General Electric Co. expects its finance arm to earn at least $3 billion this year, with earnings at GE Capital rising in 2011 and 2012 as margins improve after aggressive cost-cutting.
It expects its commercial lending and leasing business and consumer finance arm to experience the strongest improvements in 2011 as the loss rate on bad debts declines.
"We see good growth next year and in 2012," Mike Neal, GE Capital chief executive, told investors and analysts Tuesday. "We've made a lot of progress on liquidity and capital."
GE shares were up 2 percent at $17.07 on the New York Stock Exchange, outpacing the broader U.S. market.
Neal, who headed GE Capital through the financial crisis, said the business expects to resume paying a dividend to the parent company in 2012. He noted that GE Capital had cut its costs by about 8 percent this year.
GE Capital aims to pay about 45 percent of its profit back to its Fairfield, Connecticut-based parent when it resumes the dividend, Neal said.
"If they can start getting money back to the parent, that's great, that means capital coming in instead of going out," said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, which holds GE shares. "That's a validation of their program over the past couple of years."
The forecast $3 billion unit profit in 2010 is up from $1.7 billion in 2009.
GE Chief Executive Jeffrey Immelt has acknowledged that he allowed GE Capital to grow "too big." GE, the largest U.S. conglomerate by market capitalization with a $183 billion market value, is scaling back the unit to focus on areas including lending to mid-sized businesses and financing the sale of GE-made products.
The company has pulled back on operations like investing in real estate, and stopped writing mortgages. But it has decided to remain in some areas that during the worst of the financial crisis looked unattractive, such as private label credit cards.
A turnaround in the finance arm is one of the conditions investors believe will allow GE to continue to raise its dividend, which the company hiked in July by 20 percent to a quarterly rate of 12 cents per share.
3M Co. said earlier on Tuesday it would face headwinds, especially in the developed world, that would prevent sales from hitting internal targets in 2011, sending its shares down almost 3 percent.
Immelt is due to meet with investors next week to outline GE's overall expectations for 2011. The company during the financial crisis ceased providing Wall Street with per-share profit targets, instead offering a segment-by-segment "framework" of how it expects its businesses to do.
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