GE 2011 Annual Report Download - page 7

I have written in the past about “bets”
we have made in Aviation Systems,
Life Sciences and other industries.
Adjacencies have allowed us to grow
$35 billion of incremental revenue in a
decade, with more to come. We believe
in a long-term approach to entering
these fast growth segments. For
instance, we have about a $4 billion
position in Life Sciences that could
double in the next few years. We are
building strength in drug discovery,
molecular medicine, bioprocess
manufacturing and digital pathology.
All of these segments will grow at two to
three times global GDP.
GE Capital’s earnings grew more than
100% in 2011. It is stronger and safer.
Our Capital team has executed on
every commitment it made during the
fi nancial crisis. We have reduced
leverage, improved liquidity and shed
assets, while growing at high margins.
Commercial Real Estate, previously a
major investor concern, is positioned
for solid earnings growth in the future.
From 2008 to 2011, GE Capital’s fi nancial
performance compares favorably to
most other fi nancial services fi rms in
the world.
Financial services have been deeply
out of favor with investors.
Nonethe less, there are large segments
where GE Capital will lead and build
upon GE’s strengths. These include
mid-market lending and leasing,
fi nancing in GE domains and a few
other specialty fi nance segments.
Here, we have a clear advantage over
banks and can grow profi tably.
GE Capital has strengthened its balance
sheet immensely. Our Tier One Common
Ratio is about 10%, well in excess of the
levels set by fi nancial regulators. Now,
because of our fi nancial strength and
earnings power, and subject to Federal
Reserve review, we expect GE Capital
to resume paying a dividend this year
to GE. Ultimately, the size of GE Capital
depends on several factors: returns,
competitive advantage, dividend
capability and regulatory burdens. In
the near term, GE Capital should see
sustained earnings growth with good
margins and lower risk.
Our goal is to have GE Capital make
sense for GE investors. First and
foremost, we have more liquidity and
a safer profi le. We believe that having
the Federal Reserve as a regulator is
a positive. We are winning in the mar-
ketplace. The one area that we cannot
control is external “headline risk.” The
fi nancial services industry is still going
through transitions, and we are part
of that change. Regulators, governments
and rating agencies will have their say.
But that doesn’t change our fundamental
strength. We have successfully navigated
through this volatility, and we aim
to create value through GE Capital.
We have the world’s best infrastructure
company, positioned for multi-year
growth. We have a valuable specialty
fi nance company that is safer and
stronger than ever. Together we build,
power, move and help cure the world.
INITIATIVES DRIVE PERFORMANCE
We aspire to drive organic growth
faster than our peers, with expanding
margins. We drive company-wide
initiatives to achieve technical superiority,
growth market leadership, service
expansion based on profi table cus-
tomer relationships, and operational
action to achieve margin growth.
For each initiative we have bold
aspirations, and we utilize the
GE enterprise to achieve results.
We have a full pipeline of great new
products. Technical superiority is the
most sustainable form of competitive
advantage. We will invest $16 billion
in R&D from 2010 to 2012, more than
double our historical average and about
GE CAPITAL
TRANSFORMATION
Pre-Crisis 2011
TIER ONE
COMMON RATIO 4% 10%
LEVERAGE 8:1 4:1
CP COVERAGE 74% 292%
DEBT RATING AAA AA
GROWTH ADJACENCIES
Promising opportunities for expansion, such as in Oil & Gas
and Life Sciences, are closely related to our core businesses
and have helped fuel GE’s growth over the last decade.
FOCUS:
Life Sciences, Aviation Systems, Oil & Gas, Mining, Distributed Energy and Pathology,
among others
(Revenues)
2011 $39B
2001 $4B
GE 2011 ANNUAL REPORT 5