Feb 26 General Electric Co said it would
pay $1.7 billion to Japan's Shinsei Bank Ltd to end
exposure to claims related to the sale of its Japanese consumer
loan business to the bank in 2008.
GE said on Wednesday the deal would reduce fourth-quarter
and 2013 earnings by $1 billion and earnings per share by 9
cents, noting that the settlement affected last year's results
because the agreement was reached before the company filed its
annual financial statements.
Operating earnings remain unchanged and the agreement will
not affect first-quarter or 2014 results, GE said.
GE reported a fourth-quarter net profit of $4.2 billion, or
41 cents per share. Adjusted profit was 53 cents per share.
Shinsei said the agreement was not expected to have any
impact on its earnings.
GE sold its Japanese consumer finance business to Shinsei
for $5.4 billion after the government passed a law cutting
maximum interest rates and ordered lenders to repay charges on
outstanding loans that were deemed to have breached the limit.
General Electric Capital Corp and Shinsei had agreed to a
loss-sharing arrangement for potential claims on loans with
interest rates of 20-29 percent, with a buyout option to end the
obligation in the first quarter of 2014.
Daniel Holland, an analyst with Morningstar, said the
Shinsei obligations had been a lingering issue for GE's
"It's good to finally get it cleaned up and done," Holland
said. "As investors, we didn't really have the visibility of
what the magnitude could be."
GE is putting the Shinsei obligations behind it as it nears
the expected initial public offering of GE Capital's North
American retail finance business, which is expected by the end
of next month. The IPO is expected to be the first of a
two-stage process, in which as much as 20 percent of the
business could be offered this year.
GE shares rose about 0.2 percent to $25.32 in morning
trading on the New York Stock Exchange, nearly in line with the
increase in the broader U.S. markets.