Investors Worried About Exposure at GE (GE) Capital -WSJ

The Wall Street Journal published an article this morning entitled "GE Capital's Head Winds". The article highlights reasons why General Electric (NYSE: GE) Capital could create problems for the entire conglomerate as the rift in the economy deepens.

While CEO Jeff Immelt has repeatedly tried reassuring worried investors that GE has limited exposure to "credit-market upheaval", the market is pricing in a different story: since mid-August, the stock has fallen more than 10%. The WSJ article points out that investors may be considering two very sensitive corners of the economy -- commercial real estate and loans to midsize businesses.

As a whole, GE Capital made up about 45% of the conglomerates sales last year. Its real-estate unit holds about $87 billion in assets in a variety of office towers, shopping centers, etc. Despite an already lowered outlook for its real-estate branch, some analysts believe GE's estimate of $1.5-$1.7 billion could be at risk given commercial property values which have recently fallen 5-15%, a drastically slowing U.S. economy and the credit crunch. Such macro issues could increase delinquencies on GE's loans, making it harder for GE to sell properties and add to earnings.

The article notes that a similar situation which hurt GE's earnings in Q1 is now panning out: credit markets froze, leading to unfinished deals. Contrarily, the article reminds readers that GE used weakness in Q1 to pick up a construction portfolio from Merrill Lynch (NYSE: MER) at a drastic discount, and could do this again this time around.

General Electric Company operates as a technology, media, and financial services company worldwide.

You May Also Be Interested In

• Trex Company names Brian J. Taylor as its first chief commercial officer
• The West Can't Process Enough of This Critical Metal, and the Gap Doesn't Close by 2030
• The West Can't Process Enough of This Critical Metal, and the Gap Doesn't Close by 2030