Mike Neal
GE Commercial Finance Overview
Organized for faster growth and lower cost 90’s 2002 Today
GE Commercial Consumer Commercial Infrastructure Industrial NBCU Healthcare MID -MARKET FINANCING Vendor Financial Finance Finance Commercial Commercial Services Commercial Dave Calhoun John Rice Bob Wright Equipment European Finance Bill Castell Structured Vice Chairman Vice Chairman Vice Chairman Vice Chairman Financing Equipment Finance Joe Hogan Finance Finance Sr. Vice President3 Dave Nissen Mike Neal Card Services Finance Group Healthcare Sr. Vice President Vice Chairman Global Finance Real – Aircraft Engines – Cons. & Ind’l. – Network – Diagnostic Consumer Estate – Energy – Plastics – Film Imaging – Oil & Gas – Silicones/Quartz – Stations – Biosciences Finance – Rail – Security – Ent. Cable – Clinical Sys. – Water – Sensing – TVPD – Info. Tech. –Europe –Capital Solutions Financial Equity GE Consumer – Energy Fin. – Fanuc – Sports/Olympics – Services Assurance Svcs. – Inspect Tech. – Parks – Aviation Fin. – Equip. Svcs. –Asia –Real Estate CONSUMER SPECIALIZED FINANCING 2002 Svcs. (GECAS) SPECIALIZED SERVICES GE Capital SPECIALTY INSURANCE –Americas –Corp. Fin. Svcs. SPECIALIZED SERVICES SPECIALTY INSURANCE Finance Employers Capital Reinsurance –Australia –Healthcare Markets Reinsurance Corporation Re-org Fin. Svcs. Global Process Mortgage –Insurance Solutions InsuranceInsurance GE Insurance Technology Rail Financial Services Services Guaranty Aviation Insurance Penske Truck Services Mod Space Leasing Fleet Trailer European Equipment Services Leasing EQUIPMENT MANAGEMENT GESeaCo Management GE Equipment Management
From: To: Sub-scale vs. competitors Large global businesses with scale Redundant Back-rooms Common Back-rooms… lower cost Multiple faces to the customer One face to the customer A proven model for growth, simplification and lower cost
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1 / GE / Global Commercial Finance provider Capital Solutions Corporate Finance Over 1 million customers
~22,000 Employees 30+ Countries Real Estate Healthcare Financial Services
8,500+ Front-end Insurance
Aviation Energy Services Financial
Global presence, local underwriting expertise
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Strong net income and asset growth ($ in billions) Commercial Finance Assets Net Income
~$193B ~22% ROE ~$4.2B
1144% CCAAGGRR 1177% CCAAGGRR $59 $1.0
'96 '05E '96 '05E Insurance $32B ~$100B $0.8B ~$1B
Consistent growth through good and bad economic times
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2 / GE / Commercial Finance
Corporate Real Corporate Energy Financial Estate Financial Services Services Healthcare Capital Insurance Financial Aviation Solutions Services Services Provider of global commercial real estate capital and services Global provider of Innovative financial solutions across the entire supply chain Financing for working capital & capital expansion Provider of equipment, real estate and working capital financing to the global Healthcare Industry Global provider of Insurance and Reinsurance solutions Financing Global Energy, industrial and infrastructure development 1,300+ Commercial Aircraft – owned Group of businesses with small share in big markets delivering through the cycles
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Small in big markets Served available markets
U.S. Europe Asia*
2% 0.8% 0.3%
~$6T ~$5T ~$4T
*Developed Asia Source FDIC, FRB, ECB, BDJ, PBOL, BOK, RBA
Despite scale, still very small share
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3 / GE / What makes us different AAA rated – ~22,000 world class resources
Origination +Risk Management + GE Value Proposition
• Largest direct origination • Very disciplined risk processes • Six Sigma strategy aligned team 8,500+ • Broad spread of Risk / Small hold with business imperatives • Broad product portfolio positions and customer requirements • Targeted focus with deep • World-class Risk Management • Use GE intellectual capital to industry knowledge Organization around the globe help our customers… share best practices • Unparalleled collateral • Key Risk leaders each with 15-25 knowledge and experience years experience and have • Simplifying businesses to serve our customers better • Highly motivated and experienced 2 cycles leveraged • Collateralized by assets we know • Access to “all GE” solutions • Acquisitive – M&A / integration • “Smart Tools”/digitized processes to expertise trigger increased surveillance • Tough Love
“Industrial” approach to Financial Services
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How we grow…
Commercial “Net Promoter Score” Excellence Lean Six Sigma enabling growth Driving organic growth Imagination Breakthroughs Enterprise selling – Delivering one GE solution to the customer
Industry Industry and channel focused solutions Specialization Healthcare - Offering the total GE solution
Geographic Expand in Europe Expansion Create one Commercial Finance in Japan
Capital Originate to sell Markets Leveraging our front end resources
Platform Strategic acquisitions Expansion Grow what we buy
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4 / GE / Business model delivers through economic cycles More Less
Supply of Capital in market
Approach Approach • Selective on book asset growth • Originate to hold… Grow • Higher off book volume on book assets • Originate to sell • Cheaper acquisitions • More fees • More spread
Double Digit Income Growth Consistent growth through good and bad economic times
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Imagination Breakthroughs - Enterprise selling - Retention / Net promoter score
5 / GE / IB’s delivering organic growth IB
New Enterprise Client Manager brings the full breadth of Enterprise Selling CF’s products and services making it easier for our customers
Proactive program to identify customer life-cycle leverage Retention points to extend or replace maturing products
Delivering value to 4 distinct “customers”: direct borrowers, CFS: Large Cap sponsors, investors and lead banks
Utilize industry Domain Knowledge to develop New Product HFS: Hospital Growth Initiatives to meet changing Hospital needs
Grow CF share of IT finance through better Coordination CF: IT Financing & Best-Practice Sharing across Multiple CF Platforms
Growing Japan Coordinate CF resources to accelerate growth
Embed affiliate sales to pull products through CF’s ‘anchor Dealer Solutions relationships’ adding depth and breadth
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Enterprise selling IB ~2,000 potential accounts identified
Products: Dedicated • Equipment Finance Sales force • North America • Inventory Finance Industry expertise • Fleet • Europe • Working capital • Japan • Real Estate • Australia
Leveraging 8,500+ Front-end across commercial finance
Enterprise Selling
Increase share of wallet… Currently 1.3 products / customer
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6 / GE / Enterprise selling IB Pilot Results Resources In Place
• 325 accounts piloted • Single point of contact • Indirect relationships driving • Strong Product Set direct opportunities • Deep Industry Experience • $1.0B in new opportunities identified • Support Processes aligned • Easier to do business
Enterprise Selling
Increase share of wallet beyond 1.3 products/customer… Deliver full GE solution to our customers
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“Net Promoter Score” metric to IB drive customer loyalty Target… Listen… Understand… Act… Focus on key 6,000 Surveys to Drill down on Leverage segments date Promoters and Promoters Detractors Decision Makers Management Respond to Follow-up Consistent “Tree Detractors Key Influencers Structure” Address Non- Analytics Use GE tools Respondents
CTQ-based customer segmentation to NPS is driving real change Progress monitored through regular Lean Six Sigma enabling growth improve targeting CEO reviews Origination Flexible Front Ends Focus Areas Baseline Scores Customer Insights P&L One Page Template Sample 1.Same Meeting Selling - driving Customer Needs Net Promoter Score By Segment Key Drivers per Value Tree CF Businesses $400B U.S. Equip. Financing Opportunity conversion RESPONSES Products 16% Consistent pricing Hospital DIC MGP 2.Simplification - creating capacity 60.0% 55.0% 100% 6 PROMOTERS 60.0% Quality Products 9-10 People 59% External Full range of products 37% Many
Underwriting Lean Six Sigma Taking Hold PASSIVELY SATISFIED 25.4% 22.5% 30.0% Quote Process 21% Basic Needs Best-in-Class 7- 8 80 Value Processes • Some of everything 70% 100% Image 25% Application 20% Underwriting and •Every CF business in the game DETRACTORS 14.6% 17.5% 15.0% Process 4 1- 6 14% Approval 20% Portfolio •50 action workouts already conducted Responsiveness NPS 45.4% 42.5% 40.0% Process 60 21% Fewer Process Driven N= 130 N= 80 N= 40 Cost Closing Process Management • Speed & accuracy People OVERALL VALUE 7.99 7.48 8.10 49% Understand my Loan Servicing Process 18% • Reputation business N : 283 40 Availability 2 Driving Customer Value Focus Areas Status & Next Steps Fulfillment •CF easier to do business with • Willingness to lend Common OTR Few 20 Easy to do business •Improving speed and reliability Relationship Seekers Processes/Area to Current Target NPS • Action 1, Owner, Date Processes, Systems & • Relationship longevity 0 Improve -10 0 10 20 30 40 50 60 70 Metric Perf. Impact •Address customer issues faster • Flexibility & innovation Processes Speed • Action 2, Owner, Date Locations 0 • Action 3, Owner , Date Services Wholesale Trade Manufacturing Simplicity Lease, Loan COEs Transportation Construction • Etc.
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7 / GE / Industry Specialization
Driving organic growth… verticals
Verticals
Aviation Healthcare Energy Services Financial Services Financial Services Global Media & Communications
GE GE GE Transportation Healthcare Energy NBC Universal
GE Industrial
We know a lot about these industries
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8 / GE / Created successful vertical businesses
Transportation Energy
Energy Financial Aviation Services SolutionsSolutions Net Income Net Income ($ in millions) +20% +20% 506 520 376 280
'03 '04 '05E Benefits '03 '04 '05E Utilize unique domain knowledge Integrated commercial team Bring full product basket to customer base
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GE Healthcare Financial Services Right Industry… Right Model… Geared for Growth Healthcare Healthcare Industry Financial Services
HOSPITAL
Large, Dynamic Industry Industry Domain Knowledge Favorable Demographics Offering the total GE solution Capital Expenditures Growth Breadth of Products/Solutions Margin Pressure Demonstrated Execution Capability
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9 / GE / Expand our geographic presence
Global expansion… small share Geographic Asset Split 2005 Global Market Share
~$193B
$148B
ROW
Americas 79% ~63% GECF 1.1% Size GE Americas $6T ~2.0% Europe $5T ~0.8% 2001 2005E Asia $4T ~0.3% ROW NI 27% ~38% *Developed Asia Source FDIC, FRB, ECB, BDJ, PBOL, BOK, RBA
Enormous Room for Continued Growth
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10 / GE / Growing Europe presence
’05E Assets ($B) ’01A ’05E CAGR% Other UK 11% 28% Real Estate $3.6 ~$11 31% Italy 4% Luxen. Capital Solutions 11.5 ~17 10% 5% Sweden Corp Finance 4.0 ~20 50% 5% & Other Nether. 8% France 31% Total $19.1 ~$48 26% Germany 8%
% CF Assets 13% ~25%
Still very small
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Growing Asia presence
’05E Assets ($B) ’01A ’05E CAGR% Other 10%
Real Estate $1.2 ~$4 35% South Korea 8% Japan Capital Solutions 5.7 ~11 18% 48%
Corp Finance 0.9 ~1 8% India & Other 9%
Total $7.8 ~$16 20% Australia 25% % CF Assets 5% ~8%
Lots of room for growth
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11 / GE / Grow % share in Europe and Asia to US level Europe 0.8% share now Asia 0.3% share now
Strong leadership New leader appointed Focus on specific countries Focus on specific countries… Japan Selective acquisitions Selective acquisitions
2% share ~$60B 2% share ~$68B incremental assets incremental assets
$10B assets increase = ~$ 0.2B NI increase… Huge growth opportunity
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Risk Management: deep industry and customer knowledge
12 / GE / Risk Management Key for Consistent
Collateral Diversification Growth Other
A/R + Inv 11% 13%
FF&E/ Cash Other Equip 10% Experienced risk professionals 15% Flow
4% 15% Corp. Jets 5% Real Trans. Estate Rigorous governance Equip 5% 4% 11% 6% Healthcare Eqpt. Franchise Dealer Inv Fleet Well diversified portfolio Vehicles Industry Diversification
Specialty Retail Healthcare
Business 8% Small hold positions 7% Hote Services 5% ls 9% Auto 5% Real Estate Machinery equip In-depth collateral expertise 48 Industries 4% 12% 1% or less 4% Trucking
4% Tech. Hardware Other (48) 3% Diversified Fin. 1% or Less 2% Strong asset management 2% Chemical 24% 2% 2% Food & Beverage 2% Building Products 2% Construction 2% Consumer Services Steel Construction Material Senior Secured Positions… Broad Spread of Risk
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Aviation Services update Solid organization Fleet composition vs. world
• 40 years experience… managed GECAS World V Regional Jet 26% 15% +11% through cycles Narrowbody 63% 61% +2% Widebody 11% 24% -13% • 230 staff in 21 global locations AGE GECAS World V • Deep hardware knowledge, technically 0 – 10 Years 69% 48% +21% proficient 10+ Years 31% 52% -21% Strong fleet management… • Structured finance/cap markets skills • Since September 11, 2001, placed 826 aircraft • Active Asset Managers – proactive …>75% with non-US clients portfolio management • 100% of 2003 - 2005 new orders placed • Nearly 100% of 2006 new orders placed • Delivering secondary volume with better risk/return profiles • Strong improvement in worldwide demand for aircraft over past 12 months
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13 / GE / Commercial excellence
Front-end resources with deep industry & customer knowledge
Front-end Growth Total resources Initiatives volume growth ($ in billions) Enterprise Selling 8% AAGR ~17% AAGR Industry Specialization 8,500+ ~$95 $86 7,844 Capital Markets 7,375 + + $69 Geographic Expansion
Commercial Excellence
'03 '04 '05 E '03 '04 '05 E Lean Six Sigma
Strong origination driving growth
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14 / GE / Unique business positioned for continuous growth
Small global Bigger, smarter Powerful market share Front-End resources growth initiatives
Capital markets & Commercial Finance
1 Reduce risk - Credit & collateral exposure GE Healthcare Financial Services 2 RightAlternative Industry… funding Right Model…source… Geared More liquidity for Growth Healthcare Healthcare 8,500+ EnterpriseIndustry Selling Financial Services IB 3 Enhance ROE ~5,000 potential accounts identified +20 Dedicated 4 Drive organicProducts: growth • Equipment Finance Sales Force GE Healthcare FinancialHOSP ITA L Services • Inventory Finance Industry Expertise • North America • Fleet Right Industry… Right Model… Geared• Europe for Growth Leverages our most• Working unique Capitalasset… Our big origination front end • Japan +Front End + • Real Estate Healthcare • Australia Healthcare Industry Financial Services Leveraging 8,500+Global OriginatorsGE Commercial expansion…across Finance Overview Commercial2005 / 14 Fin smallance share Large, Dynamic Industry Industry Domain Knowledge Favorable Demographics Offering the total GE solution EnterpriseGeographic Selling Asset Split 2005 Global Market Share Capital Expenditures Growth Breadth of Products/Solutions HOSP ITA L Margin Pressure Demonstrated Execution$191B Capability Increase share of wallet… Resources Currently 1.3 products$148B / customer GECF 1.1% ROW GE Commercial Finance Overview 2005 / 22
Large, Dynamic Industry GEIndustry Commercial Finance Domain Overview 2005 Knowledge / 1 FavorableAmericas Demographics79% 63% Offering the total GE solutionGECF 1.1% Capital Expenditures Growth Breadth of Products/Solutions Size GE Margin Pressure Demonstrated ExecutionAmericas Capability $6T ~2.0%
2001 2005E Europe $5T ~0.8% Asia $4T ~0.3% ROW NI 27% 38% GE Commercial Finance Overview 2005 / 22 Enormous Room for Continued Growth
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Model proven through the cycles
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Agenda
Finance & Risk Jeff Bornstein Financial Performance/Productivity Bill Strittmatter Risk Management Growth Leaders Michael Pralle GE Commercial Real Estate Mike Gaudino Corporate Finance Paul Bossidy GE Capital Solutions Outlook
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15 / GE /