1 GE Capital Investor Meeting Caution Concerning Forward-Looking Statements: "Results are preliminary and unaudited. This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. “This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at www.ge.com.” “In this document, “GE” refers to the Industrial businesses of the Company including GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.” March 19, 2009 2 Key messages Running GE to be safe and secure over the long term ‒ Liquidity position is extremely strong ‒ Completed 93% of our 2009 planned long term funding Have sufficient capital and alternatives to weather adverse economic conditions Running GE with intensity ‒ Resizing our cost footprint in a meaningful way ‒ Management team is focused on delivering cash ‒ Continuing to invest/position company for long term growth We expect GE Capital will be profitable in 1Q’09 and 2009 We are committed to GE Capital GE will come out of this cycle a stronger, more focused and competitively advantaged company
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1
GE Capital
Investor Meeting
Caution Concerning Forward-Looking Statements: "Results are preliminary and unaudited. This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
“This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at www.ge.com.”
“In this document, “GE” refers to the Industrial businesses of the Company including GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.”
March 19, 2009
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Key messagesRunning GE to be safe and secure over the long term‒ Liquidity position is extremely strong‒ Completed 93% of our 2009 planned long term funding
Have sufficient capital and alternatives to weather adverse economic conditions
Running GE with intensity‒ Resizing our cost footprint in a meaningful way‒ Management team is focused on delivering cash‒ Continuing to invest/position company for long term growth
We expect GE Capital will be profitable in 1Q’09 and 2009
We are committed to GE Capital
GE will come out of this cycle a stronger, more focused and competitively advantaged company
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3
GE: safe & secure
Infused equity intoGE Capital
Strengthened liquidity ~$45B $42B
Completedto date
TY’09E
Reduced dividend … ~$9B in annualized savings
82¢
40¢~4%
Dividends/share Yield @ today’s price
20102009 2009
7:1 ~6:1
1Q’09E4Q’08
GECC leverage-a)
’09 long term funding needs
4.9%~6.0%
1Q’09E4Q’08
GECC tangible common equity/tangible assets
$48B
1Q’09E4Q’08
GE cash
(a- net of cash and equivalents and withclassification of hybrid debt as equity
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~$41B
4
Ratings updateConcluded rating review with S&P– Detailed GE Capital updates on liquidity, funding,
business model, risk assessment & capital levels– Industrial assessment (2009/2010) on revenue, margins
& cash flow
S&P rated GE & GE Capital at AA+ with a stable outlook: – This rating means “very strong capability to meet its
financial commitments” and “rating is unlikely to change in next six months to two years”
“The ratings on GE continue to reflect our view of its excellentbusiness risk profile, its significant cash flow and liquidity, its strong corporate governance, and management’s commitment to maintaining a very high credit quality” – S&P, March 12, 2009
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5
Support• GE support to ensure GECC 1.1x fixed-charge
coverage ratio• GE TLGP FDIC backstop• Infused $15B & reduced dividend from GECS• History of capital infusion or dividend
reductions when necessary
Operating businesses(Capital Finance)
GE Capital structure
100%
100%
AA+/Aaa
General Electric CapitalCorporation
Primary GE Issuer/GuarantorPrimary GE Issuer/Guarantor
General Electric Company
General Electric Capital Services, Inc.
Owns all ofGE’s financing
assets
Real Estate GECASCommercial
Lending &Leasing
EnergyFinancialServices
AA+/Aaa 100%
ConsumerFinancing
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GE Capitaloverview
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7
2009 outlookEnvironment
• Difficult market with many macro-economic indicators still deteriorating
• Pockets of increased liquidity for consumers and mid-market businesses
• Industry losses continuing
• Delinquencies and non-earning assets pressured in both Consumer and Commercial
• Very difficult to execute asset sales in today’s market– TALF may help
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GE Capital business model
GE Capital has performed for decadesWill reposition for long term success
• Capacity of $98B (incl. GE) … pricing @ slight penalty to market
• GECC/GECS outstandings matured in February … none outstanding today
• Enables GE to support investor liquidity needs & manage duration … serves as liquidity backstop
• Newly announced Fed/Treasury facility … covers AAA ABS for specified assets …currently auto & credit card … may be extended to equipment & CMBS
• $10B+ of PLCC/CDF maturing securitization debt likely eligible
• Potential for increased liquidity for real estate and equipment … may reduce cost of securitization funding … continuing to evaluate
• GECC capacity of $126B … important for LT debt market & CP market access …program now extended through October 31, 2009
• $37B LT debt issued under the program … $3B remaining for ’09
• Manage ~$25-$35B CP outstandings under TLGP
• ~$50-$60B capacity remaining … option to fund some ’10 maturities in ’09
Programs GE impact
Commercial paper funding facility
(CPFF)
Temporary liquidity
guarantee program
(TLGP)
Term Asset-backed securities
loan facility (TALF)
• New facility in development … initial focus on marketable securities & other MTM assets … could expand to leveraged loans, real estate, equipment, etc.
• Improved liquidity in these asset classes to help overall market
Public Private investment funds
(PPIF)
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2009 alternate funding($ in billions)
CD’s : Distributed through multiple firms to support asset growth in US banks
• Industrial Loan Corporation deposits $17B– Adding 3 complete business platforms to ILC …
direct origination a)
– Originating CD’s to match bank assets profile(~$7B > 1 yr. maturity as of 4Q’08)
• Federal Savings Bank deposits $2B– Direct origination of sales finance assets
International deposits $6B– Drive market share in emerging markets – Tap large/developed markets
French Gov’t program: $1B ’09 target ($0.4B YTD)
Covered bonds program: 1st issuance by Jul ’09
Exploring other asset based funding options
Cost of funding attractive vs. LT debt
Transition banks to deposit funding
4Q'07 4Q'08 4Q'09E
International
Other
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$55
$30
18
19
20
~$81
U.S. FederalSavings Bank
U.S. Industrial LoanCorporation
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1711
15
10
1
a) Subject to regulatory approval
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$58.2B bank lines ... ~100% CP coverage
Remaining Term as of 3/11/09
• ~80% lines from Aaa/Aa banks
• Lines from 64 banks globally
• Syndicated: $22.9B; Bilateral: $35.3B
• ~$12B also available to GE parent
Comments
Liquidity in great shape … on track to meet CP coverage targetswith $50B+ bank lines and $30B+ cash
• Strong base of $37B lines >1 year
• $19.8B up for renewal in Mar-Dec ’09 … phased reduction planned as outstanding CP comes down
• Expect $10B renewals by June with remaining $3-5B during 2H’09
• Support levels not materially impacted by bank consolidation
• No MAC clauses
• No covenants or rating triggers
• Drawn pricing at capped spread over Libor
$30B> 3 years but less than 4
$22Bless than 1 year
94% w/ term out
$4B
> 4 years
$3B> 1 yr but less
than 3
($ in billions)
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Capital ratios
GE infused $5.5B cash into GECS 4Q … plan to infuse ~$9.5B into GECS 1Q’09Leverage commitments ahead of plan … ~6:1 by 1Q’09TCE/TA ratio at the top end of the banks even if banks convert their TARP preferred equity into common equity
GE Capital Corp. leverage a) GE Capital Corp. TCE/TA ratio b)
4Q’08
7:1
~6:1
1Q’09ETangible bookLeverage c) 17X 14X
(a- net of cash and equivalents and with classification of hybrid debt as equity(b- TCE : Book equity less goodwill & intangibles; TA : Total assets less goodwill & intangibles(c- Total borrowings/equity less goodwill & intangibles(d- As of 4Q’08 excludes TARP equity; Source : Federal Reserve Y9 filings
U.S. Large BHC avg.
4.9%~6%
1Q’09E4Q’08
1.9% d)
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Portfolio overview
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Risk management
Disciplined approach to managing risk
Diversified portfolio – broad spread of risk, managed exposure limits
Senior secured financings – disciplined underwriting to GE “on book” standards– Collaterals GECC knows well – 2 decades of experience
>70% International~22% in developing markets~58% of receivables – Prime
6%
JVs
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Commercial Portfolio Diversification
Others
Hotels Restaurants & Leisure
Construction
Health Care
Energy
Automotive
Business Services
Diversified Finance
Real Estate
Commercial Airlines
Machinery& Equipment
Industry sectors ($386B)
45% less than 6% industry weighting -
51 industries
13%
24%
2%
6% 32%
2%
6%
4%
6%
3%
2%
A/c Rec and Inv
Cash Flow
Comm. Aircraft
Fleet Vehicles
Franchise
Healthcare Equipment
FF&E and Other Equip
Others
Comm. Real Estate
Corporate Jets
Transportation Equipment
Energy Generation/Distribution
Dealer Inventories
Collateral type ($386B)
Diversified portfolio in long-standing GECC
collateral types
13%
24%
9%
4%
12%
4% 5%
10%
7%
3%
3%
4% 2%
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Commercial Customer Concentrations
Over $1B, 15 accounts:Airlines, Class 1 Railroads, Electric Utilities, Aircraft Manufacturing, Real Estate
$500MM-$1B, 27 accounts:
Airlines, Automotive, Healthcare, Power Generating Projects, Oil & Gas Refining, Cable, Broadcast Media
$300MM-$500MM, 44 accounts:
Automotive, Airlines, Electric Utilities, Broadcast Media, Healthcare, Technology Equipment
$100MM-200MM
Over $1B
Under $50MM
$50MM-$100MM
$500MM-$1B
$200MM-300MM
$300MM-500MM
61% 11%
8%
4%
5%
5%6%
72% of single risk exposures <$100MM
Larger exposures secured primarily by essential operating assets
($386B)
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Key portfolio risks – 12/2 view(Pre-tax losses - $ in millions)December 2, 2008 outlook
2009 Assumptions
Estimated’09 financial
impactDownside case
U.S. Consumer 7% • 8.5% unemployment ~$4.2B ~$5.0B 9%unemployment
U.K. Mortgage 4% • HPI (17%) 2008• HPI (15%) 2009
Real Estate 14% • Cap rates 50-100 bps. higher $250 $400- Debt • Cap rates 50-100 bps. higher,- Equity long-term hold
GECAS 7% • Global traffic growth down ~2% 2009
$240 $500
~$300 ~$550
%Assets AssumptionsImpact
+200 bps. highest historical cap rate by
asset type
• (3%) traffic decline (9/11)
Economic environment more challenging
$600 $800 (20%) HPI
March ’09outlook
vs. Dec. 2
=
=
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Stress testing approach
Consumer• Mortgages, credit cards, auto and personal loans and sales credit financing
– By product, by geography – market specific
– Consistent methodology applied across product types globally
Commercial• Commercial Real Estate: By market and property type
• Commercial Aircraft: Valuation by equipment type
• Energy loans and leases: Stress obligor ratings, increase severity, based on outlook
• Commercial Loans and Leases: Stress probabilities of default, recovery rates
Bottoms up – asset by asset, business by business
Large commercial exposures over $300MM stressed individually
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Consumer portfolio stress testing
Key Drivers:Macro • Unemployment
• Home equity access
Portfolio • Credit quality
• Credit lines
• Loss sharing
• Recovery rates
Key Drivers:Macro • Home prices
• Unemployment
• Refinancing ability
Portfolio • LTV
• Mortgage insurance
• Borrower credit quality
• FX movements (Central Europe)
U.S. Non-U.S. Mortgage
Key Assumptions:
U.K. • 15% HPI decline in ’09 (34%’08-’09)
• 9% unemployment
• Additional loss on sale 20-25%
Central Europe • 15-30% further devaluation from today’s FX rate based on country
• Unemployment up to 13% basedon market
Key Assumptions:
GDP (2.0%) (3.3%)
U/E avg. 8.4% 8.9%
U/E peak 9.3% 10.1%
Debt sale recovery rate:
PLCC 10% to 7.2% 25% to ~6%
Sales Finance 16% to ~6.6% 25% to ~6%
Fed Base Fed Stress
Adverse
No benefits assumed from U.S. Stimulus Programs
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Commercial portfolio stress testing
Key Drivers:Macro • GDP, Unemployment
• Liquidity
Portfolio • Senior diversified positions
• Borrower leverage
• Sector diversification
• Asset value of collateral
Key Drivers:Macro • GDP, Unemployment
• Liquidity
Portfolio • LTV
• Property cash flow
• Borrower leverage
• Cap rates, liquidity
Commercial Loans, Leases Real Estate
Key Assumptions:
GDP (2.0%) (3.3%)
U/E avg. 8.4% 8.9%
Cap rates
Output
Key Assumptions:
GDP (2.0%) (3.3%)
U/E avg. 8.4% 8.9%
U/E peak 9.3% 10.1%
Fed Base Fed Stress
Defaults Increased ~100% from 2008 levels to ~6%
Severity Increased GECC historical severity by 50% on average to
~20-35%
Increased ~70% from 2008 levels to ~5%
Increased GECC historical severity by 35% on average to
~15-30%
Fed Base Fed Stress
Revert to historical medianof last 18 years
PPR model forecasting greater declines in office property cash flows
No benefits assumed from U.S. Stimulus Programs
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Portfolio overview
Asset type
Consumer 30% 64%Commercial 70% 36%
U.S. 41% 86%
U.S. consumer 6% 58%- Cards 3% 9%- Mortgage 0% 40%- Auto 0% 1%- Student loan 0% 1%- Sales Finance/other 4% 7%* Weighted average of top 4 U.S. money center banks
• Less Consumer• No U.S. mortgage, auto or student loans• More global
• Minimal real estate construction exposure• 46% of portfolio is cross-collateralized with other 1st
mortgages• Operate each owned property
• Underwrite to hold on book• Minimal junior debts, small hold positions• Global redeployment, remarketing capabilities
• Deep domain expertise in Commercial Air & Power Generation
• PLCC has smaller average balance, lower loss severity, retailer loss sharing
GE position vs. banks
GE mix different than banks
% of total portfolio
(as of 4Q’08)
GE Banks*
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37
Business reviews
38
Real Estate
20
39
Finance purchase of real estate by 3rd parties in multiple asset classes, individually and in cross-collateralized portfolios
Own, manage and add value to real estate as single assets and portfolios across office, apartment, warehouse, and retail asset classes around the world
Provide financing to owner-occupied commercial real estate for small to middle market businesses
GE Real Estate … what we do
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40
How we manage riskRigorous process around market, customers and asset evaluations
Sophisticated tools for easier market analysis and deal assessment • Market data• Customer relationship management
Semi-annual market evaluations• Global data driven, investment hurdle setting process• Leverage GE portfolio data as well as 3rd party data and analytics
Experienced, independent valuation/underwriting teams• Local presence … utilizing consistent process globally• Tenant credit analysis• Detailed lease by lease review … process designed to haircut revenue above historical avg. levels• Valuations generally 90-95% of MAI appraisal values
Led by seasoned risk leadership team• Over 25 years of experience, on average
Ongoing risk analytics review combined with asset management surveillance• Identifies risk trends, concentrations• Allows for proactive risk management measures
• Economic/market sensitivities• Deal review/approval system
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Rigorous portfolio valuation processDetailed source document review• 100% lease review, rent rolls, income statement, GL, etc.• Thorough credit review of major tenants• Review of borrower/partner operating capability and financial
strength• Know Your Customer “KYC” Surveys• Perform cash flow audits
3rd party consultant review• Environmental survey• Structural survey (earthquake as needed)
Market/site analysis• Detailed inspection of property and surrounding neighborhood • On-site management and tenant interviews• In depth discussions with brokers, appraisers• Survey competing owner/operators for rents, occupancy and
expenses, in addition to public data• Inspection of recent sale comparables
Financial modeling• DYNA lease / proprietary models created for DCF valuations
Process culminatesin roundtable asset valuation review …
all assumptions challenged
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Key market risks in 2009/2010
Challenging environment
Economic fundamentals– Industry transaction volume in 4Q’08 down 80% from 4Q’07– Rental rates , absorption , vacancies , delinquencies ,
demand , supply constant– Virtually no new liquidity available … TALF should help … 2nd half
may be better
Over $500B* of U.S. loans set to mature in 2009, $35B* from CMBS pools
– Banks deleveraging– Limited new refinancing capacity in the system
Equity valuations– Up to 20% drop in major market rents expected, vacancies up
significantly– Values still under downward pressure … our values down ~18%
’07-’08
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* Source: Property & Portfolio Research (PPR)
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Primary real estate productsDebt portfolio: $48B Equity portfolio: $33B
• On balance sheet lending • Senior secured, first mortgage• Not a construction lender• 35 year track record• Owner-occupied: mid-market credit/single tenant
• Well diversified, A-/B+ quality, avg. inv. $10MM, minimal construction risk
• Primarily wholly-owned with no 3rd party debt - $29B, joint venture investments – $4B
• Hold at historical cost less depreciation … $1.5B annual NOI, $1.1B annual depreciation
Debt portfolio primarily senior secured first mortgages, no “hung” inventory Equity portfolio is good quality, primarily 100% owned operating real estateUnder Fed Reserve adverse stress test, potential total portfolio losses are manageable
Office49%
Retail 9%
Other RE6%
Warehouse12%
Apartment14%
Parking 3%
Mixed 6%Hotel 1%
Office23.5%
Mixed3%
Owner-occupied19%
Apartment19%
Warehouse9%
Other RE6%
Construction1.5%
Retail8%
Hotel11%
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Debt
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45
$62MM
GE Real Estate position in debt markets
Senior secured debt• Layer of capital protection if stressed• Real capital committed in junior position/equity• Clear path to exercise remedies and take control of property
- We avoid legal jurisdictions where a property owners’ rights are not respected
CMBSunrated
CMBSrated
EquityMezzanine
Seniorsecured/
1st mortgage
Global RE debt market$6 trillion*
* Source: PPR
97%senior
secured/1st mortgage
3% $1.4B
GE $48B
46% cross collateralized
GE Real EstateCMBS
Subordinated
46
Singles32%
Crossed portfolios
46%
Sub-debt 3%
Collateral type dispersion
Debt portfolio
Debt structure
Total debtexposure:
$48B
Geographical profile
• Crossed portfolios (46%): a single loan secured by multiple properties in multiple locations. Benefit: loss from a single property can be offset by excess cash flow and/or value from other assets in the portfolio
• Hotel exposure: 35% acquired at a discount post credit crunch; 54% cross-collateralized; largest loan exposure at $1.1B was 33% LTC at U/W, cash flow up 7% since U/W and current DSC @ 5.52X
• $0.7B construction portfolio: 65% acquired at a discount
• Japan/UK/Germany: portfolios acquired at a discount
Comments
$1.4B
Owner-occupied19%
CMBS bonds$62MM
First mortgage senior secured 97%
a)
Office23.5%
Mixed3%
Owner-occupied
19%
Apartment19%
Warehouse9%
Other RE6%
Construction1.5%
Retail8%
Hotel11%
US -CA, 8%
US-GA 3%
US-FL, 4%
US-TX, 5%
US-Oth, 23%
US/Canada-Owner occupied
19%
Canada 8%
Mexico 8%
Japan 7%
UK 7%
Germany 4%Other 4%
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Commercial real estate at GE
• Senior secured lending in markets we understand• Value add properties in good locations• Mid range office• Affordable middle class apartments
• Reserve % driven by recovery of specific reserves from loan payoffs and improvements in debt service coverage
Reserves (1) Specific reserve process - FAS 114
• Quarterly surveillance process based on 7 triggers (DSC<1x, LTV>100%, “Risk/Watch” accounts, delinquent or non-earning, cost recovery, past maturity>90 days, loans with specific reserves)
• Specific reserves posted when loans deemed not fully recoverable, generally when LTV > 100%
(2) General reserves process - FAS 5
• Based upon robust analysis utilizing PPR “Compass” model technology - real estate market data and GE portfolio statistics
($ in millions)
’05 ’06 ’07 ‘08
PPR forecastcredit costs*
Actual GE REnet charge offs
* Forecast at end of preceding year
1117
3369
Better experience
Losses/reserves
• ’05-’08 period generally benign, however industry model losses > GE RE losses
• Over longer periods GE RE portfolio outperformed due to:
- Product mix (very low construction exposure)
- Underwriting (valuations, rigor)
- Asset management (extensive network)
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Fed Baseline
Case
Median long term historical cap rate +adders for asset quality
Asset-by-asset business plan* reflects PPR/PMA** recession case
• 2 year US office market rents flat
Median long term historical cap rate +adders for asset quality
Median long term historical cap rate +adders for asset quality
Negative rent growth and occupancy per PPR/PMA** utilizing Fed more adverse assumptions for GDP / unemployment
• 2 year US office market rents 15% • Impact on office equity portfolios: NOI 16% over 2 years
Negative rent growth and occupancy per PPR/PMA** utilizing Fed baseline assumptions for GDP / unemployment
• 2 year US office market rents 13% • Impact on office equity portfolios NOI 14% over 2 years
* Outlook reflects the best local market data available to asset managers in 4Q’08** Property Market Analysis (PMA)
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Real Estate loan loss stress cases
$1.0B
10%
27%
(2.7)
3.7
(9.6)
13.3
(26.2)
$39.5B*
$0.9B
8%
27%
(2.3)
3.2
(7.8)
11.0
(28.5)
$39.5B*
= Potential loss
Implied default rate
Implied LGD
Minus collateral value
= > 100% LTV and<1.0x DSC
Minus >1.0x DSC
= Net >100% LTV
Minus 0 - 100% LTV
Total debt NEA
Fed baseline case Fed adverse Comments• Current delinquency of $0.4B* on $39.5B*
• 4Q’08 outlook of $0.3B credit losses
• Impact of Fed base and adverse scenarios determined as follows: Apply PPR’s adjusted rent and occupancy assumptions, by market and collateral type to the underlying individual property value
• Stressed property value compared with loan principal amount to determine those above 100% LTV
• Stressed property cash flows compared with debt service required by each loan to determine those with <1.0x DSC
Semi-annual top-down assessment of:54 U.S. / 32 Europe markets4 major collateral types
Multiple inputs used:Macro Micro
GDP, demographics Local supply/demand
Industry trends Construction
Market liquidity Actual sales/leasing activity
High hurdle = rising vacancy, falling rents/values
Medium hurdle = specific issues to be addressed
Low hurdle = balanced supply/demand, stable to rising rents/values
PPR / PMA (3rd party/independent)Bottom-up review by local field network; debate through semi-annual meetingsConsistent methodology for analyzing marketsAlignment of market views between credit committee and fieldEstablishes new business parameters (no equity originations currently), and portfolio indicators
Market collateral pairs
Debt Equity
Debt Equity Debt Equity
S/T
L/T
M
Very rigorous origination guidelines
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Equity portfolio: $33B
Debt portfolio: $48B
• Equity hurdles shifted higher in ‘05/’06 resulting in fewer deals
• Focused investments on countries/ locations with low per capita retail exposure and a growing middle class
• 60% anchored by hypermarkets: Tesco, Walmart, Metro, Tokyu Hands
– Reduced U.S. equity exposure early
• Avoided malls
• Very limited retail exposure to single tenants
• Grocery anchored and DIY retail (~20%) and strip centers, less affected by discretionary spending (e.g. fashion)
• Cross-collateralized $2.8B = ~70% of retail exposure
U.S. retail
$240
$167 $157
($ in millions)
Example: hurdle process limits retail exposure
$3B
* Excludes owner-occupied lending
Retail 9%
Retail 8%*
Japan 22%
Other 10%
C. Eur 28%
Italy 10%
UK 5%
Korea7%
Mexico 5% Spain
6%
N. America
7%
0
50
100
150
200
250
300
‘06 ‘07 ‘08
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How we operate our assets (debt & equity)
Experiencedteam network
Intensive asset surveillance processes
Issue resolution/value creation techniques
• 97 field office network• Asset management team
averages 20+ years RE experience
• Shifted focus of global team from originations to asset management
– Cash pay downs and lockboxes– Joint ventures/mergers– Seller financing
• Reposition real estate– Renovate/redevelop– Re-tenant
Highly experienced global team focused to maximize asset values
Extensive depth of resources, asset surveillance activities, and value creation techniques
Asset mgt
2,200
59%
30%11%
Risk, finance,
etc.
Originations
1,500
56%
4%
40%
’07 ’09
• We buy assets … run them like a factory
• Many competitors have limited operating skills and lack local presence
GE vs. competitors
Focus:
Headcount
62
OfficeInd'lRetail
Equity NOI revenues & expensesSourcing mindset for expenses
Rebidding 3rd party PMC service contractsLeverage portfolio-wide buying powerReview/revise service scopesFiling for property tax reassessmentsSustainability & energy efficiency cost reductions and asset value enhancements
MM square feet
84.565.8
16.5
Property-level revenue actions
Vacancy % 16%’09 rollover % 15%
Intense focus on existing tenants … working plans months ahead of renewal process22 million sq. ft. leased/rolled in 200881% of projected ’09 revenues from in place leases rolling in ’10+ Leveraging our local teams, using best-in-class brokers to develop detailed leasing plans for vacant spaces
Property management
Property taxes
Utilities and other
~167MM SF (excl. apartment, hotel, parking)
22
11
33
Targeting $1.5B NOI in ’09 … Fed baseline $64MM, Fed adverse $74MM
32
63
GE vs. industry
• Maturities and periodic value swings make third party debt challenging
- Creates artificial timing in the asset life
• Third party debt generally less attractive than GE internal cost of funds
• Prefer to “control our destiny”- Use external leverage only when economic
- Levered equity structured with skilled partners
• Leverage can magnify upside/downside
Third party external debt
Equity
65-90%
10-35%
Fund leveredequity
GERE$29B
GE3 big differences vs. opportunity funds
1) We don’t mark assets up2) We depreciate assets each year3) We generally don’t lever up
64
GE $100
Why is our unrealized loss “so small” compared with opportunity funds?
$97$94
Unrealizedgain/(loss)
Acquisition-’06 ’07 (peak) YE ’08
Depreciation3% Depreciation
3%Unleveredinvestment-book value(historical cost)
Asset value $100 $103 $85
- $6 ($9)
Investmentvalue 3%
Investmentvalue 17%
Opportunity fund $33 $36$18
Acquisition-’06 ’07 (peak) YE ’08
Leveredinvestment-book value(mark to market)
3rd party debt (2:1)
$67 $67 $67
Investmentvalue 9%
Investmentvalue 50%
Asset value $100 $103 $85
33
65
Levered equity positions of funds amplifies losses
Fund - levered equity*GE all-cash
$29B
100%equity
’08 vs. ’07value loss
15%
Investment loss15%
33% equity Value loss15%
Investment loss45%
67%3rd party debt
For GE, value loss % on real estate = investment loss
For “Fund”, value loss %on real estate does NOT
= investment loss
* Assumes ~2:1 leverage
GE’s $4B unrealized loss @ year end ’08= (18%) vs. ’07, (54%) if levered 2:1
66
Equity unrealized losses summary
Rigorous valuations process• Valuations updated minimum 2 times per year
• Standard guidelines with 3rd party market assumptions
• Cap rates – long term median, range of 4.2% - 14.7%
• Local teams prepare valuations, global teams review and approve
• 3rd party data – PPR, PMA, RCA, Co-Star, Reis, etc.
• 353 dedicated asset managers review 3,200 assets across 150 markets each cycle – tremendous local knowledge
($ in billions, pretax)Value change vs. YE’07
Wholly-owned (15%)JV (42%)Total (18%)
Value drop as % of GE book value
YE’07 – unrealized gain $3Sales ($2)Depreciation $1Change in value ($6)
YE’08 – unrealized loss ($4)
Walk
JV’s($1.1)
Owned RE($2.9)
YE’08 unrealized loss - $4B
San Diego Office ($0.3) 8.3%London Office (0.3) 7.4Seattle Office (0.2) 8.1Chicago Office (0.2) 8.0Atlanta Apartment (0.2) 7.7Irvine Office (0.2) 7.7Tokyo Mixed use (0.1) 4.5Dallas Apartment (0.1) 7.8San Jose Office (0.1) 8.8All Other Various (2.3)
Total ($4.0) 7.5%
UnrealizedTop losses: Collateral loss Cap rate
Rigorous valuation process supported by 3rd
party data from respected industry sources
34
67
’05 ’06 ’07 ‘08
Equity impairments
$30 $54$153
$294
($ in millions, pre tax)
• For our owned properties, per U.S. GAAP we MUST state at depreciated cost, subject to impairment testing(mark-to-market is NOT optional)
• We do disclose the unrealized loss in our financial statements - $4B pre tax loss at year end ’08
– ’07 vintage is primary driver … $3.3B (EOP suburban Chicago 29%, Carr America 37%, Dundee 23%)
Quarterly impairment review process - FAS 144 review process
• Run undiscounted cash flow test quarterly on 100% of our portfolio
• Inputs are consistent with our rigorous asset valuation process utilizing 3rd party data sources and long term historical median cap rates
• Hold periods vary, up to 10 years• If an asset fails the undiscounted cash flow test, it is
impaired, fair valued based on current value and an impairment charge is recorded
Equity impairments
~($4.0)
$1.1$2.1
$3.1$4.1
’08UL
’09 ’10 ’11 ’12
• Real estate assets depreciated over estimated useful life (~3% annual)
• Cumulative depreciation balance eliminates current embedded loss over time and reduces risk of impairment
YE ’08 unrealized loss (‘UL’) mitigatedby cumulative depreciation
($ in billions)
68
Fed Baseline
Case
Median long term historical cap rate +adders for asset quality
Asset-by-asset business plan* reflects PPR/PMA recession case
• 2 year US office market rents flat
Median long term historical cap rate +adders for asset quality
Median long term historical cap rate +adders for asset quality
Total estimated portfolio losses utilizing impairment test:• Test: Undiscounted cash flows vs. NEA (net earning assets)• If failed, loss = Discounted FMV vs. NEA
31%28%23%Implied loss on
affected assets
($5.9B)($4.7B)($4.0B)Embedded loss on equity assets
17%11%5%% of NEA impaired
44%40%24%Implied loss rate on impaired assets
$1.5B
Fed base case
$2.6B$0.4B
4Q’08outlook
Equity impairments
Fed adversecase
(after impairments) ($3.6B) ($3.2B) ($3.3B)
($ in billions, pretax)
37
73
Real Estate summary
• We are primarily a senior secured debt underwriter and wholly owned equity operator
• We believe that we are a conservative and diligent real estate investor with strong underlying risk and valuation methodology
• The forward looking macro environment will be tough on the commercial real estate market
• Our portfolios are solid but have challenges to manage
• Even under the Federal Reserve stress cases, losses would be manageable
74
Commercial Lending and Leasing
38
75
Commercial lending & leasing overview
Who we are and what we do
EMEA22%
Asia11%
Americas67%
Portfolio Mix by Region ($230B)
Equipment leases & loans
54% Leveraged loans17%
Othersenior-secured
Factoring&ABL13%
Product Portfolio Mix ($230B)
10%
Other
6%
• Leasing and lending against hard assets for 25+ years
• Operations across 30+ countries
• No SIV/CDO exposure
• Organized by product and industry expertise
• Spread of risk: 1B+ transactions annually for 1MM+ customers globally
• 21,400 employees with over 25% dedicated to risk management
2000 2008Senior debt multiple 3.5x 3.5xSenior interest coverage 1.3x 2.1x% Top 10 names 18% 8%% Top 10 industries 63% 61%% > 4.5x senior debt multiple 31% 32%Average exposure $13MM $27MMCov lite exposure 4.5% vs. 15% industry
Leveraged lending … strong U/W discipline, better spread of risk
Global lending overview
Senior secured portfolio rigorously managed by an experienced team of professionals
$30B
$38B
$70MM
40
79
Leveraged loans: outperforms industry benchmarks in periods of stress
2.37%
1.59%
0.49%0.93%
0.37%0.30%
0.31%0.43%0.86%
4.60%
2.95%
0.46%2.08%
2.47%1.32%
1.00%0.29% 0.16%
'00 '01 '02 '03 '04 '05 '06 '07 '08
Market loss rate*
GE loss rate
* Market Loss Rate computed using Moody’s speculative grade default rate x S&P LossStat 1st lien cash flow loss-given-default rate
• Starts with good underwriting: underwrite to hold, senior secured facilities, known industries; no junior debt, start-ups, leveraged build-ups or small EBITDA companies … underwrite assuming work-out
• Rigorous portfolio management: sophisticated tools & proprietary data to re-rate portfolio as accounts or markets change; routine stress testing & scenario analysis … account surveillance to ensure early detection of stressed credits
• Proven work-out ability: willing to work longer & harder to recover full value; not selling early or into illiquid markets
Credit Distribution CollateralsAsset backed facilities with broad spread of risk by collateral,transaction size and geography
(1.8%)
• PD is impacted by slowing economy
• LGD increase is driven by price declines in major collaterals (aircraft, transportation, construction) and lower frequency of full recovery for small transactions
Senior secured credit facilities - primarily term loans collateralized by 1st lien on all assets
AAA to BBB-
7%
< B-28%
BB+ to BB-18%
333317Net Charge offs
1.2%
499
1,219
2009 Outlook
0.8%
475
827
2008 Actual
Credit cost
Reserves %
Non-Earning
Credit Distribution Industries
Cable/TV 10%
BusinessServices 10%
Printing &Publishing 8%
Other51%
Radio/Broadcasting 9%
Chemicals andAllied Products 7%
Health Services 5%
B+ to B-48%
Key variablesFed.Base
Fed.Adverse
7.8% 8.6% 9.0%
(1.8%) (2.9%)
6.9% 8.3% 9.7%
19.9% 22.2% 24.9%
499 672 880
1.37% 1.84% 2.41%
Change in GDP
Probability of Default (PD)
Estimated loss rate
Est. Credit Cost
Loss GivenDefault (LGD)
Unemployment(average)
(1.6%)
• PD increase driven by weakening economic environment and deteriorating obligor financial health
• LGD increase driven by greater uncertainty in ultimate resolution value
Portfolio overview ($38B)
Key metrics
(64 industries <5%)
OriginalOutlook
45
89
Stress scenarios – Franchise finance
80% of portfolio concentrated in 45 larger concepts
10038Net Charge offs
1.75%
101
2.4%
4%
2009 Outlook
1.73%
131
1.6%
2.7%
2008 Actual
Credit cost
Reserves %
90+
30+
Bev/Other
RestaurantCasual
26%
C&G11% L/S
Hotel8%
Stress assumptions
Key variablesFed.Base
Fed.Adverse
8.4% 8.9%
(2.0%) (3.3%)
5.3% 5.6% 6.1%
101 127 153
21% 25% 28%
7.7%
1.12% 1.41% 1.71%
RestaurantQuick-service
49%
Segments
Change in GDP
Probability of Default (PD)
Estimated loss rate
Est. Credit Cost
Loss GivenDefault (LGD)
Unemployment(average)
(1.8%)
Credit Distribution
• PD increase resulting from higher unemployment and stressed same store sales
• LGD increase driven by drop in real estate values
B+ and below37%
BB+ to BB-58%
AAA to BBB-
5%
Outlook & stressed scenariosPortfolio overview ($13B)
Key metrics
5%
OriginalOutlook
90
Stress scenarios – EU equipment
Stress assumptions
Key variablesFed.Base
Fed.Adverse
173 212 250
0.98% 1.20% 1.42%
163145Net Charge offs
1.44%
173
1.29%
2.39%
2009 Outlook
1.24%
147
1.03%
2.29%
2008 Actual
Credit cost
Reserves %
90+
30+
8.9% 9.4%
(1.1%) (1.8%)
26% 30% 32%
8.1%
3.8% 4.0% 4.4%
Fleet30%
CDF 9%
EF58%
Asset backed facilities with broad spread of risk by collateral,transaction size and geography
Change in GDP
Probability of Default (PD)
Estimated loss rate
Est. Credit Cost
Loss GivenDefault (LGD)
Unemployment(average)
(1.0%)
Credit Distribution
• PD increase driven by slowing economy
• LGD increase driven by reduction in fleet prices and lower frequency of full recovery for small transactions
AAA to BBB-
BB+ to BB-51%
B+ and below38%
Outlook & stressed scenariosPortfolio overview ($18B)
Key metrics
11%
Healthcare 3%
Fleet30%
Inventory9%
Office Equipment
22%
Const./Mfg. Equipment
24%
Aircraft 7%
Other 5%
OriginalOutlook
Collaterals
46
91
Stress scenarios – Asia Pacific
Stress assumptions
Key variablesFed.Base
5.7% 6.0%
(2.2%) (4.2%)
4.0% 4.5% 5.7%
186 225 310
1.12% 1.36% 1.87%
28% 30% 33%
5.2%
Senior secured financings, primarily equipment, in developed economies
Japan 60%
ANZ 28%
India 5%
Other 7%
Credit Distribution Countries
Fed.Adverse
159114Net Charge offs
1.0%
186
2.2%
3.4%
2009 Outlook
1.0%
152
1.4%
2.4%
2008 Actual
Credit cost
Reserves %
90+
30+
Change in GDP
Probability of Default (PD)
Estimated loss rate
Est. Credit Cost
Loss GivenDefault (LGD)
Unemployment(average)
(1.2%)
• PD increase is driven by deterioration in Japan and Australia economy
• LGD increase is driven by moderate reduction in fleet vehicle prices and collateral value depreciation
BB+ to BB-59%
AAA to BBB-19%
B+ and below22%
Outlook & stressed scenariosPortfolio overview ($20B)
Key metrics
OriginalOutlook
92
Senior secured credit facilities secured by 1st lien on current assets, managed via formulaic borrowing base
Key variablesFed.Base
Fed.Adverse
7.7% 8.4% 8.9%
Stress assumptions
Credit Distribution
Stress scenarios – U.S. ABL
Industries
5523Net Charge offs
0.7%
92
215
2009 Outlook
0.3%
36
90
2008 Actual
Credit cost
Reserves %
Non-Earnings
Retail12%
Healthsvcs 10%
Wholesalenon-durable
MetalBus Svcs
Other41%
Wholesaledurable
18%
(2.0%) (3.3%)
9.1% 10.6% 12.5%
92 117 151
0.91% 1.16% 1.50%
10.0% 11.0% 12.0%
Change in GDP
Probability of Default (PD)
Estimated loss rate
Est. Credit Cost
Loss GivenDefault (LGD)
Unemployment(average)
(1.8%)
< B-42%
9%
AAA to BBB-
B+ to B-44%
8%6%5%
• PD increase driven by weakening economic environment and deteriorating obligor financial health
• LGD increase driven by lower current asset recovery value
Outlook & stressed scenariosPortfolio overview ($10B)
Key metrics
BB+ - BB-5%
(40 industries <5%)
OriginalOutlook
47
93
GECAS
94
GECAS dynamicsWho we are and what we do
• Global fleet with ~1,500 owned and ~350 managed aircraft plus order book
• Broad range of leasing, financing and servicing products
• Expansive geographic footprint: 28 offices serving ~230 customers in over 70 countries … a leader in emerging markets
• Experienced team with deep technical, financial, marketing and restructuring expertise
• Full asset lifecycle management
48
95
Industry overviewIndustry World fleet
↓ Anticipated global traffic declining by ’08 … trending higher
↑ Aircraft demand continues to slow … OEM order deferrals; fleet reductions increase via retirements/scrapping/parking
↑ Lower jet fuel prices helps compensate for weakness in demand
↑ Due to pro-active capacity cuts & alternative revenue fees, U.S. slightly better positioned
↑ Accelerated retirement of least efficient aircraft
↔ Capital markets liquidity scarce … harder to secure financing
GECAS well-positioned to manage through another cycle:Asset-based financing
Proven placement capability
Strong industry experience
Diversified portfolio
Total Parked Passenger Aircraft = 2,025
In-Transit
(194)
Parked>1yr(865)
OlderTypes(459)
Age>20yrs
(156)
VIABLEPARKED
351
TotalWorldFleet
=20,392
CargoAircraft
2,072
TotalWorld
PassengerFleet
=18,320
ParkedFleet2,025
TotalActiveWorld
PassengerFleet
=16,295
LeastEfficient
2,331(e.g. MD80,
732, BAE, DC9, 727, A300, 742)
MoreEfficient13,964
(e.g. 737, A320, 777, A330, 744, CRJ, ERJ, EMB)
LESS LESS LESS =
(GECAS Impact)
(GECASPAX fleet)
1,386
21
0
96
Strong asset backed financing & industry expertiseIndustry/airline monitoring
• Continuous prospective focus on industry/assets: monitor production rates, passenger growth and retirements to anticipate cycle
• Frequent and direct dialogue with OEMs/airline management on current products, new technologies, and forecasts
• Asset based lender/investor with significant technical expertise• Target high quality collateral – excellent buy & hold aircraft• Limited older and out of production technology
Equipment
Focused approach on assets utilizing deep domain expertise
Proprietary valuations tool
• Forecasts of aircraft value and loss given default models• Cross-functional steering committee of aviation experts establishes/
reviews values, leveraging GE market intelligence
49
97
Performance
Placing ahead … and through downturn
Demonstrated placement capabilityGECAS approach
• Advanced placement of roll-off and skyline, easing cycle impact
– Remarketing initiated at least 18 months in advance of expected re-lease date
• History of pre-placing assets in anticipation of restructurings at weaker credits… actively manage exposures
– Minimize losses, AOG & downtime
– Bi-weekly portfolio review process
– Granular watch rating system
Stronger position than last downturn … placed ahead of projected cycle
Closely monitoring & placing unanticipated roll-offs (52 in 2008, 16YTD in 2009)
Placement as of 1Q’08:
2008 2009 2010 2011
Roll-off 99% 66% 23% 0%Today 90% 37% 15%
New Order 100% 100% 95% 51%Today 100% 100% 69%
98
Attractive portfolio mix supports cycle management*% of Aviation exposure $’s at 4Q’08
Diversified portfolio
• Portfolio* well positioned with high demand, widely used, fuel efficient aircraft
– Average age: 7 years– ~85% of fleet is < 10 years old– ~85% of narrow body fleet is high demand
A320 & 737NG– Majority of wide body fleet has broad user base
and can be readily redeployed (777 & A330)
• Deliberate evolution of portfolio to operating leases & secured loans
– Defensive loans provide cross collateralization with good LTVs
• Asset-based approach facilitates redeployment and mitigates airlines’ credit quality
– Strong track record managing through similar cycles
• Geographically diverse
Key comments
Leas
ed a
sset
s
20%
Prod
ucts
Cargo RJs
Wide-body
Narrow-body
9%16%
20% 55%
Operating LeaseFinance
Lease
Loan
Other2 %
19 %
14 %6 5%
15%34%
20%
5%
7%
19%
US
Asia
C&LA
Canada
Europe
MAC
Regi
ons
50
99
Stress analysis
Values are driven by changes in supply & demand
• All aircraft types are expected to be negatively affected by global recession
• Weaker outlets for older aircraft • OEM production cuts, retirements & parked aircraft
mitigate portfolio impact
~$265
~$635
~$320
’09 Outlook Base Adverse
Aircraft values
LA G
DP
AIRCRAFT
VALUES
DEMAND(Traffic)
SUPPLY(Active Fleet)
WORLD GDP
FLEETEXITING
FLEETENTERING
RetirementsParkingConversions
ProductionUtilizationNew OEMs
PRICEFareStimulation
US
GD
PEU
GD
P
AS
GD
P
OTH
ER G
DP
Impairments/losses
Current dynamics
$109
~$265
$128
’07 ‘08 ’09 Outlook
’09 outlook: assumes a higher 1-yr decline vs. the average 1-yr drop during last downturn
US GDP impacted by: unemployment, housing, production, etc
(Pretax $ in millions)
Base: assumes the worst 1-yr decline from last downturn occurs in ’09
Adverse: assumes the worst case peak-to-trough cycle decline in last downturn (’00-03) all occurs by ’09
100
Successfully managed through previous periods of distress
36 from Varig (’02-’03)
22 from ATA (’05)
7 from Kitty Hawk (’07)
6 from Kingfisher (’08)
8 from XL Aviation (’08)
Fleet redeployments:
Assess airline’s long term viability (franchise strength and credit outlook) and ease of asset redeployment• If viable and willing but unable to pay: consider deferral, larger restructuring, defensive deal to provide
liquidity, aircraft put and call rights
• If airline not viable: take early, aggressive action to repossess /redeploy
• If airline unwilling to pay: pursue claims aggressively (if necessary, litigate)
Improved collateral position with ~$155MM spares loan – 4Q’08
Improved collateral position with ~$240MM aircraft loan - 3Q’08
Restructurings/defensive deals:
Improved collateral position through~$360MM spare parts/engine loan – 4Q’08
Proactive approach to distressed accounts
11
22
33
51
101
Summary
Proven track record
40+ years experience and strong customer relationships
Asset-based approach to business; broad product set with full life cycle management
Demonstrated global redeployment capability supported by world-class technical department
Pricing and risk discipline with proactive portfolio focus
Sources for macro economic outlook range:FSA guidance on stress testing, CML (Council of Mortgage Lenders), Global Insight, Moody’s Economy.com, RICS (Royal Institution of Chartered Surveyors)
Stress case also includes:
11 Limited refinance ability for high risk segments
22 Counterparty risk to mortgage insurance reliance
’08A
↓19%
0.7%
5%
5.7%
$201
64
127
Mortgage stress - remaining portfolios
’09 outlook Base Proxy Adverse Proxy
Australia HPI decline 2% 5% 10%Addn’l loss on sale 15% 20% 25%Unemployment 5% 5% 6.4%
FranceHPI decline 0% 5% 15%Addn’l loss on sale 20% 20% 30%Unemployment 8% 8.6% 9.2%
MexicoHPI decline - - 10%Addn’l loss on sale - 15% 20%Unemployment 4.3% 5% 5.8%
SpainHPI decline 30% 35% 45%Addn’l loss on sale 15% 15% 15%Unemployment 13.9% 20% 22%
IrelandHPI decline 9% 15% 19%Addn’l loss on sale 13% 20% 20%Unemployment 9.2% 13% 19%
Key stress assumptions
Portfolio (assets) ’09 outlookFed Base
ProxyFed Adverse
Proxy
Australia $4 $6 $43
($ in millions)
Mexico 9 12 37
Spain 55 71 100
Rest of World 18 22 62
France 21 30 59
$13B
$11B
$2B
$1.3B
$3.6B(Ex UK and CEE)
Ireland 8 35 47$0.9B
$115 $176 $348
Credit costs
128
SummaryU.S. Consumer
Took loss actions early … entry rates downMitigating losses with profit sharing and revenue actionsSolid reserve position … 2x non-earnings
Mortgage
Low risk and stable performance outside U.K.Solid U.K. underwriting, low LTVs and MI mitigatedown cycleAggressive collections/loss mitigation focus
Prepared for challenging U.S. and U.K. economies
65
129
GE Capital Global Banking
130
Emerging markets bank dynamicsWho we are and what we do
- 89% Europe • 15 countries presence … diversified assets
- 8% Asia- 3% Central America
• Well positioned in core markets
- Top 5 in Czech & Poland- Top 3 in Turkey & Central America
• High quality portfolio
- 56% secured financing- 82% A/B risk credit grades- Underwrite to hold
- U.S. Construction loans 10.60%- 1st lien residential 3.90%- Home Equity/2nd’s 6.15%
($ in billions)
None
None
None
GECC
a) Derived from Goldman Sachs Equity Researchb) C&I loans used for leveraged loans, “other leases/loans” for equipmentc) 2.63% including $1B management planning additional losses
156
Top bank 3σ stress
• Stressed $266B financing receivables in proprietary model
• For $102B non-U.S. consumer receivables assumed growth in loss rates 50% higher than U.S.
- Real Estate debt 28.3 0.71% 7.6% 43.1 0.67% 0.67% x 28.2- Real Estate construction 0.6 0.79% 0.2% 13.1 9.35% 9.35% x 0.6- Commercial loans 33.1 0.78% 8.9% 231.1 1.01% 1.01% x 36.0- Commercial leases 43.3 1.03% 11.7% 22.4 1.0% 1.00% X 43.3
$105.3 0.87% 28.4% $1,170 2.0% 36% 0.96%
Financing receivables vs. top U.S. banksGECC
ReservecoverageReceivables
%Portfolio
($ in billions, as of 4Q’08) Top banks average a)
ReservecoverageReceivables
%Portfolio
Top bankscoverage
GECC assetcomposition
a) Consumer data avg. of Top 3 BanksReal estate data source Top 5 Bank, loss coverage est. split construction vs. non-construction Commercial loans and leases data source Top 5 Bank
17%
29%
U.S. reserves comparable
162
GECS investment securities($ in billions)
Diversified, predominantly long term debt-based portfolio
12/31/08
ABS
RMBS
20
U.S.gov’t.
3Non-U.S.
gov’t./corp. Equity1
$41B
U.S.corporate
12
4
CMBS 2
Retainedinterests
6
2State & Muni
Assets primarily support the run-off insurance operations long term liabilities and guaranteed investment contracts
We do not have debt securities classified asFAS 115 HTM
$3.1B insured by monolines – $2.2B FSA, MBIA,Ambac; $0.7B FGIC
$8B asset-backed securities; $1.3B subprimeexposure ($1.1B wrapped by monolines) – no CDO’s
U.S. corporate debt :70+% investment grade600 Companies, 60 >$100MM book valueLargest single exposures Fannie & Freddie $0.8Bin total, Wells Fargo $0.3B, rest $0.2B or less
82
163
Investments
• Compare fair value to book value; Is fair value <book value?– 68% of portfolio priced via market price or pricing services, other non-binding
broker quotes, or internal modelsMeasure
Evaluate
Test
• Evaluate underlying issuer or cash flows– Debt securities – analyze 8 credit-related and financial performance criteria– Asset backed securities – run cash flow recoverability analysis– Consider monoline wraps and ability to pay claims
• Challenge pricing service for a sample of securities; confirm process • Confirm cash flow assumptions based on current market information• Compare subordination of our holding; compare to expected losses
Conclude
• Corporate reviews of all securities with unrealized loss >$5MM and>6 months underwater OR <6 months underwater and >20% decline, regardless of test result
• Determine other than temporary impairments• GE Corporate Audit Staff and KPMG audits
$1.4B pretax impairments in 2008 … estimated $0.7B at risk for 2009
Impairment review process
164
GECC Goodwill($ in billions)
FAS 142reporting units
Consumer $9.1
Commercial Lendingand Leasing 12.6
Real Estate 1.2
Aviation 0.2
Energy Financial Services 2.2
GECC $25.2
Goodwillas of 12/31/08 Methodology/frequency
• Tested for impairment annually and whenever events or circumstances make it more likely than not that fair value < book value
• If reporting unit fair value < book value, then must fair value each identified tangible and intangible asset. Goodwill impaired when implied fair value < goodwill book value
• Fair value of reporting units estimated using discounted cash flow method; corroborated with market multiples, when available
• Retesting reporting unit goodwill for impairment in 1Q’09
– No impairments indicated
– Continuing to monitor
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Hyundai – Korea 43% $3.2 Stable Low
Garanti Bank – Turkey 21% 1.9 Outperform Low
CAMGE – Spain 50% 1.3 Stable Low
Bank of Ayudhya – Thailand 33% 1.1 Stable Low
GE Nissen – Japan 50% 0.9 Stable Low
BAC International – C. America 50% 0.7 Stable Low
Dogus GE BV – Romania 50% 0.5 Stable Low
Colpatria – Colombia 50% 0.3 Stable Low
Brunswick/Polaris – CFS 50% 0.3 Stable Low
Southern Star (LP) – Kentucky 60% 0.3 Outperform Low
Cosmos Bank – Taiwan 23% 0.3 Challenged Medium
All others 8.5 100+ partnerships, avg. $50 investment
$19.3
GECC Associated companies($ in billions)
Investment Holding4Q’08
Investment a) Performance
View ofimpairment risk
as of 2/09
a) $18.7 GECS
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Rigorous process for evaluating asset impairments
• All FAS115 assets reviewed quarterly for other than temporary impairment
• Multiple layers of review:– Business unit– Capital Finance– Corporate accounting– CAS/Auditors
• All equipment coming off lease evaluated for impairment
• All annual reviews updated if there is change in assumptionsor circumstance
Assets reviewed for impairment4Q’08 assets Frequency
Primaryacc’ting. model
Real estate owned $36.7 At least annually FAS144Cost & equity method inv. 21.6 At least annually APB18/FAS115Retained interest 4.6 Quarterly FAS115Debt securities 12.1 Quarterly FAS115($8B Trinity)
Equipment leased to others At least annually FAS144- Aircraft 32.3- Equipment 27.3Goodwill/intangibles 29.0 At least annually FAS142/144GECS Insurance securities 22.0 Quarterly FAS115
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Summary
We follow the appropriate accounting guidelines
Our reserves are very comparable to banks in similar asset categories
We are a secured lender
We do not see significant impairment risk in goodwill or associated companies
We have sufficient capital even under adverse stress tests
22
33
44
11
55
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GECC Summary+ Outlook
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169
Primary questions … the answersCommercial Real EstateWe will experience lower earnings through this cycle, but believe we have it covered in our own business framework
What is the risk in U.K. mortgage? We expect credit losses will increase, but mortgage insurance and operational rigor should help mitigate the impact to a manageable level
What is the risk in Eastern Europe? These are long established franchises. We expect credit losses to increase, but not significantly higher than the rest of world
What is the risk in U.S. Consumer? We see a tough cycle driven by unemployment in 2009, and are planning for higher losses in line with the industry
Losses/Impairments/ReservesWe apply appropriate accounting policies. Our reserves are adequate for current economic conditions
CapitalBased on stressed losses, capital appears adequate. Further options available if conditions worsen
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GE Capital future
OtherEnergyGECAS
Consumer
Real Estate
Commercial
Assets $637B $400-450
ROI 1.3% 1.5-2%
Core75%
Verticals 15%
Today Future
Banks 10%
Why to like this business
• Deposit funding with potential for growth
• High margin new business
• Consolidation + partnership potential
• 25+ year track record
• Leverage GE brand/competencies/synergy
• Leasing and asset management intensive platforms advantaged vs. banks
• Direct origination to mid-market
• Core underwriting skills
• Fewer FinCos
• Bank consolidation … historically positive
Banks
Verticals
Core
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2009 Summary
Environment much tougher – we think GECC is prepared
• Strong liquidity/limited refinancing risk today
Thoughtful view of stressed losses … working aggressively
Revised 2009 outlook – higher losses, but more cost-out
Intense focus on risk management, work-out and restructuring
• Rigorous asset management/manage risk
GE Capital business model robust as the economy recovers
22
33
44
11
55
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Closing
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How to think about GE Capital riskEven under Fed adverse stress tests, GE Capital is approximately breakeven in 2009 and we should not need to inject additional capital
Framework can accommodate ~$40B of losses over 3 years without requiring additional capital
Losses and impairments $10 $14 $18Net income $5 $2 $0Fixed charge coverage a) ~1.52 ~1.32 ~1.19Tangible equity ratio 6.9% 6.4% 6.1%
Op plan Fed base Fed adverseCases
Base plan $10B ~$30B ~$40B
20082009/2010
Cumulative3 years
Potential losses & impairments
(a- includes ~$B equity infusion
22
11
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Sources of contingent capital
We have $34B of tangible equity after $9.5B infusion
Other potential sources
• Announced dividend cut provides additional capital
• Ability to control new originations/GECC asset sales
• Ability to monetize assets or take responsibilityfor GECS liabilities
Current outlook does not require external capital
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Company update
Energy Infrastructure ++
Tech. Infrastructure +
NBCU 0/‒ —
Capital Finance $5 Profitable
Corporate Flat
Dec. 16 1Q Comments
• Global growth
• Aviation on track• Healthcare pressured
• Advertising market weak• Tough comps
• Strong cost reductions • Tax credits
• C&I/pension pressure• Costs lower
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Running GE to be safe and secure over the long term‒ Liquidity position is extremely strong‒ Completed 93% of our 2009 planned long term funding
Have sufficient capital and alternatives to weather adverse economic conditions
Running GE with intensity‒ Resizing our cost footprint in a meaningful way‒ Management team is focused on delivering cash‒ Continuing to invest/position company for long term growth
We expect GE Capital will be profitable in 1Q’09 and 2009
We are committed to GE Capital
GE will come out of this cycle a stronger, more focused and competitively advantaged company