Diversified conglomerate General Electric Co. (GE) is considering breaking off large parts of its lending business, GE Capital, due to concerns about the huge size of the business, the Wall Street Journal reported Sunday.
According to the WSJ report, GE's investors are concerned about the risks to the financial sector and the likelihood of tougher regulation hurting returns at the lending unit that has grown to become one of the largest banks in the U.S.
However, GE does not reportedly plan to split off the entire business, as it has brought substantial tax benefits and helped fund deals in other GE businesses.
Since the global financial crisis, GE has said it is in the process of shrinking GE Capital by selling assets and reducing its loan portfolio. GE's CEO Jeff Immelt is looking to pull out of consumer finance and cutting the company's real estate holdings.
According to the WSJ report citing people familiar with the matter, GE is now looking at the possibility of selling businesses in GE Capital's consumer-finance portfolio, such as private-label credit cards or showroom financing. These cuts could reportedly reduce GE's loan portfolio by about 16 percent.
In mid-April, GE reported a decline in profit for the first quarter from the prior year, as it did not report last year's NBC Universal and Garanti sales. Lower results from GE Capital also impacted the bottom line. Net earnings for the first quarter declined 10 percent to $3.03 billion, or $0.29 per share. Consolidated revenues fell 8 percent from the year-ago period to $35.18 billion.
While GE Capital's first-quarter earnings remained flat with last year, it rose 27 percent excluding the Garanti sale impact. The segment accounted for about half of GE's earnings in the first quarter.
In May, GE said it is taking a special dividend of $4.5 billion from its financial arm. Earlier in the month, the Federal Reserve gave GE Capital approval to resume returning a share of its profit to the parent company.
GE closed Friday's trading at $19.20, up $0.20 or 1.05 percent on a volume of 107.94 million shares.
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