General Electric Co. is thinking more seriously about selling off large parts of its financial business, which by itself would be the country’s fifth-largest bank and which investors want to shrink.
The Wall Street Journal reported that CEO Jeff Immelt recently told a conference that the company is examining a range of strategic options that could include an initial public offering of some parts of the business, GE Capital. And as a measure of his commitment, Immelt set a new target to cut the assets that will be held by GE Capital at the end of 2014 to less than half their size in the run-up to the 2008 financial crisis.
“We think the timing is good to be thinking strategically,” Immelt said during an annual Electrical Products Group conference in Florida. “We think there’s a lot of techniques to do it.”
GE has been selling off real-estate businesses, insurance operations and overseas banking stakes for several years to lessen its reliance on a finance business that has accounted for about half of the company’s earnings from continuing operations.
During the financial crisis, concerns about GE Capital torpedoed GE’s stock price, cost the company its top-level, triple-A credit rating and forced it to cut its dividend.
One of the criteria of Immelt’s current pay package is to increase industrial earnings and their share of total profit. That can be achieved both by improving and growing the industrial operations as well as shrinking GE Capital’s business—a stated company goal. Immelt aims to get industrial profits up to 70% of the company’s total, up from 54% last year.
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