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Slide 1: GE Capital Investor Meeting March 19, 2009 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.” 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 2 1
Slide 2: GE: safe & secure Dividends/share Yield @ today’s price ~4% 1 Reduced dividend … ~$9B in annualized savings 82¢ 40¢ 2009 2010 2009 GECC tangible common equity/tangible assets ~6.0% GECC leverage-a) 2 Infused equity into GE Capital 7:1 ~6:1 4.9% 4Q’08 4Q’08 1Q’09E 1Q’09E ’09 long term funding needs GE cash $48B ~$41B 3 Strengthened liquidity ~$45B $42B (a- net of cash and equivalents and with classification of hybrid debt as equity TY’09E Completed to date 4Q’08 1Q’09E 3 Ratings update Concluded 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 excellent business 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 4 2
Slide 3: GE Capital structure 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 General Electric Company AA+/Aaa 100% Owns all of GE’s financing assets General Electric Capital Services, Inc. 100% General Electric Capital Corporation Operating businesses (Capital Finance) Consumer Financing Primary GE Issuer/Guarantor AA+/Aaa 100% Commercial Lending & Leasing Energy Financial Services Real Estate GECAS 5 GE Capital overview 6 3
Slide 4: 2009 outlook Environment • Difficult market with many macro-economic indicators still deteriorating • Pockets of increased liquidity for consumers and midmarket 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 7 GE Capital business model Financial Services value chain “Factory” “Raw material” (capital) GE Advantage: Competitive cost GE Advantage: Low cost Risk Talent Treasury Asset Mgmt. Tax “Origination” GE Advantage: Global position Brand Domain expertise Pre-crisis competitive position: + Scale ++ Margins and results > banks + FinCo +++ Brand/domain GE Capital has performed for decades Will reposition for long term success 8 4
Slide 5: GE Capital portfolio Business Commercial Loans & Leases Real Estate - Debt - Equity Consumer - U.S. PLCC - Global Aviation Services Energy Fin. Services GECC 2008 Financials $1.7B 1.2 Domain + expertise • Entered in the 60’s • ~100% secured loans and leases • Support mid-market customers • Entered in the 70’s • Secured loans against diversified properties • Own/operate high quality properties • Entered in the 30’s • Store cards and sales finance for retailers • Broad spread of risk • Entered in the 60’s • GE domain • Broad product set with full life cycle management • Entered in the 80’s • GE domain • Essential assets; secure cash flows Assets Net income $230B 85 183 3.7 49 22 1.2 0.8 Businesses we know … decades of performance 9 GE Capital: our approach What we do + Senior secured financings + Diversified portfolio + Operate assets … global remarketing capabilities + Underwrite to hold + Restructure/work out problem loans/assets + Small hold positions + Match fund What we don’t do Did not originate CDOs, SIVs, etc. Did not sell credit default insurance Do not trade securities … Minimal MTM in up or down cycles Do not originate mezzanine or high yield debt/bonds 10 5
Slide 6: GE Capital has a strong franchise One of the few liquidity sources in 2008 • $86B of new financings to global companies, Estimated U.S. market position • Middle Market Commercial Lending • Equipment Lending/Leasing • Middle Market Corporate Finance • Aircraft Financing • Healthcare Financing • Energy Financing & Project Financing • Fleet Leasing • Franchise Finance • Commercial Real Estate Lending • Dealer Financing • Private Label Credit Cards #1 #1 #1 #1 #1 #1 #1 #1 Top 3 #1 #1 infrastructure projects and municipalities • $177B credit extended to global consumers • Have continued to support virtually all major U.S. airlines and auto companies with financings as they work through cyclical issues • Leading DIP/Bankruptcy lender for restructuring U.S. companies • Global leader in mid-market commercial lending • Provided $6B financing to support global energy projects Core is strong + competitively advantaged 11 Portfolio strategy Forward return dynamics Core Core mid-market lending + leasing 2-5% ROI + verticals • • • • • Core competencies Underwriting Direct origination Asset mgmt. intensive Re-marketing Deep domain Competitive outlook +++ - Likely fewer FinCo’s - Fewer captives - Bigger banks Ending net investment ’09 outlook ($B) $356 Grow long term GE Banking European & Emerging Market 2-4% ROI banks & JV’s Restructure Various Consumer <2% ROI & Commercial platforms • Enhance value via product development • Grow deposit base • Operating synergies ++ - Strong local franchises - Lots of options $64 Enhance value $80 • Origination • Funding advantage — - High leverage - Tend to compete w/ banks Restructure/ run-off 12 6
Slide 7: Primary questions regarding GE Capital Commercial Real Estate – What is in our portfolio and what is the corresponding risk? What is the risk in U.K. mortgage? What is the risk in Eastern Europe? What is the risk in U.S. Consumer? Losses/Impairments/Reserves – Are our reserves adequate and how do they compare to other banks? Capital – Does GE Capital have enough equity to handle future losses? Other investment securities, associated companies, goodwill We will cover all of these questions today 13 Stress testing approach Consumer Bottoms up – asset by asset, business by business Large commercial exposures over $300MM stressed individually • Mortgages, credit cards, auto and personal loans and sales credit financing – By product, by geography – market specific – Consistent methodology applied across product types globally Commercial • Commercial Real Estate: By market and property type • Commercial Aircraft: Valuation by equipment type • Energy loans and leases: Stress obligor ratings, increase severity, based on outlook • Commercial Loans and Leases: Stress probabilities of default, recovery rates 14 7
Slide 8: Summary of stress testing ($ in billions) Capital Finance Pretax pre-provision Credit losses Net income 2009 macro guidance Avg. U.S. U/E Peak U.S. U/E U.S. GDP 2009 outlook ~$13.3 9.7 ~$5 Est. Fed base ~$11.1 11.5 $2.0-2.5 Est. Fed adverse ~$9.2 13.7 ~$0 7.7% 8.5% (1.8%) 8.4% 9.3% (2.0%) 8.9% 10.1% (3.3%) Stress assumptions utilize Fed guidance and 3rd party forecasts 15 Key messages GE Capital funding is 93% complete and we have ~$60B capacity under Federal programs GE Capital is well capitalized and compares favorably to banks GE Capital is a conservative lender … losses should be lower than banks Real Estate equity valuation estimates are comparable to other real estate investors U.S. Consumer credit losses comparable to similar U.S. bank portfolio performance Adverse stress case losses of global mortgage should be manageable CEE Banks should be profitable even in an adverse stress scenario We are operating GE Capital with intensity … Collections >originations, lower cost, aggressive risk management We expect GE Capital will be profitable in 1Q’09 and 2009 Have sufficient capital alternatives to weather adverse economic conditions GE Capital has a profitable vision for the future 16 8
Slide 9: Agenda Funding & Liquidity Portfolio & Risk Management Business Reviews & Stress Testing – Real Estate – GECAS – U.S. Consumer – Mortgage – European Banks Break Operations Update Financial Update GE Capital Summary & Outlook Closing Q&A Ron Pressman, Stewart Koenigsberg & Jayne Day Henry Hubschman & Anne Kennelly-Kraky Mark Begor & Ray Duggins Mark Begor & Ray Duggins Dmitri Stockton & Denis Hall Lunch Bill Cary – GECC COO Jeff Bornstein – GECC CFO Mike Neal – GE Vice Chairman & GECC CEO Keith Sherin – GE Vice Chairman & CFO – Commercial Lending & Leasing Dan Henson & William Brasser Kathy Cassidy – GE Treasurer Jim Colica – GECC Chief Risk Officer 17 Funding/Liquidity 18 9
Slide 10: GECS 2009 funding • Global debt markets remain difficult for financial sector issuers ... strong market demand for Government supported funding • 93% long term funding complete ($42B of $45B) … considering early funding of ’10 maturities in ’09 • Issued $5B non-guaranteed debt: 30 yr. USD & GBP • CP balance @ ~$60B as of 2/09 … 100% covered by bank lines • $15B capital infusion in 4Q’08/1Q’09 improves capital ratios … leverage … TCE/TA ratio at top-end of banks • Strong cash and liquidity position 19 GECS funding ($ in billions) FIN 46 $515 6 ~$485 ~6 $509 ~$450 ~5 ~$479 ~$445 LT debt 382 348 320-330 Deposits/CD’s/ Other Comm’l paper 55 72 4Q'08 81 50 4Q'09E 85-90 40-50 4Q'10E Bank lines CP coverage Cash & equiv. LT debt<1 yr. $60 83% $37 $69 ~$50 100%+ ~$30+ ~$67 ~$50 100%+ ~$30+ ~$60-$65 20 10
Slide 11: GECS ’09/’10 Funding plan ($ in billions) Sources LT debt issuances Alternate funding Business originations/ collections mgmt. Capital infusion from GE Total sources Uses LT debt maturities CP reduction Total uses Ending cash balance (a. Ex-$13B funded in ’08 ’09 37 32-a) 26 25 9 92 ’10 ~38 35-40 4-9 20-35 – 60-80 Comments Beginning cash balance 93% of ’09 funding complete … lower ’10 planned issuances … considering early funding of ’10 CD's, Intl. bank deposits & other programs $205B collections/$180B originations in ’09 Back-up liquidity Cash / liquid assets CPFF – unused capacity BOE/ECB/BOC facilities Bank lines (69) (22) (91) ~38 (67) 0-(10) (67)-(77) ~31-41 Strategy : assets, alternate funding, … maintain strong liquidity 21 Government programs Programs Commercial paper funding facility (CPFF) GE impact • 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 • 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 • Newly announced Fed/Treasury facility … covers AAA ABS for specified assets … currently auto & credit card … may be extended to equipment & CMBS • $10B+ of PLCC/CDF maturing securitization debt likely eligible • Potential for increased liquidity for real estate and equipment … may reduce cost of securitization funding … continuing to evaluate • New facility in development … initial focus on marketable securities & other MTM assets … could expand to leveraged loans, real estate, equipment, etc. • Improved liquidity in these asset classes to help overall market Temporary liquidity guarantee program (TLGP) Term Assetbacked securities loan facility (TALF) Public Private investment funds (PPIF) 22 11
Slide 12: 2009 alternate funding ($ in billions) CD’s : Distributed through multiple firms to support asset growth in US banks ~$81 20 • Industrial Loan Corporation deposits – 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) – Direct origination of sales finance assets $17B $55 19 27 • Federal Savings Bank deposits International deposits 17 $2B U.S. Industrial Loan Corporation U.S. Federal 1 Savings Bank Other $30 18 11 10 15 11 17 – Drive market share in emerging markets – Tap large/developed markets $6B French Gov’t program: $1B ’09 target ($0.4B YTD) Covered bonds program: 1st issuance by Jul ’09 Exploring other asset based funding options International 4Q'07 4Q'08 4Q'09E Cost of funding attractive vs. LT debt a) Subject to regulatory approval Transition banks to deposit funding 23 $58.2B bank lines ... ~100% CP coverage ($ in billions) Remaining Term as of 3/11/09 > 4 years Comments • Strong base of $37B lines >1 year $4B $22B > 3 years but less than 4 less than 1 year 94% w/ term out $30B $3B > 1 yr but less than 3 • $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 • ~80% lines from Aaa/Aa banks • Lines from 64 banks globally • Syndicated: $22.9B; Bilateral: $35.3B • ~$12B also available to GE parent Liquidity in great shape … on track to meet CP coverage targets with $50B+ bank lines and $30B+ cash 24 12
Slide 13: Capital ratios GE Capital Corp. leverage a) 7:1 ~6:1 1.9% d) U.S. Large 4Q’08 BHC avg. 4.9% GE Capital Corp. TCE/TA ratio b) ~6% Tangible book Leverage c) 17X 4Q’08 1Q’09E 14X 1Q’09E GE infused $5.5B cash into GECS 4Q … plan to infuse ~$9.5B into GECS 1Q’09 Leverage commitments ahead of plan … ~6:1 by 1Q’09 TCE/TA ratio at the top end of the banks even if banks convert their TARP preferred equity into common equity (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 25 Portfolio overview 26 13
Slide 14: Risk management 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 Conservative asset residuals – 520 experienced asset managers – market intelligence & redeployment capabilities Significant commitment of people resources – ~16,000 globally – Senior risk officers have over 25 years experience Data-driven analytics – identify & monitor key risks, measure capital & leverage Rigorous process approach – detailed approval authorities, GECC Board reviews Disciplined approach to managing risk 27 GECC Portfolio Total assets ($637B) Other $68B 11% Real Estate $85B 13% Asia Pacific Geography Other 9% 11% 48% Latin America 2% U.S. Consumer $183B 29% Europe 27% 3% Canada Developing Markets $70B 36% 8% GECAS $49B 3% EFS $22B Commercial Lending & Leasing $230B Korea Others 12% 7% Poland 18% 5% Brazil Czech Republic 10% 8% 5% 17% Mexico Hungary ~70% of financing activities - Commercial ~11% Developing Markets China 6% 4% 4% Russia 4% India Thailand Turkey 28 14
Slide 15: Consumer Portfolio (assets) Product ($183B) Other JVs 6% Auto 11% Sales Finance 6% 14% Personal Loan Small and Medium Enterprises ANZ Mortgage 34% 14% Cards 17% UK 20% Western Europe Eastern Europe 16% 9% Geography ($183B) Asia 7% North America 25% 6% 2% 13% Latin America >70% International ~22% in developing markets ~58% of receivables – Prime 29 Commercial Portfolio Diversification Industry sectors ($386B) Hotels Restaurants & Leisure Health Care Construction Commercial Airlines Collateral type ($386B) Energy Generation/Distribution Others A/c Rec and Inv 4% 6% 3% 13% FF&E and Other Equip 5% 12% 4% 9% 10% Cash Flow Energy Automotive Machinery & Equipment 6% 2% 24% Corporate Jets 2% Real Estate Transportation Equipment 3% 7% 4% 24% Comm. Real Estate Healthcare Equipment 3% 4% 13% Comm. Aircraft 32% 6% Others 2% Diversified Finance Franchise Fleet Vehicles 2% Dealer Inventories Business Services 45% less than 6% industry weighting 51 industries Diversified portfolio in long-standing GECC collateral types 30 15
Slide 16: Commercial Customer Concentrations ($386B) Over $1B 6% $500MM-$1B 5% 5% $300MM-500MM $200MM-300MM 4% Over $1B, 15 accounts: Airlines, Class 1 Railroads, Electric Utilities, Aircraft Manufacturing, Real Estate $500MM-$1B, 27 accounts: 8% $100MM-200MM Airlines, Automotive, Healthcare, Power Generating Projects, Oil & Gas Refining, Cable, Broadcast Media $300MM-$500MM, 44 accounts: 61% 11% $50MM-$100MM Automotive, Airlines, Electric Utilities, Broadcast Media, Healthcare, Technology Equipment Under $50MM 72% of single risk exposures <$100MM Larger exposures secured primarily by essential operating assets 31 Key portfolio risks – 12/2 view (Pre-tax losses - $ in millions) December 2, 2008 outlook % Assets 2009 Assumptions U.S. Consumer 7% U.K. Mortgage 4% Real Estate - Debt - Equity 14% • 8.5% unemployment Estimated Downside case ’09 financial Impact Assumptions impact ~$4.2B ~$5.0B 9% unemployment (20%) HPI March ’09 outlook vs. Dec. 2 • HPI (17%) 2008 • HPI (15%) 2009 $600 $800 $400 = • Cap rates 50-100 bps. higher $250 • Cap rates 50-100 bps. higher, $240 long-term hold • Global traffic growth down ~2% 2009 ~$300 +200 bps. highest historical cap rate by $500 asset type GECAS 7% ~$550 • (3%) traffic decline (9/11) = Economic environment more challenging 32 16
Slide 17: Stress testing approach Consumer Bottoms up – asset by asset, business by business Large commercial exposures over $300MM stressed individually • 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 33 Consumer portfolio stress testing U.S. Key Drivers: Macro Portfolio • • • • • • Unemployment Home equity access Credit quality Credit lines Loss sharing Recovery rates Fed Base Fed Stress Non-U.S. Mortgage Key Drivers: Macro • • • • • • • Home prices Unemployment Refinancing ability LTV Mortgage insurance Borrower credit quality FX movements (Central Europe) Adverse Portfolio Key Assumptions: GDP U/E avg. U/E peak (2.0%) 8.4% 9.3% (3.3%) 8.9% 10.1% U.K. Key Assumptions: Debt sale recovery rate: PLCC Sales Finance 10% to 7.2% 16% to ~6.6% 25% to ~6% 25% to ~6% • 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% based on market No benefits assumed from U.S. Stimulus Programs 34 17
Slide 18: Commercial portfolio stress testing Commercial Loans, Leases Key Drivers: Macro Portfolio • GDP, Unemployment • Liquidity • Senior diversified positions • Borrower leverage • Sector diversification • Asset value of collateral Portfolio Real Estate Key Drivers: Macro • GDP, Unemployment • Liquidity • LTV • Property cash flow • Borrower leverage • Cap rates, liquidity Key Assumptions: Fed Base Fed Stress Key Assumptions: GDP U/E avg. Cap rates Output Fed Base Fed Stress GDP U/E avg. U/E peak Defaults Severity (2.0%) 8.4% 9.3% Increased ~70% from 2008 levels to ~5% Increased GECC historical severity by 35% on average to ~15-30% (3.3%) 8.9% 10.1% Increased ~100% from 2008 levels to ~6% Increased GECC historical severity by 50% on average to ~20-35% (2.0%) 8.4% (3.3%) 8.9% Revert to historical median of last 18 years PPR model forecasting greater declines in office property cash flows No benefits assumed from U.S. Stimulus Programs 35 Portfolio overview (as of 4Q’08) % of total portfolio Asset type Consumer Commercial U.S. U.S. consumer - Cards - Mortgage - Auto - Student loan - Sales Finance/other GE 30% 70% 41% 6% 3% 0% 0% 0% 4% Banks* 64% 36% 86% 58% 9% 40% 1% 1% 7% GE position vs. 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 * Weighted average of top 4 U.S. money center banks GE mix different than banks 36 18
Slide 19: Business reviews 37 Real Estate 38 19
Slide 20: GE Real Estate … what we do 1 Finance purchase of real estate by 3rd parties in multiple asset classes, individually and in crosscollateralized 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 2 3 39 How we manage risk Semi-annual market evaluations Rigorous process around market, customers and asset 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 Identifies risk trends, concentrations Allows for proactive risk management measures Ongoing risk analytics review combined with asset management surveillance • • Sophisticated tools for easier market analysis and deal assessment • • Market data Customer relationship management • • Economic/market sensitivities Deal review/approval system 40 20
Slide 21: Rigorous portfolio valuation process Detailed 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 Process culminates in roundtable asset valuation review … all assumptions challenged Financial modeling • DYNA lease / proprietary models created for DCF valuations 41 Key market risks in 2009/2010 1 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 2 Over $500B* of U.S. loans set to mature in 2009, $35B* from CMBS pools – Banks deleveraging – Limited new refinancing capacity in the system 3 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 Challenging environment * Source: Property & Portfolio Research (PPR) 42 21
Slide 22: Primary real estate products Debt portfolio: $48B Other RE Warehouse 9% Retail 8% Hotel 11% Mixed 3% Apartment 19% Owner-occupied 19% 6% Construction 1.5% Office 23.5% Equity portfolio: $33B Warehouse 12% Retail 9% Hotel 1% Mixed 6% Parking 3% Apartment 14% Other RE 6% Office 49% • • • • • 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 estate Under Fed Reserve adverse stress test, potential total portfolio losses are manageable 43 Debt 44 22
Slide 23: GE Real Estate position in debt markets GE Real Estate CMBS $62MM Global RE debt market $6 trillion* GE $48B CMBS rated Senior secured/ 1st mortgage 97% senior 46% cross secured/ collateralized 1st mortgage CMBS unrated Mezzanine Equity 3% $1.4B Subordinated 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 * Source: PPR 45 Debt portfolio Collateral type dispersion Other RE 6% Warehouse 9% Retail 8% Hotel 11% Mixed 3% Apartment 19% Construction 1.5% Office 23.5% Total debt exposure: $48B Geographical profile Germany 4% UK 7% Japan 7% US-GA 3% Mexico 8% US-Oth, 23% Other 4% US -CA, 8% US-TX, 5% US-FL, 4% Owneroccupied 19% Canada 8% US/CanadaOwner occupied 19% Comments Owner-occupied 19% CMBS bonds $62MM Singles 32% Debt structure Sub-debt $1.4B 3% a) Crossed portfolios 46% • 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 • $0.7B construction portfolio: 65% acquired at a discount • Japan/UK/Germany: portfolios acquired at a discount First mortgage senior secured 97% 46 23
Slide 24: Commercial real estate at GE What we typically avoid • Construction lending • Land loans • Single family residential development • 2nd mortgages • Mezzanine high yield • CMBS hold positions – A or B pieces • Syndication book, “hung” inventory • Malls • Trophy buildings • Brownfield sites • Resorts • Exited condo conversion early • BRICs • • • • What we do Senior secured lending in markets we understand Value add properties in good locations Mid range office Affordable middle class apartments - Avoid luxury • Retail focus grocery/hyper market anchored centers • Warehouse - Crossed parks w/multi tenant, high CoC • Opportunistic portfolio acquisitions at discounts Commercial RE debt as of Dec ’08 Total O/S ($B) Other Commercial Construction, Land and Developer Debt $112.4 $142.2 $68.2 $48.0 64% 72% 85% 98% 65% bought < par and 8% crossed w/stabilized properties 36% 28% 15% Bank 1 Bank 2 Bank 3 1.5% GE 1.5% 47 Debt portfolio performance $B 15 Maturity profile* $14.9B $9.2B $6.1B $9.2B Vintage profile* $14.4B $11.3B $7.0B $6.8B 6.0 6.4 10 2.9 0.6 7.8 2.4 2.6 9.4 Europe Asia N. America 5 0 <2006 '09 '10 '11 Thereafter 2006 2007 2008 55% of ’08 is opportunistic discounted debt purchase * Excludes owner-occupied Delinquency/defaults Commercial Banks GE (% of Total O/S) 5% 5.4%* Commercial banks (4Q’08) 3% GE 1.2%/$0.6B 0% Dec-00 Dec-01 Dec-02 'Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 * Source: FFIEC 48 24
Slide 25: Why our delinquencies and losses are lower than competitors • Primary driver is product mix • Construction and development loans - 32% of banks’ commercial real estate portfolio vs. 1.5% at GE … 65% acquired at opportunistic discounts - We also generally avoid other higher risk asset classes/structures – 2nd mortgages, mezzanine, malls, resorts, condo conversions, etc. • Underwriting rigor/standards/valuations - Independent/in-house risk underwriting - Our underwritten valuations are generally 5-10% below appraisal values • Asset management capabilities - Extensive local network … unparalleled - Every loan matters Construction & development (C&D) Banks* GE C&D % portfolio C&D charge-offs as % of total charge-offs C&D delinquencies 32% 83% 1.5% 0 11.4% 3.8% 4.4% C&D delinquencies % of total delinquencies 66% Construction and development loans drive bank losses & delinquencies *Source: FFIEC Can’t apply banks’ delinquency and loss experience to GE portfolio 49 Maintaining relatively strong performance Loan to value (LTV) Portfolio metrics DSC LTV 2.0x 74% Not Rated Debt LTV U.S.: 100 markets Eur: 32 markets High Medium Low Mexico Japan Canada Other Mkts. Hotel/Other RE U.S. Total <75% $5.0 $3.1 $0.2 $3.6 $3.1 $1.5 $1.7 $2.6 $20.8 75-90% $3.8 $2.6 $0.5 $0.2 $1.2 $2.2 $2.3 $12.8 >90% $2.4 $0.9 $0.1 $0.5 $0.4 $4.3 75-90% $12.8B <75% $20.8B >90% $4.3B Values: Current re-underwriting, historically 5-10% less than appraisals Excludes owner-occupied, purchased non-performing loans, tax credits • Top 10 markets account for 33% of total • 15% matures in ’09 Debt service coverage (DSC) Comments >1.2 $30.3B 1.0-1.2 $4.4B <1.0 $4.8B 92% paying current $2.1B mitigated - Supported by letters of credit, cash reserves, guarantees covering at least 12 months debt service payments $2.7B not mitigated - $1.2B <80% LTV - Fully reserved if not deemed recoverable Excludes owner-occupied 50 25
Slide 26: Debt maturities risk $6.1B debt maturing in ’09 $1.9B $1.9B 0.3B ’09 maturity components $6.1B $1.3B 0.1B 0.9B 2.2B $1.0B >85% LTV 0.3B 1.2B 1.6B 1.0B 2.3B 1.6B <85% LTV 0.7B 1Q 2Q 3Q 4Q Maturing 2009 <85% LTV loans likely to meet contractual extension requirements … expect all to extend Potential refinance, low LTV, amortization >85% LTV loans pose refinancing risk in current environment • $0.6B expected to pay-off • $0.5B expected to pay-down • $0.5B expected foreclosures (90%+ of loans with specific reserves or purchase discount) 51 Owner-occupied mid-market lending # of deals 1800 1600 1400 1200 1000 800 600 400 200 0 Deal Size/ <$1MM $1-$3MM $3-$5MM $5-$10MM $10-$15MM Deal size segmentation 1,492 1,658 Geographic concentration by NEA CA 14% Remaining 40% TX 6% FL 6% $MM #: 2009 $: %: Ratings by maturity 7 9 0.1 7 59 0.6 203 #: 82 $: 198 %: 2.0 #: 78 $: 132 %: 1.5 #: 2,618 $: 8,254 %: 85.1 #: $: %: #: $: %: 4 #: 1 $: 0 %: 3 #: 5 $: 0.1 %: 8 11 0.1 2 5 0.1 29 46 0.5 Total NEA $9.7B 500 344 89 23 $0.4B 2010 $: #: %: #: 14 $0.4B $15-$20MM >$20MM Total NEA$0.9B $2.7B $1.9B $2.3B $1.1B NY 5% ONTARIO 4% QUEBEC 5% AZ 2% 3% WA 2% OH NJ IL GA PA 2%2%3% 3% 3% NC 2011 $: 674 & after %: 6.6 AAA-A #: 132 #: $: 339 $: %: 3.5 %: BBB-B CCC-C D 88% of deals NEA <$5MM 57% of NEA <$5MM Largest concentration = CA 14% Only 4 states >5% concentration Historical delinquency & losses (1988-2008) 4% Stress test comments EAD ($B) PD 4Q’08 outlook 10.5 3.9% Stress case 10.5 5.1% 1.5% Delinquency % Losses % 2% Loss/yr LGD ($MM) 15% 63 20% 107 0% 1988 1992 1996 2000 2004 2008 Weighted avg. historical delinquency .73% / loss .09%, excludes off-balance sheet • Stress PD is 30% higher than Plan PD; reflects 2 notch drop for < B+, 1 notch drop for > BB• Stress LGD is a 33% increase over 4Q outlook LGD • Stress LGD of 20% requires a 50%+ collateral value loss given average LTV of 61% Credit underwriting with property collateral 52 26
Slide 27: Credit costs – total debt portfolio Our portfolio has outperformed the industry over time 128 97 99 Losses/reserves ’05 ’06 ($5) 0.74% 155 1.6x ’07 $24 0.52% 168 1.5x ‘08 $135 0.64% 301 2.0x Credit costs (provisions) Reserve % Reserve $ Debt service coverage $31 1.31% 189 1.4x ($ in millions) PPR forecast credit costs* 69 156 Better experience 33 17 11 Actual GE RE net charge offs ’05 * Forecast at end of preceding year ’06 ’07 ‘08 • ’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) • 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 53 Property valuation stress methodology NOI assumption Asset-by-asset business plan* reflects PPR/PMA** recession case • 2 year US office market rents flat Cap rate assumption 4Q’08 Outlook* Fed Baseline Case Median long term historical cap rate + adders for asset quality 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 Median long term historical cap rate + adders for asset quality Fed Adverse Case 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 Median long term historical cap rate + adders for asset quality Asset by asset = 35,000 commercial tenants, 8,000 properties, 2,600 cities * Outlook reflects the best local market data available to asset managers in 4Q’08 ** Property Market Analysis (PMA) 54 27
Slide 28: Real Estate loan loss stress cases ($ in billions, pretax) Fed baseline case Total debt NEA Minus 0 - 100% LTV = Net >100% LTV Minus >1.0x DSC = > 100% LTV and <1.0x DSC Minus collateral value = Potential loss $39.5B* (28.5) 11.0 (7.8) 3.2 (2.3) $0.9B Fed adverse $39.5B* (26.2) 13.3 (9.6) 3.7 (2.7) $1.0B 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 Implied default rate Implied LGD 8% 27% * Excludes owner-occupied lending 10% 27% 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 55 Equity 56 28
Slide 29: Equity portfolio Collateral profile Warehouse 12% Retail 9% Hotel 1% Mixed 6% Parking 3% Apartment 14% Other RE 6% Geographical profile Office 49% Total equity exposure: $33B Australia 4% Spain 4% Germany 6% USA 29% UK 6% Canada 6% France 12% Japan 19% U.S. – Top 3 cities (5% of total) – San Diego, Seattle, Austin Japan – Tokyo 9%/France – Paris 8% Predominantly office (Japan, U.S., France) Apts. (U.S., Japan); Warehouse (Mexico, U.S.) GE equity by vintage $14.8 $10.1 3.9 2.6 Equity structure Wholly-owned 3.8 Europe Asia 86% $5.5 2.8 1.4 1.3 3.7 2.6 8.3 JV $2.6 1.2 0.4 1.0 12% Other N. America 2% <2006 2006 2007 2008 48% originated before 2007 57 Portfolio characteristics Asset size > $100MM $50-100MM $20-50MM Portfolio profile Avg. investment $10MM 10% 18% Development assets 3% $33B 3.2 5.8 9.2 29% <$20MM 14.8 43% In-place assets 97% 58 29
Slide 30: Global hurdle process Semi-annual top-down assessment of: 54 U.S. / 32 Europe markets 4 major collateral types Market collateral pairs Apartments Office Debt Equity Debt Equity Multiple inputs used: Macro Micro GDP, demographics Industry trends Market liquidity Local supply/demand Construction Actual sales/leasing activity S/T L/T MH MH S/T = < 3 yrs L/T = 3-5 yrs MH MH S/T L/T PPR / PMA (3rd party/independent) Bottom-up review by local field network; debate through semi-annual meetings Consistent methodology for analyzing markets Alignment of market views between credit committee and field Establishes new business parameters (no equity originations currently), and portfolio indicators High hurdle Low hurdle = rising vacancy, falling rents/values Washington, DC Retail Debt Equity Warehouse Debt Equity S/T L/T HH HH Hurdles Medium hurdle = specific issues to be addressed = balanced supply/demand, stable to rising rents/values High Medium Low L L L L S/T L/T Very rigorous origination guidelines 59 Example: hurdle process limits retail exposure Equity portfolio: $33B $3B C. Eur 28% • Equity hurdles shifted higher in ‘05/’06 resulting in fewer deals Japan 22% Retail 9% Other 10% Mexico 5% Korea 7% • Focused investments on countries/ locations with low per capita retail exposure and a growing middle class • 60% anchored by hypermarkets: Tesco, Walmart, Metro, Tokyu Hands – Reduced U.S. equity exposure early Italy 10% N. America Spain 7% 6% UK 5% U.S. retail ($ in millions) 300 250 200 150 100 50 0 ‘06 ‘07 ‘08 Debt portfolio: $48B • Avoided malls • Very limited retail exposure to single tenants Retail 8%* $240 $167 $157 • 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 * Excludes owner-occupied lending 60 30
Slide 31: How we operate our assets (debt & equity) Extensive depth of resources, asset surveillance activities, and value creation techniques Experienced team network • 97 field office network • Asset management team averages 20+ years RE experience • Shifted focus of global team from originations to asset management Intensive asset surveillance processes Issue resolution/value creation techniques Focus: Originations Asset mgt Risk, finance, etc. Headcount ’07 ’09 2,200 1,500 4% 30% 11% 59% 40% 56% • Captive loan servicing • Change partners/operators – Billing and collections – Improve property performance – Insurance, property tax escrows – Asset strategy changes – Real-time delinquency • Investment structure monitoring modifications – Cash pay downs and lockboxes • Intensive property surveillance – Joint ventures/mergers – Asset level business plans – Seller financing – Lease reviews and approvals • Reposition real estate – Financial statement audits – Renovate/redevelop – Collateral monitoring & security – Re-tenant • Portfolio reviews and metrics GE vs. competitors – Asset categorizations – Differentiated surveillance • We buy assets … run them like a levels based on asset factory performance • Many competitors have limited – Proprietary in-house global operating skills and lack local information system presence – Portfolio performance metrics Highly experienced global team focused to maximize asset values 61 Equity NOI revenues & expenses Property-level revenue actions MM square feet 16.5 Office Ind'l Retail Sourcing mindset for expenses 1 84.5 Property management Property taxes Utilities and other 65.8 Vacancy % ’09 rollover % 16% 15% 2 3 ~167MM SF (excl. apartment, hotel, parking) Intense focus on existing tenants … working plans months ahead of renewal process 22 million sq. ft. leased/rolled in 2008 81% of projected ’09 revenues from in place leases rolling in ’10+ Leveraging our local teams, using best-inclass brokers to develop detailed leasing plans for vacant spaces Rebidding 3rd party PMC service contracts Leverage portfolio-wide buying power Review/revise service scopes Filing for property tax reassessments Sustainability & energy efficiency cost reductions and asset value enhancements Targeting $1.5B NOI in ’09 … Fed baseline $64MM, Fed adverse $74MM 62 31
Slide 32: GE vs. industry Fund levered equity GE 3 big differences vs. opportunity funds 1) We don’t mark assets up 2) We depreciate assets each year 3) We generally don’t lever up • Maturities and periodic value swings make third party debt challenging - Creates artificial timing in the asset life 65-90% Third party external debt GERE $29B • Third party debt generally less attractive than GE internal cost of funds 10-35% Equity • Prefer to “control our destiny” - Use external leverage only when economic - Levered equity structured with skilled partners • Leverage can magnify upside/downside 63 Why is our unrealized loss “so small” compared with opportunity funds? Asset value Opportunity fund Levered investment -book value (mark to market) 3rd party debt (2:1) Acquisition-’06 ’07 (peak) YE ’08 $100 $33 $67 Investment value 9% $103 $36 $67 Investment value 50% $85 $18 $67 Asset value GE Unlevered investment -book value (historical cost) Unrealized gain/(loss) $100 $100 Depreciation 3% Investment value 3% $103 $97 Depreciation 3% Investment value 17% $85 $94 Acquisition-’06 - ’07 (peak) $6 YE ’08 ($9) 64 32
Slide 33: Levered equity positions of funds amplifies losses GE all-cash $29B 100% equity Fund - levered equity* * Assumes ~2:1 leverage ’08 vs. ’07 value loss 15% Investment loss 15% 33% equity 67% 3rd party debt Value loss 15% Investment loss 45% For GE, value loss % on real estate = investment loss For “Fund”, value loss % on real estate does NOT = investment loss GE’s $4B unrealized loss @ year end ’08 = (18%) vs. ’07, (54%) if levered 2:1 65 Equity unrealized losses summary ($ in billions, pretax) YE’08 unrealized loss - $4B Owned RE ($2.9) JV’s ($1.1) Value change vs. YE’07 Walk YE’07 – unrealized gain Sales Depreciation Change in value YE’08 – unrealized loss $3 ($2) $1 ($6) ($4) Value drop as % of GE book value Wholly-owned (15%) JV (42%) Total (18%) Top losses: San Diego London Seattle Chicago Atlanta Irvine Tokyo Dallas San Jose All Other Total Collateral Office Office Office Office Apartment Office Mixed use Apartment Office Various Unrealized loss Cap rate ($0.3) (0.3) (0.2) (0.2) (0.2) (0.2) (0.1) (0.1) (0.1) (2.3) ($4.0) 8.3% 7.4 8.1 8.0 7.7 7.7 4.5 7.8 8.8 Rigorous valuations process • Valuations updated minimum 2 times per year • Standard guidelines with 3rd party market assumptions • Cap rates – long term median, range of 4.2% - 14.7% • Local teams prepare valuations, global teams review and approve • 3rd party data – PPR, PMA, RCA, Co-Star, Reis, etc. • 353 dedicated asset managers review 3,200 assets across 150 markets each cycle – tremendous local knowledge 7.5% Rigorous valuation process supported by 3rd party data from respected industry sources 66 33
Slide 34: Equity impairments ($ in millions, pre tax) Equity impairments $30 ’05 $54 ’06 $153 ’07 ‘08 ’08 UL $294 YE ’08 unrealized loss (‘UL’) mitigated by cumulative depreciation ($ in billions) $4.1 $3.1 $2.1 $1.1 ’09 ’10 ’11 ’12 • 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 ~($4.0) • Real estate assets depreciated over estimated useful life (~3% annual) • Cumulative depreciation balance eliminates current embedded loss over time and reduces risk of impairment 67 Property valuation stress methodology NOI assumption Asset-by-asset business plan* reflects PPR/PMA recession case • 2 year US office market rents flat Cap rate assumption 4Q’08 Outlook* Fed Baseline Case Median long term historical cap rate + adders for asset quality 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 Median long term historical cap rate + adders for asset quality Fed Adverse Case 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 Median long term historical cap rate + adders for asset quality Asset by asset = 35,000 commercial tenants, 8,000 properties, 2,600 cities * Outlook reflects the best local market data available to asset managers in 4Q’08 68 34
Slide 35: Rent growth assumptions % 20 15 10 5 0 -5 -10 -15 -20 London office % 8 6 4 2 0 -2 -4 -6 Atlanta apartment 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 % 15 10 5 0 -5 -10 -15 San Diego office % 8 6 4 2 0 -2 -4 -6 -8 -10 -12 Dallas warehouse 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Outlook Fed Base Fed Adverse Source: PPR, PMA 69 Los Angeles equity example Portfolio mix $0.4B Office 73% Apartment 13% 4% Historical perspective Expected Cap Rates 9% 8.90% 7.83% 8.71% 7.64% Max Median Min 5.67% 4.77% Market fundamentals Office Apartment Retail 5% Warehouse 9% psf Office Apartment p/u Rent Levels $32 $27 $25 $23 $1,780 $1,528 $1,247 $1,076 Max In-Place Median Low Source: PPR Office Apartment 18 yr. median cap rates toward historic high cap rate levels Current GE office portfolio rents 18% below market 70 35
Slide 36: Los Angeles equity Rent growth Office Equity $0.4B • Portfolio comprised of office $293MM, apartment $54MM, warehouse $35MM, retail $19MM Fed base case stress analysis - equity value ($ in millions) Retail Warehouse Apartment Office Outlook 12% 8% 4% 0% -4% -8% -12% Fed base Fed adverse 750 2009 2010 2011 2012 2013 500 $35 $400 $19 $54 $293 $313 $1 $37 $24 $252 $278 $3 $38 $26 $211 $245 $1 $38 $23 $183 Apartment Outlook 6% 4% 2% 0% -2% -4% -6% Fed base Fed adverse 250 0 NEA Impairments Outlook $0 Fed base $10 Fed adverse $76 2009 Source: PPR 2010 2011 2012 2013 Stress case impairments driven by office 71 Real Estate equity stress summary ($ in billions, pretax) Equity impairments % of NEA impaired Implied loss rate on impaired assets 4Q’08 outlook $0.4B 5% 24% Fed base case $1.5B 11% 40% Fed adverse case $2.6B 17% 44% Embedded loss on equity assets (after impairments) Implied loss on affected assets ($4.0B) ($3.6B) ($4.7B) ($3.2B) ($5.9B) ($3.3B) 23% 28% 31% Total estimated portfolio losses utilizing impairment test: • Test: Undiscounted cash flows vs. NEA (net earning assets) • If failed, loss = Discounted FMV vs. NEA 72 36
Slide 37: 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 73 Commercial Lending and Leasing 74 37
Slide 38: Commercial lending & leasing overview Product Portfolio Mix ($230B) Who we are and what we do Equipment leases & loans 54% Leveraged loans 17% • 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 6% Other Factoring& ABL 10% 13% Other senior-secured Portfolio Mix by Region ($230B) Americas 67% Asia 11% EMEA 22% 75 What we do ($ in billions) Product Assets $125 Focus Collateral: hard, foreclosable assets • Inv grade & mid market customers • Equipment & OEMs we know Collateral: inventory & receivables • Working capital for mid mkt • Industries & assets we know Collateral: enterprise & assets • Mid mkt LBO & acq finance • Sponsors & industries we know Collateral: equipment & enterprise • Top tier and larger operators • Concepts & geographies we know Collateral: dealer floor inventory • Equipment & OEMs we know Approach • Essential use equipment • Remarketing expertise • Manufacturer support • Advance rate on eligible assets • Monitoring, audits, cash control • Credit insurance for factoring • Limited hold sizes & multiples • Originate to hold • Predetermined exit strategies • Secured by assets & real estate • Avoid start-ups & locals • Leverage franchisor support • 1st lien on inventory • In-house audit staff – 320 FTE • Manufacturer support Equipment leases & loans ABL & factoring $30 Leveraged loans $38 Franchise finance $13 Inventory finance $6 Originate to hold…dedicated industry teams…foreclosable assets 76 38
Slide 39: Global lease & loan portfolio ($ in billions) 1.1% Loss rate Credit costs 0.9% 0.5% 0.2% 0.1% 0.4% 0.8% $1.4 Monitoring current portfolio trends • Global equipment finance seeing weakness in transportation, construction and automotive • Consumer-related inventory and U.S. restaurant financing under pressure • Leveraged lending experiencing weakness in newspaper, automotive, radio and retail $1.0 $0.9 $0.5 $0.2 $0.1 $0.5 Credit costs Reserve % '02 '03 1.93% 1.51% '04 1.24% '05 '06 0.78% 0.56% '07 0.60% '08 0.80% Delinquency and non-earnings 2.3% Leveraging broader domain expertise to drive portfolio solutions • Created senior executive roles in each region to lead loss mitigation teams • Shifted significant resources to drive workout and portfolio management activities • Reduced exposure to troubled sectors and restricted approvals to top-tier credits Delinquency % 1.8% 1.4% $2.1 $1.5 $1.3 $1.2 $1.5 $1.7 1.5% 1.3% 1.3% 1.3% $2.7 Non-earnings '02 '03 '04 '05 '06 '07 '08 77 Global lending overview Market $5.2 Trillion GE $68 Billion Assetbased Senior secured $30B ABL & factoring … assets better positioned than last cycle Liquidation coverage (ABL) Interest coverage (ABL) Average exposure (ABL) % Top 10 names % Top 10 industries Factoring 90-days 2000 1.2x 1.3x $5MM 19% 66% 8.4% Leveraged $38B $70MM 2008 1.7x 1.7x $24MM 7% 43% 4.2% Leveraged lending … strong U/W discipline, better spread of risk 2000 2008 Senior debt multiple 3.5x 3.5x Senior 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 $27MM Cov lite exposure 4.5% vs. 15% industry Sub debt Re-packaged (CDO) High Yield Senior secured portfolio rigorously managed by an experienced team of professionals 78 39
Slide 40: Leveraged loans: outperforms industry benchmarks in periods of stress 4.60% 2.95% 2.37% 2.47% 2.08% 0.49% 0.86% 1.32% 1.00% 0.43% 1.59% 0.29% 0.31% 0.16% 0.37% 0.30% 0.46% 0.93% Market loss rate* GE loss rate '00 '01 '02 '03 '04 '05 '06 '07 '08 • 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 * Market Loss Rate computed using Moody’s speculative grade default rate x S&P LossStat 1st lien cash flow loss-given-default rate 79 Equipment lease & loan overview Industry mix ($125B) Other (<2%) Transportation Real Estate Food & Bev Airlines Technology Financial Services Automotive Consumer Services Trucking Machinery 4% 4% 4% 5% 5% % 6% 7% 8% Healthcare Providers 8% Retail Manufacturing 14% Construction 2% 2% 3% 5% 15% Business Services Risk management approach • Underwriting teams organized by collateral & industry • Transaction analysis combines credit review and extensive asset valuation • Continuous monitoring of portfolio with dedicated industry groups • Experienced collection and workout teams to exercise remedies and mitigate losses • $14B of residual exposure 80 40
Slide 41: U.S. equipment vs. benchmark U.S. Equipment lending charge-offs vs. ELFA 1.50% 1.40% 1.30% 0.85% 0.80% 0.44% 0.72% 0.72% 0.48% 0.55% 0.46% 0.26% Dec'01 Dec'02 Dec'03 Dec'04 Dec'05 Dec'06 0.33% Dec'07 0.31% Mar'08 0.64% 0.38% 0.39% 0.57% 1.08% 1.11% 1.17% 1.58% 1.41% ELFA* 0.71% GE Equipment Jun'08 Sep'08 Dec'08 Jan'09 Differentiators • Underwrite to hold with emphasis on asset values and credit quality • 500+ person global asset management and remarketing team (specialized by asset/ industry) • 900+ person global collection and work-out team- weekly calls with underwriting teams and senior risk leaders Areas we avoid • Collaterals and industries where we don’t have strong domain expertise • Broker/intermediary sourced deal flow • Smaller regional restaurant concepts and collateral with thin secondary markets • Auction channels that we don't manage with our specialized remarketing teams Consistent performance over a sustained period *Equipment Leasing Finance Association performance indicator report & monthly leasing and finance index 81 Equipment residual values Total residual value ($14B) Marine 2% Forklifts 2% Trucks 3% Copiers 6% Health 7% Asset management approach • 500+ person global team organized by collateral, industry and geography • Independent team sets residuals utilizing extensive secondary market & proprietary data • Multiple remarketing channels to maximize value • Dedicated remarketing team managing all 3rd party sales including auction processes • 80+% of equipment (ex-fleet) sold in place or renewed Other 18% Fleet 32% Aircraft 30% 1998-2008 RV performance 160% Impairment methodology Operating leases ($8B) • Portfolio reviewed at least annually • If undiscounted rentals plus residual value < BV, leased asset impaired to fair value % of Booked RV 140% 120% 100% 80% Finance leases ($6B) • Reviewed at least annually • Compare current estimated residual to residual established at lease inception • If current < original estimate, record impairment if decline is deemed other-than-temporary '98 '99 '00 '01 '02 '03 '04 '05 '06 Total '07 '08 Fleet Aircraft Copiers 82 41
Slide 42: Well-diversified corp. aircraft portfolio Portfolio mix by aircraft type ($13B) Medium 13% Historical residual performance (% of booked residual value) 125% Small 10% 100% 116% 114% 106% 114% 110% 107% 110% 104% 105% 117% Large/Global 62% Rotary 7% Turbo Props/ Other 8% '9 8 '9 9 '0 0 '0 1 '0 2 '0 3 '0 4 '0 5 '0 6 '0 7 '0 8 Portfolio vintage in years ($13B) 16-20 21-25 11-15 7% 5% > 25 8% 5% Portfolio dynamics • 72% of customers > BB- with 15% investment grade • Average lease term is 10 years … stringent conditions protect economics upon early termination • 85% lease maturities beyond 2013 … $312MM in ’09-’10 6-10 31% 0-5 44% • 41 aircraft ($384MM) on ground, avg. age 13 years vs. 30+ year useful life • Original outlook: credit costs of $30MM; Fed base $78MM; Fed adverse $120MM 83 Global fleet residual value exposure Global exposure ($4.7B) Japan UK 4% 8% ANZ 18% France 20% Portfolio dynamics • No residual risk to GE for U.S. Fleet product Germany 28% • Established distribution channels for vehicles – Retail & wholesale outlets – Broad multi-country distribution – Web-based remarketing tools • Rigorous monthly monitoring, increased deflation assumption and shifted away from large cars • Residual realization pressured in Europe – Outlook losses of $50MM … avg. loss $1k/car – Currently experiencing losses of $1.6k/car • Implementing multiple mitigation strategies … targeting $40MM 101% 96% Other EU 22% Historical performance (% of booked residual value) 105% 103% 100% 101% 100% 101% 104% 103% 101% 100% – Extending terms – Direct remarketing – End of term fees • Original global outlook: credit/remarketing losses $70MM; Fed base $93MM; Fed adverse $116MM '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 84 42
Slide 43: Exposures of interest ($ in millions) Big 3 exposure Auto #1 Auto #2 Auto #3 Total Large cable company $521 362 60 $943 Senior debt facility structure • Secured by all assets • Liquidation coverage of 1.8x • Senior debt service coverage of 1.8x • Senior to $14B of junior capital Probable restructuring scenario • Strong operating results but company over-levered • Bankruptcy filing anticipated • Senior debt fully covered • No impairment of GE exposure expected GE has $750MM of $8.3B senior debt facility • 93% supported by equipment leases & loans in core collaterals • All facilities current with principle and interest • Exposures amortizing monthly • Proactively monitoring situation • Potential Loss of $80–150MM … Driven by restructuring scenarios 85 Stress testing summary ($ in millions) Portfolio Americas equipment Leveraged loans Franchise finance EU equipment Asia Pacific U.S. asset-based loans All other Total Loss rate Credit costs Fed Original Fed base adverse outlook $349 499 101 173 186 92 117 $1,517 0.93% $445 672 127 212 225 117 190 $1,988 1.22% $599 880 153 250 310 151 246 $2,589 1.59% Key assumptions • U.S. unemployment at Fed cases • Further deflated asset values • Decreased same store sales in Franchise • Stressed exit scenarios in leveraged lending • No benefit assumed for stimulus package and potential risk mitigation actions 86 43
Slide 44: Stress scenarios – Americas equipment Portfolio overview ($55B) AAA to BBB19% B+ and below 40% BB+ to BB41% LAEF Corp Air 4% 9% Other Canada Canada 16% 16% Office Eq. Small 8% ticket Comm’l Eq. 16% 11% Const. 14% Outlook & stressed scenarios Stress assumptions Original Key variables Outlook Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 7.7% (1.8%) 2.9% 26% 5% HFS Trucking 13% 7% Healthcare Fleet 13% 13% Fleet Citi 13% 14% Fed. Base 8.4% (2.0%) 3.3% 29% Fed. Adverse 8.9% (3.3%) 4.2% 31% Credit Distribution Collaterals Asset backed facilities with broad spread of risk by collateral, transaction size and geography Key metrics 2008 Actual 30+ 90+ Net Charge offs Credit cost Reserves % 2.2% 0.8% 269 278 0.79% 2009 Outlook 3.1% 1.3% 347 349 0.83% 349 0.76% 445 0.97% 599 1.30% Estimated loss rate • 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 87 Stress scenarios – Leveraged loans Portfolio overview ($38B) AAA to BBB7% < B28% BB+ to BB18% Business Services 10% Other 51% (64 industries <5%) Outlook & stressed scenarios Stress assumptions Original Outlook Key variables Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 7.8% (1.6%) 6.9% 19.9% Cable/TV 10% Fed. Base 8.6% (1.8%) 8.3% 22.2% Fed. Adverse 9.0% (2.9%) 9.7% 24.9% Radio/ Broadcasting 9% Printing & Publishing 8% Chemicals and Allied Products 7% Health Services 5% B+ to B48% Credit Distribution Industries Senior secured credit facilities - primarily term loans collateralized by 1st lien on all assets Key metrics 2008 Actual Non-Earning Net Charge offs Credit cost Reserves % 827 317 475 0.8% 2009 Outlook 1,219 333 499 1.2% 499 1.37% 672 1.84% 880 2.41% Estimated loss rate • PD increase driven by weakening economic environment and deteriorating obligor financial health • LGD increase driven by greater uncertainty in ultimate resolution value 88 44
Slide 45: Stress scenarios – Franchise finance Portfolio overview ($13B) AAA to BBB5% C&G 11% Restaurant Quick-service 49% L/S Hotel 8% Bev/ 5% Other Outlook & stressed scenarios Stress assumptions Original Outlook Key variables Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 7.7% (1.8%) 5.3% 21% Fed. Base 8.4% (2.0%) 5.6% 25% Fed. Adverse 8.9% (3.3%) 6.1% 28% B+ and below 37% BB+ to BB58% Restaurant Casual 26% Credit Distribution Segments 80% of portfolio concentrated in 45 larger concepts Key metrics 2008 Actual 30+ 90+ Net Charge offs Credit cost Reserves % 2.7% 1.6% 38 131 1.73% 2009 Outlook 4% 2.4% 100 101 1.75% 101 127 1.41% 153 1.71% Estimated loss rate 1.12% • PD increase resulting from higher unemployment and stressed same store sales • LGD increase driven by drop in real estate values 89 Stress scenarios – EU equipment Portfolio overview ($18B) AAA to BBB11% Const./Mfg. Equipment 24% EF 58% Office Equipment 22% Fleet 30% Other 5% Outlook & stressed scenarios Stress assumptions Original Outlook Key variables Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 8.1% (1.0%) 3.8% 26% Fed. Base 8.9% (1.1%) 4.0% 30% Fed. Adverse 9.4% (1.8%) 4.4% 32% B+ and below 38% BB+ to BB51% Inventory CDF 9% 9% Healthcare 3% Aircraft 7% Credit Distribution Collaterals Asset backed facilities with broad spread of risk by collateral, transaction size and geography Key metrics 2008 Actual 30+ 90+ Net Charge offs Credit cost Reserves % 2.29% 1.03% 145 147 1.24% 2009 Outlook 2.39% 1.29% 163 173 1.44% 173 0.98% 212 1.20% 250 1.42% Estimated loss rate • PD increase driven by slowing economy • LGD increase driven by reduction in fleet prices and lower frequency of full recovery for small transactions 90 45
Slide 46: Stress scenarios – Asia Pacific Portfolio overview ($20B) B+ and below 22% AAA to BBB19% Japan 60% BB+ to BB59% ANZ 28% India 5% Other 7% Outlook & stressed scenarios Stress assumptions Original Outlook Key variables Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 5.2% (1.2%) 4.0% 28% Fed. Base 5.7% (2.2%) 4.5% 30% Fed. Adverse 6.0% (4.2%) 5.7% 33% Credit Distribution Countries Senior secured financings, primarily equipment, in developed economies Key metrics 2008 Actual 30+ 90+ Net Charge offs Credit cost Reserves % 2.4% 1.4% 114 152 1.0% 2009 Outlook 3.4% 2.2% 159 186 1.0% 186 225 1.36% 310 1.87% Estimated loss rate 1.12% • 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 91 Stress scenarios – U.S. ABL Portfolio overview ($10B) AAA to BBBBB+ - BB5% 9% < B42% B+ to B44% 5% 6% Bus Svcs Metal Other 41% Wholesale durable 18% Retail 12% Health svcs 10% 8% Wholesale non-durable Outlook & stressed scenarios Stress assumptions Original Outlook Key variables Unemployment (average) Change in GDP Probability of Default (PD) Loss Given Default (LGD) Est. Credit Cost 7.7% (1.8%) 9.1% 10.0% Fed. Base 8.4% (2.0%) 10.6% 11.0% Fed. Adverse 8.9% (3.3%) 12.5% 12.0% (40 industries <5%) Credit Distribution Industries Senior secured credit facilities secured by 1st lien on current assets, managed via formulaic borrowing base Key metrics 2008 Actual Non-Earnings Net Charge offs Credit cost Reserves % 90 23 36 0.3% 2009 Outlook 215 55 92 0.7% 92 0.91% 117 1.16% 151 1.50% Estimated loss rate • PD increase driven by weakening economic environment and deteriorating obligor financial health • LGD increase driven by lower current asset recovery value 92 46
Slide 47: GECAS 93 GECAS dynamics Who 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 94 47
Slide 48: Industry overview (GECAS Impact) Industry 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 Total World Fleet = 20,392 Cargo Aircraft 2,072 World fleet Parked Fleet 2,025 Total Active World Passenger Fleet = 16,295 More Efficient 13,964 (GECAS PAX fleet) ↓ ↑ ↑ ↑ Total World Passenger Fleet = 18,320 1,386 (e.g. 737, A320, 777, A330, 744, CRJ, ERJ, EMB) (e.g. MD80, 732, BAE, DC9, 727, A300, 742) Least Efficient 2,331 21 ↑ Total Parked Passenger Aircraft = 2,025 InTransit (194) LESS ↔ Capital markets liquidity scarce … harder to secure financing Parked >1yr LESS (865) Older Types (459) LESS Age >20yrs (156) = VIABLE PARKED 351 0 GECAS well-positioned to manage through another cycle: Asset-based financing Proven placement capability Strong industry experience Diversified portfolio 95 Strong asset backed financing & industry expertise Industry/airline • Continuous prospective focus on industry/assets: monitor production monitoring rates, passenger growth and retirements to anticipate cycle • Frequent and direct dialogue with OEMs/airline management on current products, new technologies, and forecasts Equipment • Asset based lender/investor with significant technical expertise • Target high quality collateral – excellent buy & hold aircraft • Limited older and out of production technology 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 Focused approach on assets utilizing deep domain expertise 96 48
Slide 49: Demonstrated placement capability GECAS approach • Advanced placement of roll-off and skyline, easing cycle impact – Remarketing initiated at least 18 months in advance of expected re-lease date – 80+ technical specialists servicing assets globally • 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 Performance Placement as of 1Q’08: 2008 Roll-off Today 2009 66% 90% 100% 2010 23% 37% 2011 0% 15% 99% New Order Today 100% 100% 95% 100% 51% 69% Stronger position than last downturn … placed ahead of projected cycle Closely monitoring & placing unanticipated roll-offs (52 in 2008, 16YTD in 2009) Placing ahead … and through downturn 97 Diversified portfolio RJs Cargo 16% 9% Key comments • Narrow-body Leased assets Portfolio* Wide-body 20% 55% 20% Other Loan 2% 19 % Products 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) Finance Lease 14 % 6 5% Operating Lease Europe 20% Asia 19% 7% 5% • 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 Regions C&LA Canada US 34% 15% MAC Attractive portfolio mix supports cycle management *% of Aviation exposure $’s at 4Q’08 98 49
Slide 50: Stress analysis (Pretax $ in millions) Aircraft values Values are driven by changes in supply & demand Impairments/losses ’09 outlook: assumes a higher 1-yr decline vs. the average 1-yr drop during last downturn ~$265 AIRCRAFT VALUES DEMAND (Traffic) SUPPLY (Active Fleet) $109 FLEET $128 WORLD GDP US GDP EU GDP AS GDP LA GDP OTHER GDP PRICE Fare Stimulation FLEET ENTERING EXITING ’07 ‘08 ’09 Outlook Production Utilization New OEMs Retirements Parking Conversions 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 US GDP impacted by: unemployment, housing, production, etc Current dynamics • 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 ~$320 ~$265 ~$635 ’09 Outlook Base Adverse 99 Proactive approach to distressed accounts 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) Restructurings/defensive deals: 1 2 Improved collateral position with ~$155MM spares loan – 4Q’08 Improved collateral position with ~$240MM aircraft loan - 3Q’08 Improved collateral position through ~$360MM spare parts/engine loan – 4Q’08 Fleet redeployments: 36 from Varig (’02-’03) 22 from ATA (’05) 7 from Kitty Hawk (’07) 6 from Kingfisher (’08) 8 from XL Aviation (’08) 3 Successfully managed through previous periods of distress 100 50
Slide 51: Summary 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 Successfully managed through multiple cycles Proven track record 101 U.S. Consumer 102 51
Slide 52: U.S. Consumer Finance 2008 Served assets Dual Card $8.1B Retail $9.5B Who we are and what we do • Founded in 1932 • Diversified consumer lender; $31B PLCC & $22B Sales Finance managed receivables ($27B on book) • Broad geographic distribution with investment grade partners … over ~140,000 retail & merchant outlets • 76% of receivables with A & B credit quality customers … avg. FICO 694 • 56MM active accounts … avg. bal. ~$950 • Exited U.S. mortgage in 2007 • ~10,000 employees PLCC $22.9B CareCredit $4.8B Power $3.7B RVM $3.8B Long history of profitability challenged in current U.S. environment 103 Tough U.S. retail environment U.S. retailer sales YoY % change GE programs Retailer Retailer Sales Retailer Feb. ’09 Act. YoY V % GE YoY % 4% 2% 0% (2%) (4%) (6%) (8%) (10%) (12%) (14%) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb '08 '08 '08 '08 '08 '08 '08 '08 '08 '08 '09 '09 $1,316 $539 $745 $3,046 $20,071 (9%) (14%) (7%) (4%) +8% (17%) (24%) (14%) (17%) (10%) GE risk actions driving volume down 104 52
Slide 53: Private Label vs. Bank Cards (2008) GE PLCC $29B $620 $2,512 $1,298 5.7 19.7% 7.1% 5.7% 12.6% 699 Yes Bank card ~$850B $3,000 $10,800 $5,580 6.5 12.4% 6.0% 4.1% 6.4% 700 No a) Avg. served assets ($13.5B on book) Average balance Average credit limit Sales/active Turnover (months) Margins (net CV/ASA) Write-offs (NCOs)/ASA b) % of accounts that charge off Spread (ex-reserves & OPEX) Avg. FICO Profit sharing (3Q’08 Co-Brand Retail Benchmarks) b) Excludes benefits of profit or (loss) sharing with retailers Smaller loss severity … 23% of industry line & 21% of balance Higher margins to cover losses … 2x Spread Comparable credit quality Dampens losses a) Source: Citi, Chase, BoA, Cap One 2008 quarterly reports and supplemental datasets & Argus Syndicated Studies PLCC has higher yields on smaller balances 105 Significant Underwriting actions Raised cut-offs and reduced approvals Previous Year Current Year Risk actions New Accounts PLCC FICO cut off to 640, DC to 760 Sales Finance FICO cut off moved to 710 New account lines down 10% PLCC & 20% SF Avg. FICO 730 +38 FICO 768 Approval rates 728 744 54.9% 52.7% (460 bps.) Avg. U.S. FICO: 693 53.4% 51.3% 48.3% 46.7% October February 3Q 4Q February Cut credit lines $1,610 $990 Portfolio Cut lines 37% in PLCC & 43% in Dual Card Removed $216B of ‘Open-to-Buy’ through account closures & credit line decreases No authorizations on delinquent accounts No over limit authorizations on Accounts <780 FICO … cutting out 2.5MM authorizations (39%) $4,953 $3,984 (20%) Revolving Cut open to buy ($B) $372 $36 ($200) Sales Finance ($216B) ($16) $192 Exited higher loss portfolios … RV/Marine & Home Improvement portfolios ($4.1B) Added over 1,000 Collectors to mitigate delinquencies ’07 New Volume ’08 Red. 1Q’09 Red. ’08 Began underwriting activity in early 2007 106 53
Slide 54: New PLCC volume profitable New volume RACV by FICO band Risk action 19% 14% 9% Return hurdle 4% <586 FICO (1%) D/C 586-610 611-640 C C/B 641-670 671-695 B B/A 696-725 A 726-755 756-780 781-810 811-835 A/A+ A+ Average 7.7% U/E 8.4% U/E 8.9% U/E 836+ GE Risk grade (39%) No new accounts + credit line decreases on existing accounts Credit line decreases on existing accounts Dual card cutoff 760 Risk actions in place for higher unemployment 107 Driving yield to offset losses Revenue / Average Net Investment % 19.64% 17.88% 18.35% +129 bps. 1 Yield up with more challenging economy Revolve rates +240 bps. SF, +86 bps. PLCC Average late fee +5% for Sales Finance & 9% for PLCC 2007 Late Fee % 3.68% 2008 4.06% 2009 Outlook 4.61% 55 bps. Price +$193MM $592 100 $399 50 $228 349 110 Additional opportunity Merchant 2 Increase Pricing Avg. APR up ~60 bps. Late Fee assessments up: +620 bps. Sales Finance & +330 bps. PLCC Terms: changes driving other fee income +$50MM 3 Merchant Pricing up Renegotiate contracts Promotional pricing up 25% YoY 382 Consumer 2007 2008 2009 Outlook Driving $592MM price to mitigate higher losses 108 54
Slide 55: Credit Costs increasing Credit Cost (on book) 11.49% Entry rate at historic lows 11.37% 10.93% 10.84% 10.40% (133bps.) 4 yr. Avg. 11.28% 10.52% 9.95% 13.51% 11.10% 4.91% 3.93% Actual 6.96% Reserve Change 2.79% 6.19% 9.58% 1Q '06 3Q '06 1Q '07 3Q '07 1Q '08 3Q '08 3 due CE 52.4% Collections more challenging 46.5% 47.9% 42.6% 43.8% 1Q '09 t Write Offs (NCOs) 4.17% 4 yr. avg. 45.0% (850bps.) 39.0% ’07 Reserve % 30+ DQ. (Served) 90+ DQ. 3.29% 5.53% 1.98% ’08 ’09 Outlook 5.77% 7.19% 2.82% 6.77% 7.88% 3.46% 4+ CE 22.63% 36.5% 4 yr. avg. 18.3% 1Q '06 2Q '06 19.52% 20.42% 17.88% 15.90% 15.15% 16.23% 3Q '06 4Q '06 1Q '07 2Q '07 3Q '07 4Q '07 1Q '08 2Q '08 3Q '08 4Q '08 1Q '09 Entry rates reflect tightened underwriting… still seeing pressure on backend collections 109 Delinquency - U/E correlation DQ. vs. U/E YOY % change 80% U.S. unemployment Feb. 8.1% vs. 7.3% Plan 9.3 8.5 7.6 8.1 7.6 7.2 7.4 6.2 5.5 4.9 5.1 8.8 8.5 8.9 8.0 10.0 Fed. Adverse 9.0 Fed. Base 8.5 ‘09 Outlook 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% Jan-06 Jul-06 Jan-07 Underwriting actions Historical ratio (U/E:Write-Off) 1 : 1.1 U/E DQ – U/E Variance 90+ 30+ 2008 7.2 Jul-07 Jan-08 Jul-08 Jan-09 • Unemployment outpacing Delinquency Ju ly Au gu st Se pt em be r O ct ob er N ov em be D r ec em be r Ja nu ar y Fe br ua ry – 6 month U/E average 48% YoY at 27% at 32% M ar c Ju ne h Ap ril M ay – Average 30+ delinquency – Average 90+ delinquency Historical DQ – U/E correlation breaks in July ’08 as U/W actions take hold 110 55
Slide 56: Global Consumer stress test framework Input Macro environment Volatility & inter dependency relationships Risk assessment & decisioning model (RAD) Scenario Generator • Monte Carlo simulation • Possible paths of macroeconomic variables Model • Default = borrower’s option • Exercise probability based on: – Cash flows (DTIR) – Leverage (LTV) Output • Analysis by geography & product type & segments • PD, LGD and Loss distributions by scenario • Sensitivity to individual risk drivers (macro + assumptions) • Interest rates • Unemployment • Wages & inflation • House prices • Refinance opportunities External Forecast range Risk layers • Credit grade • LTV • Debt-to-Income (DTIR) • Product structure • Credit insurance Uses • Loss and capital adequacy planning • Risk mitigation planning • Portfolio strategy • Non-linear relationships: – Skewed distributions – Fat tails • Severity: collateral/collections Portfolio performance & assumptions • Observed PD/ LGD • Cure rates & Refi rates • Recovery assumptions • Additional loss on sale assumptions Validation • Quarterly back testing • Roll rate analysis triangulation 111 Stress scenarios – PLCC Portfolio overview ($30.4B) On book $13.5B 2009 Outlook & stressed scenarios Stress assumptions Key variables Unemployment (average) Recovery rate A 17% B 21% C 12% Pre 2007 74% ’08 12% 2007 14% ‘08 5.8% 12.3% 3.5% 12.1% $1,530 ‘09 Outlook 7.7% 8.0% 3.6% 16.3% $2,202 Fed. Fed. Base adverse 8.4% 10% 4.3% 18.9% $2,552 8.9% 25% 5.0% 21.3% $2,879 A+ 37% D 13% Credit distribution Portfolio vintage • 54% prime book • Average FICO 699 90+ Delinquency Credit Cost % Est. Credit Cost Key metrics 2008 Actual 30+ (Served) 90+ Net Write-offs (NCOs) Credit Cost Reserves % 7.5% 3.5% 956 1,530 6.0% 2009 Outlook 8.1% 3.6% 1,621 2,202 6.1% Stress case does not include : 1 2 Stimulus benefits Future benefit from risk actions 112 56
Slide 57: Stress scenarios – Sales Finance Portfolio overview ($21.5B) On book $16.0B 2009 Outlook & stressed scenarios Stress assumptions ‘09 Outlook 7.7% 7.8% 3.3% 11.1% $1,784 A 24% B 17% C 11% D 11% Pre 2007 31% ’08 40% Key variables Unemployment (average) Recovery rate ‘08 5.8% 12.4% 2.4% 10.3% $1,515 Fed. Base 8.4% ↓16% 3.8% 13.7% $2,194 Fed. adverse 8.9% ↓25% 4.1% 15.0% $2,398 A+ 37% 2007 29% Credit distribution Portfolio vintage 90+ Delinquency Credit Cost % Est. Credit Cost • 61% prime book • Average FICO 685 Key metrics 2008 Actual 30+ (Served) 90+ Net WriteOffs (NCOs) Credit Cost Reserves % 6.8% 2.4% 744 1,515 5.4% 2009 Outlook 7.7% 3.3% 1,204 1,784 7.7% Stress case does not include : 1 2 Stimulus benefits Future benefit from risk actions 113 Mortgage 114 57
Slide 58: Mortgage overview ($ in billions) Overview • $60B assets across 19 platforms ANZ $13 U.K. $22 France $11 Net income history $1.2 $0.9 $0.7 Poland $5 $1.1 4Q’08 assets Mexico $2 Hungary $1 Spain $1 Others $5 (12 platforms) ’05 ROI% 1.6% ’06 1.7% ’07 1.9% ’08 1.6% • Protected by Mortgage Insurance (MI) Platform U.K. Australia France Poland >80% current LTV with MI 66% 96% 31% 100% Exceptions Pre ’03 vintage, HPI impact Run-off portfolio Seasoned book; Prime n/a 59% 61% A/A+ credit rating 61% 61% 62% 62% 61% A+/A 23% 18% '06 21% 18% '07 20% 19% 1Q '08 20% 18% 2Q '08 20% 18% 3Q '08 21% B 18% C/D 4Q '08 • Exited $1.5B ANZ assets in Feb ’09 >80% A/B credits and MI protection 115 Mortgage portfolio performance 90 day delinquency (top 4 markets) 90% DQ 14% rate 12% 10% 8% 6% 4% 2% 0% Sep ‘07 Dec’07 Australia France Poland Mar ‘08 Jun’ 08 Sep ‘08 Dec ‘08 Feb ‘09 Total Mortgage U.K. Credit costs / ANI Annualized credit costs 1.1% 0.7% 0.3% 0.1% 0.1% Q3'07 0.2% 0.1% Q4'07 0.2% 0.0% Q1'08 Q2'08 0.2% 0.1% Q3'08 Q4'08 0.3% NCO / ANI Indexed portfolio LTV (top 4 markets) 70% with MI 2,000 1,500 1,000 $1,354 Intense focus on REO Avg. value $100,000 $1,868 Total Mortgage 217 Australia 189 557 986 U.K. >80% 49% <80% 51% '08 500 0 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 116 58
Slide 59: Shrinking Mortgage everywhere ($ in billions) $25.4 $13.8 $1.0 ’07 Country 2008 ’08 ’09 outlook V$ V% 2008 ‘07 ’08 ’09 outlook V$ V% 2009 outlook 2009 outlook Originations $72.7 Down $24.4 ENI $61.3 Down $21.4 $51.3 U.K. ANZ France Poland Others Total $4.8 2.1 2.3 1.5 3.1 $13.8 $0.1 0.1 0.5 0.1 0.2 $1.0 ($4.7) (2.0) (1.8) (1.4) (2.9) ($12.8) (97%) (97%) (79%) (91%) (94%) (93%) $22.4 12.6 11.1 5.2 10.0 $61.3 $19.7 8.4 10.2 4.5 8.5 $51.3 ($2.7) (4.2) (0.9) (0.7) (1.5) ($10.0) (12%) (34%) (8%) (14%) (15%) (16%) Cut volume dramatically … February YTD down 88% 117 Mortgage portfolio composition (’08) Assets Country U.K. Australia France Poland Mexico Spain Hungary ($B) $22 13 11 5 2 1 1 Avg. Avg. 30+ DQ 21.0% 4.9% 2.0% 1.2% 8.3% 23.2% 3.0% 90+ DQ 11.0% 2.0% 1.1% 0.4% 4.8% 13.6% 1.0% NCO % 0.4% 0.2% 0.1% 0.0% 0.3% 0.7% 0.0% Total MI% 36% 94% 16% 40% 22% 13% 15% # of insurers/ Rating 2; A+/Negative, A+/Negative 2; AA-/ Stable, AA-/Negative 1; A+/Stable 1; BBB 1; Government entity 1; A+/Negative 1; A+/Negative loan ($M) Prime Orig. LTV $94 174 155 66 105 94 34 26% 84% 87% 98% 70% 74% 98% 78% 79% 71% 73% 68% 68% 57% Vast majority of portfolio protected by strong credits, low LTV and insurance 118 59
Slide 60: U.K. Home Lending (U.K.-HL) ($ in billions) $22B mortgage assets 1st mortgage $19.1 • Created from acquisitions of igroup (’01) & First National (’03) • Originations through intermediaries 2nd mortgage $2.6 • In-house underwriting, collections & asset management • Mortgage originations down 97% • Solid LTV. … 78% and MI coverage on 66% of > 80% LTV • Reorganized business to focus on collections & loss mitigation • ~1,350 employees Originations $10.7 Down $10.6 $4.8 $0.1 ’07 ’08 ’09 Repositioned to de-risk the business 119 U.K.-HL comparison to U.S. lenders U.S. Business model Intermediaries Consumer − Owner occupied − Unemployment (’08) − Bankruptcy filing House supply Loan − Origination LTV − Pricing − Term (avg.) Mortgage insurance 30+ DQ rate (’08) Write-off rates (’08) ~70% ~7.2% Low barrier Oversupply 100%+ Variable teasers 30 years Minimal 40-45% 10-12% ~97% ~6.3% High barrier Shortage ~78% ~60% fixed 20 years 66% of >80% indexed LTV ~21% <1% Expect 3-5% in ’09-’10 Better Consumer dynamics Originate to sell Non Regulated GE U.K.-HL Originate to hold 100% Regulated Our Balance Sheet Better credits Pressured by U.K. economy, but fundamentally different from U.S. 120 60
Slide 61: U.K. economic environment GDP % -a) 3.4% 3.0 2.6 1.8 0.3 3Q’07 4Q’07 1Q’08 2Q’08 3Q’08 4Q08 ’09 forecast -1.8 -3 ~0% ’10 forecast HPI % (YOY change) –b) 10.7% 5.2 1.1 3Q’07 4Q’07 1Q0’8 2Q’08 3Q’08 4Q’08 Feb ‘09 ’10 forecast ’09 forecast -6.1 -12.4 -16.2 -17.7 -10 -5% (a- Source: Global Insight (b- Source: Actuals from HPI; GE forecasts Planning for a difficult environment 121 U.K. collections and loss mitigation New collections organization Portfolio management Actions taken New organization in place Dedicated loss mitigation group Top talent focused on collections/ workouts Increased collectors 3x to ~510 MI COO Loss mitigation Tracking & monitoring Customer service Secured collections Unsecured collections Set up Dialer 0-90 90+ Liquidation: WO’s, short sales 1st 0-29 inbound & outbound 2nd 0-90 i/b & non-high risk o/b 1st 90+ inbound and outbound Retention: Modification 1st 30-90 i/b & non-high risk o/b Structuring hardship & workout offers based on segmentation analysis (LTV, recent payment history & product type) Engaged McKinsey … on site supporting new process Weekly reviews 2nd 0-90 high risk outbound 2nd 90+ inbound and outbound Advisors 1st 30-90 high risk o/b Litigation Shifted entire organization to focus on collections / workouts 122 61
Slide 62: U.K. credit experience 30+ & 90+ Delinquencies 30+ DQ rate 90+ DQ rate 15.3% 13.3% 14.4% 14.4% 11.0% 7.4% 6.3% 7.0% 6.8% 21.0% Net Charge-offs (NCO) ($ in millions) $69 $14 ’04 $25 ’05 0.1% ’06 0.3% $29 $115 ’07 0.1% ’08 0.4% 2004 2005 2006 2007 2008 NCO% 0.1% Drivers of NCO ($ in millions) Loss on sale 360+ days / Quarterly MTM MI recoveries $115 ~$17 ~$124 Added ~340 collectors New Loss Mitigation team Intense REO focus … CFO led MI provides protection Reserving policy Past due / event • Base reserve • 90 days • 360 days/ Repo • Repo sale Model driven Non-earning; Revenue suspended until account cures to < 90 days Marked to Net realizable value; Quarterly marks thereafter Book final gain / loss on sale Policy ~($26) ’08 DQ’s pressured by weaker economy 123 U.K. Mortgage insurance coverage ($ in billions) 1st Mortgage coverage ’08 assets $19.1B Insurance example With MI No MI $200,000 90% $180,000 N/A $0 $170,000 106% $10,000 $0 $10,000 MI $7.7 No MI $11.4 Property Value (PV) Original LTV Loan Amount 80% of PV Insurance coverage PV with -15% HPI Re-Indexed LTV Loss before MI MI claim Net loss $200,000 90% $180,000 $160,000 $ 20,000 $170,000 106% $10,000 $10,000 $0 Coverage for 80% or greater LTV originations … in place since ‘03 Insurers rated “A” … locally regulated & capitalized Certification process at origination ~99% claims effectiveness 59% of delinquent balances with > 80% LTV covered by MI MI provides additional credit support 124 62
Slide 63: U.K. risk layering and losses ($ in billions) Total Indexed LTV% Credit Grade 90+ DQ % A+/A $1.9 0-80% $7.2 B $2.6 6.8% C/D $2.7 A+/A $0.6 1st Mortgage $19.1 80-90% $3.3 B $1.3 10.8% C/D $1.4 A+/A $1.6 >90% $8.6 B $3.6 13.8% C/D $3.4 2nd Mortgage $2.6 0-80% $1.2 A/B C/D $0.7 $0.5 9.7% 8090% >90% $0.9 A/B $0.7 C/D $0.2 $0.5 A/B C/ D $0.3 $ 0.2 14.6% 20.7% Non-earners to NCO $2.4 ($0.8) ($1.3) ($0.1) 90+ DQ Non-earners Cure Est. collateral value Est. MI $0.2 Est. net charge-offs LTV and MI mitigate charge-offs 125 U.K. Mortgage stress scenarios Portfolio overview ($22B) B 38% 2009 outlook & stressed scenarios 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) Credit mix A 20% C 24% D 12% A+ 6% Indexed LTV mix >100% ‘08 17% <80% 27% 38% Pre 2007 90-100% 8049% 2007 18% 90% 34% 17% Key variables Unemployment (average) HPI decline Loss on sale ’08A 5.7% ↓19% 5% $201 ’09 Outlook 7.4% ↓10% 12% $558 U.K. Base 8.5% ↓12% 20% $995 U.K. Adverse 9% ↓15% 25% $1,125 • Avg. origin LTV: 78% • Avg. indexed LTV: 84% • Vintage: Pre-’06 26%, ’06 23%, ’07 34%, ’08 17% Key metrics $MM 30+ 90+ Net Charge offs (NCOs) Credit costs Reserves % ‘08 A 21.0% 11.0% $115 $201 0.8% ‘09 outlook ~29.2% ~16.5% ~$159 ~$564 ~2.9% Estimated credit costs $MM Estimated credit cost % 0.7% 2.6% 4.5% 5.1% Stress case also includes: 1 Limited refinance ability for high risk segments 2 Counterparty risk to mortgage insurance reliance 126 63
Slide 64: Mortgage stress - remaining portfolios ($ in millions) Credit costs Portfolio (assets) ’09 outlook Australia $13B France $11B $4 21 Key stress assumptions ’09 outlook Base Proxy Adverse Proxy Australia HPI decline Addn’l loss on sale Unemployment 2% 15% 5% 0% 20% 8% 4.3% 30% 15% 13.9% 9% 13% 9.2% 5% 20% 5% 5% 20% 8.6% 15% 5% 35% 15% 20% 15% 20% 13% 10% 25% 6.4% 15% 30% 9.2% 10% 20% 5.8% 45% 15% 22% 19% 20% 19% Fed Base Fed Adverse Proxy Proxy $6 30 $43 59 France HPI decline Addn’l loss on sale Unemployment Mexico $2B Spain $1.3B Ireland $0.9B Rest of World $3.6B (Ex UK and CEE) 9 55 8 18 $115 12 71 35 22 $176 37 100 47 62 $348 Mexico HPI decline Addn’l loss on sale Unemployment Spain HPI decline Addn’l loss on sale Unemployment Ireland HPI decline Addn’l loss on sale Unemployment 127 Summary U.S. Consumer Took loss actions early … entry rates down Mitigating losses with profit sharing and revenue actions Solid reserve position … 2x non-earnings Mortgage Low risk and stable performance outside U.K. Solid U.K. underwriting, low LTVs and MI mitigate down cycle Aggressive collections/loss mitigation focus Prepared for challenging U.S. and U.K. economies 128 64
Slide 65: GE Capital Global Banking 129 Emerging markets bank dynamics Assets $6.7B Assets $11.7B Poland Hungary Czech/ Slovakia Who we are and what we do Assets $4.7B • Wholly owned banks ($27.8B) + bank JVs ($4.7B) - ~ 3,000 branches - ~ 25MM customers • 15 countries presence … diversified assets - 89% Europe - 8% Asia - 3% Central America • Well positioned in core markets - Top 3 in Turkey & Central America - Top 5 in Czech & Poland • High quality portfolio - Underwrite to hold - 82% A/B risk credit grades - 56% secured financing Assets $0.8B Latvia Assets $0.6B Romania Assets $1.0B Latin America Assets $1.0B Russia Assets $1.9B Turkey Assets $2.5B Thailand Strong franchise 130 65
Slide 66: Portfolio Product portfolio $22B 4Q‘08 Receivables (%) a) Auto Sales Finance 10% 8% 20% Mortgages 35% 21% 6% Cards a) $27.8B total assets Credit profile Credit distribution (%) D C 11% 19% 46% A+ 7% Personal Loans B SME 17% A Diversified portfolio … 63% A/A+ credit quality 131 GE early mover in Eastern Europe Financials Poland PAM ’95-’98-’08 Czech/Slovakia Assets ($B) NI ($B) PROSPERITA 2005 10.5 0.3 2.8% 2008 27.1 0.5 2.2% ’05-’08 CAGR % ex-Acq. & FX 20% 15% (40) bps. ’97-’00 Hungary ROI (%) ’01 Russia Credit performance 30+% Credit Cost % 5.72% Global Consumer% 2.89% 2.42% 7.47% ’04 Romania/Latvia 1.79% 2.99% ’06 ’02 ’03 ’04 ’05 ’06 ’07 ’08 Conservative entry … organic growth over time 132 66
Slide 67: Slower Eastern Europe growth CEE GDP growth%* 5.5% 3.8% 0.7% (0.5%) (2.0%) (3.0%) (2.0%) (2.0%) (1.8%) 4.3% 3.0% 3.2% Oct.’08 forecast Mar. ’09 forecast 4.8% (12.0%) Poland GE 4Q’08 Assets $11.7B Czech $6.7B Hungary $4.7B Russia $1.0B Latvia $0.8B Turkey $1.9B Romania $0.6B *Sources: EIU Reports February/March 2009 2009 loss planning reflects tougher environment 133 Eastern Europe outlook Banking penetration remains low Total banking revenue / GDP 9.4% 6.8% 4.8% 4.7% 4.5% WE 3.6% 3.0% External 42% debt / GDP Czech Deficit / Surplus (1.4) Current challenges driven by… 1 Macro imbalances 101% 114% 52% Latvia (1.9) Poland (1.9) 31% Russia 3.6 Hungary (3.0) ANZ North Asia* Latam America 2.2 2.0 Middle Eastern East Europe Expansion led by EU accession & GDP growth Margins 2007, percent 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0 0 2 4 2 Currency volatility Poland March’08 2.2 16.0 163.9 23.5 March’09 V% 3.5 ↓ 53% 20.4 ↓ 27% 228.4 34.7 Latin America Africa Middle East North America Western Europe 6 8 10 12 14 16 18 36 CEE Russia India China Czech Hungary Russia Czech Exports/ GDP FX lending Loans / Deposits ↓ 37% ↓ 45% 3 Structural dependencies Hungary Latvia 80 57 132 47 88 238 Poland Russia 42 25 92 32 21 116 80 8 71 Revenue CAGR (2000–2007) * Asia excl. China, India and Japan Source: EIU, McKinsey, FPK, UBS, Reuters Near term potential volatility … long term attractive 134 67
Slide 68: Core Eastern Europe banks #5 in Poland Assets * 29% #4 in Czech #4 $11.7B BPH #8 in Hungary #8 18% 31% $1.1 $2.5B ’04 1.4% SF 1% PLoans 9% 18% $6.7B 25% $3.4B $1.4B $4.7B 39% $0.6B ’00 30+% 4.2% $2.5B ’04 3.8% Auto SF 5% 7% ’08 2.2% ’00 5.2% ’04 2.1% ’08 2.2% ’01 1.4% ’08 2.7% PLoans 16% SME 13% Cards 4% Auto 11% Mortgages 23% Cards 6% SF 6% PLoans 30% Auto 19% Mortgage 25% Mortgages 55% SME 42% SME 24% Cards 3% A/B Credits = 87% * CAGR % ex-Acquisition A/B Credits = 84% A/B Credit = 91% Solid businesses… high quality portfolio 135 FX mortgage underwriting 1 2 3 4 5 Centralized underwriting & full docs on every loan -Property valuations, income verification, etc. Underwriting guidelines routinely adjusted based on FX rate movements, wage growth, & interest rate changes Conservative Debt to Income and Loan to Value ratios -100% Mortgage insurance on >80% originated LTVs No exotic products: low doc loans, self certification, interest only, teaser rates, etc. Borrowers qualified based on their capability to handle a local currency loan, even though they are given a lower interest rate FX loan FX loans fully hedged with cross currency swaps Extensive process with high standards 6 136 68
Slide 69: FX mortgages Poland ($4.5B) Credit distribution 30+ delinquency 2.3% 1.2% A+ 95% A 2%, B,C,D 1% each Hungary ($1B) Credit distribution 30+ delinquency 3.0% A+74% A 24% 0.7% 06 08 06 08 B 2% Avg. LTV=71% Stress test HPI FX (from today) Unemployment Credit losses ($MM) ’09 Outlook 4% 15% 9.5% $7 Base 10% 15% 10.5% $26 Avg. DTI =26% Adverse 20% 30% 13% $87 Avg. LTV=57% Stress test HPI FX (from today) Unemployment Credit losses ($MM) ’09 Outlook Flat 5% 8.5% $2 Avg. DTI =23% Base 10% 15% 9.4% $22 Adverse 20% 25% 10.4% $49 • Strong credit quality • Conservative underwriting • Performing well 137 Stress testing approach Approach Forum and frequency: • Operating plan & short range outlooks • Monthly portfolio reviews • Product / portfolio deep dives Assumptions Key Drivers: Macro • • • • • • • • Home prices Unemployment Currency rate movement Interest rates Loan to values Debt to income Credit quality Additional loss on sales (mortgage) Purpose and use: • Risk management mitigation planning • Loss and capital adequacy planning • Portfolio expansion or exit Portfolio Key assumptions:* Home price decline Unemployment Oversight/Review: • Banking Group CEO, CRO, CFO • GE Capital Investment Committee & Board (selective reviews annually) 10-20% further decrease from today 150-470bps increase depending on market Currency movement Another 15-30% decline from today * Source: EIU, Internal Inputs Robust process, oversight and testing 138 69
Slide 70: Banks stress test results Stress test Stress Test V’09 ’09 Outlook Assets Credit Cost 30 + Base Adverse Outlook ($MM) ($B) ($MM) ($MM) ($MM) $128 2.2% $144 $167 $16-39 Czech $6.9 0.9 0.6 13.4 1.2 4.4 87 63 192 113 73 $656 7.1% 24.3% 2.8% 9.0% 3.8% 94 85 230 160 163 161 155 328 225 232 $1,268 7-74 22-92 38-136 47-112 90-159 $220-612 Stress test assumptions ’09 outlook HPI Czech Unemployment HPI Unemployment Unemployment HPI Unemployment Unemployment HPI Unemployment flat 5.3% (10)% 6.4% 6.7% (4)% 9.5% 1.4% flat 8.5% Base (5)% 7.3% (10)% 7.4% 9% (10)% 10.5% 3.0% (10)% 9.4%% Adverse (20)% 10% (20)% 7.9% 11% (20)% 13% 5.0% (20)% 10.4% Russia Russia Latvia Latvia Poland Poland Thailand Thailand Hungary Hungary Total $27.4 3.6% $876 Under severe stress scenario … emerging market banks still earn ~$300MM 139 Summary • Nearly 15 years experience in these geographies Started small … organic growth overtime • High quality book … 82% A/B credits We underwrite to hold • Strong delinquency & credit cost performance 30+: 5.72% in ’02 to 2.89% in ’08 Low credit cost at 1.79% in ’08 • Rigorous stress testing to get ahead of problems • Adjusted originations to limit volatility 4Q’08: Reduced Mortgage/Auto originations ~50% 2009: Mortgage/Auto originations volumes planned ~80% 2009: A/B credit originations only 140 70
Slide 71: Operations update 141 Operating GE Capital 1 Tightly managing investment … 2009 YE ENI to $500B, $25B Driving higher new business returns … new business ROI Feb YTD ~2.7% Taking substantial cost out … 2009 SG&A 19% (ex-FX); Headcount 13% … 1Q on target to deliver annual savings rate Disposing/running-down ‘red’ assets … closed $23B of dispositions, Feb YTD mortgage originations 88% Driving results with rigorous operating processes 2 3 4 142 71
Slide 72: 2009 ending net investment ($ in billions) ENI Dynamics $525 $500 V% (5%) • Reduced volume across all portfolios • RE, Mortgage and U.S. Consumer volume limited to commitments • Limited BD activity assumed – Santander/Interbanca deals executed Jan. ’09 – ANZ Mortgage $1.5B closed Feb. ’09 Core 357 356 –% • Enhanced collections activities Banks Restructuring 65 103 64 80 (2%) (22%) • Capital bi-monthly reviews – Volume pipeline – Disposition activity – Alternate funding '08 Outlook '09 143 2009 originations and collections ($ in billions) 1st half +13B 2nd half $108 +12B Originations • Planned volume: – Consumer: $125 - includes revolving credit – Commercial: $55 $97 Sales $84 $96 • Monthly pricing reviews Collections • Pricing floors with minimum target ROIs Platform Americas Asia Europe Banking EFS GECAS ’09YTD ROI ~2.9% ~2.5% ~2.4% ~2.3% ~8.4% ~3.8% Sales/ collections Volume Sales/ collections Volume Assumed sales/securitizations reduced to $25B (19%) … $10B in 1Q Assumed R/E equity sales reduced to $3B Actual collections will pace new originations (41%) • Platform sales potential upside to volume and/or collections 144 72
Slide 73: Recent deals in core segments Business Americas, Corporate Lending Americas, Restructuring Finance Deal size $175MM $100MM Deal type Working capital facility for a global chemical customer Asset-backed DIP finance for a paper & packaging customer Customer benefit Closed deal in 25 days Provided a wing-to-wing solution in a quick turnaround time Financials 3.2% ROI 9.7% ROI Americas, $89MM Senior loan for a medical Healthcare Financial ($22MM hold) device customer Services Energy Financial Services GECAS Global Banking SME Financing $150MM 49% limited partnership with an Oil & Gas producer Fast turn-around thanks 3.2% ROI to GE’s Healthcare domain expertise Maintained pipeline development program at reduced debt 11% ROI $290MM $13MM Aircraft sale leaseback and Provided liquidity spare parts for a leading airline Short-term, line for a CEE energy customer Improve working capital management 3.7% ROI 11.7% ROI Strong customer value delivery at high returns for GE Capital 145 SG&A cost ($ in billions) $2.7B $14.0 FX 0.8 $11.3 $10.5 5.3 19% ex-FX 25% Focused approach 1 Organization structure and headcount re-sizing… ~$1.0B 7.1 Direct (C&B) Geographic consolidation 2 Sizing and indirect spending … ~$1.0B Driving lower roof-tops Lease, outside services, legal, sourcing and consultant costs Indirect Operations 5.6 4.0 1.2 Outlook (ex-Acq.) 3 1.3 Business exits … ~$700MM Closing/exiting underperforming/nonstrategic platforms 2008 2009 Lean and competitive structure … $1.2B more out since 12/08 (ex-FX) 146 73
Slide 74: Run-off/restructure redeployment (ENI - $ in billions) $103 ~$80 ~$60 ~$35 Portfolio Equipment Services Consumer mortgages ~15 Consumer/Commercial platforms Game plan 2008 Reduction: Outlook 2009 Outlook 2010 Outlook 2011 Manage investment down ~$70B by 2012 … reinvest in core and funding model Primarily based on pay down/ term Opportunistically sell or swap Maximize value – many attractive platforms for banks longer term $23B $20B $25B ~$70B investment Reinvest in core 2%-6% ROI Pay down CP & LTD Safer funding model Focused organization with strong leader and clear charter 147 Recent dispositions – $23B ($ in billions) Sales Japan – Personal Loans Australia Mortgage Corporate Card Office Imaging Healthcare – Practice Solutions Partnership Marketing Group U.K. Unsecured Germany Austria Finland ENI $5.9 1.5 1.3 0.5 0.8 0.4 5.6 3.4 1.7 1.7 Buyer Closed 3Q’08 1Q’09 1Q’08 2Q’08 4Q’08 2Q’08 1Q’09 4Q’08 1Q’09 1Q’09 Region Reduced assets + exited ‘challenged’ markets 148 74
Slide 75: ‘Red’ assets process • Frequency: BD leaders bimonthly reviews with senior leadership • Rigorous pipeline review & status of ‘red’/‘yellow’ assets … Resources working transactions and structures • Consideration of asset swaps, JV’s, partial or full dispositions • Content for review: Pipeline GE Capital Red/Yellow Status Prime the Pipeline – Summary metrics of deal activity – Active divestitures – Immediate visibility into status of all deals – Complete overview of ‘red’ & ‘yellow’ assets – Recap of most current strategic assessment – Rack & stack process – Creative structuring – Market feedback – Preparing platforms for sale 149 Operating GE Capital 1 Rigorous operating mechanisms Controlled Capital allocation – ENI to $500B or less – Turnover to higher returning volume 2 3 Delivering cost out Driving asset reallocation – ‘Red’ assets – Lower leverage/higher returns… Mortgage 4 150 75
Slide 76: Financial update 151 Summary losses and impairments ($ in billions) Original outlook Commercial portfolio - Real Estate - Aviation and Energy - Mid-market lease/lend - Other Commercial Consumer portfolio - U.S. - Non-U.S. Mortgage - Other Consumer Management planning Total Capital Finance earnings 4.3 0.6 1.9 1.0 ~$10.6 ~$5B 5.1 1.2 2.2 – ~$13.8 ~$2.0-2.5B 5.7 1.6 2.7 – ~$18.4 ~$0 $0.7 0.3 1.5 0.3 $2.4 0.4 2.0 0.5 $3.6 0.7 2.6 1.5 Estimated Fed base case Estimated Fed adverse case 152 76
Slide 77: Stress summary credit costs vs. impairments ($ in billions) Original outlook Credit costs Impairments Total Estimated Fed base case $1.5 0.3 – 0.5 – – – – $2.3 Estimated Fed adverse case Impairments Total Credit costs Impairments Total Credit costs Real Estate Aviation/Energy Mid-market lease/lend Other Commercial U.S. Consumer Non-U.S. Mortgage Bank/JV/Other Mgmt. planning Total $0.3 0.1 1.5 – 4.3 0.6 1.9 1.0 $9.7 $0.4 0.2 – 0.3 – – – – $0.9 $0.7 0.3 1.5 0.3 4.3 0.6 1.9 1.0 $10.6 $0.9 0.1 2.0 – 5.1 1.2 2.2 – $11.5 $2.4 0.4 2.0 0.5 5.1 1.2 2.2 – $13.8 $1.0 0.1 2.6 – 5.7 1.6 2.7 – $13.7 $2.6 0.6 – 1.5 – – – – $4.7 $3.6 0.7 2.6 1.5 5.7 1.6 2.7 – $18.4 153 Estimated stress impact ($ in billions) Original outlook Estimated Fed base case Estimated Fed adverse case Pretax, pre-provision Credit costs Pretax Capital Finance net income GECC Corporate items GECC net income Estimated: Fixed charge coverage a) a) Includes capital contribution ~$13.3 9.7 3.6 ~5.0 (0.2) ~$4.8 ~$11.1 11.5 (0.4) 2.0-2.5 (0.2) $2.0-2.5 ~$9.2 13.7 (4.5) ~0 (0.2) ~($0.2) ~1.52X ~1.32X ~1.19X 154 77
Slide 78: Estimated credit costs vs. estimated Fed 1 yr. ‘adverse’ loss assumptions ($ in billions) GECC 2009 outlook loss rate 0.61% 0.28% 0.94% 16.31% 11.14% 1.09% 4.18% 2.37% c) Estimated Estimated Fed base Fed adverse loss rate loss rate 1.94% 2.15% 0.41% 0.70% 1.22% 1.59% 18.91% 21.33% 13.71% 14.98% 2.05% 2.76% 4.71% 5.71% 3.13% 3.73% 1 year estimated Fed a) loss rates 2.95% n/a 1.57%b) 9.35% 4.95% – – 12/31 financing rec. net of reserves Real Estate $46 Aviation/Energy 24 Mid-market lease/lend 163 U.S. Consumer - Card 12 U.S. Consumer – Sales Finance 14 Non-U.S. Mortgage 59 Other Non-U.S. Consumer 50 Total GE Capital Finance $368 Total GECC $371 Memo: - U.S. Construction loans - 1st lien residential - Home Equity/2nd’s a) Derived from Goldman Sachs Equity Research b) C&I loans used for leveraged loans, “other leases/loans” for equipment c) 2.63% including $1B management planning additional losses None None None 10.60% 3.90% 6.15% 155 Top bank 3σ stress 2009 outlook • Stressed $266B financing receivables in proprietary model • For $102B non-U.S. consumer receivables assumed growth in loss rates 50% higher than U.S. • Scenario – 9.4% peak U/E 2Q’10 (4Q’09 9.2%) – 30% peak to trough housing decline 3rd party 3σ stressed GECC adverse case Losses & impairments $368B Financing receivables $14.5B $13.7B • Stressed 3 std. to 95% confidence • Did not specifically stress assets beyond financing receivables • 2008 back-testing of their results vs. actuals – 15% lower than modeled 3rd party 3σ stress within 5% of adverse stress of financing receivables 156 78
Slide 79: Key ratios – GECC TCE/TA ratio 5.9% a) 3.4% 2.1% BAC 4Q’08 Tier 1 common ratio c) 6.1% b) 6.5% 4.4% 3.1% 2.3% Citi GECC 4Q’08 6.9% a) 5.8% 7.1% 4.9% 1.1% 4Q’08 1.2% 4Q’08 4Q’08 JPM WFC Citi GECC 4Q’08 ’09 Adverse Stress GECC 4Q’08 JPM BAC 4Q’08 4Q’08 WFC 4Q’08 ’09 Adverse Stress GECC RWA/ Total Assets 61% TCE/Risk weighted assets 72% 84% 51% 93% 5.4% 6.0% a) 5.0% 2.7% 1.2% 2.3% 6.2% b) • Strong tangible equity ratios even in adverse case – Ratios improve vs. pro-forma 4Q’08 in adverse case due to balance sheet shrinkage • Tier 1 common ratio strong in adverse case, well above 5.5% estimated regulatory target post stress GECC 4Q’08 ’09 Adverse Stress 4Q’08 JPM BAC 4Q’08 4Q’08 WFC 4Q’08 Citi GECC • Tangible equity reflects $5.3B unrealized loss on investment securities a) Adjusted for equity infusion & CTA/OCI impact b) Assumes no changes to FX and level of unrealized losses c) Using data provided by Citi for peer group 157 Financing receivables reserve methodology $371B U.S. Consumer Non-U.S. Mortgage Accounting model FAS 5 • Formulaic calculation for smaller balance homogeneous loans • Estimate of incurred losses imbedded in portfolio at a point in time – Not life losses or future losses not yet incurred Methodology Consumer • Primarily roll rate models • Write-off policy – Closed-end installment – 120 days – Revolving – 180 days – Mortgage – 360 days $226B Other Consumer Mid-Market lease/loan Other Commercial • FAS 114 – Specific credit or collection evaluation approach • FAS 5 – Primarily static pool model applying historical loss curves – PD x LGD history applied to loans individually determined non-impaired FAS 114 Corporate loans • Specific reserves on individual loans deemed impaired $145B FAS 5 • Formulaic calculation of losses embedded in portfolio for which a default or loss event has been incurred but not yet observable Real Estate debt Aviation/Energy loans Franchise/Other 4Q’08 Each methodology incorporates current trends and conditions and other observable environmental factors 158 79
Slide 80: Non-earning reserve coverage ($ in billions) Commercial $3.2 1.1 228% coverage 0.5 100% recovery Loans in recovery/ workout Expect full recovery 0.8 $1.7 Exposure Collateral value on remaining exposure 0.8 4Q’08 Non-earning Estimated loss exposure 4Q’08 Reserves 159 Non-earning reserve coverage ($ in billions) $4.7 1.4 Consumer 3.3 Non-mortgage $3.2 non-mortgage reserves 231% coverage 1.0 1.8 Cure 133% coverage 0.2 4Q’08 Non-earning Mortgage non-earnings Estimated collateral value Estimated MI 0.3 Estimated loss exposure $0.4 4Q’08 Mortgage reserves 160 80
Slide 81: Financing receivables vs. top U.S. banks ($ in billions, as of 4Q’08) U.S. Consumer - U.S. credit cards - Residential mortgages - Auto - Student loans - Sales finance/other U.S. Commercial - Real Estate debt - Real Estate construction - Commercial loans - Commercial leases GECC Top banks average a) Reserve % Receivables coverage Portfolio Reserve % Receivables coverage Portfolio Top banks coverage GECC asset composition $12.7 18.3 31.0 28.3 0.6 33.1 43.3 $105.3 6.30% 5.46% 5.81% 3.4% 4.9% 8.4% $238 $1,078 7.8% 2.3% 580 1,896 43.1 13.1 231.1 22.4 $1,170 1.7% 3.1% 0.67% 9.35% 1.01% 1.0% 2.0% 7% 39% 2% 1% 9% 59% 17% 29% 36% 7.8% x 12.7 1.7% x 18.3 3.94% 0.67% x 28.2 9.35% x 0.6 1.01% x 36.0 1.00% X 43.3 0.96% 0.71% 7.6% 0.79% 0.2% 0.78% 8.9% 1.03% 11.7% 0.87% 28.4% a) Consumer data avg. of Top 3 Banks Real estate data source Top 5 Bank, loss coverage est. split construction vs. non-construction Commercial loans and leases data source Top 5 Bank U.S. reserves comparable 161 GECS investment securities ($ in billions) 12/31/08 State & Muni Retained interests 2 6 20 U.S. corporate Assets primarily support the run-off insurance operations long term liabilities and guaranteed investment contracts We do not have debt securities classified as FAS 115 HTM $3.1B insured by monolines – $2.2B FSA, MBIA, Ambac; $0.7B FGIC $8B asset-backed securities; $1.3B subprime exposure ($1.1B wrapped by monolines) – no CDO’s CMBS 2 RMBS 4 2 3 ABS Non-U.S. gov’t./corp. U.S. Equity gov’t. 11 U.S. corporate debt : $41B 70+% investment grade 600 Companies, 60 >$100MM book value Largest single exposures Fannie & Freddie $0.8B in total, Wells Fargo $0.3B, rest $0.2B or less Diversified, predominantly long term debt-based portfolio 162 81
Slide 82: Investments Measure Impairment review process • 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 models • Evaluate underlying issuer or cash flows Evaluate – 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 Test • 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 • 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 Conclude $1.4B pretax impairments in 2008 … estimated $0.7B at risk for 2009 163 GECC Goodwill ($ in billions) FAS 142 reporting units Consumer Commercial Lending and Leasing Real Estate Aviation Energy Financial Services GECC Goodwill as of 12/31/08 $9.1 12.6 1.2 0.2 2.2 $25.2 Methodology/frequency • Tested for impairment annually and whenever events or circumstances make it more likely than not that fair value < book value • If reporting unit fair value < book value, then must fair value each identified tangible and intangible asset. Goodwill impaired when implied fair value < goodwill book value • Fair value of reporting units estimated using discounted cash flow method; corroborated with market multiples, when available • Retesting reporting unit goodwill for impairment in 1Q’09 – No impairments indicated – Continuing to monitor 164 82
Slide 83: GECC Associated companies ($ in billions) Investment Hyundai – Korea Garanti Bank – Turkey CAMGE – Spain Bank of Ayudhya – Thailand GE Nissen – Japan BAC International – C. America Dogus GE BV – Romania Colpatria – Colombia Brunswick/Polaris – CFS Southern Star (LP) – Kentucky Cosmos Bank – Taiwan All others a) $18.7 GECS 4Q’08 Holding Investment a) Performance 43% 21% 50% 33% 50% 50% 50% 50% 50% 60% 23% $3.2 1.9 1.3 1.1 0.9 0.7 0.5 0.3 0.3 0.3 0.3 8.5 $19.3 Stable Outperform Stable Stable Stable Stable Stable Stable Stable Outperform Challenged View of impairment risk as of 2/09 Low Low Low Low Low Low Low Low Low Low Medium 100+ partnerships, avg. $50 investment 165 Rigorous process for evaluating asset impairments (GECS $ in billions) Assets reviewed for impairment Real estate owned Cost & equity method inv. Retained interest Debt securities Rigorous process • All FAS115 assets reviewed quarterly for other than temporary impairment • Multiple layers of review: – – – – Business unit Capital Finance Corporate accounting CAS/Auditors ($8B Trinity) Primary 4Q’08 assets Frequency acc’ting. model $36.7 At least annually FAS144 21.6 At least annually APB18/FAS115 4.6 Quarterly FAS115 12.1 Quarterly FAS115 32.3 27.3 29.0 22.0 At least annually At least annually Quarterly FAS144 FAS142/144 FAS115 Equipment leased to others - Aircraft - Equipment Goodwill/intangibles GECS Insurance securities <2% assets subject to mark-to-market 4Q’08 assets Equities-trading FAS133 hedges Retained interest (Consumer) 4Q’08 assets CMBS $– Assets held for sale 7.7 -Money 3.1 -Real Estate 0.3 -Other 4.3 $0.8 – 1.8 • All equipment coming off lease evaluated for impairment • All annual reviews updated if there is change in assumptions or circumstance Accounting models utilized are prescribed 166 83
Slide 84: Summary 1 2 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 3 4 5 167 GECC Summary + Outlook 168 84
Slide 85: Primary questions … the answers Commercial Real Estate We will experience lower earnings through this cycle, but believe we have it covered in our own business framework We expect credit losses will increase, but mortgage insurance and operational rigor should help mitigate the impact to a manageable level These are long established franchises. We expect credit losses to increase, but not significantly higher than the rest of world We see a tough cycle driven by unemployment in 2009, and are planning for higher losses in line with the industry We apply appropriate accounting policies. Our reserves are adequate for current economic conditions Based on stressed losses, capital appears adequate. Further options available if conditions worsen What is the risk in U.K. mortgage? What is the risk in Eastern Europe? What is the risk in U.S. Consumer? Losses/Impairments/Reserves Capital 169 GE Capital future Today Commercial Future Why to like this business Banks • Deposit funding with potential for growth • High margin new business • Consolidation + partnership potential Verticals • 25+ year track record • Leverage GE brand/competencies/synergy Core • Leasing and asset management intensive platforms advantaged vs. banks Banks 10% Verticals 15% Real Estate Consumer GECAS Energy Core 75% Other Assets ROI $637B 1.3% $400-450 1.5-2% • Direct origination to mid-market • Core underwriting skills • Fewer FinCos • Bank consolidation … historically positive 170 85
Slide 86: 2009 Summary 1 Environment much tougher – we think GECC is prepared • Strong liquidity/limited refinancing risk today 2 3 4 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 5 GE Capital business model robust as the economy recovers 171 Closing 172 86
Slide 87: How to think about GE Capital risk 1 Even under Fed adverse stress tests, GE Capital is approximately breakeven in 2009 and we should not need to inject additional capital Cases Op plan Fed base Net income Fixed charge coverage a) Tangible equity ratio $10 $5 ~1.52 6.9% $14 $2 ~1.32 6.4% Fed adverse $18 $0 ~1.19 6.1% 2 Losses and impairments Framework can accommodate ~$40B of losses over 3 years without requiring additional capital Potential losses & impairments 2008 Base plan (a- includes ~$B equity infusion 2009/ 2010 ~$30B Cumulative 3 years ~$40B $10B 173 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 responsibility for GECS liabilities Current outlook does not require external capital 174 87
Slide 88: Company update Dec. 16 Energy Infrastructure Tech. Infrastructure ++ + 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 NBCU Capital Finance 0/‒ $5 Profitable Corporate Flat 175 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 176 88