GE (GE) tells shareholders it's not the next Bear Stearns, IndyMac, Fannie Mae, Freddie Mac, Lehman Brothers, or Merrill Lynch:
In response to questions we received on Friday and because of the extraordinary market conditions, we wanted to provide our investors with additional information on GE's financial services businesses:
1.Commercial Real Estate
A few statistics and facts concerning our $87 billion real estate portfolio:
* The business originates to hold; it is not an originate-to-sell model.
* 60 percent of real estate assets are outside the U.S. across 23 countries.
* Average investment in both loan and REO portfolios is less than $10 million.
* Our loan-to-value average is 68 percent.
* We do not originate any land or construction loans. In 1Q, we purchased Merrill Lynch's $900 million construction portfolio at a steep discount.
* We have only $125 million of CMBS that are subject to quarterly mark-to-market requirements.
* We are executing on our plan and have generated $6 billion of proceeds from asset sales this year.
* In-house underwriting has created a strong portfolio with very low delinquencies (0.2% of assets).
* As stated in our 2Q earnings call, we expect our Commercial Real Estate business to earn $1.5 to $1.7 billion in 2008.
2. GE Money global mortgages and loss provisions
A few statistics and facts regarding our $79 billion global residential mortgage portfolio and GE Money loss provisions:
* The business originates to hold; it is not an originate-to-sell model.
* ~100 percent of residential mortgage assets are outside the U.S.
* No mortgages originated at more than 80% loan-to-value (LTV) without credit insurance.
* The UK mortgage portfolio, our biggest at $28 billion, has an average LTV of 71 percent.
* We are adequately reserved for delinquencies at GE Money, which for 2Q were 5.92 percent, equaling the December 2002 high.
* In the event that delinquencies and non-earnings rise, we will increase allowances for losses.
3. Funding
An update on our funding position, which remains strong:
* We have raised $70 billion of $80 billion full-year plan; our 3Q funding plan is complete.
* We diligently match fund our assets and liabilities across our portfolio to reduce interest rate and currency risk.
* GE Capital's commercial paper programs, which total $90 - $95 billion, remain robust with 15 programs in 11 currencies at an average funding cost of Libor less 25 basis points year-to-date in our largest market, the US.
* GE Capital cash bond spreads are trading significantly tighter than most major financial institutions. Our cash bond spreads are significantly tighter than our credit default swap spreads.
* As stated in previous investor meetings, we are not raising external capital and have no need to.
* We continue to have an unwavering commitment to maintaining our Triple A.
In summary, our financial services businesses earned $5.2 billion in the first half of 2008, making us one of the most profitable financial services providers in the world. We have over 10,000 originators around the world and our margins on new business originated this year remain very strong.
