General Electric to cut finance arm, set share buyback

General Electric is ditching the lending business, despite it being a major profit generator. It's the latest move the US technology and industrial company is taking to reduce its holdings in the finance industry.

Deutsche Welle, 10 April 2015

General Electric announced Friday it intends to sell off most of its finance arm over the next two years, opting to shed a massive unit carrying its own set of risks and instead focus more on its industrial operations.

In addition to the sale of GE capital, the Fairfield, Connecticut-based company also set a share buyback plan of up to $50 billion (47.2 billion euros), which sent its shares up in premarket trading Friday.

Blackstone and Wells Fargo are buying most of the assets of GE Capital Real Estate valued around $23 billion.

The total deal is the biggest in the commercial property market, since Blackstone's acquisition of office landlord Equity Office Properties Trust in 2007 for $39 billion, including debt.

GE has been reducing its exposure in the finance industry following the global financial crisis, off-loading its consumer credit and banking divisions. The financial division generates almost half of the company's profit, but it's also a huge regulatory burden, causing anxiety for investors.

In addition, the company has been selling off its worldwide property investments in favor of focusing more on earnings and product sales, such as of jet engines, generators, electric grid gear and oil field equipment.

The US technology and industrial company said it expected earnings from its aviation, power and water and other industrial businesses to account for about 90 percent of total earnings by 2018. These units made up just over half of GE's profit in 2013.

GE added "market conditions were favorable" to sell most GE Capital over the next two years.

el/hg (Reuters, AP, dpa, AFP)