FSOC Designates GE Capital as Nonbank SIFI

The Capital segment of General Electric Company (NYSE: GE) marked a huge milestone yesterday when the company gained the designation of a nonbank Systemically Important Financial Institute (SIFI) from the Financial Stability Oversight Council (FSOC). With this, General Electric will not be susceptible to the risks involved with the financial markets and the company will get an upper hand to turn its attention on its long-term strategy.

GE’s next move would be to grow its industrial segment that now contributes the greatest to its consolidated operating revenues. The remaining assets of GE Capital that the firm still holds supplement the financial operations of the industrial unit that the firm needs to boost for its Industrial segment.

The corporation also disclosed that General Electric managed to strike GE Capital financial assets deals amounting to $180 billion in the wake of its long-term strategy to sell assets valued at $200 billion. Out of the total $180 billion, the corporation was able to close deals worth up to $156 billion. This development resulted in a stronger balance sheet position for General Electric.

Aside from that, another part of the firm’s strategy is to return cash to its investors through dividends, in order to gain their confidence. When it comes to its strategy, GE appears to be well on track as it is ready to give dividend payments amounting to $18 billion by the end of 2016, while the rest will be given in the following years.

According to the CEO and Chairman of General Electric Mr. Jeff Immelt, “We have transformed GE by exiting most of financial services, acquiring Alstom, and investing to be a leader in the Industrial Internet.”

“I am proud of the tremendous execution of the GE Capital team. Going forward, GE Capital will continue to be part of the “GE Store,” supporting the growth of our Industrial businesses,” Immelt further added.

Because of the GE Capital’s rescission as a nonbank SIFI, the company’s stock edged higher by 2.04 percent during the trading session yesterday, and ended the session at $30.55. As of 6:20 AM GMT -4 on July 1, GE shares are changing hands at $31.48, up by 3.04 percent or 0.93.

Considering the performance of the corporation, General Electric’s stock is anticipated to further rally by the end of the current year, as the firm moves ahead to reach its target to sell the assets of GE Capital amounting to about $200 billion.

Among the different segments, the Aviation unit of the company contributes the highest revenues as reported in the earnings report of General Electric for the full year 2015. The Aviation segment contributed approximately 24.2 percent of the total company revenues. The second highest contributor is the Power and Water segment, which is responsible for 20.1 percent of the revenues.

Apart from that, the Energy Management and the Renewable Energy segment also contribute high revenues. However, these segments contribute only a small portion to the consolidated revenues. Based on the review of General Electric’s latest investments show that GE intends to expand the mentioned segments in the long term. The corporation invested in power grids and turbines offshore, which will improve the revenues of the renewable energy segments when they started to be operational.

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