CIT Group Inc.
) fourth-quarter 2013 earnings per share of 65 cents lagged the
Zacks Consensus Estimate of 86 cents. This was also below the
year-ago figure of $1.03 per share. Notably, earnings in the
reported quarter included $45 million of Tyco tax agreement
Lower-than-expected results were due to decline in non-interest
income and higher-than-expected operating expenses, partly offset
by net interest revenue growth. However, credit quality was a
mixed bag, while capital ratios remained strong.
CIT Group's net income came in at $130 million in the said
quarter, down 37.2% year over year.
For full-year 2013, net income was $676 million or $3.35 per
share, compared with a net loss of $592 million or $2.95 per
share in 2012, which included debt refinancing charges related to
redemption of high-cost debt. However, earnings per share missed
the Zacks Consensus Estimate of $3.54.
Performance in Detail
On a non-GAAP basis, total net revenue was $465.2 million, down
3.8% from the prior-year quarter. This was due to lower other
income, partially offset by growth in net finance revenue.
Further, net revenue missed the Zacks Consensus Estimate of
For 2013, total net revenue (on non-GAAP basis) increased
significantly from $576.2 million in the prior year to $1,823.7
million. However, it lagged the Zacks Consensus Estimate of
Net interest revenue was $51.3 million, up from negative net
interest revenue of $9.6 million in the year-ago quarter. The
improvement came mainly on the back of a 21.8% fall in interest
Total non-interest income was $559.8 million, down 10.2% year
over year. The decline was due to fall in rental income on
operating leases and other income.
Net finance revenue as a percentage of average earning assets
(excluding the impact of debt prepayment) decreased 88 basis
points (bps) to 4.00%. The decline was primarily owing to the
sale of higher-yielding Vendor Finance assets and a fall in
operating lease margin.
Operating expenses (excluding restructuring costs) were $269.0
million, up 22.2% from the prior-year quarter.
CIT Group's credit quality was a mixed bag in the reported
quarter. Non-accrual loans fell 27.4% year over year to $241
million. Further, net charge-offs were $15 million, down from $17
million in the prior-year quarter. However, provision for credit
losses was $14 million in the quarter, up from $0.1 million in
the year-ago quarter.
Balance Sheet and Capital Ratios
As of Dec 31, 2013, cash and short-term investment securities
were $7.6 billion, comprising $6.1 billion of cash and $1.5
billion of short-term investments. Moreover, CIT Group had
approximately $1.9 billion of unused and committed liquidity
under a $2 billion revolving credit facility as of Dec 31, 2013.
Capital ratios were stable as of Dec 31, 2013, with Tier 1
capital ratio of 16.7% and total capital ratio of 17.4%, both of
which increased from the prior-quarter level. Book value per
share was $44.78 as of Dec 31, 2013, up from $41.49 as of Dec 31,
Share Repurchase Update
During the said quarter, CIT Group repurchased more than 2.9
million shares for $140.9 million. Hence, for 2013, the company
brought back over 4 million shares for approximately $193
Further, earlier this month, CIT Group announced the increase of
its share repurchase authorization. The company authorized
buyback of up to $307 million worth of shares through the end of
this year, which includes the amount remaining from the 2013
We expect CIT Group's liability restructuring initiatives and
access to low-cost debts to support growth. Moreover, the
company's steady capital deployment activities will boost
shareholders' value. However, sluggish growth in the industries
where CIT Group provides finance, stringent regulations and a
weak economic recovery could dent the company's growth prospects.
Currently, CIT Group carries a Zacks Rank #3 (Hold).
Among other miscellaneous services companies,
FleetCor Technologies, Inc.
) is expected to announce results on Feb 5, while
Moneygram International Inc.
The Western Union Co.
) on report on Feb 11.
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