FORM 10-Q
|
(Mark One)
|
|||||
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
||||
THE SECURITIES EXCHANGE ACT OF 1934
|
|||||
For the quarterly period ended September 30, 2011
|
|||||
OR
|
|||||
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
||||
For the transition period from ___________to ___________
|
|||||
_____________________________
Commission file number 001-06461
_____________________________
|
|||||
GENERAL ELECTRIC CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware
|
13-1500700
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
901 Main Avenue, Norwalk, Connecticut
|
06851-1168
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer þ
|
Smaller reporting company ¨
|
Part I – Financial Information
|
Page
|
||
Item 1.
|
Financial Statements
|
||
Condensed Statement of Current and Retained Earnings
|
3
|
||
Condensed Statement of Financial Position
|
4
|
||
Condensed Statement of Cash Flows
|
5
|
||
Summary of Operating Segments
|
6
|
||
Notes to Condensed, Consolidated Financial Statements (Unaudited)
|
7
|
||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
51
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
72
|
|
Item 4.
|
Controls and Procedures
|
72
|
|
Part II – Other Information
|
|||
Item 1.
|
Legal Proceedings
|
73
|
|
Item 6.
|
Exhibits
|
74
|
|
Signatures
|
75
|
||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
|||||||||||
Revenues from services (a)
|
$
|
11,180
|
$
|
11,091
|
$
|
35,048
|
$
|
34,343
|
|||
Other-than-temporary impairment on investment securities:
|
|||||||||||
Total other-than-temporary impairment on investment securities
|
(83)
|
(36)
|
(260)
|
(283)
|
|||||||
Less: Portion of other-than-temporary impairment recognized in
|
|||||||||||
accumulated other comprehensive income
|
19
|
6
|
81
|
127
|
|||||||
Net other-than-temporary impairment on investment securities
|
|||||||||||
recognized in earnings
|
(64)
|
(30)
|
(179)
|
(156)
|
|||||||
Revenues from services (Note 9)
|
11,116
|
11,061
|
34,869
|
34,187
|
|||||||
Sales of goods
|
32
|
40
|
116
|
489
|
|||||||
Total revenues
|
11,148
|
11,101
|
34,985
|
34,676
|
|||||||
Costs and expenses
|
|||||||||||
Interest
|
3,557
|
3,565
|
10,721
|
10,892
|
|||||||
Operating and administrative
|
3,107
|
3,338
|
9,778
|
10,318
|
|||||||
Cost of goods sold
|
30
|
39
|
108
|
458
|
|||||||
Investment contracts, insurance losses and insurance annuity benefits
|
27
|
36
|
81
|
109
|
|||||||
Provision for losses on financing receivables
|
1,020
|
1,637
|
2,988
|
5,824
|
|||||||
Depreciation and amortization
|
1,836
|
2,016
|
5,403
|
5,778
|
|||||||
Total costs and expenses
|
9,577
|
10,631
|
29,079
|
33,379
|
|||||||
Earnings from continuing operations before income taxes
|
1,571
|
470
|
5,906
|
1,297
|
|||||||
Benefit (provision) for income taxes
|
(66)
|
366
|
(890)
|
825
|
|||||||
Earnings from continuing operations
|
1,505
|
836
|
5,016
|
2,122
|
|||||||
Earnings (loss) from discontinued operations, net of taxes (Note 2)
|
2
|
(1,051)
|
277
|
(1,501)
|
|||||||
Net earnings (loss)
|
1,507
|
(215)
|
5,293
|
621
|
|||||||
Less net earnings (loss) attributable to noncontrolling interests
|
38
|
18
|
89
|
(9)
|
|||||||
Net earnings (loss) attributable to GECC
|
1,469
|
(233)
|
5,204
|
630
|
|||||||
Dividends
|
–
|
–
|
–
|
–
|
|||||||
Retained earnings at beginning of period
|
51,702
|
46,502
|
47,967
|
45,639
|
|||||||
Retained earnings at end of period
|
$
|
53,171
|
$
|
46,269
|
$
|
53,171
|
$
|
46,269
|
|||
Amounts attributable to GECC
|
|||||||||||
Earnings from continuing operations
|
$
|
1,467
|
$
|
818
|
$
|
4,927
|
$
|
2,131
|
|||
Earnings (loss) from discontinued operations, net of taxes
|
2
|
(1,051)
|
277
|
(1,501)
|
|||||||
Net earnings (loss) attributable to GECC
|
$
|
1,469
|
$
|
(233)
|
$
|
5,204
|
$
|
630
|
|||
(a)
|
Excluding net other-than-temporary impairment on investment securities.
|
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
(Unaudited)
|
|||||
Assets
|
|||||
Cash and equivalents
|
$
|
82,391
|
$
|
59,538
|
|
Investment securities (Note 3)
|
17,362
|
17,952
|
|||
Inventories
|
44
|
66
|
|||
Financing receivables – net (Notes 4 and 12)
|
293,737
|
312,234
|
|||
Other receivables
|
13,211
|
13,674
|
|||
Property, plant and equipment, less accumulated amortization of $24,291
|
|||||
and $25,390
|
52,309
|
53,747
|
|||
Goodwill (Note 5)
|
27,726
|
27,508
|
|||
Other intangible assets – net (Note 5)
|
1,702
|
1,874
|
|||
Other assets
|
79,743
|
79,045
|
|||
Assets of businesses held for sale (Note 2)
|
3,050
|
3,127
|
|||
Assets of discontinued operations (Note 2)
|
1,461
|
12,375
|
|||
Total assets(a)
|
$
|
572,736
|
$
|
581,140
|
|
Liabilities and equity
|
|||||
Short-term borrowings (Note 6)
|
$
|
121,733
|
$
|
113,646
|
|
Accounts payable
|
7,835
|
6,839
|
|||
Non-recourse borrowings of consolidated securitization entities (Note 6)
|
29,022
|
30,018
|
|||
Bank deposits (Note 6)
|
41,515
|
37,298
|
|||
Long-term borrowings (Note 6)
|
259,332
|
284,346
|
|||
Investment contracts, insurance liabilities and insurance annuity benefits
|
4,859
|
5,779
|
|||
Other liabilities
|
21,983
|
20,287
|
|||
Deferred income taxes
|
3,091
|
6,109
|
|||
Liabilities of businesses held for sale (Note 2)
|
1,813
|
592
|
|||
Liabilities of discontinued operations (Note 2)
|
1,261
|
2,181
|
|||
Total liabilities(a)
|
492,444
|
507,095
|
|||
Capital stock
|
56
|
56
|
|||
Accumulated other comprehensive income – net(b)
|
|||||
Investment securities
|
(676)
|
(337)
|
|||
Currency translation adjustments
|
138
|
(1,541)
|
|||
Cash flow hedges
|
(1,711)
|
(1,347)
|
|||
Benefit plans
|
(353)
|
(380)
|
|||
Additional paid-in capital
|
28,462
|
28,463
|
|||
Retained earnings
|
53,171
|
47,967
|
|||
Total GECC shareowner's equity
|
79,087
|
72,881
|
|||
Noncontrolling interests(c)
|
1,205
|
1,164
|
|||
Total equity
|
80,292
|
74,045
|
|||
Total liabilities and equity
|
$
|
572,736
|
$
|
581,140
|
|
(a)
|
Our consolidated assets at September 30, 2011 include total assets of $43,259 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $36,170 million and investment securities of $4,624 million. Our consolidated liabilities at September 30, 2011 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GECC. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $28,522 million. See Note 13.
|
(b)
|
The sum of accumulated other comprehensive income − net was $(2,602) million and $(3,605) million at September 30, 2011 and December 31, 2010, respectively.
|
(c)
|
Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(150) million and $(137) million at September 30, 2011 and December 31, 2010, respectively.
|
Nine months ended September 30,
|
|||||
(In millions)
|
2011
|
2010
|
|||
Cash flows – operating activities
|
|||||
Net earnings
|
$
|
5,293
|
$
|
621
|
|
Less net earnings (loss) attributable to noncontrolling interests
|
89
|
(9)
|
|||
Net earnings attributable to GECC
|
5,204
|
630
|
|||
(Earnings) loss from discontinued operations
|
(277)
|
1,501
|
|||
Adjustments to reconcile net earnings attributable to GECC
|
|||||
to cash provided from operating activities
|
|||||
Depreciation and amortization of property, plant and equipment
|
5,403
|
5,778
|
|||
Increase (decrease) in accounts payable
|
1,158
|
650
|
|||
Provision for losses on financing receivables
|
2,988
|
5,824
|
|||
All other operating activities
|
1,569
|
381
|
|||
Cash from (used for) operating activities – continuing operations
|
16,045
|
14,764
|
|||
Cash from (used for) operating activities – discontinued operations
|
840
|
882
|
|||
Cash from (used for) operating activities
|
16,885
|
15,646
|
|||
Cash flows – investing activities
|
|||||
Additions to property, plant and equipment
|
(7,149)
|
(3,113)
|
|||
Dispositions of property, plant and equipment
|
4,514
|
3,075
|
|||
Increase in loans to customers
|
(234,537)
|
(220,665)
|
|||
Principal collections from customers – loans
|
249,444
|
238,998
|
|||
Investment in equipment for financing leases
|
(6,920)
|
(6,796)
|
|||
Principal collections from customers – financing leases
|
9,797
|
11,519
|
|||
Net change in credit card receivables
|
746
|
577
|
|||
Proceeds from sale of discontinued operations
|
8,951
|
–
|
|||
Proceeds from principal business dispositions
|
2,117
|
905
|
|||
Payments for principal businesses purchased
|
(50)
|
(561)
|
|||
All other investing activities
|
4,590
|
11,781
|
|||
Cash from (used for) investing activities – continuing operations
|
31,503
|
35,720
|
|||
Cash from (used for) investing activities – discontinued operations
|
(809)
|
(267)
|
|||
Cash from (used for) investing activities
|
30,694
|
35,453
|
|||
Cash flows – financing activities
|
|||||
Net increase (decrease) in borrowings (maturities of 90 days or less)
|
(2,020)
|
(1,285)
|
|||
Net increase (decrease) in bank deposits
|
3,746
|
3,982
|
|||
Newly issued debt (maturities longer than 90 days)
|
|||||
Short-term (91 to 365 days)
|
10
|
464
|
|||
Long-term (longer than one year)
|
33,776
|
26,513
|
|||
Non-recourse, leveraged lease
|
–
|
–
|
|||
Repayments and other debt reductions (maturities longer than 90 days)
|
|||||
Short-term (91 to 365 days)
|
(58,003)
|
(73,101)
|
|||
Long-term (longer than one year)
|
(1,603)
|
(1,679)
|
|||
Non-recourse, leveraged lease
|
(640)
|
(544)
|
|||
Dividends paid to shareowner
|
–
|
–
|
|||
All other financing activities
|
(1,002)
|
(2,096)
|
|||
Cash from (used for) financing activities – continuing operations
|
(25,736)
|
(47,746)
|
|||
Cash from (used for) financing activities – discontinued operations
|
(42)
|
(719)
|
|||
Cash from (used for) financing activities
|
(25,778)
|
(48,465)
|
|||
Effect of currency exchange rate changes on cash and equivalents
|
1,042
|
(1,037)
|
|||
Increase (decrease) in cash and equivalents
|
22,843
|
1,597
|
|||
Cash and equivalents at beginning of year
|
59,679
|
63,880
|
|||
Cash and equivalents at September 30
|
82,522
|
65,477
|
|||
Less cash and equivalents of discontinued operations at September 30
|
131
|
1,865
|
|||
Cash and equivalents of continuing operations at September 30
|
$
|
82,391
|
$
|
63,612
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(Unaudited)
|
(Unaudited)
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
|||||||||||
CLL
|
$
|
4,512
|
$
|
4,551
|
$
|
13,786
|
$
|
13,651
|
|||
Consumer
|
4,032
|
4,097
|
13,035
|
12,840
|
|||||||
Real Estate
|
935
|
953
|
2,834
|
2,888
|
|||||||
Energy Financial Services
|
221
|
291
|
931
|
1,677
|
|||||||
GECAS
|
1,265
|
1,321
|
3,917
|
3,819
|
|||||||
Total segment revenues
|
10,965
|
11,213
|
34,503
|
34,875
|
|||||||
GECC corporate items and eliminations
|
183
|
(112)
|
482
|
(199)
|
|||||||
Total revenues in GECC
|
$
|
11,148
|
$
|
11,101
|
$
|
34,985
|
$
|
34,676
|
|||
Segment profit
|
|||||||||||
CLL
|
$
|
688
|
$
|
443
|
$
|
1,943
|
$
|
987
|
|||
Consumer
|
737
|
773
|
2,976
|
1,977
|
|||||||
Real Estate
|
(82)
|
(405)
|
(775)
|
(1,332)
|
|||||||
Energy Financial Services
|
79
|
55
|
330
|
334
|
|||||||
GECAS
|
208
|
158
|
835
|
763
|
|||||||
Total segment profit
|
1,630
|
1,024
|
5,309
|
2,729
|
|||||||
GECC corporate items and eliminations
|
(163)
|
(206)
|
(382)
|
(598)
|
|||||||
Earnings from continuing operations
|
|||||||||||
attributable to GECC
|
1,467
|
818
|
4,927
|
2,131
|
|||||||
Earnings (loss) from discontinued operations,
|
|||||||||||
net of taxes, attributable to GECC
|
2
|
(1,051)
|
277
|
(1,501)
|
|||||||
Total net earnings attributable to GECC
|
$
|
1,469
|
$
|
(233)
|
$
|
5,204
|
$
|
630
|
|||
At
|
|||||
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
|
|||||
Assets
|
|
||||
Cash and equivalents
|
$
|
218
|
$
|
54
|
|
Financing receivables – net
|
483
|
1,917
|
|||
Property, plant and equipment – net
|
2,054
|
103
|
|||
Goodwill
|
135
|
–
|
|||
Other intangible assets – net
|
37
|
187
|
|||
Other assets
|
30
|
841
|
|||
Other
|
93
|
25
|
|||
Assets of businesses held for sale
|
$
|
3,050
|
$
|
3,127
|
|
|
|||||
Liabilities
|
|||||
Short-term borrowings
|
$
|
474
|
$
|
146
|
|
Accounts payable
|
82
|
46
|
|||
Long-term borrowings
|
1,144
|
228
|
|||
Other liabilities
|
113
|
172
|
|||
Liabilities of businesses held for sale
|
$
|
1,813
|
$
|
592
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Operations
|
|||||||||||
Total revenues
|
$
|
12
|
$
|
515
|
$
|
336
|
$
|
1,565
|
|||
Earnings (loss) from discontinued operations before income taxes
|
$
|
(7)
|
$
|
46
|
$
|
4
|
$
|
170
|
|||
Benefit (provision) for income taxes
|
21
|
3
|
50
|
(5)
|
|||||||
Earnings (loss) from discontinued operations, net of taxes
|
$
|
14
|
$
|
49
|
$
|
54
|
$
|
165
|
|||
Disposal
|
|||||||||||
Gain (loss) on disposal before income taxes
|
$
|
(45)
|
$
|
(1,100)
|
$
|
(86)
|
$
|
(1,666)
|
|||
Benefit (provision) for income taxes
|
33
|
–
|
309
|
–
|
|||||||
Gain (loss) on disposal, net of taxes
|
$
|
(12)
|
$
|
(1,100)
|
$
|
223
|
$
|
(1,666)
|
|||
Earnings (loss) from discontinued operations, net of taxes
|
$
|
2
|
$
|
(1,051)
|
$
|
277
|
$
|
(1,501)
|
|||
At
|
|||||
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
Assets
|
|||||
Cash and equivalents
|
$
|
131
|
$
|
142
|
|
Financing receivables - net
|
98
|
10,589
|
|||
Other assets
|
1
|
168
|
|||
Other
|
1,231
|
1,476
|
|||
Assets of discontinued operations
|
$
|
1,461
|
$
|
12,375
|
|
Liabilities
|
|||||
Accounts payable
|
$
|
7
|
$
|
110
|
|
Deferred income taxes
|
206
|
238
|
|||
Other
|
1,048
|
1,833
|
|||
Liabilities of discontinued operations
|
$
|
1,261
|
$
|
2,181
|
|
At
|
|||||||||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
Gross
|
||||||||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Estimated
|
Amortized
|
unrealized
|
unrealized
|
Estimated
|
||||||||||||||||
(In millions)
|
cost
|
gains
|
losses
|
fair value
|
cost
|
gains
|
losses
|
fair value
|
|||||||||||||||
Debt
|
|||||||||||||||||||||||
U.S. corporate
|
$
|
3,696
|
$
|
59
|
$
|
(168)
|
$
|
3,587
|
$
|
3,490
|
$
|
169
|
$
|
(14)
|
$
|
3,645
|
|||||||
State and municipal
|
654
|
17
|
(141)
|
530
|
918
|
4
|
(232)
|
690
|
|||||||||||||||
Residential mortgage-backed(a)
|
1,790
|
29
|
(281)
|
1,538
|
2,099
|
14
|
(355)
|
1,758
|
|||||||||||||||
Commercial mortgage-backed
|
1,480
|
25
|
(199)
|
1,306
|
1,619
|
-
|
(183)
|
1,436
|
|||||||||||||||
Asset-backed
|
3,925
|
2
|
(215)
|
3,712
|
3,242
|
7
|
(190)
|
3,059
|
|||||||||||||||
Corporate – non-U.S.
|
1,395
|
34
|
(124)
|
1,305
|
1,478
|
39
|
(111)
|
1,406
|
|||||||||||||||
Government – non-U.S.
|
1,787
|
4
|
(133)
|
1,658
|
1,804
|
8
|
(58)
|
1,754
|
|||||||||||||||
U.S. government and
|
|||||||||||||||||||||||
federal agency
|
2,523
|
13
|
–
|
2,536
|
2,663
|
3
|
(5)
|
2,661
|
|||||||||||||||
Retained interests
|
29
|
14
|
(6)
|
37
|
55
|
10
|
(26)
|
39
|
|||||||||||||||
Equity
|
|||||||||||||||||||||||
Available-for-sale
|
720
|
123
|
(77)
|
766
|
902
|
194
|
(9)
|
1,087
|
|||||||||||||||
Trading
|
387
|
–
|
–
|
387
|
417
|
–
|
–
|
417
|
|||||||||||||||
Total
|
$
|
18,386
|
$
|
320
|
$
|
(1,344)
|
$
|
17,362
|
$
|
18,687
|
$
|
448
|
$
|
(1,183)
|
$
|
17,952
|
|||||||
(a)
|
Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at September 30, 2011, $770 million relates to securities issued by government sponsored entities and $768 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.
|
In loss position for
|
||||||||||||
Less than 12 months
|
12 months or more
|
|||||||||||
Gross
|
Gross
|
|||||||||||
Estimated
|
unrealized
|
Estimated
|
unrealized
|
|||||||||
(In millions)
|
fair value
|
losses
|
(a)
|
fair value
|
losses
|
(a)
|
||||||
September 30, 2011
|
||||||||||||
Debt
|
||||||||||||
U.S. corporate
|
$
|
584
|
$
|
(69)
|
$
|
451
|
$
|
(99)
|
||||
State and municipal
|
56
|
(28)
|
266
|
(113)
|
||||||||
Residential mortgage-backed
|
134
|
(1)
|
892
|
(280)
|
||||||||
Commercial mortgage-backed
|
–
|
–
|
1,304
|
(199)
|
||||||||
Asset-backed
|
2,836
|
(48)
|
850
|
(167)
|
||||||||
Corporate – non-U.S.
|
38
|
(2)
|
723
|
(122)
|
||||||||
Government – non-U.S.
|
578
|
(25)
|
160
|
(108)
|
||||||||
U.S. government and federal agency
|
–
|
–
|
2
|
–
|
||||||||
Retained interests
|
–
|
–
|
3
|
(6)
|
||||||||
Equity
|
116
|
(77)
|
–
|
–
|
||||||||
Total
|
$
|
4,342
|
$
|
(250)
|
$
|
4,651
|
$
|
(1,094)
|
||||
December 31, 2010
|
||||||||||||
Debt
|
||||||||||||
U.S. corporate
|
$
|
357
|
$
|
(5)
|
$
|
337
|
$
|
(9)
|
||||
State and municipal
|
137
|
(16)
|
443
|
(216)
|
||||||||
Residential mortgage-backed
|
166
|
(3)
|
920
|
(352)
|
||||||||
Commercial mortgage-backed
|
779
|
(103)
|
652
|
(80)
|
||||||||
Asset-backed
|
111
|
(5)
|
902
|
(185)
|
||||||||
Corporate – non-U.S.
|
123
|
(2)
|
673
|
(109)
|
||||||||
Government – non-U.S.
|
642
|
(6)
|
105
|
(52)
|
||||||||
U.S. government and federal agency
|
1,613
|
(5)
|
–
|
–
|
||||||||
Retained interests
|
–
|
–
|
34
|
(26)
|
||||||||
Equity
|
46
|
(9)
|
–
|
–
|
||||||||
Total
|
$
|
3,974
|
$
|
(154)
|
$
|
4,066
|
$
|
(1,029)
|
||||
(a)
|
At September 30, 2011, other-than-temporary impairments previously recognized through other comprehensive income (OCI) on securities still held amounted to $(467) million, of which$ (378) million related to RMBS. Gross unrealized losses related to those securities at September 30, 2011 amounted to $(604) million, of which $(495) million related to RMBS.
|
Amortized
|
Estimated
|
||||
(In millions)
|
cost
|
fair value
|
|||
Due in
|
|||||
2011
|
$
|
2,663
|
$
|
2,665
|
|
2012-2015
|
4,712
|
4,720
|
|||
2016-2020
|
1,734
|
1,522
|
|||
2021 and later
|
932
|
695
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Gains
|
$
|
25
|
$
|
29
|
$
|
180
|
$
|
135
|
|||
Losses, including impairments
|
(64)
|
(32)
|
(188)
|
(161)
|
|||||||
Net
|
$
|
(39)
|
$
|
(3)
|
$
|
(8)
|
$
|
(26)
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
||||||||||
(In millions)
|
2011
|
2010
|
|||||||||
Loans, net of deferred income(a)
|
$
|
260,552
|
$
|
275,877
|
|||||||
Investment in financing leases, net of deferred income
|
39,854
|
44,390
|
|||||||||
300,406
|
320,267
|
||||||||||
Less allowance for losses
|
(6,669)
|
(8,033)
|
|||||||||
Financing receivables – net(b)
|
$
|
293,737
|
$
|
312,234
|
|||||||
(a)
|
Deferred income was $2,313 million and $2,351 million at September 30, 2011 and December 31, 2010, respectively.
|
(b)
|
Financing receivables at September 30, 2011 and December 31, 2010 included $1,221 million and $1,503 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per Accounting Standards Codification (ASC) 310, Receivables.
|
At
|
|||||||||||
September 30,
|
December 31,
|
||||||||||
(In millions)
|
2011
|
2010
|
|||||||||
Commercial
|
|||||||||||
CLL
|
|||||||||||
Americas(a)
|
$
|
81,072
|
$
|
88,558
|
|||||||
Europe
|
37,130
|
37,498
|
|||||||||
Asia
|
11,914
|
11,943
|
|||||||||
Other(a)
|
469
|
664
|
|||||||||
Total CLL
|
130,585
|
138,663
|
|||||||||
Energy Financial Services
|
5,977
|
7,011
|
|||||||||
GECAS
|
11,841
|
12,615
|
|||||||||
Other
|
1,388
|
1,788
|
|||||||||
Total Commercial financing receivables
|
149,791
|
160,077
|
|||||||||
Real Estate
|
|||||||||||
Debt
|
25,748
|
30,249
|
|||||||||
Business Properties
|
8,630
|
9,962
|
|||||||||
Total Real Estate financing receivables
|
34,378
|
40,211
|
|||||||||
Consumer
|
|||||||||||
Non-U.S. residential mortgages
|
38,708
|
40,011
|
|||||||||
Non-U.S. installment and revolving credit
|
19,801
|
20,132
|
|||||||||
U.S. installment and revolving credit
|
43,249
|
43,974
|
|||||||||
Non-U.S. auto
|
6,462
|
7,558
|
|||||||||
Other
|
8,017
|
8,304
|
|||||||||
Total Consumer financing receivables
|
116,237
|
119,979
|
|||||||||
Total financing receivables
|
300,406
|
320,267
|
|||||||||
Less allowance for losses
|
(6,669)
|
(8,033)
|
|||||||||
Total financing receivables – net
|
$
|
293,737
|
$
|
312,234
|
|||||||
(a)
|
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
|
Balance at
|
Provision
|
Balance at
|
|||||||||||||||
January 1,
|
charged to
|
Gross
|
September 30,
|
||||||||||||||
(In millions)
|
2011
|
operations
|
(a)
|
Other
|
(b)
|
write-offs
|
(c)
|
Recoveries
|
(c)
|
2011
|
|||||||
Commercial
|
|||||||||||||||||
CLL
|
|||||||||||||||||
Americas
|
$
|
1,288
|
$
|
250
|
$
|
(79)
|
$
|
(544)
|
$
|
80
|
$
|
995
|
|||||
Europe
|
429
|
126
|
17
|
(218)
|
49
|
403
|
|||||||||||
Asia
|
222
|
81
|
16
|
(194)
|
25
|
150
|
|||||||||||
Other
|
6
|
3
|
(4)
|
–
|
–
|
5
|
|||||||||||
Total CLL
|
1,945
|
460
|
(50)
|
(956)
|
154
|
1,553
|
|||||||||||
Energy Financial Services
|
22
|
10
|
–
|
(4)
|
8
|
36
|
|||||||||||
GECAS
|
20
|
(4)
|
–
|
(2)
|
–
|
14
|
|||||||||||
Other
|
58
|
13
|
–
|
(31)
|
3
|
43
|
|||||||||||
Total Commercial
|
2,045
|
479
|
(50)
|
(993)
|
165
|
1,646
|
|||||||||||
Real Estate
|
|||||||||||||||||
Debt
|
1,292
|
155
|
13
|
(494)
|
12
|
978
|
|||||||||||
Business Properties
|
196
|
70
|
–
|
(107)
|
4
|
163
|
|||||||||||
Total Real Estate
|
1,488
|
225
|
13
|
(601)
|
16
|
1,141
|
|||||||||||
Consumer
|
|||||||||||||||||
Non-U.S. residential
|
|||||||||||||||||
mortgages
|
803
|
151
|
11
|
(229)
|
43
|
779
|
|||||||||||
Non-U.S. installment
|
|||||||||||||||||
and revolving credit
|
937
|
413
|
16
|
(980)
|
430
|
816
|
|||||||||||
U.S. installment and
|
|||||||||||||||||
revolving credit
|
2,333
|
1,587
|
(1)
|
(2,365)
|
399
|
1,953
|
|||||||||||
Non-U.S. auto
|
168
|
26
|
7
|
(176)
|
98
|
123
|
|||||||||||
Other
|
259
|
107
|
(6)
|
(215)
|
66
|
211
|
|||||||||||
Total Consumer
|
4,500
|
2,284
|
27
|
(3,965)
|
1,036
|
3,882
|
|||||||||||
Total
|
$
|
8,033
|
$
|
2,988
|
$
|
(10)
|
$
|
(5,559)
|
$
|
1,217
|
$
|
6,669
|
|||||
(a)
|
Included a provision of $77 million at Consumer related to the July 1, 2011 adoption of ASU 2011-02. See Note 12.
|
(b)
|
Other primarily included transfers to held for sale and the effects of currency exchange.
|
(c)
|
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
|
Balance at
|
Adoption of
|
Balance at
|
Provision
|
Balance at
|
|||||||||||||||||||
December 31,
|
ASU 2009
|
January 1,
|
charged to
|
Gross
|
September 30,
|
||||||||||||||||||
(In millions)
|
2009
|
16 & 17(a)
|
2010
|
operations
|
Other(b)
|
write-offs(c)
|
Recoveries(c)
|
2010
|
|||||||||||||||
Commercial
|
|||||||||||||||||||||||
CLL
|
|||||||||||||||||||||||
Americas
|
$
|
1,180
|
$
|
66
|
$
|
1,246
|
$
|
823
|
$
|
(20)
|
$
|
(787)
|
$
|
95
|
$
|
1,357
|
|||||||
Europe
|
575
|
–
|
575
|
190
|
(47)
|
(348)
|
41
|
411
|
|||||||||||||||
Asia
|
244
|
(10)
|
234
|
131
|
(10)
|
(118)
|
15
|
252
|
|||||||||||||||
Other
|
10
|
–
|
10
|
(3)
|
–
|
–
|
–
|
7
|
|||||||||||||||
Total CLL
|
2,009
|
56
|
2,065
|
1,141
|
(77)
|
(1,253)
|
151
|
2,027
|
|||||||||||||||
Energy Financial Services
|
28
|
–
|
28
|
56
|
1
|
–
|
–
|
85
|
|||||||||||||||
GECAS
|
104
|
–
|
104
|
17
|
–
|
(96)
|
–
|
25
|
|||||||||||||||
Other
|
34
|
–
|
34
|
23
|
(2)
|
(3)
|
1
|
53
|
|||||||||||||||
Total Commercial
|
2,175
|
56
|
2,231
|
1,237
|
(78)
|
(1,352)
|
152
|
2,190
|
|||||||||||||||
Real Estate
|
|||||||||||||||||||||||
Debt
|
1,358
|
(3)
|
1,355
|
794
|
5
|
(505)
|
–
|
1,649
|
|||||||||||||||
Business Properties
|
136
|
45
|
181
|
124
|
(7)
|
(92)
|
2
|
208
|
|||||||||||||||
Total Real Estate
|
1,494
|
42
|
1,536
|
918
|
(2)
|
(597)
|
2
|
1,857
|
|||||||||||||||
Consumer
|
|||||||||||||||||||||||
Non-U.S. residential
|
|||||||||||||||||||||||
mortgages
|
892
|
–
|
892
|
224
|
(57)
|
(259)
|
67
|
867
|
|||||||||||||||
Non-U.S. installment
|
|||||||||||||||||||||||
and revolving credit
|
1,106
|
–
|
1,106
|
810
|
(46)
|
(1,318)
|
422
|
974
|
|||||||||||||||
U.S. installment and
|
|||||||||||||||||||||||
revolving credit
|
1,551
|
1,602
|
3,153
|
2,342
|
(3)
|
(3,285)
|
344
|
2,551
|
|||||||||||||||
Non-U.S. auto
|
292
|
–
|
292
|
83
|
(36)
|
(269)
|
128
|
198
|
|||||||||||||||
Other
|
292
|
–
|
292
|
210
|
(24)
|
(298)
|
64
|
244
|
|||||||||||||||
Total Consumer
|
4,133
|
1,602
|
5,735
|
3,669
|
(166)
|
(5,429)
|
1,025
|
4,834
|
|||||||||||||||
Total
|
$
|
7,802
|
$
|
1,700
|
$
|
9,502
|
$
|
5,824
|
$
|
(246)
|
$
|
(7,378)
|
$
|
1,179
|
$
|
8,881
|
|||||||
(a)
|
Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
|
(b)
|
Other primarily included the effects of currency exchange.
|
(c)
|
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
|
At
|
|||||
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
Goodwill
|
$
|
27,726
|
$
|
27,508
|
|
Other intangible assets
|
|||||
Intangible assets subject to amortization
|
$
|
1,702
|
$
|
1,874
|
|
Dispositions,
|
||||||||||||
Balance at
|
currency
|
Balance at
|
||||||||||
January 1,
|
exchange
|
September 30,
|
||||||||||
(In millions)
|
2011
|
Acquisitions
|
and other
|
2011
|
||||||||
CLL
|
$
|
13,893
|
$
|
8
|
$
|
78
|
$
|
13,979
|
||||
Consumer
|
10,817
|
–
|
163
|
10,980
|
||||||||
Real Estate
|
1,089
|
–
|
(31)
|
1,058
|
||||||||
Energy Financial Services
|
1,562
|
–
|
–
|
1,562
|
||||||||
GECAS
|
147
|
–
|
–
|
147
|
||||||||
Total
|
$
|
27,508
|
$
|
8
|
$
|
210
|
$
|
27,726
|
||||
At
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
Gross
|
Gross
|
||||||||||||||||
carrying
|
Accumulated
|
carrying
|
Accumulated
|
||||||||||||||
(In millions)
|
amount
|
amortization
|
Net
|
amount
|
amortization
|
Net
|
|||||||||||
Customer-related
|
$
|
1,239
|
$
|
(710)
|
$
|
529
|
$
|
1,112
|
$
|
(588)
|
$
|
524
|
|||||
Patents, licenses and trademarks
|
276
|
(225)
|
51
|
599
|
(532)
|
67
|
|||||||||||
Capitalized software
|
2,150
|
(1,650)
|
500
|
2,016
|
(1,522)
|
494
|
|||||||||||
Lease valuations
|
1,565
|
(969)
|
596
|
1,646
|
(917)
|
729
|
|||||||||||
All other
|
288
|
(262)
|
26
|
326
|
(266)
|
60
|
|||||||||||
Total
|
$
|
5,518
|
$
|
(3,816)
|
$
|
1,702
|
$
|
5,699
|
$
|
(3,825)
|
$
|
1,874
|
At
|
|||||
(In millions)
|
September 30,
|
December 31,
|
|||
2011
|
2010
|
||||
Short-term borrowings
|
|||||
Commercial paper
|
|||||
U.S.
|
$
|
25,659
|
$
|
27,398
|
|
Non-U.S.
|
9,922
|
9,497
|
|||
Current portion of long-term borrowings(a)(b)(c)(e)
|
76,423
|
65,610
|
|||
GE Interest Plus notes(d)
|
8,533
|
9,058
|
|||
Other(c)
|
1,196
|
2,083
|
|||
Total short-term borrowings
|
$
|
121,733
|
$
|
113,646
|
|
Long-term borrowings
|
|||||
Senior unsecured notes(a)(b)
|
$
|
234,968
|
$
|
263,043
|
|
Subordinated notes(e)
|
4,569
|
2,276
|
|||
Subordinated debentures(f)(g)
|
7,430
|
7,298
|
|||
Other(c)(h)
|
12,365
|
11,729
|
|||
Total long-term borrowings
|
$
|
259,332
|
$
|
284,346
|
|
Non-recourse borrowings of consolidated securitization entities(i)
|
$
|
29,022
|
$
|
30,018
|
|
Bank deposits(j)
|
$
|
41,515
|
$
|
37,298
|
|
Total borrowings and bank deposits
|
$
|
451,602
|
$
|
465,308
|
|
(a)
|
GECC had issued and outstanding $45,045 million and $53,495 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at September 30, 2011 and December 31, 2010, respectively. Of the above amounts, $32,495 million and $18,455 million is included in current portion of long-term borrowings at September 30, 2011 and December 31, 2010, respectively.
|
(b)
|
Included in total long-term borrowings were $2,047 million and $2,395 million of obligations to holders of guaranteed investment contracts at September 30, 2011 and December 31, 2010, respectively. If the long-term credit rating of GECC were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1, GECC could be required to provide up to $1,916 million as of September 30, 2011, to repay holders of GICs.
|
(c)
|
Included $9,392 million and $11,117 million of funding secured by real estate, aircraft and other collateral at September 30, 2011 and December 31, 2010, respectively, of which $3,475 million and $4,653 million is non-recourse to GECC at September 30, 2011 and December 31, 2010, respectively.
|
(d)
|
Entirely variable denomination floating rate demand notes.
|
(e)
|
Included $117 million of subordinated notes guaranteed by GE included in current portion of long-term borrowings at September 30, 2011 and in long-term borrowings at December 31, 2010.
|
(f)
|
Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.
|
(g)
|
Includes $2,981 million of subordinated debentures, which constitute the sole assets of wholly-owned trusts who have issued trust preferred securities. Obligations associated with these trusts are unconditionally guaranteed by GECC.
|
(h)
|
Included $2,066 million and $1,984 million of covered bonds at September 30, 2011 and December 31, 2010, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $790 million at September 30, 2011.
|
(i)
|
Included at September 30, 2011 and December 31, 2010, were $11,670 million and $10,499 million of current portion of long-term borrowings, respectively, and $17,352 million and $19,519 million of long-term borrowings, respectively. See Note 13.
|
(j)
|
Included $18,786 million and $18,781 million of deposits in non-U.S. banks at September 30, 2011 and December 31, 2010, respectively, and $14,755 million and $11,606 million of certificates of deposits with maturities greater than one year at September 30, 2011 and December 31, 2010, respectively.
|
At
|
|||||
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
Unrecognized tax benefits
|
$
|
2,991
|
$
|
2,949
|
|
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
|
1,436
|
1,330
|
|||
Accrued interest on unrecognized tax benefits
|
561
|
577
|
|||
Accrued penalties on unrecognized tax benefits
|
66
|
73
|
|||
Reasonably possible reduction to the balance of unrecognized
|
|||||
tax benefits in succeeding 12 months
|
0-1,300
|
0-1,200
|
|||
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
|
0-250
|
0-250
|
|||
(a)
|
Some portion of such reduction may be reported as discontinued operations.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Net earnings attributable to GECC
|
$
|
1,469
|
$
|
(233)
|
$
|
5,204
|
$
|
630
|
|||
Investment securities – net
|
(300)
|
163
|
(339)
|
137
|
|||||||
Currency translation adjustments – net
|
(848)
|
1,036
|
1,679
|
(2,942)
|
|||||||
Cash flow hedges – net
|
(105)
|
(278)
|
(364)
|
198
|
|||||||
Benefit plans – net
|
28
|
(14)
|
27
|
51
|
|||||||
Total
|
$
|
244
|
$
|
674
|
$
|
6,207
|
$
|
(1,926)
|
|||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Beginning balance
|
$
|
1,201
|
$
|
1,098
|
$
|
1,164
|
$
|
2,204
|
|||
Net earnings
|
38
|
18
|
89
|
(9)
|
|||||||
Dividends
|
(4)
|
(4)
|
(17)
|
(21)
|
|||||||
Dispositions(a)
|
–
|
–
|
–
|
(979)
|
|||||||
AOCI and other (b)
|
(30)
|
14
|
(31)
|
(69)
|
|||||||
Ending balance
|
$
|
1,205
|
$
|
1,126
|
$
|
1,205
|
$
|
1,126
|
|||
(a)
|
Includes the effects of deconsolidating Regency Energy Partners L.P. (Regency) $(979) million during the second quarter of 2010.
|
(b)
|
The amount of change related to AOCI and other for the nine months ended September 30, 2010 includes the impact of our adoption of ASC 810, Consolidations, of $(32) million. Changes to other individual components of AOCI attributable to noncontrolling interests were insignificant.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Interest on loans
|
$
|
5,027
|
$
|
4,955
|
$
|
15,161
|
$
|
15,443
|
|||
Equipment leased to others
|
2,852
|
2,799
|
8,526
|
8,329
|
|||||||
Fees
|
1,227
|
1,180
|
3,531
|
3,554
|
|||||||
Associated companies(a)(b)
|
389
|
491
|
1,997
|
1,548
|
|||||||
Financing leases
|
554
|
678
|
1,837
|
2,105
|
|||||||
Real estate investments
|
379
|
330
|
1,211
|
961
|
|||||||
Investment income
|
186
|
204
|
796
|
461
|
|||||||
Other items
|
502
|
424
|
1,810
|
1,786
|
|||||||
Total
|
$
|
11,116
|
$
|
11,061
|
$
|
34,869
|
$
|
34,187
|
|||
(a)
|
During the first quarter of 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a pre-tax gain of $690 million. Following the sale, we hold a 2.25% equity ownership interest which is classified as an available-for-sale security.
|
(b)
|
Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at September 30, 2011 and December 31, 2010 of $104,310 million and $180,015 million, respectively. Assets were primarily financing receivables of $58,115 million and $97,447 million at September 30, 2011 and December 31, 2010, respectively. Total liabilities were $77,363 million and $143,957 million, consisted primarily of bank deposits of $21,579 million and $75,661 million at September 30, 2011 and December 31, 2010, respectively, and debt of $45,387 million and $53,696 million at September 30, 2011 and December 31, 2010, respectively. Revenues in the third quarters of 2011 and 2010 totaled $4,389 million and $5,166 million, respectively, and net earnings in the third quarters of 2011 and 2010 totaled $607 million and $1,247 million, respectively. Revenues in the first nine months of 2011 and 2010 totaled $12,056 million and $14,882 million, respectively, and net earnings in the first nine months of 2011 and 2010 totaled $1,695 million and $3,279 million, respectively.
|
(In millions)
|
Netting
|
|||||||||||||
Level 1
|
(a)
|
Level 2
|
(a)
|
Level 3
|
(b)
|
adjustment
|
(c)
|
Net balance
|
||||||
September 30, 2011
|
||||||||||||||
Assets
|
||||||||||||||
Investment securities
|
||||||||||||||
Debt
|
||||||||||||||
U.S. corporate
|
$
|
435
|
$
|
1,132
|
$
|
2,020
|
$
|
–
|
$
|
3,587
|
||||
State and municipal
|
–
|
486
|
44
|
–
|
530
|
|||||||||
Residential mortgage-backed
|
–
|
1,511
|
27
|
–
|
1,538
|
|||||||||
Commercial mortgage-backed
|
–
|
1,306
|
–
|
–
|
1,306
|
|||||||||
Asset-backed
|
–
|
852
|
2,860
|
–
|
3,712
|
|||||||||
Corporate - non-U.S.
|
75
|
274
|
956
|
–
|
1,305
|
|||||||||
Government - non-U.S.
|
755
|
826
|
77
|
–
|
1,658
|
|||||||||
U.S. government and federal agency
|
–
|
2,536
|
–
|
–
|
2,536
|
|||||||||
Retained interests
|
–
|
–
|
37
|
–
|
37
|
|||||||||
Equity
|
||||||||||||||
Available-for-sale
|
750
|
–
|
16
|
–
|
766
|
|||||||||
Trading
|
387
|
–
|
–
|
–
|
387
|
|||||||||
Derivatives(d)
|
–
|
15,394
|
163
|
(3,120)
|
12,437
|
|||||||||
Other(e)
|
–
|
–
|
510
|
–
|
510
|
|||||||||
Total
|
$
|
2,402
|
$
|
24,317
|
$
|
6,710
|
$
|
(3,120)
|
$
|
30,309
|
||||
Liabilities
|
||||||||||||||
Derivatives
|
$
|
–
|
$
|
4,837
|
$
|
32
|
$
|
(3,106)
|
$
|
1,763
|
||||
Other
|
–
|
24
|
–
|
–
|
24
|
|||||||||
Total
|
$
|
–
|
$
|
4,861
|
$
|
32
|
$
|
(3,106)
|
$
|
1,787
|
||||
December 31, 2010
|
||||||||||||||
Assets
|
||||||||||||||
Investment securities
|
||||||||||||||
Debt
|
||||||||||||||
U.S. corporate
|
$
|
588
|
$
|
1,360
|
$
|
1,697
|
$
|
–
|
$
|
3,645
|
||||
State and municipal
|
–
|
508
|
182
|
–
|
690
|
|||||||||
Residential mortgage-backed
|
47
|
1,666
|
45
|
–
|
1,758
|
|||||||||
Commercial mortgage-backed
|
–
|
1,388
|
48
|
–
|
1,436
|
|||||||||
Asset-backed
|
–
|
563
|
2,496
|
–
|
3,059
|
|||||||||
Corporate - non-U.S.
|
89
|
356
|
961
|
–
|
1,406
|
|||||||||
Government - non-U.S.
|
776
|
850
|
128
|
–
|
1,754
|
|||||||||
U.S. government and federal agency
|
–
|
2,661
|
–
|
–
|
2,661
|
|||||||||
Retained interests
|
–
|
–
|
39
|
–
|
39
|
|||||||||
Equity
|
||||||||||||||
Available-for-sale
|
569
|
500
|
18
|
–
|
1,087
|
|||||||||
Trading
|
417
|
–
|
–
|
–
|
417
|
|||||||||
Derivatives(d)
|
–
|
10,319
|
330
|
(3,644)
|
7,005
|
|||||||||
Other(e)
|
–
|
–
|
450
|
–
|
450
|
|||||||||
Total
|
$
|
2,486
|
$
|
20,171
|
$
|
6,394
|
$
|
(3,644)
|
$
|
25,407
|
||||
Liabilities
|
||||||||||||||
Derivatives
|
$
|
–
|
$
|
6,228
|
$
|
102
|
$
|
(3,635)
|
$
|
2,695
|
||||
Other
|
–
|
31
|
–
|
–
|
31
|
|||||||||
Total
|
$
|
–
|
$
|
6,259
|
$
|
102
|
$
|
(3,635)
|
$
|
2,726
|
||||
(a)
|
The fair value of securities transferred between Level 1 and Level 2 was $67 million during the nine months ended September 30, 2011.
|
(b)
|
Level 3 investment securities valued using non-binding broker quotes totaled $251 million and $711 million at September 30, 2011 and December 31, 2010, respectively, and were classified as available-for-sale securities.
|
(c)
|
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.
|
(d)
|
The fair value of derivatives included an adjustment for non-performance risk. At September 30, 2011 and December 31, 2010, the cumulative adjustment for non-performance risk was a loss of $14 million and $9 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.
|
(e)
|
Included private equity investments and loans designated under the fair value option.
|
Net
|
|||||||||||||||||||||||||||||||
(In millions)
|
change in
|
||||||||||||||||||||||||||||||
Net realized/
|
unrealized
|
||||||||||||||||||||||||||||||
Net
|
unrealized
|
gains
|
|||||||||||||||||||||||||||||
realized/
|
gains (losses)
|
(losses)
|
|||||||||||||||||||||||||||||
unrealized
|
included in
|
relating to
|
|||||||||||||||||||||||||||||
gains
|
accumulated
|
instruments
|
|||||||||||||||||||||||||||||
Balance at
|
(losses)
|
other
|
Transfers
|
Transfers
|
Balance at
|
still held at
|
|||||||||||||||||||||||||
July 1,
|
included in
|
comprehensive
|
into
|
out of
|
September 30,
|
September 30,
|
|||||||||||||||||||||||||
2011
|
earnings
|
(a)
|
income
|
Purchases
|
Sales
|
Settlements
|
Level 3
|
(b)
|
Level 3
|
(b)
|
2011
|
2011
|
(c)
|
||||||||||||||||||
Investment securities
|
|||||||||||||||||||||||||||||||
Debt
|
|||||||||||||||||||||||||||||||
U.S. corporate
|
$
|
1,530
|
$
|
(27)
|
$
|
(81)
|
$
|
500
|
$
|
(25)
|
$
|
5
|
$
|
120
|
$
|
(2)
|
$
|
2,020
|
$
|
–
|
|||||||||||
State and municipal
|
166
|
–
|
2
|
–
|
–
|
(4)
|
–
|
(120)
|
44
|
–
|
|||||||||||||||||||||
Residential
|
|||||||||||||||||||||||||||||||
mortgage-backed
|
29
|
–
|
(2)
|
–
|
–
|
–
|
–
|
–
|
27
|
–
|
|||||||||||||||||||||
Commercial
|
|||||||||||||||||||||||||||||||
mortgage-backed
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Asset-backed
|
3,086
|
(2)
|
(62)
|
269
|
(14)
|
–
|
–
|
(417)
|
2,860
|
–
|
|||||||||||||||||||||
Corporate – non-U.S.
|
1,032
|
2
|
(55)
|
–
|
(5)
|
(14)
|
–
|
(4)
|
956
|
–
|
|||||||||||||||||||||
Government
|
|||||||||||||||||||||||||||||||
– non-U.S.
|
243
|
–
|
(27)
|
14
|
–
|
(13)
|
–
|
(140)
|
77
|
–
|
|||||||||||||||||||||
U.S. government and
|
|||||||||||||||||||||||||||||||
federal agency
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Retained interests
|
45
|
(1)
|
(6)
|
1
|
(1)
|
(1)
|
–
|
–
|
37
|
–
|
|||||||||||||||||||||
Equity
|
|||||||||||||||||||||||||||||||
Available-for-sale
|
14
|
–
|
–
|
–
|
–
|
–
|
2
|
–
|
16
|
–
|
|||||||||||||||||||||
Trading
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Derivatives(d)(e)
|
111
|
31
|
–
|
(3)
|
–
|
(5)
|
–
|
–
|
134
|
35
|
|||||||||||||||||||||
Other
|
595
|
(1)
|
(14)
|
26
|
(95)
|
(1)
|
–
|
–
|
510
|
(1)
|
|||||||||||||||||||||
Total
|
$
|
6,851
|
$
|
2
|
$
|
(245)
|
$
|
807
|
$
|
(140)
|
$
|
(33)
|
$
|
122
|
$
|
(683)
|
$
|
6,681
|
$
|
34
|
|||||||||||
(a)
|
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
|
(b)
|
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
|
(c)
|
Represented the amount of unrealized gains or losses for the period included in earnings.
|
(d)
|
Represented derivative assets net of derivative liabilities and included cash accruals of $3 million not reflected in the fair value hierarchy table.
|
(e)
|
Gains included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.
|
(In millions)
|
Net realized/
|
Net change
|
||||||||||||||||||||||
unrealized
|
in unrealized
|
|||||||||||||||||||||||
gains (losses)
|
gains (losses)
|
|||||||||||||||||||||||
Net realized/
|
included in
|
relating to
|
||||||||||||||||||||||
unrealized
|
accumulated
|
Purchases,
|
Transfers
|
instruments
|
||||||||||||||||||||
Balance at
|
gains(losses)
|
other
|
sales
|
in and/or
|
Balance at
|
still held at
|
||||||||||||||||||
July 1,
|
included in
|
comprehensive
|
and
|
out of
|
September 30,
|
September 30,
|
||||||||||||||||||
2010
|
earnings
|
(a)
|
income
|
settlements
|
Level 3
|
(b)
|
2010
|
2010
|
(c)
|
|||||||||||||||
Investment securities
|
||||||||||||||||||||||||
Debt
|
||||||||||||||||||||||||
U.S. corporate
|
$
|
1,632
|
$
|
12
|
$
|
84
|
$
|
(66)
|
$
|
–
|
$
|
1,662
|
$
|
–
|
||||||||||
State and municipal
|
238
|
–
|
(48)
|
(9)
|
–
|
181
|
–
|
|||||||||||||||||
Residential
|
||||||||||||||||||||||||
mortgage-backed
|
46
|
–
|
5
|
–
|
(9)
|
42
|
–
|
|||||||||||||||||
Commercial
|
||||||||||||||||||||||||
mortgage-backed
|
48
|
–
|
–
|
–
|
–
|
48
|
–
|
|||||||||||||||||
Asset-backed
|
1,461
|
(1)
|
11
|
507
|
(5)
|
1,973
|
–
|
|||||||||||||||||
Corporate - non-U.S.
|
841
|
7
|
23
|
(9)
|
(10)
|
852
|
–
|
|||||||||||||||||
Government
|
||||||||||||||||||||||||
- non-U.S.
|
115
|
–
|
5
|
–
|
–
|
120
|
–
|
|||||||||||||||||
U.S. government and
|
||||||||||||||||||||||||
federal agency
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||
Retained interests
|
41
|
1
|
1
|
(2)
|
–
|
41
|
–
|
|||||||||||||||||
Equity
|
||||||||||||||||||||||||
Available-for-sale
|
15
|
–
|
1
|
–
|
–
|
16
|
–
|
|||||||||||||||||
Trading
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||
Derivatives(d)(e)
|
224
|
51
|
12
|
(37)
|
148
|
398
|
47
|
|||||||||||||||||
Other
|
419
|
4
|
22
|
(3)
|
–
|
442
|
–
|
|||||||||||||||||
Total
|
$
|
5,080
|
$
|
74
|
$
|
116
|
$
|
381
|
$
|
124
|
$
|
5,775
|
$
|
47
|
||||||||||
(a)
|
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
|
(b)
|
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
|
(c)
|
Represented the amount of unrealized gains or losses for the period included in earnings.
|
(d)
|
Represented derivative assets net of derivative liabilities and included cash accruals of $34 million not reflected in the fair value hierarchy table.
|
(e)
|
Gains included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.
|
Net
|
|||||||||||||||||||||||||||||||
(In millions)
|
change in
|
||||||||||||||||||||||||||||||
Net realized/
|
unrealized
|
||||||||||||||||||||||||||||||
Net
|
unrealized
|
gains
|
|||||||||||||||||||||||||||||
realized/
|
gains (losses)
|
(losses)
|
|||||||||||||||||||||||||||||
unrealized
|
included in
|
relating to
|
|||||||||||||||||||||||||||||
gains
|
accumulated
|
instruments
|
|||||||||||||||||||||||||||||
Balance at
|
(losses)
|
other
|
Transfers
|
Transfers
|
Balance at
|
still held at
|
|||||||||||||||||||||||||
January 1,
|
included in
|
comprehensive
|
into
|
out of
|
September 30,
|
September 30,
|
|||||||||||||||||||||||||
2011
|
earnings
|
(a)
|
income
|
Purchases
|
Sales
|
Settlements
|
Level 3
|
(b)
|
Level 3
|
(b)
|
2011
|
2011
|
(c)
|
||||||||||||||||||
Investment securities
|
|||||||||||||||||||||||||||||||
Debt
|
|||||||||||||||||||||||||||||||
U.S. corporate
|
$
|
1,697
|
$
|
63
|
$
|
(154)
|
$
|
507
|
$
|
(180)
|
$
|
(31)
|
$
|
120
|
$
|
(2)
|
$
|
2,020
|
$
|
–
|
|||||||||||
State and municipal
|
182
|
–
|
(3)
|
4
|
–
|
(8)
|
–
|
(131)
|
44
|
–
|
|||||||||||||||||||||
Residential
|
|||||||||||||||||||||||||||||||
mortgage-backed
|
45
|
–
|
–
|
–
|
–
|
–
|
–
|
(18)
|
27
|
–
|
|||||||||||||||||||||
Commercial
|
|||||||||||||||||||||||||||||||
mortgage-backed
|
48
|
–
|
–
|
–
|
–
|
–
|
–
|
(48)
|
–
|
–
|
|||||||||||||||||||||
Asset-backed
|
2,496
|
(3)
|
(8)
|
1,049
|
(166)
|
(10)
|
–
|
(498)
|
2,860
|
–
|
|||||||||||||||||||||
Corporate – non-U.S.
|
961
|
(32)
|
18
|
12
|
(31)
|
(39)
|
71
|
(4)
|
956
|
–
|
|||||||||||||||||||||
Government
|
|||||||||||||||||||||||||||||||
– non-U.S.
|
128
|
(17)
|
(15)
|
27
|
–
|
(13)
|
107
|
(140)
|
77
|
–
|
|||||||||||||||||||||
U.S. government and
|
|||||||||||||||||||||||||||||||
federal agency
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Retained interests
|
39
|
(19)
|
24
|
1
|
(4)
|
(4)
|
–
|
–
|
37
|
–
|
|||||||||||||||||||||
Equity
|
|||||||||||||||||||||||||||||||
Available-for-sale
|
18
|
–
|
(1)
|
–
|
–
|
–
|
2
|
(3)
|
16
|
||||||||||||||||||||||
Trading
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Derivatives(d)(e)
|
227
|
86
|
4
|
2
|
–
|
(191)
|
–
|
6
|
134
|
67
|
|||||||||||||||||||||
Other
|
450
|
2
|
14
|
145
|
(95)
|
(6)
|
–
|
–
|
510
|
–
|
|||||||||||||||||||||
Total
|
$
|
6,291
|
$
|
80
|
$
|
(121)
|
$
|
1,747
|
$
|
(476)
|
$
|
(302)
|
$
|
300
|
$
|
(838)
|
$
|
6,681
|
$
|
67
|
|||||||||||
(a)
|
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
|
(b)
|
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
|
(c)
|
Represented the amount of unrealized gains or losses for the period included in earnings.
|
(d)
|
Represented derivative assets net of derivative liabilities and included cash accruals of $3 million not reflected in the fair value hierarchy table.
|
(e)
|
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.
|
(In millions)
|
Net realized/
|
Net change
|
||||||||||||||||||||
unrealized
|
in unrealized
|
|||||||||||||||||||||
gains (losses)
|
gains (losses)
|
|||||||||||||||||||||
Net realized/
|
included in
|
relating to
|
||||||||||||||||||||
unrealized
|
accumulated
|
Purchases,
|
Transfers
|
instruments
|
||||||||||||||||||
Balance at
|
gains(losses)
|
other
|
sales
|
in and/or
|
Balance at
|
still held at
|
||||||||||||||||
January 1,
|
included in
|
comprehensive
|
and
|
out of
|
September 30,
|
September 30,
|
||||||||||||||||
2010
|
(a)
|
earnings
|
(b)
|
income
|
settlements
|
Level 3
|
(c)
|
2010
|
2010
|
(d)
|
||||||||||||
Investment securities
|
||||||||||||||||||||||
Debt
|
||||||||||||||||||||||
U.S. corporate
|
$
|
1,642
|
$
|
29
|
$
|
129
|
$
|
(137)
|
$
|
(1)
|
$
|
1,662
|
$
|
–
|
||||||||
State and municipal
|
173
|
–
|
21
|
(13)
|
–
|
181
|
–
|
|||||||||||||||
Residential
|
||||||||||||||||||||||
mortgage-backed
|
44
|
–
|
8
|
–
|
(10)
|
42
|
–
|
|||||||||||||||
Commercial
|
||||||||||||||||||||||
mortgage-backed
|
1,034
|
30
|
(3)
|
(1,013)
|
–
|
48
|
–
|
|||||||||||||||
Asset-backed
|
1,475
|
5
|
25
|
570
|
(102)
|
1,973
|
–
|
|||||||||||||||
Corporate - non-U.S.
|
948
|
2
|
(51)
|
179
|
(226)
|
852
|
–
|
|||||||||||||||
Government
|
||||||||||||||||||||||
- non-U.S.
|
138
|
–
|
(18)
|
–
|
–
|
120
|
–
|
|||||||||||||||
U.S. government and
|
||||||||||||||||||||||
federal agency
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||
Retained interests
|
45
|
–
|
3
|
(7)
|
–
|
41
|
–
|
|||||||||||||||
Equity
|
||||||||||||||||||||||
Available-for-sale
|
17
|
–
|
(1)
|
–
|
–
|
16
|
–
|
|||||||||||||||
Trading
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||
Derivatives(e)(f)
|
205
|
168
|
10
|
(84)
|
99
|
398
|
95
|
|||||||||||||||
Other
|
480
|
4
|
(44)
|
2
|
–
|
442
|
3
|
|||||||||||||||
Total
|
$
|
6,201
|
$
|
238
|
$
|
79
|
$
|
(503)
|
$
|
(240)
|
$
|
5,775
|
$
|
98
|
||||||||
(a)
|
Included an increase of $1,015 million in debt securities, a reduction in retained interests of $8,782 million and a reduction in derivatives of $37 million related to adoption of ASU 2009-16 & 17.
|
(b)
|
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
|
(c)
|
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
|
(d)
|
Represented the amount of unrealized gains or losses for the period included in earnings.
|
(e)
|
Represented derivative assets net of derivative liabilities and included cash accruals of $34 million not reflected in the fair value hierarchy table.
|
(f)
|
Gains included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.
|
Remeasured during
|
Remeasured during
|
|||||||||||
the nine months ended
|
the year ended
|
|||||||||||
September 30, 2011
|
December 31, 2010
|
|||||||||||
(In millions)
|
Level 2
|
Level 3
|
Level 2
|
Level 3
|
(b)
|
|||||||
Financing receivables and loans held for sale
|
$
|
5
|
$
|
6,278
|
$
|
35
|
$
|
6,833
|
||||
Cost and equity method investments(a)
|
–
|
441
|
–
|
378
|
||||||||
Long-lived assets, including real estate
|
1,124
|
3,243
|
1,023
|
5,809
|
||||||||
Total
|
$
|
1,129
|
$
|
9,962
|
$
|
1,058
|
$
|
13,020
|
||||
(a)
|
Includes the fair value of private equity and real estate funds included in Level 3 of $82 million and $296 million at September 30, 2011 and December 31, 2010, respectively.
|
(b)
|
During 2010, our retained investment in Regency, a formerly consolidated subsidiary, was remeasured to a Level 1 fair value of $549 million.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Financing receivables and loans held for sale
|
$
|
(265)
|
$
|
(512)
|
$
|
(756)
|
$
|
(1,519)
|
|||
Cost and equity method investments(a)
|
(84)
|
(44)
|
(254)
|
(117)
|
|||||||
Long-lived assets, including real estate(b)
|
(366)
|
(867)
|
(1,266)
|
(2,184)
|
|||||||
Retained investments in formerly consolidated subsidiaries
|
–
|
–
|
–
|
109
|
|||||||
Total
|
$
|
(715)
|
$
|
(1,423)
|
$
|
(2,276)
|
$
|
(3,711)
|
|||
(a)
|
Includes fair value adjustments associated with private equity and real estate funds of $(3) million and $(14) million in the three months ended September 30, 2011 and 2010, respectively, and $(16) million and $(40) million in the nine months ended September 30, 2011 and 2010, respectively.
|
(b)
|
Includes impairments related to real estate equity properties and investments recorded in operating and administrative expenses of $223 million and $492 million in the three months ended September 30, 2011 and 2010, respectively, and $999 million and $1,595 million in the nine months ended September 30, 2011 and 2010, respectively.
|
At
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
Assets (liabilities)
|
Assets (liabilities)
|
||||||||||||||||
Notional
|
Carrying
|
Estimated
|
Notional
|
Carrying
|
Estimated
|
||||||||||||
(In millions)
|
amount
|
amount (net)
|
fair value
|
amount
|
amount (net)
|
fair value
|
|||||||||||
Assets
|
|||||||||||||||||
Loans
|
(a)
|
$
|
254,217
|
$
|
253,404
|
(a)
|
$
|
268,239
|
$
|
264,550
|
|||||||
Other commercial mortgages
|
(a)
|
129
|
129
|
(a)
|
91
|
91
|
|||||||||||
Loans held for sale
|
(a)
|
262
|
262
|
(a)
|
287
|
287
|
|||||||||||
Other financial instruments(c)
|
(a)
|
2,525
|
3,023
|
(a)
|
2,082
|
2,490
|
|||||||||||
Liabilities
|
|||||||||||||||||
Borrowings and bank
|
|||||||||||||||||
deposits(b)(d)
|
(a)
|
(451,602)
|
(452,974)
|
(a)
|
(465,308)
|
(477,425)
|
|||||||||||
Guaranteed investment contracts
|
(a)
|
(4,624)
|
(4,637)
|
(a)
|
(5,502)
|
(5,524)
|
|||||||||||
Insurance - credit life(e)
|
$
|
1,934
|
(105)
|
(88)
|
$
|
1,812
|
(102)
|
(68)
|
|||||||||
(a)
|
These financial instruments do not have notional amounts.
|
(b)
|
See Note 6.
|
(c)
|
Principally cost method investments.
|
(d)
|
Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at September 30, 2011 and December 31, 2010 would have been reduced by $9,540 million and $4,298 million, respectively.
|
(e)
|
Net of reinsurance of $2,800 million at both September 30, 2011 and December 31, 2010.
|
Notional amount at
|
|||||
September 30,
|
December 31,
|
||||
(In millions)
|
2011
|
2010
|
|||
Ordinary course of business lending commitments(a)
|
$
|
2,872
|
$
|
3,584
|
|
Unused revolving credit lines(b)
|
|||||
Commercial(c)
|
17,858
|
21,338
|
|||
Consumer - principally credit cards
|
254,891
|
227,006
|
|||
(a)
|
Excluded investment commitments of $1,941 million and $1,990 million as of September 30, 2011 and December 31, 2010, respectively.
|
(b)
|
Excluded inventory financing arrangements, which may be withdrawn at our option, of $11,856 million and $11,840 million as of September 30, 2011 and December 31, 2010, respectively.
|
(c)
|
Included commitments of $13,114 million and $16,243 million as of September 30, 2011 and December 31, 2010, respectively, associated with secured financing arrangements that could have increased to a maximum of $16,623 million and $20,268 million at September 30, 2011 and December 31, 2010, respectively, based on asset volume under the arrangement.
|
At
|
|||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||
Fair value
|
Fair value
|
||||||||||
(In millions)
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|||||||
Derivatives accounted for as hedges
|
|||||||||||
Interest rate contracts
|
$
|
9,206
|
$
|
1,133
|
$
|
5,885
|
$
|
2,674
|
|||
Currency exchange contracts
|
4,387
|
2,858
|
2,915
|
2,402
|
|||||||
Other contracts
|
–
|
–
|
–
|
–
|
|||||||
13,593
|
3,991
|
8,800
|
5,076
|
||||||||
Derivatives not accounted for as hedges
|
|||||||||||
Interest rate contracts
|
329
|
283
|
294
|
551
|
|||||||
Currency exchange contracts
|
1,553
|
570
|
1,281
|
653
|
|||||||
Other contracts
|
82
|
25
|
274
|
50
|
|||||||
1,964
|
878
|
1,849
|
1,254
|
||||||||
Netting adjustments(a)
|
(3,120)
|
(3,106)
|
(3,644)
|
(3,635)
|
|||||||
Total
|
$
|
12,437
|
$
|
1,763
|
$
|
7,005
|
$
|
2,695
|
|||
Derivatives are classified in the captions “Other assets” and “Other liabilities” in our financial statements.
|
(a)
|
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts included fair value adjustments related to our own and counterparty non-performance risk. At September 30, 2011 and December 31, 2010, the cumulative adjustment for non-performance risk was a loss of $14 million and $9 million, respectively.
|
Three months ended
|
||||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(In millions)
|
Gain (loss)
|
Gain (loss)
|
Gain (loss)
|
Gain (loss)
|
||||||||
on hedging
|
on hedged
|
on hedging
|
on hedged
|
|||||||||
derivatives
|
items
|
derivatives
|
items
|
|||||||||
Interest rate contracts
|
$
|
5,735
|
$
|
(5,863)
|
$
|
1,862
|
$
|
(2,048)
|
||||
Currency exchange contracts
|
64
|
(74)
|
57
|
(60)
|
||||||||
Nine months ended
|
||||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(In millions)
|
Gain (loss)
|
Gain (loss)
|
Gain (loss)
|
Gain (loss)
|
||||||||
on hedging
|
on hedged
|
on hedging
|
on hedged
|
|||||||||
derivatives
|
items
|
derivatives
|
items
|
|||||||||
Interest rate contracts
|
$
|
5,297
|
$
|
(5,626)
|
$
|
5,673
|
$
|
(6,178)
|
||||
Currency exchange contracts
|
103
|
(121)
|
48
|
(59)
|
||||||||
|
Gain (loss) reclassified
|
||||||||||
Gain (loss) recognized in AOCI
|
from AOCI into earnings
|
||||||||||
for the three months ended
|
for the three months ended
|
||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Cash flow hedges
|
|||||||||||
Interest rate contracts
|
$
|
(256)
|
$
|
(250)
|
$
|
(178)
|
$
|
(296)
|
|||
Currency exchange contracts
|
(583)
|
627
|
(570)
|
(34)
|
|||||||
Commodity contracts
|
–
|
–
|
–
|
969
|
|||||||
Total
|
$
|
(839)
|
$
|
377
|
$
|
(748)
|
$
|
639
|
|||
|
Gain (loss) reclassified
|
||||||||||
Gain (loss) recognized in AOCI
|
from AOCI into earnings
|
||||||||||
for the nine months ended
|
for the nine months ended
|
||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Cash flow hedges
|
|||||||||||
Interest rate contracts
|
$
|
(378)
|
$
|
(736)
|
$
|
(657)
|
$
|
(1,070)
|
|||
Currency exchange contracts
|
79
|
(790)
|
294
|
(123)
|
|||||||
Commodity contracts
|
–
|
5
|
–
|
(519)
|
|||||||
Total
|
$
|
(299)
|
$
|
(1,521)
|
$
|
(363)
|
$
|
(1,712)
|
|||
Gain (loss) recognized
|
Gain (loss) reclassified
|
||||||||||
in CTA for the
|
from CTA for the
|
||||||||||
three months ended September 30,
|
three months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Net investment hedges
|
|||||||||||
Currency exchange contracts
|
$
|
1,924
|
$
|
(3,184)
|
$
|
(15)
|
$
|
18
|
|||
Gain (loss) recognized
|
Gain (loss) reclassified
|
||||||||||
in CTA for the
|
from CTA for the
|
||||||||||
nine months ended September 30,
|
nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Net investment hedges
|
|||||||||||
Currency exchange contracts
|
$
|
(1,448)
|
$
|
(939)
|
$
|
(713)
|
$
|
(12)
|
|||
Commercial
|
Financing receivables at
|
|||||||||||
September 30,
|
December 31,
|
|||||||||||
(In millions)
|
2011
|
2010
|
||||||||||
CLL
|
||||||||||||
Americas(a)
|
$
|
81,072
|
$
|
88,558
|
||||||||
Europe
|
37,130
|
37,498
|
||||||||||
Asia
|
11,914
|
11,943
|
||||||||||
Other(a)
|
469
|
664
|
||||||||||
Total CLL
|
130,585
|
138,663
|
||||||||||
Energy Financial Services
|
5,977
|
7,011
|
||||||||||
GECAS
|
11,841
|
12,615
|
||||||||||
Other
|
1,388
|
1,788
|
||||||||||
Total Commercial financing receivables, before allowance for losses
|
$
|
149,791
|
$
|
160,077
|
||||||||
Non-impaired financing receivables
|
$
|
143,974
|
$
|
154,257
|
||||||||
General reserves
|
817
|
1,014
|
||||||||||
Impaired loans
|
5,817
|
5,820
|
||||||||||
Specific reserves
|
829
|
1,031
|
||||||||||
(a)
|
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
|
At
|
||||||||||||
Commercial
|
September 30, 2011
|
December 31, 2010
|
||||||||||
Over 30 days
|
Over 90 days
|
Over 30 days
|
Over 90 days
|
|||||||||
past due
|
past due
|
past due
|
past due
|
|||||||||
CLL
|
||||||||||||
Americas
|
1.1
|
%
|
0.7
|
%
|
1.2
|
%
|
0.8
|
%
|
||||
Europe
|
4.0
|
2.3
|
4.2
|
2.3
|
||||||||
Asia
|
1.7
|
1.1
|
2.2
|
1.4
|
||||||||
Other
|
0.6
|
0.6
|
2.4
|
1.2
|
||||||||
Total CLL
|
2.0
|
1.2
|
2.1
|
1.3
|
||||||||
Energy Financial Services
|
0.3
|
0.3
|
0.9
|
0.8
|
||||||||
GECAS
|
0.4
|
–
|
–
|
–
|
||||||||
Other
|
4.3
|
4.0
|
5.8
|
5.5
|
||||||||
Total
|
1.8
|
1.1
|
2.0
|
1.2
|
||||||||
Commercial
|
Nonaccrual financing
|
Nonearning financing
|
||||||||||
receivables at
|
receivables at
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
|||||||||
(Dollars in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||
CLL
|
||||||||||||
Americas
|
$
|
2,553
|
$
|
3,208
|
$
|
1,967
|
$
|
2,573
|
||||
Europe
|
1,599
|
1,415
|
1,086
|
1,241
|
||||||||
Asia
|
379
|
616
|
230
|
406
|
||||||||
Other
|
16
|
7
|
16
|
6
|
||||||||
Total CLL
|
4,547
|
5,246
|
3,299
|
4,226
|
||||||||
Energy Financial Services
|
135
|
78
|
135
|
62
|
||||||||
GECAS
|
62
|
–
|
62
|
–
|
||||||||
Other
|
123
|
139
|
71
|
102
|
||||||||
Total
|
$
|
4,867
|
$
|
5,463
|
$
|
3,567
|
$
|
4,390
|
||||
Allowance for losses percentage
|
33.8
|
%
|
37.4
|
%
|
46.1
|
%
|
46.6
|
%
|
||||
Commercial(a)
|
With no specific allowance
|
With a specific allowance
|
||||||||||||||||||
Recorded
|
Unpaid
|
Average
|
Recorded
|
Unpaid
|
Average
|
|||||||||||||||
investment
|
principal
|
investment in
|
investment
|
principal
|
Associated
|
investment in
|
||||||||||||||
(In millions)
|
in loans
|
balance
|
loans
|
in loans
|
balance
|
allowance
|
loans
|
|||||||||||||
September 30, 2011
|
||||||||||||||||||||
CLL
|
||||||||||||||||||||
Americas
|
$
|
2,136
|
$
|
2,104
|
$
|
2,126
|
$
|
1,433
|
$
|
1,571
|
$
|
439
|
$
|
1,494
|
||||||
Europe
|
1,103
|
1,036
|
1,016
|
561
|
539
|
260
|
570
|
|||||||||||||
Asia
|
59
|
50
|
97
|
139
|
107
|
71
|
228
|
|||||||||||||
Other
|
–
|
–
|
3
|
12
|
12
|
3
|
3
|
|||||||||||||
Total CLL
|
3,298
|
3,190
|
3,242
|
2,145
|
2,229
|
773
|
2,295
|
|||||||||||||
Energy Financial Services
|
4
|
4
|
24
|
131
|
132
|
19
|
104
|
|||||||||||||
GECAS
|
88
|
88
|
67
|
3
|
3
|
2
|
14
|
|||||||||||||
Other
|
63
|
63
|
68
|
85
|
84
|
35
|
103
|
|||||||||||||
Total
|
$
|
3,453
|
$
|
3,345
|
$
|
3,401
|
$
|
2,364
|
$
|
2,448
|
$
|
829
|
$
|
2,516
|
||||||
December 31, 2010
|
||||||||||||||||||||
CLL
|
||||||||||||||||||||
Americas
|
$
|
2,030
|
$
|
2,127
|
$
|
1,547
|
$
|
1,699
|
$
|
1,744
|
$
|
589
|
$
|
1,754
|
||||||
Europe
|
802
|
674
|
629
|
566
|
566
|
267
|
563
|
|||||||||||||
Asia
|
119
|
117
|
117
|
338
|
303
|
132
|
334
|
|||||||||||||
Other
|
–
|
–
|
9
|
–
|
–
|
–
|
–
|
|||||||||||||
Total CLL
|
2,951
|
2,918
|
2,302
|
2,603
|
2,613
|
988
|
2,651
|
|||||||||||||
Energy Financial Services
|
54
|
61
|
76
|
24
|
24
|
6
|
70
|
|||||||||||||
GECAS
|
24
|
24
|
50
|
–
|
–
|
–
|
31
|
|||||||||||||
Other
|
58
|
57
|
30
|
106
|
99
|
37
|
82
|
|||||||||||||
Total
|
$
|
3,087
|
$
|
3,060
|
$
|
2,458
|
$
|
2,733
|
$
|
2,736
|
$
|
1,031
|
$
|
2,834
|
||||||
(a)
|
We recognized $133 million, $88 million and $49 million of interest income for the nine months ended September 30, 2011, the year ended December 31, 2010 and the nine months ended September 30, 2010, respectively, principally on a cash basis. A substantial majority of this amount was related to income recognized in our CLL Americas business. The total average investment in impaired loans for the nine months ended September 30, 2010, was $5,172 million.
|
Commercial
|
Secured
|
||||||||||
(In millions)
|
A
|
B
|
C
|
Total
|
|||||||
September 30, 2011
|
|||||||||||
CLL
|
|||||||||||
Americas(a)
|
$
|
73,994
|
$
|
2,688
|
$
|
4,390
|
$
|
81,072
|
|||
Europe
|
33,731
|
734
|
1,323
|
35,788
|
|||||||
Asia
|
10,851
|
159
|
711
|
11,721
|
|||||||
Other(a)
|
371
|
25
|
73
|
469
|
|||||||
Total CLL
|
118,947
|
3,606
|
6,497
|
129,050
|
|||||||
Energy Financial Services
|
5,763
|
196
|
18
|
5,977
|
|||||||
GECAS
|
11,360
|
439
|
42
|
11,841
|
|||||||
Other
|
1,388
|
–
|
–
|
1,388
|
|||||||
Total
|
$
|
137,458
|
$
|
4,241
|
$
|
6,557
|
$
|
148,256
|
December 31, 2010
|
|||||||||||
CLL
|
|||||||||||
Americas(a)
|
$
|
78,939
|
$
|
4,103
|
$
|
5,516
|
$
|
88,558
|
|||
Europe
|
33,642
|
840
|
1,262
|
35,744
|
|||||||
Asia
|
10,777
|
199
|
766
|
11,742
|
|||||||
Other(a)
|
544
|
66
|
54
|
664
|
|||||||
Total CLL
|
123,902
|
5,208
|
7,598
|
136,708
|
|||||||
Energy Financial Services
|
6,775
|
183
|
53
|
7,011
|
|||||||
GECAS
|
11,034
|
1,193
|
388
|
12,615
|
|||||||
Other
|
1,788
|
–
|
–
|
1,788
|
|||||||
Total
|
$
|
143,499
|
$
|
6,584
|
$
|
8,039
|
$
|
158,122
|
|||
(a)
|
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
|
Real Estate
|
Financing receivables at
|
|||||||||||
September 30,
|
December 31,
|
|||||||||||
(In millions)
|
2011
|
2010
|
||||||||||
Debt
|
$
|
25,748
|
$
|
30,249
|
||||||||
Business Properties
|
8,630
|
9,962
|
||||||||||
Total Real Estate financing receivables, before allowance for losses
|
$
|
34,378
|
$
|
40,211
|
||||||||
Non-impaired financing receivables
|
$
|
25,021
|
$
|
30,394
|
||||||||
General reserves
|
281
|
338
|
||||||||||
Impaired loans
|
9,357
|
9,817
|
||||||||||
Specific reserves
|
860
|
1,150
|
||||||||||
At
|
||||||||||||
Real Estate
|
September 30, 2011
|
December 31, 2010
|
||||||||||
Over 30 days
|
Over 90 days
|
Over 30 days
|
Over 90 days
|
|||||||||
past due
|
past due
|
past due
|
past due
|
|||||||||
Debt
|
4.3
|
%
|
3.6
|
%
|
4.3
|
%
|
4.1
|
%
|
||||
Business Properties
|
3.8
|
3.6
|
4.6
|
3.9
|
||||||||
Total
|
4.2
|
3.6
|
4.4
|
4.0
|
Real Estate
|
Nonaccrual financing
|
Nonearning financing
|
||||||||||
receivables at
|
receivables at
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
|||||||||
(Dollars in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||
Debt
|
$
|
6,648
|
$
|
9,039
|
$
|
714
|
$
|
961
|
||||
Business Properties
|
637
|
680
|
314
|
386
|
||||||||
Total
|
$
|
7,285
|
$
|
9,719
|
$
|
1,028
|
$
|
1,347
|
||||
Allowance for losses percentage
|
15.7
|
%
|
15.3
|
%
|
111.0
|
%
|
110.5
|
%
|
||||
Real Estate(a)
|
With no specific allowance
|
With a specific allowance
|
||||||||||||||||||
Recorded
|
Unpaid
|
Average
|
Recorded
|
Unpaid
|
Average
|
|||||||||||||||
investment
|
principal
|
investment
|
investment
|
principal
|
Associated
|
investment
|
||||||||||||||
(In millions)
|
in loans
|
balance
|
in loans
|
in loans
|
balance
|
allowance
|
in loans
|
|||||||||||||
September 30, 2011
|
||||||||||||||||||||
Debt
|
$
|
3,759
|
$
|
3,822
|
$
|
3,571
|
$
|
4,922
|
$
|
4,918
|
$
|
737
|
$
|
5,654
|
||||||
Business Properties
|
237
|
237
|
211
|
439
|
525
|
123
|
475
|
|||||||||||||
Total
|
$
|
3,996
|
$
|
4,059
|
$
|
3,782
|
$
|
5,361
|
$
|
5,443
|
$
|
860
|
$
|
6,129
|
||||||
December 31, 2010
|
||||||||||||||||||||
Debt
|
$
|
2,814
|
$
|
2,873
|
$
|
1,598
|
$
|
6,323
|
$
|
6,498
|
$
|
1,007
|
$
|
6,116
|
||||||
Business Properties
|
191
|
213
|
141
|
489
|
476
|
143
|
382
|
|||||||||||||
Total
|
$
|
3,005
|
$
|
3,086
|
$
|
1,739
|
$
|
6,812
|
$
|
6,974
|
$
|
1,150
|
$
|
6,498
|
||||||
(a)
|
We recognized $309 million, $189 million and $200 million of interest income for the nine months ended September 30, 2011, the year ended December 31, 2010 and the nine months ended September 30, 2010, respectively, principally on a cash basis. A substantial majority of this amount was related to our Real Estate-Debt portfolio. The total average investment in impaired loans for the nine months ended September 30, 2010 was $7,842 million.
|
Loan-to-value ratio at
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
Less than
|
80% to
|
Greater than
|
Less than
|
80% to
|
Greater than
|
||||||||||||
(In millions)
|
80%
|
95%
|
95%
|
80%
|
95%
|
95%
|
|||||||||||
Debt
|
$
|
14,588
|
$
|
5,053
|
$
|
6,107
|
$
|
12,362
|
$
|
9,392
|
$
|
8,495
|
|||||
Internal Risk Rating at
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
(In millions)
|
A
|
B
|
C
|
A
|
B
|
C
|
|||||||||||
Business Properties
|
$
|
8,048
|
$
|
103
|
$
|
479
|
$
|
8,746
|
$
|
437
|
$
|
779
|
Consumer
|
Financing receivables at
|
|||||||||||
September 30,
|
December 31,
|
|||||||||||
(In millions)
|
2011
|
2010
|
||||||||||
Non-U.S. residential mortgages
|
$
|
38,708
|
$
|
40,011
|
||||||||
Non-U.S. installment and revolving credit
|
19,801
|
20,132
|
||||||||||
U.S. installment and revolving credit
|
43,249
|
43,974
|
||||||||||
Non-U.S. auto
|
6,462
|
7,558
|
||||||||||
Other
|
8,017
|
8,304
|
||||||||||
Total Consumer financing receivables, before allowance for losses
|
$
|
116,237
|
$
|
119,979
|
||||||||
Non-impaired financing receivables
|
$
|
113,144
|
$
|
117,431
|
||||||||
General reserves
|
3,161
|
3,945
|
||||||||||
Impaired loans
|
3,093
|
2,548
|
||||||||||
Specific reserves
|
721
|
555
|
||||||||||
At
|
||||||||||||
Consumer
|
September 30, 2011
|
December 31, 2010
|
||||||||||
Over 30 days
|
Over 90 days
|
Over 30 days
|
Over 90 days
|
|||||||||
past due
|
past due(a)
|
past due
|
past due(a)
|
|||||||||
Non-U.S. residential mortgages
|
13.6
|
%
|
8.9
|
%
|
13.7
|
%
|
8.8
|
%
|
||||
Non-U.S. installment and revolving credit
|
4.2
|
1.3
|
4.5
|
1.3
|
||||||||
U.S. installment and revolving credit
|
5.1
|
2.1
|
6.2
|
2.8
|
||||||||
Non-U.S. auto
|
3.2
|
0.5
|
3.3
|
0.6
|
||||||||
Other
|
3.7
|
2.0
|
4.2
|
2.3
|
||||||||
Total
|
7.6
|
4.1
|
8.1
|
4.4
|
||||||||
(a)
|
Included $42 million and $65 million of loans at September 30, 2011 and December 31, 2010, respectively, which are over 90 days past due and accruing interest.
|
Nonaccrual financing
|
Nonearning financing
|
|||||||||||
Consumer
|
receivables at
|
receivables at
|
||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
|||||||||
(Dollars in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||
Non-U.S. residential mortgages
|
$
|
3,753
|
$
|
3,986
|
$
|
3,619
|
$
|
3,738
|
||||
Non-U.S. installment and revolving credit
|
347
|
302
|
299
|
289
|
||||||||
U.S. installment and revolving credit
|
882
|
1,201
|
882
|
1,201
|
||||||||
Non-U.S. auto
|
35
|
46
|
35
|
46
|
||||||||
Other
|
491
|
600
|
441
|
478
|
||||||||
Total
|
$
|
5,508
|
$
|
6,135
|
$
|
5,276
|
$
|
5,752
|
||||
Allowance for losses percentage
|
70.5
|
%
|
73.3
|
%
|
73.6
|
%
|
78.2
|
%
|
||||
Loan-to-value ratio at
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
80% or
|
Greater than
|
Greater than
|
80% or
|
Greater than
|
Greater than
|
||||||||||||
(In millions)
|
less
|
80% to 90%
|
90%
|
less
|
80% to 90%
|
90%
|
|||||||||||
Non-U.S. residential mortgages
|
$
|
21,921
|
$
|
6,580
|
$
|
10,207
|
$
|
22,403
|
$
|
7,023
|
$
|
10,585
|
Internal ratings translated to approximate credit bureau equivalent score at
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
681 or
|
615 to
|
614 or
|
681 or
|
615 to
|
614 or
|
||||||||||||
(In millions)
|
higher
|
680
|
less
|
higher
|
680
|
less
|
|||||||||||
Non-U.S. installment and
|
|||||||||||||||||
revolving credit
|
$
|
10,429
|
$
|
5,185
|
$
|
4,187
|
$
|
10,192
|
$
|
5,749
|
$
|
4,191
|
|||||
U.S. installment and
|
|||||||||||||||||
revolving credit
|
26,912
|
8,743
|
7,594
|
25,940
|
8,846
|
9,188
|
|||||||||||
Non-U.S. auto
|
4,425
|
1,256
|
781
|
5,379
|
1,330
|
849
|
Consolidated Securitization Entities (a)
|
||||||||||||||||||||
Credit
|
Trade
|
|||||||||||||||||||
(In millions)
|
Trinity(b)
|
Cards(c)
|
Equipment(d)
|
Real Estate
|
Receivables
|
Other(d)
|
Total
|
|||||||||||||
September 30, 2011
|
||||||||||||||||||||
Assets(e)
|
||||||||||||||||||||
Financing receivables, net
|
$
|
–
|
$
|
17,272
|
$
|
10,217
|
$
|
3,764
|
$
|
2,722
|
$
|
3,006
|
$
|
36,981
|
||||||
Investment securities
|
4,624
|
–
|
–
|
–
|
–
|
–
|
4,624
|
|||||||||||||
Other assets
|
352
|
18
|
251
|
213
|
–
|
1,780
|
2,614
|
|||||||||||||
Total
|
$
|
4,976
|
$
|
17,290
|
$
|
10,468
|
$
|
3,977
|
$
|
2,722
|
$
|
4,786
|
$
|
44,219
|
||||||
Liabilities(e)
|
||||||||||||||||||||
Borrowings
|
$
|
–
|
$
|
–
|
$
|
137
|
$
|
25
|
$
|
–
|
$
|
823
|
$
|
985
|
||||||
Non-recourse borrowings
|
–
|
12,934
|
8,236
|
3,882
|
2,449
|
1,021
|
28,522
|
|||||||||||||
Other liabilities
|
4,920
|
54
|
30
|
3
|
360
|
290
|
5,657
|
|||||||||||||
Total
|
$
|
4,920
|
$
|
12,988
|
$
|
8,403
|
$
|
3,910
|
$
|
2,809
|
$
|
2,134
|
$
|
35,164
|
||||||
December 31, 2010
|
||||||||||||||||||||
Assets(e)
|
||||||||||||||||||||
Financing receivables, net
|
$
|
–
|
$
|
20,570
|
$
|
9,431
|
$
|
4,233
|
$
|
1,882
|
$
|
3,356
|
$
|
39,472
|
||||||
Investment securities
|
5,706
|
–
|
–
|
–
|
–
|
–
|
5,706
|
|||||||||||||
Other assets
|
283
|
17
|
234
|
209
|
99
|
2,047
|
2,889
|
|||||||||||||
Total
|
$
|
5,989
|
$
|
20,587
|
$
|
9,665
|
$
|
4,442
|
$
|
1,981
|
$
|
5,403
|
$
|
48,067
|
||||||
Liabilities(e)
|
||||||||||||||||||||
Borrowings
|
$
|
–
|
$
|
–
|
$
|
184
|
$
|
25
|
$
|
–
|
$
|
906
|
$
|
1,115
|
||||||
Non-recourse borrowings
|
–
|
12,824
|
8,091
|
4,294
|
2,970
|
1,265
|
29,444
|
|||||||||||||
Other liabilities
|
5,690
|
132
|
8
|
4
|
–
|
243
|
6,077
|
|||||||||||||
Total
|
$
|
5,690
|
$
|
12,956
|
$
|
8,283
|
$
|
4,323
|
$
|
2,970
|
$
|
2,414
|
$
|
36,636
|
||||||
(a)
|
Includes entities consolidated on January 1, 2010 by the initial application of ASU 2009-16 & 17. On January 1, 2010, we consolidated financing receivables of $39,463 million and investment securities of $1,015 million and non-recourse borrowings of $36,112 million. At September 30, 2011, financing receivables of $29,155 million and non-recourse borrowings of $23,850 million remained outstanding in respect of those entities.
|
(b)
|
Contractual credit and liquidity support provided to those entities was $1,363 million at September 30, 2011 and $1,508 million at December 31, 2010.
|
(c)
|
In February 2011, the capital structure of one of our consolidated credit card securitization entities changed and it is now consolidated under the voting interest model and accordingly is no longer reported in the table above. The entity’s assets and liabilities at December 31, 2010 were $2,875 million and $525 million, respectively.
|
(d)
|
In certain transactions entered into prior to December 31, 2004, we provided contractual credit and liquidity support to third parties who funded the purchase of securitized or participated interests in assets. We have not entered into additional arrangements since that date. Liquidity and credit support was $907 million at September 30, 2011 and $936 million at December 31, 2010.
|
(e)
|
Asset amounts exclude intercompany receivables for cash collected on behalf of the entities by GE as servicer, which are eliminated in consolidation. Such receivables provide the cash to repay the entities’ liabilities. If these intercompany receivables were included in the table above, assets would be higher. In addition other assets, borrowings and other liabilities exclude intercompany balances that are eliminated in consolidation.
|
At
|
|||||||||||||||||
September 30, 2011
|
December 31, 2010
|
||||||||||||||||
(In millions)
|
PTL
|
All other
|
Total
|
PTL
|
All other
|
Total
|
|||||||||||
Other assets and investment
|
|||||||||||||||||
securities
|
$
|
6,717
|
$
|
5,440
|
$
|
12,157
|
$
|
5,790
|
$
|
4,580
|
$
|
10,370
|
|||||
Financing receivables – net
|
–
|
1,905
|
1,905
|
–
|
2,240
|
2,240
|
|||||||||||
Total investments
|
6,717
|
7,345
|
14,062
|
5,790
|
6,820
|
12,610
|
|||||||||||
Contractual obligations to fund
|
|||||||||||||||||
investments or guarantees
|
600
|
2,961
|
3,561
|
600
|
1,981
|
2,581
|
|||||||||||
Revolving lines of credit
|
1,615
|
106
|
1,721
|
2,431
|
–
|
2,431
|
|||||||||||
Total
|
$
|
8,932
|
$
|
10,412
|
$
|
19,344
|
$
|
8,821
|
$
|
8,801
|
$
|
17,622
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
$
|
4,512
|
$
|
4,551
|
$
|
13,786
|
$
|
13,651
|
|||
Segment profit
|
$
|
688
|
$
|
443
|
$
|
1,943
|
$
|
987
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
$
|
195,257
|
$
|
202,650
|
$
|
203,634
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
|||||||||||
Americas
|
$
|
2,624
|
$
|
2,636
|
$
|
8,082
|
$
|
7,842
|
|||
Europe
|
940
|
971
|
2,914
|
3,102
|
|||||||
Asia
|
585
|
545
|
1,686
|
1,604
|
|||||||
Other
|
363
|
399
|
1,104
|
1,103
|
|||||||
Segment profit
|
|||||||||||
Americas
|
$
|
547
|
$
|
345
|
$
|
1,548
|
$
|
861
|
|||
Europe
|
104
|
117
|
319
|
287
|
|||||||
Asia
|
68
|
34
|
140
|
120
|
|||||||
Other
|
(31)
|
(53)
|
(64)
|
(281)
|
|||||||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
|||||||||||
Americas(a)
|
$
|
114,023
|
$
|
119,809
|
$
|
121,600
|
|||||
Europe
|
47,738
|
50,026
|
49,081
|
||||||||
Asia
|
18,292
|
18,269
|
18,232
|
||||||||
Other(a)
|
15,204
|
14,546
|
14,721
|
||||||||
(a)
|
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
$
|
4,032
|
$
|
4,097
|
$
|
13,035
|
$
|
12,840
|
|||
Segment profit
|
$
|
737
|
$
|
773
|
$
|
2,976
|
$
|
1,977
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
$
|
141,074
|
$
|
147,327
|
$
|
146,140
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
$
|
935
|
$
|
953
|
$
|
2,834
|
$
|
2,888
|
|||
Segment profit
|
$
|
(82)
|
$
|
(405)
|
$
|
(775)
|
$
|
(1,332)
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
$
|
64,449
|
$
|
72,630
|
$
|
75,227
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
$
|
221
|
$
|
291
|
$
|
931
|
$
|
1,677
|
|||
Segment profit
|
$
|
79
|
$
|
55
|
$
|
330
|
$
|
334
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
$
|
18,199
|
$
|
19,549
|
$
|
19,847
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Revenues
|
$
|
1,265
|
$
|
1,321
|
$
|
3,917
|
$
|
3,819
|
|||
Segment profit
|
$
|
208
|
$
|
158
|
$
|
835
|
$
|
763
|
|||
At
|
|||||||||||
September 30,
|
December 31,
|
September 30,
|
|||||||||
(In millions)
|
2011
|
2010
|
2010
|
||||||||
Total assets
|
$
|
48,613
|
$
|
49,106
|
$
|
48,696
|
|||||
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||
Earnings (loss) from discontinued operations,
|
|||||||||||
net of taxes
|
$
|
2
|
$
|
(1,051)
|
$
|
277
|
$
|
(1,501)
|
|||
·
|
Repayments exceeded new issuances of total borrowings by $28.5 billion and collections on financing receivables exceeded originations by $18.5 billion;
|
·
|
Proceeds from sales of businesses, including the sale of a significant portion of our investment in Garanti Bank were $14.9 billion; and
|
·
|
The U.S. dollar was weaker for most major currencies at September 30, 2011 than at December 31, 2010, increasing the translated levels of our non-U.S. dollar assets and liabilities.
|
Financing receivables at
|
Nonearning receivables at
|
Allowance for losses at
|
|||||||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
September 30,
|
December 31,
|
||||||||||||
(In millions)
|
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
|||||||||||
Commercial
|
|||||||||||||||||
CLL
|
|||||||||||||||||
Americas(a)
|
$
|
81,072
|
$
|
88,558
|
$
|
1,967
|
$
|
2,573
|
$
|
995
|
$
|
1,288
|
|||||
Europe
|
37,130
|
37,498
|
1,086
|
1,241
|
403
|
429
|
|||||||||||
Asia
|
11,914
|
11,943
|
230
|
406
|
150
|
222
|
|||||||||||
Other(a)
|
469
|
664
|
16
|
6
|
5
|
6
|
|||||||||||
Total CLL
|
130,585
|
138,663
|
3,299
|
4,226
|
1,553
|
1,945
|
|||||||||||
Energy
|
|||||||||||||||||
Financial
|
|||||||||||||||||
Services
|
5,977
|
7,011
|
135
|
62
|
36
|
22
|
|||||||||||
GECAS
|
11,841
|
12,615
|
62
|
–
|
14
|
20
|
|||||||||||
Other
|
1,388
|
1,788
|
71
|
102
|
43
|
58
|
|||||||||||
Total
|
|||||||||||||||||
Commercial
|
149,791
|
160,077
|
3,567
|
4,390
|
1,646
|
2,045
|
|||||||||||
Real Estate
|
|||||||||||||||||
Debt(b)
|
25,748
|
30,249
|
714
|
961
|
978
|
1,292
|
|||||||||||
Business
|
|||||||||||||||||
Properties(c)
|
8,630
|
9,962
|
314
|
386
|
163
|
196
|
|||||||||||
Total Real Estate
|
34,378
|
40,211
|
1,028
|
1,347
|
1,141
|
1,488
|
|||||||||||
Consumer
|
|||||||||||||||||
Non-U.S.
|
|||||||||||||||||
residential
|
|||||||||||||||||
mortgages(d)
|
38,708
|
40,011
|
3,619
|
3,738
|
779
|
803
|
|||||||||||
Non-U.S.
|
|||||||||||||||||
installment
|
|||||||||||||||||
and revolving
|
|||||||||||||||||
credit
|
19,801
|
20,132
|
299
|
289
|
816
|
937
|
|||||||||||
U.S. installment
|
|||||||||||||||||
and revolving
|
|||||||||||||||||
credit
|
43,249
|
43,974
|
882
|
1,201
|
1,953
|
2,333
|
|||||||||||
Non-U.S. auto
|
6,462
|
7,558
|
35
|
46
|
123
|
168
|
|||||||||||
Other
|
8,017
|
8,304
|
441
|
478
|
211
|
259
|
|||||||||||
Total Consumer
|
116,237
|
119,979
|
5,276
|
5,752
|
3,882
|
4,500
|
|||||||||||
Total
|
$
|
300,406
|
$
|
320,267
|
$
|
9,871
|
$
|
11,489
|
$
|
6,669
|
$
|
8,033
|
|||||
(a)
|
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
|
(b)
|
Financing receivables included $119 million and $218 million of construction loans at September 30, 2011 and December 31, 2010, respectively.
|
(c)
|
Our Business Properties portfolio is underwritten primarily by the credit quality of the borrower and secured by tenant and owner-occupied commercial properties.
|
(d)
|
At September 30, 2011, net of credit insurance, approximately 25% of our secured Consumer non-U.S. residential mortgage portfolio comprised loans with introductory, below market rates that are scheduled to adjust at future dates; with high loan-to-value ratios at inception (greater than 90%); whose terms permitted interest-only payments; or whose terms resulted in negative amortization. At origination, we underwrite loans with an adjustable rate to the reset value. Of these loans, 79% are in our U.K. and France portfolios, which comprise mainly loans with interest-only payments and introductory below market rates, have a delinquency rate of 14%, have a loan-to-value ratio at origination of 76% and have re-indexed loan-to-value ratios of 85% and 57%, respectively. At September 30, 2011, 6% (based on dollar values) of these loans in our U.K. and France portfolios have been restructured.
|
Nonearning financing receivables
|
Allowance for losses
|
Allowance for losses
|
|||||||||||||||
as a percent of
|
as a percent of
|
as a percent of
|
|||||||||||||||
financing receivables at
|
nonearning financing receivables at
|
total financing receivables at
|
|||||||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
September 30,
|
December 31,
|
||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Commercial
|
|||||||||||||||||
CLL
|
|||||||||||||||||
Americas
|
2.4
|
%
|
2.9
|
%
|
50.6
|
%
|
50.1
|
%
|
1.2
|
%
|
1.5
|
%
|
|||||
Europe
|
2.9
|
3.3
|
37.1
|
34.6
|
1.1
|
1.1
|
|||||||||||
Asia
|
1.9
|
3.4
|
65.2
|
54.7
|
1.3
|
1.9
|
|||||||||||
Other
|
3.4
|
0.9
|
31.3
|
100.0
|
1.1
|
0.9
|
|||||||||||
Total CLL
|
2.5
|
3.0
|
47.1
|
46.0
|
1.2
|
1.4
|
|||||||||||
Energy Financial Services
|
2.3
|
0.9
|
26.7
|
35.5
|
0.6
|
0.3
|
|||||||||||
GECAS
|
0.5
|
–
|
22.6
|
–
|
0.1
|
0.2
|
|||||||||||
Other
|
5.1
|
5.7
|
60.6
|
56.9
|
3.1
|
3.2
|
|||||||||||
Total Commercial
|
2.4
|
2.7
|
46.1
|
46.6
|
1.1
|
1.3
|
|||||||||||
Real Estate
|
|||||||||||||||||
Debt
|
2.8
|
3.2
|
137.0
|
134.4
|
3.8
|
4.3
|
|||||||||||
Business Properties
|
3.6
|
3.9
|
51.9
|
50.8
|
1.9
|
2.0
|
|||||||||||
Total Real Estate
|
3.0
|
3.3
|
111.0
|
110.5
|
3.3
|
3.7
|
|||||||||||
Consumer
|
|||||||||||||||||
Non-U.S.
|
|||||||||||||||||
residential mortgages
|
9.3
|
9.3
|
21.5
|
21.5
|
2.0
|
2.0
|
|||||||||||
Non-U.S.
|
|||||||||||||||||
installment and
|
|||||||||||||||||
revolving credit
|
1.5
|
1.4
|
272.9
|
324.2
|
4.1
|
4.7
|
|||||||||||
U.S. installment
|
|||||||||||||||||
and revolving credit
|
2.0
|
2.7
|
221.4
|
194.3
|
4.5
|
5.3
|
|||||||||||
Non-U.S. auto
|
0.5
|
0.6
|
351.4
|
365.2
|
1.9
|
2.2
|
|||||||||||
Other
|
5.5
|
5.8
|
47.8
|
54.2
|
2.6
|
3.1
|
|||||||||||
Total Consumer
|
4.5
|
4.8
|
73.6
|
78.2
|
3.3
|
3.8
|
|||||||||||
Total
|
3.3
|
3.6
|
67.6
|
69.9
|
2.2
|
2.5
|
|||||||||||
Nonaccrual
|
Nonearning
|
||||||||||
financing
|
financing
|
||||||||||
(In millions)
|
receivables
|
receivables
|
|||||||||
September 30, 2011
|
|||||||||||
Commercial
|
|||||||||||
CLL
|
$
|
4,547
|
$
|
3,299
|
|||||||
Energy Financial Services
|
135
|
135
|
|||||||||
GECAS
|
62
|
62
|
|||||||||
Other
|
123
|
71
|
|||||||||
Total Commercial
|
4,867
|
3,567
|
|||||||||
Real Estate
|
7,285
|
1,028
|
|||||||||
Consumer
|
5,508
|
5,276
|
|||||||||
Total
|
$
|
17,660
|
$
|
9,871
|
|||||||
(In millions)
|
At
|
||||||||||
September 30,
|
December 31,
|
||||||||||
2011
|
2010
|
||||||||||
Loans requiring allowance for losses
|
|||||||||||
Commercial(a)
|
$
|
2,364
|
$
|
2,733
|
|||||||
Real Estate
|
5,361
|
6,812
|
|||||||||
Consumer
|
3,043
|
2,446
|
|||||||||
Total loans requiring allowance for losses
|
10,768
|
11,991
|
|||||||||
Loans expected to be fully recoverable
|
|||||||||||
Commercial(a)
|
3,453
|
3,087
|
|||||||||
Real Estate
|
3,996
|
3,005
|
|||||||||
Consumer
|
50
|
102
|
|||||||||
Total loans expected to be fully recoverable
|
7,499
|
6,194
|
|||||||||
Total impaired loans
|
$
|
18,267
|
$
|
18,185
|
|||||||
Allowance for losses (specific reserves)
|
|||||||||||
Commercial(a)
|
$
|
829
|
$
|
1,031
|
|||||||
Real Estate
|
860
|
1,150
|
|||||||||
Consumer
|
721
|
555
|
|||||||||
Total allowance for losses (specific reserves)
|
$
|
2,410
|
$
|
2,736
|
|||||||
Average investment during the period
|
$
|
18,602
|
$
|
15,538
|
|||||||
Interest income earned while impaired(b)
|
543
|
391
|
|||||||||
(a)
|
Includes CLL, Energy Financial Services, GECAS and Other.
|
(b)
|
Recognized principally on a cash basis. Interest income earned while impaired for the nine months ended September 30, 2011, the year ended December 31, 2010 and the nine months ended September 30, 2010, were $543 million, $391 million and $328 million, respectively. The total average investment in impaired loans for the nine months ended September 30, 2010, was $14,888 million.
|
At
|
|||||||||||
September 30,
|
December 31,
|
||||||||||
(In millions)
|
2011
|
2010
|
|||||||||
Method used to measure impairment
|
|||||||||||
Discounted cash flow
|
$
|
9,262
|
$
|
7,644
|
|||||||
Collateral value
|
9,005
|
10,541
|
|||||||||
Total
|
$
|
18,267
|
$
|
18,185
|
At
|
||||||||||||
September 30,
|
December 31,
|
|||||||||||
2011
|
2010
|
|||||||||||
CLL
|
2.0
|
%
|
2.1
|
%
|
||||||||
Consumer
|
7.6
|
8.1
|
||||||||||
Real Estate
|
4.2
|
4.4
|
Exhibit 12
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
Exhibit 31(a)
|
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended.
|
|
Exhibit 31(b)
|
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended.
|
|
Exhibit 32
|
Certification Pursuant to 18 U.S.C. Section 1350.
|
|
Exhibit 99(a)
|
Financial Measures That Supplement Generally Accepted Accounting Principles.
|
|
Exhibit 101
|
The following materials from General Electric Capital Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language); (i) Condensed Statement of Earnings for the three and nine months ended September 30, 2011 and 2010, (ii) Condensed Statement of Financial Position at September 30, 2011 and December 31, 2010, (iii) Condensed Statement of Cash Flows for the nine months ended September 30, 2011 and 2010, and (iv) Notes to Condensed, Consolidated Financial Statements.*
|
|
*
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
General Electric Capital Corporation
(Registrant)
|
|||
November 7, 2011
|
/s/Jamie S. Miller
|
||
Date
|
Jamie S. Miller
Senior Vice President and Controller
Duly Authorized Officer and Principal Accounting Officer
|
||
Ratio of
|
||
earnings to
|
||
fixed charges
|
||
(Dollars in millions)
|
||
Earnings(a)
|
$
|
5,618
|
Plus:
|
||
Interest included in expense(b)
|
10,721
|
|
One-third of rental expense(c)
|
153
|
|
Adjusted “earnings”
|
$
|
16,492
|
Fixed charges:
|
||
Interest included in expense(b)
|
$
|
10,721
|
Interest capitalized
|
19
|
|
One-third of rental expense(c)
|
153
|
|
Total fixed charges
|
$
|
10,893
|
Ratio of earnings to fixed charges
|
1.51
|
|
(a)
|
Earnings before income taxes, noncontrolling interests, discontinued operations and undistributed earnings of equity investees.
|
(b)
|
Included interest on tax deficiencies.
|
(c)
|
Considered to be representative of interest factor in rental expense.
|
I, Michael A. Neal, certify that:
|
||
1.
|
I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Michael A. Neal
|
|
Michael A. Neal
|
|
Chief Executive Officer
|
I, Jeffrey S. Bornstein, certify that:
|
||
1.
|
I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Jeffrey S. Bornstein
|
|
Jeffrey S. Bornstein
|
|
Chief Financial Officer
|
(1)
|
The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
|
November 7, 2011
|
|
/s/ Michael A. Neal
|
|
Michael A. Neal
Chief Executive Officer
|
|
/s/ Jeffrey S. Bornstein
|
|
Jeffrey S. Bornstein
Chief Financial Officer
|
At
|
|||||
September 30,
|
December 31,
|
||||
(In billions)
|
2011
|
2010
|
|||
GECC total assets
|
$
|
572.7
|
$
|
581.1
|
|
Less assets of discontinued operations
|
1.5
|
12.4
|
|||
Less non-interest bearing liabilities
|
36.7
|
38.7
|
|||
GE Capital ENI
|
534.5
|
530.0
|
|||
Less cash and equivalents
|
82.4
|
59.5
|
|||
GE Capital ENI, excluding cash and equivalents
|
$
|
452.1
|
$
|
470.5
|
|
Condensed Statement of Financial Position (Unaudited) (USD $) In Millions | Sep. 30, 2011 | Dec. 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||
Cash and equivalents | $ 82,391 | $ 59,538 | ||||||||
Investment securities (Note 3) | 17,362 | 17,952 | ||||||||
Inventories | 44 | 66 | ||||||||
Financing receivables - net (Notes 4 and 12) | 293,737 | 312,234 | ||||||||
Other receivables | 13,211 | 13,674 | ||||||||
Property, plant and equipment, less accumuatled amorizations of $24,291 and $25,390 | 52,309 | 53,747 | ||||||||
Goodwill (Note 5) | 27,726 | 27,508 | ||||||||
Other intangible assets - net (Note 5) | 1,702 | 1,874 | ||||||||
All other assets | 79,743 | 79,045 | ||||||||
Assets of businesses held for sale (Note 2) | 3,050 | 3,127 | ||||||||
Assets of discontinued operations (Note 2) | 1,461 | 12,375 | ||||||||
Total assets(a) | 572,736 | [1] | 581,140 | [1] | ||||||
Liabilities and equity | ||||||||||
Short-term borrowings (Note 6) | 121,733 | 113,646 | ||||||||
Accounts payable | 7,835 | 6,839 | ||||||||
Non-recourse borrowings of consolidated securitization entities (Note 6) | 29,022 | 30,018 | ||||||||
Bank deposits (Note 6) | 41,515 | 37,298 | ||||||||
Long-term borrowings (Note 6) | 259,332 | 284,346 | ||||||||
Investment contracts, insurance liabilities and insurance annuity benefits | 4,859 | 5,779 | ||||||||
Other liabilities | 21,983 | 20,287 | ||||||||
Deferred income taxes | 3,091 | 6,109 | ||||||||
Liabilities of businesses held for sale (Note 2) | 1,813 | 592 | ||||||||
Liabilities of discontinued operations (Note 2) | 1,261 | 2,181 | ||||||||
Total liabilities(b) | 492,444 | [1] | 507,095 | [1] | ||||||
Capital Stock | 56 | 56 | ||||||||
Accumulated other comprehensive income - net(b) | ||||||||||
Investment securities | (676) | [2] | (337) | [2] | ||||||
Currency translation adjustments | 138 | [2] | (1,541) | [2] | ||||||
Cash flow hedges | (1,711) | [2] | (1,347) | [2] | ||||||
Benefit plans | (353) | [2] | (380) | [2] | ||||||
Additional paid-in capital | 28,462 | 28,463 | ||||||||
Retained earnings | 53,171 | 47,967 | ||||||||
Total Company shareowners' equity | 79,087 | 72,881 | ||||||||
Noncontrolling interests(c) | 1,205 | [3] | 1,164 | [3] | ||||||
Total equity | 80,292 | 74,045 | ||||||||
Total liabilities and equity | $ 572,736 | $ 581,140 | ||||||||
|
Condensed Statement of Financial Position (Unaudited) (Parenthetical) (USD $) In Millions | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Accumulated amortization | $ 24,291 | $ 25,390 |
Document and Entity Information | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Document and Entity Information [Abstract] | |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2011 |
Amendment Flag | false |
Document Fiscal Period Focus | Q3 |
Document Fiscal Year Focus | 2011 |
Entity Registrant Name | General Electric Capital Corp |
Entity Central Index Key | 0000040554 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 3,985,404 |
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Borrowings and Bank Deposits | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Borrowings and bank deposits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings and Bank Deposits | 6. BORROWINGS AND BANK DEPOSITS Borrowings are summarized in the following table.
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Financial Instruments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | 11. FINANCIAL INSTRUMENTS The following table provides information about the assets and liabilities not carried at fair value in our Condensed Statement of Financial Position. Consistent with ASC 825, Financial Instruments, the table excludes finance leases and non-financial assets and liabilities. Apart from certain of our borrowings and certain marketable securities, few of the instruments discussed below are actively traded and their fair values must often be determined using financial models. Realization of the fair value of these instruments depends upon market forces beyond our control, including marketplace liquidity. For a description on how we estimate fair value, see Note 15 in our 2010 consolidated financial statements.
Loan Commitments
Derivatives and hedging As a matter of policy, we use derivatives for risk management purposes and we do not use derivatives for speculative purposes. A key risk management objective for our financial services businesses is to mitigate interest rate and currency risk by seeking to ensure that the characteristics of the debt match the assets they are funding. If the form (fixed versus floating) and currency denomination of the debt we issue do not match the related assets, we typically execute derivatives to adjust the nature and tenor of funding to meet this objective. The determination of whether we enter into a derivative transaction or issue debt directly to achieve this objective depends on a number of factors, including market related factors that affect the type of debt we can issue.
The notional amounts of derivative contracts represent the basis upon which interest and other payments are calculated and are reported gross, except for offsetting foreign currency forward contracts that are executed in order to manage our currency risk of net investment in foreign subsidiaries. Of the outstanding notional amount of $297,000 million, approximately 98% or $291,000 million, is associated with reducing or eliminating the interest rate, currency or market risk between financial assets and liabilities in our financial services businesses. The remaining derivative activities primarily relate to hedging against adverse changes in currency exchange rates and commodity prices related to anticipated sales and purchases and contracts containing certain clauses which meet the accounting definition of a derivative. The instruments used in these activities are designated as hedges when practicable. When we are not able to apply hedge accounting, or when the derivative and the hedged item are both recorded in earnings concurrently, the derivatives are deemed economic hedges and hedge accounting is not applied. This most frequently occurs when we hedge a recognized foreign currency transaction (e.g., a receivable or payable) with a derivative. Since the effects of changes in exchange rates are reflected currently in earnings for both the derivative and the transaction, the economic hedge does not require hedge accounting.
The following table provides information about the fair value of our derivatives, by contract type, separating those accounted for as hedges and those that are not.
Derivatives are classified in the captions “Other assets” and “Other liabilities” in our financial statements.
Fair value hedges We use interest rate and currency exchange derivatives to hedge the fair value effects of interest rate and currency exchange rate changes on local and non-functional currency denominated fixed-rate debt. For relationships designated as fair value hedges, changes in fair value of the derivatives are recorded in earnings within interest along with offsetting adjustments to the carrying amount of the hedged debt. The following tables provide information about the earnings effects of our fair value hedging relationships for the three and nine months ended September 30, 2011 and 2010, respectively.
Fair value hedges resulted in $(138) million and $(189) million of ineffectiveness in the three months ended September 30, 2011 and 2010, respectively. In both the three months ended September 30, 2011 and 2010, there were insignificant amounts excluded from the assessment of effectiveness.
Fair value hedges resulted in $(347) million and $(516) million of ineffectiveness in the nine months ended September 30, 2011 and 2010, respectively. In both the nine months ended September 30, 2011 and 2010, there were insignificant amounts excluded from the assessment of effectiveness.
Cash flow hedges We use interest rate, currency exchange and commodity derivatives to reduce the variability of expected future cash flows associated with variable rate borrowings and commercial purchase and sale transactions, including commodities. For derivatives that are designated in a cash flow hedging relationship, the effective portion of the change in fair value of the derivative is reported as a component of AOCI and reclassified into earnings contemporaneously and in the same caption with the earnings effects of the hedged transaction.
The following tables provide information about the amounts recorded in AOCI, as well as the gain (loss) recorded in earnings, primarily in interest, when reclassified out of AOCI, for the three and nine months ended September 30, 2011 and 2010.
The total pre-tax amount in AOCI related to cash flow hedges of forecasted transactions was $2,054 million at September 30, 2011. We expect to transfer $643 million to earnings as an expense in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. In both the three and nine months ended September 30, 2011 and 2010, we recognized insignificant gains and losses, respectively, related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At September 30, 2011 and 2010, the maximum term of derivative instruments that hedge forecasted transactions was 1 year and 2 years, respectively.
For cash flow hedges, the amount of ineffectiveness in the hedging relationship and amount of the changes in fair value of the derivatives that are not included in the measurement of ineffectiveness are both reflected in earnings each reporting period. These amounts are primarily reported in revenues from services and totaled $56 million and $12 million in the three months ended September 30, 2011 and 2010, respectively, and $68 million and $(15) million in the nine months ended September 30, 2011 and 2010, respectively.
Net investment hedges in foreign operations We use currency exchange derivatives to protect our net investments in global operations conducted in non-U.S. dollar currencies. For derivatives that are designated as hedges of net investment in a foreign operation, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivative are recorded as a component of AOCI until such time as the foreign entity is substantially liquidated or sold. The change in fair value of the forward points, which reflects the interest rate differential between the two countries on the derivative, is excluded from the effectiveness assessment.
The following tables provide information about the amounts recorded in AOCI for the three and nine months ended September 30, 2011 and 2010, as well as the gain (loss) recorded in revenues from services when reclassified out of AOCI.
The amounts related to the change in the fair value of the forward points that are excluded from the measure of effectiveness were $(384) million and $(204) million for the three months ended September 30, 2011 and 2010, respectively, and $(1,041) million and $(616) million for the nine months ended September 30, 2011 and 2010, respectively, and are recorded in interest.
Free-standing derivatives Changes in the fair value of derivatives that are not designated as hedges are recorded in earnings each period. As discussed above, these derivatives are typically entered into as economic hedges of changes in interest rates, currency exchange rates, commodity prices and other risks. Gains or losses related to the derivative are typically recorded in revenues from services, based on our accounting policy. In general, the earnings effects of the item that represent the economic risk exposure are recorded in the same caption as the derivative. Gains for the nine months ended September 30, 2011 on derivatives not designated as hedges were $86 million comprised of amounts related to interest rate contracts of $52 million, currency exchange contracts of $9 million, and other derivatives of $25 million. These gains more than offset the earnings effects from the underlying items that were economically hedged. Losses for the nine months ended September 30, 2010 on derivatives not designated as hedges, without considering the offsetting earnings effects from the item representing the economic risk exposure, were $(661) million comprised of amounts related to interest rate contracts of $190 million, currency exchange contracts of $(832) million, and other derivatives of $(19) million.
Counterparty credit risk Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. Accordingly, we actively monitor these exposures and take appropriate actions in response. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our standard master agreements) on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we offset our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. When net exposure to a counterparty, based on the current market values of agreements and collateral, exceeds credit exposure limits, we typically take action to reduce such exposures. These actions may include prohibiting additional transactions with the counterparty, requiring additional collateral from the counterparty (as described below) and terminating or restructuring transactions.
As discussed above, we have provisions in certain of our master agreements that require counterparties to post collateral (typically, cash or U.S. Treasuries) when our receivable due from the counterparty, measured at current market value, exceeds a specified limit. At September 30, 2011, our exposure to counterparties, including interest due, net of collateral we hold, was $1,005 million. The fair value of such collateral was $16,032 million, of which $3,504 million was cash and $12,528 million was in the form of securities held by a custodian for our benefit. Under certain of these same agreements, we post collateral to our counterparties for our derivative obligations, the fair value of which was $1,184 million at September 30, 2011.
Additionally, our standard master agreements typically contain mutual downgrade provisions that provide the ability of each party to require termination if the long-term credit rating of the counterparty were to fall below A-/A3. In certain of these master agreements, each party also has the ability to require termination if the short-term rating of the counterparty were to fall below A-1/P-1. The net amount relating to our derivative liability of $1,763 million subject to these provisions, after consideration of collateral posted by us and outstanding interest payments, was $775 million at September 30, 2011. |
Assets and Liabilities of Businesses Held For Sale and Discontnued Operations | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Assets and Liabilities of Businesses Held For Sale and Discontinued Operations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Of Business Held For Sale and Discontinued Operations | 2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS Assets and Liabilities of Businesses Held for Sale In the third quarter of 2011, we committed to sell our CLL marine container leasing business, which consists of our controlling interests in the GE SeaCo joint venture along with other owned marine container assets, and our CLL trailer fleet services business in Mexico.
In the second quarter of 2011, we committed to sell our Consumer business banking operations in Latvia.
In 2010, we committed to sell our Consumer businesses in Argentina, Brazil, and Canada, a CLL business in South Korea, and our Interpark business in Real Estate. The Consumer Canada disposition was completed during the first quarter of 2011. The Consumer Brazil and our Interpark business in Real Estate dispositions were completed during the second quarter of 2011 for proceeds of $22 million and $704 million, respectively. The Consumer Argentina disposition was completed during the third quarter of 2011 for proceeds of $41 million.
Summarized financial information for businesses held for sale is shown below.
Discontinued Operations Discontinued operations primarily comprised BAC Credomatic GECF Inc. (BAC) (our Central American bank and card business), GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our U.S. recreational vehicle and marine equipment financing business (Consumer RV Marine), Consumer Mexico, Consumer Singapore and our Consumer home lending operations in Australia and New Zealand (Australian Home Lending). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
Summarized financial information for discontinued operations is shown below.
Assets at September 30, 2011 and December 31, 2010, primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2015 and in part in 2017, related to the sale of our GE Money Japan business.
BAC Credomatic GECF Inc. (BAC) During the fourth quarter of 2010, we classified BAC as discontinued operations and completed the sale of BAC for $1,920 million. Immediately prior to the sale, and in accordance with terms of a previous agreement, we increased our ownership interest in BAC from 75% to 100% for a purchase price of $633 million. As a result of the sale of our interest in BAC, we recognized an after-tax gain of $780 million in 2010.
BAC revenues from discontinued operations were $264 million and $772 million in the three and nine months ended September 30, 2010, respectively. In total, BAC earnings from discontinued operations, net of taxes, were $19 million and $56 million in the three and nine months ended September 30, 2010, respectively.
GE Money Japan During the third quarter of 2007, we committed to a plan to sell our Japanese personal loan business, Lake, upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. In connection with the sale, we reduced the proceeds from the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese Yen (approximately $3,000 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009. In the third quarter of 2010, we began making reimbursements under this arrangement.
Our overall claims experience developed unfavorably through 2010. We believe that the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. In September 2010, a large independent personal loan company in Japan filed for bankruptcy, which precipitated a significant amount of publicity surrounding excess interest refund claims in the Japanese marketplace, along with substantial legal advertising. We observed an increase in claims during September 2010 and higher average daily claims in the fourth quarter of 2010 and the first two months of 2011. Since February and through August 2011, we have experienced substantial declines in the rate of incoming claims, though claims severity has been higher than expected and we experienced an increase in claims in September 2011. As of September 30, 2011, our reserve for reimbursement of claims in excess of the statutory interest rate was $739 million.
The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. Our estimated liability for excess interest refund claims at September 30, 2011 assumes the pace of incoming claims will continue to decelerate, although at a lower pace than recently experienced, average exposure per claim remains consistent with historical experience, and we continue to see the impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant effect on the total amount of our liability. Holding all other assumptions constant, if claims declined at a rate of one percent higher or lower than our assumed long-term average, our liability estimate would change by approximately $250 million.
Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business, the financial status of other personal lending companies in Japan and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, market activity regarding other personal loan companies, higher claims severity and consumer activity, may continue to have an adverse effect on claims development.
GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $2 million and $(1,101) million in the three months ended September 30, 2011 and 2010, respectively, and $2 million and $(1,673) million in the nine months ended September 30, 2011 and 2010, respectively.
WMC During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC's contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. All claims received for early payment default have either been resolved or are no longer being pursued.
Pending claims for unmet representations and warranties were $783 million at December 31, 2009, $347 million at December 31, 2010 and $568 million at September 30, 2011. Reserves related to these contractual representations and warranties were $122 million and $101 million at September 30, 2011 and December 31, 2010, respectively. We recorded an adjustment to our reserve of $21 million in the third quarter of 2011 to reflect the higher amount of pending claims and an increase in our reserve for unidentified claims. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. A ten percent adverse change in these key assumptions would result in an increase to our reserves of approximately $35 million. Based on our historical experience, we estimate that a small percentage of the total loans WMC originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations. Uncertainties surrounding economic conditions, the ability and propensity of mortgage holders to present valid claims and governmental actions make it difficult to develop a meaningful estimate of aggregate possible claim exposure. Actual losses could exceed the reserve amount if actual claim rates, investigative or litigation activity, valid tenders or losses WMC incurs on repurchased loans are higher than we have historically observed with respect to WMC.
WMC revenues (loss) from discontinued operations were $(21) million and $(1) million in the three months ended September 30, 2011 and 2010, respectively, and $(21) million and $(4) million in the nine months ended September 30, 2011 and 2010, respectively. In total, WMC's earnings (loss) from discontinued operations, net of taxes, were $(15) million and $(2) million in the three months ended September 30, 2011 and 2010, respectively, and $(18) million and $(5) million in the nine months ended September 30, 2011 and 2010, respectively.
Other In the second quarter of 2011, we entered into an agreement to sell our Australian Home Lending operations and classified it as discontinued operations. As a result, we recognized an after-tax loss of $148 million in 2011. We completed the sale in the third quarter of 2011 for proceeds of approximately $4,577 million. Australian Home Lending revenues from discontinued operations were $33 million and $118 million in the three months ended September 30, 2011 and 2010, respectively, and $248 million and $386 million in the nine months ended September 30, 2011 and 2010, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were $15 million and $14 million in the three months ended September 30, 2011 and 2010, respectively, and $(65) million and $51 million in the nine months ended September 30, 2011 and 2010, respectively.
In the first quarter of 2011, we entered into an agreement to sell our Consumer Singapore business for $692 million. The sale was completed in the second quarter of 2011 and resulted in the recognition of a gain on disposal, net of taxes, of $319 million. Consumer Singapore revenues from discontinued operations were $(1) million and $27 million in the three months ended September 30, 2011 and 2010, respectively, and $30 million and $79 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $7 million and $11 million in the three months ended September 30, 2011 and 2010, respectively, and $333 million and $27 million in the nine months ended September 30, 2011 and 2010, respectively.
In the fourth quarter of 2010, we entered into agreements to sell our Consumer RV Marine portfolio and Consumer Mexico business. The Consumer RV Marine and Consumer Mexico dispositions were completed during the first quarter and the second quarter of 2011, respectively, for proceeds of $2,365 million and $1,943 million, respectively. Consumer RV Marine revenues from discontinued operations were $0 million and $52 million in the three months ended September 30, 2011 and 2010, respectively, and $11 million and $160 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer RV Marine earnings (loss) from discontinued operations, net of taxes, were $(1) million and $(8) million in the three months ended September 30, 2011 and 2010, respectively, and $1 million and $(9) million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Mexico revenues from discontinued operations were $1 million and $55 million in the three months ended September 30, 2011 and 2010, respectively, and $68 million and $172 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Mexico earnings from discontinued operations, net of taxes, were $1 million and $18 million in the three months ended September 30, 2011 and 2010, respectively, and $34 million and $53 million in the nine months ended September 30, 2011 and 2010, respectively. |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareowners' Equity | 8. SHAREOWNER'S EQUITY A summary of increases (decreases) in GECC shareowner's equity that did not result directly from transactions with the shareowner, net of income taxes, follows.
Changes to noncontrolling interests are as follows.
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Variable Interest Entities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | 13. VARIABLE INTEREST ENTITIES We securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improving returns, these securitization transactions serve as alternative funding sources for a variety of diversified lending and securities transactions. Historically, we have used both GECC-supported and third-party VIEs to execute off-balance sheet securitization transactions funded in the commercial paper and term markets. The largest group of VIEs that we are involved with are former Qualified Special Purpose Entities (QSPEs), which under guidance in effect through December 31, 2009 were excluded from the scope of consolidation standards based on their characteristics. Except as noted below, investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in 2011 or 2010.
In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity's economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity's future performance and the exercise of professional judgment in deciding which decision-making rights are most important.
In determining whether we have the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity's design, including: the entity's capital structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent payments, as well as other contractual arrangements that have potential to be economically significant. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests is a matter that requires the exercise of professional judgment.
Consolidated Variable Interest Entities We consolidate VIEs because we have the power to direct the activities that significantly affect the VIE's economic performance, typically because of our role as either servicer or manager for the VIE. As more fully described in Note 17 in our 2010 consolidated financial statements, our consolidated VIEs fall into three main groups: (1) Trinity, a group of sponsored special purpose entities that holds investment securities funded by the issuance of GICs; (2) Consolidated Securitization Entities, primarily former QSPEs that were created to facilitate securitization of financial assets and other forms of asset-backed financing; and (3) Other consolidated VIEs, primarily asset-backed financing entities where we are the collateral manager, joint ventures and insurance entities. The table below summarizes the assets and liabilities of these entities.
Revenues from services from our consolidated VIEs were $1,426 million and $1,535 million in the three months ended September 30, 2011 and 2010, respectively, and $4,311 million and $5,112 million in the nine months ended September 30, 2011 and 2010, respectively. Related expenses consisted primarily of provisions for losses of $332 million and $460 million in the three months ended September 30, 2011 and 2010, respectively, and $882 million and $1,207 million in the nine months ended September 30, 2011 and 2010, respectively, and interest of $143 million and $176 million in the three months ended September 30, 2011 and 2010, respectively, and $450 million and $591 million in the nine months ended September 30, 2011 and 2010, respectively. These amounts do not include intercompany revenues and costs, principally fees and interest between GECS and the VIEs, which are eliminated in consolidation. Investments in Unconsolidated Variable Interest Entities Our involvement with unconsolidated VIEs consists of the following activities: assisting in the formation and financing of the entity, providing recourse and/or liquidity support, servicing the assets and receiving variable fees for services provided. We are not required to consolidate these entities because the nature of our involvement with the activities of the VIEs does not give us power over decisions that significantly affect their economic performance.
The largest unconsolidated VIE with which we are involved is Penske Truck Leasing (PTL), a joint venture and limited partnership formed in 1988 between Penske Truck Leasing Corporation (PTLC) and GE. PTLC is the sole general partner of PTL and an indirect wholly-owned subsidiary of Penske Corporation. PTL is engaged in truck leasing and support services, including full-service leasing, dedicated logistics support and contract maintenance programs, as well as rental operations serving commercial and consumer customers. At September 30, 2011, our investment of $6,717 million primarily comprised a 49.9% partnership interest of $864 million and loans and advances of $5,817 million. GECC continues to provide loans under long-term revolving credit and letter of credit facilities to PTL.
Other significant exposures to unconsolidated VIEs at September 30, 2011 include investments in real estate entities ($1,920 million), which generally consist of passive limited partnership investments in tax-advantaged, multi-family real estate and investments in various European real estate entities; debt investment fund ($2,715 million); and exposures to joint ventures that purchase factored receivables ($2,617 million). The vast majority of our other unconsolidated entities consist of passive investments in various asset-backed financing entities.
The classification of our variable interests in these entities in our financial statements is based on the nature of the entity and the type of investment we hold. Variable interests in partnerships and corporate entities are classified as either equity method or cost method investments. In the ordinary course of business, we also make investments in entities in which we are not the primary beneficiary but may hold a variable interest such as limited partner interests or mezzanine debt investments. These investments are classified in two captions in our financial statements: “Other assets” for investments accounted for under the equity method, and “Financing receivables – net” for debt financing provided to these entities. Our investments in unconsolidated VIEs at September 30, 2011 and December 31, 2010 follow.
In addition to the entities included in the table above, we also hold passive investments in RMBS, commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) issued by VIEs. Such investments were, by design, investment grade at issuance and held by a diverse group of investors. Further information about such investments is provided in Note 3. |
Revenues From Services | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Services Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues From Services | 9. REVENUES FROM SERVICES Revenues from services are summarized in the following table.
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Income Taxes | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense (Benefit) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | 7. INCOME TAXES The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:
The IRS is currently auditing the GE consolidated income tax returns for 2006-2009, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years were unresolved. It is reasonably possible that the 2006–2007 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.
GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECC effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE's tax payments are due. The effect of GECC on the amount of the consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the group absent the tax on formation. |
Summary of Operating Segments (Unaudited) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Summary of Operating Segments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Operating Segments | Summary of Operating Segments
See accompanying notes. |
Investment Securities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investment Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | 3. INVESTMENT SECURITIES Substantially all of our investment securities are classified as available-for-sale. These comprise investment grade debt securities, including investment securities supporting obligations to holders of guaranteed investment contracts (GICs) in Trinity, and investment securities at our treasury operations. We do not have any securities classified as held to maturity.
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the three and nine months ended September 30, 2011 have not changed from those described in our 2010 consolidated financial statements. See Note 3 in our 2010 consolidated financial statements for additional information regarding these methodologies and inputs.
During the third quarter of 2011, we recorded other-than-temporary impairments of $83 million, of which $64 million was recorded through earnings ($6 million relates to equity securities) and $19 million was recorded in accumulated other comprehensive income (AOCI). At July 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $392 million. During the third quarter, we recognized first time impairments of $36 million and incremental charges on previously impaired securities of $20 million. These amounts included $1 million related to securities that were subsequently sold.
During the third quarter of 2010, we recorded other-than-temporary impairments of $36 million, of which $30 million was recorded through earnings ($23 million relates to equity securities) and $6 million was recorded in AOCI. At July 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $249 million. During the third quarter of 2010, we recognized first time impairments of $2 million which included $1 million related to securities that were subsequently sold.
During the nine months ended September 30, 2011, we recorded other-than-temporary impairments of $260 million, of which $179 million was recorded through earnings ($16 million relates to equity securities) and $81 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $316 million. During the nine months ended September 30, 2011, we recognized first time impairments of $55 million and incremental charges on previously impaired securities of $99 million. These amounts included $22 million related to securities that were subsequently sold.
During the nine months ended September 30, 2010, we recorded other-than-temporary impairments of $283 million, of which $156 million was recorded through earnings ($24 million relates to equity securities) and $127 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $140 million. During the nine months ended September 30, 2010, we recognized first time impairments of $92 million and incremental charges on previously impaired securities of $34 million. These amounts included $15 million related to securities that were subsequently sold.
Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.
Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.
Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.
Proceeds from investment securities sales and early redemptions by the issuer totaled $3,369 million and $4,520 million in the three months ended September 30, 2011 and 2010, respectively, and $13,131 million and $11,449 million in the nine months ended September 30, 2011 and 2010, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.
We recognized net pre-tax gains (losses) on trading securities of $(29) million and $33 million in the three months ended September 30, 2011 and 2010, respectively, and $26 million and $52 million in the nine months ended September 30, 2011 and 2010, respectively. |
Financing Receivables and Allowance For Losses On Financing Receivables | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Financing Receivables And Allowance For Losses On Financing Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Receivables And Allowance For Losses On Financing Receivables | 4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES Financing receivables – net, consisted of the following.
The following tables provide additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios.
Financing Receivables – net The following table displays our financing receivables balances.
Allowance for Losses on Financing Receivables The following tables provide a roll-forward of our allowance for losses on financing receivables.
See Note 12 for supplemental information about the credit quality of financing receivables and allowance for losses on financing receivables. |
Supplemental Information About The Credit Quality Of Financing Receivables And Allowance For Losses On Financing Receivables | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Information About Credit Quality Of Financing Receivables And Allowance For Losses On Financing Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information About The Credit Quality Of Financing Receivables And Allowance For Losses On Financing Receivables | 12. SUPPLEMENTAL INFORMATION ABOUT THE CREDIT QUALITY OF FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES Pursuant to new disclosures required by ASC 310-10, effective December 31, 2010, we provide further detailed information about the credit quality of our Commercial, Real Estate and Consumer financing receivables portfolios. For each portfolio, we describe the characteristics of the financing receivables and provide information about collateral, payment performance, credit quality indicators, and impairment. While we provide data on selected credit quality indicators in accordance with the new disclosure requirements of ASC 310-10, we manage these portfolios using delinquency and nonearning data as key performance indicators. The categories used within this section such as impaired loans, troubled debt restructuring and nonaccrual financing receivables are defined by the authoritative guidance and we base our categorization on the related scope and definitions contained in the related standards. The categories of nonearning and delinquent are defined by us and are used in our process for managing our financing receivables. Definitions of these categories are provided below: Impaired loans are larger-balance or restructured loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement. Troubled debt restructurings (TDRs) are those loans for which we have granted a concession to a borrower experiencing financial difficulties where we do not receive adequate compensation. Such loans are classified as impaired, and are individually reviewed for specific reserves. Nonaccrual financing receivables are those on which we have stopped accruing interest. We stop accruing interest at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past due. Although we stop accruing interest in advance of payments, we recognize interest income as cash is collected when appropriate provided the amount does not exceed that which would have been earned at the historical effective interest rate. Nonearning financing receivables are a subset of nonaccrual financing receivables for which cash payments are not being received or for which we are on the cost recovery method of accounting (i.e., any payments are accounted for as a reduction of principal). This category excludes loans purchased at a discount (unless they have deteriorated post acquisition). Delinquent financing receivables are those that are 30 days or more past due based on their contractual terms. The same financing receivable may meet more than one of the definitions above. Accordingly, these categories are not mutually exclusive and it is possible for a particular loan to meet the definitions of a TDR, impaired loan, nonaccrual loan and nonearning loan and be included in each of these categories in the tables that follow. The categorization of a particular loan also may not be indicative of the potential for loss.
On July 1, 2011, we adopted FASB ASU 2011-02, an amendment to ASC 310, Receivables. ASU 2011-02 provides guidance for determining whether a restructuring of a debt constitutes a TDR. ASU 2011-02 requires that a restructuring be classified as a TDR when it is both a concession and the debtor is experiencing financial difficulties. The amendment also clarifies the guidance on a creditor's evaluation of whether it has granted a concession. The amendment applies to restructurings that have occurred subsequent to January 1, 2011. As a result of adopting these amendments on July 1, 2011, we have classified an additional $271 million of financing receivables as TDRs and have recorded an increase of $77 million to our allowance for losses on financing receivables.
Our loss mitigation strategy intends to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a TDR.
We utilize certain loan modification programs for borrowers experiencing financial difficulties in our Consumer loan portfolio. These loan modification programs are primarily concentrated in our non-U.S. residential mortgage and non-U.S. installment and revolving portfolios and include short-term (three months or less) interest rate reductions and payment deferrals, which were not part of the terms of the original contract and are not classified as TDRs. We sold our U.S. residential mortgage business in 2007 and as such, do not participate in the U.S. government-sponsored mortgage modification programs.
Our allowance for losses on financing receivables on these modified consumer loans is determined based upon a formulaic approach that estimates the probable losses inherent in the portfolio based upon statistical analyses of the portfolio. Data related to redefault experience is also considered in our overall reserve adequacy review. Once the loan has been modified, it returns to current status (re-aged) only after receipt of at least three consecutive minimum monthly payments or the equivalent cumulative amount, subject to a re-aging limitation of once a year, or twice in a five-year period in accordance with the Federal Financial Institutions Examination Council guidelines on Uniform Retail Credit Classification and Account Management policy issued in June 2000. We believe that the allowance for losses would not be materially different had we not re-aged these accounts.
For commercial loans, we evaluate changes in terms and conditions to determine whether those changes meet the criteria for classification as a TDR on a loan-by-loan basis. In CLL, these changes primarily include: changes to covenants, short-term payment deferrals and maturity extensions. For these changes, we receive economic consideration, including additional fees and/or increased interest rates, and evaluate them under our normal underwriting standards and criteria. Changes to Real Estate's loans primarily include maturity extensions, principal payment acceleration, changes to collateral terms, and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. The determination of whether these changes to the terms and conditions of our commercial loans meet the TDR criteria includes our consideration of all of the relevant facts and circumstances. When the borrower is experiencing financial difficulty, we carefully evaluate these changes to determine whether they meet the form of a concession. In these circumstances, if the change is deemed to be a concession, we classify the loan as a TDR. COMMERCIAL Substantially all of our commercial portfolio comprises secured collateral positions. CLL products include loans and leases collateralized by a wide variety of equipment types, cash flow loans, asset-backed loans and factoring arrangements. Our loans and leases are secured by assets such as heavy machinery, vehicles, medical equipment, corporate aircraft, and office imaging equipment. Cash flow financing is secured by our ability to liquidate the underlying assets of the borrower and the asset-backed loans and factoring arrangements are secured by customer accounts receivable, inventory, and/or machinery and equipment. The portfolios in our Energy Financial Services and GECAS businesses are primarily collateralized by energy generating assets and commercial aircraft, respectively. Our senior secured position and risk management expertise provide loss mitigation against borrowers with weak credit characteristics.
Financing Receivables and Allowance for Losses The following table provides further information about general and specific reserves related to Commercial financing receivables.
Past Due Financing Receivables The following table displays payment performance of Commercial financing receivables.
Nonaccrual Financing Receivables The following table provides further information about Commercial financing receivables that are classified as nonaccrual. Of our $4,867 million and $5,463 million of nonaccrual financing receivables at September 30, 2011 and December 31, 2010, respectively, $1,243 million and $1,016 million are currently paying in accordance with their contractual terms, respectively.
Impaired Loans The following table provides information about loans classified as impaired and specific reserves related to Commercial.
Impaired loans classified as TDRs in our CLL business were $3,620 million and $2,911 million at September 30, 2011, and December 31, 2010, respectively, and were primarily attributable to CLL Americas ($2,691 million and $2,347 million, respectively). For the nine months ended September 30, 2011, we modified $1,408 million of loans classified as TDRs, primarily in CLL Americas ($810 million) and CLL EMEA ($521 million). Changes to these loans primarily included debt to equity exchange, extensions, interest only payment periods and forbearance or other actions, which are in addition to, or sometimes in lieu of, fees and rate increases. Of our modifications classified as TDRs in the last nine months, $41 million have subsequently experienced a payment default.
Credit Quality Indicators Substantially all of our Commercial financing receivables portfolio is secured lending and we assess the overall quality of the portfolio based on the potential risk of loss measure. The metric incorporates both the borrower's credit quality along with any related collateral protection.
Our internal risk ratings process is an important source of information in determining our allowance for losses and represents a comprehensive, statistically validated approach to evaluate risk in our financing receivables portfolios. In deriving our internal risk ratings, we stratify our Commercial portfolios into twenty-one categories of default risk and/or six categories of loss given default to group into three categories: A, B and C. Our process starts by developing an internal risk rating for our borrowers, which are based upon our proprietary models using data derived from borrower financial statements, agency ratings, payment history information, equity prices and other commercial borrower characteristics. We then evaluate the potential risk of loss for the specific lending transaction in the event of borrower default, which takes into account such factors as applicable collateral value, historical loss and recovery rates for similar transactions, and our collection capabilities. Our internal risk ratings process and the models we use are subject to regular monitoring and validation controls. The frequency of rating updates is set by our credit risk policy, which requires annual Audit Committee approval. The models are updated on a regular basis and statistically validated annually, or more frequently as circumstances warrant.
The table below summarizes our Commercial financing receivables by risk category. As described above, financing receivables are assigned one of twenty-one risk ratings based on our process and then these are grouped by similar characteristics into three categories in the table below. Category A is characterized by either high credit quality borrowers or transactions with significant collateral coverage which substantially reduces or eliminates the risk of loss in the event of borrower default. Category B is characterized by borrowers with weaker credit quality than those in Category A, or transactions with moderately strong collateral coverage which minimizes but may not fully mitigate the risk of loss in the event of default. Category C is characterized by borrowers with higher levels of default risk relative to our overall portfolio or transactions where collateral coverage may not fully mitigate a loss in the event of default.
For our secured financing receivables portfolio, our collateral position and ability to work out problem accounts mitigates our losses. Our asset managers have deep industry expertise that enables us to identify the optimum approach to default situations. We price risk premiums for weaker credits at origination, closely monitor changes in creditworthiness through our risk ratings and watch list process, and are engaged early with deteriorating credits to minimize economic loss. Secured financing receivables within risk Category C are predominantly in our CLL businesses and are primarily comprised of senior term lending facilities and factoring programs secured by various asset types including inventory, accounts receivable, cash, equipment and related business facilities as well as franchise finance activities secured by underlying equipment.
Loans within Category C are reviewed and monitored regularly, and classified as impaired when it is probable that they will not pay in accordance with contractual terms. Our internal risk rating process identifies credits warranting closer monitoring; and as such, these loans are not necessarily classified as nonearning or impaired.
Substantially all of our unsecured Commercial financing receivables portfolio is attributable to our Interbanca S.p.A. and GE Sanyo Credit acquisitions in Europe and Asia, respectively. At September 30, 2011 and December 31, 2010, these financing receivables included $258 million and $208 million rated A, $680 million and $964 million rated B, and $597 million and $783 million rated C, respectively. REAL ESTATE Our real estate portfolio primarily comprises fixed and floating loans secured by commercial real estate. Our Debt portfolio is underwritten based on the cash flows generated by underlying income-producing commercial properties and secured by first mortgages. Our Business Properties portfolio is underwritten primarily by the credit quality of the borrower and secured by tenant and owner-occupied commercial properties.
Financing Receivables and Allowance for Losses The following table provides further information about general and specific reserves related to Real Estate financing receivables.
Past Due Financing Receivables The following table displays payment performance of Real Estate financing receivables.
Nonaccrual Financing Receivables The following table provides further information about Real Estate financing receivables that are classified as nonaccrual. Of our $7,285 million and $9,719 million of nonaccrual financing receivables at September 30, 2011 and December 31, 2010, respectively, $5,821 million and $7,888 million are currently paying in accordance with their contractual terms, respectively.
Impaired Loans The following table provides information about loans classified as impaired and specific reserves related to Real Estate.
Real Estate TDRs increased from $4,866 million at December 31, 2010 to $6,730 million at September 30, 2011, primarily driven by loans scheduled to mature during 2011, some of which were modified during 2011 and classified as TDRs upon modification. We deem loan modifications to be TDRs when we have granted a concession to a borrower experiencing financial difficulty and we do not receive adequate compensation in the form of an effective interest rate that is at current market rates of interest given the risk characteristics of the loan or other consideration that compensates us for the value of the concession. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has typically resulted in the conclusion that the modified terms are not at current market rates of interest, even if the modified loans are expected to be fully recoverable. For the nine months ended September 30, 2011, we modified $2,978 million of loans classified as TDRs, substantially all in our Debt portfolio. Changes to these loans primarily included maturity extensions, principal payment acceleration, changes to collateral or covenant terms and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. Of our modifications classified as TDRs in the last nine months, $196 million have subsequently experienced a payment default.
Credit Quality Indicators Due to the primarily non-recourse nature of our Debt portfolio, loan-to-value ratios provide the best indicators of the credit quality of the portfolio. By contrast, the credit quality of the Business Properties portfolio is primarily influenced by the strength of the borrower's general credit quality, which is reflected in our internal risk rating process, consistent with the process we use for our Commercial portfolio.
Within Real Estate, these financing receivables are primarily concentrated in our North American and European Lending platforms and are secured by various property types. Collateral values for Real Estate-Debt financing receivables are updated at least semi-annually, or more frequently for higher risk loans. A substantial majority of the Real Estate-Debt financing receivables with loan-to-value ratios greater than 95% are paying in accordance with contractual terms. Substantially all of these loans and substantially all of the Real Estate-Business Properties financing receivables included in Category C are impaired loans which are subject to the specific reserve evaluation process described in Note 1 in our 2010 consolidated financial statements. The ultimate recoverability of impaired loans is driven by collection strategies that do not necessarily depend on the sale of the underlying collateral and include full or partial repayments through third-party refinancing and restructurings. CONSUMER Our Consumer portfolio is largely non-U.S. and primarily comprises residential mortgage, sales finance, and auto and personal loans in various European and Asian countries. At September 30, 2011, our U.S. consumer financing receivables included private-label credit card and sales financing for approximately 51 million customers across the U.S. with no metropolitan area accounting for more than 6% of the portfolio. Of the total U.S. consumer financing receivables, approximately 63% relate to credit card loans, which are often subject to profit and loss sharing arrangements with the retailer (which are recorded in revenues), and the remaining 37% are sales finance receivables, which provide financing to customers in areas such as electronics, recreation, medical and home improvement.
Financing Receivables and Allowance for Losses The following table provides further information about general and specific reserves related to Consumer financing receivables.
Past Due Financing Receivables The following table displays payment performance of Consumer financing receivables.
Nonaccrual Financing Receivables The following table provides further information about Consumer financing receivables that are classified as nonaccrual.
Impaired Loans The vast majority of our Consumer nonaccrual financing receivables are smaller balance homogeneous loans evaluated collectively, by portfolio, for impairment and therefore are outside the scope of the disclosure requirement for impaired loans. Accordingly, impaired loans in our Consumer business represent restructured smaller balance homogeneous loans meeting the definition of a TDR, and therefore subject to the disclosure requirement for impaired loans, and commercial loans in our Consumer–Other portfolio. The recorded investment of these impaired loans totaled $3,093 million (with an unpaid principal balance of $2,662 million) and comprised $50 million with no specific allowance, primarily all in our Consumer–Other portfolio, and $3,043 million with a specific allowance of $721 million at September 30, 2011. The impaired loans with a specific allowance included $370 million with a specific allowance of $95 million in our Consumer–Other portfolio and $2,673 million with a specific allowance of $626 million across the remaining Consumer business and had an unpaid principal balance and average investment of $2,246 million and $2,262 million, respectively, at September 30, 2011. We recognized $101 million, $114 million and $79 million of interest income for the nine months ended September 30, 2011, the year ended December 31, 2010 and the nine months ended September 30, 2010, respectively, principally on a cash basis. A substantial majority of this amount related to income recognized in our Consumer–U.S. installment and revolving credit portfolio. The total average investment in impaired loans for the nine months ended September 30, 2010 was $1,874 million.
Impaired loans classified as TDRs in our Consumer business were $2,914 million and $2,256 million at September 30, 2011, and December 31, 2010, respectively. We utilize certain loan modification programs for borrowers experiencing financial difficulties in our Consumer loan portfolio. These loan modification programs primarily include interest rate reductions and payment deferrals in excess of three months, which were not part of the terms of the original contract, and are primarily concentrated in our non-U.S. residential mortgage and U.S. credit card portfolios. For the nine months ended September 30, 2011, we modified $1,510 million of consumer loans for borrowers experiencing financial difficulties, which are classified as TDRs, and included $730 million of non-U.S. consumer loans, primarily residential mortgages, credit cards and personal loans and approximately $780 million of credit card loans in the U.S. We expect borrowers whose loans have been modified under these programs to continue to be able to meet their contractual obligations upon the conclusion of the modification. For loans modified as TDRs in the last nine months, $184 million have subsequently experienced a payment default, primarily in our U.S. credit card and non-U.S. residential mortgage portfolios. Credit Quality Indicators Our Consumer financing receivables portfolio comprises both secured and unsecured lending. Secured financing receivables comprise residential loans and lending to small and medium-sized enterprises predominantly secured by auto and equipment, inventory finance, and cash flow loans. Unsecured financing receivables include private-label credit card financing. A substantial majority of these cards are not for general use and are limited to the products and services sold by the retailer. The private label portfolio is diverse with no metropolitan area accounting for more than 6% of the related portfolio. Non-U.S. residential mortgages For our secured non-U.S. residential mortgage book, we assess the overall credit quality of the portfolio through loan-to-value ratios (the ratio of the outstanding debt on a property to the value of that property at origination). In the event of default and repossession of the underlying collateral, we have the ability to remarket and sell the properties to eliminate or mitigate the potential risk of loss. The table below provides additional information about our non-U.S. residential mortgages based on loan-to-value ratios.
The majority of these financing receivables are in our U.K. and France portfolios and have re-indexed loan-to-value ratios of 85% and 57%, respectively. We have third-party mortgage insurance for approximately 67% of the balance of Consumer non-U.S. residential mortgage loans with loan-to-value ratios greater than 90% at September 30, 2011. Such loans were primarily originated in the U.K. and France. Installment and Revolving Credit For our unsecured lending products, including the non-U.S. and U.S. installment and revolving credit and non-U.S. auto portfolios, we assess overall credit quality using internal and external credit scores. Our internal credit scores imply a probability of default which we consistently translate into three approximate credit bureau equivalent credit score categories, including (a) 681 or higher which are considered the strongest credits; (b) 615 to 680, considered moderate credit risk; and (c) 614 or less, which are considered weaker credits.
Of those financing receivable accounts with credit bureau equivalent scores of 614 or less at September 30, 2011, 94% relate to installment and revolving credit accounts. These smaller balance accounts have an average outstanding balance less than one thousand U.S. dollars and are primarily concentrated in our retail card and sales finance receivables in the U.S. (which are often subject to profit and loss sharing arrangements), and closed-end loans outside the U.S., which minimizes the potential for loss in the event of default. For lower credit scores, we adequately price for the incremental risk at origination and monitor credit migration through our risk ratings process. We continuously adjust our credit line underwriting management and collection strategies based on customer behavior and risk profile changes.
Consumer – Other Secured lending in Consumer – Other comprises loans to small and medium-sized enterprises predominantly secured by auto and equipment, inventory finance, and cash flow loans. We develop our internal risk ratings for this portfolio in a manner consistent with the process used to develop our Commercial credit quality indicators, described above. We use the borrower's credit quality and underlying collateral strength to determine the potential risk of loss from these activities.
At September 30, 2011, Consumer – Other financing receivables of $6,027 million, $759 million and $1,231 million were rated A, B, and C, respectively. At December 31, 2010, Consumer – Other financing receivables of $6,415 million, $822 million and $1,067 million were rated A, B, and C, respectively. |
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Goodwill and Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets – net, consisted of the following.
Changes in goodwill balances follow.
Goodwill balances increased $218 million during the nine months ended September 30, 2011, primarily as a result of the weaker U.S. dollar ($399 million). Our reporting units and related goodwill balances are CLL ($13,979 million), Consumer ($10,980 million), Real Estate ($1,058 million), Energy Financial Services ($1,562 million) and GECAS ($147 million) at September 30, 2011.
We test goodwill for impairment annually and more frequently if circumstances warrant. We determine fair values for each of the reporting units using an income approach. When available and appropriate, we use comparative market multiples to corroborate discounted cash flow results. For purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 11.0% to 13.75%. Valuations using the market approach reflect prices and other relevant observable information generated by market transactions involving comparable businesses.
Compared to the market approach, the income approach more closely aligns each reporting unit valuation to our business profile, including geographic markets served and product offerings. Required rates of return, along with uncertainty inherent in the forecasts of future cash flows, are reflected in the selection of the discount rate. Equally important, under this approach, reasonably likely scenarios and associated sensitivities can be developed for alternative future states that may not be reflected in an observable market price. A market approach allows for comparison to actual market transactions and multiples. It can be somewhat more limited in its application because the population of potential comparables is often limited to publicly-traded companies where the characteristics of the comparative business and ours can be significantly different, market data is usually not available for divisions within larger conglomerates or non-public subsidiaries that could otherwise qualify as comparable, and the specific circumstances surrounding a market transaction (e.g., synergies between the parties, terms and conditions of the transaction, etc.) may be different or irrelevant with respect to our business. It can also be difficult, under certain market conditions, to identify orderly transactions between market participants in similar businesses. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation and weight the methodologies appropriately.
We performed our annual impairment test of goodwill for all of our reporting units in the third quarter using data as of July 1, 2011. The impairment test consists of two steps: in step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied when the carrying value is more than its fair value, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit's assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill. In performing the valuations, we used cash flows that reflected management's forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of our step one testing, the fair values of each of the CLL, Consumer, Energy Financial Services and GECAS reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized.
Our Real Estate reporting unit had a goodwill balance of $1,087 million at June 30, 2011. As of July 1, 2011, the carrying amount exceeded the estimated fair value of our Real Estate reporting unit by approximately $0.7 billion. The estimated fair value of the Real Estate reporting unit is based on a number of assumptions about future business performance and investment, including loss estimates for the existing finance receivable and investment portfolio, new debt origination volume and margins, and anticipated stabilization of the real estate market allowing for sales of real estate investments at normalized margins. Our assumed discount rate was 11.25% and was derived by applying a capital asset pricing model and corroborated using equity analyst research reports and implied cost of equity based on forecasted price to earnings per share multiples for similar companies. Given the volatility and uncertainty in the current commercial real estate environment, there is uncertainty about a number of assumptions upon which the estimated fair value is based. Different loss estimates for the existing portfolio, changes in the new debt origination volume and margin assumptions, changes in the expected pace of the commercial real estate market recovery, or changes in the equity return expectation of market participants may result in changes in the estimated fair value of the Real Estate reporting unit.
Based on the results of the step one testing, we performed the second step of the impairment test described above as of July 1, 2011. Based on the results of the second step analysis for the Real Estate reporting unit, the estimated implied fair value of goodwill exceeded the carrying value of goodwill by approximately $3.9 billion. Accordingly, no goodwill impairment was required. In the second step, unrealized losses in an entity's assets have the effect of increasing the estimated implied fair value of goodwill. The results of the second step analysis were attributable to several factors. The primary driver was the excess of the carrying value over the estimated fair value of our Real Estate Equity Investments, which approximated $4.1 billion at that time. Other drivers for the favorable outcome include the unrealized losses in the Real Estate finance receivable portfolio and the fair value premium on the Real Estate reporting unit allocated debt. The results of the second step analysis are highly sensitive to these measurements, as well as the key assumptions used in determining the estimated fair value of the Real Estate reporting unit.
Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates described above could change in future periods.
Intangible Assets Subject to Amortization
Amortization related to intangible assets subject to amortization was $139 million and $152 million in the three months ended September 30, 2011 and 2010, respectively, and $410 million and $476 million in the nine months ended September 30, 2011 and 2010, respectively. |
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