GE Capital Seeing Brighter Days

Once an area of concern for General Electric (NYSE:GE), its GE Capital arm is becoming a bright spot for the company. It started the new year off right by announcing strong fourth quarter numbers.

On Friday, GE reported that GE Capital’s earnings jumped 58 percent to $1.6 billion in the fourth quarter. For 2011, the unit saw its profit more than double to $6.5 billion, with its lending portfolio stabilizing, according to the New York Times.

In response to the numbers, GE chairman and CEO Jeffrey R. Immelt said,“GE Capital is strong and profitable.” He also noted that it was “stronger and competitively positioned to win.”

Changes and Challenges

Looking ahead, GE Capital will face …

some change and challenges. The unit now has a banking deposit division on its balance sheet from its recent purchase of MetLife’s (NYSE:MET) deposit business. This could evolve into an independent deposit entity.

On the regulatory front, the Financial Stability Oversight Council may name GE Capital as a “nonbank systemically important institution.” This will bring in a scrutinizing eye from regulators and greater capital requirements.

Earnings have room for improvement. The unit’s strong fourth quarter results are still not at pre-financial crisis levels; it reported a 9 percent decline in revenue. On a positive note, the unit did see less delinquencies in its mortgage, consumer lending and real estate portfolios.

Once dragged down by increased lending that got them snared into financial crisis, Immelt sees brighter days ahead for the unit.