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FAIRFIELD, Conn. (

TheStreet

) --

General Electric

(GE) - Get General Electric Company Report

Chairman and CEO Jeff Immelt defended shrinkage in the company's financial unit Friday, as profits in the division fell by 87% versus the third quarter of last year.

"We're shrinking GE Capital faster than we'd planned," Immelt said during a somewhat tense Q&A session with analysts. "We think that's on strategy. We view this as being a positive execution point."

Immelt made the comment during a pause in the conference call after Goldman Sachs analyst Terry Darling seemed to looking for a discrepancy between GE Capital's performance and earlier forecasts.

GE executives had said earlier in the call that they expect GE Capital to be profitable for the year, noting it has earned $2 billion so far through the third quarter. Asked for more detail by Chris Glynn, an analyst at Oppenheimer, GE CFO Keith Sherin said simply: "No." Then he reminded Glynn the company does not give quarterly guidance for the unit.

Morgan Stanley analyst Scott Davis noted GE's loss provisioning is less than most banks, asking Sherin to explain the discrepancy. Sherin initially said GE's portfolio is different from that of banks, but as Davis persisted, Sherin said: "We're not going to comment on

what banks do versus what we do."In a report sent shortly after the call, Davis reiterated his "overweight" rating on the company, noting that GE is generating more cash than he had forecast. As for GE Capital, he wrote "provisioning improved in the quarter but remains too light in our opinion."

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The questions on the provisioning issue continued however, with Bank of America-Merrill Lynch analyst John Inch asking whether GE planned to set aside more capital in the future against losses. GE executives were non-committal , but defended the provisioning they have done so far as more than adequate.

GE Capital, which has grown dramatically over the past decade, has become the most controversial segment of the parent company's business, and analysts and investors vary widely in their view of the extent of unrealized losses in its loan portfolio . Immelt has made a commitment to shrinking the business and returning GE to its industrial roots.

Third-quarter revenue for the unit totaled $12.2 billion, compared to $12.8 billion in the second quarter, and $17.2 billion in the third quarter of 2008.

GE shares were down more than 5% to $15.94 Friday morning. It earned 27 cents a share for the

third quarter

), above the 20 cents forecast by analysts surveyed by

Thomson Reuters

but total sales came in short of Wall Street's expectations.

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Written by Dan Freed in New York

.