Stock Alert for CIT Group Inc. ($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. (CIT) is a bank holding company providing commercial financing and leasing products, and management advisory services to clients in a variety of industries. 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. It has 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. In July 2010, the Company sold its Australian and New Zealand Vendor Finance business to Bank of Queensland Ltd.

    CIT was founded in 1908 and is headquartered in New York, New York.

    Share Statistics (21-July-10) FY

    2008

    FY

    2009

    %

    Chg

    Q1

    2009

    Q1

    2010

    %

    Chg

    Symbol CIT Revenue, $Mn 6,098.5 3,984.8 -34.7% 1,302.8 1,599.4 22.8%
    Current price $36.83 Gross marg. 48.5% 33.3% -31.3% 8.5% 36.0% 323.5%
    52wk Range: 24.83-42.94 Oper. margin 1.3% 8.7%
    Avg Vol (3m): 2,661,010 Net margin -45.9% 4.6% -110.0% -26.3% 6.1% -123.2%
    Market Cap. 7.37B
    Shares Outstanding 200.04M EPS, $ -1.29 -5.75 345.7% -1.24 0.63 -150.8%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    CIT reported net income for the  quarter ended March 31, 2010, of $97 million, $0.49 per share.

    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 United States 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 benefitted 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 its 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 four 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.

    The Company is expected to announce its Q2 2010 results on Tuesday, July 27, 2010

    Source: CIT Group Inc.

    Financial Strength (21-July-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.00 4.61 0.77
    Current Ratio (MRQ) 0.00 8.36 0.93
    LT Debt to Equity (MRQ) 485.11 97.26 102.92 117.77
    Total Debt to Equity (MRQ) 485.76 314.61 270.14 181.80
    Interest Coverage (TTM) 0.00 -7.38 42.65

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 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 1 2 0 0 0
    3 months ago 2 1 2 0 0 0
    Last year 0 0 8 0 2 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 21.62% increase from the last price of 36.59.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Sep-10 1 25.10 25.10 25.10 474.00
    Quarter Ending Dec-10 1 3.00 3.00 3.00 462.00
    Year Ending Dec-10 1 287.70 287.70 287.70 1,735.20
    Year Ending Dec-11 1 51.30 51.30 51.30
    EARNINGS (per share)
    Quarter Ending Sep-10 4 0.43 0.80 0.11 -0.30
    Quarter Ending Dec-10 4 0.42 0.94 -0.09 -0.54
    Year Ending Dec-10 4 1.67 2.86 0.79 -1.56
    Year Ending Dec-11 4 2.86 4.48 0.24
    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 provides financing and leasing capital to its clients and their customers in more than 30 industries and 50 countries. Its businesses focus is primarily on commercial clients with a particular emphasis on small business and middle-market companies. The Company’s serve clients in a variety of industries including transportation, particularly aerospace and rail, manufacturing, retailing, healthcare, communications, media and entertainment, energy, and various service-related industries.  CIT stated that it funded $7 billion of new business volume during 2009.

    The Company’s products include asset-based loans, secured lines of credit, leases (operating, finance and leveraged), vendor finance programs, import and export financing, debtor-in-possession/turnaround financing, acquisition and expansion financing, letters of credit / trade acceptances structuring and small business loans. Its services include financial risk management, asset management and servicing, merger and acquisition advisory services, debt restructuring, credit protection, account receivables collection, debt underwriting and syndication, capital markets and insurance services.

    The Company meets customer financing needs through five business segments: Corporate Finance, Transportation Finance, Trade Finance, Vendor Finance and Consumer Finance.

    Recent News

    Earlier this month, the Company said it made significant progress on its key corporate initiatives to increase its funding flexibility, streamline assets, and reduce financing costs. CIT reported that it has repaid nearly half of its first lien debt, closed approximately $2.5 billion in new funding facilities and sold approximately $2.8 billion in assets so far this year.

    Also earlier this month, CIT announced that it appointed a new chief financial officer and corporate controller, completing the Company’s leadership team.  CIT named Scott Parker, the former finance chief of a Cerberus Capital Management affiliate, as its CFO, and Carol Hayles, the former deputy controller of Citigroup, as corporate controller.

    Last week, the Company announced the appointment of Lisa D. Zonino as global head of human resources effective immediately.  She will report directly to chairman and CEO John Thain and will be responsible for the Company’s human capital strategy including the development and implementation of CIT’s global employee programs, policies and benefits initiatives.

    Source: Latest 10-K; www.cit.com; reuters.com

    Technical Analysis

    Source: http://stockcharts.com

    Monday, CIT closed above its 13 day moving average. This is generally considered to be an indication of a bullish trend.

    CIT is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the 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 9day 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
    July21-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    GATX Corp. GMT 28.14 1,300 17.48 14.73 1.12 1.09
    TCF Financial Corp. TCB 15.24 2,170 13.49 10.96 1.78 1.76
    SunTrust Banks Inc. STI 22.42 11,210 n/a 24.91 1.44 1.38
    Regional Banks Median 15.05 n/a 1.83 n/a
    CIT Group Inc. CIT 36.83 7,370 29.46 12.88 25.59 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHSE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases 14,700 2
    Sales n/a 0
    Net Shares Purchased (Sold) 14,700 2
    Total Insider Shares Held 84.02K n/a
    % Net Shares Purchased (Sold) 21.1% n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) 14,230,000
    % Change in Institutional Shares Held 7.63%

    Source: Yahoo Finance

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