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CIT Group Q4 2011 Net Income Slides 59%; Full Year Net Income Drops 95%

January 31, 2012, 07:45 AM
Filed Under: Corporate Earnings

CIT Group, Inc. reported net income of $34 million for the quarter, a decline of 59% compared to net income of $83 million for the year-ago quarter. For the year ended December 31, 2011, the company reported net income of $28 million, a decline of 95% compared to net income of $526 million for the year ended December 31, 2010.

The declines reflect reduced benefits from fresh start accounting (“FSA”) and increased costs related to debt redemptions.
Pre-tax income excluding net FSA accretion and the costs associated with accelerated debt repayment was $140 million and $302 million for the 2011 fourth quarter and full year, respectively, and improved from pre-tax losses of $160 million and $575 million for the respective 2010 periods.

Total financing and leasing assets declined $3 billion to $34 billion, with $2 billion of the decline coming from our liquidating government-guaranteed student lending portfolio. Commercial assets declined $0.8 billion, to $27.9 billion  is a 73% increase in commercial new business volume was offset by portfolio collections and the sale of $2.4 billion of low-yielding/non-core assets.

Transportation Finance - Financing and leasing assets increased $1 billion to $13.3 billion. New business volume was $1.2 billion, reflecting the addition of 15 aircraft and over 1,600 railcars, and $0.2 billion of loans originated by CIT Bank. All aircraft to be delivered during the next 12 months have lease commitments.

Vendor Finance - Financing and leasing assets rose $0.1 billion to $5.0 billion. The increase was due primarily to higher new business volumes and lower asset sales. Funded new business volume was $717 million, an 11% sequential increase and a 17% increase from the prior-year quarter. Excluding the impact of platforms sales, the volume increased 28% from the prior-year quarter. The U.S. funded volume for the current quarter was essentially all originated in CIT Bank.

Trade Finance -Factoring volume was $6.9 billion, up slightly from the third quarter and down from $7.0 billion in the 2010 fourth quarter, due to the wind-down of our German factoring operation. Core factoring volume increased approximately 2% from the 2010 fourth quarter. Non-accrual balances decreased from the prior quarter, primarily due to paydowns.
Portfolio quality improved. Net charge-offs of $265 million, declined from $465 million in 2010 with the majority of the improvement in Vendor Finance. For the Commercial segments, net charge-offs as a percentage of finance receivables improved from 2.04% in 2010 to 1.68% in 2011. The provision for credit losses was $270 million, down from $820 million in 2010. In addition to the improved credit metrics, the trend reflects higher provisions in 2010 in order to rebuild an allowance for credit losses following the Company’s adoption of fresh start accounting in 2009.

“We made significant progress this past year advancing our goals and priorities,” said John A. Thain, Chairman and Chief Executive Officer. “Our new business activity increased and we lowered our cost of funds through the reduction of high cost debt and the growth of CIT Bank and other funding sources. We will look to capitalize on this momentum in 2012 as our market leading commercial franchises are well positioned for growth. Our focus will remain on providing capital to small businesses and middle market companies, while delivering attractive and sustainable returns and increasing long-term value for all our stakeholders.”

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