GE says its finance unit is profitable, and is no ‘time bomb’
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General Electric Co.’s chief financial officer tried to talk his investors off the ledge today. He has succeeded, for the moment.
Amid another meltdown in blue-chip stocks in general, GE shares were up 7 cents to $6.76 at about 11:15 a.m. PST. The Dow Jones industrial average, which includes GE, was down 254 points, or 3.7%, to a new 12-year low of 6,620.
GE stock had dived as low as $5.73 on Wednesday on fears the company would have to raise more capital to support its massive financial-services unit.
Early today, CFO Keith Sherin went on CNBC (which is owned by GE) to say investors’ concerns were ‘overdone’ -- and that GE Capital would be profitable this quarter.
‘I don’t see a need to put additional capital into GE Capital,’ he said.
From Bloomberg News:
GE Capital’s cost of funds is about 4.6%, less than last year’s, in part because of a Federal Deposit Insurance Corp. program to back debt, Sherin said. With that, plus the ability to sell commercial paper through a federal facility, he said GE has enough capacity to fund its needs through 2010. There are several ways GE can add to the finance unit’s reserves without raising outside funds, including a further slowdown in loan originations, Sherin said. ‘We are dealing with an incredibly difficult environment in the financial world, but we do not have a time bomb in GE Capital,’ Sherin said.
He also promised investors that GE would hold an investor meeting the week of March 16 to do a ‘deep dive’ into the fundamentals of GE Capital.
‘We will do a deep dive around the hot spots in the company, including real estate, U.S. consumer, global mortgage with a focus on U.K. home lending, and central and eastern Europe exposure,’ Sherin said in a statement.
-- Tom Petruno