GE Capital Investor Meeting December 7, 2010
"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: 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 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; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (Grey Zone); 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 adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the planned 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 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.”
“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” 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 We see a more favorable competitive landscape
2 Our balance sheet is safer and stronger
3 We appear to be well positioned under Basel III
4 We are ahead of our ENI reduction plan … non-core asset book is down significantly
5 Playing offense again with deep domain expertise … deliver value to our customers
6 Losses are better … Real Estate on plan
7 Regulatory reform is as expected and manageable
8 Do not expect to need additional capital from parent
CFPA1586 Investor Meeting_Dec. 2010 2 2010 execution
Goal Status Dynamics Liquidity Strong $41B CP outstanding $66B GECS cash and equivalents at 3Q
Funding Complete ~$24B long-term funding YTD
Balance sheet Ahead of plan ENI down ~$40B+ (ex. FX)
Cost Ahead of plan ~$0.8B cost out
Capital Better 8.2% 3Q Tier 1 common ratio (GECC)
Losses & impairments Better Lower than Stress base case and Plan
Earnings Better ~$3B+
Well positioned for the future
CFPA1586 Investor Meeting_Dec. 2010 3
Funding & liquidity ($ in billions) Long-term debt funding ENI – $440 basis-d) $84-a) $532 $70-b) ~50% of 2011 $516 pre-funded $500 $491
$24-c)
‟08 ‟09 ‟10YTD 1/1/10 1Q‟10 2Q‟10 3Q‟10 a) – Includes $13B ‟09 pre-funding Reported $538 $516 $487 $489 b) – Includes $38B ‟10 pre-funding c) - $24B of ‟11 pre-funding d) – Ex. cash at 1Q‟10 FX GECS commercial paper T1C % ratio $72 7.6% 8.1% 8.2% $47 $41 GECC GECS 6.6 7.1 7.3
4Q‟08 4Q‟09 3Q‟10 4Q‟09 2Q‟10 3Q‟10 Funding and capital in good shape
CFPA1586 Investor Meeting_Dec. 2010 4 GE Capital business model Advantage Pre-crisis Today • Largest direct • Still largest direct 1• Substantial origination capability origination team origination team
2• Deep domain expertise • Unique focus on key • Strong relationships – Healthcare, Energy, Media, Aircraft verticals
3• Experts at collateral/asset management • Strong residual • Strong collateral and realization residual realization
4• Experienced, disciplined risk management and capital allocation • On balance sheet • Core to business model underwriting – Spread of risk, secured
5• GE operational headset & tools • Scale focus • >25% lower costs
6• Match funded • Core value • Important differentiator
Attractive markets Room to grow Unique vertical expertise Regulatory compliance
CFPA1586 Investor Meeting_Dec. 2010 5
Competitive advantage
High Core franchises Verticals GE Capital Aviation Services
Energy Financial Services Healthcare Commercial Lending & Leasing Mid-market Sponsor Factoring Vendor Finance Commercial Distribution Finance
Operating intensity Consumer Private Label Credit Card Sales Finance Select banks/JVs Regions Low Australia Standard Specific Canada Industry/Geographic domain GE will compete in 15-20 key segments Strong competitive advantage with deep domain expertise
CFPA1586 Investor Meeting_Dec. 2010 6 Attractive markets GE Capital total volume ($ in billions)-a) Underwriting business at attractive ROIs 15% (~2.9%) $253 Providing liquidity to critical areas of U.S. economy. Since 1/1/08: $220 – ~$254B new U.S. commercial financing 137 – ~$221B credit ~48MM U.S. consumers International 115 Best performing consumer credit business in the U.S.
Key wins/renewals 116 U.S. 105
3Q‟09YTD 3Q‟10YTD a) - Total volume = on-book plus flow Volume 15% vs. 2009 … providing critical liquidity to customers in our markets
CFPA1586 Investor Meeting_Dec. 2010 7
Normalized returns (ENI,- a) $ in billions)
~2.0% Return expectations ~$480 (~105) ROI • ~2% ROI “Red” ~65 ~$440+ ROI “Red” assets 22% assets Core growth ~15-20% ~2% • ~7-9% Tier 1 common ~$375 ~10-15% ~1-2% • ~11-15% ROE Consumer 16% ~20-25% ~2-3% Assumptions Real Estate 16% • $440B ENI in ‟12, future Connected to GE “Verticals” 13% growth based on debt markets Mid-market ~45-50% ~2% Lending & 33% • Better Real Estate Leasing • Meet regulatory requirements in a 2010E Future capital efficient way
Remixing to higher returning business
CFPA1586 Investor Meeting_Dec. 2010 8 a) – Ex. Cash at 1Q‟10 FX Dodd-Frank Financial Reform Bill
GE business model remains intact
Supervision will transfer to the Fed, regardless of whether GE Capital is designated “systemic”
Volcker rule impact should be limited … rulemaking on-going
Capital requirements should be within GE Capital earnings growth & asset reduction plans
Expect limited impact from new rules on derivatives & securitization
Outcome as expected & manageable Expect final rules to be determined over next 24 months
CFPA1586 Investor Meeting_Dec. 2010 9
Valuable franchise ($ in billions)
1 Solid earnings 2 More liquidity/more capital ++ ~$40-60 ~7-9% ++ ~$3.0+ $1.7 Cash T1C ‟09 ‟10E ‟11E ‟12F 3 Higher margins 4 Returns > WACC 5%+ ~11-15% 4.6% ~5.0% Lower “red” assets Assume efficient capital requirements ‟09 ‟10E ‟11E Normalized ROE
5 Should generate surplus capital 6 Strategic connection Do not expect to need to fund income Unique verticals with GE domain maintenance for 2010 expertise Expect to return to dividend in 2012 Commercial best practices
GE Capital will deliver for investors
CFPA1586 Investor Meeting_Dec. 2010 10 Agenda
Financial update Jeff Bornstein – CFO
Funding & Liquidity Kathy Cassidy – Treasurer
Portfolio update Ryan Zanin – CRO
Real Estate Ron Pressman – Real Estate CEO
U.S. Consumer Mark Begor – U.S. Consumer CEO
Growth & Business update Bill Cary – COO
Summary Mike Neal
Q&A
CFPA1586 Investor Meeting_Dec. 2010 11
Financial Update
CFPA1586 Investor Meeting_Dec. 2010 12 GE Capital financial performance
2009 2010E Earnings $1.7B ~$3B+ + Do not expect IMA contribution Pretax earnings $(2.0)B ~$2B + Better losses, margins ENI (on $440B basis)-a) $503B ~$480B + A year ahead of plan Losses/impairments $12.6B ~$10.6B + Better, Real Estate on plan Costs $3.1B $0.8B + Down another ~$0.8B Volume (on-book, ex. flow) $145B $154B + CLL 30+%, pipeline growing, ~2.9% ROI Margins 4.6% ~5.0% + Improved Cost of funds 3.1% ~2.8% + Spreads improving Reserve Coverage 2.35% ~2.6% + 2.69% at 3Q
Our assessment Significantly improved financial performance Well positioned for 2011+
CFPA1586 Investor Meeting_Dec. 2010 13 a) – Ex. Cash at 1Q‟10 FX
2010 earnings outlook ($ in billions) 3Q‟10 YTD Vs. Plan Dynamics
+ Lower losses CLL $1.0 + + Improved margins
Consumer 2.2 ++ + Lower losses + Lower SG&A
Real Estate (1.3) = = Stabilizing losses/impairments
Aviation/Energy 1.1 + + Margin improvement
Corporate/Other (0.6) Restructuring/Treasury marks/HQ
$2.3 ++
Ahead of plan … expect ~$3B+ earnings in ‟10
CFPA1586 Investor Meeting_Dec. 2010 14 Losses and impairments ($ in billions)
$19.0 Dynamics $16.9 5.4 Adverse Losses trending down to ‟03-‟07 3.9 levels; expect losses in 2011 to be $12.6 down substantially vs. peak in ~$10.6 2009 U.S. Retail out-performing as a result of early credit actions 13.0 13.6 Base U.K. Home Lending better
Real estate losses below Plan; impairments above Plan 2009 2009 2010E 2010 Stress Stress
Losses lower than Stress base case and Plan
CFPA1586 Investor Meeting_Dec. 2010 15 Note: Ex. Treasury FAS 133
Delinquencies and Non-earnings
30+ delinquencies Non-earnings ($B)
Non-earnings % Fin. rec. 14.20% 3.88% 3.84% 13.38% 13.26% 13.49% 13.68% 3.73% Mortgage 3.70% 3.61%
8.82% 8.85% 8.72% 8.66% 8.34% Consumer $11.9 4.97% 5.40% 5.74% $13.8 ex. FX 4.09% 4.22% Real Estate $13.3 $13.6 $12.7 $12.3 Equipment 3.01% 2.81% 2.71% 2.50% 2.26% Consumer 6.5 6.5 6.8 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 4Q'10E 6.4 6.2
Equipment showing signs of stabilization … improvement across all poles Commercial 7.3 Real Estate increase driven by accounts paying 6.7 6.7 6.2 5.9 current beyond maturity; 72% of impaired loans remain current
Consumer delinquencies continue to decline 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 4Q'10E Portfolio continues to improve
CFPA1586 Investor Meeting_Dec. 2010 16 Reserve coverage ($ in billions)
15 mos. $9.5 write-offs in Allowance $9.1 $9.1 reserves Dynamics for losses $8.1 Overall months in coverage increased by 3 months vs. 5.8 12 mos. 5.2 5.1 write-offs in YE 2009 Consumer 4.5 reserves
Coverage likely peaked in 3Q … 25 mos. expect to decline through write-offs in Commercial 3.6 3.7 3.9 4.0 reserves write-offs
4Q'09 1Q'10 2Q'10 3Q'10 Non-earning coverage Reserve coverage 2.35% 2.61% 2.66% 2.69% expected to increase
Non-earning coverage 61% 70% 72% 74% Expect 4Q‟10 reserves to be slightly lower
CFPA1586 Investor Meeting_Dec. 2010 17
SG&A ($ in billions) Dynamics $14.0 • Continued benefit from structural ~$(4.0)B cost out $10.9 ‟08–‟10 Dispositions $(1.0) ~$10.1 Org. structures (1.6) Indirect spend (1.4)
~$(4.0)
• Strong discipline on indirect spending – Down over 500 rooftops since 2008
• Investments in front-end, regulatory '08 '09 '10E readiness and collections
~$4B lower costs vs. 2008
CFPA1586 Investor Meeting_Dec. 2010 18 Note: Ex. acquisitions/assessments/Penske disposition March ‟09 look back… Performance vs. Areas of concern our expectations Status Portfolio U.S. Consumer losses & profitability Outperform 2010 – most profitable year U.K. Mortgage losses Better Profitable ‟09 & ‟10 – continue to work Real Estate losses & impairments As expected Very tough, but appears to have bottomed Eastern European Banks Better Solid ‟09 & ‟10 Middle Market Leverage Lending Outperform Strong earnings, solidified market position GECAS (Aviation Leasing) As expected Stable source of strength, competitively better Corporate Aircraft Below Stabilized and improving Safe & Secure Investment (ENI) Better 1 year ahead of plan Capital As expected Ratios strong and improving Liquidity/CP Better 3Q cash and equivalents at $66B, CP at $41B Funding As expected ‟10 funded in ‟09, ~50% of ‟11 funded Regulatory As expected Final rules over next 24 months
Solid execution
CFPA1586 Investor Meeting_Dec. 2010 19
Funding and Liquidity
CFPA1586 Investor Meeting_Dec. 2010 20 GECS cash – Sources and uses ($ in billions) TY'10E TY'11E TY'12F Beginning cash balance-a) $69 ~$58-60 ~$60-70 Dynamics
Sources
LT debt issuances 25 25-30 35-40 Completed $24B YTD
CP ~(5-7) 0-8 (5)-2 Managing CP between $40-$50B
Alternative funding ~(4) 0-5 4-8 Growing deposits
Business cash flows/other ~41 25-35 20-28 Working towards $440B ENI by ‟12 Total sources ~$55-57 ~$63-68 ~$65-75
~$33B Long term debt maturities (66) (62) (81) in ‟13F Paying off TLGP by ‟12 and reducing yearly maturities going forward
-b) -a) ~$40-45B Ending cash balance ~$58-60 ~$60-70 ~$50-60 in ‟13F
CFPA1586 Investor Meeting_Dec. 2010 21 (a- Includes $4B short term investments >3 mos. (b- Intra quarter balance for ‟12 ~$50-70B
GECC & GECS capital metrics Key capital metrics Dynamics
GECC GECS
a)
– + Ending net investment down ~$40B + 7.6 8.2 from 1/1/10 6.6 7.3 5.7 4.7 Ratios strong & improving
Basel1 T1C / RWA 4Q‟08 4Q‟09 3Q‟10 4Q‟10E
a)
– + + Limited impact from Basel 3 proposals 9.0 8.0 8.0 6.1 6.9 5.0 – No mortgage servicing rights, net deferred tax liability position, no Basel1 T1 / RWA trading book & minimal impact
4Q‟08 4Q‟09 3Q‟10 4Q‟10E
b) from banking JVs –
7.7 7.1 Closely monitoring U.S. regulatory 5.2 5.5 5.2 5.5 developments
Adjusteddebt/equity 4Q‟08 4Q‟09 3Q‟10 4Q‟10E
CFPA1586 Investor Meeting_Dec. 2010 22 (a- Estimated based on SCAP requirements (b- Net of cash & equivalents with hybrid debt as equity, ex. non-controlling interests Funding environment GECC spreads Libor spreads (bps.)
540 12/31/08 Funding sources ‟09 avg. ‟10 avg. Change 435 460
CP w/ fees ~0 ~(5-10) ~(5-10)
(bps.) 230 12/31/09 CDs (2 yrs.) ~82 ~42 ~(40) 210 184 130 227 12/02/10 87 175 TLGP debt w/ fees (3 yrs.) ~150 - ~(150) SpreadTo 3Mo. Libor 85 120 Non-TLGP debt (5 yrs.) ~240 ~100 ~(140) 3 5 10 30 Maturity (yrs.) ABS (Card – AAA) (3 yrs.) ~175 ~71 ~(104) 5 year USD cash spreads L-OAS (bps.) 1,000
800 • TLGP + CPFF fees of $2.4B paid ‟08/‟09 … run off by ‟12 600 • Spreads tightened significantly … $2B of 5 year debt at 400 +95 bps. 200 • Positioned competitively for 2011 0 Mar-09 Jul-09 Oct-09 Mar-10 Jul-10 Nov-10
GECC BAC C GS JPM WFC Safe, secure and competitive funding position … Continuing to execute in multiple currencies, at longer tenor and tightening spreads
CFPA1586 Investor Meeting_Dec. 2010 23
Summary ($ in billions) Debt composition Resilient funding model
$500 $486 Securitization 4 ~$468 • Sustainable share of debt markets … long term 59 30 ~30 investment grade debt market share of 2-3% LT debt - TLGP 55 ~53 • Liquidity in the global commercial paper markets continues to be strong … CP as % of LT debt non-guaranteed 325 293 ~285 total debt ~10% … U.S. CP market share ~3%
• Diversified funding sources … alternative Alternative funding ~10%-15% of total debt, -a) 65 67 ~59 funding/others securitization ~6-8% Comm‟l. paper 47 41 ~41
4Q'09 3Q'10 4Q'10E • Strong liquidity position … covering ~12
Bank lines $52 $52 $52 months of long term debt maturities … cash and bank lines are ~2.9 times CP CP coverage 100%+ 100%+ 100%+ Cash-b) $68 $70 ~$58-60 • Strong parent support (IMA) and ratings LT debt <1 yr. $70 $63 $62 (CP A-1+/P-1 ... LTD Aa2/AA+)
CFPA1586 Investor Meeting_Dec. 2010 24 (a- Includes GE-GECS inter-company loan (b- Includes $4B investment/liquidity portfolio >3 mos. Portfolio Update
CFPA1586 Investor Meeting_Dec. 2010 25
Portfolio Risk update Key dynamics Outlook • Negative credit migration from limited refinancing opportunities on debt maturities – workout actions Real Estate • Pressure from office fundamentals (rents & occupancy) Bottoming • Value declines slowed – focused on lease up execution • CMBS activity starting to re-emerge
• Industry recovering; better aircraft seeing upturn in values • Continue to mitigate weaker airline credits with global GECAS Improving redeployment ability and mix of aircraft • Well positioned vs. other large players
• Favorable credit migration; obligor financials stabilizing CLL • Continue to see pressures in some consumer facing sectors Improving • Senior secured positions mitigate losses • Improving credit migration on unsecured products; benefit Consumer from new vintages Improving • Focus on aged mortgage accounts and REO units/pipeline • Predominately contracted, hedged, long-lived assets EFS Stable • Portfolio performing well
Overall Portfolio getting better and Real Estate manageable
CFPA1586 Investor Meeting_Dec. 2010 26 Europe exposure manageable (Funded assets,-a) $ in billions) Europe Dynamics ~$136 CEE Banks performing CLL ~92% secured; favorable credit migration U.K. Home Lending actions paying off Commercial real estate stablizing in key markets (London, Paris) Limited concentration risk – well diversified across ~670K commercial customers ~$21 ~$0.3 “Focus” countries Europe “Focus” Direct sovereign Small pockets of manageable pressures countries risk Minimal direct sovereign exposure Italy, Spain, Ireland, Portugal, Greece
Limited sovereign exposure … manageable risk
CFPA1586 Investor Meeting_Dec. 2010 27 a) - Funded assets includes financing and investing activities (excludes Treasury cash and cash equivalents)
Central & Eastern Europe update ($ in millions) Product mix (Global Banking) Losses stabilized ~$19B 3Q‟10 receivables $262 Sales Finance Cards $210 $213 5% 3% $200 Auto Mortgage $196 7% $156 $135 $134 42% Personal 21% Loans
22% 4Q‟08 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2009 2010 SME Credit quality stabilizing Delinquency 4.26 3.79 4.17 4.10 4.22 4.18 4.24 CEE mortgages LTV ~69% 30+% 2.89 2.33 2.33 2.79 2.64 Downside risk from any economic 1.43 1.63 1.88 NE% 1.02 deterioration well understood/manageable
4Q‟08 1Q 2Q 3Q 4Q 1Q 2Q 3Q CEE profitable every quarter during crisis 2009 2010 Improving portfolio with pockets of pressure
CFPA1586 Investor Meeting_Dec. 2010 28 U.K. Home Lending update
Shrinking assets ($B) Delinquencies declining 24.2% 30+ 22.6% 22.1% 210 bps. Down
~$4.4B 15.0% $24.0 90+ 14.5% 14.2% 80 bps. $21.2 Receivables $19.6 Dec.‟09 Mar.‟10 Jun.‟10 Sept.‟10 Oct.‟10 ($1.55/GBP) REO stock down 2,080 64% ~116% of book ‟08 ‟09 3Q‟10 value recovery in 3Q Units # 746 ~750 Increased collections and loss mitigation resources 3x from ‟07 to ‟09 2Q‟09 peak 3Q‟10 4Q‟10 est. Re-indexed average LTV ~82% HPI stabilizing 5.2% 6.3% 3Q‟10 YTD credit costs $67MM vs. $740MM 2.6% 3Q‟09 YTD Halifax HPI (12.4)% (16.2)% (17.5)% (15.0)% (7.4)% 1.1% 1.2% (YoY change) 3Q‟10 reserve coverage at 3.19% Profitable every year during crisis 3Q‟08 4Q‟08 1Q‟09 2Q‟09 3Q‟09 4Q‟09 1Q‟10 2Q‟10 3Q‟10 Oct‟10 Actions paying off … continue to watch HPI and interest rates
CFPA1586 Investor Meeting_Dec. 2010 29
Commercial Lending and Leases
Funded assets ($183B) Loss on default experience 2008-09 (LGD) Others (JVs/investments) Moody‟s* 9% Cash flow 67% 31% 54% 42% 24% 16% Equipment 47% 3% 13% GE CLL GE CLL GE CLL ABL & ABL Cash flow Equipment Factoring (U.S.) (U.S.) (U.S.)
2009 Default rates (PD) GE CLL default rates better than market during peak crisis – product and customer mix Moody‟s 12.9% Successfully mitigating losses on defaulted credits
5.2% – Senior secured positions 4.3% 2.1% 2.9% – Work out mentality All Speculative GE CLL GE CLL GE CLL Corporates ABL Cash flow Equipment Residual realization rates stable
CFPA1586 Investor Meeting_Dec. 2010 30 *Average of 2008 and 2009 published rates CLL Americas residual realization
Residual realization rate-a) Dynamics • 3Q‟10 selected segments realization rates 129% 124% 119% 120% 119% 118% – Healthcare: 161% 116% 113% – Copiers: 124% 100% – Transportation: 122% – Corporate Aircraft: 82% (Above 4 collaterals represent 70% of $7.5B of Residual) 4Q'08 1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10
Resid. ($B)-b) $0.4 $0.3 $0.3 $0.2 $0.3 $0.2 $0.3 $0.3 • Lower 3Q‟10 realization driven by fall in disposed realization a) - Realization rate includes early termination income, automatic renewals income & equipment sale proceeds rate of early termed Aircraft b) - Represents residual dollars disposed during quarter
Realization rates holding up well through the cycle
CFPA1586 Investor Meeting_Dec. 2010 31
Risk approach
Underwriting basics Engage early with problems Infrastructure/governance
Underwrite Active portfolio Enterprise risk to hold monitoring framework
Senior secured Early warning Commercial Risk appetite signals financing
Simple product Workout Granular structures + and Restructures + portfolio analytics
Manage Portfolio aggregation Line management concentration and reporting
GE domain Reallocation Policies expertise of resources documentation
Continued strong risk management with expanded toolkit
CFPA1586 Investor Meeting_Dec. 2010 32 Real Estate
CFPA1586 Investor Meeting_Dec. 2010 33
Executing through a challenging RE environment ($ in billions)
$93 $88 $84 1 Reducing portfolio size $74 Ending net • ENI down 20% from ‟08 peak investment–a) • Targeted collections & sales 2Q‟08 4Q‟08 4Q‟09 3Q‟10 2 Equity unrealized loss declining 4Q‟09 4Q‟10E Unrealized • Significant reduction from ‟09 level loss estimate ~$(5.0)-(5.5) • Depreciation/losses … maintaining occupancy ~($7)
3Q‟10 YTD TY‟11E 3 Improving earnings profile Net • Expecting losses to peak this year income • Pace of recovery dependent on macro + $(1.3) environment ~$7
Assets under $4 4 Building out capital efficient model management • Leveraging existing platforms for third party investors ‟09 ‟10E
CFPA1586 Investor Meeting_Dec. 2010 34 a) – 2008 & 2009 adjusted for FAS 167 Debt portfolio @ 3Q‟10: $42B ($ in billions) Debt structure Impaired loans $9.1 Without 1.4 Singles On balance sheet lending reserve 17% reserve coverage 21% Crossed 95% Senior, 1st mortgage portfolios Quarterly revaluation process Owner- 50% With 7.7 occupied 83% current LTV/2.2x DSC reserve $3.1B TDR … 70% of ‟10 additions 24% Minimal construction at higher pricing 5% 3Q‟10 Sub-debt 72% of impaired paying current
Reserve coverage Delinquency trends Coverage 4.08% 4.37% 9.2% 8.7% 8.6% 3.33% 3.27% 8.4% 8.5% -a) 2.26% $1.9B Banks reserved -a) 5.4% Banks % Non-earners 5.7% 5.6% 4.7% 5.2% (ex. const.) 119% 111% 130% 78% 89% 5.4% 5.7% 5.0% GE 4.1% 4.2% (managed)
3Q‟09 4Q‟09 1Q‟10 2Q‟10 3Q‟10 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 Non-earning $ $1.3 $1.7 $1.6 $1.4 30+ $ $2.0 $2.1 $2.4 $2.4 $2.4 a) - Source: FFIEC (all commercial banks) Losses peaking this year Delinquency dollars flattening
CFPA1586 Investor Meeting_Dec. 2010 35
Debt portfolio dynamics ($ in billions)
Debt walk Maturity resolution
$49 -a) ~$(6) % % Estimated result 2010E total 2011E total ~$(1) ~$(1) ~$41 Collect $2.7 24% $4.2 39% Extend/restructure -b) 7.8 69% 6.3 59%
Foreclose 0.9 7% 0.2 2%
4Q‟09 Collections Losses Sales/other 4Q‟10E Total $11.4 $10.7 Collections exceeding expectations Resolution trends improving into 2011 a) – Includes FAS 167 b) – Includes $1.8B & $3.7B, respectively of contractual extensions ‟10 YTD modifications Market dynamics Maturity $8.6 100 15% vs. 2011+ 2.4 $0.5B cash pay downs U.S. debt 90 3Q‟09 $0.2B additional life income originations 80 2010 5.2 index Reduce exposure through cash 70 flow sweeps 60 Pre ‟10 1.0 50 Loans 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
96% at or above prior terms Liquidity improving for stable class A … still limited for transitional property Source: PPR
CFPA1586 Investor Meeting_Dec. 2010 36 Equity portfolio @ 3Q‟10: $29B ($ in billions, pretax) 87% wholly owned Unrealized equity loss (est.)
Other A-/B+ quality JV Sales/value Losses/FX/ 3% 4Q‟09 decline depreciation 4Q‟10E 10% Avg. inv. $11MM
Minimal construction Owned RE 87% Primarily wholly owned, limited 3rd party debt ~$2.5-3 ~$(1) ~$(5.0)-(5.5) Occupancy YTD leasing (MM sq. ft.) ~$(7) 79% 79% 22 19 Unrealized equity loss over time-a)
4Q‟10E Depr. Sales/losses YE‟13F 3Q‟09 3Q'10 3Q‟09 3Q'10 ~$0 • Occupancy stable despite negative absorption ~$2 • Leasing volume up 15% year on year ~$(5.0)-(5.5) ~$3 • Solid YTD renewal rate of 60% a) – Excludes market movements
CFPA1586 Investor Meeting_Dec. 2010 37
Real Estate key priorities ($ in billions)
Net income 1 Navigate portfolio through difficult market cycle 3Q‟10 YTD TY‟11E • ENI reduction $4B ahead of plan • Improved liquidity helping 2010 2011
2 Preserve global lending and investing platforms • Maintain occupancy in tough environment + • Restructure debt for enhanced returns
$(1.3) 3 Build out capital efficient model • Grow assets under management
CFPA1586 Investor Meeting_Dec. 2010 38 U.S. Consumer
CFPA1586 Investor Meeting_Dec. 2010 39
U.S. Consumer overview 3Q‟10 assets $41B Our value … more important than ever Critical to retailers – sales & profit High penetration… … at lower cost Dual Card Percent total retail sales – ‟09 Sales in bps., RCF $7.7B 60% 152 Retail 43% 38% 32% $4.7B PLCC $20.6B CareCredit (175) $5.0B Retail 1 Retail 2 Retail 3 Retail 4 Industry Power Our cards deliver $70B in … while saving $1.2B & $2.9B critical retail sales … delivering $21B in profit Critical to consumers – loyalty & sales Who we are and what we do Tangible rewards … … Intangible benefits • Status & recognition • Wide geographic distribution with over 185K investment grade partners • 3.5 yrs. average tenure • “My Treat” – ability to • 50 million active card holders … average segregate spend balance $818 • Immediate benefits (15% off) • Average FICO ~706 Customers get $1B+ in tangible – perfect for today‟s mindset value from our cards … Strong competitive position … long history of profitability
CFPA1586 Investor Meeting_Dec. 2010 40 Supporting our retail partners Pent up demand … “Black Friday” weekend +10% U.S. Consumer results Compelling offers & foot traffic drove applications Average spend Applications in thousands 645 +13.1% vs. 570 foot traffic +8.7%
Shoppers ‟09 ‟10 Improving approval rates helped drive new accts. Approval rate, New accounts in thousands 53.6% 54.9% 354 306 +2.4% +15.8% November same store sales +6%
+6% ‟09 ‟10 „09 ‟10 5% Driving sales and increasing penetration Net credit sales in millions $1,038 0% $906 +14.5% vs. Credit industry +7.0%
(5)% ‟10 J J A S O N D J F M A M J J A S O N
Sources: company reports; Thomson Reuters ‟09 ‟10 Positive weekend for industry … GE performing
CFPA1586 Investor Meeting_Dec. 2010 41
Took significant underwriting actions Risk actions Continued outperformance in ‟10 Approval rate Open to Buy 3Q‟10 YTD, Total losses ($ in billions, ex. Securitization) ($ in billions) Actions reduced $372 56.1% (19)% OTB by $162B $7.8 ‟09 losses significantly better than stress … 45.3% $210 ‟10 pacing better than expected
Early ‟07 Early ‟09 3Q‟07 3Q‟10 $5.7
Delinquency – U/E correlation broken $4.5 $4.5 YoY percent increase Underwriting Actions
70% $2.4 50% Historical ratio U/E:Write-Off (U/E:Write-Off) 1.0 : 0.6 1.0 : 1.1 30%
10% U/E FY ‟08 FY 2009 2010 -10% DQ-U/E gap Actual Adverse Actual FY Adverse 3Q YTD 90+ Stress Stress Actual -30% 30+
Early actions broke historical DQ-U/E correlation
CFPA1586 Investor Meeting_Dec. 2010 42 U.S. Consumer summary U.S. Consumer earnings Net income, $ in millions, ex. securitization $1,014 Up ~2X in ‟10 $657 Scale position in U.S.
$371 Important to retailers and consumers
Adding new distribution in Served TY‟08 TY‟09 3Q‟10 YTD Receivables ($B) $48.9 $44.1 $40.7 favorable environment
Return on investment 3.3% Deep domain expertise drove early Percent, ex. securitization Up ~2X in ‟10 loss actions Pricing enhancing margins 1.5% 0.8% Managing regulatory environment
TY‟08 TY‟09 3Q‟10 YTD Self funding growth Strong execution in challenging U.S. environment
CFPA1586 Investor Meeting_Dec. 2010 43
Growth & Business Update
CFPA1586 Investor Meeting_Dec. 2010 44 Growing our core assets
Managing the balance sheet ~$440B ENI by 2012 – Red assets ‟09 – ‟11 – Core assets ‟09 – ‟11
Pipeline and volume growing with expanding returns
Margins increasing
Strengthening the GE Capital brand
Delivering GE Capital‟s unique value proposition
Core businesses performing … back on offense
CFPA1586 Investor Meeting_Dec. 2010 45
Ending Net Investment (ENI) ($ in billions) ENI–a) $503 V‟09 2010 dynamics ~$480 ~$460 ~$(43) Real Estate 79 • ~$20B ahead of plan ~73 ~60 ~(17) ~$440 • Core platforms increasing as a “Red” 138 ~105 ~80 ~(60) businesses percentage of total book … ~63% at YE 2010, up 6 pts.
• “Red” assets volume limited to commitments Core ~320 ~35 – 2010 YTD mortgage volume 286 ~302 businesses–b) down over 90% from 2008
‟09 ‟10E ‟11E ‟12F
Growing core and managing balance sheet to achieve goal of ~$440B
CFPA1586 Investor Meeting_Dec. 2010 46 a) – Ex. Cash at 1Q‟10 FX b) – Includes HQ/other Funding core growth – executing on dispositions ($ in billions)
2010 deals ENI Expected timing BAC $7.9 4Q (Gain in Disc. Ops.) Garanti 2.4 1H‟11 Canada PLCC 1.5 1Q‟11 ~$17B+ pipeline targeted for Hong Kong 0.9 Closed 2011 closings Indonesia 0.5 4Q Romania 0.4 4Q Other (6 deals) 0.5 4Q/2011 ~$14
Signed/closed ~$14B … working additional ~$17B+ pipeline
CFPA1586 Investor Meeting_Dec. 2010 47
On-book volume ($ in billions) Volume profile New business ROI TY 6% ~$47 Business 2010 YTD $42.3 $37.7 $35.3 $35.2 $37.7 ~16 Americas 2.7% $32.3 11.0 $31.0 8.3 7.3 10.3 10.6 Commercial 7.4 6.7 Asia 2.6 Bank 2.7 27.1 27.8 31.3 27.5 27.1 ~31 Consumer 24.9 24.3 EFS 6.4 Europe 2.3 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE U.S. Consumer 3.0 2009 2010 Aviation 4.1 CLL pipeline & volume Pipeline Volume Highlights ~$11 $37 $38 $33 $8.1 $8.1 • Building momentum in CLL … 3Q‟10 volume $7.4 up 37%, YTD up 29% $25 $26 $27 $6.2 $5.9 $22 $4.4 $5.0 • Pipeline growing; up ~$11B from 4Q‟09 • Underwriting business at attractive ROIs 1Q 2Q 3Q 4Q 1Q 2Q Current 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 2009 2010 2009 2010 Sustained sequential improvement
CFPA1586 Investor Meeting_Dec. 2010 48 Margins Consumer Portfolio margin trend ~13.0% 12.2% ~10.1% 10%+ Consumer 9.6% 8.9% ~9.4% 9.3% 9.4% 9.0% Total 5.7% 5.4% 5%+ 4.8% ~5.0% Commercial 4.6% 4.0% ‟09 ‟10E ‟09 ‟10E 3.4% 3%+ 2.9% ~3.0% Run-off New volume 2.7% Commercial 2006 2007 2008 2009 2010E 2011E
4.6% ~4.4% Dynamics 2.9% ~3.0% • New on-book margins continue to be attractive • Consumer ENI mix down from 37% in ‟09 ‟10E ‟09 ‟10E 2006, to 31% in 2008, to 28% in 2010 Run-off New volume Portfolio margins continue to expand
CFPA1586 Investor Meeting_Dec. 2010 49
Strengthening the GE Capital brand Brand awareness Prospects
77% 17% pts. “Shares the values that drive American business” 27% pts. 70% 60% 70% 43% 3Q‟09 4Q‟09 3Q‟10 Ad Ad unaware aware
“American Renewal” “Partners”
Sept . ’09 – June ’10 July ’10 – Dec. ’10 Customer success stories
• “Main Street” lender • Critical provider of finance • Invested in long-term to U.S. businesses partnerships • Open for business • Deep domain expertise Effective campaign - solid foundation for future
CFPA1586 Investor Meeting_Dec. 2010 50 Summary/Q&A
CFPA1586 Investor Meeting_Dec. 2010 51
2011 earnings outlook ($ in billions) 3Q‟10 YTD 2011E Dynamics + Lower losses CLL $1.0 ++ + Improved margins + Improved margins Consumer 2.2 ++ + Lower losses + Lower SG&A
Real Estate (1.3) + = Stabilizing losses/impairments
Aviation/Energy 1.1 + + Lower losses and impairments
Corporate/Other (0.6) =
$2.3 ++ ~$3B+ earnings in 2010 … Solid foundation for 2011+
CFPA1586 Investor Meeting_Dec. 2010 52 Valuable franchise ($ in billions)
1 Solid earnings 2 More liquidity/more capital ++ ++ ~$40-60 ~7-9% ~$3.0+ $1.7 Cash T1C ‟09 ‟10E ‟11E ‟12F 3 Higher margins 4 Returns > WACC 5%+ ~11-15% 4.6% ~5.0% Lower “red” assets Assume efficient capital requirements ‟09 ‟10E ‟11E Normalized ROE
5 Should generate surplus capital 6 Strategic connection Do not expect to need to fund income Unique verticals with GE domain maintenance in 2010 expertise Expect to return to dividend in 2012 Commercial best practices
GE Capital will deliver for investors
CFPA1586 Investor Meeting_Dec. 2010 53