GE may cut capital finance unit's earnings target: Deutsche Bank

giovedì 12 marzo 2009 18:49

March 12 (Reuters) - General Electric Co (GE.N: Quotazione) may lower its capital finance segment's 2009 earnings target of $5 billion, when GE Capital, the finance arm of the U.S. conglomerate, holds its investor meeting next week, Deutsche Bank said.

The brokerage, which has an earnings estimate of $2.9 billion for the segment, said it does not expect the company to benefit from any meaningful earnings or cash flow from GE Capital Corp through 2010.

In January, the Fairfield, Connecticut-based company said it expects about $5 billion in capital finance earnings for 2009. Earnings for the segment -- which a few years ago represented half of GE's profits -- fell 29 percent in 2008.

Analysts and investors fear that GE's planning for the finance arm, which anticipates a 42 percent fall in profit and rising defaults, may not be sufficiently bearish.

On Thursday, Standard & Poor's stripped GE of its top-tier, triple-A credit rating, lowering its rating by one notch to AA-plus with a stable outlook, citing the credit profile of the GE Capital unit.

Deutsche Bank, which has a "hold" rating on the company's stock, said this is good news as the market was expecting the downgrade and it removes a layer of uncertainty that ratings could fall to AA- or lower, which would trigger collateral requirements in GE Capital.

Shares of GE were up more than 14 percent at $9.74 Thursday afternoon on the New York Stock Exchange. (Reporting by Mary Meyase in Bangalore; Editing by Deepak Kannan)