Post on 16-Dec-2015
transcript
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GE CapitalCredit Roundtable
ChicagoNovember 2012
Caution Concerning Forward-Looking Statements: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; potential market disruptions or other impacts arising in the United States or Europe from developments in the European sovereign debt situation; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’s asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (GE Money Japan); pending and future mortgage securitization claims and litigation in connection with WMC, which may affect our estimates of liability, including possible loss estimates; 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 pay our quarterly dividend at the planned level; GECC’s ability to pay dividends to GE at the planned level; our ability to convert pre-order commitments into orders; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, 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, joint ventures and dispositions and our success in completing announced transactions and integrating acquired businesses; the impact of potential information technology or data security breaches; 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 GECC on an equity basis. “GE (ex. GECC)” and/or “Industrial” refer to GE excluding Financial Services.”
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GE Capital
Business
CommercialLoans & Leases (CLL)
3Q’12 assets• Entered in the 60’s• ~100% secured loans and leases• Support mid-market customers
• Entered in the 70’s• Secured loans against diversified properties• Own/operate high quality properties
• Entered in the 30’s• Store cards and sales finance for retailers• Broad spread of risk
• Entered in the 60’s• GE domain• Broad product set with full life cycle management
• Entered in the 80’s• GE domain• Essential assets; secure cash flows
Domain + expertise
Businesses we know … decades of performance
Real Estate $55B - Debt - Equity
Consumer $136B - U.S. PLCC - Global
Aviation Services $49B
Energy Financial Services $20B
$181B
$550B+ assets, $49B revenue FY’11, ~51K employees , 50+ countries
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'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12E
GE Capital earnings history
$1Recession
Japan recession
Asiacurrency
crisis
9/11recession
U.S. growth
Europeanslowdown
War
SARS
Airlinebankruptcy
Katrina
$12
$7
$1
$3
$6.6
Profitable through the credit crisis… on track for double digit growth in ’12
++
($ in billions)
~1/3rd smallerbalance sheet
Raised FICO cut-offs early
High collateral recoveries
Early to exit LBO, CMBS, U.S. mortgages
Portfolio insulated from rate swings
Successes in crisis
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Looking back
ENI-1) (2007 # is peak ENI = 3Q’08+FAS 167) $637$446$(191)
Long term debt outstanding $361 $303 $(58)
Annual long term debt issuance$90 $27 $(63)
Commercial paper (CP) $101 $44 $(57)
Alt. funding/total debt 8% 22% +14%
Liquidity $9 $80 $71
T1C Basel 1 % 4.4% 9.9% +5.5%
Adj. debt/equity ratio 7.4:1 4.2:1 (3.2)
2007 2011
Fundin
g &
liq
uid
ity
Capit
al
Lessons learned
De-levered
Strong capital ratios
V
1) - Ex. cash @ 1Q’10 Fx rates, peak excludes legacy insurance & some corporate components
($ in billions)
Early, proactive management actions
Stronger liquidity & funding profile
Improved liquidity management framework
Shrunk while maintaining franchise
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Bank lines $65 $48CP coverage 64% 100%+Cash & equiv. $9 $78LT debt<1 yr. $56 $61
(a- Continuing operations(b- Includes ~$2.2B YTD FX impact and ~$0.9B YTD FAS 133
GECC funding ($ in billions)
Debt composition–a)
Comm’l paper
LT debt
$420-b)Non-recourseSecuritization
$524
Alternative funding/others
Diversifying by growing alternative funding
sources
'07 '11
$40
$96
7% of debt
22% of debt
Alternative funding
U.S. CD program
GE Interest Plus
International deposits
Securitization Covered
bonds
•Maintained match-funding principles•Sustain Brokered CD program in US … issue CDs to match assets•Met Life acquisition
$6B retail deposits
Fundamentally different funding profile
2007 3Q'124369
277
31
101
30
361
32
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GECC long term debt dynamics
'07 '08 '09 '10 '11 '12F '13F
Issuances Maturities
GECC issuances and maturities ($B) –a)
9084
70
25
27
45
56
69 66
64
25-30
25-35
80
35
2012 issuance substantially complete Issuance in 9 currencies … >6 year
WAM Smaller market footprint <2% of USD
investment grade index Support from diverse investor base Committed to current rating (A1/AA+)(a- senior unsecured long term debt
Share of USD issuance4.6% 2.8%1.8% 1.8%1.6%
Significantly reduced long term debt issuance and market share
2012 YTD issuance - ~$29B
USD60%
EUR17%
AUD7%
GBP6%
CAD5%CHF
2%
Other4%
7
50
100
150
200
250
300
350
400
Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12
OAS over Treasuries(bps)
GE Capital 5yr bond spread vs. peers
Source: Barclays Capital
WFC
GECC
Bank IndexJPM
FinCo Index
C
Investors rewarding GE Capital
Aa Corp
KSS China CEO Program 06-17-10/8GECC disciplines key to success
Repositioned GE Capital Balance sheet reduced …. $489B at 3Q’10 … $425B
by 2012 Significantly increase cash balance to strengthen
liquidity
Improved funding plan Commercial paper reduced from $100B+ to $40-
$50B … back up lines at 100%+ Long term debt issuance down … $90B in ‘07; $25-
30B in ‘11 Managing debt maturities in 2013 and beyond
~$35B
Increased disclosure Three analyst meetings in 2009; supplemental data
available
Improved capital metrics Cash increased from ~$15B to $60+B Debt to equity ratio improved … 7.7:1 at 4Q’08;
3.9:1 at 2Q’12 Tier 1 common ratio … 5.7% at 4Q’08; 10.1% at
2Q’12 after $3B dividend to parent
How GE managed through the crisis