GE Finance and the road to recovery

July 30, 2009

If you needed a sign that banks are becoming more confident on the finance biz, take a look at what analysts are saying about General Electric this morning. The clouds that have hung over the industrial conglomerate’s finance arm through the financial crisis, are starting to break up, say Goldman Sachs and Deutsche Bank. GE’s stock put on 4 percent on the comments before the market opened.

With support seen waning for regulatory reforms that would require such GE to dump its finance arm, Goldman boosted the bank’s rating on the GE stock to a “buy” from “neutral”. Deutsche was also upbeat. Both noted that allowing GE to keep the business would give it more strategic flexibility and Goldman had estimated that a forced break-up could cost GE equity holders $40 billion.

GE Capital is the biggest drag on the company, which is trying to wind the unit back to represent no more than 30 percent of earnings, down from half before the crisis. There is little doubt that government intervention elsewhere has been bitter medicine, even if it was seen as necessary to sustaining the financial system. Signs that politicians are releasing their supportive stranglehold on the sector, such as allowing TARP paybacks, are likely to be pointed to as signs of a broader recovery.

2 comments so far | RSS Comments RSS

I want to see some concrete evidence that GE desires to be a buy. I get tired of analysis who it seems they are paid to rate a stock high and it goes the wrong way.

Even morning star is suspect at times or they are sleeping or something. These claim to be PROFESSIONALS.

Posted by todnwth | Report as abusive

I want to see some concrete evidence that GE deserves to be a buy instead of speculation.

I get tired of those who call themselves analysis, who are suppose to be PROFESSIONALS saying a stock is a buy and it goes the wrong way.

They are asleep at the wheel or more likely want to like by the corporation they are rating or I hate to say being paid off to rate them high—we do not anymore Enrons.

Posted by todnwth | Report as abusive

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