GE Stock Just Became a Better Buy

General Electric Company (NYSE:GE) is getting out of the banking business. Even though GE has been headed in this direction for some time, the decision still feels a little shocking. After all, it’s the end of an era. And considering the cash windfall that will come with the deal, it’s also very good news for anyone holding GE stock. The financial crisis makes it hard to remember what a superstar GE Capital used to be. Indeed, long before the crisis — back in the Jack Welch days when GE was the biggest, most admired company on the planet, and GE stock was among the most desired — GE Capital was known as the company’s secret weapon. It was the main engine of profits and allowed General Electric to beat Wall Street estimates like clockwork.

GE Capital went from secret weapon to big, honking albatross, and it clearly no longer has a place in an industrial company that wants to focus on things like jet engines, power turbines and medical devices. The finance unit is much smaller since before the financial crisis, and yet it’s still the nation’s seventh-largest bank by assets. With so many assets under its care, GE Capital was designated a “systemically important financial institution,” which means its regulatory burdens are even more strenuous in these days of especially tight federal oversight.GE Capital still accounts for about half of GE’s profits, but influential shareholders and company management have come to realize that the risk and regulatory stresses are simply not worth it.

Source: InvestorPlace

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