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GE-Financial Services Investor Meeting
 

GE-Financial Services Investor Meeting

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    GE-Financial Services Investor Meeting GE-Financial Services Investor Meeting Presentation Transcript

    • GE Capital Finance Overview December 2, 2008 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 often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest and exchange rates, commodity and equity prices and the value of financial assets: continued volatility and further deterioration of the capital markets; the commercial and consumer credit environment; the impact of regulation and regulatory, investigative and legal actions; strategic actions, including acquisitions and dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.“ “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.”
    • Overview • Macro environment is very challenging • 4Q’08 results are trending toward low end of range … $.50-.52 • In addition, evaluating restructuring and other charges to accelerate cost out and reviewing losses in current environment Expecting ~$1.0-1.4B after tax charge Industrial and financial cost out • GE Capital is a vital financial services business 1) Safe + conservative in economic environment 2) Creating a financial framework to earn ~$5B in 2009 3) Business model that performs for the long term 4) A strong fit with GE • GE is well positioned to perform in a difficult 2009 Board approved management plan to sustain dividend at $1.24/share Including restructuring and other charges, Company earns ~$4B in 4Q … $18B+ in ’08 GE Capital Finance earns ~$9B in ’08 Financial Services earns ~$8B in ’08 CFPA1397 December 2008 Analysts Pitch_V6 2
    • Additional 4Q items ($ in billions – after tax) Focus $1.0-1.4B Financial Services & Industrial headcount reductions Financial Services portfolio exits Facility consolidations Structural improvements Additional losses, higher reserves Restructuring, higher Approximately ~70% financial losses & other charges services 4Q items drive: + 5% lower base cost in 2009 + Loss reserves reflecting a tougher environment CFPA1397 December 2008 Analysts Pitch_V6 3
    • GE is committed to the Triple A rating 9/25 Commitment Additional actions 1 Improve liquidity profile 1 Issued $15B of common & preferred stock – Reduce absolute reliance on CP ( to ~$80B) to accelerate liquidity planning – Bank lines & cash ≥ CP by 4Q’08 2 Gained access to CPFF & TLGP – Shrink GECS through originations/collection – $98B capacity under CPFF incl. GE management … assuming no issuance in 4Q’08 – $132B guaranteed debt capacity under TLGP 2 3 Refined business model to allow core Strengthen capital base – Reduce GECS dividend to parent to 10% growth with cash redeployed from run-off – 6:1 book leverage w/hybrids by end ’09 portfolio … ’09 LT debt plan to $45B – Suspend share buyback until 1Q’10 – No increase to GE dividend for ’09 4 Targeting $50B CP balance by YE’09 with 100% bank lines coverage 3 More focused Financial Services 5 Grew deposits base by >$20B in ’08 … plan – Smaller commercial Real Estate, more debt/ to double size in ’09 less equity – Reduce high leverage products (mortgages) 6 Committed to 7:1 leverage YE’08 – Shrinking overall portfolio & changing asset mix – Evaluating ~$5B capital infusion to GECS Substantial actions completed CFPA1397 December 2008 Analysts Pitch_V6 4
    • GE Capital business model Financial Services value chain “Factory” “Raw material” GE Advantage: “Origination” (capital) GE Advantage: Low cost Treasury GE Advantage: Global position Competitive cost Risk Asset Mgmt. Brand “AAA” 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 CFPA1397 December 2008 Analysts Pitch_V6 5
    • GE Capital Finance
    • GE Capital has a strong franchise One of the few liquidity sources since 3Q’07 Estimated U.S. market position • $120B of new financings to U.S. companies, • Middle Market Commercial Lending #1 infrastructure projects and municipalities • Equipment Lending/Leasing #1 • $245B credit extended to U.S. consumers • Middle Market Corporate Finance #1 • 1Q’08 Merrill Lynch – bought $13B of • Aircraft Financing #1 troubled assets • Healthcare Financing #1 • 3Q’08 CitiBank – bought $13B of middle • Energy Financing & Project Financing #1 market commercial financings • Fleet Leasing #1 • Have contributed to support all major U.S. • Franchise Finance #1 airlines and auto companies with financings as they work through cyclical issues • Commercial Real Estate Lending Top 3 • Dealer Financing #1 • Leading DIP/Bankruptcy lender for restructuring U.S. companies • Private Label Credit Cards #1 Core is strong + competitively advantaged CFPA1397 December 2008 Analysts Pitch_V6 7
    • GE Capital Finance overview ($ in billions) Net income ~$50B $12.2B 4Q volume Our focus ~$9B Capital 1 Manage current cycle in a safe and Finance responsible way – Reposition funding model ’07 ’08E – Manage credit cycle GECC ENI 537 545 ROI 2.4% 1.7% ROE 22% 15% 2 Reposition GE Capital as a well- Challenging year but strong relative performance funded, smaller finance company – Outperform in 2009 Earnings 3Q’07-3Q’08 3Q assets GE Capital Services $10.6 $680B – Position business to grow in 2010 JPM 7.9 1.8T and beyond GS 7.6 1.1T WF 6.8 620B BoA 6.2 1.7T Next 5 12.0 1.1T CFPA1397 December 2008 Analysts Pitch_V6 8
    • Reposition funding model
    • Strategy: Diversified FinCo model Current view of future capacity (2010+) Pre-crisis Post-crisis Capital Leverage 8:1 ~6:1 ~$70-80B Funding ~$535B ~$470B CP outstanding ~100B ~$50B LTD 2016+ LT debt annual capacity $80 – $100B ~ $50B ~$85B LTD @ ~$50B/yr. Spread L+10 L+100 + 5 yr. maturity ~$250B Capacity to Growth 10 - 12% continue to CP backed 100% by bank lines grow ~$50B ROE 20% 15% - 20% Deposits/alternate funding Ratings AAA/Aaa AAA/Aaa ~$85B ~$470B Strong diversified funding plan CFPA1397 December 2008 Analysts Pitch_V6 10
    • U.S. government programs Programs GE GE impact • Capacity of $98B … pricing @ slight penalty to market Commercial paper funding facility • Enables GE to support investor liquidity needs and manage (CPFF) duration • Serves as liquidity backstop • GECC capacity of $132B Temporary • Solidifies debt issuance capacity ($45B) and improves LT debt liquidity guarantee program pricing & CP market access (TLGP) • CDS & cash spreads tightening … reduces refinancing risk perception • GE not participating TARP/TARP capital purchase plan • $15B GE equity raise provides capital/liquidity flexibility if markets continue to deteriorate Programs level playing field CFPA1397 December 2008 Analysts Pitch_V6 11
    • Debt market size ($ in trillions) CP market – U.S. only • Institutional demand from money funds, $2.2T $1.8 state & local governments, corporation & ~$1.5 ~$1.5 peak central banks • CPFF helped stabilize declining market … rollover risk and liquidity enhanced 2007 2008E 2009+ investor confidence & led to term buying GECS Global O/S ($B) 101 80 50 GECS US mkt. share ~4% ~4% ~3% Global IG Term issuances +$6T $2.7 Govt. • TLGP opens GE access to government ~$2.0 market debt buyers through June’09 ~$1.3 • Pension funds / insurance companies will continue to invest in LT debt driving need 2007 2008E 2009E • GECC targeting $45B issuances in ’09 … GECC issuance ($B) 90 70 ~45 half of ‘07 Market share 3.3% 3.5% <1% Government programs have helped restart debt markets … GECC aligning issuance plan to markets CFPA1397 December 2008 Analysts Pitch_V6 12
    • 2009 funding plan ($ in billions) $536 ~$514 Focus: Downsize + diversify ~$485 1 CP at $50B by YE’09 100% bank line coverage LT debt 391 377 354 2 Lower LT debt … $45B issuance in ’09 3 Grow alternative funding to $80B+ Deposits/ Others 57 57 81 + Comm’l paper 88 80 50 Plan on government programs ending 3Q'08 4Q'08E* 4Q'09E* Equity $56 ~$57 ~$62 Origination pricing > cost of funds Bank lines + ENI ~$45B … 3Q’08 – 4Q’09 cash/CP 85% 100%+ 100%+ * Constant FX Solid + conservative plan CFPA1397 December 2008 Analysts Pitch_V6 13
    • Commercial paper update ($ in billions) $101 Limited use of CPFF … helping investors Int’l 30 ~$80 manage redemptions … plan assumes 15 ~$65 CPFF ends as scheduled 15 ~$50 10 CP markets have improved … more term U.S. 71 65 buying 50 40 GE maintained good demand, pricing and term issuance despite market disruption 4Q'07 4Q'08E 1H'09E 4Q'09E – Portfolio cost at 2.15% as of 11/21 Weighted average yield % – Weighted average maturity restored to GECC U.S. CP portfolio cost % 55-65 day target 6.0 5.0 Diverse, deep global investor base 4.0 – 1,250 U.S. investors 3.0 – 11 currencies, 15 programs 2.0 100% coverage with cash + bank lines 1.0 Feb- May- Aug- Nov- Feb- May- Aug- Nov- 07 07 07 07 08 08 08 08 CFPA1397 December 2008 Analysts Pitch_V6 14
    • Long term debt ($ in billions) ’09 Plan $29 $39 ~$61 $23 ~$50 $22 • FDIC TLGP eligibility solidifies Issuance annual debt issuance Maturities capacity ($45B) and improves Guaranteed pricing debt 1H’09 2H’09 ’10E • Pricing to reflect market Performance vs. 5 yr. cash bonds dynamics Libor-OAS (bps) 850 FinCo Index 750 650 • Continue to maintain match 550 Bank Index C funded book 450 JPM 350 GECC 250 WFC • Opportunistic TLGP issuance 150 50 in 4Q’08 to pre-fund ’09 Jul-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 FinCo Index Bank Index GECC 5yr Spreads C 5yr Spreads JPM 5yr Spreads WFC 5yr Spreads Source: Barclays Capital CFPA1397 December 2008 Analysts Pitch_V6 15
    • 2009 alternate funding ($ in billions) ~$96 International deposits $4B Additional +15B – Drive market share in emerging markets opportunity – Tap large/developed markets ~$81 ~$54B Brokered CD’s : Distributed through multiple today 18 firms to support asset growth in US banks ~$57 • Industrial Loan Corporation deposits $17B –Direct origination into ILC 27 –Bank loan group; Distribution Finance 23 Business properties; Franchise Finance $30 –Originating CD’s to match bank assets Other 10 18 profile U.S. Industrial Loan Corporation 18 10 U.S. Federal • Federal Savings Bank deposits $8B Savings Bank 1 18 –Direct origination of sales finance assets 11 14 International Ongoing exploration of thrift opportunities 4Q'07 4Q'08E 4Q'09E with FDIC cooperation Transition banks to deposit funding CFPA1397 December 2008 Analysts Pitch_V6 16
    • GECC cost of funds Average USD cost of funds 5.3% Match • Portfolio downsizing reducing impact ~4.6% funded ~4.3% of new higher cost debt … only ~30% Fixed 5.1% new / roll-over debt ~5.3% ~5.4% • Match funded portfolio minimizes Float 5.5% interest rate and currency risk ~3.5% ~2.8% ’07 ’08E ’09E • Floating portfolio rates reducing due 2009 new/roll-over debt costs to benchmark rate cuts Instrument Amount Spread to Libor (bps.) • New fixed debt spread … CP ~$50B (5)-(30) same as ’08YTD substantially offset by benchmark Deposits/Other ~$25-50B 30-200 based on maturity rates LT debt ~$45B 180-200 under TLGP & Costs are competitive 350-400 for 3+ yr. duration % of Portfolio ~30% CFPA1397 December 2008 Analysts Pitch_V6 17
    • Strong capital base GECC Debt/Equity w/hybrids* • GECC has lower book leverage than 7.7X most peers ~7X Target ~6X • GECC leverage ratio appropriate for business model – Lower loss rates than banks – Secured portfolio – Asset management capabilities – History of successful acquisitions 3Q’08 4Q’08E 4Q’09E • Achieve 6:1 leverage through Debt/Equity 8.8X ~8X ~7X – Retained earnings growth Debt/Tangible 13.6X ~12.5X ~10.5X – Lower GECC dividends Equity w/hybrids* – Portfolio actions Assets/Tangible 17.0X ~16X ~14X Equity w/hybrids* • Evaluating ~$5B capital contribution * ~$8B Hybrids represent sub-debt receiving rating agency equity credit and have a maturity of 60 years, callable at the end of year 10 $15B capital raised at GE provides flexibility to strengthen capital as needed CFPA1397 December 2008 Analysts Pitch_V6 18
    • Funding summary 1 Well funded, smaller Finance Company 2 Safer, more diversified funding model … at competitive cost 3 Participating in applicable government programs that level playing field … Currently don’t see need to become Bank Holding Company CFPA1397 December 2008 Analysts Pitch_V6 19
    • Weather credit cycle
    • GE Capital Finance portfolio model What we do What we don’t do • Underwrite to hold • Did not originate CDO’s, SIV’s, etc. • Senior secured financings • Did not sell credit default insurance • Match funding • Do not trade securities • Diversified Consumer portfolio • Do not trade/hold mezzanine or high yield • Restructure/work out problem debt/bonds loans/assets Actions already taken U.S. mortgage – exited early Japan P-loans – exited UK Private Label CC – agreement to sell ANZ Mortgage & Auto – exiting U.S. Consumer – tightened underwriting, reduced credit lines, more collectors UK Mortgage – tightened underwriting, 2008 volume down ~60% CFPA1397 December 2008 Analysts Pitch_V6 21
    • Comprehensive risk assessment and capital allocation GE Key risk policies Policy 5.0 - Delegation • CRO independent review Board • Maximum single risk approval with GE CEO authorities - Most <$100MM • GE Audit committee • Major acquisitions reviewed by chairman attends 3 • Investments, the Board GECC Board meetings GE Capital Board portfolio reviews of Directors • 5.0 authorities Policy 6.0 - Monitoring • Risk policy, Exposure • Sets portfolio risk limits GE Corporate database (REM) • Defines risk parameters risk • BOD investments, portfolio • Sets trigger points – early management warnings • Establishes corrective actions • Capital allocation, portfolio analytics • Monitors performance • Portfolio management, emerging issues Business • Delegates approval authorities under 5.0 CEO level • Capital markets execution • Capital allocation & product leverage implementation Business • Focused risk organization in each market “field” level • Product level performance monitoring (6.0) • Product level delegated authorities (5.0) CFPA1397 December 2008 Analysts Pitch_V6 22
    • Key portfolio risks (Pre-tax losses - $ in millions) Estimated ’09 financial Downside case % Assets 2009 Assumptions impact Impact Assumptions U.S. Consumer 7% • 8.5% unemployment 2009 ~$4.2B ~$5.0B 9% unemployment UK 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 - Debt • Cap rates 50-100 bps. higher, historical cap rate - Equity long-term hold $240 $500 by asset type GECAS 7% • Global traffic growth down ~$300 ~$550 • (3%) traffic 1-2% 2009 decline (9/11) • 2 airlines liquidate Credit impact is “incremental” and well understood CFPA1397 December 2008 Analysts Pitch_V6 23
    • 2009 estimated losses ($ in billions) Credit losses (pre-tax) Assumptions/drivers +22% +64% ~$9.0 • U.S. consumer cycle expected to ~$7.2 peak in 2009 w/ unemployment $4.4 Consumer estimated at 8.5% by Dec ’09 $3.0 $3.2 $3.2 $3.0 $2.5 Commercial • Mortgages – UK HPI down 15% in 2009 '02 '03 '04 '05 '06 '07 '08E '09E Reserves ~$6.6 • Commercial cycle tends to lag ~$5.8 $5.2 consumer 12 to 18 months … likely $4.6 $4.9 $3.9 $3.9 $4.2 Consumer shorter lag this cycle • Bank loan default rates expected Commercial to increase from ~3% in ’08 to 7-8% in ’09 '02 '03 '04 '05 '06 '07 '08E '09E Cov. 2.44% 2.36% 1.85% 1.42% 1.21% 1.10% 1.38% 1.61% CFPA1397 December 2008 Analysts Pitch_V6 24
    • U.S. Consumer What we do Risk approach $54B served assets Strong, disciplined underwriting approach – Proprietary scoring models Broad geographic distribution with Private Label Sales investment grade retailers credit card Finance $32 $22 56MM active accounts Low credit lines … $600 average PLCC balance Loss sharing with retail partners Broad diversification and strong underwriting risk principles CFPA1397 December 2008 Analysts Pitch_V6 25
    • U.S. Consumer Delinquency Actions 30+ 6.17% 5.44% 5.52% 5.75% 5.55% 5.00% 4.93% Tightened underwriting on new accounts 90+ − Raised approval hurdles — new volume at A/B 1.86% 1.70% 1.74% 1.84% 1.91% 2.08% 2.24% − Enhanced GE credit scoring to mitigate weaknesses in FICO − Lowered initial lines '04 '05 '06 '07 1Q'08 2Q'08 3Q'08 Account management Losses / Reserves − Reduced open lines 8.15% Loss % 6.22% 5.82% 6.44% 6.23% Exited higher risk sales finance markets 4.50% 4.02% Added 1,300 collectors Coverage % 3.76% 3.62% 3.47% 4.07% 3.08% 3.03% 3.31% Increasing restructuring efforts by 60% Monitoring new accounts — performing better with '04 '05 '06 '07 1Q'08 2Q'08 3Q'08 lower delinquency/first payment default rates Estimated ’09 Reserve coverage ~6%+ Planning for 8.5% U.S. unemployment … 2009 losses $4.2B CFPA1397 December 2008 Analysts Pitch_V6 26
    • Consumer mortgage Country diversification Portfolio dynamics $72B Assets Exited U.S. Consumer Mortgage business in 2007 Originate to Hold model Czech $1.5 Strong GE risk/valuation management Other $5.8 U.K. $26.9 MI with strong (in country) insurers Spain $1.4 – AA/A+ rated, separately capitalized and regulated Mexico $2.4 No mark-to-market risk in GE Money Poland $5.6 ANZ $17.0 France Major market assumptions $11.7 U.K. • HPI decline 15% in ’09 Asset quality • MI on LTV >80% 9.28 • Portfolio LTV ~ 79% at current market prices 8.12 8.53 7.38 7.26 7.80 • Continue to tighten underwriting – expect ’09 volume to be 30+ 6.89 minimal 4.25 4.15 4.64 Estimated losses increasing from $0.3B to ~$0.6B 90+ 3.39 3.45 3.39 3.75 Australia & New Zealand Loss % 0.43 0.28 0.15 0.16 0.16 0.38 • Exited October 2008 — Wizard sale in process, remainder of - portfolio in liquidation '04 '05 '06 '07 1Q'08 2Q'08 3Q'08 • Mortgage insured (first dollar loss) Seeing continued pressure, but manageable CFPA1397 December 2008 Analysts Pitch_V6 27
    • GE Real Estate portfolio • $41B first mortgages and $10B owner-occupied; $34B equity • 58% international Diversified • ~8,600 properties, 2600 cities, 28 countries • Average investment size $12MM • 62% office, multi-family • Debt – 70% LTV Strong underwriting, • In house risk teams value each property asset management • A-/B+ asset quality – operating mindset • $23.4B in crossed portfolios • 400+ experienced risk professionals Real estate is an operating platform Strong performance through cycles CFPA1397 December 2008 Analysts Pitch_V6 28
    • GE Real Estate debt portfolio $51B Debt property type Actions Other RE Storage Max LTV advance limits reduced Warehouse 7% 1% Office in ’07 11% 30% $10B owner-occupied in run-off/ restructure Retail 12% Rate caps to protect debt service Apartment coverage Hotel 14% 25% Front end resources moved to portfolio account management 1.6x debt service coverage; 70% LTV Protect occupancy 2009 debt maturities - $5.6B ($4B <80% LTV) - Tenant rollovers 3Q delinquency on Real Estate debt 0.1% - Fund improvements Solid 1st mortgage portfolio, low LTV’s CFPA1397 December 2008 Analysts Pitch_V6 29
    • GE Real Estate equity portfolio $34B Property type Actions Other 6% Hotel 1% Asset-by-asset portfolio Warehouse management 12% Annual NOI $1.9B Weighted Retail 13% Office avg. yield Preserve/improve property cash 54% 6% flow - until markets recover – Yield covers carrying costs Apartment 14% – Depreciate basis $0.9B/yr. Complete value add strategy • Diversified portfolio through renovation & lease up – 3200 properties — A/B+ quality – Average investment ~$11MM 308 properties sold, $5.0B, through – 150 markets globally 3Q’08 – Top 10 markets ~36% of portfolio – Paris 10%, Tokyo 7%, Others <4% Hold for longer term value CFPA1397 December 2008 Analysts Pitch_V6 30
    • GECAS portfolio $47B Asset type Assumptions Cargo RJs 9% • Planning for 1-2% decline in global 16% traffic growth in 2009 Wide-body 21% • Worst year in last downturn (2002) 54% Narrow-body was 2.5% decline Actions • Average age 6 years 1• Pre-placing assets in anticipation of restructurings at weaker credits • 85% of narrow-body fleet is high-demand A320 + 737NG aircraft 2• Advanced placement of roll-off and • $6B earnings since 2001 skyline helps manage cycle • No unsecured airline lending 3• 50-seat RJs and 737 classics Versus entering last cycle (’01) – Redeploy in emerging markets Today ’01 – Bombardier remarketing JV (RJ) Placement higher – Cargo conversion/parts-out (classics) – Roll-offs 67% 10% – New orders 100 48 4– Capitalize on opportunity Proactively position for downturn CFPA1397 December 2008 Analysts Pitch_V6 31
    • Rigorous process for evaluating asset impairments (GECS $ in billions) Assets reviewed for impairment Rigorous process Primary 3Q’08 assets Frequency acc’ting model • All FAS115 assets reviewed Real estate owned $37.2 At least annually FAS144 quarterly for other than Equities (Cost & equity methods) 22.7 At least annually APB18/FAS115 temporary impairment Retained interest 4.0 Quarterly FAS115 Debt securities 11.7 Quarterly FAS115 ($10B Trinity) • Multiple layers of review: Equipment leased to others At least annually FAS144 – Business unit - Equipment 33.3 - Aircraft 28.7 – Capital Finance Goodwill/intangibles 29.9 At least annually FAS142/144 – Corporate accounting GECS Insurance securities 21.7 Quarterly FAS115 – CAS/Auditors <2% assets subject to mark-to-market • All equipment coming off lease 3Q’08 assets 3Q’08 assets evaluated for impairment Equities-trading $1.0 CMBS (FAS159) $0.1 FAS133 hedges – Assets held for sale 7.0 • All annual reviews updated if Retained interest 2.0 -Money 2.8 there is change in assumptions (Consumer) -Real Estate 1.2 or circumstance -Other 3.0 $0.7B of pre-tax impairments 3QYTD’08 Anticipating a similar profile in 2009 CFPA1397 December 2008 Analysts Pitch_V6 32
    • Off balance sheet securitization assets ($ in billions) Collateral type $53.5 Equipment loans 6.6 $50.1 and leases 6.2 Consideration Commercial Real Estate 9.2 1 Assumed on balance sheet for • loans 8.3 capital/leverage purposes Credit card 2 True sale of assets • receivables 22.8 21.9 $2.3B liquidity/credit support Trade 2.0 receivables 2.6 3 No SIV, CDO structures • Other 12.9 receivables 11.1 2007 3Q’08 CFPA1397 December 2008 Analysts Pitch_V6 33
    • Risk summary Positioned the Company for very difficult credit cycle + Reserves 2X versus 2007 + Substantial resources involved Credit impact is “incremental” and well understood + Always have risk that unemployment is 9% versus 8.5% + Do not foresee unplanned or large exposure that emerges suddenly CFPA1397 December 2008 Analysts Pitch_V6 34
    • Reposition GE Capital as a well-funded + focused finance company – Expect to outperform in 2009 – Position to grow in 2010 CFPA1397 December 2008 Analysts Pitch_V6 35
    • Segmentation strategy Forward return Core Competitive dynamics competencies outlook Size ($B) Core Core mid-market 2-5% ROI • Underwriting +++ 345 lending + leasing • Direct origination - Likely no FinCo’s Grow + verticals • Asset mgmt. intensive - Fewer captives • Re-marketing - Bigger banks long term • Deep domain GE Banking 90 European & • Enhance value via ++ Emerging Market product development - Strong local franchises 2-4% ROI • Grow deposit base - Lots of options Enhance banks & JV’s • Operating synergies value Restructure 90 Various Consumer • Origination — & Commercial <2% ROI • AAA funding - High leverage Restructure/ platforms - Tend to compete w/ banks run-off CFPA1397 December 2008 Analysts Pitch_V6 36
    • GE Capital Finance ($ in billions) Earnings 2009 plan basics ~$9 1 Expectations of higher losses and fewer gains +10% ~$5 2 Collections and volume plan that Capital assumes no 1st half improvements Finance and take into account customer refinancing risk 3 Invest @ high ROI’s 4 Execute $2B (pre-tax) cost-out plan ’08E ’09F ’10F GECC ENI $545 $525 $515 5 Position core business and Bank Co. Lvg. w/hybrids* ~7x ~6x ~6x for longer term growth *GECC Balanced view of 2009 … position for growth in 2010 CFPA1397 December 2008 Analysts Pitch_V6 37
    • 2009 earnings outlook Capital Finance ’09 dynamics 2008 estimated earnings ~$9B Assets/portfolio ~0-(1.0) • Fewer assets , new business margins Gains (1.4)-(1.8) • Assuming ~$1B in gains … Real Estate down ~$1B vs. 2008 Losses (1.3)-(2.0) • Higher credit losses/impairments … more conservative than 10/10 Earnings call guidance SG&A cost 1.1-1.3 • Lower headcount and indirect spend Tax (1.0)-(2.0) • Lower tax benefits planned 2009 estimated earnings ~$5B CFPA1397 December 2008 Analysts Pitch_V6 38
    • 2009 estimated originations & collections Net $30 $10B ($ in billions) $234 Hedge Net Net $11 $204 $12 Net $68 Net $64 $2 $4 $57 $52 $53 $51 $49 Sales/Sec. $45 Cash collections Collections/ Volume Collections/ Volume Collections/ Volume Collections/ Volume Collections/ Volume sales sales sales sales sales 1QE 2QE 3QE 4QE TYE Commercial volume $60B on book, $260B $10B hedge for re-financing risk and with revolving credit sales/securitization plan Consumer volume $145B $25B sales/securitizations, down 20% vs. ’08 Balancing cash flow with originations –$11.3B sales/securitizations in 2H’08 CFPA1397 December 2008 Analysts Pitch_V6 39
    • Portfolio margins expand in 2009 Capital Solutions Corporate Finance Portfolio Margin % 4.64 4.48 4.50 4.14 6.00 Portfolio 4.28 Margin %* 4.11 4.17 3.77 3.43 New 3.38 3.50 Business 3.30 New 3.15 Margin % * Business 3.17 Margin % 3.27 06A 07A 08E 09E 06A 07A 08E 09E *NBM = economic yield – leveraged cost of funding *Note: Excludes Capital Gains • Business pricing actions driving ’08 NBM +47 bps. • Business pricing actions driving ’08 NBM +74 bps. • Portfolio margins accretive starting 1Q’09 • Portfolio margins accretive starting 1Q’09 3Q YTD volume on-book (ex-flow) 3Q YTD volume on-book (ex-flow) Volume ($B) NBM ROE Volume ($B) NBM ROE Equipment Financing 6.9 3.81 21.8 Corporate Lending 8.2 4.38 30.7 Europe Leasing 6.1 4.21 23.2 Sponsor 7.8 5.22 30.8 Canada Leasing 2.4 2.90 33.5 Media/Communications 2.8 4.95 30.9 Fleet 2.2 3.89 20.5 Europe 3.9 3.14 20.7 Franchise Finance 1.6 3.07 20.2 Replacing run-off with higher ROI, lower risk assets CFPA1397 December 2008 Analysts Pitch_V6 40
    • GE Capital Finance SG&A plan ($ in billions) Focused approach ~$14.5 (~15%) 1 Organization structure … $250MM ~$12.5 Geographic consolidation 2 Sizing and indirect spending … $1.4B Re-size Real Estate Lease outside services and legal, sourcing and consultant costs 3 Business exits … $175MM 12/08E 12/09F Closing/exiting underperforming/non-strategic platforms Lean and competitive structure CFPA1397 December 2008 Analysts Pitch_V6 41
    • GE Capital Finance (core) ($ in billions) Competitive positioning ~$355B • Verticals leverage GE competencies ~$335B • Leasing and asset management intensive platforms advantaged vs. banks • PLCC and Real Estate equity; selectively ++ harvest $3-4B • Direct origination to mid-market • Core underwriting skills • Few, if any FinCos • Bank consolidation … historically positive Outlook • New business >2%+ROI • Re-invest run-off/restructure into higher '09 '10 '09 '10 return core ENI Earnings • Benchmark interest rates going lower … ROI 1.1% 1.5%+ support asset values Very attractive AAA FinCo more focused, competitively advantaged CFPA1397 December 2008 Analysts Pitch_V6 42
    • GE Capital global banking ($ in billions) $100B Competitive positioning $90B • Wholly-owned banks ($85B) + bank JV ($15B) + Well positioned in attractive regions $1.0-1.5B • CEE, Asia, Latin America • Deposit funding with potential for growth Outlook • High margin new business '09 '10 '09 '10 ENI Earnings • Consolidation + partnership potential ROI 1.5% 1.6% Deposits/funding 20% 50% Robust business models in fast growth regions – Deposit funded + multiple earnings levers CFPA1397 December 2008 Analysts Pitch_V6 43
    • Run-off/restructure redeployment (ENI - $ in billions) $102 ~$90 Portfolio Equipment Services ~$70 Consumer mortgages ~$40 ~12 Consumer/Commercial platforms Game plan Manage investment down $60B+ by 2008E 2009F 2010F 2011F 2012 … reinvest in core and funding model Reduction: $12B $20B $30B Primarily based on pay down/ term ~$60B investment Opportunistically sell or swap Reinvest Pay down Maximize value – many attractive in core CP & LTD platforms for banks longer term 2%-6% ROI Safer Focused organization with funding model strong leader and clear charter CFPA1397 December 2008 Analysts Pitch_V6 44
    • GE Capital Finance framework ($ in billions) 2010 Net income drivers +10% ~$5 Margins Cost • Portfolio run-off • Carryover of @ 0.3% ROI 2009 actions 2010 loss cycle • New business + Consumer better Deliver @ ~3% ROI - Commercial worse cost Re-mix Manage credit cycle 2009F 2010F Favorable competitive dynamics High margin origination Create options for further capital redeployment ~80%+ spread income vs. gains CFPA1397 December 2008 Analysts Pitch_V6 45
    • Business model still strong … smaller, more focused “Factory” “Raw material” GE Advantage: “Origination” (capital) GE Advantage: Low cost Treasury GE Advantage: Global position Competitive cost Risk Asset Mgmt. Brand “AAA” Domain expertise Talent Tax Pre-crisis competitive position: + Scale ++ Margins and results > banks + FinCo +++ Brand/domain 1) Solid plan for 2009 2) Diversify + remix + grow for 2010 3) New origination at 2% + ROI 4) Solid GE business CFPA1397 December 2008 Analysts Pitch_V6 46
    • Summary
    • GE is very strong Portfolio Great Industrial businesses 1 Sustain Infrastructure “Infrastructure-type” earnings growth ~60% Energy Technology Big backlog Energy Aviation Strong services Oil & Gas Transportation Global diversity Water Healthcare Technical strength Ent. Solutions Margin enhancement ~30% Financial Services Media ~10% 2 NBCU performs through Comm’l. Finance NBCU GE Money cycles Verticals Diverse revenue streams Cost control Preparing for a very difficult environment … but remain confident in our businesses CFPA1397 December 2008 Analysts Pitch_V6 48
    • GE dividend ’05 ’06 ’07 ’08E ’09F ’10F Cash Generation Ind’l CFOA-CAPX 9.9 11.0 13.0 ~13 13-14 + Progress down GECS dividend 7.8 9.8 7.3 2.4 .5 ++ offset by working capital and capex Other/dispositions 1.9 3.1 11.8 2.5 2+ = reductions 19.6 23.9 32.1 ~18 ~16 + Return to Shareholders Dividend (9.4) (10.4) (11.5) (12.4) (13.4) = Buyback (5.0) (8.1) (13.9) (3.2) 0 = Historic return high percentage of “Surplus” 5.2 5.5 6.7 ~2 2-3 + earnings to Investors Dividend + buyback % NI 83 95 115 80 = = GE plans to sustain 2009 dividend CFPA1397 December 2008 Analysts Pitch_V6 49
    • Summary • Macro environment is very challenging • 4Q’08 results are trending toward low end of range … $.50-.52 • In addition, evaluating restructuring and other charges to accelerate cost out and reviewing losses in current environment Expecting ~$1.0-1.4B after tax charge Industrial + Financial cost out • GE Capital is a vital financial services business 1) Safe + conservative in economic environment 2) Creating a financial framework to earn ~$5B in 2009 3) Business model that performs for the long term 4) GE is committed to GE Capital • GE is well positioned to perform in a difficult 2009 Board approved management plan to sustain dividend at $1.24/share CFPA1397 December 2008 Analysts Pitch_V6 50