GE 2013 Annual Report Download - page 101

GE 2013 ANNUAL REPORT 99
    
related business facilities as well as franchise fi nance activities
secured by underlying equipment.
Loans within Category C are reviewed and monitored regu-
larly, and classifi ed as impaired when it is probable that they
will not pay in accordance with contractual terms. Our internal
risk rating process identifi es credits warranting closer monitor-
ing; and as such, these loans are not necessarily classifi ed as
nonearning or impaired.
Our unsecured Commercial fi nancing receivables port-
folio is primarily attributable to our Interbanca S.p.A. and GE
Sanyo Credit acquisitions in Europe and Asia, respectively. At
December 31, 2013 and 2012, these fi nancing receivables
included $313 million and $458 million rated A, $580 million and
$583 million rated B, and $231 million and $452 million rated C,
respectively.
REAL ESTATE
Due to the primarily non-recourse nature of our Debt portfo-
lio, loan-to-value ratios provide the best indicators of the credit
quality of the portfolio.
Loan-to-value ratio
December 31 (In millions)
Less
than 80%
80%
to 95%
Greater
than 95%
2013
Debt $ 15,576 $ 1,300 $ 2,111
2012
Debt $ 13,570 $ 2,572 $ 3,604
By contrast, the credit quality of the owner occupied/credit
tenant portfolio is primarily infl uenced by the strength of the
borrower’s general credit quality, which is refl ected in our internal
risk rating process, consistent with the process we use for our
Commercial portfolio. At December 31, 2013, the internal risk
rating of A, B and C for our owner occupied/credit tenant portfolio
approximated $571 million, $179 million and $162 million, respec-
tively, as compared to December 31, 2012 ratings of $956 million,
$25 million and $219 million, respectively.
Within Real Estate—Debt, these fi nancing receivables are
primarily concentrated in our North American and European
Lending platforms and are secured by various property types. A
substantial majority of the Real Estate—Debt fi nancing receiv-
ables with loan-to-value ratios greater than 95% are paying in
accordance with contractual terms. Substantially all of these
loans and the majority of our owner occupied/credit tenant
fi nancing receivables included in Category C are impaired loans
that are subject to the specifi c reserve evaluation process
described in Note 1. The ultimate recoverability of impaired loans
is driven by collection strategies that do not necessarily depend
on the sale of the underlying collateral and include full or partial
repayments through third-party refi nancing and restructurings.
CONSUMER
At December 31, 2013, our U.S. consumer fi nancing receivables
included private-label credit card and sales fi nancing for approxi-
mately 61 million customers across the U.S. with no metropolitan
area accounting for more than 6% of the portfolio. Of the total
U.S. consumer fi nancing receivables, approximately 67% relate to
credit card loans that are often subject to profi t and loss-sharing
arrangements with the retailer (which are recorded in revenues),
and the remaining 33% are sales fi nance receivables that provide
fi nancing to customers in areas such as electronics, recreation,
medical and home improvement.
Our Consumer fi nancing receivables portfolio comprises both
secured and unsecured lending. Secured fi nancing receivables
comprise residential loans and lending to small and medium-
sized enterprises predominantly secured by auto and equipment,
inventory fi nance and cash fl ow loans. Unsecured fi nancing
receivables include private-label credit card fi nancing. A substan-
tial majority of these cards are not for general use and are limited
to the products and services sold by the retailer. The private-label
portfolio is diverse with no metropolitan area accounting for
more than 6% of the related portfolio.
NON-U.S. RESIDENTIAL MORTGAGES
For our secured non-U.S. residential mortgage book, we assess
the overall credit quality of the portfolio through loan-to-value
ratios (the ratio of the outstanding debt on a property to the
value of that property at origination). In the event of default and
repossession of the underlying collateral, we have the ability
to remarket and sell the properties to eliminate or mitigate the
potential risk of loss. The table that follows provides additional
information about our non-U.S. residential mortgages based on
loan-to-value ratios.
Loan-to-value ratio
December 31 (In millions)
80%
or less
Greater
than 80%
to 90%
Greater
than 90%
2013
Non-U.S. residential mortgages $ 17,224 $ 5,130 $ 8,147
2012
Non-U.S. residential mortgages $ 18,568 $ 5,699 $ 9,083
The majority of these fi nancing receivables are in our U.K. and
France portfolios and have re-indexed loan-to-value ratios of
77% and 56%, respectively. Re-indexed loan-to-value ratios
may not refl ect actual realizable values of future repossessions.
We have third-party mortgage insurance for about 24% of the
balance of Consumer non-U.S. residential mortgage loans with
loan-to-value ratios greater than 90% at December 31, 2013.
Such loans were primarily originated in France and the U.K.