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GE Capital, CLL Americas
Dan Henson
June 9, 2010
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 General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’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 GECC 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 forward-looking statements.”
“In this document, “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.”
GE Capital summary
GE Capital has a strong and advantaged business model
Have strengthened our liquidity position
Strong risk practices … underwrite to hold on our balance sheet
Portfolio margins improve in 2010
Losses have peaked and Real Estate risk is manageable
Supportive of regulatory reform, preparing for more oversight
Profitable
Solid, long-term value creation
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
3
GE Capital franchise… CLL Americas
($ in millions)
Net Income
World class offering
Healthcare
Equipment
Finance
Sponsor
$1,194
$659
Inventory Finance
$249
Bank Loan
Group
ENI ($B)
TY'08
TY'09
1Q'10
$125
$108
$115
Corp
Finance
Leading provider of
senior secured
financing to middle
market companies
Fleet
Services
Franchise
• Leasing and lending against hard, foreclosable assets
• Organized by product & industry
• Spread of risk through over 400K customers and dealers
Disciplined underwrite to hold approach
4
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
Approach
Direct
Lending
Recognized leader in key segments with deep domain expertise
Experienced sales force, structured ABL, DIP & restructuring
$9B
5.7%
Sponsor
#1 leader – mid-market, deep relationships, strong sales
coverage
$3B
5.0%
• Predetermined exit
strategies
Healthcare
Strong healthcare expertise & capital markets capabilities,
dedicated sales force
$4B
2.5%
• Monitoring, audits, &
cash control
Equipment
Strong industry & collateral knowledge, structuring expertise
Speed… constant focus on cycle time, touchless originations
$28B
2.5%
• Essential use equipment
• Remarketing expertise
Dealer
Finance
Domain expertise & 50+ years of industry experience
Best in class systems infrastructure & service applications
$28B
4.8%
• 1st lien on inventory
• Manufacturer support
Franchise
Restaurant industry expertise, product breadth, structuring
flexibility
$1B
2.3%
• Secured by assets & RE
• Avoid start-ups & locals
• Limited hold sizes &
multiples
a) - Total 2009 volume
5
Our competitive advantage
Direct
origination reach
+
Disciplined risk
management
• ~1,200 Direct
origination team
• Strong credit &
structuring skills
• Local market
knowledge
• Solid, well tenured
organization
• Strong customer
relationships
• Diverse portfolio
• Leadership position
in products
+
Domain
expertise
• Broad & deep
industry, collateral &
product knowledge
• Speed & certainty of
execution
• Creative structuring
expertise
• Sophisticated tools
• Dedicated specialists,
early detection of
distressed credits
Leverage GE
+
• Share GE best
practices
• Enterprise selling
• Operational
excellence
• Net Promoter
Score… driving
behavior
+
Experienced senior leadership team … weathered many cycles
6
Equipment market … positive signs
CapEx growing & the outlook is strong
CapEx post-recession recovery cycles
Quarterly % change (annualized)
40
30
20
10
0
-10
-20
-30
-40
Forecast
2005
2006
2007
2008
2009
2010
2011
Source: Global Insights
Index base: 2000=100; seasonally adjusted (SA)
120.0
115
115.0
Index base: 2000=100; SA
1982
Avg of cycles
before 1982
Current
1991
2001
-4 -3
-2 -1
0
1
2
3
4
5
6
7
8
Quarters before/after the end of a recession
ATA truck tonnage index up to 110
Index
120
Source: BofA Merrill Lynch Global
Research, February 22, 2010
140
135
130
125
120
115
110
105
100
95
110
April ‘10
110
110.0
105
105.0
98
Dec ‘08
100
• Macroeconomic trends suggest broadening
economic recovery … manufacturing activity
expanding
• Mfg capacity utilization trending up to 74% in
April ’10 since bottoming out in July ’09
100.0
95
• Uneven recovery across sectors … recovery
expected to be led by technology, transportation
& construction
95.0
2007
2008
2009
2010
Source: American Trucking Association
7
Lending market strengthening
Solid 2010 volume thru April …
… and positive outlook for recovery
U.S. Leveraged Lending market
U.S. Leveraged Lending market
$B
2009
2010
$20
$8
Jan
$4
$5
Feb
Mar
$6
$302
$11 $12
Jan
Apr
Feb
$153
Mar
Apr
Source: S&P Leveraged Commentary & Data
Leveraged loan defaults peaked in 2009
Default rate by # of issuers
10%
8%
6%
4%
8.3%
11/09
0.3%
12/07
’00
’04
Source: S&P LCD and S&P/LSTA Leveraged Loan Index
’07
Avg
’03-’06
2007
2008
+
++
$75
2009
2010
2011
S&P LCD
• Price normalizing … but still at attractive levels
with increased activity
6.2%
5/10
• Structures remain reasonable within core middle
market space … meaningful equity contribution
and debt multiples down from historical highs
‘10
• Industry default rate down 25% from November
‘09 peak
2%
0%
’98
$535
$26
8
Commercial pipeline is building
Americas pipeline trend
Origination environment outlook
$26B
$24B
$20B
$19B
In-credit
Proposal
1Q ‘09
2Q ‘09
3Q ‘09
4Q ‘09
++
Healthcare finance
++
Leverage finance
++
Mid-ticket leasing
+
Inventory finance
+
Fleet services
+
Franchise finance
=
Backlog
$17B
$15B
Vendor & dealer finance
1Q ‘10
Current
9
CLL Americas margins
6.09
6.01
5.75
5.48
5.00
Portfolio
Margin%a)
New
business
margin%
3.94
3.64
3.58
3.59
3.56
3.61
3.61
3.54
3.30
2.87
3.36
'07
1Q'08
2Q'08
3Q'08
4Q'08
1Q'09
3.96
4.00
4Q'09
1Q'10
3.70
3.47
2Q'09
3Q'09
a) - CV ex-gains
• Disciplined capital allocation
• Focused effort driving attractive ROI
• Significantly accretive new originations
• ’09 new business margin @ 5.7%
• Portfolio margin continues to increase
• Runoff $49B ’09-’10 @ 2.5% NBM
Margins estimated up $1B+ pre-tax in ’10 vs. ’08
10
CLL Americas portfolio quality
($ in billions)
Delinquency and non-earnings
2.6%
2.3%
Delinquency %
$3.2
1.4%
Current portfolio dynamics
2.4%
• Delinquencies beginning to decline across
portfolio led by small ticket equipment
$3.2
• Non-earnings down from 3Q’09 peak of $3.5B…
expected to decline throughout 2010
$2.0
Non-earnings
• Continuing to see pressure in restaurants,
transportation, construction & media
$0.7
'07
'08
'09
1Q'10
Leveraging broader domain expertise to
drive portfolio solutions
Credit costs
1.5%
1.3%
• Mitigated $800MM+ losses since January 2009
through SWAT team approach
0.9%
Loss rate
0.4%
$1.4
$1.3
• Reduced exposure by $9B & tightened credit
criteria in troubled segments
$0.9
Credit costs
$0.3
'07
'08
'09
1Q’10
Annualized
• Leveraging manufacturing partners to extend
inventory repurchase programs
11
Americas portfolio residual analysis
Residual realization ratea)
Dynamics
(U.S. based collateral)
122%
• 1Q’10 selected segments
realization rates
129%
122%
119% 124%
120%
119%
118%
3Q'08
4Q'08
1Q'09
2Q'09
3Q'09
4Q'09
1Q'10
$0.4
$0.4
$0.3
$0.3
$0.2
$0.3
$0.2
100%
–
–
–
–
Corporate Aircraft – 103%
Copiers – 129%
Transportation – 116%
Healthcare – 155%
(Above 4 collaterals represent 66% of $6.7B of Residual)
2Q'08
Resid. ($B)b) $0.4
• Higher stick rates (70% in 1Q’10)
driving improved realization
a) Realization rate includes early termination income, automatic renewals
income & equipment sale proceeds
b) Represents residual dollars disposed during quarter
Realization rates holding up well through the cycle
12
Focused & profitable GE Capital
2010 dynamics
Strong franchise
Funding on plan
High-margin origination
Delinquencies have stabilized
+ Direct origination … domain based
+ Industrial skills … ACFC
Reserve coverage near all-time highs
+ Risk & asset management
+ Attractive markets
Capital ratios improving
+ Less competition
13
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