Updated from 2:24 p.m. EST
shares closed down 5.7% to $8.85 Monday, amid concerns about its real estate holdings and other unrecognized losses.
GE has written down less than 1% of its $36.7 billion in commercial real estate investments, compared to
The Wall Street Journal
reported Monday. The small writedown is in spite of the fact that GE acquired roughly one third of the current portfolio in 2007, when the commercial real estate market was far pricier than it is today.
The analysis also raises questions about reserves GE holds against losses on its $59.6 billion portfolio of residential mortgages. GE has increased reserves to just 11.5% of the total of mortgages more than 90 days past due, only a bit higher than the 10% reserves it held at the end of 2007.
A GE spokesman responded that it does note in its annual report that the value of its real estate holdings is $4 billion less than the value it assigns on its balance sheet. As for its mortgage exposure, he says GE's reserves are "appropriate," given low loan-to-value ratios in addition to insurance.
The GE selloff also may have been fueled by Deutsche Bank analysts, who lowered their price target on GE shares to $12 from $17.
The Deutsche Bank report focuses on unrecognized losses, not just in real estate but in GE's investment securities and loan portfolio. While the Deutsche Bank analysts note that GE is not subject to mark-to-market accounting requirements because it does not have to liquidate assets at current prices, they also point out that "the pace of deterioration is stunning and it is clear, even to a layman, that conditions are not getting any better."