General Electric Co could be on the hook to Shinsei Bank Ltd for more charges related to its former Japanese consumer finance arm, but the arrangement is not typical of businesses the largest US conglomerate has sold, GE's chief financial officer said.
GE's first-quarter earnings report, which topped analysts' profit estimates, included a 4 cent per share charge related to GE's former Japanese consumer lending unit, which it sold to Shinsei in 2008 for $5.4 billion. "There is not a contractual cap with Shinsei," on the losses for which GE can be held accountable, said Sherin, who said future losses related to the former GE unit could bring additional charges.
The issue traces back to a 2007 decision by Japan's government that capped the amount of interest lenders could charge and declared that loans with higher rates were illegal. That change prompted GE to sell its Japanese consumer finance unit, called Lake. A weak Japanese economy has also pushed up defaults on consumer loans. "This is a unique Japanese regulatory problem," Sherin said.
Analysts excluded the 4 cent charge from GE's 21 cent profit from continuing operations, which topped the 16 cents analysts had expected. The company also believes it is on track to close the sale of a majority stake in its NBC Universal media to No 1 US cable company Comcast Corp by the end of the year. "We're optimistic that we can close the transaction in the fourth quarter," Sherin said.