First International Bank of GE

General Electric wants to do something that no industrial conglomerate and few banks have ever accomplished: become a global mass-market financial institution. Watch out, Citigroup and HSBC -- but also, watch out, GE.

For 126 years General Electric Co. has been bringing good things to life. Things like lightbulbs, refrigerators, jet engines and power turbines, whose sales have made GE the world’s biggest industrial company, with 2003 revenues of $134 billion and a market capitalization of $360 billion.

It’s an extraordinary record that has made GE the cynosure of the corporate world. But when it comes to profits, the Fairfield, Connecticutbased conglomerate has a not-so-well-kept little secret: It earns much of its money not by selling the many things it makes but by helping consumers purchase these and countless other products. In 2003, 51 percent of its $15 billion in profits came from making loans and providing other financial services. In the first nine months of this year, after some of the company’s insurance businesses were sold, finance contributed 40 percent of GE’s $14.4 billion net.

Under Jeffrey Immelt, who succeeded the legendary Jack Welch as CEO in September 2001, banklike activities have become ever more important. Certainly, Immelt wasted little time putting his stamp on the business. After ten months on the job, he split GE Capital Services into separate consumer, commercial, insurance and equipment-leasing entities, all reporting directly to him. Then, in classic GE fashion, he began to make clear distinctions between those areas with growth potential and those less worthy of capital commitments, shucking a number of profitable but low-margin insurance businesses and redirecting the company’s focus -- and funds -- to commercial and consumer finance.

“My emphasis is on growth with high returns,” Immelt tells Institutional Investor, adding of his lending and banking portfolio: “It is a fast-growth business. We’re still relatively small on the global stage, but we think it’s a business where our operating processes and muscle -- and our brand -- play pretty well.”

Specifically, Immelt wants to muscle GE Consumer Finance -- a business that since the reorganization has been increasing revenues by more than 20 percent annually -- into a retail bank capable of challenging such global giants as Citigroup and HSBC Holdings, particularly in emerging markets. In its most visible move, the company in June began rebranding its more than 3,000 banking and consumer lending offices around the globe as GE Money.

It’s a dream worthy of the ultra-ambitious GE, which under Welch famously declared that it would exit businesses where it was not ranked at least third. How far-fetched is this dream? Consider that no nonbank has ever made the kind of leap into consumer financial services that Immelt envisions. This is daunting territory even for most established banks.

“It’s not a natural stretch to assume that just because a large conglomerate can enter financial services, it can be good at it,” observes Trevor Gruzin, a Sydney, Australiabased partner of consulting firm Accenture. “There are technical bits around banking -- payments, settlements, lending risks, collections -- that are difficult to master.”

GE starts with some real advantages. It’s already a formidable operation. In 2003 all of the company’s financial activities, including insurance, earned $7.8 billion on $64.3 billion in revenues. That’s far from Citigroup’s $17.9 billion in profits on $94.7 billion in revenues but not very much different from Bank of America Corp.'s net income of $10.8 billion on $48.1 billion in sales, J.P. Morgan Chase & Co.'s $6.7 billion on $44.4 billion or HSBC’s $8.8 billion on $63.1 billion.

GE Commercial Finance, with $17.2 billion in revenues and profits of $3.2 billion for the first nine months of 2004, is the biggest single unit in the company (see box, page 28), but its 13 percent revenue growth year-over-year was topped by the 23 percent posted by GE Consumer. The latter’s nine-month revenues of $11.4 billion yielded a $1.9 billion profit, up 14 percent.

GE Consumer, run by longtime GE marketing whiz David Nissen, is already on the ground in 41 countries, including such developed markets as the U.K. and U.S., where it pockets the bulk of its profits. The company has banking licenses -- permitting it to take deposits to fund its loans -- in 16 markets, from the U.S. and U.K. to Brazil, the Czech Republic and Hong Kong. Its hottest prospects are in places such as Russia and the other former Soviet bloc nations, as well as Argentina, Brazil, China, Mexico, South Korea and Taiwan. Asia, though accounting for only 5 percent of GE Consumer’s assets and 3 percent of its net income last year, could turn out to be the unit’s growth star.

“We couldn’t talk enough about Asia,” says Nissen of a recent strategic planning session. “We hope to grow Asia by 50 percent a year for the foreseeable future.”

Nissen can count on unstinting support from above. Immelt has labeled GE Consumer a “growth engine,” a Welchian imprimatur that assures the unit a priority claim on the company’s capital. It will take plenty to roll out the GE Money brand over the next 18 months and stock the retail shelves with a cohesive set of products. Almost nowhere does GE yet offer its full arsenal of deposits, debit and credit cards, personal and auto loans, mortgages and insurance.

(To focus on that effort, Immelt has divested much of GE’s insurance business, keeping the commercial and reinsurance lines but getting out of the less profitable life and mortgage insurance segments last year, selling GE Edison Life Insurance Co. in Japan and Financial Guaranty Insurance Co. in the U.S. GE bundled its remaining life and mortgage holdings into a separate company, Genworth Financial, and raised $3.8 billion by taking one third of it public in a May IPO. Immelt says he’ll sell the rest at an unspecified pace.)

It’s not hard to figure out why Immelt finds consumer finance so compelling. Accenture estimates annual global banking revenues at between $1.5 trillion and $1.8 trillion, yielding pretax profits of $450 billion. “It’s a massive market,” says Immelt. “It’s got good inherent growth, and it’s very niche-y. There are lots of ways to play and lots of ways to win. We like that.”

Yet global banking is fraught with risks that should give pause to even a colossus like GE, which has $705 billion in total assets. In the briskly growing but economically immature markets the company is so avidly eyeing, loan-loss rates can be sky-high, and competition to serve the emerging middle class can be fierce. “Taking risks in places like Eastern Europe, where credit information systems are lacking and where credit is in many cases a new concept, is a very different business from what they know in the U.S.,” warns Adam Dener, a New Yorkbased partner in financial industry consulting firm Capco.

Credit exposure is just one of a range of risks -- operational, regulatory and reputational -- that are complicating the international banking business for incumbents and new entrants alike. For starters, GE has taken its hunt for margins into the subprime-mortgages business, offering loans at above-market interest rates to borrowers who don’t qualify for conventional bank loans. It’s a hot button for regulators on both sides of the Atlantic, raising a specter that GE Consumer CEO Nissen admits keeps him awake at night (see box, below). And if financial services becomes more important to its bottom line, GE may have trouble convincing the investment community that it still deserves the high ratings and multiples of a blue-chip industrial enterprise rather than the relatively discounted valuation of a banking company.

GE approaches this potential minefield with a well-honed, carefully thought-out strategy. Unlike the ambitious big banks of yore, the company doesn’t want to be all things to all people. It aims to be different things to different people in different places.

Becoming a full-service global retail bank “is not the end goal per se,” as Immelt puts it. The end goal is to be a good specialty consumer finance business. That will take lots of different shapes in different places around the world.”

GE Consumer may have banking licenses in the U.S. and U.K., for example, but it has no intention of trolling for deposits in these brutally competitive markets, where it makes a handsome profit from higher-margin businesses such as credit cards, personal loans and auto loans.

By contrast, Nissen is eager to solicit deposits in less developed markets, where he regards basic banking services as the entry point to securing a bigger share of customers’ wallets.

“By becoming a deposit-taking institution, you get a more robust relationship with the consumer,” he asserts. “Most consumer finance companies have one or two loans per customer. Most consumer banks have three or four products per customer.” GE’s banks in the Czech Republic, Germany, Hungary and Switzerland, offering full product menus ranging from auto loans to small-business credit, are proving the point: Nissen says they are delivering four products per customer, far better than the overall GE Consumer ratio of 1.4 per customer.

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GE Consumer ultimately wants to make most of its deposit and loan products available everywhere it does business, thereby becoming what Nissen terms “a big international retail bank.” That would put GE in rather rarefied company: The league table today consists of Citigroup and HSBC, both global deposit-takers with well-known brands and trillion-dollar balance sheets. Citigroup’s consumer loan portfolio alone, at $399 billion, is more than three times that of GE Consumer.

Catching up and then forging ahead is just the kind of challenge Immelt exults in. But his headlong aggressiveness may make GE shareholders a tad nervous. GE maintains a triple-A credit rating as an industrial conglomerate with a financial ser-vices component. Growing the finance side of the business too much could undercut that golden rating or, potentially worse, bring on a full-blown corporate identity crisis: Is GE a financial enterprise or an industrial company?

This is no parlor game -- the answer has real consequences. As Anthony Boase, an analyst with U.S. brokerage A.G. Edwards & Sons, points out, the stocks of industrial concerns typically fetch price-earnings multiples of about 20, whereas finance companies usually sell for about 15 because investors perceive them to be riskier. GE’s current P/E is 22. “If the finance component gets too large,” warns Boase, GE could find itself with a much lower, “blended” multiple, part financial, part industrial. Standard and Poor’s equity analyst Robert Friedman adds that although the consumer financial services market is strategically attractive, he doubts that “most investors understand how much GE is counting on it for growth.”

Immelt downplays such concerns, noting that “we’ve got a lot of great industrial businesses that are growing just as fast.” There are, indeed, growth engines that are faster, if smaller, than GE Consumer: Among them are health care, up 34 percent in revenues in the first nine months of 2004, to $9.2 billion; and the NBC Universal television unit, up 73 percent over the same period, to $8.5 billion.

In any case, finance’s earnings contribution has already declined from last year’s 51 percent. Immelt has said he’d be comfortable in the neighborhood of 45 percent -- slightly above average for the past decade -- with insurance deemphasized and GE Consumer and Commercial carrying most of the load.

Under CEO Nissen, $120 billion-in-assets GE Consumer has been expanding steadily by acquisition. The unit has made more than 60 deals since 1993, including six in 2003, a flurry that brought in $16 billion, or two thirds of last year’s asset growth. In a three-week period in July and August of this year, GE Consumer agreed to buy the credit card receivables of Target Corp.'s Mervyn’s subsidiary for $475 million, 38 percent of South Korean auto lender Hyundai Capital Services for $375 million, Russian credit card lender DeltaBank for $150 million and the credit card business of U.S. retailer Dillard’s for $850 million.

“We’re an acquisitions machine,” crows Nissen, a 23-year GE veteran and a key consumer finance executive since the late 1980s. Having built a foundation with 32,000 employees serving 106 million customers worldwide, he wants to rely on internal growth for two thirds of asset increases -- a target he says he’s hitting so far this year.

As long as he keeps revenues rising well into the double digits, Nissen is doing his part to offset the lackluster results in GE’s core consumer and industrial products business, where revenues were up only 7 percent in the first three quarters of 2004, to $10 billion, and in energy, which fell 10 percent, to $12.1 billion.

“We’re not going to settle for GE’s average growth,” proclaims Nissen. “We want to be at two or three times that level.” Through September of this year, GE Consumer was growing at about double the companywide pace of 12 percent in revenue and 7 percent in net earnings. That, of course, is music to Immelt’s ears.

IMMELT BEGAN IMPLEMENTING HIS FINANCIAL strategy practically from the moment he succeeded Jack Welch three years ago. A classic brainy GE engineering type -- he majored in applied mathematics at Dartmouth College -- Immelt had diligently worked his way up through the ranks of GE’s plastics, appliances and medical systems businesses. He also acquired an MBA from Harvard Business School along the way, and in 1997, when he was heading GE Medical Systems, Immelt landed on the board of GE Capital. The position amounted to an intense honors seminar in the wondrous workings of finance at GE. When Immelt became CEO, he focused right away on then-$400 billion-in-assets GE Capital.

As he saw it, GE Capital, having grown like Topsy, had lost all cohesion. The company traces its roots back to 1932, when GE started financing consumer appliance sales through a subsidiary called GE Contract Corp. In the 1950s, GE Capital branched out into sales and dealer finance -- loans on bigger-ticket items such as cars and motorcycles -- and in the 1960s it began arranging loans and leases for turbines and commercial equipment. By the turn of this century, GE possessed an agglomeration of 25 variegated finance businesses that Immelt wanted to rationalize.

The new CEO was determined to be hands-on in finance. That set him apart from Welch: From 1985 to 1998 -- the bulk of his 20-year tenure -- Welch had delegated the running of GE Capital to Gary Wendt, whose 1997 divorce generated more headlines than even GE’s misbegotten dalliance with Wall Street bank Kidder, Peabody & Co. from the mid-1980s to the mid-1990s. (Wendt went on to run troubled insurer Conseco from 2000 to 2002 and, at age 62, is now retired.)

In 2002, seeking to simplify the GE Capital structure, Immelt broke the unit up into four parts, each with its own profit-and-loss statement, each reporting to the GE chief executive. “Jeff had a different view of how to run the company and wanted to be closer -- he didn’t see any reason to have layers in between,” says Michael Neal, who was president of GE Capital at the time of the breakup and is now CEO of $230 billion-in-assets GE Commercial.

Even if Immelt wanted to micromanage finance, he has far too many other responsibilities to attempt it. Thus the onus for executing his vision has fallen heavily on Neal and, in the more far-flung and faster-growing consumer segment, Nissen.

A native of Peekskill, New York, Nissen, 53, earned an economics degree from Northwestern University in 1973 and an MBA from the University of Chicago in 1975. He spent six years in the finance and M&A department of RCA Corp. and joined GE in 1981 -- the same year Welch became CEO (and the year before Immelt joined the company).

Recruited into a business planning and development post, Nissen worked on GE’s hallowed unit-by-unit annual compilations of three-year strategic plans. In the familiar executive roundelay, he moved in 1983 into a marketing post in GE Capital’s credit card business, and by 1990 he was overseeing all U.S. consumer financial services, including Monogram CreditCard Bank of Georgia, a MasterCard and Visa card-issuing subsidiary, and private label credit, in which GE issues and manages cards on behalf of retailers.

In 1993, Wendt handed Nissen a mandate to export the private label business to Europe.

“I was skeptical as to whether this would be a success and as to whether I would like it,” recalls the lanky and surprisingly soft-spoken Nissen. “I hadn’t traveled the world much. I thought the U.S. consumer was the be-all and end-all.”

Highly analytical in his approach -- Immelt describes him as “an unbelievably strong strategic leader and one of the company’s best marketing professionals” -- Nissen concluded after some study that European national economies were too small to provide GE with the critical mass to prosper in private label cards alone. He persuaded Wendt and Welch that a much greater opportunity lay in broad-based consumer finance -- including auto, personal and home equity loans -- along the lines of what the U.S.'s Household International offered. (In a more recent move to export the U.S. consumer finance model, and particularly to take advantage of the company’s subprime lending expertise, HSBC bought Household last year for $14 billion. Household fueled a 55 percent rise in first-half net income at HSBC, to $6.3 billion.)

Given the green light by Wendt, Nissen launched into a string of acquisitions that may have looked scattershot at the time but laid the foundation for the GE Money strategy that is now unfolding. GE Consumer, for example, now has a foothold in Poland because Nissen acquired Solidarity Bank in 1995, when it had $20 million in assets. Today Gdansk-based GE Capital Bank has $2 billion in assets and 58 branches. Having added credit cards, auto and personal loans, mortgages and bigger-ticket sales financing to what was originally a small-business lender, GE has boosted the bank’s annual earnings from $1 million in 1998 to a projected $85 million this year.

Nissen has also purchased depository institutions in the Czech Republic, Germany and Switzerland; car lenders in Argentina and Indonesia; sales finance outfits in India and Norway; and credit card portfolios in Australia and the U.K. Of the 3,000 GE Consumer locations worldwide, 400 are bank branches, currently accepting deposits and making loans in five countries. Outside of those, the vast majority of outlets are small storefronts or two-person kiosks in high-traffic locations such as subway stations or retail shops, mainly peddling credit cards and personal loans.

Many of Nissen’s moves have paid off, but not all have. In 1999, GE Capital set up a sales finance operation with retailers in Guangzhou, China. Today Nissen writes the 50-employee venture off as a failure; GE booked a $1 million loss. “After two years we had only 30 contracts,” he says. “The Chinese consumer just wasn’t ready to think about borrowing to buy something. In China you save money to buy something.”

Nissen isn’t giving up on China -- far from it. He’s planning to go back in, most likely with some kind of cobranded credit card offering, but he’s not ready to divulge details. “It shows we’re capable of being flexible,” he says. “We’ll try things, but if they don’t work, it doesn’t mean we’ll walk away from a country forever.”

The ventures that have done well have often done very well indeed. Two years ago, for example, GE Consumer introduced a then-unheard-of, no-annual-fee credit card in Thailand. “It was a program that had worked well in more-mature markets, so we thought we’d give it a try there,” recalls Nissen. The card attracted 500,000 customers within three months; the program now accounts for just under $500 million of a $2.8 billion-in-assets Thai operation -- including personal, auto and sales finance loans -- that is expected to earn $73 million this year. That’s a prime demonstration of the power of an aggressive, deep-pocketed newcomer, says veteran emerging-markets banker Rana Talwar.

“If you’re another bank, with a million customers each paying $50 in annual fees, you can’t suddenly say, ‘Hey, I’ll go to zero fees’ -- that would be $50 million off the bottom line on day one,” says Talwar, a longtime Citigroup executive who was CEO of Standard Chartered from 1998 to 2001 and now heads London-based private equity firm Sabre Capital Worldwide. He notes that GE had plenty of room to undercut prevailing market prices: A typical Thai card offering might have a $50 annual fee and a 30 percent interest rate. “If you come in with a no-fee card at, say, 22 percent, that’s very attractive,” adds Talwar. “If you have a name that’s respected, like GE, you can cherry-pick many of the most attractive customers.”

Regional returns vary by product concentration. Europe, responsible for 53 percent of assets, generated 39 percent of last year’s net income thanks to heavy doses of low-margin home and car loans. Japan, where higher-margin personal loans are the rule, produced 19 percent of profits with just 10 percent of assets. The Americas -- dominated by U.S. private label credit, a market where GE is second only to Citigroup -- contributed 33 percent of income on 25 percent of assets.

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Most of the GE Consumer portfolio is distributed among five baskets: auto loans (23 percent), cards (21 percent), mortgages (20 percent), personal loans (18 percent) and sales finance (15 percent). Small-business credit accounts for the remaining 3 percent. Nissen’s superiors are more than satisfied with the results, for good reason: GE Consumer’s 25 percent rise in revenues last year was the second-best of any division in the company, after a 30 percent gain by advanced materials, which include lubricants and electronics compounds.

One sign of Immelt’s high regard for Nissen: A year ago the CEO appointed him co-leader of a companywide sales and marketing council that draws together the marketing chiefs of GE’s 11 business units every two months or so to brainstorm what Immelt likes to call “imagination breakthroughs.” In 2003 the council spawned 100 projects, one of which involves GE Consumer’s establishing a mortgage lending platform in each of the 41 countries in which it operates.

BREAKING INTO THE GLOBAL CONSUMER BANKING elite won’t come easy, even for GE. Nissen says that the Welch rule -- that the company wouldn’t enter a business unless it had a good prospect of becoming at least No. 2 or No. 3, if not No. 1 -- applies somewhat loosely when it comes to global financial services. Although GE still aims for dominance in such well-established niches as private label credit, Nissen explains, “we take a more relaxed approach because the markets are so big.”

Nonetheless, the No. 3 spot seems there for the taking. Accenture consultant Gruzin reckons that there is room for three to five “global gorillas” in banking and that only two of those roles are filled -- by Citigroup and HSBC. GE Consumer could be next, he suggests, though it would start as a very distant third. Gruzin believes that GE has begun to show that it has “an act it can take on the road” -- a banking strategy that it can apply consistently in one country after another. “GE has superior risk management skills and has been able to leverage its card business across multiple countries and make money,” adds the consultant. “And it has patience and an ability to cope with economic cycles in different regions.”

GE has much ground to make up. Citigroup, which is in more than 100 countries, has $1.4 trillion in total assets and a whopping $524 billion in deposits -- about half of which comes from consumers ($156 billion from North America, $99 billion from elsewhere). GE Consumer has all of $5 billion in deposits.

The $1.2 trillion-in-assets HSBC has been using its Household acquisition to flex its muscles in markets that GE is targeting. The London-based giant has accelerated the growth of its consumer financing businesses in Brazil and Mexico, and in the U.K. it is competing on GE’s store turf: In the first half of this year, HSBC introduced a card program for retailer John Lewis and acquired the credit card and consumer finance business of Marks & Spencer for £762 million ($1.4 billion). “Neither of those two deals could have been done by either HSBC or Household alone,” HSBC CEO Stephen Green said at the company’s earnings presentation in August.

GE has historically relied on its pristine rating to raise money cheaply in the capital markets to fund its lending. But Sabre Capital’s Talwar -- who is chairman of India’s Centurion Bank, one of his firm’s investments -- says that the purchased-money strategy can take GE only so far. “Local banks can fund themselves more cheaply,” he says, because local-currency deposits cost them less than what GE will have to pay for funds in dollar-based money markets and carry less liquidity and interest rate risk.

Although Nissen contends that “you can borrow U.S. dollars and change them into local currency relatively easily and not have to raise local deposits,” GE has barely begun to exploit its deposit-taking powers. To Jack Welch’s heirs, their $5 billion is just table stakes. The plan is to obtain full banking licenses in all countries where GE Consumer operates. A follower of retail banking orthodoxy, Nissen views deposits as the centerpiece of a consumer financial relationship, the door-opener to sales of the higher-margin auto, personal loan and credit card services that GE considers its strengths.

“We have no intention of taking deposits in the U.S. or U.K.” says Nissen. (GE does own limited-purpose banks to manage some of its credit businesses in those countries.) But in other parts of the world, “we’re always looking for more-robust business models, and consumer banking and deposit-taking are more robust” than stand-alone consumer lending. He adds: “We’re focused on ‘Where can we win? Where can we bring value and maintain a good, strong return on equity?’ We very much pick our fights.”

One big fight Nissen has picked involves selling GE Consumer’s wares directly to consumers. This isn’t the traditional forte of a conglomerate that has long specialized in manufacturing and in commercial and wholesale product distribution.

When it comes to consumer credit, GE has done well as a behind-the-scenes servicer to department stores or durable-goods dealers, applying systematic risk management and underwriting processes. Automobile, credit card and mortgage lending are, at bottom, “factory-type businesses” that depend on scale and efficiency, and “no one is better at running a factory than GE,” asserts Charles Wendel, president of Financial Institutions Consulting in New York.

Nissen’s challenge is to marry GE Consumer’s “manufacturing” -- the company develops and coordinates distribution of all products centrally -- with retailing. “Marketing is a go-out-and-sell thing,” Nissen says. “We’ve traditionally been relatively weak in the consumer marketing area.”

The GE Money strategy is meant to change that. Since June, GE has introduced the brand name in Australia, France and Germany -- always in English -- in hopes of projecting a friendlier image than do traditional banks. “We were looking for a name that could be easily embraced and didn’t have to be translated into a lot of different languages,” explains George Awad, GE Consumer’s senior vice president for marketing.

Wherever GE owns a bank -- such as Germany, where it bought $2.3 billion-in-assets Allbank in 2003 -- the signs are being changed to GE Money Bank. Elsewhere, in loan stores and kiosks, such as those in Seoul subway stations or Brazilian Wal-Mart Stores, they’ll simply say GE Money. Individual products will also be rebranded: Look for GE Money credit cards, personal loans and mortgages to replace the GE Consumer Finance branding in the U.S. next year. The entire effort should be completed globally sometime in 2006.

Awad says the idea is to differentiate GE from competitors. “Banks are perceived as unfriendly and full of red tape, and consumer finance companies are viewed as charging too much,” he says. “We want to be somewhere in the middle -- flexible, quick and simple. We want people to think about banking with us the way they feel when they walk into a [retail] store.”

GE had better gird for a battle royal. Citigroup is ubiquitous around the globe. Other multinationals, such as HSBC and Standard Chartered, have a long history of serving consumers throughout Asia -- and competing against entrenched local players. Anticipating a bonanza in Eastern Europe, Germany’s Commerzbank, France’s Société Générale and Italy’s UniCredito have gobbled up banks in the former Communist nations. So have Vienna-based regionals Erste Bank and Raiffeisen Zentralbank Österreich.

Sabre Capital’s Talwar says that GE also “can expect a lot of resistance” from indigenous banks that already have extensive branch networks. Yet Talwar concedes that GE Consumer has an edge with its combination of brand identity, global product distribution and loan underwriting skills.

The company relies on a rigorous risk management apparatus to compensate for emerging markets’ lack of loan-scoring and other standard Western credit evaluation tools. GE Consumer’s chief risk officer, Ray Duggins, asserts that GE excels in “analytic rigor,” even as it delegates credit decisions to managers in the various regions. “We want to be nimble and adjust quickly to changes,” says Duggins, who has done risk management for American Express Co., Bank of New York Co. and Mellon Financial Corp. He adds that GE prides itself on being so adaptable to local requirements that its collection agents will “go door-to-door in oxcarts” if that’s what it takes to reach delinquent borrowers.

Knock on wood that GE Consumer’s credit record in emerging markets is better than in the developed world: International loan delinquencies are running about 4 percent of outstandings, versus 6 percent in the more credit-card-oriented U.S.; the blended global rate is 5.5 percent. All those numbers are well above the 1.9 percent of consumer loans that are at least 30 days past due in the U.S., according to the American Bankers Association. (The U.S. credit card delinquency average is 4.7 percent.)

GE Consumer’s mountain of information on credit card holders isn’t just for risk management; it also makes a perfect platform for cross-selling, the key to raising the products-per-customer figure above the lending business’s paltry 1.4. Specialized lenders -- notably U.S.-based credit card banks Capital One Financial Corp. and MBNA Corp. -- are masters at scientific direct marketing, but their cross-selling is limited by their lack of branch networks, foreclosing the possibility of face-to-face contact with clients.

Nissen asserts that GE Consumer will not only have a physical presence to draw in prospects but that it is also honing automated marketing techniques to push product. The company has, for example, been granting instant approvals on co-branded Honda Motor Co. credit cards to motorcycle buyers applying for loans at the point of sale. Nissen also sees promise in remote cross-selling, such as pitching personal loans to card customers who call to check on their balances.

The CEO places heavy emphasis on product development: GE Consumer makes about 100 product introductions annually. (One product introduced in 40 countries counts as 40 introductions.) Often these offerings are local adaptations of those products that succeeded in another market. In Australia, GE converted retailer Coles Meyer’s private label credit card into a Visa with cash-access capability. The company is introducing mortgages in some markets and in others has been seeking to tack personal loans onto auto loans.

Marketing chief Awad calculates that GE Consumer earns $25 in annual profit per customer. “Even $10 more per consumer would be an additional $1 billion for the bottom line,” he notes. Long term, that’s a worthy goal -- and no doubt an attainable one. But GE can’t get ahead of itself: It will have to fight for each customer, one product and one basis point at a time, on both a local and a global scale, against some tough competitors who won’t be sitting still.