"If trends continue - and there is no reason to think they won't - in Europe, we will come under some pressure. We think it's manageable," the chief executive of GE Capital said. "We thought Europe was going to be this bad, and we weren't disappointed."

GE Capital's business in Europe is largely focused on the United Kingdom, France and Germany, which have been relatively healthier financially than southern European countries.

He noted that 85 percent of the company's loans in Europe are secured by property, such as trucks, machine tools or aircraft, which can be resold in case the borrower defaults on the loan.

"We repossess," Neal said. "It's not like we're writing off a bond."

DIVIDEND PLANS

GE Capital, which earlier this month won the approval of its regulator, the Federal Reserve, to resume paying a share of its profit back to its parent company, could return some $20 billion to GE over the next few years, Neal noted.

His boss, GE's CEO Jeff Immelt, told investors last week that the company intends to use much of the money GE Capital pays back to GE, the largest U.S. conglomerate, to buy back its shares.

GE's stock rose 9 cents at $19.13 in late afternoon trading on the New York Stock Exchange.

Neal also elaborated on the company's decision to further cut back its reliance on commercial paper to about $25 billion from $43 billion at the end of the first quarter and $105 billion in early 2008 before the financial crisis, saying the move was intended to protect it from potential future problems in that market.

"I don't think there's any issue with it right now," Neal said. "99.9 percent of days, there's no issue with that. It's that you have to build your strategy around that one bad day that's out there. We've learned our lesson."

The commercial paper market, where companies sell very short-term debt, locked up briefly in late 2008 during the credit crisis, threatening GE's financial security.

(Reporting By Scott Malone; Editing by Gerald E. McCormick and Jan Paschal)

By Scott Malone