Not everyone is moving with General Electric (GE) to its new corporate home in Boston.
Specifically, the manufacturing giant's costly federal oversight team is set to be eliminated now that GE has obtained permission to scrap its onerous Systemically Important Financial Institution, or SIFI, designation, roughly four months soon than expected.
Nick Heymann, an analyst with William Blair, said in a Thursday phone interview with Real Money that GE could be saving as much as $750 million to $800 million annually -- or more than 4% of GE's average annual selling, general and administrative expenses -- by eliminating its roughly 1,500-strong federal oversight team. William Blair estimates the savings could add three cents to four cents to GE's earnings per share for the second half of the year.
(GE's stock is an investment held in Jim Cramer's Action Alerts PLUS charitable trust.)
"They are no longer under parental supervision, and they have their own license," Heymann said relief from GE's SIFI designation, which the U.S. Treasury Department's Financial Stability Oversight Council permitted GE to begin unwinding last week.
"The surprise was not the lifting of the de-designation, which came perhaps a bit earlier than expected, but rather the benefit from lower cost to administer and be in compliance with Federal Reserve regulatory oversight," Heymann added in a Thursday email.
GE long has bristled under regulatory controls associated with the SIFI label, which has set limits on debt incurrence and financial reserve requirements, and lifting the designation has been a central goal of CEO Jeff Immelt's plan to return GE to its industrial roots.
The SIFI controls were established as part of the post-recession Dodd-Frank regulatory reform to rein in financial corporations deemed "too big too fail." Because of GE's lending arm, GE Capital -- which pressured GE shares throughout the crisis and subsequent recovery because of GE Capital assets tied to the collapsing U.S. housing market -- General Electric has been taxed with financial oversight not placed on industrial rivals such as United Technologies (UTX) and Honeywell (HON).
GE so far has inked deals to divest more than 90% of the $200 billion in GE Capital assets Immelt targeted for divestiture and expects to hit its mark by the end of the year.
"The removal of that burden will be half-realized in the second half of this year, and half in the first of half of next year," Heymann said, noting that removal of the SIFI designation also will create roughly $20 billion in financial flexibility as balance sheet leverage restraints will be relaxed.