GE on the rebound

GE Capital is generating more profit from a reduced asset base in Australia, and releasing plenty of cash for its owner, General Electric Company' as well.

GE yesterday provided to Banking Day and national newspapers what it described as aggregated financial information for more than 100 reporting entities in Australia.

The "headline" profit for GE Capital in Australia was $475 million in 2009, following a loss of $903 million in 2008. In late 2008 GE Capital resolved to cease originating new home loans and to sell Wizard Home Loans (Wizard was sold to Aussie Home Loans in early 2009). GE also wound down its motor finance business.

GE said its cash profit in 2009 was $521 million and up from $263 million in 2008.

Lending assets for GE in 2009 were $19.5 billion, down from $34 billion in 2008. The decline represents the run off in the home loan and motor finance portfolios, and the sale of some of the home loan book to Commonwealth Bank.

GE said "continuing" lending assets declined over 2009 to $8.4 billion from $9.5 billion.

This decline partly reflects management's needs to restrict its demands on funding from its US parent, and also reflects credit demand, especially early in 2009.

Skander Malcolm, the newly promoted chief executive officer of GE Capital for Australia and New Zealand, said business levels picked up in the last quarter of 2009 and said the first quarter of 2010 was the best since 2007.

GE is looking to grow its slightly slimmed down portfolio lending businesses, which include retail finance, credit cards, personal loans, insurance premium funding, fleet management and leasing, middle market corporate lending and real estate finance.

Funding the business remains an issue, with local investors holding only a few hundred million in a commercial paper program that used to run well into the billions.

The rest of the funding comes from GE Capital in the US, which faces its own funding issues two years after the financial crisis.

GE Capital in Australia released more than $13 billion in cash to its owner over 2009, up from around $5 billion in 2008.