GE to take $300 million to $400 million charge to quit subprime
GE said it will take a third-quarter charge of between $300 million and $400 million to exit the subprime market.
The subprime losses are among total charges of between $1.7 billion and $1.9 billion, including $900 million to $1 billion to write down the value of Lake, GE's Japanese personal-loan operation, and $500 million for restructuring efforts in GE's industrial operations.
GE has said it plans to sell the Japanese business.
In announcing its second-quarter earnings in July, GE said it dumped $3.7 billion of the subprime mortgage portfolio held by its WMC Mortgage business. GE said then it took a $160 million hit on the sale of its portfolio.
Rising loan defaults have hit subprime mortgage lenders, who give home loans to people with poor credit. The subprime crisis has led to tighter credit markets and forced companies such as GE to reassess their continued presence in the business.
GE expects to offset the charges with proceeds from the $11.6 billion sale of its plastics division to Saudi Basic Industries Corp., which closed last month. The deal is expected to create a net gain, after taxes, of $1.5 billion.
Keith Sherin, chief financial officer, reiterated at a GE analyst meeting on Tuesday the company's forecast for third-quarter earnings of 54 cents to 56 cents a share.
He reiterated guidance for full-year earnings from continuing operations of $2.18 a share to $2.23 a share. Including the losses at Lake and WMC, Sherin said GE expects full-year net earnings to be a bit lower, at $2.16 to $2.21 a share.
Analysts polled by Thomson Financial expect the company will earn $2.21 per share for the full year ending in December.
GE shares rose 17 cents, to $41.85, in early afternoon trading today.
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