Daily News: July 23, 2012

GE Capital’s Q2 Performance Driven By Real Estate

In its conference call and presentation on its Q2 financial results, GE noted that GE Capital’s net income of $2.1 billion, up 31% year/year, was driven by its real estate business. The company said a big highlight of Q2 was the continued improvement in commercial real estate.

GE said real estate’s net income of $221 million was up $555 million from the previous year and $160 million from the previous quarter. GE said earnings were driven by lower marks and impairments, one-time tax benefits and lower credit costs, which was the “lowest level we’ve had in years.”

GE said GE Capital ended the quarter with an ending net investment of $433 billion, net of cash, which was already below its original $440 billion target for the year. The company said it expects an ENI of about $425 billion at the end of the year. Part of the reduction ENI, or about $5 billion, will result from the sale of real estate’s Business Properties business, which is expected to close in the fourth quarter. The company said GE Capital’s revenue decline of 8% was in line with asset shrinkage of 7%.

Commenting on its Commercial Lending and Leasing (CLL) business, GE said assets were down 7% year/year driven by non-core runoff. Commercial volume in the Americas was $7.7 billion, up 2%, and returns on new volume remained at a 2% ROI. GE said CLL’s earnings of $626 million were down 11% and noted the decline was mostly impacted by $60 million of year/year pressure in Italy from credit costs.

GE Capital restarted its dividend with $3 billion paid to the parent in the second quarter. In his remarks, CEO Jeff Immelt said with the GE Capital dividend, GE was at $6.8 billion in cash, up 55% and ahead of expectations. Immelt noted that the dividend will help support GE’s plan to buy back an additional $3.5 billion to $4.5 billion of stock by year-end.

To see GE’s presentation slides, click here.

To read GE’s conference call transcript, click here.