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CIT Reports Loss on Debt Charges; Vendor Group Posts Double Digit Growth

April 24, 2012, 08:15 AM
Filed Under: Corporate Earnings

CIT Group Inc. reported a net loss for the quarter ended March 31, 2012 of $447 million. This net loss compares to net income of $66 million for the first quarter of 2011 and includes debt refinancing charges of $620 million related to the prepayment of $6.5 billion of high cost debt, while the year-ago period included debt refinancing charges of $46 million. Pre-tax income excluding debt refinancing charges was $214 million, up from $178 million in the year ago quarter.
Total assets at March 31, 2012 were $44.1 billion, down $1.1 billion from December 31, 2011, and $6.9 billion from March 31, 2011. Commercial financing and leasing assets increased from prior periods and the company reduced lower yielding assets through the sale of student loans and non-accrual commercial loans.
Total loans of $20.5 billion declined from the prior year but increased sequentially as commercial loan growth exceeded consumer loan run-off. Operating lease equipment increased $0.9 billion from a year ago to $11.9 billion largely reflecting aircraft deliveries, but fell slightly sequentially.
Funded new business volume of $2.0 billion increased 51% from the prior-year quarter, while committed new business volume of $2.5 billion increased 46%. Corporate Finance and Vendor Finance each reported double-digit percentage increases in both funded and committed volume from the prior year.

Vendor Finance Highlights:

  • Financing and leasing assets, while down from a year ago, rose $0.1 billion during the quarter to $5.1 billion. Funded new business volume was $673 million, a 17% increase from the prior-year quarter but down from the prior quarter, reflecting seasonal trends. Excluding the impact of platforms sold in 2011, volume increased 28% from the prior-year quarter.
  • Portfolio credit quality remained stable from the prior quarter and improved significantly from the prior-year quarter with declines in non-accrual loans and delinquencies. Net charge-offs of $6 million improved from $18 million in the prior-year first quarter, but rose from $2 million in the fourth quarter reflecting lower recoveries. 

Corporate Finance Highlights:

  • Financing and leasing assets increased nearly $300 million from year-end to $7.4 billion. New committed loan volume rose 93% from the prior-year first quarter to $1.5 billion, while new funded volume increased 139% to $1.0 billion. Current period volumes, both funded and committed, were above those of the prior quarter.

Net Charge-offs and Provisions:

Net charge-offs were $22 million, or 0.42% as a percentage of average finance receivables, down from $140 million (2.32%) in the year-ago quarter and $24 million (0.45%) in the fourth quarter. The improvement from the prior-year quarter was driven primarily by Corporate Finance. Net charge-offs do not reflect recoveries of loans charged off pre-emergence and loans classified as held for sale. Recoveries on these loans are recorded in other income and totaled $10 million, $33 million and $30 million for the current quarter, the prior-year quarter, and the prior quarter, respectively.

The first quarter provision for credit losses was $43 million, compared to $122 million in the year-ago quarter and $16 million in the fourth quarter. The decrease from the prior-year quarter reflects improved portfolio credit quality, including a reduction in specific reserves, and the continued reduction in non-accrual loans. The sequential quarter increase in the provision is primarily due to the establishment of reserves for commercial asset growth.

"We made further progress this quarter positioning CIT for profitability and growth," said John A. Thain, Chairman and Chief Executive Officer. "We grew commercial assets and significantly advanced the transformation of our funding profile as we successfully issued unsecured debt and redeemed legacy high cost debt, which caused the majority of our debt to become unsecured. CIT Bank online deposits surpassed $1.1 billion and we expanded our online deposit product offerings. We will continue to focus on improving our core profitability as we work to meet the financing needs of our small business and middle market clients."

To read the full press release and financial report, click here:

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