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GE Investor Presentation

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  • 1. GE Capital Investor Meeting March 19, 2009 Caution Concerning Forward-Looking Statements: quot;Results are preliminary and unaudited. 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: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; 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 soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; 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 GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.” Key messages 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 Have sufficient capital and alternatives to weather adverse economic conditions 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 We expect GE Capital will be profitable in 1Q’09 and 2009 We are committed to GE Capital GE will come out of this cycle a stronger, more focused and competitively advantaged company 2 1
  • 2. GE: safe & secure Dividends/share Yield @ today’s price 82¢ Reduced dividend … 1 ~4% 40¢ ~$9B in annualized savings 2009 2010 2009 GECC tangible common GECC leverage-a) equity/tangible assets 7:1 ~6:1 ~6.0% Infused equity into 2 4.9% GE Capital 4Q’08 1Q’09E 4Q’08 1Q’09E ’09 long term funding needs GE cash $48B ~$45B $42B ~$41B Strengthened liquidity 3 (a- net of cash and equivalents and with TY’09E Completed 4Q’08 1Q’09E classification of hybrid debt as equity to date 3 Ratings update 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 S&P rated GE & GE Capital at AA+ with a stable outlook: – This rating means “very strong capability to meet its financial commitments” and “rating is unlikely to change in next six months to two years” “The ratings on GE continue to reflect our view of its excellent business risk profile, its significant cash flow and liquidity, its strong corporate governance, and management’s commitment to maintaining a very high credit quality” – S&P, March 12, 2009 4 2
  • 3. 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 100% reductions when necessary General Electric Capital Corporation Primary GE Issuer/Guarantor Operating businesses AA+/Aaa 100% (Capital Finance) Commercial Energy Consumer Lending & Real Estate Financial GECAS Financing Leasing Services 5 GE Capital overview 6 3
  • 4. 2009 outlook Environment • Difficult market with many macro-economic indicators still deteriorating • Pockets of increased liquidity for consumers and mid- market businesses • Industry losses continuing • Delinquencies and non-earning assets pressured in both Consumer and Commercial • Very difficult to execute asset sales in today’s market – TALF may help 7 GE Capital business model Financial Services value chain “Factory” “Origination” GE Advantage: “Raw material” GE Advantage: (capital) Low cost Treasury Global position GE Advantage: Risk Asset Mgmt. Brand Competitive cost Domain expertise Talent Tax Pre-crisis competitive position: + Scale ++ Margins and results > banks + FinCo +++ Brand/domain GE Capital has performed for decades Will reposition for long term success 8 4
  • 5. GE Capital portfolio GECC 2008 Financials Business 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 Real Estate 85 1.2 • Entered in the 70’s • Secured loans against diversified properties - Debt • Own/operate high quality properties - Equity Consumer 183 3.7 • Entered in the 30’s • Store cards and sales finance for retailers - U.S. PLCC • Broad spread of risk - Global • Entered in the 60’s Aviation Services 49 1.2 • GE domain • Broad product set with full life cycle management • Entered in the 80’s Energy Fin. Services 22 0.8 • GE domain • Essential assets; secure cash flows Businesses we know … decades of performance 9 GE Capital: our approach What we do + Senior secured financings + Diversified portfolio + Operate assets … global remarketing capabilities + Underwrite to hold + Restructure/work out problem loans/assets + Small hold positions + Match fund What we don’t do Did not originate CDOs, SIVs, etc. Did not sell credit default insurance Do not trade securities … Minimal MTM in up or down cycles Do not originate mezzanine or high yield debt/bonds 10 5
  • 6. 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 • Healthcare Financing #1 financings as they work through cyclical issues • Energy Financing & Project Financing #1 • Leading DIP/Bankruptcy lender for • Fleet Leasing #1 restructuring U.S. companies • Franchise Finance #1 • Global leader in mid-market commercial • Commercial Real Estate Lending Top 3 lending • Dealer Financing #1 • Provided $6B financing to support global • Private Label Credit Cards #1 energy projects Core is strong + competitively advantaged 11 Portfolio strategy Forward Ending net return Core Competitive investment dynamics competencies outlook ’09 outlook ($B) Core $356 Core mid-market • Underwriting +++ lending + leasing 2-5% ROI • Direct origination - Likely fewer FinCo’s Grow • Asset mgmt. intensive - Fewer captives + verticals long term • Re-marketing - Bigger banks • Deep domain GE Banking $64 • Enhance value via ++ European & product development - Strong local franchises Emerging Market 2-4% ROI Enhance • Grow deposit base - Lots of options banks & JV’s value • Operating synergies $80 Restructure Various Consumer • Origination — <2% ROI Restructure/ • Funding advantage - High leverage & Commercial run-off - Tend to compete platforms w/ banks 12 6
  • 7. Primary questions regarding GE Capital Commercial Real Estate – What is in our portfolio and what is the corresponding risk? What is the risk in U.K. mortgage? What is the risk in Eastern Europe? What is the risk in U.S. Consumer? Losses/Impairments/Reserves – Are our reserves adequate and how do they compare to other banks? Capital – Does GE Capital have enough equity to handle future losses? Other investment securities, associated companies, goodwill We will cover all of these questions today 13 Stress testing approach Bottoms up – asset by asset, business by business Large commercial exposures over $300MM stressed individually Consumer • Mortgages, credit cards, auto and personal loans and sales credit financing – By product, by geography – market specific – Consistent methodology applied across product types globally Commercial • Commercial Real Estate: By market and property type • Commercial Aircraft: Valuation by equipment type • Energy loans and leases: Stress obligor ratings, increase severity, based on outlook • Commercial Loans and Leases: Stress probabilities of default, recovery rates 14 7
  • 8. Summary of stress testing ($ in billions) 2009 Est. Fed Est. Fed outlook base adverse Capital Finance 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 2009 macro guidance Avg. U.S. U/E 7.7% 8.4% 8.9% Peak U.S. U/E 8.5% 9.3% 10.1% U.S. GDP (1.8%) (2.0%) (3.3%) Stress assumptions utilize Fed guidance and 3rd party forecasts 15 Key messages GE Capital funding is 93% complete CEE Banks should be profitable even and we have ~$60B capacity under in an adverse stress scenario Federal programs We are operating GE Capital with GE Capital is well capitalized and intensity … Collections >originations, compares favorably to banks lower cost, aggressive risk management GE Capital is a conservative lender … losses should be lower than banks We expect GE Capital will be profitable in 1Q’09 and 2009 Real Estate equity valuation estimates are comparable to other real estate Have sufficient capital alternatives to investors weather adverse economic conditions U.S. Consumer credit losses comparable to similar U.S. bank GE Capital has a profitable vision for portfolio performance the future Adverse stress case losses of global mortgage should be manageable 16 8
  • 9. 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
  • 10. GECS 2009 funding • Global debt markets remain difficult for financial sector issuers ... strong market demand for Government supported funding • 93% long term funding complete ($42B of $45B) … considering early funding of ’10 maturities in ’09 • Issued $5B non-guaranteed debt: 30 yr. USD & GBP • CP balance @ ~$60B as of 2/09 … 100% covered by bank lines • $15B capital infusion in 4Q’08/1Q’09 improves capital ratios … leverage … TCE/TA ratio at top-end of banks • Strong cash and liquidity position 19 GECS funding ($ in billions) $515 ~$485 FIN 46 6 ~$450 ~6 $509 ~5 ~$479 ~$445 LT debt 382 348 320-330 Deposits/CD’s/ 55 81 85-90 Other 72 Comm’l paper 50 40-50 4Q'08 4Q'09E 4Q'10E Bank lines $60 ~$50 ~$50 CP coverage 83% 100%+ 100%+ Cash & equiv. $37 ~$30+ ~$30+ LT debt<1 yr. $69 ~$67 ~$60-$65 20 10
  • 11. GECS ’09/’10 Funding plan ($ in billions) Comments ’09 ’10 Beginning cash balance 37 ~38 Sources LT debt issuances 93% of ’09 funding complete … lower ’10 planned issuances 32-a) 35-40 … considering early funding of ’10 Alternate funding CD's, Intl. bank deposits & other programs 26 4-9 Business originations/ $205B collections/$180B originations in ’09 25 20-35 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) BOE/ECB/BOC facilities Total uses (91) (67)-(77) Bank lines Ending cash balance ~38 ~31-41 (a. Ex-$13B funded in ’08 Strategy : assets, alternate funding, … maintain strong liquidity 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 • Enables GE to support investor liquidity needs & manage duration … serves as (CPFF) liquidity backstop • GECC capacity of $126B … important for LT debt market & CP market access … program now extended through October 31, 2009 Temporary liquidity • $37B LT debt issued under the program … $3B remaining for ’09 guarantee • Manage ~$25-$35B CP outstandings under TLGP program (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 • $10B+ of PLCC/CDF maturing securitization debt likely eligible loan facility • Potential for increased liquidity for real estate and equipment … may reduce cost of (TALF) securitization funding … continuing to evaluate • New facility in development … initial focus on marketable securities & other MTM Public Private assets … could expand to leveraged loans, real estate, equipment, etc. investment funds • Improved liquidity in these asset classes to help overall market (PPIF) 22 11
  • 12. 2009 alternate funding ($ in billions) CD’s : Distributed through multiple firms to support asset growth in US banks • Industrial Loan Corporation deposits $17B – Adding 3 complete business platforms to ILC … ~$81 direct origination a) – Originating CD’s to match bank assets profile 20 (~$7B > 1 yr. maturity as of 4Q’08) $55 • Federal Savings Bank deposits $2B – Direct origination of sales finance assets 27 19 International deposits $6B – Drive market share in emerging markets $30 10 Other – Tap large/developed markets 17 U.S. Industrial Loan Corporation French Gov’t program: $1B ’09 target ($0.4B YTD) 15 18 U.S. Federal 1 17 Savings Bank Covered bonds program: 1st issuance by Jul ’09 11 11 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 $58.2B bank lines ... ~100% CP coverage ($ in billions) Remaining Term as of 3/11/09 Comments > 4 years • Strong base of $37B lines >1 year $4B • $19.8B up for renewal in Mar-Dec ’09 … phased less than 1 year reduction planned as outstanding CP comes $22B 94% w/ term out down $30B > 3 years but • Expect $10B renewals by June with remaining less than 4 $3-5B during 2H’09 $3B > 1 yr but less than 3 • Support levels not materially impacted by bank consolidation • ~80% lines from Aaa/Aa banks • No MAC clauses • Lines from 64 banks globally • No covenants or rating triggers • Syndicated: $22.9B; Bilateral: $35.3B • Drawn pricing at capped spread over Libor • ~$12B also available to GE parent Liquidity in great shape … on track to meet CP coverage targets with $50B+ bank lines and $30B+ cash 24 12
  • 13. Capital ratios GE Capital Corp. leverage a) GE Capital Corp. TCE/TA ratio b) 7:1 ~6% 4.9% ~6:1 1.9% d) U.S. Large 4Q’08 4Q’08 1Q’09E 1Q’09E BHC avg. Tangible book Leverage c) 17X 14X GE infused $5.5B cash into GECS 4Q … plan to infuse ~$9.5B into GECS 1Q’09 Leverage commitments ahead of plan … ~6:1 by 1Q’09 TCE/TA ratio at the top end of the banks even if banks convert their TARP preferred equity into common equity (a- net of cash and equivalents and with classification of hybrid debt as equity (b- TCE : Book equity less goodwill & intangibles; TA : Total assets less goodwill & intangibles (c- Total borrowings/equity less goodwill & intangibles (d- As of 4Q’08 excludes TARP equity; Source : Federal Reserve Y9 filings 25 Portfolio overview 26 13
  • 14. Risk management Diversified portfolio – broad spread of risk, managed exposure limits Senior secured financings – disciplined underwriting to GE “on book” standards – Collaterals GECC knows well – 2 decades of experience Conservative asset residuals – 520 experienced asset managers – market intelligence & redeployment capabilities Significant commitment of people resources – ~16,000 globally – Senior risk officers have over 25 years experience Data-driven analytics – identify & monitor key risks, measure capital & leverage Rigorous process approach – detailed approval authorities, GECC Board reviews Disciplined approach to managing risk 27 GECC Portfolio Total assets ($637B) Geography Other 9% Other Asia Pacific Real Estate $68B 11% U.S. 48% $85B Latin America 2% 11% 13% 27% Europe Consumer 29% $183B 3% Canada Developing Markets $70B 36% Others Poland Commercial 12% 18% Korea 8% Lending & Leasing 7% $230B 3% 5% Brazil GECAS EFS Czech Republic 10% $49B $22B 8% Hungary 6% ~70% of financing activities - Commercial 5% China India 4% 4% Russia 4% ~11% Developing Markets Thailand 17% Turkey Mexico 28 14
  • 15. Consumer Portfolio (assets) Geography ($183B) Product ($183B) Other Asia Sales Finance JVs North America 6% Eastern 7% 14% Europe 6% 25% 16% Personal Auto 11% 9% Loan Small and Latin 6% 2% Medium America Enterprises 13% ANZ 14% 20% Mortgage 34% Cards 17% Western Europe UK >70% International ~22% in developing markets ~58% of receivables – Prime 29 Commercial Portfolio Diversification Industry sectors ($386B) Collateral type ($386B) Construction Energy Others Hotels Restaurants & A/c Rec and Inv Generation/Distribution Commercial Airlines Leisure 3% 4% 4% 9% 13% 5% Health Care Cash Flow 6% FF&E and Other Equip Energy 10% 12% 6% Automotive 2% Machinery Corporate Jets 3% 2% 24% Real Estate & Equipment Transportation 7% 24% Equipment Comm. Real 4% Estate Healthcare Equipment 3% 2% 4% 32% Franchise 2% 13% Diversified Finance 6% Fleet Vehicles Others Dealer Inventories Business Services Comm. Aircraft 45% less than 6% Diversified portfolio in industry weighting - long-standing GECC 51 industries collateral types 30 15
  • 16. Commercial Customer Concentrations ($386B) Over $1B Over $1B, 15 accounts: $500MM-$1B 6% Airlines, Class 1 Railroads, Electric 5% $300MM-500MM Utilities, Aircraft Manufacturing, Real 5% Estate $200MM-300MM 4% $500MM-$1B, 27 accounts: Airlines, Automotive, Healthcare, Power $100MM-200MM 8% Generating Projects, Oil & Gas Refining, Cable, Broadcast Media $300MM-$500MM, 44 accounts: 11% 61% Automotive, Airlines, Electric Utilities, $50MM-$100MM Broadcast Media, Healthcare, Technology Equipment Under $50MM 72% of single risk exposures <$100MM Larger exposures secured primarily by essential operating assets 31 Key portfolio risks – 12/2 view (Pre-tax losses - $ in millions) December 2, 2008 outlook Estimated March ’09 Downside case ’09 financial % outlook impact Assets 2009 Assumptions vs. Dec. 2 Impact Assumptions U.S. Consumer 7% • 8.5% unemployment ~$4.2B ~$5.0B 9% unemployment U.K. Mortgage 4% • HPI (17%) 2008 = $600 $800 (20%) HPI • HPI (15%) 2009 Real Estate 14% • Cap rates 50-100 bps. higher $250 $400 +200 bps. highest historical cap rate by - Debt • Cap rates 50-100 bps. higher, $240 $500 asset type - Equity long-term hold GECAS = 7% • Global traffic growth down ~$550 • (3%) traffic decline ~$300 ~2% 2009 (9/11) Economic environment more challenging 32 16
  • 17. 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 Consumer portfolio stress testing U.S. Non-U.S. Mortgage Key Drivers: Key Drivers: Macro • Unemployment Macro • Home prices • Home equity access • Unemployment Portfolio • Credit quality • Refinancing ability • Credit lines Portfolio • LTV • Loss sharing • Mortgage insurance • Recovery rates • Borrower credit quality • FX movements (Central Europe) Key Assumptions: Fed Base Fed Stress Key Assumptions: Adverse GDP (2.0%) (3.3%) U.K. • 15% HPI decline in ’09 (34% U/E avg. 8.4% 8.9% ’08-’09) U/E peak 9.3% 10.1% • 9% unemployment Debt sale recovery rate: • Additional loss on sale 20-25% Central Europe • 15-30% further devaluation from PLCC 10% to 7.2% 25% to ~6% today’s FX rate based on country Sales Finance 16% to ~6.6% 25% to ~6% • Unemployment up to 13% based on market No benefits assumed from U.S. Stimulus Programs 34 17
  • 18. Commercial portfolio stress testing Commercial Loans, Leases Real Estate Key Drivers: Key Drivers: Macro • GDP, Unemployment Macro • GDP, Unemployment • Liquidity • Liquidity Portfolio • LTV Portfolio • Senior diversified positions • Property cash flow • Borrower leverage • Borrower leverage • Sector diversification • Cap rates, liquidity • Asset value of collateral 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 of last 18 years Defaults Increased ~70% from Increased ~100% from Output 2008 levels to ~5% 2008 levels to ~6% PPR model forecasting greater declines in office property cash flows Severity Increased GECC Increased GECC 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) GE position vs. banks % of total portfolio • Less Consumer Banks* Asset type GE • No U.S. mortgage, auto or student loans Consumer 30% 64% • More global Commercial 70% 36% • Minimal real estate construction exposure • 46% of portfolio is cross-collateralized with other 1st U.S. 41% 86% mortgages • Operate each owned property U.S. consumer 6% 58% • Underwrite to hold on book - Cards 3% 9% • Minimal junior debts, small hold positions - Mortgage 0% 40% • Global redeployment, remarketing capabilities - Auto 0% 1% • Deep domain expertise in Commercial Air & Power - Student loan 0% 1% Generation - Sales Finance/other 4% 7% • PLCC has smaller average balance, lower loss severity, * Weighted average of top 4 U.S. money center banks retailer loss sharing GE mix different than banks 36 18
  • 19. Business reviews 37 Real Estate 38 19
  • 20. GE Real Estate … what we do Finance purchase of real estate by 3rd parties in 1 multiple asset classes, individually and in cross- collateralized portfolios Own, manage and add value to real estate as 2 single assets and portfolios across office, apartment, warehouse, and retail asset classes around the world Provide financing to owner-occupied commercial 3 real estate for small to middle market businesses 39 How we manage risk Rigorous process around market, customers and asset evaluations Semi-annual market evaluations • Global data driven, investment hurdle setting process • Leverage GE portfolio data as well as 3rd party data and analytics Experienced, independent valuation/underwriting teams Local presence … utilizing consistent process globally • Tenant credit analysis • • Detailed lease by lease review … process designed to haircut revenue above historical avg. levels • Valuations generally 90-95% of MAI appraisal values Led by seasoned risk leadership team Over 25 years of experience, on average • Ongoing risk analytics review combined with asset management surveillance Identifies risk trends, concentrations • Allows for proactive risk management measures • Sophisticated tools for easier market analysis and deal assessment Economic/market sensitivities Market data • • Customer relationship management Deal review/approval system • • 40 20
  • 21. 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 3rd party consultant review Process culminates • Environmental survey in roundtable asset • Structural survey (earthquake as needed) valuation review … Market/site analysis all assumptions • Detailed inspection of property and surrounding neighborhood challenged • On-site management and tenant interviews • In depth discussions with brokers, appraisers • Survey competing owner/operators for rents, occupancy and expenses, in addition to public data • Inspection of recent sale comparables Financial modeling • DYNA lease / proprietary models created for DCF valuations 41 Key market risks in 2009/2010 1 Economic fundamentals – Industry transaction volume in 4Q’08 down 80% from 4Q’07 – Rental rates , absorption , vacancies , delinquencies , demand , supply constant – Virtually no new liquidity available … TALF should help … 2nd half may be better 2 Over $500B* of U.S. loans set to mature in 2009, $35B* from CMBS pools – Banks deleveraging – Limited new refinancing capacity in the system 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
  • 22. Primary real estate products Debt portfolio: $48B Equity portfolio: $33B Construction Other RE Other RE 1.5% 6% Office 6% Warehouse Warehouse 23.5% 9% 12% Retail 8% Retail 9% Office 49% Hotel 1% Hotel Mixed 6% 11% Parking 3% Owner-occupied Mixed 19% 3% Apartment Apartment 14% 19% • On balance sheet lending • Well diversified, A-/B+ quality, avg. inv. $10MM, minimal construction risk • Senior secured, first mortgage • Primarily wholly-owned with no 3rd party debt - $29B, • Not a construction lender joint venture investments – $4B • 35 year track record • Hold at historical cost less depreciation … $1.5B annual • Owner-occupied: mid-market credit/single tenant NOI, $1.1B annual depreciation Debt portfolio primarily senior secured first mortgages, no “hung” inventory Equity portfolio is good quality, primarily 100% owned operating real estate Under Fed Reserve adverse stress test, potential total portfolio losses are manageable 43 Debt 44 22
  • 23. GE Real Estate position in debt markets GE Real Global RE debt market GE $48B Estate $6 trillion* CMBS $62MM 97% CMBS Senior senior 46% cross rated secured/ secured/ collateralized 1st mortgage 1st mortgage CMBS unrated Mezzanine 3% $1.4B Subordinated Equity Senior secured debt • Layer of capital protection if stressed • Real capital committed in junior position/equity • Clear path to exercise remedies and take control of property - We avoid legal jurisdictions where a property owners’ rights are not respected * Source: PPR 45 Debt portfolio Total debt Collateral type dispersion Geographical profile Construction US -CA, 8% Other RE exposure: Other 4% 1.5% Germany 4% 6% Office US-TX, 5% UK 7% Warehouse 23.5% $48B US-FL, 4% 9% Japan 7% 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 Comments 19% Debt structure • Crossed portfolios (46%): a single loan secured by multiple Singles properties in multiple locations. Benefit: loss from a single 32% Owner-occupied property can be offset by excess cash flow and/or value 19% from other assets in the portfolio CMBS bonds • Hotel exposure: 35% acquired at a discount post credit $62MM Sub-debt $1.4B crunch; 54% cross-collateralized; largest loan exposure at 3% Crossed a) $1.1B was 33% LTC at U/W, cash flow up 7% since U/W portfolios and current DSC @ 5.52X 46% • $0.7B construction portfolio: 65% acquired at a discount First mortgage senior secured 97% • Japan/UK/Germany: portfolios acquired at a discount 46 23
  • 24. Commercial real estate at GE What we typically avoid What we do • Construction lending • Senior secured lending in markets we understand • Value add properties in good locations • Land loans • Mid range office • Affordable middle class apartments • Single family residential development - Avoid luxury • 2nd mortgages • Retail focus grocery/hyper market anchored centers • Mezzanine high yield • Warehouse - Crossed parks w/multi tenant, high CoC • CMBS hold positions – A or B pieces • Opportunistic portfolio acquisitions at discounts • Syndication book, “hung” inventory Commercial RE debt as of Dec ’08 • Malls • Trophy buildings Total O/S ($B) $68.2 $48.0 $112.4 $142.2 • Brownfield sites Other Commercial 64% 65% bought < par • Resorts 72% and 8% crossed 85% 98% w/stabilized Construction, properties • Exited condo conversion early Land and 36% Developer Debt 28% • BRICs 15% 1.5% 1.5% Bank 1 Bank 2 Bank 3 GE 47 Debt portfolio performance Maturity profile* Vintage profile* $B $14.9B 15 $14.4B Europe $11.3B 2.4 $9.2B $9.2B Asia 2.6 10 2.9 $7.0B $6.8B 0.6 $6.1B N. America 9.4 7.8 6.4 5 6.0 <2006 2006 2007 2008 0 55% of ’08 is opportunistic discounted debt purchase '09 '10 '11 Thereafter * Excludes owner-occupied Delinquency/defaults 5.4%* (% of Total O/S) Commercial Banks GE 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
  • 25. 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 C&D delinquencies - Our underwritten valuations are generally 5-10% below % of total delinquencies 66% 4.4% appraisal values • Asset management capabilities Construction and development loans drive bank losses & - Extensive local network … unparalleled delinquencies - Every loan matters *Source: FFIEC Can’t apply banks’ delinquency and loss experience to GE portfolio 49 Maintaining relatively strong performance Debt U.S.: 100 markets LTV Eur: 32 markets Portfolio metrics Loan to value (LTV) <75% 75-90% >90% $5.0 $3.8 $2.4 High DSC 2.0x $3.1 $2.6 $0.9 Medium LTV 74% $0.2 $0.5 - Low $3.6 - - Mexico Not Rated 75-90% Values: $3.1 $0.2 - Japan $12.8B Current re-underwriting, $1.5 $1.2 $0.1 Canada historically 5-10% less <75% $1.7 $2.2 $0.5 Other Mkts. $20.8B than appraisals $2.6 $2.3 $0.4 Hotel/Other RE U.S. $20.8 $12.8 $4.3 Total >90% • Top 10 markets account for 33% of total $4.3B • 15% matures in ’09 Excludes owner-occupied, purchased non-performing loans, tax credits Debt service coverage (DSC) Comments 92% paying current 1.0-1.2 $2.1B mitigated $4.4B - Supported by letters of credit, cash >1.2 <1.0 reserves, guarantees covering at least 12 $30.3B $4.8B months debt service payments $2.7B not mitigated - $1.2B <80% LTV - Fully reserved if not deemed recoverable Excludes owner-occupied 50 25
  • 26. Debt maturities risk $6.1B debt maturing in ’09 $1.9B $1.9B ’09 maturity components 0.3B Maturing 2009 $6.1B <85% LTV loans likely to meet 2.2B 0.9B $1.3B contractual extension requirements 0.1B … expect all to extend $1.0B Potential refinance, low LTV, 2.3B >85% amortization 0.3B 1.6B LTV >85% LTV loans pose refinancing 1.6B 1.2B risk in current environment 1.0B • $0.6B expected to pay-off <85% 0.7B LTV • $0.5B expected to pay-down • $0.5B expected foreclosures (90%+ of loans with specific reserves or purchase discount) 1Q 2Q 3Q 4Q 51 Owner-occupied mid-market lending Deal size segmentation Geographic concentration Ratings by maturity # of deals $MM by NEA 1800 1,658 1600 1,492 CA #: 7 #: 82 #: 4 #: 8 14% 2009 $: 9 $: 198 $: 1 $: 11 1400 %: 0.1 %: 2.0 %: 0 %: 0.1 TX 1200 Total NEA Remaining 6% $9.7B 1000 #: 7 #: 78 #: 3 #: 2 40% FL 2010 $: 59 $: 132 $: 5 $: 5 6% 800 %: 0.6 %: 1.5 %: 0.1 %: 0.1 NY 600 500 5% 344 400 ONTARIO #: 203 #: 2,618 #: 132 #: 29 4% 2011 $: 674 $: 8,254 $: 339 $: 46 200 QUEBEC 89 23 14 5% & after %: 6.6 %: 85.1 %: 3.5 %: 0.5 AZ 2% 3% 0 WA 2% OH NJ IL GA PA Deal Size/ <$1MM $1-$3MM $3-$5MM $5-$10MM $10-$15MM $15-$20MM >$20MM 2%2%3% 3% 3% NC AAA-A BBB-B CCC-C D Total NEA$0.9B $2.7B $1.9B $2.3B $1.1B $0.4B $0.4B 88% of deals NEA <$5MM Largest concentration = CA 14% 57% of NEA <$5MM Only 4 states >5% concentration Historical delinquency & losses (1988-2008) Stress test comments 4% Delinquency % Losses % EAD Loss/yr ($B) PD LGD ($MM) 4Q’08 outlook 10.5 3.9% 15% 63 Stress case 10.5 5.1% 20% 107 2% 1.5% • Stress PD is 30% higher than Plan PD; reflects 2 notch drop for < B+, 1 notch drop for > BB- • Stress LGD is a 33% increase over 4Q outlook LGD • Stress LGD of 20% requires a 50%+ collateral value loss 0% 1988 1992 1996 2000 2004 2008 given average LTV of 61% Weighted avg. historical delinquency .73% / loss .09%, excludes off-balance sheet Credit underwriting with property collateral 52 26
  • 27. Credit costs – total debt portfolio Our portfolio has outperformed Losses/reserves the industry over time ’05 ’06 ’07 ‘08 ($ in millions) Credit costs 156 (provisions) $31 ($5) $24 $135 128 PPR forecast 99 Reserve % 1.31% 0.74% 0.52% 0.64% 97 credit costs* Reserve $ 189 155 168 301 Better Debt service experience 69 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 • Quarterly surveillance process based on 7 triggers • ’05-’08 period generally benign, however (DSC<1x, LTV>100%, “Risk/Watch” accounts, industry model losses > GE RE losses delinquent or non-earning, cost recovery, past maturity>90 days, loans with specific reserves) • Over longer periods GE RE portfolio outperformed due to: • Specific reserves posted when loans deemed not fully recoverable, generally when LTV > 100% - Product mix (very low construction exposure) (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 Property valuation stress methodology NOI assumption Cap rate assumption Asset-by-asset business plan* reflects PPR/PMA** recession Median long term historical cap rate + 4Q’08 case adders for asset quality • 2 year US office market rents flat Outlook* Negative rent growth and occupancy per PPR/PMA** utilizing Fed Fed baseline assumptions for GDP / unemployment Median long term historical cap rate + Baseline • 2 year US office market rents 13% adders for asset quality Case • Impact on office equity portfolios NOI 14% over 2 years Fed Negative rent growth and occupancy per PPR/PMA** utilizing Fed more adverse assumptions for GDP / unemployment Adverse Median long term historical cap rate + • 2 year US office market rents 15% adders for asset quality Case • Impact on office equity portfolios: NOI 16% over 2 years Asset by asset = 35,000 commercial tenants, 8,000 properties, 2,600 cities * Outlook reflects the best local market data available to asset managers in 4Q’08 ** Property Market Analysis (PMA) 54 27
  • 28. Real Estate loan loss stress cases ($ in billions, pretax) Comments Fed baseline case Fed adverse • Current delinquency of $0.4B* on $39.5B* Total debt NEA $39.5B* $39.5B* Minus 0 - 100% LTV (28.5) (26.2) • 4Q’08 outlook of $0.3B credit losses = Net >100% LTV 11.0 13.3 • Impact of Fed base and adverse scenarios determined as follows: Minus >1.0x DSC (7.8) (9.6) Apply PPR’s adjusted rent and occupancy = > 100% LTV and 3.2 3.7 assumptions, by market and collateral <1.0x DSC type to the underlying individual Minus collateral (2.3) (2.7) property value value = Potential loss $0.9B $1.0B • Stressed property value compared with loan principal amount to determine those above 100% LTV Implied default rate 8% 10% • Stressed property cash flows compared Implied LGD 27% 27% with debt service required by each loan * Excludes owner-occupied lending to determine those with <1.0x DSC 55 Equity 56 28
  • 29. 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% U.S. – Top 3 cities (5% of total) – San Diego, Seattle, Austin 3% Apartment Japan – Tokyo 9%/France – Paris 8% 14% GE equity by vintage Predominantly office (Japan, U.S., France) Apts. (U.S., Japan); Warehouse (Mexico, U.S.) $14.8 Equity structure Europe 3.9 $10.1 2.6 Asia 3.8 Wholly-owned $5.5 86% 3.7 8.3 2.8 $2.6 JV 1.4 1.2 2.6 12% 0.4 1.3 N. America 1.0 <2006 2006 2007 2008 Other 2% 48% originated before 2007 57 Portfolio characteristics Asset size Portfolio profile $33B Avg. investment $10MM 3.2 10% > $100MM Development assets 3% 5.8 18% $50-100MM $20-50MM 9.2 29% 43% 14.8 <$20MM In-place assets 97% 58 29
  • 30. Global hurdle process Semi-annual top-down assessment of: Market collateral pairs 54 U.S. / 32 Europe markets 4 major collateral types Apartments Office Multiple inputs used: Debt Equity Debt Equity Macro Micro MH MH S/T S/T S/T = < 3 yrs GDP, demographics Local supply/demand MH MH L/T = 3-5 yrs L/T Industry trends Construction L/T Market liquidity Actual sales/leasing activity Washington, DC PPR / PMA (3rd party/independent) Bottom-up review by local field network; debate through semi-annual meetings Consistent methodology for analyzing markets Retail Warehouse Alignment of market views between credit committee and field Establishes new business parameters (no equity Debt Equity Debt Equity originations currently), and portfolio indicators L L HH S/T S/T L L HH L/T L/T High hurdle = rising vacancy, falling rents/values High Medium hurdle = specific issues to be addressed Medium Hurdles Low hurdle Low = balanced supply/demand, stable to rising rents/values Very rigorous origination guidelines 59 Example: hurdle process limits retail exposure Equity portfolio: $33B • Equity hurdles shifted higher in ‘05/’06 $3B resulting in fewer deals Japan • Focused investments on countries/ 22% locations with low per capita retail C. Eur exposure and a growing middle class 28% Retail • 60% anchored by hypermarkets: Tesco, Italy 9% 10% Walmart, Metro, Tokyu Hands Other 10% N. – Reduced U.S. equity exposure early Mexico America 5% Korea Spain 7% UK 6% 7% U.S. retail 5% Debt portfolio: $48B ($ in millions) 300 $240 250 • Avoided malls $167 200 $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) ‘08 ‘06 ‘07 • Cross-collateralized $2.8B = ~70% of retail exposure * Excludes owner-occupied lending 60 30
  • 31. 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 • 97 field office network • Captive loan servicing • Change partners/operators – Billing and collections – Improve property performance • Asset management team averages 20+ years RE – Insurance, property tax escrows – Asset strategy changes experience – Real-time delinquency • Investment structure monitoring • Shifted focus of global team modifications from originations to asset – Cash pay downs and lockboxes management • Intensive property surveillance – Joint ventures/mergers – Asset level business plans Headcount – Seller financing – Lease reviews and approvals ’07 ’09 • Reposition real estate – Financial statement audits Focus: – Renovate/redevelop 2,200 1,500 – Collateral monitoring & security 4% – Re-tenant • Portfolio reviews and metrics Originations 30% GE vs. competitors 40% – Asset categorizations 11% Asset mgt – Differentiated surveillance • We buy assets … run them like a levels based on asset factory performance Risk, • Many competitors have limited – Proprietary in-house global finance, 59% 56% operating skills and lack local etc. information system presence – Portfolio performance metrics Highly experienced global team focused to maximize asset values 61 Equity NOI revenues & expenses Property-level revenue actions Sourcing mindset for expenses MM square feet 1 Property management 16.5 2 Vacancy % 16% Property taxes Office 84.5 Ind'l 65.8 ’09 rollover % 15% Retail 3 Utilities and other ~167MM SF (excl. apartment, hotel, parking) Rebidding 3rd party PMC service contracts Intense focus on existing tenants … working plans months ahead of renewal process Leverage portfolio-wide buying power 22 million sq. ft. leased/rolled in 2008 Review/revise service scopes 81% of projected ’09 revenues from in place Filing for property tax reassessments leases rolling in ’10+ Sustainability & energy efficiency cost Leveraging our local teams, using best-in- reductions and asset value enhancements class brokers to develop detailed leasing plans for vacant spaces Targeting $1.5B NOI in ’09 … Fed baseline $64MM, Fed adverse $74MM 62 31
  • 32. GE vs. industry 3 big differences vs. opportunity funds Fund levered equity GE 1) We don’t mark assets up 2) We depreciate assets each year 3) We generally don’t lever up • Maturities and periodic value swings make third party debt challenging 65-90% Third party GERE external debt - Creates artificial timing in the asset life $29B • Third party debt generally less attractive than GE internal cost of funds • Prefer to “control our destiny” 10-35% Equity - Use external leverage only when economic - Levered equity structured with skilled partners • Leverage can magnify upside/downside 63 Why is our unrealized loss “so small” compared with opportunity funds? Asset value $100 $103 $85 Opportunity fund $36 $33 $18 Investment Levered Investment value 9% investment value 50% $67 $67 $67 -book value (mark to market) 3rd party debt (2:1) Acquisition-’06 ’07 (peak) YE ’08 Asset value $100 $103 $85 $100 GE $97 Depreciation $94 3% Depreciation Unlevered 3% investment -book value Investment Investment (historical cost) value 3% value 17% Acquisition-’06 ’07 (peak) YE ’08 Unrealized gain/(loss) - $6 ($9) 64 32
  • 33. Levered equity positions of funds amplifies losses GE all-cash Fund - levered equity* * Assumes ~2:1 leverage $29B ’08 vs. ’07 Value loss value loss 33% equity 15% 15% 100% equity Investment loss Investment loss 67% 3rd party debt 15% 45% For “Fund”, value loss % For GE, value loss % on real estate on real estate does NOT = investment loss = investment loss GE’s $4B unrealized loss @ year end ’08 = (18%) vs. ’07, (54%) if levered 2:1 65 Equity unrealized losses summary ($ in billions, pretax) YE’08 unrealized loss - $4B Value change vs. YE’07 Value drop as % Walk of GE book value YE’07 – unrealized gain $3 Owned RE ($2.9) JV’s Sales ($2) ($1.1) Wholly-owned (15%) Depreciation $1 JV (42%) Change in value ($6) Total (18%) YE’08 – unrealized loss ($4) Unrealized Top losses: Collateral loss Cap rate Rigorous valuations process San Diego Office ($0.3) 8.3% London Office (0.3) 7.4 • Valuations updated minimum 2 times per year Seattle Office (0.2) 8.1 • Standard guidelines with 3rd party market assumptions Chicago Office (0.2) 8.0 • Cap rates – long term median, range of 4.2% - 14.7% Atlanta Apartment (0.2) 7.7 Irvine Office (0.2) 7.7 • Local teams prepare valuations, global teams review and approve Tokyo Mixed use (0.1) 4.5 Dallas Apartment (0.1) 7.8 • 3rd party data – PPR, PMA, RCA, Co-Star, Reis, etc. San Jose Office (0.1) 8.8 • 353 dedicated asset managers review 3,200 assets across 150 All Other Various (2.3) markets each cycle – tremendous local knowledge Total ($4.0) 7.5% Rigorous valuation process supported by 3rd party data from respected industry sources 66 33
  • 34. Equity impairments ($ in millions, pre tax) YE ’08 unrealized loss (‘UL’) mitigated Equity impairments by cumulative depreciation $294 ($ in billions) $4.1 $153 $3.1 $54 $30 $2.1 ’05 ’06 ’07 ‘08 $1.1 • For our owned properties, per U.S. GAAP we MUST state ’08 at depreciated cost, subject to impairment testing UL (mark-to-market is NOT optional) ’09 ’10 ’11 ’12 • We do disclose the unrealized loss in our financial statements - $4B pre tax loss at year end ’08 – ’07 vintage is primary driver … $3.3B (EOP suburban Chicago 29%, Carr America 37%, Dundee 23%) Quarterly impairment review process - FAS 144 review ~($4.0) process • Run undiscounted cash flow test quarterly on 100% of our portfolio • Inputs are consistent with our rigorous asset valuation • Real estate assets depreciated over estimated process utilizing 3rd party data sources and long term useful life (~3% annual) historical median cap rates • Cumulative depreciation balance eliminates • Hold periods vary, up to 10 years current embedded loss over time and reduces • If an asset fails the undiscounted cash flow test, it is risk of impairment impaired, fair valued based on current value and an impairment charge is recorded 67 Property valuation stress methodology NOI assumption Cap rate assumption Asset-by-asset business plan* reflects PPR/PMA recession Median long term historical cap rate + 4Q’08 case adders for asset quality • 2 year US office market rents flat Outlook* Negative rent growth and occupancy per PPR/PMA utilizing Fed Fed baseline assumptions for GDP / unemployment Median long term historical cap rate + Baseline • 2 year US office market rents 13% adders for asset quality Case • Impact on office equity portfolios NOI 14% over 2 years Fed Negative rent growth and occupancy per PPR/PMA utilizing Fed more adverse assumptions for GDP / unemployment Adverse Median long term historical cap rate + • 2 year US office market rents 15% adders for asset quality Case • Impact on office equity portfolios: NOI 16% over 2 years Asset by asset = 35,000 commercial tenants, 8,000 properties, 2,600 cities * Outlook reflects the best local market data available to asset managers in 4Q’08 68 34
  • 35. Rent growth assumptions London office Atlanta apartment % % 8 20 6 15 4 10 5 2 0 0 -5 -2 -10 -4 -15 -6 -20 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 San Diego office Dallas warehouse 15 % % 8 6 10 4 2 5 0 0 -2 -4 -5 -6 -8 -10 -10 -15 -12 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Outlook Fed Base Fed Adverse Source: PPR, PMA 69 Los Angeles equity example Historical perspective Portfolio mix Expected Cap Rates $0.4B 9% 8.90% Office 8.71% 73% 7.64% 7.83% Max Median Min Apartment 5.67% 13% 4.77% 4% Office Apartment psf p/u Retail 5% Rent Levels Warehouse $1,780 9% $1,528 $32 Market fundamentals $1,247 Max In-Place $27 Apartment Office Median $1,076 $25 Low $23 Office Apartment Source: PPR 18 yr. median cap rates toward historic high cap rate levels Current GE office portfolio rents 18% below market 70 35
  • 36. Los Angeles equity Rent growth Equity $0.4B Office • Portfolio comprised of office $293MM, Outlook Fed base Fed adverse apartment $54MM, warehouse $35MM, 12% retail $19MM 8% 4% 0% Fed base case stress analysis - equity value Retail ($ in millions) -4% Warehouse 750 -8% Apartment -12% Office 2009 2010 2011 2012 2013 500 $400 $19 $313 Apartment $35 $278 $54 $245 $1 $3 $37 $24 250 $38 $26 $1 $38 $23 Outlook Fed base Fed adverse $293 $252 $211 $183 6% 0 4% NEA Outlook Fed base Fed adverse 2% 0% -2% Impairments $0 $10 $76 -4% -6% 2009 2010 2011 2012 2013 Stress case impairments driven by office Source: PPR 71 Real Estate equity stress summary 4Q’08 Fed base Fed adverse ($ in billions, pretax) outlook case case Equity impairments $0.4B $1.5B $2.6B % of NEA impaired 5% 11% 17% Implied loss rate on impaired assets 24% 40% 44% Embedded loss on equity assets ($4.0B) ($4.7B) ($5.9B) (after impairments) ($3.6B) ($3.2B) ($3.3B) Implied loss on 23% 28% 31% affected assets Total estimated portfolio losses utilizing impairment test: • Test: Undiscounted cash flows vs. NEA (net earning assets) • If failed, loss = Discounted FMV vs. NEA 72 36
  • 37. Real Estate summary • We are primarily a senior secured debt underwriter and wholly owned equity operator • We believe that we are a conservative and diligent real estate investor with strong underlying risk and valuation methodology • The forward looking macro environment will be tough on the commercial real estate market • Our portfolios are solid but have challenges to manage • Even under the Federal Reserve stress cases, losses would be manageable 73 Commercial Lending and Leasing 74 37
  • 38. Commercial lending & leasing overview Product Portfolio Mix ($230B) Who we are and what we do • Leasing and lending against hard Equipment leases & loans assets for 25+ years 54% Leveraged loans 17% • Operations across 30+ countries Factoring& ABL 6% • No SIV/CDO exposure 10% 13% Other Other • Organized by product and industry senior-secured expertise Portfolio Mix by Region ($230B) • Spread of risk: 1B+ transactions annually for 1MM+ customers Americas 67% globally Asia 11% • 21,400 employees with over 25% EMEA dedicated to risk management 22% 75 What we do ($ 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 • 1st lien on inventory Inventory finance $6 Collateral: dealer floor inventory • Equipment & OEMs we know • In-house audit staff – 320 FTE • Manufacturer support Originate to hold…dedicated industry teams…foreclosable assets 76 38
  • 39. Global lease & loan portfolio ($ in billions) Credit costs Monitoring current portfolio trends Loss rate 1.1% 0.9% 0.8% 0.5% 0.4% 0.2% • Global equipment finance seeing weakness in 0.1% $1.4 transportation, construction and automotive $1.0 $0.9 • Consumer-related inventory and U.S. restaurant financing under pressure $0.5 $0.5 Credit costs $0.2 • Leveraged lending experiencing weakness in $0.1 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% Leveraging broader domain expertise Delinquency and non-earnings to drive portfolio solutions 2.3% Delinquency % 1.8% • Created senior executive roles in each $2.7 1.4% 1.5% 1.3% 1.3% 1.3% region to lead loss mitigation teams $2.1 $1.7 • Shifted significant resources to drive work- $1.5 $1.5 $1.3 $1.2 out and portfolio management activities Non-earnings • Reduced exposure to troubled sectors and restricted approvals to top-tier credits '02 '03 '04 '05 '06 '07 '08 77 Global lending overview Market GE ABL & factoring … assets better $5.2 Trillion positioned than last cycle $68 Billion 2000 2008 Liquidation coverage (ABL) 1.2x 1.7x Asset- $30B Interest coverage (ABL) 1.3x 1.7x based Average exposure (ABL) $5MM $24MM % Top 10 names 19% 7% Senior Leveraged % Top 10 industries 66% 43% $38B secured Factoring 90-days 8.4% 4.2% $70MM Leveraged lending … strong U/W discipline, better spread of risk 2000 2008 Senior debt multiple 3.5x 3.5x Sub debt Senior interest coverage 1.3x 2.1x % Top 10 names 18% 8% Re-packaged % Top 10 industries 63% 61% (CDO) % > 4.5x senior debt multiple 31% 32% Average exposure $13MM $27MM High Yield Cov lite exposure 4.5% vs. 15% industry Senior secured portfolio rigorously managed by an experienced team of professionals 78 39
  • 40. Leveraged loans: outperforms industry benchmarks in periods of stress 4.60% 2.95% 2.37% Market loss 2.47% rate* 1.32% 1.59% 1.00% 2.08% 0.16% 0.29% 0.46% GE loss rate 0.93% 0.43% 0.31% 0.37% 0.86% 0.49% 0.30% '00 '01 '02 '03 '04 '05 '06 '07 '08 • 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 Equipment lease & loan overview Risk management approach Industry mix ($125B) Other • Underwriting teams organized by (<2%) Transportation Business collateral & industry Services Real Estate 5% 2% 2% Food & Bev 15% • Transaction analysis combines 3% Airlines credit review and extensive asset 4% Technology valuation 4% Construction 14% Financial 4% • Continuous monitoring of portfolio Services with dedicated industry groups 5% Automotive • Experienced collection and work- 8% 5% Consumer out teams to exercise remedies and Healthcare Services Providers % mitigate losses 8% Trucking 6% 7% Retail • $14B of residual exposure Machinery Manufacturing 80 40
  • 41. U.S. equipment vs. benchmark U.S. Equipment lending charge-offs vs. ELFA 1.58% 1.50% ELFA* 1.41% 1.40% 1.30% 1.17% 1.11% 1.08% 0.85% 0.80% GE Equipment 0.71% 0.48% 0.64% 0.72% 0.57% 0.72% 0.44% 0.55% 0.46% 0.39% 0.38% 0.33% 0.31% 0.26% Dec'01 Dec'02 Dec'03 Dec'04 Dec'05 Dec'06 Dec'07 Mar'08 Jun'08 Sep'08 Dec'08 Jan'09 Differentiators Areas we avoid • Underwrite to hold with emphasis on asset • Collaterals and industries where we don’t have values and credit quality strong domain expertise • 500+ person global asset management and • Broker/intermediary sourced deal flow remarketing team (specialized by asset/ • Smaller regional restaurant concepts and industry) collateral with thin secondary markets • 900+ person global collection and work-out • Auction channels that we don't manage with team- weekly calls with underwriting teams our specialized remarketing teams and senior risk leaders Consistent performance over a sustained period *Equipment Leasing Finance Association performance indicator report & monthly leasing and finance index 81 Equipment residual values Total residual value ($14B) Asset management approach • 500+ person global team organized by collateral, industry and geography Other Marine • Independent team sets residuals utilizing 2% 18% Fleet extensive secondary market & proprietary data Forklifts 32% 2% • Multiple remarketing channels to maximize value Trucks 3% • Dedicated remarketing team managing all 3rd Copiers party sales including auction processes Aircraft 6% 30% • 80+% of equipment (ex-fleet) sold in place or Health 7% renewed Impairment methodology 1998-2008 RV performance Operating leases ($8B) • Portfolio reviewed at least annually 160% • If undiscounted rentals plus residual value < BV, % of Booked RV 140% leased asset impaired to fair value Finance leases ($6B) 120% • Reviewed at least annually 100% • 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
  • 42. Well-diversified corp. aircraft portfolio Portfolio mix by aircraft type ($13B) Historical residual performance (% of booked residual value) Medium 125% 13% Small 114% 116% 110% 10% 117% 114% 107% Rotary 110% 106% 100% 105% 7% Large/Global 104% Turbo Props/ 62% Other 8% '9 8 '9 9 '0 0 '0 1 '0 2 '0 3 '0 4 '0 5 '0 6 '0 7 '0 8 Portfolio vintage in years ($13B) Portfolio dynamics • 72% of customers > BB- with 15% investment grade 16-20 21-25 11-15 7% 5% > 25 8% • Average lease term is 10 years … stringent conditions 5% protect economics upon early termination • 85% lease maturities beyond 2013 … $312MM in ’09-’10 6-10 31% • 41 aircraft ($384MM) on ground, avg. age 13 years vs. 0-5 30+ year useful life 44% • Original outlook: credit costs of $30MM; Fed base $78MM; Fed adverse $120MM 83 Global fleet residual value exposure Global exposure ($4.7B) Portfolio dynamics • No residual risk to GE for U.S. Fleet product Japan UK 4% • Established distribution channels for vehicles 8% Germany – Retail & wholesale outlets 28% – Broad multi-country distribution ANZ 18% – Web-based remarketing tools • Rigorous monthly monitoring, increased deflation Other EU France assumption and shifted away from large cars 22% 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% – Extending terms 103% 103% 101% 101% 101% 100% – Direct remarketing 104% 100% 101% 96% 100% – 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 $116MM 84 42
  • 43. Exposures of interest ($ in millions) Big 3 exposure Large cable company Auto #1 $521 GE has $750MM of $8.3B senior debt facility Auto #2 362 Senior debt facility structure Auto #3 60 • Secured by all assets Total $943 • Liquidation coverage of 1.8x • Senior debt service coverage of 1.8x • 93% supported by equipment leases & • Senior to $14B of junior capital loans in core collaterals • All facilities current with principle and Probable restructuring scenario interest • Strong operating results but company over-levered • Exposures amortizing monthly • Bankruptcy filing anticipated • Proactively monitoring situation • Senior debt fully covered • Potential Loss of $80–150MM … Driven by restructuring scenarios • No impairment of GE exposure expected 85 Stress testing summary ($ in millions) Credit costs Fed Original Fed base adverse Portfolio outlook Key assumptions Americas equipment $349 $445 $599 • U.S. unemployment at Fed cases Leveraged loans 499 672 880 • Further deflated asset values Franchise finance 101 127 153 • Decreased same store sales in Franchise EU equipment 173 212 250 • Stressed exit scenarios in Asia Pacific 186 225 310 leveraged lending U.S. asset-based loans 92 117 151 • No benefit assumed for stimulus package and potential risk All other 117 190 246 mitigation actions Total $1,517 $1,988 $2,589 Loss rate 0.93% 1.22% 1.59% 86 43
  • 44. Stress scenarios – Americas equipment Portfolio overview ($55B) Outlook & stressed scenarios Other Stress assumptions Corp Air 4% Original Fed. Fed. 9% Canada Canada LAEF Key variables Outlook Base Adverse AAA to BBB- 16% 16% 5% HFS 19% Trucking 13% Office Eq. B+ and below Unemployment 7.7% 8.4% 8.9% 7% Small 8% ticket 40% (average) Comm’l Eq. 16% Healthcare Fleet 11% BB+ to BB- 13% 13% Change in GDP (2.0%) (3.3%) (1.8%) Const. Fleet 41% Citi 14% 13% 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) Key metrics Est. Credit Cost 349 445 599 2008 2009 Actual Outlook Estimated loss rate 0.76% 0.97% 1.30% 30+ 2.2% 3.1% 90+ 0.8% 1.3% • PD is impacted by slowing economy Net Charge offs 269 347 • LGD increase is driven by price declines in major collaterals (aircraft, transportation, construction) and lower frequency Credit cost 278 349 of full recovery for small transactions Reserves % 0.79% 0.83% 87 Stress scenarios – Leveraged loans Portfolio overview ($38B) Outlook & stressed scenarios AAA to BBB- Cable/TV 10% Stress assumptions 7% Original Fed. Fed. Business Key variables Outlook Base Adverse Services 10% < B- BB+ to BB- 28% 18% Other Unemployment 7.8% 8.6% 9.0% Radio/ 51% Broadcasting 9% (average) (64 industries <5%) B+ to B- Printing & Change in GDP (1.6%) (1.8%) (2.9%) Publishing 8% 48% Chemicals and Allied Products 7% Probability of 6.9% 8.3% 9.7% Health Services 5% Default (PD) Credit Distribution Industries Senior secured credit facilities - primarily term loans Loss Given 19.9% 22.2% 24.9% collateralized by 1st lien on all assets Default (LGD) Key metrics Est. Credit Cost 499 672 880 2008 2009 Actual Outlook Estimated loss rate 1.37% 1.84% 2.41% Non-Earning 827 1,219 Net Charge offs 317 333 • PD increase driven by weakening economic environment and deteriorating obligor financial health Credit cost 475 499 • LGD increase driven by greater uncertainty in ultimate Reserves % 0.8% 1.2% resolution value 88 44
  • 45. Stress scenarios – Franchise finance Portfolio overview ($13B) Outlook & stressed scenarios AAA to BBB- Stress assumptions 5% C&G Original Fed. Fed. 11% L/S Key variables Outlook Base Adverse Hotel 8% Bev/ B+ and below 5% Other Restaurant Unemployment 7.7% 8.4% 8.9% 37% Quick-service BB+ to BB- (average) 49% 58% Restaurant Casual Change in GDP (1.8%) (2.0%) (3.3%) 26% Probability of 5.3% 5.6% 6.1% Default (PD) Credit Distribution Segments 80% of portfolio concentrated in 45 larger concepts Loss Given 21% 25% 28% Default (LGD) Key metrics Est. Credit Cost 101 127 153 2008 2009 Actual Outlook Estimated loss rate 1.12% 1.41% 1.71% 30+ 2.7% 4% • PD increase resulting from higher unemployment and 90+ 1.6% 2.4% stressed same store sales Net Charge offs 38 100 • LGD increase driven by drop in real estate values Credit cost 131 101 Reserves % 1.73% 1.75% 89 Stress scenarios – EU equipment Portfolio overview ($18B) Outlook & stressed scenarios AAA to BBB- Other 5% Stress assumptions Original Fed. Fed. 11% Key variables Outlook Base Adverse Const./Mfg. Fleet Equipment 30% B+ and below Unemployment 8.1% 8.9% 9.4% 24% EF 38% (average) 58% BB+ to BB- Office 51% Inventory CDF 9% Change in GDP (1.0%) (1.1%) (1.8%) Equipment 9% 22% Healthcare 3% Probability of 3.8% 4.0% 4.4% Aircraft 7% Default (PD) Credit Distribution Collaterals Asset backed facilities with broad spread of risk by collateral, Loss Given 26% 30% 32% transaction size and geography Default (LGD) Key metrics Est. Credit Cost 173 212 250 2008 2009 Actual Outlook Estimated loss rate 0.98% 1.20% 1.42% 30+ 2.29% 2.39% 90+ 1.03% 1.29% • PD increase driven by slowing economy Net Charge offs 145 163 • LGD increase driven by reduction in fleet prices and lower frequency of full recovery for small transactions Credit cost 147 173 Reserves % 1.24% 1.44% 90 45
  • 46. Stress scenarios – Asia Pacific Portfolio overview ($20B) Outlook & stressed scenarios Stress assumptions Original Fed. Fed. B+ and ANZ AAA to BBB- Key variables Outlook Base Adverse below 28% 19% 22% Unemployment 5.2% 5.7% 6.0% Japan (average) India 5% 60% BB+ to BB- Other 7% Change in GDP (1.2%) (2.2%) (4.2%) 59% Probability of 4.0% 4.5% 5.7% Default (PD) Credit Distribution Countries Senior secured financings, primarily equipment, in developed Loss Given 28% 30% 33% economies Default (LGD) Key metrics Est. Credit Cost 186 225 310 2008 2009 Actual Outlook Estimated loss rate 1.12% 1.36% 1.87% 30+ 2.4% 3.4% 90+ 1.4% 2.2% • PD increase is driven by deterioration in Japan and Australia economy Net Charge offs 114 159 • LGD increase is driven by moderate reduction in fleet Credit cost 152 186 vehicle prices and collateral value depreciation Reserves % 1.0% 1.0% 91 Stress scenarios – U.S. ABL Portfolio overview ($10B) Outlook & stressed scenarios AAA to BBB- Stress assumptions BB+ - BB- 5% Original Fed. Fed. 9% Wholesale durable Key variables Outlook Base Adverse 18% Other < B- Retail 41% Unemployment 7.7% 8.4% 8.9% 42% 12% (40 industries <5%) (average) B+ to B- Health 44% svcs (1.8%) Change in GDP (2.0%) (3.3%) 10% 5% 6% 8% Probability of 9.1% 10.6% 12.5% Bus Svcs Wholesale Metal non-durable Default (PD) Credit Distribution Industries Senior secured credit facilities secured by 1st lien on current Loss Given 10.0% 11.0% 12.0% assets, managed via formulaic borrowing base Default (LGD) Key metrics Est. Credit Cost 92 117 151 2008 2009 Actual Outlook Estimated loss rate 0.91% 1.16% 1.50% Non-Earnings 90 215 Net Charge offs 23 55 • PD increase driven by weakening economic environment and deteriorating obligor financial health Credit cost 36 92 • LGD increase driven by lower current asset recovery value Reserves % 0.3% 0.7% 92 46
  • 47. GECAS 93 GECAS dynamics Who we are and what we do • Global fleet with ~1,500 owned and ~350 managed aircraft plus order book • Broad range of leasing, financing and servicing products • Expansive geographic footprint: 28 offices serving ~230 customers in over 70 countries … a leader in emerging markets • Experienced team with deep technical, financial, marketing and restructuring expertise • Full asset lifecycle management 94 47
  • 48. Industry overview (GECAS Industry World fleet (GECAS PAX fleet) Impact) Cargo ↓ Anticipated global traffic declining by ’08 Aircraft Total More 2,072 … trending higher World Efficient Fleet Parked 1,386 13,964 Total ↑ Aircraft demand continues to slow … OEM = Fleet (e.g. 737, A320, World 20,392 2,025 order deferrals; fleet reductions increase 777, A330, 744, Passenger CRJ, ERJ, EMB) Total Fleet via retirements/scrapping/parking Active = World ↑ 18,320 Lower jet fuel prices helps compensate for Passenger Least weakness in demand Fleet Efficient = 2,331 21 ↑ Due to pro-active capacity cuts & (e.g. MD80, 16,295 732, 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 VIABLE In- Parked Older Age ↔ Capital markets liquidity scarce … harder PARKED Transit >1yr Types >20yrs LESS = LESS LESS 0 351 (194) (865) (459) (156) to secure financing GECAS well-positioned to manage through another cycle: Asset-based financing Strong industry experience Proven placement capability Diversified portfolio 95 Strong asset backed financing & industry expertise Industry/airline • Continuous prospective focus on industry/assets: monitor production monitoring rates, passenger growth and retirements to anticipate cycle • Frequent and direct dialogue with OEMs/airline management on current products, new technologies, and forecasts Equipment • Asset based lender/investor with significant technical expertise • Target high quality collateral – excellent buy & hold aircraft • Limited older and out of production technology Proprietary • Forecasts of aircraft value and loss given default models valuations tool • Cross-functional steering committee of aviation experts establishes/ reviews values, leveraging GE market intelligence Focused approach on assets utilizing deep domain expertise 96 48
  • 49. Demonstrated placement capability GECAS approach Performance Placement as of 1Q’08: • Advanced placement of roll-off and skyline, 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 New Order 100% 100% 95% 51% globally Today 100% 100% 69% • History of pre-placing assets in anticipation of restructurings at weaker credits… actively Stronger position than last downturn … manage exposures placed ahead of projected cycle – Minimize losses, AOG & downtime Closely monitoring & placing unanticipated – Bi-weekly portfolio review process roll-offs (52 in 2008, 16YTD in 2009) – Granular watch rating system Placing ahead … and through downturn 97 Diversified portfolio Key comments Cargo RJs 9% Leased assets 16% Portfolio* • well positioned with high demand, widely used, fuel efficient aircraft – Average age: 7 years Wide-body 20% 55% Narrow-body – ~85% of fleet is < 10 years old – ~85% of narrow body fleet is high demand 20% A320 & 737NG Other Loan 2% – Majority of wide body fleet has broad user base Products and can be readily redeployed (777 & A330) 19 % Operating • Deliberate evolution of portfolio to operating Finance Lease 14 % Lease leases & secured loans 6 5% – Defensive loans provide cross collateralization with good LTVs Asia Europe 19% • Asset-based approach facilitates redeployment 20% Regions and mitigates airlines’ credit quality C&LA 7% – Strong track record managing through similar 5% Canada cycles US 15% 34% MAC • Geographically diverse Attractive portfolio mix supports cycle management *% of Aviation exposure $’s at 4Q’08 98 49
  • 50. Stress analysis (Pretax $ in millions) Impairments/losses Aircraft values 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 $128 DEMAND SUPPLY $109 (Traffic) (Active Fleet) WORLD PRICE FLEET FLEET Fare ENTERING EXITING GDP Stimulation ’07 ‘08 ’09 Outlook Retirements Production EU GDP US GDP OTHER GDP AS GDP LA GDP Base: assumes the worst 1-yr decline from last downturn Parking Utilization Conversions New OEMs occurs in ’09 Adverse: assumes the worst case peak-to-trough cycle US GDP impacted by: unemployment, housing, production, etc decline in last downturn (’00-03) all occurs by ’09 Current dynamics ~$635 • All aircraft types are expected to be negatively ~$320 affected by global recession ~$265 • Weaker outlets for older aircraft • OEM production cuts, retirements & parked aircraft mitigate portfolio impact ’09 Outlook Base Adverse 99 Proactive approach to distressed accounts Assess airline’s long term viability (franchise strength and credit outlook) and ease of asset redeployment • If viable and willing but unable to pay: consider deferral, larger restructuring, defensive deal to provide liquidity, aircraft put and call rights • If airline not viable: take early, aggressive action to repossess /redeploy • If airline unwilling to pay: pursue claims aggressively (if necessary, litigate) Restructurings/defensive deals: Fleet redeployments: 36 from Varig (’02-’03) Improved collateral position with 1 ~$155MM spares loan – 4Q’08 22 from ATA (’05) Improved collateral position with 2 7 from Kitty Hawk (’07) ~$240MM aircraft loan - 3Q’08 6 from Kingfisher (’08) Improved collateral position through 3 ~$360MM spare parts/engine loan – 4Q’08 8 from XL Aviation (’08) Successfully managed through previous periods of distress 100 50
  • 51. Summary 40+ years experience and strong customer relationships Asset-based approach to business; broad product set with full life cycle management Demonstrated global redeployment capability supported by world-class technical department Pricing and risk discipline with proactive portfolio focus Successfully managed through multiple cycles Proven track record 101 U.S. Consumer 102 51
  • 52. U.S. Consumer Finance 2008 Served assets Who we are and what we do • Founded in 1932 Dual Card Retail $8.1B • Diversified consumer lender; $31B PLCC $9.5B & $22B Sales Finance managed CareCredit receivables ($27B on book) PLCC $4.8B $22.9B Power • Broad geographic distribution with $3.7B RVM investment grade partners … over $3.8B ~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 Long history of profitability challenged in current U.S. environment 103 Tough U.S. retail environment U.S. retailer sales GE programs YoY % change Retailer Sales Retailer Retailer Feb. ’09 Act. YoY V % GE YoY % 4% $1,316 (9%) (17%) 2% 0% $539 (14%) (24%) (2%) (4%) (6%) $745 (7%) (14%) (8%) (10%) $3,046 (4%) (17%) (12%) (14%) $20,071 +8% (10%) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb '08 '08 '08 '08 '08 '08 '08 '08 '08 '08 '09 '09 GE risk actions driving volume down 104 52
  • 53. 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 Sales/active $1,298 $5,580 Turnover (months) 5.7 6.5 Higher margins Margins (net CV/ASA) 19.7% 12.4% to cover losses … 2x Spread Write-offs (NCOs)/ASA b) 7.1% 6.0% % of accounts that charge off 5.7% 4.1% Spread (ex-reserves & OPEX) 12.6% 6.4% Comparable credit quality Avg. FICO 699 700 Profit sharing Yes No Dampens losses a) Source: Citi, Chase, BoA, Cap One 2008 quarterly reports and supplemental datasets & Argus Syndicated Studies (3Q’08 Co-Brand Retail Benchmarks) b) Excludes benefits of profit or (loss) sharing with retailers PLCC has higher yields on smaller balances 105 Significant Underwriting actions Raised cut-offs and reduced approvals Risk actions Avg. FICO Approval rates Previous Year New Accounts +38 FICO (460 bps.) Current Year 768 54.9% 52.7% 53.4% PLCC FICO cut off to 640, DC to 760 728 744 51.3% 730 48.3% 46.7% Avg. U.S. Sales Finance FICO cut off moved to 710 FICO: 693 New account lines down 10% PLCC & 20% SF October February 3Q 4Q February Portfolio Cut credit lines Cut lines 37% in PLCC & 43% in Dual Card (20%) Removed $216B of ‘Open-to-Buy’ through $4,953 (39%) $1,610 $3,984 account closures & credit line decreases $990 No authorizations on delinquent accounts No over limit authorizations on Accounts Sales Revolving <780 FICO … cutting out 2.5MM Finance Cut open to buy ($B) authorizations ($216B) $36 ($200) $372 Exited higher loss portfolios … RV/Marine & Home Improvement portfolios ($4.1B) ($16) $192 Added over 1,000 Collectors to mitigate delinquencies ’07 New ’08 1Q’09 ’08 Volume Red. Red. Began underwriting activity in early 2007 106 53
  • 54. 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 (1%) FICO 586-610 611-640 641-670 671-695 696-725 726-755 756-780 781-810 811-835 836+ D/C C C/B B B/A A A/A+ A+ GE Risk grade Average 7.7% U/E (39%) 8.4% U/E 8.9% U/E Risk actions in place for higher unemployment 107 Driving yield to offset losses Revenue / Average Net Investment % Yield up with more challenging economy 1 19.64% +129 bps. 18.35% Revolve rates +240 bps. SF, +86 bps. 17.88% PLCC Average late fee +5% for Sales Finance & 9% for PLCC 2007 2008 2009 Outlook 2 Increase Pricing Late Fee % 3.68% 4.06% 4.61% 55 bps. Avg. APR up ~60 bps. Price Late Fee assessments up: +620 bps. +$193MM Sales Finance & +330 bps. PLCC $592 Additional Terms: changes driving other fee 100 opportunity income +$50MM $399 110 Merchant 50 3 Merchant Pricing up $228 382 Consumer 349 Renegotiate contracts Promotional pricing up 25% YoY 2007 2008 2009 Outlook Driving $592MM price to mitigate higher losses 108 54
  • 55. Credit Costs increasing Entry rate at historic lows Credit Cost (on book) (133bps.) 11.49% 11.37% 4 yr. Avg. 13.51% 11.28% 10.93% 10.84% 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 t Reserve Change 2.79% Collections more challenging 9.58% 3 due CE 6.19% 52.4% (850bps.) 47.9% 46.5% Write Offs (NCOs) 4.17% 4 yr. avg. 42.6% 43.8% 45.0% 39.0% 36.5% 4+ CE ’08 ’09 Outlook ’07 22.63% 20.42% 19.52% 17.88% 4 yr. avg. Reserve % 3.29% 5.77% 6.77% 18.3% 30+ DQ. (Served) 5.53% 7.19% 7.88% 15.90% 16.23% 15.15% 90+ DQ. 1.98% 2.82% 3.46% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 Entry rates reflect tightened underwriting… still seeing pressure on backend collections 109 Delinquency - U/E correlation DQ. vs. U/E YOY % change 80% U/E U.S. unemployment Underwriting 70% actions 60% DQ – U/E Variance 50% Historical ratio 90+ 40% Feb. 8.1% vs. (U/E:Write-Off) 10.0 Fed. Adverse 30% 7.3% Plan 1 : 1.1 30+ 9.3 20% 9.0 Fed. Base 8.8 10% 8.5 8.9 8.5 ‘09 Outlook 8.5 0% 7.6 8.1 8.0 -10% 7.6 2008 7.4 -20% 7.2 7.2 -30% 6.2 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 5.5 5.1 4.9 • Unemployment outpacing Delinquency r – 6 month U/E average 48% YoY y ry ne r h ly ril r er st be ay be be ar c Ju ua Ap gu ob Ju ar M em nu em em br M Au ct Ja ov Fe ec O pt N Se D – Average 30+ delinquency at 27% – Average 90+ delinquency at 32% Historical DQ – U/E correlation breaks in July ’08 as U/W actions take hold 110 55
  • 56. Global Consumer stress test framework Input Risk assessment & Output decisioning model (RAD) • Analysis by geography & Macro environment product type & segments Volatility & inter dependency relationships Scenario Generator • Interest rates • Monte Carlo simulation • PD, LGD and Loss • Unemployment External distributions by scenario • Possible paths of • Wages & inflation Forecast macroeconomic variables • House prices range • Sensitivity to individual • Refinance Model risk drivers (macro + opportunities • Default = borrower’s option assumptions) Risk layers • Exercise probability based on: • Credit grade Uses – Cash flows (DTIR) • LTV – Leverage (LTV) • Loss and capital • Debt-to-Income (DTIR) • Non-linear relationships: adequacy planning • Product structure – Skewed distributions • Risk mitigation planning – Fat tails • Credit insurance • Portfolio strategy • Severity: collateral/collections Portfolio performance & assumptions Validation • Observed PD/ LGD • Cure rates & Refi rates • Quarterly back testing • Recovery assumptions • Roll rate analysis • Additional loss on sale triangulation assumptions 111 Stress scenarios – PLCC Portfolio overview ($30.4B) 2009 Outlook & stressed scenarios On book $13.5B Stress assumptions ’08 ‘09 Fed. Fed. 12% B 21% A 17% 2007 Key variables ‘08 Outlook Base adverse 14% C 12% Pre 2007 Unemployment 5.8% 7.7% 8.4% 8.9% 74% A+ 37% (average) D 13% Recovery rate 12.3% 8.0% 10% 25% Credit distribution Portfolio vintage 90+ Delinquency 3.5% 3.6% 4.3% 5.0% • 54% prime book • Average FICO 699 Credit Cost % 12.1% 16.3% 18.9% 21.3% Key metrics Est. Credit Cost $1,530 $2,202 $2,552 $2,879 2008 2009 Actual Outlook Stress case does not include : 30+ (Served) 7.5% 8.1% Stimulus benefits 1 90+ 3.5% 3.6% Net Write-offs 956 1,621 Future benefit from risk actions 2 (NCOs) Credit Cost 1,530 2,202 Reserves % 6.0% 6.1% 112 56
  • 57. Stress scenarios – Sales Finance Portfolio overview ($21.5B) 2009 Outlook & stressed scenarios On book $16.0B Stress assumptions ‘09 Fed. Fed. A 24% Pre 2007 B 17% Key variables ‘08 Outlook Base adverse 31% ’08 40% C 11% Unemployment 5.8% 7.7% 8.4% 8.9% A+ 37% (average) D 11% 2007 29% ↓16% ↓25% Recovery rate 12.4% 7.8% 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 $2,398 Key metrics 2008 2009 Actual Outlook Stress case does not include : 30+ (Served) 6.8% 7.7% Stimulus benefits 1 90+ 2.4% 3.3% Net Write- 744 1,204 Future benefit from risk actions 2 Offs (NCOs) Credit Cost 1,515 1,784 Reserves % 5.4% 7.7% 113 Mortgage 114 57
  • 58. Mortgage overview ($ in billions) Overview Net income history $1.2 • $60B assets across 19 platforms $1.1 $0.9 $0.7 ANZ France $13 $11 4Q’08 Poland $5 assets Mexico $2 U.K. 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) 61% A/A+ credit rating >80% current Platform Exceptions LTV with MI U.K. 66% Pre ’03 vintage, HPI impact 61% 59% 61% 62% 61% A+/A 62% Australia 96% Run-off portfolio France 31% Seasoned book; Prime 20% 23% 21% 20% 21% B 20% Poland 100% n/a 18% C/D 19% 18% 18% 18% 18% • Exited $1.5B ANZ assets in Feb ’09 '06 '07 1Q '08 2Q '08 3Q '08 4Q '08 >80% A/B credits and MI protection 115 Mortgage portfolio performance 90 day delinquency (top 4 markets) Annualized credit costs 90% DQ 14% 1.1% U.K. rate 12% Credit costs / ANI 10% 0.7% Total Mortgage 8% 0.3% NCO / 6% ANI 0.2% 0.2% 0.2% 0.3% 4% 0.1% Australia 2% France 0.0% 0.1% 0.1% 0.1% Poland 0% Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Sep ‘07 Dec’07 Mar ‘08 Jun’ 08 Sep ‘08 Dec ‘08 Feb ‘09 Intense focus on REO Indexed portfolio LTV (top 4 markets) Avg. value $1,868 Total $100,000 2,000 70% Mortgage with MI $1,354 49% 1,500 >80% 217 Australia 1,000 189 500 <80% 51% 986 U.K. 557 0 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 '08 116 58
  • 59. Shrinking Mortgage everywhere ($ in billions) Originations ENI Down $72.7 $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 ($10.0) (16%) Cut volume dramatically … February YTD down 88% 117 Mortgage portfolio composition (’08) Assets Avg. Avg. 30+ 90+ NCO Total Country ($B) loan ($M) Prime Orig. LTV DQ DQ % MI% # of insurers/ Rating U.K. $22 $94 26% 78% 21.0% 11.0% 0.4% 36% 2; A+/Negative, A+/Negative Australia 13 174 84% 79% 4.9% 2.0% 0.2% 94% 2; AA-/ Stable, AA-/Negative France 11 155 87% 71% 2.0% 1.1% 0.1% 16% 1; A+/Stable Poland 5 66 98% 73% 1.2% 0.4% 0.0% 40% 1; BBB Mexico 2 105 70% 68% 8.3% 4.8% 0.3% 22% 1; Government entity Spain 1 94 74% 68% 23.2% 13.6% 0.7% 13% 1; A+/Negative Hungary 1 34 98% 57% 3.0% 1.0% 0.0% 15% 1; A+/Negative Vast majority of portfolio protected by strong credits, low LTV and insurance 118 59
  • 60. U.K. Home Lending (U.K.-HL) ($ in billions) • Created from acquisitions of $22B mortgage assets igroup (’01) & First National (’03) • Originations through 1st mortgage $19.1 intermediaries • In-house underwriting, collections & asset management 2nd mortgage $2.6 • Mortgage originations down 97% Originations • Solid LTV. … 78% and MI $10.7 Down coverage on 66% of > 80% LTV $10.6 • Reorganized business to focus $4.8 on collections & loss mitigation $0.1 • ~1,350 employees ’09 ’07 ’08 Repositioned to de-risk the business 119 U.K.-HL comparison to U.S. lenders U.S. GE U.K.-HL Our Business model Originate to sell Originate to hold Balance Sheet Intermediaries Non Regulated 100% Regulated Consumer − Owner occupied ~70% ~97% Better Consumer − Unemployment (’08) ~7.2% ~6.3% dynamics − Bankruptcy filing Low barrier High barrier House supply Oversupply Shortage Loan − Origination LTV 100%+ ~78% Better − Pricing Variable teasers ~60% fixed credits − Term (avg.) 30 years 20 years Mortgage insurance Minimal 66% of >80% indexed LTV Expect 30+ DQ rate (’08) 40-45% ~21% 3-5% in Write-off rates (’08) 10-12% <1% ’09-’10 Pressured by U.K. economy, but fundamentally different from U.S. 120 60
  • 61. U.K. economic environment GDP % -a) 3.4% 3.0 2.6 1.8 0.3 ~0% -1.8 -3 ’10 forecast 3Q’07 4Q’07 1Q’08 2Q’08 3Q’08 4Q08 ’09 forecast HPI % (YOY change) –b) 10.7% 5.2 1.1 -12.4 -6.1 -16.2 -17.7 -10 -5% 3Q’07 4Q’07 1Q0’8 ’10 forecast 2Q’08 (a- Source: Global Insight ’09 forecast 3Q’08 (b- Source: Actuals from HPI; GE forecasts 4Q’08 Feb ‘09 Planning for a difficult environment 121 U.K. collections and loss mitigation New collections organization Actions taken New organization in place Portfolio management Dedicated loss mitigation group Loss COO MI mitigation Top talent focused on collections/ workouts Tracking & Customer Secured Unsecured Set up monitoring service collections collections Increased collectors 3x to ~510 Liquidation: WO’s, short Dialer 0-90 90+ Structuring hardship & workout sales offers based on segmentation 2nd 0-90 i/b & analysis (LTV, recent payment 1st 0-29 inbound 1st 90+ inbound Retention: non-high risk & outbound and outbound Modification o/b history & product type) 1st 30-90 i/b & 2nd 0-90 high 2nd 90+ inbound non-high risk risk outbound and outbound Advisors o/b Engaged McKinsey … on site supporting new process 1st 30-90 high Litigation risk o/b Weekly reviews Shifted entire organization to focus on collections / workouts 122 61
  • 62. U.K. credit experience 30+ & 90+ Delinquencies Net Charge-offs (NCO) $115 ($ in millions) 30+ DQ rate 21.0% 90+ DQ rate $69 15.3% 14.4% 14.4% 13.3% $29 $25 11.0% $14 7.4% 7.0% 6.8% 6.3% ’04 ’05 ’06 ’07 ’08 NCO% 0.1% 0.1% 0.3% 0.1% 0.4% 2004 2005 2006 2007 2008 Reserving policy Drivers of NCO ($ in millions) Past due / event Policy $115 • Base reserve Model driven ~$17 Added ~340 collectors Loss on sale • 90 days Non-earning; Revenue suspended until New Loss Mitigation team account cures to < 90 days 360+ days / ~$124 • 360 days/ Repo Marked to Net realizable value; Intense REO focus … CFO Quarterly Quarterly marks thereafter led MTM • Repo sale Book final gain / loss on sale MI provides protection ~($26) MI recoveries ’08 DQ’s pressured by weaker economy 123 U.K. Mortgage insurance coverage ($ in billions) 1st Mortgage coverage Insurance example ’08 assets $19.1B With MI No MI $200,000 Property Value (PV) $200,000 No MI 90% Original LTV 90% $11.4 $180,000 Loan Amount $180,000 MI N/A 80% of PV $160,000 $7.7 $0 Insurance coverage $ 20,000 $170,000 PV with -15% HPI $170,000 Coverage for 80% or greater LTV 106% Re-Indexed LTV 106% originations … in place since ‘03 Loss before MI $10,000 $10,000 Insurers rated “A” … locally regulated & $0 MI claim $10,000 capitalized $10,000 Net loss $0 Certification process at origination ~99% claims effectiveness 59% of delinquent balances with > 80% LTV covered by MI MI provides additional credit support 124 62
  • 63. U.K. risk layering and losses ($ in billions) 1st Mortgage 2nd Mortgage Total $19.1 $2.6 80- 0-80% 80-90% 0-80% >90% >90% Indexed 90% LTV% $3.3 $7.2 $1.2 $0.9 $8.6 $0.5 A/B C/ C/D B C/D A/B C/D A/B A+/A B A+/A A+/A C/D B C/D Credit D $0.3 $ $0.6 $0.2 $3.4 $0.7 $0.5 $0.7 $1.9 $2.7 $3.6 $2.6 $1.3 $1.4 Grade $1.6 0.2 90+ DQ % 6.8% 10.8% 13.8% 9.7% 14.6% 20.7% Non-earners to NCO $2.4 ($0.8) ($1.3) ($0.1) $0.2 90+ DQ Cure Est. collateral Est. MI Est. net Non-earners value charge-offs LTV and MI mitigate charge-offs 125 U.K. Mortgage stress scenarios Portfolio overview ($22B) 2009 outlook & stressed scenarios Sources for macro economic outlook range: FSA guidance on stress testing, CML (Council of Mortgage Lenders), Global >100% ‘08 17% Insight, Moody’s Economy.com, RICS (Royal Institution of Chartered Surveyors) B 38% Indexed <80% 27% C 24% Credit 38% Pre 2007 LTV mix ’09 U.K. U.K. 90-100% 80- mix 49% 18% 90% 34% 2007 Key variables ’08A Outlook Base Adverse D 12% A 20% 17% Unemployment 5.7% 7.4% 8.5% 9% A+ 6% (average) • Avg. origin LTV: 78% ↓12% ↓15% ↓19% ↓10% HPI decline • Avg. indexed LTV: 84% • Vintage: Pre-’06 26%, ’06 23%, ’07 34%, ’08 17% Loss on sale 20% 25% 5% 12% Key metrics $MM ‘08 A ‘09 Estimated credit $201 $558 $995 $1,125 outlook costs $MM 30+ 21.0% ~29.2% Estimated credit 0.7% 2.6% 4.5% 5.1% 90+ 11.0% ~16.5% cost % Net Charge offs $115 ~$159 (NCOs) Stress case also includes: Credit costs $201 ~$564 1 Limited refinance ability for high risk segments Reserves % 0.8% ~2.9% 2 Counterparty risk to mortgage insurance reliance 126 63
  • 64. Mortgage stress - remaining portfolios ($ in millions) Credit costs Key stress assumptions Fed Base Fed Adverse ’09 outlook Base Proxy Adverse Proxy Portfolio (assets) ’09 outlook 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% France France $11B 21 30 59 HPI decline 0% 5% 15% Addn’l loss on sale 20% 20% 30% Unemployment 8% 8.6% 9.2% Mexico $2B 9 12 37 Mexico HPI decline - - 10% Spain $1.3B 55 71 100 Addn’l loss on sale - 15% 20% Unemployment 4.3% 5% 5.8% 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 Unemployment 13.9% 20% 22% 18 22 62 (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 Took loss actions early … entry rates down Mitigating losses with profit sharing and revenue actions Solid reserve position … 2x non-earnings Mortgage Low risk and stable performance outside U.K. Solid U.K. underwriting, low LTVs and MI mitigate down cycle Aggressive collections/loss mitigation focus Prepared for challenging U.S. and U.K. economies 128 64
  • 65. GE Capital Global Banking 129 Emerging markets bank dynamics Who we are and what we do Assets $6.7B • Wholly owned banks ($27.8B) + bank JVs ($4.7B) Czech/ Assets $11.7B - ~ 3,000 branches Slovakia Assets $4.7B - ~ 25MM customers Poland Hungary • 15 countries presence … diversified assets Assets $0.8B - 89% Europe Assets $0.6B - 8% Asia Latvia Romania - 3% Central America • Well positioned in core markets Assets $1.0B Assets $1.0B - Top 3 in Turkey & Central America Latin Russia - Top 5 in Czech & Poland America • High quality portfolio Assets $1.9B Assets $2.5B - Underwrite to hold Turkey Thailand - 82% A/B risk credit grades - 56% secured financing Strong franchise 130 65
  • 66. Portfolio Product portfolio Credit profile $22B 4Q‘08 Receivables (%) a) Credit distribution (%) Sales Auto D Finance 7% 10% 8% C Personal 11% Loans A+ 20% 46% Mortgages 35% 19% B 21% 17% 6% SME Cards A a) $27.8B total assets Diversified portfolio … 63% A/A+ credit quality 131 GE early mover in Eastern Europe Financials ’05-’08 CAGR % Poland PAM ex-Acq. & FX 2005 2008 ’95-’98-’08 Assets ($B) 10.5 27.1 20% Czech/Slovakia NI ($B) 0.3 0.5 15% PROSPERITA ROI (%) 2.8% 2.2% (40) bps. ’97-’00 Hungary Credit performance ’01 Global Consumer% Russia 30+% 5.72% 2.89% 7.47% ’04 Credit 2.42% Cost % Romania/Latvia 1.79% 2.99% ’06 ’02 ’03 ’04 ’05 ’06 ’07 ’08 Conservative entry … organic growth over time 132 66
  • 67. 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%) (1.8%) (2.0%) (2.0%) (2.0%) (3.0%) (12.0%) Poland Czech Hungary Russia Latvia Turkey Romania GE 4Q’08 $11.7B $6.7B $4.7B $1.0B $0.8B $1.9B $0.6B Assets *Sources: EIU Reports February/March 2009 2009 loss planning reflects tougher environment 133 Eastern Europe outlook Banking penetration remains low Current challenges driven by… 1 Macro imbalances Total banking revenue / GDP 9.4% 114% 101% External 6.8% 52% 42% 31% 4.8% 4.7% 4.5% debt / GDP 3.6% 3.0% Czech Hungary Latvia Poland Russia Deficit / ANZ North Asia* Latam WE Middle Eastern (1.4) (3.0) (1.9) (1.9) 3.6 Surplus America East Europe Expansion led by EU accession & GDP growth 2 Currency volatility 2.2 March’08 March’09 V% Latin 2.0 ↓ 53% Poland 2.2 3.5 America 1.8 Margins 2007, percent CEE ↓ 27% Czech 16.0 20.4 Africa 1.6 ↓ 37% Hungary 163.9 228.4 Russia Middle East 1.4 1.2 ↓ 45% Russia 23.5 34.7 India North China 1.0 3 Structural dependencies America 0.8 Czech Hungary Latvia Poland Russia 0.6 Western 0.4 Exports/ 80 80 47 42 32 Europe GDP 0.2 0 FX lending 8 57 88 25 21 0 2 4 6 8 10 12 14 16 18 36 Revenue CAGR (2000–2007) Loans / * Asia excl. China, India and Japan 71 132 238 92 116 Deposits Source: EIU, McKinsey, FPK, UBS, Reuters Near term potential volatility … long term attractive 134 67
  • 68. Core Eastern Europe banks #5 in Poland #4 in Czech #4 #8 in Hungary #8 Assets $11.7B 18% $6.7B 18% * $4.7B 29% BPH 31% 25% $3.4B $2.5B 39% $2.5B $1.4B $1.1 $0.6B ’00 ’04 ’08 ’00 ’04 ’08 ’01 ’04 ’08 30+% 4.2% 3.8% 2.2% 5.2% 2.1% 2.2% 1.4% 1.4% 2.7% SF Auto SF SF 1% Auto 5% 7% 6% PLoans 11% Auto PLoans 9% 19% 16% PLoans Mortgages 30% 23% Mortgages SME SME Mortgage 55% 13% 42% 25% Cards SME Cards 6% Cards 24% 4% 3% A/B Credits = 87% A/B Credits = 84% A/B Credit = 91% * CAGR % ex-Acquisition Solid businesses… high quality portfolio 135 FX mortgage underwriting Centralized underwriting & full docs on every loan 1 -Property valuations, income verification, etc. Underwriting guidelines routinely adjusted based on FX rate 2 movements, wage growth, & interest rate changes Conservative Debt to Income and Loan to Value ratios 3 -100% Mortgage insurance on >80% originated LTVs No exotic products: low doc loans, self certification, interest 4 only, teaser rates, etc. Borrowers qualified based on their capability to handle a 5 local currency loan, even though they are given a lower interest rate FX loan 6 FX loans fully hedged with cross currency swaps Extensive process with high standards 136 68
  • 69. 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 B 2% A 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 10% 20% 10% 20% HPI 4% HPI Flat 15% 30% 15% 25% FX (from today) 15% FX (from today) 5% Unemployment 9.5% 10.5% 13% Unemployment 8.5% 9.4% 10.4% $26 $87 $22 $49 Credit losses ($MM) $7 Credit losses ($MM) $2 • Strong credit quality • Conservative underwriting • Performing well 137 Stress testing approach Approach Assumptions Forum and frequency: Key Drivers: • Operating plan & short range outlooks • Home prices • Monthly portfolio reviews • Unemployment Macro • Product / portfolio deep dives • Currency rate movement • Interest rates • Loan to values Purpose and use: • Debt to income Portfolio • Risk management mitigation planning • Credit quality • Loss and capital adequacy planning • Additional loss on sales (mortgage) • Portfolio expansion or exit Key assumptions:* 10-20% further decrease Home price decline Oversight/Review: from today • Banking Group CEO, CRO, CFO 150-470bps increase Unemployment • GE Capital Investment Committee & Board depending on market (selective reviews annually) Currency movement Another 15-30% decline from today Robust process, oversight and testing * Source: EIU, Internal Inputs 138 69
  • 70. Banks stress test results Stress test Stress test assumptions ’09 ’09 Outlook Stress Test V’09 outlook Base Adverse Adverse Outlook Assets Credit Cost 30 + Base ($MM) ($B) ($MM) ($MM) ($MM) flat (5)% (20)% HPI Czech $6.9 $128 2.2% $144 $167 $16-39 5.3% 7.3% 10% Czech Unemployment HPI (10)% (10)% (20)% 0.9 87 7.1% 94 161 7-74 Unemployment 6.4% 7.4% 7.9% Russia Russia Unemployment 6.7% 9% 11% 0.6 63 24.3% 85 155 22-92 Latvia Latvia HPI (4)% (10)% (20)% 13.4 192 2.8% 230 328 38-136 Unemployment 9.5% 10.5% 13% Poland Poland Unemployment 1.4% 3.0% 5.0% 1.2 113 9.0% 160 225 47-112 Thailand Thailand HPI flat (10)% (20)% 4.4 73 3.8% 163 232 90-159 Unemployment 8.5% 9.4%% 10.4% Hungary Hungary Total $27.4 $656 3.6% $876 $1,268 $220-612 Under severe stress scenario … emerging market banks still earn ~$300MM 139 Summary • Nearly 15 years experience in these geographies Started small … organic growth overtime • High quality book … 82% A/B credits We underwrite to hold • Strong delinquency & credit cost performance 30+: 5.72% in ’02 to 2.89% in ’08 Low credit cost at 1.79% in ’08 • Rigorous stress testing to get ahead of problems • Adjusted originations to limit volatility 4Q’08: Reduced Mortgage/Auto originations ~50% 2009: Mortgage/Auto originations volumes planned ~80% 2009: A/B credit originations only 140 70
  • 71. Operations update 141 Operating GE Capital Tightly managing investment … 2009 YE ENI to $500B, 1 $25B Driving higher new business returns … new business 2 ROI Feb YTD ~2.7% Taking substantial cost out … 2009 SG&A 19% 3 (ex-FX); Headcount 13% … 1Q on target to deliver annual savings rate Disposing/running-down ‘red’ assets … closed $23B of 4 dispositions, Feb YTD mortgage originations 88% Driving results with rigorous operating processes 142 71
  • 72. 2009 ending net investment ($ in billions) Dynamics ENI • Reduced volume across all portfolios $525 V% $500 • RE, Mortgage and U.S. Consumer (5%) volume limited to commitments • Limited BD activity assumed Core 357 – Santander/Interbanca deals executed 356 –% Jan. ’09 – ANZ Mortgage $1.5B closed Feb. ’09 • Enhanced collections activities Banks 65 • Capital bi-monthly reviews 64 (2%) – Volume pipeline 103 Restructuring 80 (22%) – Disposition activity – Alternate funding '08 '09 Outlook 143 2009 originations and collections ($ in billions) 1st half 2nd half Originations • Planned volume: +12B $108 – Consumer: $125 - includes +13B $97 $96 revolving credit $84 Sales – Commercial: $55 • Monthly pricing reviews • Pricing floors with minimum target ROIs Collections Platform ’09YTD ROI Americas ~2.9% Asia ~2.5% Sales/ Sales/ Europe ~2.4% Volume Volume collections collections Banking ~2.3% EFS ~8.4% Assumed sales/securitizations reduced to $25B GECAS ~3.8% (19%) … $10B in 1Q • Platform sales potential Assumed R/E equity sales reduced to $3B (41%) upside to volume and/or Actual collections will pace new originations collections 144 72
  • 73. 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 $13MM Short-term, line for a CEE Improve working capital 11.7% ROI SME Financing energy customer management Strong customer value delivery at high returns for GE Capital 145 SG&A cost ($ in billions) $2.7B Focused approach $14.0 25% $11.3 19% ex-FX 1 Organization structure and headcount FX 0.8 re-sizing… ~$1.0B $10.5 7.1 Geographic consolidation Direct 2 (C&B) Sizing and indirect spending … ~$1.0B 5.3 Driving lower roof-tops Lease, outside services, legal, sourcing and consultant costs 5.6 Indirect 4.0 3 Business exits … ~$700MM Operations 1.3 1.2 Closing/exiting underperforming/non- strategic platforms 2008 2009 Outlook (ex-Acq.) Lean and competitive structure … $1.2B more out since 12/08 (ex-FX) 146 73
  • 74. Run-off/restructure redeployment (ENI - $ in billions) $103 Portfolio ~$80 Equipment Services ~$60 Consumer mortgages ~15 Consumer/Commercial platforms ~$35 Game plan Manage investment down ~$70B by 2008 2009 2010 2011 2012 … reinvest in core and funding Outlook Outlook Outlook model Reduction: $23B $20B $25B Primarily based on pay down/ term ~$70B investment Opportunistically sell or swap Maximize value – many attractive Reinvest Pay down platforms for banks longer term in core CP & LTD Safer 2%-6% ROI Focused organization with funding model strong leader and clear charter 147 Recent dispositions – $23B ($ in billions) Region Sales ENI Buyer Closed Japan – Personal Loans $5.9 3Q’08 Australia Mortgage 1.5 1Q’09 Corporate Card 1.3 1Q’08 Office Imaging 0.5 2Q’08 Healthcare – Practice Solutions 0.8 4Q’08 Partnership Marketing Group 0.4 2Q’08 U.K. Unsecured 5.6 1Q’09 Germany 3.4 4Q’08 Austria 1.7 1Q’09 Finland 1.7 1Q’09 Reduced assets + exited ‘challenged’ markets 148 74
  • 75. ‘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 Rigorous operating mechanisms 1 Controlled Capital allocation 2 – ENI to $500B or less – Turnover to higher returning volume Delivering cost out 3 Driving asset reallocation 4 – ‘Red’ assets – Lower leverage/higher returns… Mortgage 150 75
  • 76. Financial update 151 Summary losses and impairments ($ in billions) Original Estimated Fed Estimated Fed outlook base case adverse case Commercial portfolio - Real Estate $0.7 $2.4 $3.6 - Aviation and Energy 0.3 0.4 0.7 - Mid-market lease/lend 1.5 2.0 2.6 - Other Commercial 0.3 0.5 1.5 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 Capital Finance earnings ~$5B ~$2.0-2.5B ~$0 152 76
  • 77. Stress summary credit costs vs. impairments Estimated Estimated ($ 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 Other Commercial – 0.3 0.3 – 0.5 0.5 – 1.5 1.5 U.S. Consumer 4.3 – 4.3 5.1 – 5.1 5.7 – 5.7 Non-U.S. Mortgage 0.6 – 0.6 1.2 – 1.2 1.6 – 1.6 Bank/JV/Other 1.9 – 1.9 2.2 – 2.2 2.7 – 2.7 Mgmt. planning 1.0 – 1.0 – – – – – – Total $9.7 $0.9 $10.6 $11.5 $2.3 $13.8 $13.7 $4.7 $18.4 153 Estimated stress impact ($ in billions) Original Estimated Fed Estimated Fed outlook base case adverse case Pretax, pre-provision ~$13.3 ~$11.1 ~$9.2 Credit costs 9.7 11.5 13.7 Pretax 3.6 (0.4) (4.5) Capital Finance net income ~5.0 2.0-2.5 ~0 GECC Corporate items (0.2) (0.2) (0.2) GECC net income ~$4.8 $2.0-2.5 ~($0.2) Estimated: Fixed charge coverage a) ~1.52X ~1.32X ~1.19X a) Includes capital contribution 154 77
  • 78. Estimated credit costs vs. estimated Fed 1 yr. ‘adverse’ loss assumptions ($ in billions) GECC 2009 Estimated Estimated 1 year outlook Fed base Fed adverse estimated Fed a) 12/31 financing loss rate loss rate loss rate loss rates rec. net of reserves 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: None - U.S. Construction loans 10.60% - 1st lien residential 3.90% None - Home Equity/2nd’s 6.15% None 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 155 Top bank 3σ stress 2009 outlook Losses & impairments • Stressed $266B financing receivables in proprietary model $368B $14.5B Financing $13.7B receivables • For $102B non-U.S. consumer receivables assumed growth in loss rates 50% higher than U.S. • 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 3rd party 3σ stress within 5% of adverse stress of financing receivables 156 78
  • 79. Key ratios – GECC TCE/TA ratio Tier 1 common ratio c) 7.1% 6.1% b) 6.9% a) 5.9% a) 6.5% 4.4% 5.8% 3.4% 4.9% 3.1% 2.1% 2.3% 1.2% 1.1% GECC JPM WFC Citi GECC GECC BAC BAC JPM WFC Citi GECC ’09 4Q’08 4Q’08 4Q’08 4Q’08 ’09 4Q’08 4Q’08 4Q’08 4Q’08 4Q’08 4Q’08 Adverse Adverse Stress Stress TCE/Risk weighted assets RWA/ Total • Strong tangible equity ratios even in adverse Assets 61% 93% 72% 84% 51% 6.2% b) case 6.0% a) 5.4% – Ratios improve vs. pro-forma 4Q’08 in adverse case due to balance sheet shrinkage 5.0% 2.7% • Tier 1 common ratio strong in adverse case, 2.3% well above 5.5% estimated regulatory target 1.2% post stress • Tangible equity reflects $5.3B unrealized loss GECC JPM WFC Citi GECC BAC ’09 4Q’08 4Q’08 4Q’08 4Q’08 on investment securities 4Q’08 Adverse a) Adjusted for equity infusion & CTA/OCI impact Stress b) Assumes no changes to FX and level of unrealized losses c) Using data provided by Citi for peer group 157 Financing receivables reserve methodology $371B Accounting model Methodology U.S. Consumer Consumer FAS 5 • Primarily roll rate models • Formulaic calculation for smaller Non-U.S. balance homogeneous loans Mortgage • Write-off policy • Estimate of incurred losses imbedded in – Closed-end installment – 120 days portfolio at a point in time $226B – Revolving – 180 days Other – Not life losses or future losses not Consumer – Mortgage – 360 days yet incurred Commercial Mid-Market • FAS 114 lease/loan – Specific credit or collection evaluation approach Other • FAS 5 FAS 114 – Primarily static pool model applying • Specific reserves on individual loans historical loss curves Corporate deemed impaired loans – PD x LGD history applied to loans FAS 5 $145B individually determined non-impaired • Formulaic calculation of losses Real Estate embedded in portfolio for which debt Each methodology incorporates current a default or loss event has been Aviation/Energy loans incurred but not yet observable trends and conditions and other Franchise/Other observable environmental factors 4Q’08 158 79
  • 80. Non-earning reserve coverage ($ in billions) Commercial $3.2 1.1 228% coverage 0.5 100% $1.7 recovery 0.8 Loans in recovery/ workout Exposure 0.8 Expect full Collateral recovery value on remaining exposure Estimated 4Q’08 4Q’08 loss exposure Non-earning Reserves 159 Non-earning reserve coverage ($ in billions) Consumer $4.7 1.4 1.0 3.3 Non-mortgage $3.2 1.8 non-mortgage Cure reserves 231% 133% coverage coverage 0.2 $0.4 0.3 Estimated Estimated 4Q’08 4Q’08 Mortgage Estimated MI loss non-earnings collateral Non-earning Mortgage exposure value reserves 160 80
  • 81. Financing receivables vs. top U.S. banks ($ in billions, as of 4Q’08) Top banks average a) GECC Top banks coverage GECC asset Reserve % Reserve % composition Receivables coverage Portfolio Receivables coverage Portfolio U.S. Consumer - 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% 0.67% x 28.2 17% - 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% $1,170 2.0% 36% 0.96% U.S. reserves comparable a) Consumer data avg. of Top 3 Banks Real estate data source Top 5 Bank, loss coverage est. split construction vs. non-construction Commercial loans and leases data source Top 5 Bank 161 GECS investment securities ($ in billions) 12/31/08 Assets primarily support the run-off insurance operations long term liabilities and guaranteed State & Muni investment contracts U.S. 2 Retained corporate interests We do not have debt securities classified as 6 20 FAS 115 HTM $3.1B insured by monolines – $2.2B FSA, MBIA, CMBS 2 Ambac; $0.7B FGIC 4 $8B asset-backed securities; $1.3B subprime RMBS exposure ($1.1B wrapped by monolines) – no CDO’s 2 ABS 3 U.S. corporate debt : 11 Non-U.S. 70+% investment grade gov’t./corp. U.S. Equity 600 Companies, 60 >$100MM book value gov’t. Largest single exposures Fannie & Freddie $0.8B in total, Wells Fargo $0.3B, rest $0.2B or less $41B Diversified, predominantly long term debt-based portfolio 162 81
  • 82. 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 • Evaluate underlying issuer or cash flows – Debt securities – analyze 8 credit-related and financial performance criteria – Asset backed securities – run cash flow recoverability analysis Evaluate – Consider monoline wraps and ability to pay claims • Challenge pricing service for a sample of securities; confirm process • Confirm cash flow assumptions based on current market information Test • Compare subordination of our holding; compare to expected losses • Corporate reviews of all securities with unrealized loss >$5MM and >6 months underwater OR <6 months underwater and >20% decline, regardless of test result Conclude • Determine other than temporary impairments • GE Corporate Audit Staff and KPMG audits $1.4B pretax impairments in 2008 … estimated $0.7B at risk for 2009 163 GECC Goodwill ($ in billions) FAS 142 Goodwill reporting units as of 12/31/08 Methodology/frequency • Tested for impairment annually and whenever Consumer $9.1 events or circumstances make it more likely than not that fair value < book value Commercial Lending • If reporting unit fair value < book value, then and Leasing 12.6 must fair value each identified tangible and intangible asset. Goodwill impaired when Real Estate 1.2 implied fair value < goodwill book value • Fair value of reporting units estimated using Aviation 0.2 discounted cash flow method; corroborated with market multiples, when available Energy Financial Services 2.2 • Retesting reporting unit goodwill for impairment in 1Q’09 GECC $25.2 – No impairments indicated – Continuing to monitor 164 82
  • 83. GECC Associated companies View of ($ in billions) impairment risk 4Q’08 Holding Investment a) Performance as of 2/09 Investment 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 165 Rigorous process for evaluating asset impairments (GECS $ in billions) Rigorous process Assets reviewed for impairment Primary • All FAS115 assets reviewed 4Q’08 assets Frequency acc’ting. model quarterly for other than Real estate owned $36.7 At least annually FAS144 Cost & equity method inv. 21.6 At least annually APB18/FAS115 temporary impairment Retained interest 4.6 Quarterly FAS115 Debt securities 12.1 Quarterly FAS115 • Multiple layers of review: ($8B Trinity) Equipment leased to others At least annually FAS144 – Business unit - Aircraft 32.3 – Capital Finance - Equipment 27.3 – Corporate accounting Goodwill/intangibles 29.0 At least annually FAS142/144 GECS Insurance securities 22.0 Quarterly FAS115 – CAS/Auditors <2% assets subject to mark-to-market • All equipment coming off lease 4Q’08 assets 4Q’08 assets evaluated for impairment Equities-trading $0.8 CMBS $– • All annual reviews updated if FAS133 hedges – Assets held for sale 7.7 -Money 3.1 Retained interest 1.8 there is change in assumptions -Real Estate 0.3 (Consumer) or circumstance -Other 4.3 Accounting models utilized are prescribed 166 83
  • 84. Summary We follow the appropriate accounting guidelines 1 Our reserves are very comparable to banks in similar asset 2 categories We are a secured lender 3 We do not see significant impairment risk in goodwill or 4 associated companies We have sufficient capital even under adverse stress tests 5 167 GECC Summary + Outlook 168 84
  • 85. Primary questions … the answers Commercial Real Estate We will experience lower earnings through this cycle, but believe we have it covered in our own business framework What is the risk in U.K. mortgage? We expect credit losses will increase, but mortgage insurance and operational rigor should help mitigate the impact to a manageable level What is the risk in Eastern Europe? These are long established franchises. We expect credit losses to increase, but not significantly higher than the rest of world What is the risk in U.S. Consumer? We see a tough cycle driven by unemployment in 2009, and are planning for higher losses in line with the industry Losses/Impairments/Reserves We apply appropriate accounting policies. Our reserves are adequate for current economic conditions 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 • High margin new business Banks 10% • Consolidation + partnership potential Verticals 15% Real Estate Verticals Core • 25+ year track record 75% Consumer • Leverage GE brand/competencies/synergy GECAS Core Energy 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 170 85
  • 86. 2009 Summary Environment much tougher – we think GECC is prepared 1 • Strong liquidity/limited refinancing risk today Thoughtful view of stressed losses … working aggressively 2 Revised 2009 outlook – higher losses, but more cost-out 3 Intense focus on risk management, work-out and restructuring 4 • Rigorous asset management/manage risk GE Capital business model robust as the economy recovers 5 171 Closing 172 86
  • 87. 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% Framework can accommodate ~$40B of losses over 3 years without requiring additional capital Potential losses & impairments 2009/ Cumulative 2008 2010 3 years Base plan $10B ~$30B ~$40B (a- includes ~$B equity infusion 173 Sources of contingent capital We have $34B of tangible equity after $9.5B infusion Other potential sources • Announced dividend cut provides additional capital • Ability to control new originations/GECC asset sales • Ability to monetize assets or take responsibility for GECS liabilities Current outlook does not require external capital 174 87
  • 88. Company update Dec. 16 1Q Comments Energy Infrastructure ++ • Global growth Tech. Infrastructure + • Aviation on track • Healthcare pressured NBCU 0/‒ — • Advertising market weak • Tough comps Capital Finance $5 Profitable • Strong cost reductions • Tax credits Corporate Flat • C&I/pension pressure • Costs lower 175 Key messages 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 Have sufficient capital and alternatives to weather adverse economic conditions 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 We expect GE Capital will be profitable in 1Q’09 and 2009 We are committed to GE Capital GE will come out of this cycle a stronger, more focused and competitively advantaged company 176 88