Jeff Bornstein. Financial Performance/ Productivity. 1H 05 key highlights. Chief Financial Officer. + Strong profit growth across all businesses

Transcription

1 Jeff Bornstein Chief Financial Officer Financial Performance/ Productivity 1H 05 key highlights + Strong profit growth across all businesses + Growth initiatives delivering Largest volume production ever IB s contributing Enterprise selling gaining momentum + Asset quality continues to improve + Simplification driving productivity CFPA1147 Oct SA_Bornstein 2 1 /

2 1H 05 CF financial performance (ex Insurance) Assets Net Income Drivers +28% 4% $186B 22% $1.8B Total Volume 20% $178B $1.5B Net Income 22% Risk Adjusted Margin Expense Productivity & Other 18pts 4pts 1H 04 1H 05 1H 04 1H 05 Selective on book asset growth Maximizing net income CFPA1147 Oct SA_Bornstein 3 Match funding: Mitigates exposure to change in interest / FX rates 2 /

3 Managing funding and spread risk Commercial Finance Assets Latin America Europe Canada 6% 3% 25% Global Treasury Operations Matched Funding eliminate all but credit risk Currency 8% Asia & Australia Term/Duration Rate (fixed vs. float) USA 58% Centralized No speculative trading Not profit center No trading for own account Conservative funding process CFPA1147 Oct SA_Bornstein 5 Continue to enhance return on capital 3 /

4 Expanding return on capital Several key levers 19% ~22% ~3pts Risk Adj. Margin ~1.0 pt Spreads Losses Fees Cap. Mkts. Capital Allocation ~1.7 pts Prod.leverage Exit non-performing Equity Check book 04 05E Productivity ~0.3 pt ~3.0 pts Simplification Sourcing Lean Six Sigma Focused on Return on Capital CFPA1147 Oct SA_Bornstein 7 Using capital markets to grow faster with our customers 4 /

5 Strategically use Capital Markets Reduce risk - Credit & collateral exposure Alternative funding source More liquidity Enhance ROE Tool to drive organic growth Leverages our most unique asset Our big origination front end CFPA1147 Oct SA_Bornstein 9 Using capital markets to grow faster with our customers Sales force g Commercial Finance 8,500+ Front-end Credit / Return A B Syndication Securitization CLO Investors Banks Pension funds Insurance Companies $95B Total Volume C Syndication Private Originations/ Club Institutional investors Originate to more than GE Balance Sheet CFPA1147 Oct SA_Bornstein 10 5 /

6 Effective capital allocation Capital allocation process Before: 8 to1 leverage for all businesses Now: product leverage Process Capital alignment with product risk Objective Statistical Analysis coupled with expert judgment (leverage ceilings) Highlights underperforming products / portfolios Benchmarked industry comparables external validation as needed Stress-tested & cycle adjusted model results Ensured 99.99% Confidence Interval for AAA rating Annual Management Review process to update leverages Capital efficient model Redeploying capital for growth CFPA1147 Oct SA_Bornstein 12 6 /

7 Managing capital in Commercial Finance Business Growth e Dividends to GE 40% Earnings Growth Financing 60% Asset Growth Retained Growth Capital Disciplined approach Plans built to be self-funding & target ROE Forces capital to best risk reward opportunities Drives alternative Capital Markets / origination strategies Solid processes around capital investments CFPA1147 Oct SA_Bornstein 13 Rigorous cost out 7 /

8 Simplicity, productivity Initiatives Expense % avg. served assets Organization Front end focus Smart P&Ls 1.81 (11)bps ~1.76 ~1.70 Process Efficient, fewer backrooms Six Sigma processes Technology Fewer systems & platforms 04 05E 06E $200MM+ savings in 05 with similar goal for 06 CFPA1147 Oct SA_Bornstein 15 Streamlined organization Smart P&L s Smart P&L concept Mexico: 3 biz. Merged into 1 Integration of separate businesses Commercial team coordinated Create Wing to Wing COE Sales Force Offering All Products Equip. Financing Factoring Fleet Financing Customer benefits Deliver to customer complete GE product offering in one meeting Single point of contact Enhanced relationship management Shared Services COE Risk Organization Back Room 2005 Growth Up 18% vs Consolidated Backroom 3 to 1 Locations 30% Reduction In FTE CFPA1147 Oct SA_Bornstein 16 8 /

9 Inventory Finance Using simplicity and Six Sigma in acquisition integration 3 stand alone businesses One integrated global player Targeting new markets Deutsche Financial Services closed 02 Transamerica Closed 04 Bombardier Closed 05 Growing adjacent markets Taking it global Risk organization Best in class processes Back room Average Net Receivables up 25% in 2 years $55MM in cost out Seamless integration to customer base CFPA1147 Oct SA_Bornstein 17 Loan shared service one platform for structured loans 2003 Vision 1 system, common processes for NA, EU & Australia Same People Best-in-Class Low-cost, scaleable long term platform Identified Corp. Fin. as GE Best in Class Chose leading partner to avoid costly ERP implementation Same Processes Shared service Efficiency from Scale 2005 Results One Platform Customer Focus Successful integration 75% CF Structured Loans in COE 6 to 1 platforms, >15,000 loans serviced Extending scope to Asia and Australia $10MM cost out Enhanced controllership CFPA1147 Oct SA_Bornstein 18 9 /

10 Creating shareholder value Growth Risk Mgmt. Simplicity Efficient Use Of Capital Commercial Finance ROE ~22% 19% 15% '03 '04 '05E ROE up ~7 pts since 03 CFPA1147 Oct SA_Bornstein Outlook 10 /

11 Insurance ($ in billions) Net income ~$1.0 $0.6 '04 '05E ROE 2% ~4% Assets $179 ~$100 Dynamics Actively working Insurance Strategy Reduce investment; redeploy capital Ongoing repositioning of Insurance Solutions Closed sale of MedPro Exited unprofitable lines Maintain underwriting & price discipline Maintain the compliance culture Genworth performing better than expected 1Q & 3Q Secondary offerings complete Ownership after 3Q offering ~27% '04 '05E Continue to reduce investment while managing with intensity CFPA1147 Oct SA_Bornstein outlook Net income* $ B ~25% Total volume ~$95B ~11% Assets ~$193B >5% Loss rate % ~0.27% ~(13)bps Expense % assets ~1.76% ~(5)bps *Includes Insurance ROE ~22% Ex- Insurance Strong production Disciplined asset growth Strong Risk management $200MM+ cost out, invest in origination On track to deliver 2005 plan CFPA1147 Oct SA_Bornstein /