July 29, 2009

General Electric Co. (GE) said Tuesday that the loss provisions that have weighed down its finance arm should peak by mid-2010 amid signs of improvement in some parts of the business. The losses and rising provisions at GE Capital have forced the U.S. company to shrink the unit and seek alternative funding sources, as well as tighten underwriting and collection practices. While investor concerns have abated, there are lingering worries about its commercial real-estate and consumer lending portfolios.

GE Capital executives moved to ease the concerns during a two-hour presentation, noting overall provisions should peak by "early to mid-2010". "Not booking the loss provisions is what's really going to drive the profitability of [GE Capital]" said GE Capital Chief Executive Mike Neal on the call. While executives have debated the likely peaks, best estimates are for provisions at the U.S. consumer business and equipment leasing units to top out in early to mid-2010. The U.K. mortgage book, one of its main concerns, is seen as improving, with peak losses in 2010.