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GE Consumer Finance
GE Consumer Finance Dave Nissen President and CEO, GE Consumer Finance Mark Begor President and CEO, GE Consumer Finance – Americas October 29, 2003 This presentation includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive, market and regulatory factors. More detailed information about those factors is contained in GE's filings with the Securities and Exchange Commission. This presentation includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, at the end of this slide presentation we have provided a reconciliation of those measures to the most directly comparable GAAP measure and a copy of the relevant slides is available on our investor relations website. Strong Asset Growth Record Served Assets ($B) ~$100 ~18% AAGR $48 $27 $30 ’95 ’96 $54 $80 $65 $58 $36 ’97 ’98 ’99 ’00 ’01 ’02 ’03E Consistent Growth Through Cycles Nissen Analyst Final 2 1 Earnings History Net Income ($B) $2.1-2.2 Double-Digit Growth At 30+% ROE 20+% AAGR War / SARS/ War Slow Growth Uncertainty/ Stagnant Economy 9/11 Recession European Slowdown Asia Currency Crisis U.S. Growth Economy Japan Recession $0.4 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03E Consistent Growth Through Cycles Nissen Analyst Final 3 Charter Net Income ($B) ’95 1 Double-Digit Asset and Profit Growth 2 Develop Consumer Marketing Zealots 3 Risk Management Vigilance 4 Execute in a Huge Marketplace ($14T) ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03E A Strong, Growing Consumer Finance Business Nissen Analyst Final 4 2 Industry Landscape Consumer Market = Industry Returns Continues To Be Strong $14Trillion ROA % Personal Loan 735 2.8 2.6 Secured Debt 1,350 2.4 2.0 Auto via Dealers 1,300 2.2 2.4 2.0 Cards 925 Mortgages 10,000 1996 1997 1998 1999 2000 2001 2002 Huge Industry With Strong Returns Nissen Analyst Final 5 What We Do Broad Product Line Credit Cards Multiple Distribution Channels Retailers Personal Loans Mail Sales Finance Telemarketing Mortgages Auto Insurance Target Customers Branches / Partner Points ATM / Kiosks Internet Nissen Analyst Final 6 3 Products and Reach Product Lines – Served Assets Sales Finance Personal Loans 18% Customers 16% 21% 3% 103MM Served Assets $95B ATMs 185M Retail Outlets 140M Cards 23% Auto Reach 19% Commercial Mortgages Large and Diverse Customer Base Nissen Analyst Final 7 Business Overview Net Income Served Assets Japan Australia Japan 7% Americas 26% Asia Australia 10% 5% 6% 34% 52% Americas Asia 20% 3% 37% Europe Europe A Global GE Business Nissen Analyst Final 8 4 2003 Acquisitions FNB - $8.2B Conseco - $2.7B Allbank - $2.3B GC Card - $1.1B AMAG - $1.0B Auxifina - $0.3B ~$16B Assets YTD Nissen Analyst Final 9 Acquisition Window Good Geographic Spread of Opportunities - 16 Deals In Pipeline; 4 Deals In Due Diligence Solid Pipeline Heading Into ’04 Nissen Analyst Final 10 5 Post Acquisition Growth ($B) Post Acquisition Income Growth Acquisition Year Income $2.1-2.2 $1.6 $1.8 $1.3 $0.8 $0.5 $0.6 1.1 1.3 1.51.6 0.9 0.5 $0.4 $0.4 0.3 0.1 0.3 0.1 0.4 0.1 0.3 0.4 0.5 0.5 0.6 0.2 '95 '96 '97 '98 '99 '00 '01 '02 '03 E 0.4 23% AAGR We Don’t Buy Growth … We Grow What We Buy Nissen Analyst Final 11 Core Growth Focus + Broad Distribution + Cross-Sell / Up-Sell + Consumer Marketing + NPI Double-Digit Core Growth 4 Years Running Nissen Analyst Final 12 6 Global Product Offerings: NPI UK Sweden Norway Denmark France Austria Ger Switz Czech Rep Poland Hungary Spain Indonesia Portugal Ireland Japan India Australia Brazil Mexico Hong Kong Thailand US Product Lines PLCC / Cards Bank Cards Sales Finance Personal Loans Mortgages Auto Loan / Lease Cash Access Insurance / PPI Savings / Deposits Life General PURCHASED ADDED OPPORTUNITY Huge Opportunity to Expand Global Product Offerings Nissen Analyst Final 13 Risk Management • World Class Risk Management – Apps, Collections and Behavior Scoring – Rigorous Credit Line Management – High Tech Collection Centers – Risk Dashboards for Continuous Portfolio Monitoring – ~7,000+ Risk and Collection Professionals • Strong Reserving Policies – 3Q’03 Reserves up 40% to $3.7B from 3Q’02 – Revolving – 180 Day = Full Reserve / W/O – Closed End – 120 Day = Full Reserve / W/O – Strict Re-Aging Policies • Great Long-Term Performance World Class Risk Management Critical To Success Nissen Analyst Final 14 7 30+ Delinquencies U.S. GE Consumer Finance 7% 10% 6% 5.48% 5.37% 4.89% 4.74% 5.56% 5.58% 4.89% 4.94% 9% 5.84% 5.81% 5.62% 5.08% 4.91% 8% 6.71% 7% 5% 5.11% 6.84% 6.25% 6.85% 6.61% 6.46% 6% 4% 5.96% 5% 4% 3% 30+% 30+% excl igroup 3% 2% 2003 13.98% 15% 4.21% 4.22% 4.25% 4.56% 4.42% Jul Sep May Jan Mar Nov Jul May Sep 2003 igroup 20% 6% 5% 2002 * Excludes THD International 7% Mar Jan Sep Jul May Jan Mar Sep Nov Jul Mar May Jan 2% 2002 14.04% 14.04% 12.90% 13.06% 13.46% 12.83% 4.88% 4.51% 10% 4% 5% 3% 2002 2003 2002 Sep Jul May Mar Jan Nov Sep Jul May Jan Mar Sep Jul May Mar Jan Sep Nov Jul May Jan 0% Mar 2% * Excludes igroup 2003 Asset Quality Stable Nissen Analyst Final 15 Loss Trends Loss Rate % U.S. 6.1 5.2 5.2 6.5 6.3 International 2.2 2.3 2.2 2.4 2.6 '99 '00 '01 '02 '03E A Broad Range of Product Risk Profiles … Higher Spreads Compensate for Higher Losses Mortgage Sales Finance Auto Personal Loans Cards Loss Rate % 0 1 2 3 4 5 6 7 Losses Have Been Stable Nissen Analyst Final 16 8 Productivity OP & Admin / ANI % 7.0% $2.1 ’99 6.9% $2.3 6.1% $2.6 ‘00 ’01 5.7% 5.3% $3.1 Assets / $2.9 ’02 Head ($MM) ’03 YTD Consistent Productivity Gains Every Year Nissen Analyst Final 17 Compliance • Compliance Leadership in Every Country • Compliance Culture – Spirit & Letter – Ombuds System – Key Priority of Acquisition Integration • Telephone Follow Ups • Secret Shoppers / Secret Audits More Than 200 Legal, Compliance and Audit Personnel …Ongoing Corporate Audit Staff Involvement Nissen Analyst Final 18 9 GE Consumer Finance Americas “Becoming a Broad Consumer Finance Company” Our Priorities 1. Drive Retail Finance 9 More Retailers 9 Penetration/New Accounts 9 Manage Losses 9 Drive Productivity 2. Transformation Into Consumer Finance 9 Leverage Large Base of Touchpoints 9 Adding New Products… Dual Card, Personal Loan, Home Finance Drive Core at Retail… Build on Touchpoints With New Products Nissen Analyst Final 20 10 Expanding Distribution Through Retailers 100+ Partners Recent Extensions / New Deals 9 Wal-Mart U.S. 9 Wal-Mart Canada 9 Sam’s Club Canada 9 Lowe’s – Commercial & Consumer 9 Bebe 9 Brooks Brothers + 90,000 Dealers 9 Meijer 9 Carrefour 9 Yamaha 9 Grupo Gigante 9 Grupo Mercado Building Retail Relationship And Source Of Customers Nissen Analyst Final 21 Grow Retail Card Offerings Served Assets $25B $18B Key Growth Objectives • Win More Deals • Extend Current Retailer Relationships • Expand Functionality 10-15% – Cash Access – Debt Cancellation Today 2006F – Improved Statements – Youth & Hispanic • Grow Canada & Mexico Double-Digit Growth From Core Business Nissen Analyst Final 22 11 Drive Sales Finance Key Growth Objectives Served Assets • Expand Relationships $12B • Integrate and Grow Conseco $6B 25-30% • Drive New Market Growth… Healthcare, Power Sports Today • X-Sell Opportunity And New 2006F Products Great Growth Business… Huge X-Sell Opportunity Nissen Analyst Final 23 Drive Healthcare Sales Finance $83B Industry • Dentists • Orthodontists Insured $30B • Veterinaries Self Pay $53B • Optometrists • Weight Loss Clinics Served Assets • Patient Financing Of Self Pay Treatments • ’02 CareCredit & ’03 Citi Acquisitions • Strong Relationships In Dental • 40 Medical Associations Endorsements • Exploring New Industries Growth ’04F Dealers $0.8B 44% 40,000 Dental $0.5 35% 27,000 Vision Vet / Other $0.1 $0.2 82% 6,000 59% 7,000 Today Expanding In High Growth Healthcare Industry Nissen Analyst Final 24 12 Risk Management Key Risk Levers Loss Rate % • Increase Approval Rates With Consistent Credit Standards 6.5% 6.1% Excess Fraud 6.3% • Continuous Re-Scoring Of Portfolio Drives Stable Credit Quality • Manage Credit Lines In All Economies '01 '02 • Driving Collection Effectiveness Through Capacity & Strategic Models '03E Holding Losses In A Tough Environment Nissen Analyst Final 25 Credit Quality Mix % Of Assets 80% Low Risk 60% 40% Medium Risk 20% Higher Risk 3 l-0 Ju -0 3 M ay -0 3 M ar 2 03 nJa v0 No 02 2 l-0 pSe Ju -0 2 M ay -0 2 M ar Ja n- 02 0% Advanced Risk Tools Resulting In Stable Credit Quality Nissen Analyst Final 26 13 Productivity Cost / Active Account Core Business $31.32 Driving Core Productivity… (7%) $29.19 '04F ’03E 1. Activity-Based Costing 2. Low-Cost Countries 3. Technology & Op Excellence '05F 7% Reduction In Cost/Active Account … Fueling New Product Growth Nissen Analyst Final 27 U.S. Consumer Finance Landscape Assets ($B) $966 $5,431 Loans Our Focus Mortgage/ Home Equity H Bank Card Bankcard Mortgages M $610 GE Focus PLCC L Products $7,100 $93 Product Attractiveness Real Estate Non-Revolving Revolving Growth Areas Auto Vacation Education L Dual Card Private Label Home Equity Sales Finance Personal Loans Boats / RVs Manuf. Housing M H GE’s Expertise Huge Market With Big Growth Potential for GE Nissen Analyst Final 28 14 Using Customer Touch Points To X-Sell New Products X-Sell Channels New GECF Products • Dual Card Direct Mail • Personal Loans Customer Service/ Collections Offers • Convenience Checks X-Sell Out-Bound Calls Statements • Cash Access • Debt Consolidation • Home Equity & Secured Debt IVR Kiosk In Store Multi-Product Relationships… Core GECF Capability Nissen Analyst Final 29 Expand Product Offerings … Dual Card Roll-Out Private Label • Entry Card 1. Convert Inactives • Lower Lines • Promo’s 2. Upgrade Actives 3. POS Integration Dual Card • Expanded Functionality … Not Just Co-Brand • Loyalty / Rewards • Larger Lines • Cash Access 4. Dual Application 5. Selective Direct Mail Right Card for Right Customer . . . Dual Card To $5B By ’06 Nissen Analyst Final 30 15 Expand Product Offerings … Personal Loans Roll-Out 1. Retailer Branded • Big Ticket Purchases . . . Kitchens, Decks, Electronics, Furniture • POS Offers By Retailer Actives + Inactives 44MM 12 24 36 Offer? Offer? Offer? (Months) 2. GE FlexPlus X-Sell • Sales Finance Offers In Life Cycle 48MM 1. Direct Mail 2. POS / Dual Application 3. Customer Service Offers • Direct Mail • Customer Service Offer 4. Statement Messages $3 - 4B Assets By ’06 Nissen Analyst Final 31 Expand Product Offerings… Secured Debt Cross-Sell Models • Highly Analytic llRo • PLCC and Sales Finance Customer Base ow Target X-Sell Sell Closing N st Te t Ou Close • Outside Network Of Lawyers, Appraisers, etc. Telesales • Large, Centralized Locations • Best Practice Compliance X-Sell Secured Credit To Our Customer Base Nissen Analyst Final 32 16 Our Vision For Consumer Finance Acquire Customers Finance Retail Sales Build on GE Touchpoints X-Sell New Products 21MM Cards Issued • Dual Card 86MM Cust. Service Calls Retailer + Dealer Partnerships • Personal Loans 550MM Statements 15MM Letters 49 MM Collection Calls (In/Out) • Home Equity • Line Extensions • Cash Access • Credit Protection 10MM Hits From 1 Product / Customer To Multi-Product Focus Nissen Analyst Final 33 Financials – Americas Served Assets ($B) Net Income ($MM) AAGR = 18-22% Core Growth 12% $28.1 THD 7.2 $20.9 '02 # Active A/Cs (MM) 45 $740 - 765 $26.1+ 2.7+ $627 Conseco $23.4 '03E 44 ROE '02 '03E 46% ~50% Continued Asset and Earnings Growth Nissen Analyst Final 34 17 Transformation Into Broad Consumer Finance Player Our Focus $50B Home Fin Personal Loan Dual Card $26B Private Label/ Sales Finance Today • Consumer Life Cycle • # Products/Customer • X-Sell Rate Private Label/ Sales Finance • Customers & Partners • Product / Retailer P&Ls Future Strong Growth Potential… Still Small in Huge Market Nissen Analyst Final 35 European Growth • Served Assets Ï 44% • Core Growth – Consumer . . . Launched Dualcard – Mortgage . . . Launching Start-ups • Acquisitions . . . Deals Completed UK Germany Swiss Poland Belgium Nissen Analyst Final 36 18 Growth - Eastern Europe Strong Growth: Population (MM) • Czech Republic 10 • Hungary 10 • Poland 40 Total 60 NEA’s ($B) AAGR = 51% NI ($MM) 40+% 4.2B 125 87 0.8 ’99 ’03E ’02 ’03E With Further Potential: GDP per Head • Eastern Europe • EU Average $4.7 M 20.8 M Consumer Indebtedness 7% 50% A Growth Engine in Europe Nissen Analyst Final 37 Europe: Productivity Ongoing Commitment. . . Acquisition Integration On Track Opex to CV % OpEx / CV % 63% Cetelem 2000A 2001A 2002A 03SI 2003 03SI 2004 03SI 2005 03SI 2006 59% 67.2% 59.4% 89.1% 94.8% 80.6% 72.9% 68.6% 40.6% 39.8% 36.0% 32.5% 57%51.6% 59.1% 49.6% 47.9% 45.6% 41.1% 93.1% Austria Belgium Czech Republic DOMs France Germany Hungary Ireland Italy Poland GECB Poland HB Portugal Norway Sweden Auto Sweden Denmark Spain Auto Spain Mortgage Switzerland UK Auto UK Consumer UK First National UK igroup Europe HQ GECF Europe 40.7% 98.0% 103.9% -1.3% 43.2% 61.5% 56.1% 88.1% 57.9% 28.4% 46.3% 67.2% 37.0% 67.7% 37.3% 90.8% 92.6% 81.2% 45.6% 66.2% 42.7% 63.6% 69.7% 32.1% 45.9% 72.0% 46.2% 72.2% 37.8% 33.7% 42.9% 56.3% 30.2% 44.6% 69.5% 47.9% 65.8% 53.9% 43.1% 44.7% 49.0% 46.7% 43.4% 45.6% 65.2% 41.5% 171.9% 56.9% 76.9% 1473.7% 57.0% 43.2% -800.4% 50.9% 35.2% 35.2% 34.9% 39.6% 62.3% 30.8% 42.4% 36.7% 55.9% 30.3% 38.8% 34.4% 48.8% 29.5% 38.1% 48.8% 41.1% 47.1% 49.7% 31.9% 35.2% 40.8% 28.5% 32.2% 1225.3% 40.2% 68.7% 63.3% 57.0% 50.8% 54%64.8% 73.7% 74.5% 65.8% 54.9% 49.4% MBNA 71.0% 63.2% 60.9% 53%64.8% Citi 65.4% Cons 48.4% 53.0% 50.3% 47.9% W-Eur 42.2% 47.7% 42.4% 42.3% 39.0% 38.3% 52% GECF-E 31.8% 29.4% 28.3% 29.0% 28.1% 43.1% 61.1% 49% 30.2% 43.6% 64.3% 49.0% 70.8% 353.2% 38.6% 40.5% 47.6% 37.4% 40.9% 379.6% 49.3% 62.1% 54.9% 47% 48.4% 45.8% 60.4% 52.6% 119.3% 70.3% 38.2% 34.8% 38.8% 38.0% 46.1% 44.1% 35.2% 31.0% 37.5% 34.7% -312.7% 1433.0% 47.1% 43.6% 43% Double Digit Productivity Served Assets / Head Ï 15% 40% '00 '01 '02 '03 '04 '05 '06 Building Cross-Border Capabilities Increasing Focus… 40% OpEx To CV % By 2006 Nissen Analyst Final 38 19 Europe: Risk Management Loss Rate 1.6 1.4% 1.4% 1.2% 1.2 0.8 0.4 0 '01 '02 '03 E 30+ Delinquency 5.6 4.2 4.3% 4.3% 4.4% '01 '02 '03 2.8 1.4 0 * Excludes igroup Stable Portfolio Performance Nissen Analyst Final 39 Financials - Europe Net Income ($MM) Served Assets ($B) Core Growth ~10% AAGR = 31% $48.0 11.7 $33.2 $860-890 Acq $671 $36.3 $510 $25.9 # Active A/Cs '01 '02 '03E 15 16 20MM ROE '01 '02 31% 32% '03E ~25 – 30% Growth, Productivity & Risk Vigilance Driving Strong Results Nissen Analyst Final 40 20 2003 Japan Performance $9.2B +1% ~$440MM • Economy Continues to Struggle (10%) • Lenders Dealing with Higher Bankruptcy / Loss Environment … GE Loss Rate Up 164 bps to ~6.70% • Taking Necessary Actions… Core Assets/Earnings Down Served Assets ’03E • Tightened Credit Lines • 35% More Collectors in ’03 • Implementing Global Best Practices Net Income ’03E ROE 40+% • Opportunistic Acquisition Environment (GC Card) Very Profitable Business… Managing A Tough Environment Nissen Analyst Final 41 Japan: Strategy Summary 1. Become the Low Cost Player in the Market 2. Proactive Risk Management • Branch Consolidation • Risk Based Pricing • Back-office Centralization • Build Line Management Skills •Dalian Outsourcing • Upgrade Scores for Anti-BKO 3. Expand Breadth & Depth • Visa / MC Acquisition (GC Card) • Cross-Sell Debt Consolidation Creating A Sustainable Growth Company Nissen Analyst Final 42 21 Japan: Productivity Results ’01 OP & Admin / ANI % ’02 6.7% ’03E 6.0% (70bps) 5.7% (30bps) Comparison (Est.) NEA ($B) Citi Kiosks Manned Branches EFT Opex/ ANI $13 370 850 6,300 9.4% Acom 14 1,240 520 4,360 8.0% Promise 12 1,050 460 3,979 7.9% Aiful 11 1,050 530 3,600 7.7% GECF-Japan 9.6 1,032 304 3,093 6.0% Takefuji 15 1,320 530 3,750 4.9% Source: ’02 Yr. End internal estimates Nissen Analyst Final 43 Japan: Risk Management 30+ Delinquency 4.30% 4.10% 3.90% 3.70% 3.50% 3.30% 3.10% 2.90% 2.70% 2.50% 4.00% 3.93% Dec Mar 4.03% 4.06% June Sept 3.68% 3.56% 3.33% Mar June Sept 2002 2003 Annualized BKO % of Outstandings 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Jan Mar May 2001 Jul Sep Nov 2002 Jan Mar May Jul Sep 2003 Delinquency And Bankruptcies Stabilizing Nissen Analyst Final 44 22 Financials – Australia/New Zealand Served Assets ($B) Net Income ($MM) Core Growth ~20% AAGR = 37% $7.1 $140-160 $6.0 $93 $80 $2.4 '01 # Active A/Cs 2.0 '02 3.3 '01 '02 '03E Loss Rate % 2.0% 1.9% 2.0% 22% 24% ~25 – 28% '03E 2.9MM ROE Dual Card and Cross-Sell Re-energizing Core Growth and Margin Nissen Analyst Final 45 GECF Asia • In 8 Countries • Good Economic Recovery • 3 Billion Population New Player in Dynamic Growing Market Nissen Analyst Final 46 23 Financials - Asia Served Assets ($B) Net Income ($MM) Core Growth 26% AAGR = 50% $5.3 $46 $4.2 $2.8 # Active A/Cs $60-70 $29 '01 '02 '03E 1.9 2.4 2.7MM '01 '02 '03E Loss Rate % 2.4% 3.5% 4.2% ROE 19% 21% ~21 – 23% Strengthening Resources Across Asia Nissen Analyst Final 47 GE Consumer Finance ’03 Financials • Net Income • Assets • Risk Management • Productivity • Acquisitions Loss Rate % Reduce Expenses As % Investment ROE 30+% ~$2.1-2.2B ~20% ~$100B 25% U.S. 6.3% Int’l 2.6% State of the Art Risk Management Ð 40 bps $16B Assets 6σ Process Discipline Core Acquisitions A Strong, Growing Consumer Finance Business Nissen Analyst Final 48 24
