GE 2012 Annual Report Download - page 53

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management’s discussion and analsis
GE 2012 ANNUAL REPORT 51
Financing receivables Nonearning receivables Allowance for losses
December 31 (In millions) 2012 2011 2012 2011 2012 2011
COMMERCIAL
CLL
Americas $ 72,517 $ 80,505 $1,333 $1,862 $ 490 $ 889
Europe 37,035 36,899 1,299 1,167 445 400
Asia 11,401 11,635 193 269 80 157
Other 605 436 52 11 6 4
Total CLL 121,558 129,475 2,877 3,309 1,021 1,450
Energy Financial Services 4,851 5,912 — 22 9 26
GECAS 10,915 11,901 — 55 8 17
Other 486 1,282 13 65 337
Total Commercial 137,810 148,570 2,890 3,451 1,041 1,530
REAL ESTATE
Debt (a) 19,746 24,501 321 541 279 949
Business Properties (b) 1,200 8,248 123 249 41 140
Total Real Estate 20,946 32,749 444 790 320 1,089
CONSUMER
Non-U.S. residential mortgages (c) 33,451 35,550 2,569 2,870 480 546
Non-U.S. installment and revolving credit 18,546 18,544 224 263 623 717
U.S. installment and revolving credit 50,853 46,689 1,026 990 2,282 2,008
Non-U.S. auto 4,260 5,691 24 43 67 101
Other 8,070 7,244 351 419 172 199
Total Consumer 115,180 113,718 4,194 4,585 3,624 3,571
Total $273,936 $295,037 $7,528 $8,826 $4,985 $6,190
(a) Financing receivables included no construction loans at December 31, 2012 and $0.1 billion of construction loans at December 31, 2011.
(b) Our Business Properties portfolio is underwritten primarily by the credit quality of the borrower and secured by tenant and owner-occupied commercial properties. In 2012,
we completed the sale of a portion of our Business Properties portfolio.
(c) At December 31, 2012, net of credit insurance, about 40% of our Consumer non-U.S. residential mortgage portfolio comprised loans with introductory, below market rates
that are scheduled to adjust at future dates; with high loan-to-value ratios at inception (greater than 90%); whose terms permitted interest-only payments; or whose terms
resulted in negative amortization. At origination, we underwrite loans with an adjustable rate to the reset value. Of these loans, about 85% are in our U.K. and France
portfolios, which comprise mainly loans with interest-only payments, high loan-to-value ratios at inception and introductory below market rates, have a delinquency rate of
15%, have a loan-to-value ratio at origination of 82% and have re-indexed loan-to-value ratios of 91% and 64%, respectively. At December 31, 2012, 10% (based on dollar
values) of these loans in our U.K. and France portfolios have been restructured.
The portfolio of financing receivables, before allowance for losses,
was $273.9 billion at December 31, 2012, and $295.0 billion at
December 31, 2011. Financing receivables, before allowance for
losses, decreased $21.1 billion from December 31, 2011, primarily
as a result of write-offs ($6.6 billion), dispositions ($5.7 billion),
collections (which includes sales) exceeding originations ($5.4 bil-
lion), partially offset by the weaker U.S. dollar ($2.7 billion).
Related nonearning receivables totaled $7.5 billion (2.7% of
outstanding receivables) at December 31, 2012, compared with
$8.8 billion (3.0% of outstanding receivables) at December 31,
2011. Nonearning receivables decreased from December 31, 2011,
primarily due to write-offs at CLL, write-offs and discounted
payoffs at Real Estate and improved economic conditions in our
non-U.S. residential mortgage portfolio.
The allowance for losses at December 31, 2012 totaled
$5.0 billion compared with $6.2 billion at December 31, 2011,
representing our best estimate of probable losses inherent in
the portfolio. Allowance for losses decreased $1.2 billion from
December 31, 2011, primarily because provisions were lower than
write-offs, net of recoveries by $1.1 billion, which is attributable
to a reduction in the overall financing receivables balance and an
improvement in the overall credit environment. The allowance
for losses as a percent of total financing receivables decreased
from 2.1% at December 31, 2011 to 1.8% at December 31, 2012
primarily due to a decrease in the allowance for losses as dis-
cussed above, partially offset by a decline in the overall financing
receivables balance as collections exceeded originations. Further
information surrounding the allowance for losses related to each
of our portfolios is detailed below.