Standard & Poor's Ratings Services said that its ratings on General Electric Co. (GE; AAA/Negative/A-1+) and General Electric Capital Corp. (GECC; AAA/Negative/A-1+) were not immediately affected by the company's fourth-quarter earnings. Industrial cash from operating activities of $16.7 billion and cash balances at the industrial parent of $12 billion at the end of 2008 were both at the higher end of our expectations. Still, for GECC there are signs that 2009 will be even more difficult than we assumed when we revised the outlook on both companies to negative on Dec. 18, 2008. GECC would have reported a significant net loss for the quarter, were it not for a substantial tax credit. This disappointing result reflects higher credit costs across a number of its businesses, as well as write-downs and impairment charges. Management has increased its guidance for full-year 2009 credit losses to $10 billion, compared with $9 billion previously, and has also indicated that there is presently a $4 billion unrealized loss in its real estate portfolio, compared with the $2 billion unrealized gain previously disclosed. With intensifying pressures from the credit cycle, we believe it will be increasingly challenging for GECC to realize management's current guidance of a $5 billion net income in 2009."
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