GE Capital delivers on earnings promise

GE Capital Australia has shrunk its balance sheet and delivered on a promise to more than double cash earnings in calender 2009.

GE Capital Australia has shrunk its balance sheet and delivered on a promise to more than double cash earnings in calender 2009, as the group switches its focus to growth.

Cash profit last year jumped from $263 million to $571m, despite a contraction in lending assets from $34 billion to $19.5bn because of the mortgage and automotive finance businesses closing.

The continuing rundown of unwanted legacy assets, as part of the US parent's acceptance that global funding markets would no longer support a $500bn financial services business, will further downsize the local unit's balance sheet by more than $10bn.

The remaining core businesses include credit cards and retail finance, corporate financial services, and fleet and equipment finance.

GE Capital is No 1 in sales finance, the second-biggest credit card issuer, and the nation's leading fleet manager.

GE Capital Australia and New Zealand chief executive Skander Malcolm said yesterday that he had strong growth plans for the core businesses.

"Our fourth quarter was our strongest in 2009, and the first quarter this year was stronger again," Mr Malcolm said.

He said the financial crisis had opened up profitable niches in financial services that GE Capital was examining.

GE globally has undergone a transformation, slashing the size of the balance sheet by $US53bn, ($57.2bn) cutting its commercial paper program by $US25bn and sharply boosting liquidity.

Although financial services remains the dominant GE business in Australia and New Zealand, the parent is returning to its industrial core, focusing on infrastructure.

Headline profit last year was $475m, a big turnaround from the $903m loss in 2008.

Mr Malcolm said the sale and run-off of low-yielding businesses had expanded profit margins, and the consumer portfolio had held up well during the financial crisis.

Impairment charges for GE's continuing businesses eased from $241m in 2008, or $301m including the unwanted assets, to $237m. For the core business, loans overdue for more than 90 days fell from $163m to $123m.

Mr Malcolm said GE reviewed its back book of home loans for possible sale every three months.

"That market (for the home loans) is re-emerging now," he said.