GE Capital Services. Overview / Strategy first quarter

Transcription

1 GE Capital Services Overview / Strategy 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 often contain words such as expect, anticipate, intend, plan, believe, seek, or will. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest and exchange rates and commodity and equity prices; the commercial and consumer credit environment; the impact of regulation and regulatory and legal actions; strategic actions, including acquisitions and dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; 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."

2 GE

3 GE s portfolio and financials 2010 revenue $150B 53% revenues outside U.S. 32% revenues in developing markets -a) Energy Infrastructure $37.5B Rev. OP $7.3B Aviation Healthcare Transportation GE Capital $17.6B $16.9B $3.4B $47.0B $3.3B $2.7B $0.3B $3.3B Home & Business Solutions $8.6B $0.5B Thermal Wind Oil & Gas Services T&D Commercial Military Service Avionics/Systems Healthcare Systems Life Sciences Healthcare IT Molecular Diagnostics Locomotives Services Propulsion Systems Commercial Consumer Real Estate GECAS EFS Appliances Lighting Intelligent Platforms 2011 Earnings Growth Outlook =/+ = = (a-excludes GECS & NBC Universal 3

4 1Q 11 consolidated results ($ in billions except EPS) ($ in millions) Continuing operations 1Q 11 V% Revenues $38.4 6% Industrial sales 22.1 (6) Financial Svcs. rev Operating earnings Operating EPS Continuing earnings a) Continuing EPS b) CFOA 1.7 (34) Industrial CFOA 1.7 (34) 1Q 11 Tax rate 53% 37 pts. GE (ex. GECS) GECS 18 (a- Attributable to GE (b- Earnings attributable to common shareowners Memo: includes NBCU pretax operating profit of $93MM excluding the gain on the disposition Segment Revenues profit $ V% $ V% Energy Infra. $9,449 9% $1,381 (7)% Aviation 4, Healthcare 4, Transportation H&BS 1, Industrial 20, ,984 1 GE Capital 12, ,842 ~3X $33,123 6% $4,826 36% 4

5 1Q 11 orders +13% ($ in billions) 1Q orders $19/+13% Equipment Services $ V% $ V% Energy $3.4 19% $3.9 15% O&G Energy Infra Aviation Healthcare Transportation 0.4 (18) Total $9.4 13% $9.9 13% $8.3 $9.5 $9.3 $13.1 $9.4 1Q 2Q 3Q 4Q 1Q 2010 Equipment Orders profile 2011 Services Equip. CSA $8.7 $9.7 $10.1 $11.7 $9.9 1Q 2Q 3Q 4Q 1Q $ $158 Strong backlog ($B) 49 $172 $175 $175 $ '06 '07 '08 '09 '10 1Q Energy takeaways 2011 Broad strength +15% growth, +9% organic Orders pricing down (1)% Backlog remains strong at $68B & pipeline improving Gas turbine quote activity increasing Solid orders growth 5

6 Capital allocation choices ($ in billions) Actions Financial flexibility $4 $6 1Q 10 2Q 11E $ E ~$12 Increase dividend Buyback/ preferred Infrastructure acquisitions Balanced + Positioned for growth + Improve yield + Accretive for 12 EPS Planned actions Parent cash ~$8 Closed/announced M&A Pension funding Retire preferred shares Key assumptions Capital dividends resume Special Capital dividend NBCU first monetization in 14 CFOA growth Cash above actions ~$30+ '11E-'14F Priorities 1) Attractive dividend payout 2) Continue buyback to reduce float excess GE Capital dividends support incremental buyback 3) Opportunistic M&A big deals done in 11 6

7 Value creation Operating EPS $ Industrial earnings growth is in position, a primary focus, & strategically important to all; improvement driven by organic growth, margins & acquisitions GE Capital is a strong business whose earnings are trending better than expectations will work through regulatory changes Big focus on successful acquisition integration NPI investment has improved competitiveness will drive organic growth E-2013F Company has significant financial flexibility capital allocation is a top board priority The world is volatile we are safer & will hold more cash 7

8 Financial Services

9 GE Capital 10 assets: $576B 10 revenue: $47B 10 profit: $3.3B Commercial Lending & Leasing Energy Financial Services GECAS Consumer Real Estate Middle market lending & leasing Financing for energy & water industries Commercial aircraft leasing & financing Consumer & retail financing Debt & equity financing for commercial real estate 2010: Assets NI V% 2011 NI Outlook $203B $20B $49B $154B $73B $1,554MM $367MM $1,195MM $2,629MM $(1,741) 61% 73% 18% 85% (13) One year ahead on reduction targets Volumes increasing at attractive rates Well capitalized prepared for new requirements 9

10 GE Capital highlights ($ in millions) 1Q 11 $ V% Revenue $12,324 3% Pretax earnings 2,305 F Net income 1,842 F ENI (ex. cash) 461B (8) Assets ($B) $ V% Segment profit ($MM) $ V% Consumer $147 (7)% $1,257 F Real Estate 71 (14) (358) 11 CLL 197 (7) 554 F GECAS (3) EFS 19 (18) 112 (27) GECC balance sheet metrics 1Q 10 4Q 10 1Q 11 Tier 1 common ratio 7.8% 8.9% 9.8% Leverage 5.5:1 4.9:1 4.5:1 1Q dynamics Volume of $37B growing attractive business at higher margins, 1Q seasonally lower quarter ENI $20B vs. 4Q excluding FX $4B from dispositions & $2B in discontinued operations Garanti $317MM gain in quarter as expected Portfolio quality continues to show improvement reserve coverage 2.4% $1.8B losses & impairment, $(0.7)B vs. 4Q Continuing to prepare for new regulator in 2H Strong first quarter 10

11 GE Capital structure Support GE support to ensure GECC 1.1x fixed-charge coverage ratio (strengthened Income Maintenance Agreement in 2009) History of capital infusion or dividend reductions when necessary Commitment to local markets GECC unconditional guarantee Highly rated parent Proceeds used primarily to fund local assets Access to deeper investor base General Electric Company AA+/Aa2 100% General Electric Capital Services, Inc. 100% General Electric Capital Corporation Primary GE Issuer/Guarantor AA+/Aa2 100% Owns all of GE s financing assets GE Japan Funding KK GE Capital UK Funding GE Capital European Funding GE Capital New Zealand Funding GE Capital Australia Funding GE Capital Canada Funding GE Capital Mexico Funding 11

12 GE credit ratings Moody s Rating Short Term Long Term Short Term S&P Rating Long Term General Electric Company P-1 Aa2 A-1+ AA+ General Electric Capital Services P-1 Aa3 A-1+ AA+ General Electric Capital Corporation P-1 Aa2 A-1+ AA+ GE Capital Australia Funding* P-1 Aa2 A-1+ AA+ GE Capital Canada Funding* P-1 Aa2 A-1+ AA+ GE Capital European Funding* P-1 Aa2 A-1+ AA+ GE Japan Funding KK* P-1 Aa2 A-1+ AA+ GE Capital Mexico Funding* P-1 Aa2 A-1+ AA+ GE Capital UK Funding* P-1 Aa2 A-1+ AA+ * Guaranteed by General Electric Capital Corporation 12

13 GE Capital business model 1 Substantial origination capability 2 Deep domain expertise Healthcare, Energy, Media, Aircraft, Retail Cards 3 Experts at collateral/asset management 4 Experienced, disciplined risk management and capital allocation Spread of risk, secured 5 GE operational headset & tools 6 Match funded Advantage Pre-crisis Largest direct origination team Advantaged in key verticals Strong residual realization On balance sheet underwriting Scale focus Core value Today Still largest direct origination team Growing advantage Strong collateral and residual realization Core to business model >25% lower costs Important differentiator Well positioned to compete 13

14 GE Capital - normalized returns -a) (ENI, $ in billions) Red assets Consumer Real Estate Connected to GE Verticals Mid-market Lending & Leasing $477 22% ~$375 16% 16% 13% 33% 2010 (~105) Red assets ~65 Core growth ~$440+ ~15-20% ~10-15% ~20-25% ~45-50% Future ~2.0% ROI ROI ~2% ~1-2% ~2-3% ~2% Return expectations ~2% ROI ~7-9% Tier 1 common ~11-15% ROE Assumptions $440B ENI in 12, future growth based on debt markets Better Real Estate Meet regulatory requirements in a capital efficient way Remixing to higher returning business a) Ex. Cash at 1Q 10 FX 14

15 Commercial Real Estate 1Q 11 Collateral type Geography Average deal size ~$10- $15MM) Debt book Disciplined underwriting Senior positions No construction lending Low LTV at origination ~70%, DSCR ~2.5x Cross collateralized Portfolio performing as expected Delinquency down, reserve coverage at 3.33% Equity book Primarily wholly owned, limited 3 rd party debt Occupancy (~80%) and NOI yield (~5.5%) stable Well diversified portfolio challenged business but signs of stabilization/improvement 15

16 GE Capital portfolio quality & reserves 30+ delinquencies 13.82% 14.60% 14.00% 13.30% 13.13% Mortgage 9.06% 9.01% 8.65% 8.20% 8.07% Consumer 5.40% 5.74% 4.97% 4.41% 4.08% Real Estate 2.77% 2.58% 2.40% 2.14% 2.03% CLL 1Q'10 2Q'10 3Q'10 4Q'10 1Q'11 Allowance for losses Commercial Reserves ($B) Reserve walk WO s > new provisions $(0.4)B Bal. sheet CRE (0.1) P&L in reserves $(0.5)B $ $ $ CLL showing signs of stabilization Americas & Europe monitoring run-offs Consumer delinquencies continue to decline impactful loss mitigation efforts Non-earnings $(0.5)B to $11.1B Mortgage 27 bps. as portfolios shrink Real Estate delinquencies (33) bps. & within expected range non-earnings $(0.2)B Consumer Coverage: 1Q'10 4Q'10 1Q'11 Reserves 2.62% 2.47% 2.42% Non-earnings 69% 70% 69% Portfolio continues to improve 16

17 GE Capital non-earnings exposure ($ in billions) Commercial Consumer 4Q 10 coverage 238% $5.7 (1.8) $5.3 (0.2) (0.9) 248% coverage (1.3) 3.9 (1.6) (1.6) 1.3 $ % coverage $3.5 nonmortgage reserves (1.9) 4Q 10 coverage 259% (0.1) % coverage $0.8 1Q 11 nonearnings Interbanca NPL Collateral 100% recovery Workout full recovery Other collateral Est. loss exposure 1Q 11 reserves 1Q 11 nonearnings Mortgage nonearnings Nonmortgage Cure Est. collateral value Est. MI Est. loss exposure 1Q 11 reserves 17

18 GE Capital non-earnings/write-offs ($ in millions) Non-earning assets/non-earnings % fin. rec. 1Q 11 4Q 10 1Q 10 Total write-offs/write-offs % fin. rec. 1Q 11 4Q 10 1Q 10 CLL $3,957 $4,226 $4, % 3.05% 3.18% Real Estate 1,137 1,347 1, GECAS EFS Consumer 5,729 5,826 6, Corporate & elims GE Capital $11,101 $11,563 $13, % 3.55% 3.78% CLL $265 $442 $ % 1.26% 1.15% Real Estate GECAS EFS Consumer 1,112 1,346 1, Corporate & elims GE Capital $1,670 $2,231 $2, % 2.72% 2.71% 18

19 GE Capital strength ($ in billions) Earnings growth accelerating ENI a) reductions on plan Expect 11-15% ROE long term $ $526 $477 ~$450 ~$440 $1.5 1/1/ E 12F Significant origination advantage CRE improving steadily '09 '10 '11E '12E Continue to remix portfolio grow green Limited European sovereign debt exposure Capital Tier 1 common ratios strong Plan to reinstate dividend by 2012 GECC GECS 7.6% 6.6% 8.9% 7.8% Requires Fed approval Excess capital should be available for special distribution to parent '09 '10 '11E '12E (a- Ex. cash & equivalents; 11 & 12 using 1Q 10 FX rates Stronger franchise that is executing well 19