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GE To Offer Investors Peek Inside GE Capital
By The Associated Press

03/17/09 02:03 PM EDT

By STEPHEN MANNING

WASHINGTON (AP) -- General Electric Co. plans to take investors on a "deep dive" into the books of its wobbling finance unit on Thursday, part of an offensive to calm worries that bigger troubles loom at GE Capital.

Investors attending a five-hour GE conference in New York will want to know how healthy the lending unit actually is. They'll look for more information about losses on investments and bad loans. And they'll be anxious about GE Capital's cash levels.

Another question in shareholders' minds: Will GE's $5 billion earnings forecast for the unit hold up this year given its lending in battered sectors like real estate and credit cards?

Fears of lurking losses at GE Capital have dragged down GE shares 72 percent in the past year. The unit's problems also have played a big role in GE's recent dividend cut -- its first since 1938 -- and the loss of its top 'AAA' credit rating.

The meeting is GE's second update in four months on GE Capital, a complex tangle of $660 billion in assets that some analysts say has been hard to understand because GE did not traditionally say much about it. GE has now promised to be more transparent as it tries to restore confidence.

"Investors are looking for GE to pull the curtain back," said Matt Collins, an analyst with Edward Jones.

Until recently, the finance unit accounted for half of GE's overall profits, but GE is now shrinking the business as part of a restructuring.

Chief Financial Officer Keith Sherin said recently the meeting will focus on "hot spots" at GE Capital. They include home mortgages, credit cards and commercial real estate. Sherin said in a recent interview on CNBC, which is owned by GE, that there are "no time bombs" in GE Capital.

GE expects $35 billion worth of losses and impairments over a three-year period at GE Capital, but Sherin said the parent company has enough cash -- $16 billion this year -- to meet its funding needs.

In an investor note Monday, Jason Feldman of UBS wrote that commercial real estate and GE Capital's mortgage business in sinking housing markets like the United Kingdom could result in larger credit losses.

Some analysts also believe GE will reduce its earnings forecast for GE Capital. Deutsche Bank estimated last week that GE could lower its GE Capital outlook to around $2.9 billion.

Recently, the company's stock has fared better. Since losing its top credit rating last week, shares have climbed about 15 percent because the ratings cut wasn't as bad as feared.

While Thursday's meeting could ease anxiety over GE Capital, GE is also taking a risk by opening up its books, analysts say.

"It is an opportunity for the psychology to turn more positive," said Peter Sorrentino, senior portfolio manager of Huntington Asset Advisors, which owns 6.4 million GE shares. "But all it takes is one stumble or one missed target and they will give up all the gains they had in the last couple of days pretty quickly."

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