.5%
~3.3%
~4.0%
~6.0%
New volume
5.4%
~5.0%
2009E
Consumer marginb)
4.8%
~4.6%
~12.5%
~9.1%
2006
Run-off
2007
2008 2009E 2010F
New volume
b) - CV ex-gains; ex-Restructuring operations
a) - ex-FX
Portfolio margins expand in 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 8
Funding & liquidity
($ in billions)
Long-term debt funding
Actions
$84
2009 funding completed in June
$45a)
’08
’09E
$38b)
2010 long-term debt plan fully
funded
’10F
Plan to pre-fund $20-25B of ’11
in 2010
(a - Includes $13B pre-funded in 2008
(b - 2009 YTD as of Dec. 4
GECS commercial paper
$72
CP reduced to $50B as committed
$50
$50
Cash and back-up bank lines >2x CP
2010 cash planned at ~$40B+
4Q’08
2Q’09
3Q’09
Funding in good shape
CFPA1478 Security Analysts_December 2009_TUES a.m. 9
Capital and investment
($ in billions)
Ending net investment–a)
$525
4Q’08
Dynamics
$501
$485
$475-485
2Q’09
3Q’09
4Q’09E
Balance sheet down $40B+
Shrinking in the right
places:
(a - Capital Finance excluding effects of FX
Leverage–b)
GECS
Tier 1 common ratio
7.5% ~7.7%
7.7:1
5.7:1 ~5.6:1
GECC 7.1:1
5.4:1
5.4:1
4Q’08
3Q’09
4Q’09E
GECC
– “Red” assets, Real Estate
~$30B
– Mortgage originations
~91%
5.7%
GECS 4.7
4Q’08
GECC equity $58
GECC TCE c) $30
6.5
6.6
Ratios strong and
improving
3Q’09 4Q’09E
$73
$42
~$73
~$42
(b - Net of cash & equivalents with hybrid debt as equity ex-non-controlling interests
(c - Shareholder’s equity less goodwill & intangibles
Strengthened fixed charge
coverage agreement
Balance sheet on track: ratios strong
CFPA1478 Security Analysts_December 2009_TUES a.m. 10
Losses and impairments
($ in billions)
~$16.9
~$13.0
2009
estimated
Fed base
case
Dynamics
~$12.0-13.0
2009
estimated
Fed adverse
case
2009
estimate
Strong work out, collections and
collateral capabilities
Better
• U.S. Consumer
• U.K. Mortgage
~Base case
• Commercial loans
and leases
• Global Banking
Still challenging • Commercial
Real Estate
Total losses running in line with Fed base case or better
CFPA1478 Security Analysts_December 2009_TUES a.m. 11
2009 execution
Dynamics
Goal
Liquidity
Status
Complete
Funding
Complete
2010 LTD plan 100% pre-funded
Executed on alternative funding
Balance sheet
Ahead of plan
ENI down $40B+ (ex-FX 3Q’09 YTD)
Cost
Ahead of plan
$3.4B cost out
Capital
On track
5.4:1 leverage (GECC),
7.5% Tier 1 common ratio (GECC)
Earnings
On track
$2.0B 3Q YTD
$50B CP outstanding
$57B GECS cash and equivalents at 3Q’09
Well positioned for 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 12
Agenda
Funding & Liquidity
Kathy Cassidy – Treasurer
Financial Update
Jeff Bornstein – CFO
Portfolio Update
Jim Colica – CRO
Real Estate
Ron Pressman – Real Estate CEO
CLL Americas
Dan Henson – CLL Americas CEO
Operations Update
Bill Cary – COO
Summary
Mike Neal
Q&A
CFPA1478 Security Analysts_December 2009_TUES a.m. 13
Funding & Liquidity
CFPA1478 Security Analysts_December 2009_TUES a.m. 14
GECS funding
($ in billions)
Securitization
(FAS 167/FIN 46)
TLGP - LT debt
Non-g’teed
- LT debt
Highlights
$515
6
$509
13
~$505a)
~$500a)
~4
~$501
59
30-40
$460-$470
53
368
334
285-295
• ’09 issuances included $47B TLGP
& $23B un-guaranteed debt to
complete ’09 & ’10 LTD plan
• Spreads significantly better …
recent issuances below TLGP allin levels
• Plan to issue ~$20-$25B LT debt in
’10 to pre-fund 50%+ ’11 LTD plan
• Strong GECC capital ratios with
declining leverage
Alternative
funding/others
56
Comm’l paper
72
50
65-75
40-50
4Q'08
4Q'09E
4Q'10F
• Will continue to maintain strong
cash & liquidity position
~$57
~$40+
• Funding cost remains competitive
Cash & equivalents $37
55-60
(a - Includes ~$15B 3Q’09 YTD FX impact … excludes future FX changes
CFPA1478 Security Analysts_December 2009_TUES a.m. 15
Alternative funding plan
($ in billions)
$65-$75B
ex-securitization
$100-$110
30-40
$62
6
~$59-64
~4
Others
19
~20
Intl. deposits
12
Securitization
(FAS 167/FIN 46)
20-25
25
4Q’08
15-18
4Q’09E
• U.S. bank deposits (ILC/FSB) : Lower
assets in U.S. banks driving lower
deposits … ramping up direct origination
of assets in banks … launching retail
deposits
• International deposits : Continue
growth in emerging markets (CEE &
Central America) … launching new
programs in large/developed markets
20-25
• Others: Continue to expand asset based
funding, Euro covered bonds, Sukuk
funding, GE Interest Plus growth, etc.
20-25
• Securitization : Increase primarily
driven by consolidation of securitization
debt per FAS 167
20-22
U.S. deposits
(ILC/FSB)
Comments
4Q’10F
CFPA1478 Security Analysts_December 2009_TUES a.m. 16
GECC cost of funds
5-year bond spreads
OAS (bps.)
Libor spreads (bps.)
Funding sources
’09A avg.
Today
900
800
CP w/fees
~0
(5)-(10)
700
CD’s ( 2 yrs.)
~100
~90
TLGP debt w/fees (3 yrs.)
~150
None
Non-TLGP debt (5 yrs.)
~240
~130
Securitization (3 yrs.)
~165
~125
1100
1000
600
500
400
300
200
FinCo Index
C
Bank Index
GECC
JPM
100
Sep-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Jul-09
Sep-09
Nov-09
(Credit cards)
FinCo Index
Bank Index
GECC 5yr spreads
C 5yr
JPM 5yr
• TLGP + CPFF fees of $2.42B paid ’08/’09
• Spreads tightened significantly from crisis highs
• Portfolio downsizing reducing impact of new higher cost debt … Avg. spread on ~$83B LT
debt issued is L+ ~180 bps., including $5B 30 yr. LT debt raised at L+~400 in 1Q’09
• Positioned competitively for 2010
Spreads continue to tighten ... only a portion of LT debt portfolio
re-priced in 2009 … offset by better pricing on new volume
CFPA1478 Security Analysts_December 2009_TUES a.m. 17
Financial Update
CFPA1478 Security Analysts_December 2009_TUES a.m. 18
Capital Finance
Total year: 2009 and 2010
Earnings
ENIa)
2009E
2010F
$2.0-2.5B
~Flat, more
pre-tax
~$475-485B
~$445-455B
Fed base case
or better
~Flat
Costs
~$3.4B
Lower by ~$0.5B
(ex-FX, acq.)
Volume (on-book, ex-flow)
~$150B
+15-20%
Margins
~4.6%
+
Cost of funds
~3.8%
Spreads improving
Reserve Coverage
~2.25%
~2.85%-3.00%
Losses/impairments
(a – 2009: ex-FX, 2010: ex-FX and FAS 167
Solid foundation for 2011+
CFPA1478 Security Analysts_December 2009_TUES a.m. 19
Delinquencies
Commercial
30+ delinquency
Consumer
4.69%
4.03%
4.19%
30+ delinquency
a)
Mortgage
13.23% 13.38%
13.21%
11.80%
Equipmenta)
2.84%
2.78%
3.01%
10.56%
3.01%
9.21%
2.17%
7.43%
2.24%
1.61%
8.20%
Total
8.80%
8.73%
8.76%
6.38%
Real Estate b)
0.62%
1.15%
4.71%
3Q'08
4Q'08
1Q'09
2Q'09
3Q'09
Oct '09
Drivers
3Q'08
5.62%
6.02%
5.95%
5.92%
Non-mortgage
6.02%
4Q'08
1Q'09
2Q'09
Oct '09
3Q'09
Drivers
Equipment showing signs of stabilization
– Improvement in Americas and EMEA
North America up 31 bps. from 2Q to 7.27% in 3Q,
up 13 bps. in October
Real Estate increase driven by accounts paying
current beyond maturity
– Excluding these loans, rate stable at ~3.5%
U.K. Home Lending down 9 bps. in 3Q from 2Q, down
40 bps. in October
‒ Up from seasonal low as expected
(a - managed assets; (b - on book
‒ Continued improvement in HPI (5 consecutive months)
‒ Net gains on REO sales vs. marks in all 3 quarters
Global Banking delinquencies flat
Tough environment … but some signs of stabilization
CFPA1478 Security Analysts_December 2009_TUES a.m. 20
Non-earnings
($ in billions)
Capital Finance
3.60%
Non-earnings %
financing receivables
Commercial
$7.2
(1.5)
(2.3)
2.13%
1.73%
$13.0
$13.7
Loans in
recovery/
workout
6.5
Expect full
recovery/
cure
6.6
$10.0
$7.3
$5.4
$6.1
4.8
6.4
$6.5
1.9
1.9
1Q'08
2Q'08
Commercial 1.7
3Q'08
Nonmortgage
1Q'09
2Q'09
3Q'09
78%
71%
(2.8)
$3.3 nonmortgage
reserves
Cure
4Q
1Q
2Q
3Q
186%
coverage
Non-earnings coverage %
Total
69%
63%
67%
173%
2Q’09 coverage
(1.4)
4.8
3.2
4Q'08
3Q’09
reserves
(1.8)
4.5
2.5
Est. loss
exposure
Consumer
7.2
4.7
$3.1
1.6
Collateral
value on
remaining
exposure
3Q’09
non-earning
5.5
4.6
4.2
Consumer 3.7
4Q'07
$6.5
$8.0
173%
189%
coverage
100%
recovery
2.80%
1.41% 1.47% 1.53%
2Q’09 coverage
(1.8)
3.89%
57%
50%
53%
3Q’09
non-earning
Mortgage
non-earnings
206%
coverage
~98%
payment
rate
30%
33%
32%
29%
Est.
collateral
value
(0.1)
0.5
Est. MI
Est. loss
exposure
$1.0
3Q’09
reserves
CFPA1478 Security Analysts_December 2009_TUES a.m. 21
Commercial non-earnings roll-forward
($ in billions)
4Q’08 non-earnings roll-forward
100% recovery
Loans in recovery/
workout
Collateral on
remaining exp.
Est. loss exposure
1Q’09 non-earnings roll-forward
Balance Remaining
@ 4Q’08 @ 3Q’09
∆
$1.0
$0.4
($0.6)
0.4
0.2
(0.2)
1.1
0.7
$3.2
0.6
0.4
$1.6
(0.5)
(0.3)
($1.6)
100% recovery
Loans in recovery/
workout
Collateral on
remaining exp.
Est. loss exposure
3Q’09 remaining
balance composition
Bankruptcy proceedings
Negotiation/restructure
In process of liquidating
collateral
All other, net
Customer paying
0.4
0.2
(0.2)
0.7
0.4
$1.8
0.2
0.1
$0.7
(0.6)
(0.2)
($1.1)
3Q’09 remaining
balance composition
Bankruptcy proceedings
Negotiation/restructure
In process of liquidating
collateral
All other, net
$0.5
0.2
0.3
0.2
$1.3
0.3
$1.6
New Remaining
@ 1Q’09 @ 3Q’09
∆
$0.3
$0.2
($0.1)
Real Estate
EFS
GECAS
CLL
3Q
$0.1
0.2
0.1
1.1
$0.2
0.3
0.1
0.1
$0.7
Real Estate
EFS
GECAS
CLL
3Q
$0.1
–
–
0.6
Performing largely as expected
CFPA1478 Security Analysts_December 2009_TUES a.m. 22
Reserve coverage
($ in billions)
Commercial
$7.3
$6.6
Allowance
for losses $5.3
1.7
Comm’l.
Consumer
Reserve
coverage
$5.7
3.1
2.5
19 mos.
write-offs
in reservesa)
2.0
4.2
3.6
3.7
4.1
4Q'08
1Q'09
2Q'09
3Q'09
1.42%
1.59%
1.81%
2.08%
9 mos.
write-offs
in reservesa)
Reserves increased by $0.6B in
3Q’09 … coverage rate to 1.43%
Real Estate – 77% of impaired
loans with specific reserves are
current
Consumer
Coverage at 3.11%
U.S. Card & Sales Finance
– Coverage rate up 45 bps. to 7.02%
– Reserves/non-earnings 209%
Mortgage
– Coverage rate up 26 bps. to 1.59%
– U.K. REO sales realization at 115%
a) - 3Q’09 write-offs annualized/3Q’09 allowance
Reserves +$757MM, coverage +27 bps. vs. prior quarter
CFPA1478 Security Analysts_December 2009_TUES a.m. 23
Securitization accounting change (FAS 167)
($ in billions)
Impact
Accounting change – 1/1/10
• Substantially all securitization or conduit sale of
receivables through a QSPE must be consolidated
• Consolidation results in ~$1.5-2.0B charge to retained
earnings, not P&L … “earned back” over time
• Prospectively, new securitizations will likely be on
balance sheet alternative funding
• Receivables , reserves , 3rd party debt , retained
interest , retained earnings , TCE/TA • ENI , but no incremental GE debt required
Proforma impact
Estimated balance sheet
Receivables
Reserves
Other assets
Assets
3rd party debt
Other liabilities (net)
Equity
~$42
(~2)
(~10)
Estimated income impact
Retained earnings charge “earn back”
~$1.7
~$1.3
“Top up”
~$30
~$37
~$1.2
YoY NI impact
~$0.3
~$1.3 Earn back
~(1.2) “Foregone” gains
~$0.1
~$0.9
(~5)
(~2)
Liabilities & equity ~$30
Securitization gains offset
~$0.1
~$0.3
’11F
NI
’12+F
NI
$0
Day 1 charge
to retained
earnings
’10F
NI
2009E
gains
’10F
gains
YoY impact … “new earnings” offset by no securitization gains
CFPA1478 Security Analysts_December 2009_TUES a.m. 24
Losses and impairments vs. stress
($ in billions)
2009
Estimated Estimated
adverse
base
case
case
Commercial portfolio
- Real Estate
Credit costs
$0.9
Impairments
0.7
- Aviation and Energy
0.4
- Mid-market lease/lend
2.0
- Other commercial
0.5
Consumer portfolio
- U.S.
5.1
- Non-U.S. mortgage
1.2
- Other consumer
2.2
Total
~$13.0
2010
Estimated Estimated
base
adverse
case
case
Estimate
$1.0
1.1
0.7
2.6
1.5
~$1.3
~0.8
~0.4
~2.7
–
$0.5
1.4
0.2
2.0
0.5
$1.4
1.5
1.0
3.1
1.0
5.7
1.6
2.7
~$16.9
~3.5
~1.1
~2.5
~$12.0-13.0
4.8
0.7
2.1
~$12.1
FAS 167
1.5
$13.6
5.0
1.3
3.2
~$17.5
1.5
$19.0
2011 Fixed CC
~$2B
~$7B
Current 2010 total loss expectations equal to or less than base case
CFPA1478 Security Analysts_December 2009_TUES a.m. 25
SG&A
($ in billions)
$13.1
Drivers
• Delivering cost out:
$3.4
Mar 19
Now
($1.0)
($1.4)
+$0.4
Org. structures/HC
~$9.7a)
5%b)
V
Indirect spend
(1.0)
(1.3)
+0.3
Dispositions
(0.7)
(0.7)
–
Total cost out
($2.7B)
($3.4B) +$0.7B
• $500MM Restructurings across 40+
platforms
TY’08
TY’09
estimate
TY’10
outlook
• Investing in growth platforms and
portfolio management
$3.4B cost-out in ’09 … more in 2010
a) - Excludes Penske which was deconsolidated 1Q’09, acquisitions and corporate assessments
b) - ex-FX
CFPA1478 Security Analysts_December 2009_TUES a.m. 26
Summary
Losses and impairments running at to below Fed
base case
Equipment and Consumer delinquency flattening,
Real Estate continues to be pressured
Non-earnings coverage strong … managing portfolio
Reserves coverage up to 2.08%, +66 bps. 3Q YTD
2010 similar to 2009, higher pre-tax earnings …
improved margins, lower costs
CFPA1478 Security Analysts_December 2009_TUES a.m. 27
Portfolio Update
CFPA1478 Security Analysts_December 2009_TUES a.m. 28
GE Capital credit costs
2010
outlook
Key factors
U.S. Consumer
• Unemployment key variable, historically low
entry rate
Losses
stable
Non-U.S. Consumer
• U.K. Home Lending - HPI improving, loss severity
stable … unemployment, HPI key variables
• Spain & Ireland pressure losses
Losses
peak
Equipment Leasing
• Construction, auto, transportation &
manufacturing sectors stabilizing
Losses
lower
Corporate Lending
• Pressure in media, manufacturing and run off
portfolios … Europe LBO book stabilizing
• Defaults peaking … higher non-earnings but loss
severity remains <20%
Losses
peak
Real Estate
• Most pressure in U.S. market (multi-family, office)
• Driven by 2006-’08 vintages
• Key dynamics: unemployment, lack of liquidity
Losses
higher
Expect total losses to peak in 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 29
Commercial portfolio
Core Leasing ($64B)
Corporate Lending ($81B)
Credit losses
Credit losses
Loss rate
Credit costs
’09E
1.4%
~$1.1B
’10 Fed
base/adverse
1.2%/1.9%
$0.9/$1.4B
Key indicators stabilizing
– Delinquency and non-earnings flattening
– Loss severity within base case estimates
Strong underwriting and asset remarketing
– Residual recovery >100%
Loss rate
Credit costs
’09E
1.2%
~$1.0B
’10 Fed
base/adverse
1.2%/1.9%
$1.1/$1.7B
Leveraged finance trends improving
– Defaults peaking, non-earnings growth slowing
– Loss severity remains <20% estimate … despite
workouts taking up to 9 months
Reduced exposure to auto, publishing and media
Corporate aircraft values stabilizing
Retail exposure – all asset based loans
Increased collections focus
– ~100 additional collectors in EU
– 500+ U.S. collectors now managed centrally
– Front-end moved into loss mitigation
Resources switched to portfolio mgt./work-outs
– 55+ work-out team in Americas
– 8 additional in EMEA; 36 in Asia
– Daily/weekly reviews
Losses should improve in ’10
Losses should peak in ’10
CFPA1478 Security Analysts_December 2009_TUES a.m. 30
Consumer portfolio
U.S. Consumer Finance ($26B)a)
Loss rate
Credit costs
’09E
14.5%
~$3.7B
’10 Fed
base/adverse
16.6%/17.3%
~$4.8/$5.0B
• All time low entry rate of 9.4%
• Early actions paying off ... improving sensitivity to U/E
– $240B of line thru the cycle … avg. line size $1.1K
a) - ’09 average assets on book
Rest of world: Consumer Finance ($52B)
Loss rate
Credit costs
’09E
4.6%
~$2.3B
’10
base/adverse
4.7%/7.0%
$2.1/$3.2B
U.K. Mortgage ($22B)
Loss rate
Credit costs
’09E
3.5%
~$0.8B
’10
base/adverse
3.1%/4.6%
$0.5/$0.8B
• REO @1,495 @ Nov ’09 ... 8 asset managers with ~56% of stock
under offer
• ’09 YTD loss severity for 80+ LTV ~13% (pre-MI 30%)
• Continued focus on collections and hardship solutions
Rest of world: Mortgage ($39B)
Loss rate
Credit costs
’09E
0.7%
~$0.3B
’10
base/adverse
0.5%/1.6%
$0.2/$0.5B
• CEE 30+ DQ 5.10% … FX pressures stabilized
• Top 3 portfolios: Australia in runoff; France & Poland stable
• Australia unsecured portfolios stable … 30+ DQ 4.89%
• Global avg. LTV ~71% … non-earnings ~$1.2B (3.06%) …
REO conversion slow due to longer legal procedures
– Losses reflect mark to market
– U/E & BKO pressures offset by timely portfolio actions
• Global Auto 30+ DQ steady at ~3.3%
Trends stabilizing going into 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 31
Commercial
Real Estate
CFPA1478 Security Analysts_December 2009_TUES a.m. 32
3Q’09 YTD performance
3Q’09 YTD dynamics
Financials
$88.7
Assets ($B)
$83.7
Net income ($MM) $1,204
Original
outlook Actuals Status
Levers ($MM)
NOI
$1,104
$1,199
$618
$500
$124
$88
$1,377
$2,392
Occupancy
80%
79%
Leasing
18.0
19.1
(pre-tax)
Gains
1,202
Debt margin
(net)
($948)
88
533
777
Core
Depreciation/
losses
(776)
(1,570)
Gains
(net)
Depreciation/
losses
(pre-tax)
Volume ($B)
3Q’08
YTD
3Q’09
YTD
$19.3
$1.3
(MM sq. ft.)
Team is executing … losses are challenge
CFPA1478 Security Analysts_December 2009_TUES a.m. 33
Equity portfolio @ 3Q’09: $33B
87% wholly-owned
Property income
Yield
JV
10%
Owned RE
87%
Other
3%
• 97% existing
properties
NOI
5.4%
5.6%
$1.5
$1.6
3/19
3Qa)
3/19
3Qa)
• 3% development
• $11MM average
investment
• Each asset a small business with multiple
performance levers
a) - 3Q’09 annualized
Occupancy b)
80%
2Q’09
79%
3Q’09
• Leased 19.1MM sq. ft. YTD (13.1MM renewals;
6.0MM new leases) vs. 18.0MM sq. ft. plan
b) - Excludes multifamily, hotel, parking & Mexico JV assets
Leasing outlook
(MM sq. ft.)
GE lease roll
’08A
’09E
’10F
’11F
22
32
23
22
• Market will remain challenging
• GE portfolio roll reduces in ’10/’11
• Team targeting strong out-performance
- Outperformed in 8 of 11 major markets YTD
• Availability of capex/tenant improvement $ is a
critical differentiator
• Limited debt on properties … increases speed on
leasing decisions
CFPA1478 Security Analysts_December 2009_TUES a.m. 34
Equity unrealized loss update
($ in billions, pre-tax)
Unrealized gain/(loss) movement
Y/E ’09 estimate: ~$7B b)
$3
($4)
(~$7)
Owned RE
~81%
JV/other
~19%
($7)
(~$3)
YE’07
’08
changes
YE’08
’09
changes
YE’09E
34% value drop since peak a)
Pole
∆ value
Structure
∆ value
Asia Pacific
(33%)
Owned RE
(30%)
Europe
(25%)
JV/other
(72%)
Americas
(44%)
• For owned properties, per U.S. GAAP we must state
at depreciated cost, subject to impairment testing
NEA
$B
$3
Unrealized loss by vintage b)
~7%
’08+
~56%
14
’07
10
’06
6
<=’05
~33%
~4%
a) - Change in values since YE ’07 as % of GE book value
b) - Percentages of total ~$7B unrealized loss
CFPA1478 Security Analysts_December 2009_TUES a.m. 35
Working through equity unrealized loss
($ in billions, pre-tax)
Unrealized equity loss over time (est.)
Depreciation/potential impairment
~$0
~$4
Leasing wins are creating value
a)
O’Connor St., Ottawa
• Tenant occupied 96% but vacated
105k sq. ft. in 2H’09
(~$7)
~$3
YE’09
loss
estimate
’10F
• Leased 104k sq. ft. to federal
government
• Increase NOI by 80% to $3.5MM
’11-’13F
Static
2013 YE
view
• Goal to outperform Fed adverse losses
through strong property level execution
• Highly experienced global team focused on
maximizing asset values
a) - Fed adverse case
Old Broad St., London
• 337k sq ft office asset
• Leased 88k sq ft in ’09 … current
occupancy of 74%
• Agreed-upon leases push
projected occupancy to 88%
CFPA1478 Security Analysts_December 2009_TUES a.m. 36
Debt portfolio @ 3Q’09: $45B
Debt structure
Owneroccupied
Sub-debt
19%
5%
Delinquency trends
(% o/s)
>90% LTV + <1.0x DSC a)
5.6%
$3.3B
Singles
25%
Delinquent 26%
74%
Crossed
portfolios
51%
• 95% senior secured
• 83% current LTV; 2.6x DSCa)
4.1%
Current
pay
• 38% matures 2011+
a) - Excludes $8.4B owner occupied and $1.2B other debt balances, includes
specific reserves
2.0%
4.0%
4.2%
3.5%
3.4%
2Q’09
4.1%
8.4%
Banksb)
4.7%
Banksb)
(ex-const.)
3.7%
2.2%
0.6%
2Q'08
3Q'08
Credit costs ($MM)
Reserve %
Non-earnings %
2.8%
4.2%
GE
4.0%
1.2%
2.2%
4Q'08
1Q'09
2Q'09
3Q'09
$87
0.64%
0.41%
$110
0.87%
1.22%
$234
1.24%
2.88%
$559
2.26%
2.90%
b) - Source: FFIEC (all commercial banks)
Reserve components
Delinquency by class
Delinquent
4.7%
0.3%
3Q delinquency at $1.9B
Performing
beyond maturity
7.7%
7.0%
• Apartment
10.1%
• Hotel/retail
• Other
3.4%
2.8%
3Q’09
$1.0B
$0.2B
$0.8B
• 77% current
paying with
1.5x DSC
3Q’09
General
Specific
CFPA1478 Security Analysts_December 2009_TUES a.m. 37
Debt maturities
($ in billions)
’09 maturities update
’10 maturities outlook
Estimated result
Collect
12/8
$2.2
$4.1
68%
Extend/restructure
$7.8
14%
Foreclose
$0.6
Total
$10.6
12/8
$1.1
Collect
Extend/restructure
$3.5
Foreclose
$0.8
$0.8
Total
$6.0
$6.0
a)
Estimated result
% of
total
18%
7/28
$1.7
a)
a) - Includes $3.0B of contractual extensions
Safety and margins:
• Cross loans with same borrower
• Structure partial pay-down
• Prepare if necessary for foreclosure
• Enhance pricing/terms and conditions
74%
6%
b) - Includes $4.5B of contractual extensions
Extensions/modifications
Security:
• Borrower is a strong operator for property
• Collateral well positioned to meet/
out-perform market occupancy/rent
b)
% of
total
20%
Modifications
Modified
Total 3Q YTD
$4.4B
Pay down
$0.5B
Incremental
life-time income
$120MM
4Q’09E
$1.6 – 2.8
$0.0 – 0.1
$90 – 170
Total ’09
$6.0 – 7.2
$0.5 – 0.6
$210 – 290
CFPA1478 Security Analysts_December 2009_TUES a.m. 38
Loss outlook
($ in billions, pre-tax)
Loss views a)
Dynamics
Stress cases
• Tough environment … real estate
recovery will lag rest of economy
~$1.9-2.9
~$2.1 ~$1.6-2.1
$1.4
Equity
0.5
Debt
0.9
~0.8
~1.3
3Q’09
YTD
’09
estimate
~1.4-1.5
~0.5-1.4
• Get ahead of debt collateral values
Restructure loans
Maximize collections
Create value in foreclosure
’10
base/
adverse
• Maintain equity cash flows
Outperform leasing market
Control property expenses
~0.7-1.1
~0.9-1.0
’09
base/
adverse
a) - Owner occupied reported separately in ’09 (~$0.1B)
CFPA1478 Security Analysts_December 2009_TUES a.m. 39
Executing through a challenging
environment
+ Realistic about valuations … assuming additional 13% value decline
+ Managing debt maturities
Restructured 10% of portfolio in ’09 YTD
$0.5B pay downs, reducing LTV
~200 bps. estimated margin improvement
+ Executing NOI/leasing plans
19MM sq.ft. leased … ahead of plan
84% of ’10 NOI already in place
+ Working through JV 3rd party debt maturities
70% of ’09 maturities resolved/agreement in concept
Minimal fundings … limited write-offs
+ Controlling costs
Reduced SG&A by 33% YTD vs. ’08 … continue to invest in asset management
CFPA1478 Security Analysts_December 2009_TUES a.m. 40
CLL Americas
CFPA1478 Security Analysts_December 2009_TUES a.m. 41
Commercial lending & leasing overview
Portfolio mix ($214B) – 3Q’09
Equipment
leases & loans
45%
Americas
64%
Asia
10%
EMEA
26%
Leveraged
loans
19%
• Leasing and lending against hard,
foreclosable assets for 25+ years
Factoring &
ABL
17%
• Operations across 30+ countries
Other
11% 8%
Other
senior-secured
• Organized by product & industry
Healthcare
Inventory Finance
• Disciplined underwrite to hold approach
Equip
Finance
Sponsor
Leading provider of
senior secured
financing to middle
market companies
Bank Loan
Group
Franchise
Fleet
Services
Corp
Finance
• Spread of risk: 1B+ transactions
annually for 1MM+ customers globally
• 21,400 employees with over 25%
dedicated to risk management
CFPA1478 Security Analysts_December 2009_TUES a.m. 42
What we do in the U.S.
($ in billions)
3Q’09
assets
Product
Focus
Approach
Equipment leases
& loans
$49
Collateral: hard, foreclosable assets • Essential use equipment
• Inv. grade & mid-market customers • Remarketing expertise
ABL & factoring
$10
Collateral: inventory & receivables
• Working capital for mid-market
• Advance rate on eligible assets
• Monitoring, audits, cash control
Leveraged loans
$32
Collateral: enterprise & assets
• Mid-market LBO & acq. finance
• Limited hold sizes & multiples
• Predetermined exit strategies
Franchise finance
$12
Collateral: equipment & enterprise
• Top tier and larger operators
• Secured by assets & real estate
• Avoid start-ups & locals
Inventory finance
$4
Collateral: dealer floor inventory
• Equipment & OEMs we know
• 1st lien on inventory
• Manufacturer support
Originate to hold … dedicated industry teams … foreclosable assets
CFPA1478 Security Analysts_December 2009_TUES a.m. 43
Americas portfolio residual analysis
Residual realization ratea)
Dynamics
(U.S. based collateral)
• 3Q’09 YTD selected segments
realization rates (~70%
coverage):
128% 128%
122% 122%
124%
120% 119%
119%
– Corporate Aircraft – 97%
– Copiers – 121%
– Transportation – 120%
100%
– Healthcare – 137%
• Lower return rates (69% 3Q’09
YTD “stick rate”), higher lease
extension income helping offset
softer equipment price levels
4Q'07
$B Residual $0.6
1Q'08
2Q'08
3Q'08
4Q'08
1Q'09
2Q'09
3Q'09
$0.4
$0.4
$0.4
$0.4
$0.3
$0.3
$0.2
a) - Realization rate includes early termination income, automatic renewals income
+ equipment sales proceeds
• Corporate air exposure lessened
by contractual early termination
provisions (>~90% early term)
Realization rates holding up well
CFPA1478 Security Analysts_December 2009_TUES a.m. 44
How we go to market
Equipment
Lending
• Equipment leases
& loans
• Franchise finance
• Inventory finance
Our products
+
• Leverage
loans
• Asset based
loans
Leases & loans
secured by hard
foreclosable
assets
Total
volumea) ROI
Value proposition
Direct
Lending
Recognized leader in key segments with deep domain expertise
Experienced sales force, highly structured ABL, DIP & restructuring
Sponsor
#1 leader – mid-market, deep relationships, strong sales coverage
~$2B
~4.3%
Healthcare
Strong healthcare expertise & capital markets capabilities,
dedicated sales force
~$3B
~3.1%
Equipment
Strong industry & collateral knowledge, structuring expertise
Speed … constant focus on cycle time, touchless originations
~$29B ~2.4%
Dealer
Finance
Domain expertise & 50+ years of industry experience
Best in class systems infrastructure & service applications
~$27B ~2.8%
Franchise
Restaurant industry expertise, product breadth, structuring
flexibility
~$10B ~5.6%
~$1B
Mid-market
($30-500MM)
player
Best-in-class
service … over
300,000
customers
~2.6%
a) - Total 2009 volume estimate
CFPA1478 Security Analysts_December 2009_TUES a.m. 45
Americas margins
6.09
6.01
~5.75
5.48
~5.25
~5.00
Portfolio
Margin%a)
New
business
margin%
~5.00
3.94
3.64
3.58
3.59
3.54
3.30
3.56
3.61
3.61
2.87
3.36
'07
1Q'08
2Q'08
3Q'08
4Q'08
1Q'09
~3.92
~4.00
4Q'09E
1Q'10F
~4.15
~4.26
~5.00
~4.43
3.70
3.47
2Q'09
3Q'09
2Q'10F
3Q'10F
4Q'10F
a) - CV ex-gains
• Disciplined capital allocation
• Runoff $49B ’09-’10 @ 2.5%
• Significantly accretive new originations
• New on-book volume $40B @ 5.2%
• Rigorous risk-based repricing effort
• Repriced $22B, up 175 bps.
Margins up strongly … additional $1B+ in ’10 vs. ’08
CFPA1478 Security Analysts_December 2009_TUES a.m. 46
CLL Americas summary
($ in millions)
’10 net income
outlook
Dynamics
• Deep industry & product expertise
Corporate
++
Sponsor
+
Equipment
+
Healthcare
=
Comm’l. Distribution
=
Franchise
=
• Leadership position across core
mid-market financing products
• Strong customer relationships with
1,300+ direct originators
• Best-in-class credit & risk
management
• Experienced leadership team that’s
weathered many cycles
CFPA1478 Security Analysts_December 2009_TUES a.m. 47
Operations Update
CFPA1478 Security Analysts_December 2009_TUES a.m. 48
U.K. Mortgage
($ in millions)
Collections actions paying-off … DQs stabilizing
30%
7.9%
U/E Est.
8%
U/E % (RHS)
24%
25.9%
$22.4B
7%
25.3%
5.2%
6%
18%
15.8%
30+ DQ (LHS)
$21.6B
4%
3%
90+ DQ (LHS)
7.1%
($2.8B)
ex-FX
5%
15.9%
15.1%
12%
Shrinking assets
9%
8.0%
2%
6%
1%
Jan '08
Apr '08
Jul '08
Oct '08
Jan '09
Apr '09
Jul '09
Oct '09
’08A
Real Estate owned … declining …
2,080
1,960
2Q’09
3Q’09
Out-performing stress loss scenarios
3Q sales 115%
of carrying
value
1,495
$995
Nov ’09
House prices stabilizing … up 4.2% YTD
Halifax HPI
(QoQ
change)
+2.8%
(1.4%)
(5.1%)
(5.6%) (5.2%)
(2.7%)
(1.9%)
1Q’08
2Q’08
3Q’08
1Q’09
2Q’09
’09E
$1,125
~$750
’09
credit
costs
+3.7%
’09 Base ’09 Adverse
4Q’08
3Q’09
’09E
Nov’09
’09 better than expected … earnings improve in 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 49
CEE Banks
($ in millions)
Assets ($B)
FX/Disp.
Core
$29.0
1.6
$28.2
Credit Grade
A+
50%
A
20%
B
16%
C
7%
D
7%
28.2
27.4
29.6
Stabilizing exchange rates and delinquencies
249.065
FX
22.826
183.818
(1.4)
’09E
PLN
2.839
Dec ’08
Mar ’09
$1,043
90+%
~Base case
losses
~$760
’09E
Sep ’09
Nov ’09
3.79%
4.17%
4.10% 4.11%
1.43%
1.63%
1.63% 1.64%
0.91%
3Q’08 4Q’08 1Q’09 4/’09 5/’09 6/’09 7/’09 8/’09 9/’09 10/’09
$724
Net income
(3Q YTD)
’09 Adv.
Jun ’09
Delinquency
2009 credit costs
’09 Base
17.624
2.547
30+% 2.50%
$716
181.42
CZK
3.762
18.326
Oct ’08
’08A
HUF
$331
’08
’09
2009 as expected, 2010 net income up
CFPA1478 Security Analysts_December 2009_TUES a.m. 50
U.S. Consumer
($ in millions)
Delinquency
Served receivables ($B)
(served)
$56.3
Exits
$49.8
$9.1
9.3%
8.1%
Core
$47.2
6.1%
5.8%
’08A
4.9%
’09E
2009 Credit costs
1Q'08
5.6%
7.3%
$5,196
2Q'08
3Q'08
4Q'08
1Q'09
2Q'09
3Q'09 Oct '09
Net income (3Q YTD)
$663
259
PY gains/Disp. Bus.
’09 Adverse
7.0%
7.4%
30+ DQ
6.2%
$3,864
8.4%
6.9%
7.1%
5.4%
Much lower
losses
$5,764
’09 Base
Unemployment
7.1%
$43.3
Avg. U/E
10.2%
9.6%
Risk actions have
broken correlation
$6.5
$404
$370
’08
’09
’09E
8.9%
9.3%
2009 net income well ahead of expectations; earnings up in 2010
CFPA1478 Security Analysts_December 2009_TUES a.m. 51
Investment going forward
($ in billions)
ENI
’09 dynamics
8%+
$525
$475-485
FX/FAS 167
“Green”
businesses
$445-455
345
~$400
~325335
• Managing volume: “green”
platforms increasing as % of
total book … ~69% at YE’09, up
3 points
• “Red” assets/Real Estate volume
limited to commitments
– 3QYTD Mortgage originations
~91%
– Real Estate volume ~87%
“Red”
businesses
+ Real Estate
a) - ex-FX
180
~150
’08
’09
outlooka)
• ~$12B in dispositions
’10F
’12F
• Includes Interbanca acquisition/
BAC step-up (~$17B)
Positioning to grow “green” platforms
CFPA1478 Security Analysts_December 2009_TUES a.m. 52
Summary/Q&A
CFPA1478 Security Analysts_December 2009_TUES a.m. 53
2010 earnings outlook
($ in billions)
3Q’09 YTD 2010F
CLL
Dynamics
+ Lower losses
+ Improved margins
+ Lower SG&A
$0.6
++
Consumer
1.4
+
+ Improved margins
+ Stabilizing to lower losses
+ Lower SG&A
Real Estate
(0.9)
–
– Higher losses/impairments
0.9
=
+ Margin improvement
= Manage aviation cycle
Aviation/Energy
Capital Finance
$2.0
Solid foundation for 2011+
CFPA1478 Security Analysts_December 2009_TUES a.m. 54
GE Capital future
($ in billions)
++
Dynamics
+
$2.0+
Targeting $400B ENI
~Flat
(ex-FAS 167 and FX) in
2012
2009E
2010F
2011F
2012F
$475-485
$445-455
$415-425
~$400
Losses
–
–
+
=
+
+
++
++
SG&A
+
+
+
++
Tax
+
–
=
=
ENIa)
Margins
Margins improving
Losses expected to peak
in 2010
Estimated ~$2B capital
contribution in 2011 under
income maintenance
agreement
a) – 2009: ex-FX, 2010+: ex-FX and FAS 167
Higher pre-tax in 2010 … earnings growth in 2011
CFPA1478 Security Analysts_December 2009_TUES a.m. 55
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