Putting GE Capital Through Its Stress-Test Paces

From the Wall Street Journal's Deal Journal blog:

Would General Electric’s financial unit, GE Capital, have passed the bank “stress test?”

“Yes. But not by much,” writes Steven Winoker, senior analyst at Bernstein Research in New York.

After analyzing GE Capital’s balance sheet, Winoker writes that the unit would have passed one of the Federal Reserve’s tests comfortably, and the other more narrowly. That means “a relatively low probability that GE will need (or be forced to) raise additional capital,” Winoker writes.

GE Capital wasn’t included in the stress tests because it isn’t part of the Troubled Asset Relief Program, though it does benefit from the government’s assistance and guarantee programs for short term and long term debt. Still, GE Capital’s total assets of $612 billion and risk-weighted assets of $593 billion would make it the nation’s fifth-largest bank-holding company, ahead of Goldman Sachs Group and Morgan Stanley. The unit’s close call on the stress test, according to Winoker, would have been on its Tier 1 Capital ratio, a measure of a bank’s health, which is lower than any of the 19 banks the Fed tested. (Tier 1 Capital includes common and some preferred stock as well as retained earnings.)

Following the lead of Fed examiners, Winoker estimated future losses at GE Capital. He found the highest exposure in GE’s U.S. credit card, sales finance and real-estate groups....MORE

Just in case you forgot:
F.D.I.C. to Back $139 Billion in GE Capital Debt

General Electric said Wednesday that the federal government had agreed to insure as much as $139 billion in debt for its lending subsidiary, GE Capital. This is the second time in a month that G.E. has turned to a federal program aimed at helping companies during the global credit crisis.

GE Capital is not a bank, but granting it access to a new program from the Federal Deposit Insurance Corporation may reassure investors and help the lender compete with banks that already have government-protected debt, a G.E. spokesman, Russell Wilkerson, told Bloomberg News....MORE at DealBook

They better effin pass the stress test.