GE Capital’s 3Q15 revenues
GECC (General Electric Capital Corporation) reported $6.3 billion in revenues in 3Q15 compared to $6.4 billion in 3Q14, a 1% drop.
While GE Capital’s commercial lending and leasing was up 14%, consumer finance up 1%, and aviation finance up 4%, the energy finance business saw a 35% drop in revenues due to a weak investment environment in the energy sector.
Why is GE downsizing its financial services business?
In April 2015, GE (GE) chairman and chief executive officer Jeffrey Immelt announced plans to downsize the financial services (XLF) business to focus on traditional industrial businesses including power, oil and gas, aviation, transportation, healthcare, and energy management.
GE’s financial services business had over $400 billion in assets excluding cash and cash equivalents at the time of the announcement, making it equivalent to the seventh-largest US bank by assets. Due to its sheer size and reliance on wholesale funding, GECC has been on the radar of regulators and shareholders in recent years. GECC is categorized as a SIFI (systematically important financial institution) by the Federal Reserve. SIFIs are closely regulated by the Fed and are subject to stricter regulations due to their importance and the ability, due to their size, to disrupt the economy in case of any trouble.
Due to regulatory issues, reduced attractiveness, and mounting pressure from shareholders, GE decided to substantially reduce its exposure to financial services and generate 90% of its overall profits from the industrial business by 2018. GE’s financial services business includes Synchrony Financial (SYF) and GECC’s wholesale and retail operations.
In the next part, we’ll look at how GE’s plans are progressing.