GE settles subprime case, reports profit

After years of belt-tightening and spin-offs that ate into revenue and profits, General Electric Company, GE, reported fourth-quarter net income of US$761 million, sending shares up 10 per cent in premarket trading.

The company also reached a US$1.5-billion settlement with the US Department of Justice over its subprime mortgage business before the 2008 financial crisis. The Boston-based industrial conglomerate is considerably smaller now than it was before becoming entangled in the financial crisis a decade ago and is seeking to get even smaller, intending to sell its healthcare business and possibly others.

GE said it had profit of seven cents per share. Earnings, adjusted for non-recurring costs and discontinued operations, came to 17 cents per share, slightly less than the 18 cents per share that analysts were expecting.

Even though earnings came up short of projections, investors seemed encouraged by increased revenue and profit across most of its segments.

The industrial conglomerate posted revenue of US$33.28 billion in the period, surpassing street forecasts of US$32.01 billion and last year’s US$31.6-billion fourth quarter.

Despite the mostly good news for GE, the struggles in its power division continued. Orders in the segment were down 19 per cent and revenue was down 25 per cent from the same quarter in 2017, resulting in a loss of US$872 million.

The company blamed “execution and operational problems,” among other issues, and said discipline and project management were among its priorities in the power division going forward.

GE announced last quarter that it was splitting its power business into two separate divisions: a gas-focused division and a second unit that will include steam, grid solutions, nuclear and power conversion. That planned split has led some analysts to think that GE might be considering spinning off all but the gas-related parts of its power business.

All other segments earned a profit with the exception of its financing division, GE Capital, which the company said it intends to shrink. GE’s aviation segment was particularly strong, with increased orders and revenue generating 20 per cent in profits.

GE shares have increased 20 per cent since the beginning of the year, but are still down 43 per cent in the last 12 months.