Hoffman, A.N. (Alan)
- Author
Citation Note
Based on published sources; 22 pages.
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description
GE Capital was downsized and reorganized into a leaner and more focused firm after being hit hard by the 2008 economic recession. In 2012, it hoped to see continued sustainable growth and lower portfolio risk, but it was still purchasing underpriced assets from even more troubled competitors. How could the company maintain sustainable growth earnings with growing margins and lower portfolio risk, as well as return money to investors and resume paying dividends to its parent company?
Abstract
The financial services industry was, by definition, volatile, and GE Capital was particularly hard hit by the economic recession of 2008. With the credit markets illiquid and financial markets falling, GE Capital found itself overexposed to commercial real estate and foreign residential mortgages. At this point, GE’s parent corporation stepped in, began reorganizing GE Capital, and significantly downsized the unit. GE Capital sold most of its insurance lines, completely left the US mortgage market, and substantially tightened its consumer underwriting guidelines. However, the company still was on the lookout for underpriced assets and purchased several lending lines from even more troubled Citigroup and a large commercial real estate portfolio from Merrill Lynch financing. By 2012, GE Capital was smaller, leaner, and more focused on specialty financing, especially mid-market lending and leasing. However, like its parent company, GE Capital hoped to see continued sustainable growth earnings with growing margins and lower portfolio risk, as well as to return money to investors and resume paying dividends to its parent company.
usage
This case is written in a way that complex strategic decisions can easily be analyzed during limited classroom discussion time. Professors have commented that the case has worked well in their classrooms.
Type
Case Study