FAIRFIELD, Conn., June 11 (UPI) -- U.S. conglomerate General Electric is mulling a reduction of its banking business, GE Capital, to calm nervous investors, sources told The Wall Street Journal.
The parent company could sell off as much as 16 percent of GE Capital, despite its return to profitability, as investors are nervous given GE Capital, as a side business, amounts to a bank that ranks seventh largest in the country, the newspaper said.
"It's a better business today than it has ever been," said GE Capital Chairman Mike Neal last week. However, "Is it severable? Sure. Everything is," he said.
In the first three months of the year, GE's banking unit earned a profit of $1.8 billion, about half of the company's total profit. It did so with 5 percent fewer loans than it had in the same quarter of 2011, the Journal said.
In 2012, GE Capital expects to pay $7 billion to GE in dividends. But the company's stock price has not reflected any new-found confidence among investors.
Despite the contribution of its lending business, for the most part "GE investors do not value its financial-company earnings as highly as they do its industrial-company earnings," said Bob Spremulli, an equity analyst at TIAA-CREF, which is a major GE shareholder.
"Investors, including ourselves, want GE to de-emphasize the earnings contribution of GE Capital to the total and want them to demonstrate growth in the industrial earnings," Spremulli said.
