GE clears the air on 2009 trading

One problem for GE Capital in Australia, and for many foreign-owned financiers that do not operate fully fledged bank subsidiaries, is that outsiders rarely get a clear picture of their financial condition.

Which does not stop some outsiders, such as the business media, making use of what information is on the public record.

So yesterday in The Australian the newspaper selected the statutory accounts for one GE entity - GE Capital Australia - for the half year to June 2009 and reported losses for this entity over the six months of $264 million.

The newspaper went on to report, or speculate, that GE's "US parent [is] threatening to cut off its funding in 12 months".

For the 2008 calendar year, though not the latest half year, GE did make an effort to head this partial, late and inevitably under-informed commentary by taking the trouble to provide a consolidated view of its financial position in Australia.

And as reported here in early May, (and repeating the most relevant details) GE Capital in Australia reported a headline loss of $902 million in 2008 compared with a headline profit of $516 million in 2007.

On a cash basis GE made a profit of $263 million in 2008, a slight improvement on a cash profit of $243 million in 2007.

GE yesterday did not want to provide any hard numbers for its 2009 first half trading to rebut the article in The Australian, but was prepared to talk about some trends.

Steve Sargent, CEO of GE in Australia and New Zealand, said earnings "are up quite significantly on last year, for the [half year] period" and that while GE's mortgage business was now in run off, profits were higher in other areas (which include consumer finance, commercial and property finance). GE also closed its financing arm for motor dealers last year.

Costs are also down across the business.

Sargent said new business levels were "pretty good" for the first half, losses were "about the same" and said the consumer finance side was "holding up nicely" though demand for credit is softer, with the stimulus payments used to pay down credit card debts.