General Electric's plans for asset sales from its GE Capital unit are ahead of schedule and expected to be completed by the end of this year, according to executives speaking Friday (22 July) on the US conglomerate's second quarter earning call.
Through the end of the second quarter, GE Capital had signed $181 billion of asset sales and closed $158 billion in sales from its financing unit, after deciding to sell most of the business in April 2015. Executives reported further that the $10 billion closing in July on the sale of the GE Capital's equipment finance and receivable finance businesses in France and Germany earlier this month brought the total closings to date to $168 billion at the time of the call.
Assets still on the block include the unit's Italian bank, a book of French mortgage loans and other unnamed portfolios and investments. Chief financial officer and senior vice president Jeffrey Bornstein said he expects GE Capital will continue to hold about $10 billion in outstanding loans and sign deals for the $15 billion in remaining asset sales by the end of the third quarter.
The de-designation of GE Capital as a systemically important financial institution on 28 June was a “major step” in GE's exit plan for the business, according Bornstein. GE Capital was the first institution to complete this process, according to presentation materials released in conjunction with the earnings call.
Distinct units focused on energy, aviation, and industrial finance remain as active vertical businesses within GE Capital. These businesses earned $452 million in the second quarter, which saw GE Capital support $1.1 billion in industrial orders through third-party financings.
Overall, GE Capital reported a $1.1 billion loss for the second quarter of 2016. Bornstein attributed the unit's loss to the effects of excess interest expense, preferred dividend payments, operating costs, restructuring and actions related to asset liability actions. The earnings represent a 15 percent decline from the same period last year, a difference GE executives on the call attributed to higher insurance reserve provisions. Three quarters of the $2.1 billion in loans originated by GE Capital in the second quarter were in support of GE's industrial businesses.
With $11 billion in dividends paid in the first half of the year and a further $4 billion paid in July, the GE Capital unit has returned a $15 billion dividend year to date; nearly reaching its stated goal of $18 billion in dividend returns for the year, according to the presentation.
The April 2015 decision by GE to sell most of its financing business has been a formative event for the private debt industry, with many units and personnel from GE Capital going on to form important components of businesses that continue to operate in the market. Among the most significant of the asset sales has been GE Capital's $12 billion sale of GE Antares to the Canada Pension Plan Investment Board, the sale of three of its business units to Wells Fargo for $32 billion and the $9 billion sale of its healthcare lending unit to Capital One.