Professional Documents
Culture Documents
“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
9 Running GE to be safe and secure over the long term
‒ Liquidity position is extremely strong
‒ Completed 93% of our 2009 planned long term funding
9 Have sufficient capital and alternatives to weather adverse
economic conditions
9 Running GE with intensity
‒ Resizing our cost footprint in a meaningful way
‒ Management team is focused on delivering cash
‒ Continuing to invest/position company for long term growth
9 We expect GE Capital will be profitable in 1Q’09 and 2009
9 We are committed to GE Capital
1
GE: safe & secure
Dividends/share Yield @ today’s price
82¢
1 Reduced dividend … ~4%
40¢
~$9B in annualized
savings 2009 2010 2009
7:1
~6:1 ~6.0%
2 Infused equity into 4.9%
GE Capital
4Q’08 1Q’09E 4Q’08 1Q’09E
~$45B $48B
3 Strengthened liquidity $42B ~$41B
Ratings update
9 Concluded rating review with S&P
– Detailed GE Capital updates on liquidity, funding,
business model, risk assessment & capital levels
– Industrial assessment (2009/2010) on revenue, margins
& cash flow
2
GE Capital structure
General Electric
Support Company
• GE support to ensure GECC 1.1x fixed-charge AA+/Aaa 100%
coverage ratio
Owns all of
• GE TLGP FDIC backstop GE’s financing
General Electric
• Infused $15B & reduced dividend from GECS assets
Capital Services, Inc.
• History of capital infusion or dividend
reductions when necessary 100%
GE Capital
overview
3
2009 outlook
Environment
• Difficult market with many macro-economic indicators
still deteriorating
“Factory”
GE Advantage: “Origination”
“Raw material”
(capital) GE Advantage:
9 Low cost 9 Treasury
GE Advantage: 9 Global position
9 Risk 9 Asset Mgmt. 9 Brand
Competitive cost
9 Talent 9 Tax 9 Domain expertise
4
GE Capital portfolio
GECC
Business 2008 Financials Domain + expertise
Assets Net income
Commercial • Entered in the 60’s
• ~100% secured loans and leases
Loans & Leases $230B $1.7B • Support mid-market customers
What we don’t do
9Did not originate CDOs, SIVs, etc.
9Did not sell credit default insurance
9Do not trade securities … Minimal MTM in up or down cycles
9Do not originate mezzanine or high yield debt/bonds
10
5
GE Capital has a strong franchise
One of the few liquidity sources in 2008 Estimated U.S. market position
• $86B of new financings to global companies, • Middle Market Commercial Lending #1
infrastructure projects and municipalities
• Equipment Lending/Leasing #1
• $177B credit extended to global consumers • Middle Market Corporate Finance #1
• Have continued to support virtually all major • Aircraft Financing #1
U.S. airlines and auto companies with
financings as they work through cyclical • Healthcare Financing #1
issues • Energy Financing & Project Financing #1
11
Portfolio strategy
Forward Ending net
return Core Competitive investment
dynamics competencies outlook ’09 outlook ($B)
Core
Core mid-market • Underwriting +++ $356
lending + leasing 2-5% ROI • Direct origination - Likely fewer FinCo’s
Grow
+ verticals • Asset mgmt. intensive - Fewer captives
• Re-marketing - Bigger banks long term
• Deep domain
GE Banking $64
European & • Enhance value via ++
Emerging Market 2-4% ROI product development - Strong local franchises
• Grow deposit base - Lots of options
Enhance
banks & JV’s value
• Operating synergies
Restructure $80
Various Consumer • Origination —
<2% ROI
& Commercial • Funding advantage - High leverage Restructure/
platforms - Tend to compete run-off
w/ banks
12
6
Primary questions regarding GE Capital
n Commercial Real Estate
– What is in our portfolio and what is the corresponding risk?
s Capital
– Does GE Capital have enough equity to handle future losses?
13
Consumer
• Mortgages, credit cards, auto and personal loans and sales credit financing
– By product, by geography – market specific
– Consistent methodology applied across product types globally
Commercial
• Commercial Real Estate: By market and property type
• Commercial Aircraft: Valuation by equipment type
• Energy loans and leases: Stress obligor ratings, increase severity, based on
outlook
• Commercial Loans and Leases: Stress probabilities of default, recovery rates
14
7
Summary of stress testing
($ in billions)
2009 Est. Fed Est. Fed
Capital Finance outlook base adverse
Pretax pre-provision ~$13.3 ~$11.1 ~$9.2
Credit losses 9.7 11.5 13.7
Net income ~$5 $2.0-2.5 ~$0
15
Key messages
9 GE Capital funding is 93% complete 9 CEE Banks should be profitable even
and we have ~$60B capacity under in an adverse stress scenario
Federal programs
9 We are operating GE Capital with
9 GE Capital is well capitalized and intensity … Collections >originations,
compares favorably to banks lower cost, aggressive risk
management
9 GE Capital is a conservative lender …
losses should be lower than banks 9 We expect GE Capital will be
profitable in 1Q’09 and 2009
9 Real Estate equity valuation estimates
are comparable to other real estate 9 Have sufficient capital alternatives to
investors weather adverse economic
conditions
9 U.S. Consumer credit losses
comparable to similar U.S. bank 9 GE Capital has a profitable vision for
portfolio performance the future
9 Adverse stress case losses of global
mortgage should be manageable
16
8
Agenda
Funding & Liquidity Kathy Cassidy – GE Treasurer
Portfolio & Risk Management Jim Colica – GECC Chief Risk Officer
Business Reviews & Stress Testing
– Real Estate Ron Pressman, Stewart Koenigsberg & Jayne Day
– Commercial Lending & Leasing Dan Henson & William Brasser
– GECAS Henry Hubschman & Anne Kennelly-Kraky
– U.S. Consumer Mark Begor & Ray Duggins
– Mortgage Mark Begor & Ray Duggins
– European Banks Dmitri Stockton & Denis Hall
Break Lunch
Operations Update Bill Cary – GECC COO
Financial Update Jeff Bornstein – GECC CFO
GE Capital Summary & Outlook Mike Neal – GE Vice Chairman & GECC CEO
Closing Keith Sherin – GE Vice Chairman & CFO
Q&A
17
Funding/Liquidity
18
9
GECS 2009 funding
• Global debt markets remain difficult for financial sector issuers ...
strong market demand for Government supported funding
19
GECS funding
($ in billions)
$515
FIN 46 6 ~$485
~6 ~$450
$509 ~5
~$479
~$445
LT debt 382
348
320-330
Deposits/CD’s/ 55 81 85-90
Other
Comm’l paper 72 50 40-50
4Q'08 4Q'09E 4Q'10E
20
10
GECS ’09/’10 Funding plan
($ in billions) ’09 ’10 Comments
Beginning cash balance 37 ~38
Sources
LT debt issuances 32-a) 35-40 93% of ’09 funding complete … lower ’10 planned issuances
… considering early funding of ’10
Alternate funding 26 4-9 CD's, Intl. bank deposits & other programs
Business originations/ 25 20-35 $205B collections/$180B originations in ’09
collections mgmt.
Capital infusion from GE 9 –
Total sources 92 60-80
Back-up liquidity
Uses
Cash / liquid assets
LT debt maturities (69) (67)
CPFF – unused capacity
CP reduction (22) 0-(10)
Total uses BOE/ECB/BOC facilities
(91) (67)-(77)
Bank lines
Ending cash balance ~38 ~31-41
(a. Ex-$13B funded in ’08
21
Government programs
Programs GE impact
• Capacity of $98B (incl. GE) … pricing @ slight penalty to market
Commercial paper
• GECC/GECS outstandings matured in February … none outstanding today
funding facility
(CPFF) • Enables GE to support investor liquidity needs & manage duration … serves as
liquidity backstop
• GECC capacity of $126B … important for LT debt market & CP market access …
Temporary program now extended through October 31, 2009
liquidity • $37B LT debt issued under the program … $3B remaining for ’09
guarantee
program • Manage ~$25-$35B CP outstandings under TLGP
(TLGP) • ~$50-$60B capacity remaining … option to fund some ’10 maturities in ’09
• Newly announced Fed/Treasury facility … covers AAA ABS for specified assets …
Term Asset- currently auto & credit card … may be extended to equipment & CMBS
backed securities
loan facility • $10B+ of PLCC/CDF maturing securitization debt likely eligible
(TALF) • Potential for increased liquidity for real estate and equipment … may reduce cost of
securitization funding … continuing to evaluate
Public Private • New facility in development … initial focus on marketable securities & other MTM
investment funds assets … could expand to leveraged loans, real estate, equipment, etc.
(PPIF) • Improved liquidity in these asset classes to help overall market
22
11
2009 alternate funding
($ in billions)
CD’s : Distributed through multiple firms to support
asset growth in US banks
• Industrial Loan Corporation deposits Ç$17B
~$81 – Adding 3 complete business platforms to ILC …
direct origination a)
20 – Originating CD’s to match bank assets profile
(~$7B > 1 yr. maturity as of 4Q’08)
$55
• Federal Savings Bank deposits Ç$2B
– Direct origination of sales finance assets
27
19
International deposits Ç$6B
$30 – Drive market share in emerging markets
Other 10
– Tap large/developed markets
U.S. Industrial Loan 17
Corporation 18 15 French Gov’t program: $1B ’09 target ($0.4B YTD)
U.S. Federal
Savings Bank
1 17
11 11 Covered bonds program: 1st issuance by Jul ’09
International
Exploring other asset based funding options
4Q'07 4Q'08 4Q'09E
Cost of funding attractive vs. LT debt
Transition banks to deposit funding a) Subject to regulatory approval
23
• ~$12B also available to GE parent • Drawn pricing at capped spread over Libor
24
12
Capital ratios
GE Capital Corp. leverage a) GE Capital Corp. TCE/TA ratio b)
7:1 ~6%
~6:1 4.9%
1.9% d)
25
Portfolio overview
26
13
Risk management
9 Diversified portfolio – broad spread of risk, managed exposure limits
9 Data-driven analytics – identify & monitor key risks, measure capital & leverage
27
GECC Portfolio
Total assets ($637B) Geography
Other
Other 9%
Real Estate Asia Pacific
$68B 11% 48% U.S.
$85B
Latin America 2%
11%
13%
27%
Consumer Europe
$183B 29%
3%
Canada
28
14
Consumer Portfolio (assets)
Product ($183B) Geography ($183B)
Other
Asia
JVs Sales Finance
North America
6% Eastern 7%
14% Europe
6%
25%
Auto Personal 16%
11% 9% Loan
Small and
6% Medium 2% Latin
Enterprises America
13%
ANZ
14% 20%
Mortgage 34% Cards
17% Western
Europe
UK
>70% International
~22% in developing markets
~58% of receivables – Prime
29
Transportation 7%
24%
Equipment
Comm. Real
4% Estate
Healthcare Equipment 3%
32% 2% Franchise 4%
2%
Diversified Finance 13%
6%
Fleet Vehicles
Others Business Services Dealer Inventories
Comm. Aircraft
30
15
Commercial Customer Concentrations
($386B)
Over $1B
$500MM-$1B Over $1B, 15 accounts:
6%
5% Airlines, Class 1 Railroads, Electric
$300MM-500MM Utilities, Aircraft Manufacturing, Real
5%
Estate
$200MM-300MM
4%
$500MM-$1B, 27 accounts:
Airlines, Automotive, Healthcare, Power
8% $100MM-200MM
Generating Projects, Oil & Gas Refining,
Cable, Broadcast Media
$300MM-$500MM, 44 accounts:
61% 11%
$50MM-$100MM Automotive, Airlines, Electric Utilities,
Broadcast Media, Healthcare,
Technology Equipment
Under $50MM
31
Real Estate 14% • Cap rates 50-100 bps. higher $250 $400 +200 bps. highest
- Debt • Cap rates 50-100 bps. higher, historical cap rate by
- Equity long-term hold $240 $500 asset type È
GECAS 7% • Global traffic growth down ~$300 ~$550 • (3%) traffic decline =
~2% 2009 (9/11)
32
16
Stress testing approach
Bottoms up – asset by asset, business by business
Large commercial exposures over $300MM stressed individually
Consumer
• Mortgages, credit cards, auto and personal loans and sales credit financing
– By product, by geography – market specific
– Consistent methodology applied across product types globally
Commercial
• Commercial Real Estate: By market and property type
• Commercial Aircraft: Valuation by equipment type
• Energy loans and leases: Stress obligor ratings, increase severity, based on
outlook
• Commercial Loans and Leases: Stress probabilities of default, recovery rates
33
U/E avg. 8.4% 8.9% U.K. • 15% HPI decline in ’09 (34%
’08-’09)
U/E peak 9.3% 10.1%
• 9% unemployment
Debt sale recovery rate: • Additional loss on sale 20-25%
PLCC È10% to 7.2% È25% to ~6% Central Europe • 15-30% further devaluation from
today’s FX rate based on country
Sales Finance È16% to ~6.6% È25% to ~6% • Unemployment up to 13% based
on market
No benefits assumed from U.S. Stimulus Programs
34
17
Commercial portfolio stress testing
Commercial Loans, Leases Real Estate
Key Drivers: Key Drivers:
Macro • GDP, Unemployment Macro • GDP, Unemployment
• Liquidity • Liquidity
Portfolio • Senior diversified positions Portfolio • LTV
• Borrower leverage • Property cash flow
• Sector diversification • Borrower leverage
• Asset value of collateral • Cap rates, liquidity
Key Assumptions: Key Assumptions:
Fed Base Fed Stress Fed Base Fed Stress
GDP (2.0%) (3.3%) GDP (2.0%) (3.3%)
U/E avg. 8.4% 8.9% U/E avg. 8.4% 8.9%
U/E peak 9.3% 10.1% Cap rates Revert to historical median
Defaults Increased ~70% from Increased ~100% from
of last 18 years
2008 levels to ~5% 2008 levels to ~6% Output PPR model forecasting greater
Severity Increased GECC Increased GECC declines in office property cash flows
historical severity by historical severity by
35% on average to 50% on average to
~15-30% ~20-35%
No benefits assumed from U.S. Stimulus Programs
35
Portfolio overview
(as of 4Q’08)
36
18
Business reviews
37
Real Estate
38
19
GE Real Estate … what we do
1 Finance purchase of real estate by 3rd parties in
multiple asset classes, individually and in cross-
collateralized portfolios
2 Own, manage and add value to real estate as
single assets and portfolios across office,
apartment, warehouse, and retail asset classes
around the world
3 Provide financing to owner-occupied commercial
real estate for small to middle market businesses
39
40
20
Rigorous portfolio valuation process
Detailed source document review
• 100% lease review, rent rolls, income statement, GL, etc.
• Thorough credit review of major tenants
• Review of borrower/partner operating capability and financial
strength
• Know Your Customer “KYC” Surveys
• Perform cash flow audits
Financial modeling
• DYNA lease / proprietary models created for DCF valuations
41
3 Equity valuations
– Up to 20% drop in major market rents expected, vacancies up
significantly
– Values still under downward pressure … our values down ~18%
’07-’08
Challenging environment
* Source: Property & Portfolio Research (PPR)
42
21
Primary real estate products
Debt portfolio: $48B Equity portfolio: $33B
Other RE Construction
Other RE
6% 1.5%
Office 6%
Warehouse Warehouse
23.5%
9% 12%
Retail
8% Retail 9%
Office
Hotel 1% 49%
Hotel
11% Mixed 6%
43
Debt
44
22
GE Real Estate position in debt markets
GE Real Global RE debt market GE $48B
Estate $6 trillion*
CMBS
$62MM
CMBS
unrated
Mezzanine 3% Î $1.4B Subordinated
Equity
45
Debt portfolio
Collateral type dispersion
Construction
Total debt Geographical profile
US -CA, 8%
Other RE
exposure:
Other 4%
1.5% Germany 4%
6% Office US-TX, 5%
Warehouse UK 7%
23.5%
9%
$48B Japan 7%
US-FL, 4%
Retail
US-GA 3%
8%
Mexico 8%
Hotel
US-Oth, 23%
11% Canada 8%
Owner-
Mixed occupied
US/Canada-
3% 19% Owner occupied
19%
Apartment
19% Comments
Debt structure • Crossed portfolios (46%): a single loan secured by multiple
Singles
properties in multiple locations. Benefit: loss from a single
32% Owner-occupied
19%
property can be offset by excess cash flow and/or value
from other assets in the portfolio
CMBS bonds
Sub-debt $1.4B $62MM • Hotel exposure: 35% acquired at a discount post credit
3% a) Crossed crunch; 54% cross-collateralized; largest loan exposure at
portfolios $1.1B was 33% LTC at U/W, cash flow up 7% since U/W
46% and current DSC @ 5.52X
• $0.7B construction portfolio: 65% acquired at a discount
First mortgage senior secured 97%
• Japan/UK/Germany: portfolios acquired at a discount
46
23
Commercial real estate at GE
What we typically avoid What we do
• Construction lending • Senior secured lending in markets we understand
• Value add properties in good locations
• Land loans • Mid range office
• Affordable middle class apartments
• Single family residential development - Avoid luxury
• 2nd mortgages • Retail focus grocery/hyper market anchored
centers
• Mezzanine high yield • Warehouse
- Crossed parks w/multi tenant, high CoC
• CMBS hold positions – A or B pieces • Opportunistic portfolio acquisitions at discounts
• Syndication book, “hung” inventory
Commercial RE debt as of Dec ’08
• Malls
• Trophy buildings Total O/S ($B) $112.4 $142.2 $68.2 $48.0
• Brownfield sites Other
Commercial 64% 65% bought < par
• Resorts 72%
85%
98%
and 8% crossed
w/stabilized
Construction, properties
• Exited condo conversion early Land and
36%
Developer Debt 28%
47
'09 '10 '11 Thereafter 55% of ’08 is opportunistic discounted debt purchase
* Excludes owner-occupied
Delinquency/defaults
(% of Total O/S) Commercial Banks GE 5.4%*
5%
Commercial
banks (4Q’08)
3%
GE
1.2%/$0.6B
0%
Dec-00 Dec-01 Dec-02 'Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08
* Source: FFIEC
48
24
Why our delinquencies and losses are
lower than competitors
• Primary driver is product mix
Construction
• Construction and development loans & development (C&D)
- 32% of banks’ commercial real estate portfolio Banks* GE
vs. 1.5% at GE … 65% acquired at opportunistic
C&D % portfolio 32% 1.5%
discounts
- We also generally avoid other higher risk asset C&D charge-offs as
classes/structures – 2nd mortgages, mezzanine, malls, % of total charge-offs 83% 0
resorts, condo conversions, etc.
• Underwriting rigor/standards/valuations C&D delinquencies 11.4% 3.8%
- Independent/in-house risk underwriting
- Our underwritten valuations are generally 5-10% below C&D delinquencies
appraisal values % of total delinquencies 66% 4.4%
• Asset management capabilities Construction and development
- Extensive local network … unparalleled loans drive bank losses &
delinquencies
- Every loan matters
*Source: FFIEC
49
Comments
1.0-1.2 92% paying current
$4.4B $2.1B mitigated
>1.2 - Supported by letters of credit, cash
$30.3B <1.0 reserves, guarantees covering at least 12
$4.8B months debt service payments
$2.7B not mitigated
- $1.2B <80% LTV
Excludes owner-occupied - Fully reserved if not deemed recoverable
50
25
Debt maturities risk
$6.1B debt maturing in ’09
51
Historical delinquency
& losses (1988-2008) Stress test comments
4%
Delinquency % Losses % EAD Loss/yr
($B) PD LGD ($MM)
4Q’08 outlook 10.5 3.9% 15% 63
2%
Stress case 10.5 5.1% 20% 107
1.5%
• Stress PD is 30% higher than Plan PD; reflects 2 notch
drop for < B+, 1 notch drop for > BB-
• Stress LGD is a 33% increase over 4Q outlook LGD
0%
1988 1992 1996 2000 2004 2008
• Stress LGD of 20% requires a 50%+ collateral value loss
given average LTV of 61%
Weighted avg. historical delinquency .73% / loss .09%, excludes
off-balance sheet
52
26
Credit costs – total debt portfolio
Our portfolio has outperformed
the industry over time Losses/reserves
’05 ’06 ’07 ‘08
($ in millions) Credit costs
156
128 (provisions) $31 ($5) $24 $135
PPR forecast 99 Reserve % 1.31% 0.74% 0.52% 0.64%
credit costs* 97
Reserve $ 189 155 168 301
Better Debt service
69 experience
coverage 1.4x 1.6x 1.5x 2.0x
Actual GE RE 33
17
net charge offs 11
• Reserve % driven by recovery of specific reserves from
loan payoffs and improvements in debt service
’05 ’06 ’07 ‘08 coverage
* Forecast at end of preceding year Reserves
(1) Specific reserve process - FAS 114
• ’05-’08 period generally benign, however • Quarterly surveillance process based on 7 triggers
industry model losses > GE RE losses (DSC<1x, LTV>100%, “Risk/Watch” accounts,
delinquent or non-earning, cost recovery, past
• Over longer periods GE RE portfolio maturity>90 days, loans with specific reserves)
outperformed due to: • Specific reserves posted when loans deemed not
- Product mix (very low construction exposure) fully recoverable, generally when LTV > 100%
(2) General reserves process - FAS 5
- Underwriting (valuations, rigor)
• Based upon robust analysis utilizing PPR
- Asset management (extensive network) “Compass” model technology - real estate market
data and GE portfolio statistics
53
54
27
Real Estate loan loss stress cases
($ in billions, pretax)
55
Equity
56
28
Equity portfolio
Collateral profile Geographical profile
Total equity
Other RE Australia 4%
6% Spain 4%
Warehouse
exposure:
Germany 6%
12% USA 29%
Retail
$33B
UK 6%
9%
Office Canada 6%
Hotel
49%
1%
Mixed France 12%
6%
Parking Japan 19%
3% Apartment U.S. – Top 3 cities (5% of total) – San Diego, Seattle, Austin
14% Japan – Tokyo 9%/France – Paris 8%
57
Portfolio characteristics
Asset size Portfolio profile
$33B Avg. investment $10MM
> $100MM 3.2 10%
Development
assets 3%
$50-100MM 5.8 18%
In-place assets
97%
58
29
Global hurdle process
Semi-annual top-down assessment of:
54 U.S. / 32 Europe markets
Market collateral pairs
4 major collateral types
Apartments Office
Multiple inputs used:
Debt Equity Debt Equity
Macro Micro
59
250
$240
• Avoided malls 200
$167 $157
• Very limited retail exposure to single tenants 150
100
• Grocery anchored and DIY retail (~20%) and 50
Retail
strip centers, less affected by discretionary 0
8%*
spending (e.g. fashion) ‘06 ‘07 ‘08
60
30
How we operate our assets (debt & equity)
Extensive depth of resources, asset surveillance activities, and value creation techniques
Experienced Intensive asset Issue resolution/value
team network surveillance processes creation techniques
61
Targeting $1.5B NOI in ’09 … Fed baseline È$64MM, Fed adverse È$74MM
62
31
GE vs. industry
Fund levered 3 big differences vs. opportunity funds
equity GE 1) We don’t mark assets up
2) We depreciate assets each year
3) We generally don’t lever up
63
64
32
Levered equity positions of funds
amplifies losses
GE all-cash Fund - levered equity*
* Assumes ~2:1 leverage
65
66
33
Equity impairments
($ in millions, pre tax)
YE ’08 unrealized loss (‘UL’) mitigated
Equity impairments by cumulative depreciation
$294
($ in billions)
$153 $4.1
$30 $54 $3.1
67
68
34
Rent growth assumptions
% London office % 8 Atlanta apartment
20
15 6
10 4
5 2
0
0
-5
-2
-10
-4
-15
-6
-20
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
69
Median
Min
Apartment 5.67%
13%
4.77%
4%
Office Apartment
psf p/u
Retail
5%
Warehouse Rent Levels $1,780
9% $32 $1,528
Market fundamentals $1,247 Max
In-Place
$27
Office Apartment $25 $1,076
Median
Low
$23
Office Apartment
Source: PPR
9 18 yr. median cap rates toward historic high cap rate levels
9 Current GE office portfolio rents 18% below market
70
35
Los Angeles equity
Rent growth Equity $0.4B
Office
• Portfolio comprised of office $293MM,
Outlook Fed base Fed adverse
12%
apartment $54MM, warehouse $35MM,
8% retail $19MM
4%
0% Fed base case stress analysis - equity value Retail
-4% ($ in millions) Warehouse
-8% 750 Apartment
-12% Office
2009 2010 2011 2012 2013
500 $400
$19 $313
Apartment $35 $278
$54 $1 $245
$37 $24 $3
250 $38 $26 $1
$38 $23
Outlook Fed base Fed adverse $293 $252 $211 $183
6%
4% 0
2% NEA Outlook Fed base Fed adverse
0%
-2%
-4% Impairments $0 $10 $76
-6%
2009 2010 2011 2012 2013
Source: PPR
Stress case impairments driven by office
71
Embedded loss on
equity assets ($4.0B) ($4.7B) ($5.9B)
(after impairments) ($3.6B) ($3.2B) ($3.3B)
Implied loss on
affected assets 23% 28% 31%
72
36
Real Estate summary
• We are primarily a senior secured debt underwriter and wholly
owned equity operator
73
Commercial Lending
and Leasing
74
37
Commercial lending & leasing overview
Product Portfolio Mix ($230B)
Who we are and what we do
Equipment
leases & loans
• Leasing and lending against hard
54% Leveraged
loans
assets for 25+ years
17%
75
What we do
($ in billions)
Product Assets Focus Approach
Equipment leases $125 Collateral: hard, foreclosable assets • Essential use equipment
& loans • Inv grade & mid market customers • Remarketing expertise
• Equipment & OEMs we know • Manufacturer support
ABL & factoring $30 Collateral: inventory & receivables • Advance rate on eligible assets
• Working capital for mid mkt • Monitoring, audits, cash control
• Industries & assets we know • Credit insurance for factoring
Leveraged loans $38 Collateral: enterprise & assets • Limited hold sizes & multiples
• Mid mkt LBO & acq finance • Originate to hold
• Sponsors & industries we know • Predetermined exit strategies
Franchise finance $13 Collateral: equipment & enterprise • Secured by assets & real estate
• Top tier and larger operators • Avoid start-ups & locals
• Concepts & geographies we know • Leverage franchisor support
76
38
Global lease & loan portfolio
($ in billions)
Credit costs
Loss rate 1.1%
0.9% 0.8% Monitoring current portfolio trends
0.5% 0.4%
0.2% 0.1% $1.4 • Global equipment finance seeing weakness in
transportation, construction and automotive
$1.0
$0.9
• Consumer-related inventory and U.S.
Credit costs $0.5 $0.5 restaurant financing under pressure
$0.2
$0.1 • Leveraged lending experiencing weakness in
newspaper, automotive, radio and retail
'02 '03 '04 '05 '06 '07 '08
Reserve % 1.93% 1.51% 1.24% 0.78% 0.56% 0.60% 0.80%
77
78
39
Leveraged loans: outperforms industry
benchmarks in periods of stress 4.60%
2.95%
2.37%
2.47% Market loss
1.32%
1.00%
1.59% rate*
2.08%
0.29% 0.16% 0.46%
0.43% 0.31%
0.93% GE loss rate
0.49% 0.86% 0.37%
0.30%
• Starts with good underwriting: underwrite to hold, senior secured facilities, known
industries; no junior debt, start-ups, leveraged build-ups or small EBITDA companies
… underwrite assuming work-out
• Rigorous portfolio management: sophisticated tools & proprietary data to re-rate
portfolio as accounts or markets change; routine stress testing & scenario analysis
… account surveillance to ensure early detection of stressed credits
• Proven work-out ability: willing to work longer & harder to recover full value; not
selling early or into illiquid markets
* Market Loss Rate computed using Moody’s speculative grade default rate x S&P LossStat 1st lien cash flow loss-given-default rate
79
5%
8%
• Experienced collection and work-
Consumer
Services
Healthcare
Providers out teams to exercise remedies and
%
Trucking 6% 7%
8% mitigate losses
Retail
Machinery
Manufacturing
• $14B of residual exposure
80
40
U.S. equipment vs. benchmark
U.S. Equipment lending charge-offs vs. ELFA
1.58%
1.50%
1.41% ELFA*
1.40% 1.30%
1.17%
1.08% 1.11%
0.85%
0.80%
0.71% GE Equipment
0.48% 0.64%
0.72% 0.57%
0.44% 0.72% 0.55%
0.46% 0.39%
0.33% 0.38%
0.26% 0.31%
Dec'01 Dec'02 Dec'03 Dec'04 Dec'05 Dec'06 Dec'07 Mar'08 Jun'08 Sep'08 Dec'08 Jan'09
81
Copiers
• Dedicated remarketing team managing all 3rd
6% Aircraft party sales including auction processes
Health 30% • 80+% of equipment (ex-fleet) sold in place or
7%
renewed
Impairment methodology
1998-2008 RV performance
Operating leases ($8B)
160% • Portfolio reviewed at least annually
• If undiscounted rentals plus residual value < BV,
% of Booked RV
140%
leased asset impaired to fair value
120%
Finance leases ($6B)
100% • Reviewed at least annually
• Compare current estimated residual to residual
80%
established at lease inception
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
• If current < original estimate, record impairment if
Fleet Aircraft Copiers Total
decline is deemed other-than-temporary
82
41
Well-diversified corp. aircraft portfolio
Portfolio mix by aircraft type ($13B) Historical residual performance
(% of booked residual value)
Medium 125%
13%
Small 116%
114%
110%
10% 114% 107%
117%
'9 8 '9 9 '0 0 '0 1 '0 2 '0 3 '0 4 '0 5 '0 6 '0 7 '0 8
83
Japan
• No residual risk to GE for U.S. Fleet product
UK 4%
8%
• Established distribution channels for vehicles
Germany – Retail & wholesale outlets
ANZ 28% – Broad multi-country distribution
18% – Web-based remarketing tools
• Rigorous monthly monitoring, increased deflation
France Other EU
22%
assumption and shifted away from large cars
20%
• Residual realization pressured in Europe
– Outlook losses of $50MM … avg. loss $1k/car
– Currently experiencing losses of $1.6k/car
Historical performance
• Implementing multiple mitigation strategies …
(% of booked residual value)
targeting $40MM
105%
103% 101%
103%
101% 101% – Extending terms
100%
100%
104%
– Direct remarketing
101% 100% 96%
– End of term fees
• Original global outlook: credit/remarketing losses
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
$70MM; Fed base $93MM; Fed adverse $116MM
84
42
Exposures of interest
($ in millions)
Big 3 exposure Large cable company
Auto #1 $521 GE has $750MM of $8.3B senior debt facility
Auto #2 362
Auto #3 60 Senior debt facility structure
85
86
43
Stress scenarios – Americas equipment
Portfolio overview ($55B) Outlook & stressed scenarios
Other
Corp Air Stress assumptions
4%
9%
Canada
Canada Original Fed. Fed.
LAEF
AAA to BBB- 5%
HFS
16%
16% Key variables Outlook Base Adverse
19%
Trucking
13% Office Eq.
B+ and below Unemployment 7.7% 8.4% 8.9%
7% Small 8%
ticket
40%
Healthcare
Fleet
Comm’l
16% Eq. (average)
11%
BB+ to BB- 13%
13%
41% Fleet Const. Change in GDP (1.8%) (2.0%) (3.3%)
Citi
13%
14% 14%
Probability of 2.9% 3.3% 4.2%
Default (PD)
Credit Distribution Collaterals
Asset backed facilities with broad spread of risk by collateral, Loss Given 26% 29% 31%
transaction size and geography Default (LGD)
87
88
44
Stress scenarios – Franchise finance
Portfolio overview ($13B) Outlook & stressed scenarios
AAA to BBB-
5%
Stress assumptions
C&G
11% L/S
Original Fed. Fed.
Hotel
8%
Key variables Outlook Base Adverse
Bev/
B+ and below Restaurant 5% Other
37% Quick-service
Unemployment 7.7% 8.4% 8.9%
BB+ to BB-
58% 49% (average)
Restaurant
Casual
26% Change in GDP (1.8%) (2.0%) (3.3%)
Credit cost 131 101 • LGD increase driven by drop in real estate values
89
90
45
Stress scenarios – Asia Pacific
Portfolio overview ($20B) Outlook & stressed scenarios
Stress assumptions
B+ and ANZ
Original Fed. Fed.
below AAA to BBB- Key variables Outlook Base Adverse
28%
22% 19%
Japan Unemployment 5.2% 5.7% 6.0%
60% India 5% (average)
BB+ to BB-
Other 7%
59% Change in GDP (1.2%) (2.2%) (4.2%)
91
Reserves % 0.3% 0.7% • LGD increase driven by lower current asset recovery value
92
46
GECAS
93
GECAS dynamics
Who we are and what we do
94
47
Industry overview (GECAS
(GECAS
Impact)
Industry World fleet PAX fleet)
Cargo
↓ Anticipated global traffic declining by ’08 Total Aircraft
2,072 More
… trending higher World
Efficient
Fleet Parked 1,386
Total 13,964
↑ Aircraft demand continues to slow … OEM =
World
Fleet (e.g. 737, A320,
20,392 2,025
order deferrals; fleet reductions increase Passenger
777, A330, 744,
CRJ, ERJ, EMB)
Fleet Total
via retirements/scrapping/parking Active
=
World
↑ Lower jet fuel prices helps compensate for 18,320
Passenger Least
weakness in demand Fleet Efficient
= 2,331 21
↑ Due to pro-active capacity cuts & 16,295 (e.g. MD80,
732, BAE, DC9,
alternative revenue fees, U.S. slightly 727, A300, 742)
better positioned
↑ Accelerated retirement of least efficient Total Parked Passenger Aircraft = 2,025
aircraft
In- Parked Older Age VIABLE
↔ Capital markets liquidity scarce … harder Transit LESS >1yr LESS Types LESS >20yrs = PARKED 0
to secure financing (194) (865) (459) (156)
351
95
96
48
Demonstrated placement capability
GECAS approach Performance
• Advanced placement of roll-off and skyline, Placement as of 1Q’08:
easing cycle impact
2008 2009 2010 2011
– Remarketing initiated at least 18 months
in advance of expected re-lease date Roll-off 99% 66% 23% 0%
Today 90% 37% 15%
– 80+ technical specialists servicing assets
globally New Order 100% 100% 95% 51%
Today 100% 100% 69%
• History of pre-placing assets in anticipation
of restructurings at weaker credits… actively 9 Stronger position than last downturn …
manage exposures placed ahead of projected cycle
– Minimize losses, AOG & downtime 9 Closely monitoring & placing unanticipated
– Bi-weekly portfolio review process roll-offs (52 in 2008, 16YTD in 2009)
– Granular watch rating system
97
Diversified portfolio
RJs
Cargo
Key comments
9%
Leased assets
16%
• Portfolio*well positioned with high demand, widely
used, fuel efficient aircraft
Wide-body 20%
55% – Average age: 7 years
Narrow-body
– ~85% of fleet is < 10 years old
20% – ~85% of narrow body fleet is high demand
Other A320 & 737NG
Loan 2%
– Majority of wide body fleet has broad user base
Products
19 %
and can be readily redeployed (777 & A330)
Operating
Finance 14 % Lease • Deliberate evolution of portfolio to operating
Lease
leases & secured loans
6 5%
7%
C&LA and mitigates airlines’ credit quality
5%
Canada – Strong track record managing through similar
US 34% 15%
cycles
MAC
• Geographically diverse
98
49
Stress analysis
(Pretax $ in millions)
Aircraft values Impairments/losses
Values are driven by changes in supply & demand ’09 outlook: assumes a higher 1-yr decline vs. the
average 1-yr drop during last downturn
~$265
AIRCRAFT
VALUES
DEMAND SUPPLY
$128
(Traffic) (Active Fleet) $109
OTHER GDP
AS GDP
LA GDP
Utilization Parking Base: assumes the worst 1-yr decline from last downturn
New OEMs Conversions
occurs in ’09
US GDP impacted by: unemployment, Adverse: assumes the worst case peak-to-trough cycle
housing, production, etc
decline in last downturn (’00-03) all occurs by ’09
Current dynamics ~$635
• All aircraft types are expected to be negatively
affected by global recession ~$320
• Weaker outlets for older aircraft ~$265
• OEM production cuts, retirements & parked aircraft
mitigate portfolio impact
99
100
50
Summary
40+ years experience and strong customer relationships
101
U.S. Consumer
102
51
U.S. Consumer Finance
2008 Served assets Who we are and what we do
Dual Card • Founded in 1932
$8.1B Retail
$9.5B
• Diversified consumer lender; $31B PLCC
CareCredit
& $22B Sales Finance managed
PLCC
$22.9B
$4.8B receivables ($27B on book)
Power
RVM
$3.7B • Broad geographic distribution with
$3.8B investment grade partners … over
~140,000 retail & merchant outlets
• 76% of receivables with A & B credit
quality customers … avg. FICO 694
• 56MM active accounts … avg. bal. ~$950
• Exited U.S. mortgage in 2007
• ~10,000 employees
103
104
52
Private Label vs. Bank Cards
(2008) a)
GE PLCC Bank card
Avg. served assets ($13.5B on book) $29B ~$850B
Smaller loss
Average balance $620 $3,000 severity … 23% of
industry line &
Average credit limit $2,512 $10,800 21% of balance
105
106
53
New PLCC volume profitable
New volume RACV by FICO band
No new accounts Credit line decreases Dual card
Risk action + credit line decreases on existing accounts cutoff 760
19% on existing accounts
14%
9%
Return hurdle
4%
<586
FICO (1%) 586-610 611-640 641-670 671-695 696-725 726-755 756-780 781-810 811-835 836+
GE Risk grade D/C C C/B B B/A A A/A+ A+
Average
107
108
54
Credit Costs increasing
Credit Cost (on book) Entry rate at historic lows
11.49% (133bps.)
11.37%
4 yr. Avg.
13.51%
10.93% 10.84%
11.28%
10.52%
11.10% 3.93% 10.40%
Actual
9.95%
4.91%
6.96%
1Q '06 3Q '06 1Q '07 3Q '07 1Q '08 3Q '08 1Q '09
Reserve Change 2.79% t
9.58%
3 due CE
Collections more challenging
6.19% 52.4%
46.5%
47.9% (850bps.)
Write Offs (NCOs) 4.17% 4 yr. avg. 42.6% 43.8%
45.0%
39.0%
36.5%
4+ CE
’07 ’08 ’09 Outlook 22.63%
19.52% 20.42%
17.88%
Reserve % 3.29% 5.77% 6.77% 4 yr. avg.
18.3%
30+ DQ. (Served) 5.53% 7.19% 7.88% 15.90% 15.15% 16.23%
109
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Ju
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nu
em
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br
Au
ct
Ja
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110
55
Global Consumer stress test framework
Input Risk assessment & Output
Macro environment decisioning model (RAD) • Analysis by geography &
Volatility & inter dependency relationships product type & segments
Scenario Generator
• Interest rates
• Monte Carlo simulation • PD, LGD and Loss
• Unemployment
External distributions by scenario
• Wages & inflation • Possible paths of
Forecast
• House prices macroeconomic variables
range
• Refinance • Sensitivity to individual
opportunities
Model risk drivers (macro +
• Default = borrower’s option assumptions)
Risk layers • Exercise probability based on:
• Credit grade – Cash flows (DTIR) Uses
• LTV – Leverage (LTV)
• Loss and capital
• Debt-to-Income (DTIR) • Non-linear relationships: adequacy planning
• Product structure – Skewed distributions • Risk mitigation planning
• Credit insurance – Fat tails
• Portfolio strategy
• Severity: collateral/collections
Portfolio performance & assumptions
• Observed PD/ LGD Validation
• Cure rates & Refi rates
• Quarterly back testing
• Recovery assumptions
• Roll rate analysis
• Additional loss on sale
assumptions
triangulation
111
112
56
Stress scenarios – Sales Finance
Portfolio overview ($21.5B) 2009 Outlook & stressed scenarios
On book $16.0B
Stress assumptions
A 24% ‘09 Fed. Fed.
B 17% Pre 2007
31% ’08 40% Key variables ‘08 Outlook Base adverse
C 11%
A+ 37% Unemployment 5.8% 7.7% 8.4% 8.9%
D 11%
2007 29%
(average)
Recovery rate 12.4% 7.8% ↓16% ↓25%
Credit distribution Portfolio vintage
90+ Delinquency 2.4% 3.3% 3.8% 4.1%
• 61% prime book
Credit Cost % 10.3% 11.1% 13.7% 15.0%
• Average FICO 685
Est. Credit Cost $1,515 $1,784 $2,194 $2,398
Key metrics
2008 2009
Actual Outlook
30+ (Served) 6.8% 7.7%
Stress case does not include :
90+ 2.4% 3.3% 1 Stimulus benefits
Net Write- 744 1,204
Offs (NCOs) 2 Future benefit from risk actions
Credit Cost 1,515 1,784
113
Mortgage
114
57
Mortgage overview
($ in billions)
Overview Net income history
• $60B assets across 19 platforms $1.2 $1.1
$0.9
ANZ France $0.7
4Q’08 $13 $11
Poland $5
assets
U.K. Mexico $2
Hungary $1
$22 Spain $1 ’05 ’06 ’07 ’08
Others $5 (12 platforms)
ROI% 1.6% 1.7% 1.9% 1.6%
• Protected by Mortgage Insurance (MI)
>80% current
61% A/A+ credit rating
Platform LTV with MI Exceptions
U.K. 66% Pre ’03 vintage, HPI impact
59% 61% 61% 62% 62% 61% A+/A
Australia 96% Run-off portfolio
• Exited $1.5B ANZ assets in Feb ’09 '06 '07 1Q '08 2Q '08 3Q '08 4Q '08
6% 0.3% NCO /
0.2% 0.2% 0.2% ANI
4% Australia 0.1% 0.3%
2% France 0.0%
0.1% 0.1% 0.1%
Poland
0%
Sep ‘07 Dec’07 Mar ‘08 Jun’ 08 Sep ‘08 Dec ‘08 Feb ‘09 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08
189
500
<80% 51% 557 986 U.K.
0
'08 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08
116
58
Shrinking Mortgage everywhere
($ in billions)
Originations ENI
$72.7 Down
$25.4 $21.4
Down $61.3
$24.4
$51.3
$13.8
$1.0
’07 ’08 ’09 outlook ‘07 ’08 ’09 outlook
Country 2008 2009 outlook V$ V% 2008 2009 outlook V$ V%
U.K. $4.8 $0.1 ($4.7) (97%) $22.4 $19.7 ($2.7) (12%)
ANZ 2.1 0.1 (2.0) (97%) 12.6 8.4 (4.2) (34%)
France 2.3 0.5 (1.8) (79%) 11.1 10.2 (0.9) (8%)
Poland 1.5 0.1 (1.4) (91%) 5.2 4.5 (0.7) (14%)
Others 3.1 0.2 (2.9) (94%) 10.0 8.5 (1.5) (15%)
Total $13.8 $1.0 ($12.8) (93%) $61.3 $51.3 ($10.0) (16%)
117
U.K. $22 $94 26% 78% 21.0% 11.0% 0.4% 36% 2; A+/Negative, A+/Negative
Australia 13 174 84% 79% 4.9% 2.0% 0.2% 94% 2; AA-/ Stable, AA-/Negative
Mexico 2 105 70% 68% 8.3% 4.8% 0.3% 22% 1; Government entity
118
59
U.K. Home Lending (U.K.-HL)
($ in billions)
$22B mortgage assets • Created from acquisitions of
igroup (’01) & First National (’03)
1st mortgage • Originations through
$19.1
intermediaries
• In-house underwriting,
2nd mortgage collections & asset management
$2.6
• Mortgage originations down
Originations 97%
$10.7 • Solid LTV. … 78% and MI
Down
$10.6 coverage on 66% of > 80% LTV
$4.8 • Reorganized business to focus
on collections & loss mitigation
$0.1
’07 ’08 ’09 • ~1,350 employees
Repositioned to de-risk the business
119
Consumer
− Owner occupied ~70% ~97% Better
− Unemployment (’08) ~7.2% ~6.3% Consumer
dynamics
− Bankruptcy filing Low barrier High barrier
60
U.K. economic environment
GDP % -a)
3.4%
3.0
2.6
1.8
0.3 ~0%
-1.8 -3
3Q’07 4Q’07 1Q’08 2Q’08 3Q’08 ’10 forecast
4Q08
’09 forecast
HPI % (YOY change) –b)
10.7%
5.2
1.1 -6.1 -12.4 -16.2 -17.7 -10 -5%
3Q’07 4Q’07 1Q0’8
2Q’08 ’10 forecast
(a- Source: Global Insight
’09 forecast
(b- Source: Actuals from HPI; GE forecasts 3Q’08
4Q’08
Feb ‘09
121
122
61
U.K. credit experience
30+ & 90+ Delinquencies Net Charge-offs (NCO)
($ in millions) $115
30+ DQ rate 21.0%
90+ DQ rate
15.3%
14.4% 14.4%
$69
13.3%
123
124
62
U.K. risk layering and losses
($ in billions) 1st Mortgage 2nd Mortgage
Total $19.1 $2.6
80-
Indexed 0-80% 80-90% >90% 0-80% 90%
>90%
LTV% $7.2 $3.3 $8.6 $1.2 $0.5 $0.9
A+/A B C/D A+/A A+/A B C/D A/B C/D A/B C/ A/B C/D
Credit B C/D D
$1.9 $2.6 $2.7 $0.6 $1.3 $1.4 $3.6 $3.4 $0.7 $0.5 $0.3 $ $0.7 $0.2
Grade $1.6 0.2
Non-earners to NCO
$2.4 ($0.8)
($1.3)
($0.1) $0.2
125
126
63
Mortgage stress - remaining portfolios
($ in millions)
Credit costs Key stress assumptions
Fed Base Fed Adverse ’09 outlook Base Proxy Adverse
Portfolio (assets) ’09 outlook Proxy Proxy Proxy
Australia
HPI decline 2% 5% 10%
Australia $13B $4 $6 $43 Addn’l loss on sale 15% 20% 25%
Unemployment 5% 5% 6.4%
Spain
Ireland $0.9B 8 35 47 HPI decline 30% 35% 45%
Addn’l loss on sale 15% 15% 15%
Rest of World $3.6B 18 22 62 Unemployment 13.9% 20% 22%
(Ex UK and CEE) Ireland
HPI decline 9% 15% 19%
$115 $176 $348
Addn’l loss on sale 13% 20% 20%
Unemployment 9.2% 13% 19%
127
Summary
U.S. Consumer
9 Took loss actions early … entry rates down
9 Mitigating losses with profit sharing and revenue actions
9 Solid reserve position … 2x non-earnings
Mortgage
9 Low risk and stable performance outside U.K.
9 Solid U.K. underwriting, low LTVs and MI mitigate
down cycle
9 Aggressive collections/loss mitigation focus
128
64
GE Capital
Global Banking
129
Strong franchise
130
65
Portfolio
Product portfolio Credit profile
$22B 4Q‘08 Receivables (%) a) Credit distribution (%)
Sales
Auto Finance D
7%
10% 8% C
Personal 11%
Loans
20% A+
46%
Mortgages 35% 19%
B
21%
6% 17%
SME
Cards A
a) $27.8B total assets
131
’01
Credit performance
Global
Russia Consumer%
30+% 5.72%
2.89% 7.47%
’04
Credit 2.42%
Romania/Latvia Cost % 1.79% 2.99%
’06
132
66
Slower Eastern Europe growth
CEE GDP growth%* Oct.’08 forecast Mar. ’09 forecast
5.5%
4.8%
4.3%
3.8%
3.2%
3.0%
0.7%
(0.5%)
(2.0%) (2.0%) (2.0%) (1.8%)
(3.0%)
(12.0%)
Poland Czech Hungary Russia Latvia Turkey Romania
GE 4Q’08
Assets $11.7B $6.7B $4.7B $1.0B $0.8B $1.9B $0.6B
*Sources: EIU Reports February/March 2009
133
134
67
Core Eastern Europe banks
#5 in Poland #4 in Czech #4 #8 in Hungary #8
Assets
$11.7B
29%* BPH 18% $6.7B 18% $4.7B
31%
39% 25% $3.4B $2.5B
$2.5B $1.4B
$0.6B $1.1
SF
Auto SF SF
Auto 1%
5% 7% 6% PLoans
11% Auto
PLoans 9%
19%
16% PLoans
Mortgages
30%
23%
Mortgages SME Mortgage SME
55% 13% 25% 42%
Cards SME
Cards
6% 24% Cards
4%
3%
135
FX mortgage underwriting
1 Centralized underwriting & full docs on every loan
-Property valuations, income verification, etc.
2 Underwriting guidelines routinely adjusted based on FX rate
movements, wage growth, & interest rate changes
3 Conservative Debt to Income and Loan to Value ratios
-100% Mortgage insurance on >80% originated LTVs
4 No exotic products: low doc loans, self certification, interest
only, teaser rates, etc.
5 Borrowers qualified based on their capability to handle a
local currency loan, even though they are given a lower
interest rate FX loan
6 FX loans fully hedged with cross currency swaps
136
68
FX mortgages
Poland ($4.5B) Hungary ($1B)
Credit distribution 30+ delinquency Credit distribution 30+ delinquency
3.0%
2.3% A+74%
1.2% A 24% 0.7%
A+ 95%
06 08 06 08
A 2%, B 2%
B,C,D 1% each
Avg. LTV=71% Avg. DTI =26% Avg. LTV=57% Avg. DTI =23%
Stress test ’09 Outlook Base Adverse Stress test ’09 Outlook Base Adverse
HPI È 4% 10% 20% HPI È Flat 10% 20%
FX È (from today) 15% 15% 30% FX È (from today) 5% 15% 25%
Unemployment 9.5% 10.5% 13% Unemployment 8.5% 9.4% 10.4%
Credit losses ($MM) $7 $26 $87 Credit losses ($MM) $2 $22 $49
137
138
69
Banks stress test results
Stress test Stress test assumptions
’09 Outlook Stress Test V’09 ’09
Assets Credit Cost 30 + Base Adverse Outlook outlook Base Adverse
($B) ($MM) ($MM) ($MM) ($MM)
HPI flat (5)% (20)%
Czech $6.9 $128 2.2% $144 $167 $16-39 Czech Unemployment 5.3% 7.3% 10%
Under severe stress scenario … emerging market banks still earn ~$300MM
139
Summary
• Nearly 15 years experience in these geographies
9 Started small … organic growth overtime
140
70
Operations
update
141
Operating GE Capital
1 Tightly managing investment … 2009 YE ENI to $500B,
È$25B
2 Driving higher new business returns … new business
ROI Feb YTD ~2.7%
3 Taking substantial cost out … 2009 SG&A È19%
(ex-FX); Headcount È13% … 1Q on target to deliver
annual savings rate
4 Disposing/running-down ‘red’ assets … closed $23B of
dispositions, Feb YTD mortgage originations È88%
Driving results with rigorous operating processes
142
71
2009 ending net investment
($ in billions)
ENI Dynamics
• Reduced volume across all portfolios
$525 V%
$500 (5%) • RE, Mortgage and U.S. Consumer
volume limited to commitments
• Limited BD activity assumed
Core 357 – Santander/Interbanca deals executed
356 –%
Jan. ’09
– ANZ Mortgage $1.5B closed Feb. ’09
143
144
72
Recent deals in core segments
Business Deal size Deal type Customer benefit Financials
Americas, $175MM Working capital facility for a Closed deal in 25 days 3.2% ROI
Corporate Lending global chemical customer
Americas, $100MM Asset-backed DIP finance for a Provided a wing-to-wing 9.7% ROI
Restructuring paper & packaging customer solution in a quick turn-
Finance around time
Americas, $89MM Senior loan for a medical Fast turn-around thanks 3.2% ROI
Healthcare Financial ($22MM hold) device customer to GE’s Healthcare domain
Services expertise
Energy $150MM 49% limited partnership with Maintained pipeline 11% ROI
Financial Services an Oil & Gas producer development program at
reduced debt
GECAS $290MM Aircraft sale leaseback and Provided liquidity 3.7% ROI
spare parts for a leading airline
Global Banking $13MM Short-term, line for a CEE Improve working capital 11.7% ROI
SME Financing energy customer management
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SG&A cost
($ in billions)
$2.7B
$14.0 Focused approach
È25%
$11.3 19% ex-FX
1 Organization structure and headcount
FX 0.8
re-sizing… ~$1.0B
7.1
$10.5
9 Geographic consolidation
Direct
(C&B) 2
5.3 Sizing and indirect spending … ~$1.0B
9 Driving lower roof-tops
9 Lease, outside services, legal, sourcing and
5.6 consultant costs
Indirect
4.0
3
Operations Business exits … ~$700MM
1.3 1.2
9 Closing/exiting underperforming/non-
2008 2009 strategic platforms
Outlook (ex-Acq.)
Lean and competitive structure … $1.2B more out since 12/08 (ex-FX)
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73
Run-off/restructure redeployment
(ENI - $ in billions)
$103
Portfolio
~$80 9 Equipment Services
~$60 9 Consumer mortgages
Game plan
9 Manage investment down ~$70B by
2008 2009 2010 2011 2012 … reinvest in core and funding
Outlook Outlook Outlook
model
Reduction: $23B $20B $25B
9 Primarily based on pay down/ term
~$70B investment 9 Opportunistically sell or swap
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148
74
‘Red’ assets process
• Frequency: BD leaders bimonthly reviews with senior leadership
• Rigorous pipeline review & status of ‘red’/‘yellow’ assets …
Resources working transactions and structures
• Consideration of asset swaps, JV’s, partial or full dispositions
• Content for review:
Pipeline Red/Yellow Status Prime the Pipeline
GE Capital
– Summary metrics of deal activity – Complete overview of ‘red’ & – Rack & stack process
– Active divestitures ‘yellow’ assets – Creative structuring
– Immediate visibility into status of – Recap of most current strategic – Market feedback
all deals assessment – Preparing platforms for sale
149
Operating GE Capital
1 Rigorous operating mechanisms
150
75
Financial
update
151
Consumer portfolio
- U.S. 4.3 5.1 5.7
- Non-U.S. Mortgage 0.6 1.2 1.6
- Other Consumer 1.9 2.2 2.7
Management planning 1.0 – –
Total ~$10.6 ~$13.8 ~$18.4
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76
Stress summary credit costs vs.
impairments Estimated Estimated
($ in billions) Original outlook Fed base case Fed adverse case
Credit Credit Credit
costs Impairments Total costs Impairments Total costs Impairments Total
Real Estate $0.3 $0.4 $0.7 $0.9 $1.5 $2.4 $1.0 $2.6 $3.6
Aviation/Energy 0.1 0.2 0.3 0.1 0.3 0.4 0.1 0.6 0.7
Mid-market
lease/lend 1.5 – 1.5 2.0 – 2.0 2.6 – 2.6
Total $9.7 $0.9 $10.6 $11.5 $2.3 $13.8 $13.7 $4.7 $18.4
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Estimated:
Fixed charge coverage a) ~1.52X ~1.32X ~1.19X
a) Includes capital contribution
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77
Estimated credit costs vs. estimated
Fed 1 yr. ‘adverse’ loss assumptions
($ in billions) GECC
2009 Estimated Estimated 1 year
12/31 financing outlook Fed base Fed adverse estimated Fed a)
rec. net of reserves loss rate loss rate loss rate loss rates
Real Estate $46 0.61% 1.94% 2.15% 2.95%
Aviation/Energy 24 0.28% 0.41% 0.70% n/a
Mid-market lease/lend 163 0.94% 1.22% 1.59% 1.57%b)
U.S. Consumer - Card 12 16.31% 18.91% 21.33% 9.35%
U.S. Consumer – Sales Finance 14 11.14% 13.71% 14.98% 4.95%
Non-U.S. Mortgage 59 1.09% 2.05% 2.76% –
Other Non-U.S. Consumer 50 4.18% 4.71% 5.71% –
Total GE Capital Finance $368 2.37% c) 3.13% 3.73%
Total GECC $371
Memo:
- U.S. Construction loans None 10.60%
- 1st lien residential None 3.90%
- Home Equity/2nd’s None 6.15%
a) Derived from Goldman Sachs Equity Research
b) C&I loans used for leveraged loans, “other leases/loans” for equipment
c) 2.63% including $1B management planning additional losses
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• Scenario
– 9.4% peak U/E 2Q’10 (4Q’09 9.2%)
– 30% peak to trough housing decline 3rd party 3σ GECC
stressed adverse
• Stressed 3 std. to 95% confidence case
• Did not specifically stress assets • 2008 back-testing of their results vs. actuals
beyond financing receivables – 15% lower than modeled
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78
Key ratios – GECC
TCE/TA ratio Tier 1 common ratio c)
6.1% b) 6.9% a) 7.1%
5.9% a) 6.5%
JPM BAC WFC Citi GECC GECC JPM BAC WFC Citi GECC GECC
4Q’08 4Q’08 4Q’08 4Q’08 4Q’08 ’09 4Q’08 4Q’08 4Q’08 4Q’08 4Q’08 ’09
Adverse Adverse
Stress Stress
157
Mid-Market
Commercial
lease/loan • FAS 114
– Specific credit or collection evaluation
Other approach
• FAS 5
FAS 114 – Primarily static pool model applying
• Specific reserves on individual loans historical loss curves
Corporate
loans deemed impaired
– PD x LGD history applied to loans
FAS 5
$145B • Formulaic calculation of losses
individually determined non-impaired
Real Estate
debt embedded in portfolio for which
Aviation/Energy a default or loss event has been Each methodology incorporates current
loans incurred but not yet observable
Franchise/Other trends and conditions and other
observable environmental factors
4Q’08
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79
Non-earning reserve coverage
($ in billions)
Commercial
$3.2 1.1
228%
coverage
0.5
100%
recovery
0.8
$1.7
Loans in
recovery/
workout
Exposure
Expect full
Collateral
0.8
recovery
value on
remaining
exposure
Estimated
4Q’08 4Q’08
loss exposure
Non-earning Reserves
159
3.3 1.0
Non-mortgage
$3.2
non-mortgage
1.8
reserves Cure
231%
coverage 133%
coverage
0.2 $0.4
0.3
Estimated Estimated
4Q’08 Mortgage Estimated
MI
4Q’08
non-earnings collateral loss
Non-earning value exposure Mortgage
reserves
160
80
Financing receivables vs. top U.S. banks
($ in billions, as of 4Q’08) GECC Top banks average a) Top banks
coverage
Reserve % Reserve % GECC asset
U.S. Consumer Receivables coverage Portfolio Receivables coverage Portfolio composition
- U.S. credit cards $12.7 6.30% 3.4% $238 7.8% 7% 7.8% x 12.7
- Residential mortgages - - - $1,078 2.3% 39%
- Auto - - - 2%
- Student loans - - - 1%
- Sales finance/other 18.3 5.46% 4.9% 580 1.7% 9% 1.7% x 18.3
31.0 5.81% 8.4% 1,896 3.1% 59% 3.94%
U.S. Commercial
- Real Estate debt 28.3 0.71% 7.6% 43.1 0.67% 17% 0.67% x 28.2
- Real Estate construction 0.6 0.79% 0.2% 13.1 9.35% 9.35% x 0.6
- Commercial loans 33.1 0.78% 8.9% 231.1 1.01% 1.01% x 36.0
29%
- Commercial leases 43.3 1.03% 11.7% 22.4 1.0% 1.00% X 43.3
$105.3 0.87% 28.4% $1,170 2.0% 36% 0.96%
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Investments
Impairment review process
• Compare fair value to book value; Is fair value <book value?
– 68% of portfolio priced via market price or pricing services, other non-binding
Measure
broker quotes, or internal models
163
GECC Goodwill
($ in billions)
164
82
GECC Associated companies
($ in billions) View of
4Q’08 impairment risk
Investment Holding Investment a) Performance as of 2/09
Hyundai – Korea 43% $3.2 Stable Low
Garanti Bank – Turkey 21% 1.9 Outperform Low
CAMGE – Spain 50% 1.3 Stable Low
Bank of Ayudhya – Thailand 33% 1.1 Stable Low
GE Nissen – Japan 50% 0.9 Stable Low
BAC International – C. America 50% 0.7 Stable Low
Dogus GE BV – Romania 50% 0.5 Stable Low
Colpatria – Colombia 50% 0.3 Stable Low
Brunswick/Polaris – CFS 50% 0.3 Stable Low
Southern Star (LP) – Kentucky 60% 0.3 Outperform Low
Cosmos Bank – Taiwan 23% 0.3 Challenged Medium
All others 8.5 100+ partnerships, avg. $50 investment
$19.3
a) $18.7 GECS
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166
83
Summary
1 We follow the appropriate accounting guidelines
167
GECC Summary
+ Outlook
168
84
Primary questions … the answers
n Commercial Real Estate
We will experience lower earnings through this cycle, but believe we have it covered in
our own business framework
r Losses/Impairments/Reserves
We apply appropriate accounting policies. Our reserves are adequate for current
economic conditions
s Capital
Based on stressed losses, capital appears adequate. Further options available if
conditions worsen
169
GE Capital future
Why to like this business
Today Future
Banks
• Deposit funding with potential for growth
Commercial
Banks 10% • High margin new business
Verticals 15% • Consolidation + partnership potential
Real Estate
Verticals
Core
75% • 25+ year track record
Consumer
• Leverage GE brand/competencies/synergy
GECAS
Energy Core
Other • Leasing and asset management intensive
platforms advantaged vs. banks
Assets $637B $400-450 • Direct origination to mid-market
ROI 1.3% 1.5-2% • Core underwriting skills
• Fewer FinCos
• Bank consolidation … historically positive
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85
2009 Summary
1 Environment much tougher – we think GECC is prepared
• Strong liquidity/limited refinancing risk today
171
Closing
172
86
How to think about GE Capital risk
1 Even under Fed adverse stress tests, GE Capital is approximately breakeven in
2009 and we should not need to inject additional capital
Cases
Op plan Fed base Fed adverse
2 Losses and impairments $10 $14 $18
Net income $5 $2 $0
Fixed charge coverage a) ~1.52 ~1.32 ~1.19
Tangible equity ratio 6.9% 6.4% 6.1%
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87
Company update
Dec. 16 1Q Comments
175
Key messages
9 Running GE to be safe and secure over the long term
‒ Liquidity position is extremely strong
‒ Completed 93% of our 2009 planned long term funding
9 Have sufficient capital and alternatives to weather adverse
economic conditions
9 Running GE with intensity
‒ Resizing our cost footprint in a meaningful way
‒ Management team is focused on delivering cash
‒ Continuing to invest/position company for long term growth
9 We expect GE Capital will be profitable in 1Q’09 and 2009
9 We are committed to GE Capital
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GECC debt/equity ratio
($ in billions)
4Q’08 1Q’09E
As reported (4Q’08/estimated 1Q’09)
Adjustments
Add: hybrids to equity 7.7 ~8
Subtract: hybrids from debt (7.7) ~(8)
Subtract: cash from debt (36.4) ~(39)