Stock Alert for CIT Group Inc. (NYSE: CIT)
  • Stock Alert for CIT Group Inc. (CIT)
  • Stock Alert for CIT Group Inc. (CIT)
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    Stock Alert for CIT Group Inc. ($CIT)

    CIT Group Inc. (NYSE: $CIT)

    CIT Group Inc. (CIT) is a bank holding company, which provides commercial financing and leasing products, and management advisory services to clients in a variety of industries. CIT operates primarily in North America, with locations in Europe, Latin America, Australia and the Asia-Pacific region. CIT bank is its primary bank subsidiary. The Company provides financing and leasing capital to its clients and their customers in over 30 industries and 50 countries. It serves clients in a variety of industries, including transportation, aerospace and rail, manufacturing, wholesaling, retailing, healthcare, communications, media and entertainment, and various service-related industries. The Company operates through five segments: Corporate Finance, Transportation Finance, Trade Finance, Vendor Finance and Consumer Finance. In November 2009, the Company filed for bankruptcy. In December 2009, CIT emerged from bankruptcy.

    The company was founded in 1908 and is headquartered in New York, New York.

    Share Statistics (30-Apr-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol CIT Revenue, $Mn 8.61B 1.38B 78.7% n/a 931.3M n/a
    Current price $40.94 Gross marg. 45.1% 44.0% 2.4% n/a -62.1% n/a
    52wk Range: $42.94-24.83 Oper. margin 14.0% -17.6% 225.7% n/a 328.3% n/a
    Avg Vol (3m): 2,175,900 Net margin -10.2% -10.3% 200.9% n/a 341.2% n/a
    Market Cap. 8.19B
    Dil. Shares Outst. 200.1M EPS, $ -0.58 -2.74 572.4% n/a 1.16 n/a

    Source: Reuters.com, SEC Filings.

    Financial Summary

    Total assets declined nearly $2 billion from year-end to $58.1 billion driven by a reduction in finance and leasing assets as cash collections and asset sales were partially offset by a modest level of loan and lease originations.

    Assets held for sale increased by $1 billion, largely reflecting CIT’s decision to sell certain non-strategic Vendor Finance assets outside the U.S. and student lending receivables.

    Preliminary Tier 1 and Total Capital ratios improved to 15.5% and 15.8% from 14.2% at December 31, 2009, as risk-weighted assets declined and common equity increased.

    Net income included pre-tax net accretion and lower depreciation of $421 million resulting from fresh start accounting (“FSA”) balance sheet adjustments recorded in December 2009.

    Net finance revenue as a percentage of average earning assets was 4.09%, which includes a 3.55% benefit from the net accretion and lower depreciation.

    Non-spread revenue benefited from gains on loan and asset sales, which were partially offset by losses on unhedged foreign currency positions.

    Operating expenses declined from fourth quarter’s core operating expense level. The current quarter includes $12 million for restructuring as CIT continues to take actions to better align costs with CIT’s smaller balance sheet.

    Credit

    Overall, credit performance was within expectations. Non-accrual loans, after FSA, increased from year-end levels reflecting some deterioration in Vendor Finance and Transportation Finance. Net charge-offs were modest at $42 million, as loans had been written down at year-end to estimated fair values. Excluding FSA, charge-offs were $233 million, 2.40% of receivables, significantly lower than recent quarters.

    The provision for loan losses reflects the re-establishment of certain reserves eliminated in FSA and some deterioration on loans discounted in FSA. The provision includes $37 million for reserves on new originations (including Trade Finance – $27 million) and $74 million for re-establishing reserves on performing loans. Provisions also were made for reserves of $33 million on impaired loans and $42 million was provided for charge-offs in excess of existing discounts.

    At March 31, 2010, the $181 million reserve for credit losses reflects the provisioning above less charge-offs and also includes $40 million of reserves for securitized loans brought on-balance sheet in conjunction with a new accounting pronouncement (no provision or income statement impact).

    Operating Highlights

    New loan and lease volumes, excluding factoring, declined modestly from the prior quarter to $0.9 billion. Vendor Finance programs began to expand with volume totaling $0.5 billion, and CIT took delivery of 4 airplanes valued at $0.2 billion.

    Corporate Finance credit metrics began to stabilize. Net charge-offs, before the benefit of non-accretable discounts, were 3.55% of finance receivables, improving from 5.96% in the prior quarter. Corporate Finance selectively resumed originating loans in CIT Bank.

    Vendor Finance signed new vendor relationships and successfully returned to the capital markets by executing term and conduit asset-backed financings.

    Transportation Finance aerospace fleet was fully utilized, as CIT placed all new aircraft deliveries and re-leased all aircraft upon their lease expiration. Rail fleet utilization was essentially unchanged at 90%.

    Trade Finance factoring volume declined from the fourth quarter, reflecting seasonality and some residual impact of prior year client terminations. CIT resumed factoring for certain clients that had previously withheld business.

    Liquidity and Financing

    Total cash increased to $10.0 billion, and consisted of $5.5 billion of cash available to repay debt at the bank holding company, $1.5 billion at CIT Bank, $1.5 billion at operating subsidiaries and $1.5 billion in other restricted cash.

    During the quarter, the Company prepaid $750 million of high cost first lien debt and $731 million of secured rail financing using available cash resources. CIT completed a $667 million private placement equipment finance securitization (principally vendor finance assets), and re-established a $1.0 billion vendor finance conduit facility. Weighted average funding costs for these two financings approximates 3.0%.

    As a result of improved liquidity, cash flows from CITs portfolio and the success of financing initiatives, the Company intends to make an additional $1.5 billion prepayment of first lien debt to lower its cost of capital and increase finance margins.

    CIT ended the quarter with very strong capital and liquidity. The total capital ratio was 47.7% with total leverage at 17.7%. Total deposits were $4.9 billion, down from year-end.

    Financial Strength (30-Apr-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.00 4.65 0.75
    Current Ratio (MRQ) 0.00 8.50 0.90
    Long-Term Debt to Equity (MRQ) 486.58 99.14 106.13 143.72
    Total Debt to Equity (MRQ) 487.23 347.78 291.61 206.21

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Buy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast amongst five polled investment analysts. Against the CIT Group Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 1 2 0 0 0
    4 weeks ago 2 1 2 0 0 0
    2 months ago 2 0 1 0 0 0
    3 months ago 1 0 1 0 0 0
    Last year 1 2 7 0 0 0

    The four analysts offering 12-month price targets for CIT have a median target of 44.50, with a high estimate of 46.00 and a low estimate of 43.25. The median estimate represents a 9.15% increase from the last price of 40.77.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Year Ending Dec-10 1 1,368.50 1,368.50 1,368.50 1,956.86
    EARNINGS (per share)
    Quarter Ending Jun-10 3 0.10 0.19 -0.02 -0.24
    Quarter Ending Sep-10 4 0.43 0.80 0.10 -0.13
    Year Ending Dec-10 1 0.78 0.78 0.78 -0.43
    Year Ending Dec-11 3 3.58 4.03 3.00
    LT Growth Rate (%) 1 12.50 12.50 12.50 11.75

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CIT

    Investment Highlights

    CIT recently announced that it sold its 50% interest in the CIT Business Credit Canada Inc. (CIT Business Credit) joint venture to CIBC (CM: TSX: NYSE). The new business will be renamed CIBC Asset-Based Lending Inc. Terms were not disclosed. CIT Business Credit was established in 2000 as a joint venture between CIBC and CIT Canada, a wholly owned subsidiary of CIT Group Inc. CIT Business Credit combined CIBC’s full range of commercial banking solutions with CIT’s asset-based lending capability customized for the Canadian marketplace.

    CIT, the large commercial lender that became a casualty of the credit crisis, returned to profit on Tuesday following its emergence from bankruptcy protection last year and said it planned to pay down $1.5bn in high-cost debt. The bank, a big lender to small and medium-sized businesses, ran into trouble when it expanded into residential mortgage lending during the housing bubble. It sold that division before filing for Chapter 11 bankruptcy protection last November.

    At the height of its financial troubles last year, CIT lost many of its small business borrowers, but the bank has since regained some of those clients. The recession-hit manufacturing sector – to which CIT is a big lender – is continuing to recover, according to two reports released on Tuesday. Manufacturing activity in the Midwest increased by 1.3% last month after contracting marginally in February, the Chicago Federal Reserve said. Meanwhile, the Institute for Supply Management said manufacturing revenue would grow 6.3% this year.

    CIT said its net profit was $97m, or 49 cents a share, in the period. Analysts had been expecting a loss of 25 cents a share. The results, which benefited from a change in accounting rules, are not directly comparable with prior quarters because of changes to CIT’s financial structure made during bankruptcy proceedings. The company repaid $750m in high-cost debt in the period and said it planned to pay down an additional $1.5bn. Total cash on the balance sheet increased to $10bn, up from $9.8bn at year-end.

    Source: http://www.cit.com/index.htm

    Technical Analysis

    Source: http://stockcharts.com

    CIT is trading above its 50-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

    CIT has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, CIT is trading near its upper Bollinger Band. This suggests that the stock price is high relative to its recent price action.

    The MACD for CIT currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Apr30-2010 symbol Share, $ $ Mn 2009 2010 2009 2010
    GATX Corp. GMT 33.77 1.56B 22.33 n/a 1.35 n/a
    SunTrust Banks Inc. STI 29.61 14.80B n/a n/a 1.78 n/a
    TCF Financial Corp. TCB 18.71 2.66B 29.90 n/a 2.27 n/a
    Regional Banks Median 6.34B 17.41 n/a 1.80 n/a
    CIT Group Inc. CIT 40.92 8.19B 27.05 n/a 2.05 n/a

    Source: Thomson Financial

    http://www.thomson.com/financial/financial.jsp

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases 13,200 1
    Sales n/a 0
    Net Shares Purchased (Sold) 13,200 1
    Total Insider Shares Held 10.69M n/a
    % Net Shares Purchased (Sold) 0.1% n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) 151,468,000
    % Change in Institutional Shares Held 49.7%

    http://www.thomson.com/financial/financial.jsp

    Source: Yahoo Finance

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