18.07.2007 10:00:00
|
CIT Reports Second Quarter Results
CIT Group Inc. (NYSE: CIT), today reported a diluted loss per share of
$0.70 for the 2007 quarter, versus $1.16 of earnings per share for the
2006 quarter. The net loss attributable to common shareholders was
$134.5 million for the current quarter, versus $236.0 million income for
the prior year quarter.
The net loss included noteworthy items related to executing active
portfolio management and other operating initiatives as follows:
a pretax charge of $765 million (net of pre-existing credit reserves
of $228 million, but including unamortized origination costs) relating
to a fair value adjustment on $10.6 billion of receivables transferred
to assets held for sale in connection with the planned exit of our
home lending business ($495.3 million after tax, $2.58 per share loss);
a pretax gain of $228.7 million, from the sale of our $2.6 billion
U.S. construction portfolio ($136.9 million after tax, $0.71 per share
gain); and
a pretax charge of $34.9 million for employee termination benefits in
conjunction with non-home lending work force reductions ($21.1 million
after tax, $0.11 per share loss).
"Although we made progress executing on our business strategy, it was a
challenging quarter where we had to make some tough decisions," said
Jeffrey M. Peek, Chairman and Chief Executive Officer of CIT. "All
CIT's businesses must meet rigorous return standards. As a result, we
decided to exit home lending and construction enabling us to redeploy
resources to higher returning businesses. While we believe exiting home
lending is the right decision, it significantly impacted our current
results.” "In terms of strategic progress, we advanced
our business through active portfolio management and asset manager
initiatives. We acquired Citigroup's $2 billion U.S. Business Technology
Finance unit and Edgeview Partners, further building our core franchise.
The completion of our CLO and a healthcare REIT reflect solid progress
in building an asset manager model. We have also decided to pursue a
public offering option for a portion of our Aerospace portfolio. We are
confident that our actions in this difficult quarter will deliver
long-term shareholder value.”
Excluding the noteworthy items described above, quarterly earnings
improved over the prior year on higher finance revenue, due to higher
earning assets, a lower effective tax rate and strong year over year
volume growth. The current quarter was also negatively impacted by a
$22.5 million charge ($0.07 EPS) in non-spread revenue relating to the
disposition of a waste-to-energy plant previously acquired in a loan
workout and $14.6 million of home lending operating losses ($0.04 EPS).
Consolidated Financial Highlights:
Net Finance Revenue
Net finance revenue was up 17% from last year and 9% from last quarter
on higher assets and spread expansion from last quarter.
Net finance revenue as a percentage of average earning assets was
2.89%, versus 2.83% last quarter and 3.16% last year. The decline from
last year is primarily due to competitive pricing, capital
initiatives, and lower yield-related fees, while benefits from
refinancing debt earlier this year contributed to the sequential
increase.
Operating lease net revenue, driven primarily by aerospace and rail
equipment rentals, was 7.24% of average operating leases, up from
6.48% last year and 6.82% last quarter.
Other Revenue
Other revenue increased over last year and last quarter, driven by the
previously-mentioned construction sale gain. Excluding this item,
non-spread revenue declined from both periods, as higher syndication
fees and gains from receivable sales were offset by lower fees and
other income during the quarter. The year over year decline in fee
income primarily reflected a Transportation Finance commercial
aircraft insurance recovery in the prior year, while the sequential
decrease reflected lower joint venture profits and reduced structuring
fees.
Excluding the construction sale, during the quarter we sold or
syndicated receivables of $3.1 billion (28% of origination volume),
compared to $2.2 billion (22%) last year.
Credit Quality
Net charge-offs as a percentage of average finance receivables were up
from last quarter and last year, due to home lending and lower
commercial recoveries. Excluding home lending, charge-offs were 0.34%
and 0.24% for the current and prior year quarters.
Second quarter home lending net charge-offs were $38.4 million (1.37%
of average finance receivables), up from $30.8 million (1.20%) and
$18.8 million (0.84%) last quarter and last year.
Total 60+ day owned delinquencies as a percentage of finance
receivables were up from last quarter and a year ago, primarily due to
home lending. Excluding both home lending and student lending,
delinquencies were 1.16%, versus 1.15% last quarter and 1.47% last
year.
Non-performing assets (non-accrual loans plus repossessed assets) were
up from last quarter and last year on higher home lending trends.
Excluding both home lending and student lending, non-performing assets
were 0.83%, unchanged from last quarter and down from 1.31% last year.
The provision for credit losses increased $25 million over last year
reflecting higher net charge-offs and additional reserves, both of
which were driven by home lending.
The reserve for credit losses declined $196 million from last quarter,
reflecting the transfer of $210 million in home lending reserves into
the carrying value of assets held for sale. Excluding specific
reserves and U.S. Government guaranteed student loans, the reserve was
1.22% of finance receivables, flat with last quarter (excluding home
lending).
Expenses
For the quarter, salaries and general operating expenses were up from
a year ago and last quarter. Sequentially, lower employee costs were
offset by increases related to the acquisition of Citigroup's U.S.
Business Technology Finance unit, along with higher legal and
settlement costs. During the quarter, we entered into a Cooperation
Agreement and Assurance of Discontinuance with the New York Attorney
General’s Office pursuant to which we made
a $3 million contribution to a national fund for educating students
and their families about the financial aid process. The increase from
last year primarily reflects higher employee costs on increased
headcount, as well as incremental costs associated with acquisitions.
The provision for severance and real estate exit activities totaled
$35 million for the quarter for cost saving actions across the
Company, which covered the elimination of approximately 300 positions.
Employee headcount totaled approximately 7,310, down from 7,500 at
March 31, 2007.
The efficiency ratios were 40.0% for the current quarter, 46.0% last
year and 44.0% last quarter. The improvement is due to the previously
stated noteworthy items. Excluding the noteworthy items, the
efficiency ratio was 48.3%.
Volume and Assets
Origination volume for the quarter, excluding factoring, was $10.9
billion, up 9% over last year, on higher results in Corporate Finance
and Vendor Finance. Excluding home lending, origination volume
increased 15% over last year.
Managed assets were up 19% over last year, driven by the combination
of higher origination volume and acquisitions.
Significant asset transactions during the quarter included: the
purchase of approximately $2.0 billion of Citigroup’s
U.S. business technology finance unit, the sale of approximately $2.6
billion of assets of our U.S. construction portfolio, the $765 million
fair value adjustment to home lending assets, and a total of $500
million of assets sold into the newly established healthcare REIT and
the CLO.
Capitalization
The ratio of total tangible equity to managed assets at June 30, 2007
was 8.27%, compared to 8.65% last quarter and 9.59% last year.
Segment Results: Corporate Finance
Excluding the construction sale, total net revenues before provision
for credit losses increased 12%. Net finance revenue after
depreciation was up on higher assets. In addition to the gain, other
revenue was driven by strong syndication fees, which were offset by
the charge on an energy plant asset. During the quarter, we syndicated
or sold $1.5 billion of receivables, compared to $0.7 billion last
year.
As a percentage of average earning assets, net finance revenue
decreased from last year on tighter spreads reflecting market
liquidity.
Net charge-offs increased from last year on lower recoveries.
Delinquencies were up and non-performing assets were down slightly
from last quarter.
Volume was up 17% from last year and was broad-based.
Return on risk adjusted capital was 37.4%, up from 13.5% last year due
to the construction portfolio gain. Excluding the construction gain,
return on risk adjusted capital was 12.4%.
Transportation Finance
Total net revenues were up from last year on an increase in net
finance revenue after depreciation, partially offset by a decrease in
other revenue due to the previously mentioned insurance recovery last
year.
As a percentage of average earning assets, net finance revenue after
depreciation increased 51 bps from last year on stronger operating
lease margins in both aerospace and rail. Sequentially, aerospace
utilization and lease rates were stable, while rail utilization and
lease rates declined slightly.
Delinquencies and non-performing accounts were down slightly from last
quarter.
Volume for the quarter was down from last year, as the decrease in
aircraft deliveries offset an increase in rail volume.
Return on risk-adjusted capital declined to 15.4% from 18.5% last year.
Trade Finance
Total net revenues were up slightly from last year primarily due to an
increase in net finance revenue, partially offset by a decrease in
other revenue due to lower commission rates.
As a percentage of average earning assets, net finance revenue
decreased 22 bps from the prior year reflecting high market liquidity
and competitive pricing.
Net charge-offs were up 24 basis points from last year, while
delinquencies and non-performing accounts were down from last quarter.
Factored volumes were essentially flat compared to last year.
Return on risk adjusted capital declined to 16.5% from 18.5% last year.
Vendor Finance
Total net revenues were up modestly from last year, as growth in net
finance revenues on higher asset balances was offset by lower other
revenue, reflecting lower joint venture earnings and reduced end of
lease revenue in international businesses.
As a percentage of average earning assets, net finance revenue after
depreciation was down from last year, primarily due to thinner spreads
in recent acquisitions.
Credit metrics remained strong as net charge-offs of 0.59% for the
quarter were down from last year; delinquencies improved from last
quarter and non-performing accounts were flat.
Total new business volume grew 20% over last year as both
international and domestic volumes increased with the addition of
recent acquisitions. Excluding Dell in the U.S. and recent
acquisitions, volumes were up 14%.
Return on risk-adjusted capital of 15.4% was down from 19.7% and 25.8%
last quarter and last year. The decline reflects acquisition goodwill
and unrealized cost synergies.
Consumer and Small Business Lending
Total net revenues improved, driven by an increase in net finance
revenue on higher assets but partially offset by a decline in other
revenue (lower asset gains).
Net finance revenue as a percentage of average earning assets was down
26 bps from last year primarily due to lower lending spreads and
portfolio mix.
During the quarter, $1.3 billion (including $0.4 billion of home
lending) was sold, versus $1.2 billion ($0.8 billion) last year.
Net charge-offs were up from last year on higher home lending
charge-offs, which increased to 1.37% this quarter from 0.84% last
year. Excluding home lending, net charge-offs were 0.34%, up from
0.26% last year. Increases in home lending delinquencies (6.50% from
2.88%) and non-performing accounts (6.58% from 2.70%) reflect the
negative impact of economic conditions in this portfolio. Excluding
home lending, delinquencies increased to 4.78% from 3.24% last year
due to student lending (U.S. government guaranteed), while
non-performing accounts were flat. See page 14 for selected home
lending portfolio statistics.
Results include the pretax charge of $765 million relating to the fair
value adjustment on $10.6 billion of receivables transferred to assets
held for sale in connection with the planned exit of our home lending
business.
Results include a $25 million home lending credit reserve increase
that was recorded prior to the transfer of the receivables into assets
held for sale.
New business volume increases in student and small business lending
were offset by a decrease in home lending business volume.
Return on risk-adjusted capital declined to a loss from 7.7% last year
reflecting the exit related fair value adjustment, higher home lending
charge-offs and the reserve increase. Excluding the fair value
adjustment, return on risk adjusted capital was 2.4%.
Corporate and Other
Corporate and other expenses dampened return on equity by
approximately 200 bps this quarter and last year.
Earnings Guidance
Due to the weakness in home lending operations, we are providing second
half guidance of $2.60 to $2.70 per share, a $0.25 reduction from our
original estimate. We are also reaffirming our target of 15% return on
common equity.
Conference Call and Webcast:
We will discuss this quarter’s results, as
well as ongoing strategy, on a conference call and audio webcast today
at 11:00 am (EDT). Interested parties may access the conference call
live today by dialing 866-831-6272 for U.S. and Canadian callers or
617-213-8859 for international callers, and reference access code "CIT
Group” or access the audio webcast at the
following website: http://ir.cit.com. An
audio replay of the call will be available beginning shortly after the
conclusion of the call until 11:59 pm (EDT) July 25, 2007, by dialing
888-286-8010 for U.S. and Canadian callers or 617-801-6888 for
international callers with the access code 13791892, or at the following
website: http://ir.cit.com.
About CIT:
CIT Group Inc. (NYSE: CIT),
a leading commercial and consumer finance company, provides clients with
financing and leasing products and advisory services. Founded in 1908,
CIT has approximately $80 billion in managed assets and possesses the
financial resources, industry expertise and product knowledge to serve
the needs of clients across approximately 30 industries worldwide. CIT,
a Fortune 500 company and a member of the S&P 500 Index, holds leading
positions in cash flow lending, vendor financing, factoring, equipment
and transportation financing, Small Business Administration loans, and
asset-based lending. With its global headquarters in New York City, CIT
has approximately 7,300 employees in locations throughout North America,
Europe, Latin America and Asia Pacific. www.cit.com Forward-Looking Statements:
This release contains "forward-looking
statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All forward-looking statements
(including statements regarding future financial and operating results)
involve risks, uncertainties and contingencies, many of which are beyond
CIT’s control, which may cause actual
results, performance, or achievements to differ materially from
anticipated results, performance, or achievements. All statements
contained in this release that are not clearly historical in nature are
forward-looking, and the words "anticipate,” "believe,” "expect,” "estimate,” "plan,” "target,” and
similar expressions are generally intended to identify forward-looking
statements. Economic, business, funding market, competitive and/or
regulatory factors, among others, affecting CIT’s
businesses are examples of factors that could cause actual results to
differ materially from those described in the forward-looking
statements. More detailed information about these factors are described
in CIT’s filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the
year ended December 31, 2006. CIT is under no obligation to (and
expressly disclaims any such obligation to) update or alter its
forward-looking statements, whether as a result of new information,
future events or otherwise. This release includes certain non-GAAP
financial measures as defined under SEC rules. As required by SEC rules,
we have provided a reconciliation of those measures to the most directly
comparable GAAP measures, which is available with this release and on
our website at http://ir.cit.com.
Individuals interested in receiving future updates on CIT via e-mail can
register at http://newsalerts.cit.com CIT GROUP INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED INCOME STATEMENTS (dollars in millions, except per share data)
Quarters Ended June 30, March 31, June 30, Six Months Ended June 30,
2007
2007
2006
2007
2006
Finance revenue $ 1,758.1 $ 1,617.1 $ 1,379.3 $ 3,375.2 $ 2,673.9
Interest expense
942.6
873.6
677.7
1,816.2
1,276.0
Depreciation on operating lease equipment
292.3
263.6
256.2
555.9
505.6
Net finance revenue
523.2
479.9
445.4
1,003.1
892.3
Provision for credit losses
73.0
71.1
48.2
144.1
81.5
Net finance revenue, after credit provision
450.2
408.8
397.2
859.0
810.8
Other revenue
509.1
328.6
303.5
837.7
563.6
Total net revenue, after credit provision
959.3
737.4 700.7
1,696.7
1,374.4
Salaries and general operating expenses
378.0
355.8
344.8
733.8
667.9
Provision for severance and real estate exit activities
34.9
-
-
34.9
11.1
Loss on planned asset dispositions
787.9
-
-
787.9
-
Loss on early extinguishments of debt
-
139.3
-
139.3
-
Income before provision for income taxes
(241.5
)
242.3
355.9
0.8
695.4
Provision for income taxes
114.7
(34.1
)
(111.9
)
80.6
(213.2
)
Minority interest, after tax
(0.2
)
(0.1
)
(0.5
)
(0.3
)
(1.3
)
Net income before preferred stock dividends
(127.0
)
208.1
243.5
81.1
480.9
Preferred stock dividends
(7.5
)
(7.5
)
(7.5
)
(15.0
)
(15.2
)
Net income available to common stockholders $ (134.5 ) $ 200.6
$ 236.0
$ 66.1
$ 465.7
Per common share data
Basic earnings per share
$
(0.70
)
$
1.03
$
1.18
$
0.34
$
2.34
Diluted earnings per share
$
(0.70
)
$
1.01
$
1.16
$
0.34
$
2.28
Number of shares - basic (thousands)
191,808
194,099
199,189
192,953
199,308
Number of shares - diluted (thousands)
195,349
197,922
203,923
196,635
204,172
Other Revenue
Fees and other income(1)
$
108.2
$
185.5
$
144.8
$
293.7
$
273.5
Gains on receivable sales and syndication fees
76.4
53.6
63.1
130.0
103.7
Factoring commissions
52.5
52.4
55.9
104.9
111.7
Gains on sales of leasing equipment
33.6
29.5
33.2
63.1
54.6
Gains on securitizations
7.8
7.6
6.5
15.4
20.1
Net gain on U.S. construction and U.K. trucking sales
230.6
-
-
230.6
-
Total other revenue
$
509.1
$
328.6
$
303.5
$
837.7
$
563.6
(1) Fees and other income primarily includes servicing fees and
structuring and advisory fees.
Note: Loss on planned asset dispositions includes a $765.4 million
fair value adjustment relating to the planned home lendig exit and
a $22.5 million energy plant asset charge.
CIT GROUP INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (dollars in millions)
June 30, December 31, 2007 2006
ASSETS
Financing and leasing assets held for investment:
Finance receivables
$
49,100.1
$
55,064.9
Reserve for credit losses
(508.1
)
(659.3
)
Net finance receivables
48,592.0
54,405.6
Operating lease equipment, net
11,932.5
11,017.9
Financing and leasing assets held for sale
2,463.9
1,553.7
Home lending finance receivables held for sale
10,383.8
240.0
Cash and cash equivalents
5,433.4
4,458.4
Retained interests in securitizations and other investments
1,204.5
1,059.4
Goodwill and intangible assets, net
1,382.1
1,008.4
Other assets
3,771.0
3,324.5
Total Assets $ 85,163.2
$ 77,067.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Commercial paper
$
6,195.4
$
5,365.0
Deposits
3,352.3
2,399.6
Non-recourse, secured borrowings
6,253.6
4,398.5
Variable-rate senior unsecured notes
24,095.5
19,184.3
Fixed-rate senior unsecured notes
28,600.2
29,107.1
Junior subordinated notes
750.0
-
Preferred capital securities
-
250.3
Total debt
69,247.0
60,704.8
Credit balances of factoring clients
3,911.0
4,131.3
Accrued liabilities and payables
4,644.2
4,440.8
Total Liabilities 77,802.2 69,276.9
Minority interest
47.2
39.9
Stockholders' Equity:
Preferred stock
500.0
500.0
Common stock
2.1
2.1
Paid-in capital
10,689.2
10,678.9
Accumulated deficit
(2,872.6
)
(2,838.9
)
Accumulated other comprehensive income
217.0
129.6
Less: treasury stock, at cost
(1,221.9
)
(720.6
)
Total Common Stockholders' Equity
6,813.8
7,251.1
Total Stockholders' Equity
7,313.8
7,751.1
Total Liabilities and Stockholders' Equity $ 85,163.2
$ 77,067.9
Other Assets
Deposits on commercial aerospace flight equipment
$
817.9
$
719.0
Accrued interest and receivables from derivative counterparties
682.2
643.6
Investments in and receivables from non-consolidated subsidiaries
294.2
535.7
Repossessed assets and off-lease equipment
220.4
124.1
Prepaid expenses
118.2
99.2
Furniture and fixtures, miscellaneous receivables and other assets
1,638.1
1,202.9
$
3,771.0
$
3,324.5
CIT GROUP INC. AND SUBSIDIARIES OWNED AND MANAGED ASSET COMPOSITION (dollars in millions)
June 30, March 31, June 30,
2007
2007
2006 Commercial Finance Group Corporate Finance
Finance receivables
$
17,791.0
$
19,421.8
$
16,178.6
Operating lease equipment, net
160.9
185.5
167.3
Financing and leasing assets held for sale
769.3
921.9
211.8
Owned assets
18,721.2
20,529.2
16,557.7
Finance receivables securitized and managed by CIT
1,090.7
1,436.6
2,121.3
Managed assets
19,811.9
21,965.8
18,679.0
Transportation Finance
Finance receivables
2,163.8
2,186.7
1,474.4
Operating lease equipment, net
10,513.6
10,174.7
9,377.9
Financing and leasing assets held for sale
4.6
71.1
67.6
Owned assets
12,682.0
12,432.5
10,919.9
Trade Finance
Finance receivables
6,900.5
6,889.2
6,439.5
Financing and leasing assets held for sale
-
-
29.0
Owned assets
6,900.5
6,889.2
6,468.5
Specialty Finance Group Vendor Finance
Finance receivables
10,512.8
9,452.0
7,322.3
Operating lease equipment, net
1,258.0
934.2
1,038.4
Financing and leasing assets held for sale
911.7
351.4
527.2
Owned assets
12,682.5
10,737.6
8,887.9
Finance receivables securitized and managed by CIT
4,267.1
4,277.5
3,840.8
Managed assets
16,949.6
15,015.1
12,728.7
Consumer and Small Business Lending
Finance receivables - home lending
-
10,837.1
9,263.2
Finance receivables - student lending
9,695.4
9,493.4
6,929.3
Finance receivables - small business lending
1,251.0
1,257.7
1,262.4
Finance receivables - other
785.6
588.6
436.4
Home lending finance receivables held for sale
10,383.8
115.0
240.0
Financing and leasing assets held for sale
778.3
495.5
265.0
Owned assets
22,894.1
22,787.3
18,396.3
Home lending finance receivables securitized and managed by CIT
569.4
600.5
723.8
Managed assets
23,463.5
23,387.8
19,120.1
Other - Equity Investments
151.9
21.2
27.8
Total Finance receivables
$
49,100.1
$
60,126.5
$
49,306.1
Operating lease equipment, net
11,932.5
11,294.4
10,583.6
Home lending finance receivables held for sale
10,383.8
115.0
240.0
Financing and leasing assets held for sale
2,463.9
1,839.9
1,100.6
Financing and leasing assets excl. equity investments
73,880.3
73,375.8
61,230.3
Equity investments (included in other assets)
151.9
21.2
27.8
Owned assets
74,032.2
73,397.0
61,258.1
Finance receivables securitized and managed by CIT
5,927.2
6,314.6
6,685.9
Managed assets
$
79,959.4
$
79,711.6
$
67,944.0
Managed assets, excluding home lending
$
69,575.6
$
68,759.5
$
58,440.8
CIT GROUP INC. AND SUBSIDIARIES SEGMENT DATA (dollars in millions)
Quarters Ended June 30, March 31, June 30, Six Months Ended June 30, 2007 2007 2006 2007 2006
Commercial Finance Group Corporate Finance
Net finance revenue, before depreciation
$
175.1
$
158.5
$
145.5
$
333.6
$
272.5
Depreciation on operating lease equipment
10.6
9.8
7.8
20.4
16.5
Provision for credit losses
7.9
16.8
(0.6)
24.7
(3.2)
Other revenue*
311.8
87.7
58.4
399.5
118.4
Total net revenue, after credit provision
468.4
219.6
196.7
688.0
377.6
Provision for income taxes
(126.3)
(39.8)
(31.1)
(166.1)
(63.0)
Net income
209.8
72.4
64.7
282.2
119.0
Return on risk-adjusted capital
37.4%
13.2%
13.5%
25.6%
12.9%
New business volume
$
4,279.0
$
3,318.0
$
3,654.7
$
7,597.0
$
6,092.7
Transportation Finance
Net finance revenue, before depreciation
$
226.9
$
210.9
$
174.2
$
437.8
$
359.1
Depreciation on operating lease equipment
137.0
133.5
110.9
270.5
215.2
Provision for credit losses
0.3
(22.5)
1.3
(22.2)
0.9
Other revenue
19.4
17.7
33.2
37.1
39.3
Total net revenue, after credit provision
109.0
117.6
95.2
226.6
182.3
Provision for income taxes
(10.8)
(7.7)
1.1
(18.5)
(3.1)
Net income
62.9
76.3
64.6
139.2
114.1
Return on risk-adjusted capital
15.4%
19.3%
18.5%
17.3%
16.6%
New business volume
$
696.3
$
686.2
$
785.7
$
1,382.5
$
1,282.8
Trade Finance
Net finance revenue, before depreciation
$
42.0
$
41.3
$
38.6
$
83.3
$
77.1
Provision for credit losses
10.3
7.9
5.4
18.2
12.4
Other revenue
66.5
67.7
69.7
134.2
139.4
Total net revenue, after credit provision
98.2
101.1
102.9
199.3
204.1
Provision for income taxes
(21.7)
(23.3)
(23.4)
(45.0)
(47.0)
Net income
36.1
36.6
39.3
72.7
79.1
Return on risk-adjusted capital
16.5%
17.0%
18.5%
16.8%
18.8%
Total Commercial Finance Group
Net finance revenue, before depreciation
$
444.0
$
410.7
$
358.3
$
854.7
$
708.7
Depreciation on operating lease equipment
147.6
143.3
118.7
290.9
231.7
Provision for credit losses
18.5
2.2
6.1
20.7
10.1
Other revenue
375.2
173.1
161.3
548.3
297.1
Total net revenue, after credit provision
653.1
438.3
394.8
1,091.4
764.0
Provision for income taxes
(158.8)
(70.8)
(53.4)
(229.6)
(113.1)
Net income
308.8
185.3
168.6
494.1
312.2
Return on risk-adjusted capital
26.0%
15.9%
16.2%
21.1%
15.4%
New business volume, excluding factoring
$
4,975.3
$
4,004.2
$
4,440.4
$
8,979.5
$
7,375.5
*
The June 2007 balance includes the $235.0 million gain on sale of
construction portfolio.
CIT GROUP INC. AND SUBSIDIARIES SEGMENT DATA (dollars in millions)
Quarters Ended June 30, March 31, June 30, Six Months Ended June 30, 2007 2007 2006 2007 2006
Specialty Finance Group Vendor Finance
Net finance revenue, before depreciation
$
292.8
$
252.5
$
265.2
$
545.3
$
532.0
Depreciation on operating lease equipment
144.8
120.4
137.4
265.2
273.9
Provision for credit losses
8.8
13.5
17.8
22.3
35.3
Other revenue
47.2
112.8
98.8
160.0
183.6
Total net revenue, after credit provision
186.4
231.4
208.8
17.8
406.4
Provision for income taxes
(28.9
)
(37.9
)
(35.1
)
(66.8
)
(70.4
)
Net income
67.9
73.5
70.3
141.4
132.4
Return on risk-adjusted capital
15.4
%
19.7
%
25.8
%
16.5
%
24.1
%
New business volume
$
2,470.1
$
2,317.6
$
2,063.9
$
4,787.7
$
4,012.9
Consumer and Small Business Lending*
Net finance revenue, before depreciation
$
103.4
$
93.9
$
88.5
$
197.3
$
173.2
Provision for credit losses
68.7
43.7
18.8
112.4
39.4
Other revenue
40.4
42.3
42.4
82.7
81.6
Total net revenue, after credit provision
75.1
92.5
112.1
167.6
215.4
Provision for income taxes
271.8
(9.8
)
(13.9
)
262.0
(26.1
)
Net income
(486.3
)
20.3
24.9
(466.0
)
46.5
Return on risk-adjusted capital
(127.7)%
5.7
%
7.7
%
(63.1)%
7.3
%
New business volume
$
3,492.5
$
4,457.4
$
3,486.7
$
7,949.9
$
7,318.2
Total Specialty Finance Group
Net finance revenue, before depreciation
$
396.2
$
346.4
$
353.7
$
742.6
$
705.2
Depreciation on operating lease equipment
144.8
120.4
137.4
265.2
273.9
Provision for credit losses
77.5
57.2
36.6
134.7
74.7
Other revenue
122.0
155.1
141.2
277.1
265.2
Total net revenue, after credit provision
295.9
323.9
320.9
619.8
621.8
Provision for income taxes
242.9
(47.7
)
(49.0
)
195.2
(96.5
)
Net income
(418.4
)
93.8
95.2
(324.6
)
178.9
Return on risk-adjusted capital
(50.9)
%
12.8
%
15.9
%
(20.3)
%
15.0
%
New business volume
$
5,962.6
$
6,775.0
$
5,550.6
$
12,737.6
$
11,331.1
Corporate and Other
Net finance revenue, before depreciation
$
(24.7
)
$
(13.6
)
$
(10.4
)
$
(38.3
)
$
(16.0
)
Provision for credit losses
(23.0
)
11.7
5.5
(11.3
)
(3.3
)
Other revenue
(10.6
)
0.4
1.0
(10.2
)
1.3
Total net revenue, after credit provision
(12.2
)
(24.8
)
(15.0
)
(37.0
)
(11.4
)
Provision for income taxes
30.6
84.4
(9.5
)
115.0
(3.6
)
Net (loss) income
(24.9
)
(78.5
)
(27.8
)
(103.4
)
(25.4
)
Return on risk-adjusted capital
(2.3)
%
-3.0
%
-2.0
%
(2.4)
%
-1.1
%
*
The June 2007 results include a $765 million pretax fair value
adjustment relating to the planned exit of the home lending
portfolio.
CIT GROUP INC. AND SUBSIDIARIES CREDIT METRICS (dollars in millions)
Quarters Ended Six Months Ended June 30, June 30, 2007 March 31, 2007 June 30, 2006 2007 2006 Net Credit Losses - Owned as a Percentage of Average Finance
Receivables
Corporate Finance
$
6.5
0.13
%
$
17.8
0.37
%
$
(5.4
)
(0.14
)%
$
24.3
0.25
%
$
(5.2
)
(0.07
)%
Transportation Finance
0.4
0.08
%
(22.5
)
(4.15
)%
1.4
0.36
%
(22.1
)
(2.02
)%
1.4
0.17
%
Trade Finance
10.0
0.59
%
7.0
0.42
%
5.8
0.35
%
17.0
0.51
%
12.5
0.39
%
Total Commercial Finance Group
16.9
0.23
%
2.3
0.03
%
1.8
0.03
%
19.2
0.13
%
8.7
0.08
%
Vendor Finance
15.8
0.59
%
13.7
0.57
%
16.7
0.89
%
29.5
0.58
%
30.5
0.82
%
Consumer and Small Business Lending
49.4
0.87
%
41.2
0.78
%
24.1
0.56
%
90.6
0.83
%
45.7
0.55
%
Total Specialty Finance Group
65.2
0.78
%
54.9
0.72
%
40.8
0.66
%
120.1
0.75
%
76.2
0.64
%
Total
$
82.1
0.53
%
$
57.2
0.39
%
$
42.6
0.35
%
$
139.3
0.46
%
$
84.9
0.36
%
Total, excluding student loans
$
82.1
0.62
%
$
57.2
0.46
%
$
42.6
0.41
%
$
139.3
0.54
%
$
84.9
0.42
%
Net Credit Losses - Managed as a Percentage of Average Managed
Finance Receivables
Corporate Finance
$
9.6
0.18
%
$
19.8
0.38
%
$
(2.9
)
(0.06
)%
$
29.4
0.28
%
$
(1.6
)
(0.02
)%
Transportation Finance
0.4
0.08
%
(22.5
)
(4.15
)%
1.4
0.36
%
(22.1
)
(2.02
)%
1.4
0.17
%
Trade Finance
10.0
0.59
%
7.0
0.42
%
5.8
0.35
%
17.0
0.51
%
12.5
0.38
%
Total Commercial Finance Group
20.0
0.26
%
4.3
0.06
%
4.3
0.07
%
24.3
0.16
%
12.3
0.10
%
Vendor Finance
24.6
0.66
%
20.0
0.59
%
25.6
0.91
%
44.6
0.62
%
47.3
0.84
%
Consumer and Small Business Lending
53.1
0.91
%
45.7
0.84
%
31.1
0.70
%
98.9
0.88
%
59.3
0.69
%
Total Specialty Finance Group
77.7
0.81
%
65.7
0.74
%
56.7
0.78
%
143.5
0.78
%
106.6
0.75
%
Total
$
97.7
0.57
%
$
70.0
0.43
%
$
61.0
0.44
%
$
167.8
0.50
%
$
118.9
0.44
%
Total, excluding student loans
$
97.7
0.66
%
$
70.0
0.50
%
$
61.0
0.50
%
$
167.8
0.58
%
$
118.9
0.50
%
Finance Receivables Past Due 60 days or more - Owned as a
Percentage of Finance Receivables June 30, 2007 March 31, 2007 June 30, 2006
Corporate Finance
$
73.6
0.41
%
$
59.9
0.31
%
$
87.0
0.54
%
Transportation Finance
12.5
0.58
%
16.3
0.75
%
18.7
1.27
%
Trade Finance
87.2
1.26
%
94.9
1.38
%
117.5
1.82
%
Total Commercial Finance Group
173.3
0.65
%
171.1
0.60
%
223.2
0.93
%
Vendor Finance
211.7
2.02
%
226.8
2.40
%
213.3
2.91
%
Consumer and Small Business Lending
1,296.7
5.62
%
1,056.9
4.77
%
546.2
3.05
%
Total Specialty Finance Group
1,508.4
4.50
%
1,283.7
4.06
%
759.5
3.01
%
Total
$
1,681.7
2.78
%
$
1,454.8
2.42
%
$
982.7
1.99
%
Total, excluding student loans
$
1,193.9
2.35
%
$
1,001.9
1.98
%
$
754.0
1.78
%
Non-performing Assets - Owned as a Percentage of Finance
Receivables
Corporate Finance
$
84.9
0.48
%
$
99.0
0.51
%
$
196.9
1.22
%
Transportation Finance
5.0
0.23
%
7.6
0.35
%
10.5
0.71
%
Trade Finance
53.2
0.77
%
57.9
0.84
%
79.5
1.23
%
Total Commercial Finance Group
143.1
0.53
%
164.5
0.58
%
286.9
1.19
%
Vendor Finance
119.7
1.14
%
108.7
1.15
%
101.2
1.38
%
Consumer and Small Business Lending
811.2
3.52
%
609.9
2.75
%
297.5
1.66
%
Total Specialty Finance Group
930.9
2.77
%
718.6
2.27
%
398.7
1.58
%
Total
$
1,074.0
1.78
%
$
883.1
1.47
%
$
685.6
1.39
%
Total, excluding student loans
$
1,074.0
2.12
%
$
883.1
1.74
%
$
685.6
1.62
%
Finance Receivables Past Due 60 days or more - Managed as a
Percentage of Managed Financial Assets
Corporate Finance
$
79.1
0.40
%
$
70.0
0.32
%
$
90.6
0.49
%
Transportation Finance
12.5
0.58
%
16.3
0.72
%
18.7
1.21
%
Trade Finance
87.2
1.26
%
94.9
1.38
%
117.5
1.82
%
Total Commercial Finance Group
178.8
0.62
%
181.2
0.59
%
226.8
0.86
%
Vendor Finance
373.7
2.38
%
363.2
2.58
%
309.1
2.64
%
Consumer and Small Business Lending
1,345.5
5.51
%
1,107.6
4.74
%
611.3
3.20
%
Total Specialty Finance Group
1,719.2
4.29
%
1,470.8
3.93
%
920.4
2.99
%
Total
$
1,898.0
2.76
%
$
1,652.0
2.42
%
$
1,147.2
2.00
%
Total, excluding student loans
$
1,410.2
2.41
%
$
1,199.1
2.05
%
$
918.5
1.82
%
CIT GROUP INC. AND SUBSIDIARIES RATIOS AND OTHER DATA (dollars in millions, except per share data)
Quarters Ended June 30, March 31, June 30, Six Months Ended June 30, 2007 2007 2006 2007 2006 Profitability
Net finance revenue as a percentage of AEA
2.89
%
2.83
%
3.16
%
2.85
%
3.27
%
Net finance revenue after provision as a percentage of AEA
2.49
%
2.41
%
2.82
%
2.44
%
2.97
%
Salaries and general operating expenses as a percentage of AMA
2.10
%
1.92
%
2.19
%
2.01
%
2.21
%
Efficiency ratio
42.3
%
44.0
%
46.0
%
43.1
%
46.6
%
Return on average common stockholders' equity
-7.8
%
11.5
%
14.1
%
1.9
%
14.1
%
Return on AEA
-0.74
%
1.18
%
1.68
%
0.19
%
1.71
%
Return on AMA
-0.68
%
1.08
%
1.50
%
0.17
%
1.51
%
See "Non-GAAP Disclosures" for additional information regarding
profitability ratio and metric comparisons.
Average Balances
Average Finance Receivables (AFR)
$
62,417.8
$
58,798.1
$
48,393.8
$
60,669.3
$
46,927.4
Average Earning Assets (AEA)
72,352.8
67,920.9
56,296.3
70,277.0
54,616.9
Average Managed Assets (AMA)
78,640.9
74,100.6
63,032.6
76,459.6
61,509.8
Average Operating Leases (AOL)
11,695.6
11,168.2
10,481.9
11,450.5
10,195.3
Average Common Stockholders' Equity
6,889.1
6,955.4
6,715.9
6,925.3
6,608.1
June 30, March 31, June 30, 2007 2007 2006 Capital and Leverage
Total tangible stockholders' equity to managed assets
8.27
%
8.65
%
9.59
%
Tangible book value per common share
$
28.13
$
29.43
$
29.04
Reserve for Credit Losses
Reserve for credit losses as a percentage of finance receivables,
excluding student loans
1.29
%
1.39
%
1.51
%
Reserve for credit losses (excluding reserves related to impaired
loans and hurricane reserves) as a percentage of finance
receivables, excluding student loans1
1.22
%
1.22
%
1.21
%
Reserve for credit losses as a percentage of finance receivables
1.03
%
1.17
%
1.29
%
Reserve for credit losses as a percentage of non-performing assets
47.3
%
79.7
%
93.1
%
Reserve for credit losses as a percentage of finance receivables
past due 60 days or more
30.2
%
48.4
%
64.9
%
Reserve for credit losses as a percentage of finance receivables
past due 60 days or more, excluding student lending
42.6
%
70.2
%
84.6
%
1 All periods exclude home lending.
CIT GROUP INC. AND SUBSIDIARIES Select Concentration Data (dollars in millions unless specified)
Commercial Aerospace Portfolio:
June 30, 2007 March 31, 2007 June 30, 2006 Net Investment Number Net Investment Number Net Investment Number By Region:
Europe
$
2,893.7
88
$
2,826.2
88
$
2,708.8
86
U.S. and Canada
1,237.8
59
1,262.0
59
905.5
41
Asia Pacific
1,822.0
57
1,758.8
54
1,509.0
50
Latin America
985.4
31
984.5
31
859.6
28
Africa / Middle East
497.2
13
486.8
12
367.1
9
Total
$
7,436.1
248
$
7,318.3
244
$
6,350.0
214
By Manufacturer:
Boeing
$
3,204.7
126
$
3,162.9
126
$
2,750.0
114
Airbus
4,222.0
121
4,150.0
118
3,571.7
94
Other
9.4
1
5.4
-
28.3
6
Total
$
7,436.1
248
$
7,318.3
244
$
6,350.0
214
By Body Type (1):
Narrow body
$
5,537.4
190
$
5,394.7
186
$
4,896.9
172
Intermediate
1,631.8
43
1,657.9
43
1,244.2
26
Wide body
257.5
14
260.3
15
180.6
10
Other
9.4
1
5.4
-
28.3
6
Total
$
7,436.1
248
$
7,318.3
244
$
6,350.0
214
By Product:
Operating lease
$
6,645.2
205
$
6,439.1
198
$
5,968.0
190
Leveraged lease (other)
40.5
2
40.5
2
148.5
5
Leveraged lease (tax optimized)
44.3
1
43.9
1
90.2
5
Capital lease
145.1
5
214.2
8
69.3
3
Loan
561.0
35
580.6
35
74.0
11
Total
$
7,436.1
248
$
7,318.3
244
$
6,350.0
214
Number of accounts
98
94
97
Weighted average age of fleet (years)
6
6
6
Largest customer net investment
$
282.8
$
286.0
$
294.7
Off-lease aircraft
-
-
1
New Aircraft Delivery Order Book (dollars in billions)
For the Years Ending December 31,
2006 (Remaining 2006)
$
-
-
$
-
-
$
0.4
8
2007 (Remaining 2007)
0.7
14
1.1
21
1.2
26
2008
1.4
24
1.4
24
1.1
21
2009
0.8
13
0.8
13
-
-
Thereafter
4.1
60
2.3
28
0.6
5
Total
$
7.0
111
$
5.6
86
$
3.3
60
(1) Narrow body are single aisle design and consist primarily of
Boeing 737 and 757 series and Airbus A320 series aircraft.
Intermediate body are smaller twin aisle design and consist
primarily of Boeing 767 series and Airbus A330 series aircraft. Wide
body are large twin aisle design and consist primarily of Boeing 747
and 777 series and McDonnell Douglas DC10 series aircraft.
Managed Home Lending Portfolio Statistics
June 30, March 31, June 30, 2007 2007 2006
Managed assets
$
11,894.2
$
11,552.6
$
10,227.0
Portfolio assets
$
11,324.7
$
10,952.1
$
9,503.2
% of first mortgages
89%
89%
90%
Average loan size
$
127.9
$
124.3
$
119.8
Fixed-rate mortgage %
43%
42%
44%
Weighted Average loan-to-value
82%
82%
81%
Average FICO score
637
636
636
Delinquencies (sixty days or more)
6.60%
5.15%
3.24%
Net charge-offs-managed basis
1.43%
1.30%
1.03%
Net charge-offs-owned basis
1.37%
1.20%
0.84%
CIT GROUP INC. AND SUBSIDIARIES Non-GAAP Disclosures (dollars in millions)
June 30, March 31, June 30,
2007
2007
2006
Managed assets (1):
Finance receivables
$
49,100.1
$
60,126.5
$
49,306.1
Operating lease equipment, net
11,932.5
11,294.4
10,583.6
Financing and leasing assets held for sale
2,463.9
1,839.9
1,100.6
Home lending finance receivables held for sale
10,383.8
-
-
Equity and venture capital investments (included in other assets)
151.9
21.2
27.8
Total financing and leasing portfolio assets
74,032.2
73,282.0
61,018.1
Securitized assets
5,927.2
6,314.6
6,685.9
Managed assets
$
79,959.4
$
79,596.6
$
67,704.0
Earning assets (2):
Total financing and leasing portfolio assets
$
74,032.2
$
73,282.0
$
61,018.1
Credit balances of factoring clients
(3,911.0
)
(3,769.9
)
(3,702.8
)
Earning assets
$
70,121.2
$
69,512.1
$
57,315.3
Tangible equity (3):
Total equity
$
6,813.8
$
6,927.9
$
6,910.9
Other comprehensive income relating to derivative financial
instruments
(59.5
)
(11.6
)
(99.9
)
Unrealized gain on securitization investments
(8.2
)
(15.5
)
(12.0
)
Goodwill and intangible assets
(1,382.1
)
(1,252.4
)
(1,033.6
)
Tangible common equity
5,364.0
5,648.4
5,765.4
Preferred stock
500.0
500.0
500.0
Preferred capital securities (4)
-
-
251.2
60 year junior subordinated notes
750.0
750.0
-
Tangible equity
$
6,614.0
$
6,898.4
$
6,516.6
Non-GAAP financial measures disclosed by management are meant to
provide additional information and insight relative to trends in
the business to investors and, in certain cases, to present
financial information as measured by rating agencies and other
users of financial information. These measures are not in
accordance with, or a substitute for, GAAP and may be different
from, or inconsistent with, non-GAAP financial measures used by
other companies.
1) Managed assets are utilized in certain credit and expense
ratios. Securitized assets are included in managed assets because
CIT retains certain credit risk and the servicing related to
assets that are funded through securitizations.
2) Earning assets are utilized in certain revenue and earnings
ratios. Earning assets are net of credit balances of factoring
clients. This net amount, which corresponds to amounts funded, is
a basis for revenues earned.
3) Tangible equity is utilized in leverage ratios, and is
consistent with certain rating agency measurements. Other
comprehensive income and unrealized gains on securitization
investments (both included in the separate component of equity)
are excluded from the calculation, as these amounts are not
necessarily indicative of amounts which will be realized.
4) The preferred capital securities were called on March 16, 2007.
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