CIT Group Inc.
) second-quarter 2013 earnings of 91 cents per share came in line
with the Zacks Consensus Estimate. Moreover, this is
significantly better than the year-ago loss of 36 cents, which
included debt refinancing charges related to the redemption of
CIT GROUP (CIT): Free Stock Analysis Report
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Results on a year-over-year basis benefited from increased net
interest revenue, partly offset by lower non-interest income and
a rise in operating expenses. Credit quality was a mixed bag,
while capital ratios remained strong during the quarter.
CIT's net income came in at $184 million in the said quarter,
compared with a net loss of $73 million in the year-ago quarter.
Performance in Detail
On a non-GAAP basis, total net revenue was $460.6 million, almost
twice the prior-year quarter figure of $230.9 million. Increases
in net finance revenue and other income were the primary reasons
for the rise. However, net revenue missed the Zacks Consensus
Estimate of $689.0 million.
Net interest revenues were $70.2 million, compared with a
negative $223.9 million in the year-ago quarter. The improvement
came primarily on the back of a fall in interest expense.
Total non-interest income was $531.7 million, down 9.2% year over
year. The fall was mainly due to lower other income.
Net finance revenue as a percentage of average earning assets
(excluding the impact of debt prepayment) improved 21 basis
points (bps) to 4.62%. The rise was driven mainly by lower
Operating expenses (excluding restructuring costs) were $229.7
million, up 1.3% from $226.8 million in the prior-year quarter.
The expense in the reported quarter included $9.5 million of
CIT's credit quality was a mixed bag in the reported quarter.
Non-accrual loans fell 38.7% year over year to $279 million.
Non-accruing loans as a percentage of finance receivables
declined 98 bps year over year to 1.28%.
However, net charge-offs were $29 million, up from $17 million in
the prior-year quarter. Further, provision for credit losses was
$15 million in the second quarter, compared with $9 million in
the year-ago quarter.
Balance Sheet and Capital Ratios
As of Jun 30, 2013, cash and short-term investment securities
were $6.9 billion, comprising $5.7 billion of cash and $1.2
billion of short-term investments. Additionally, CIT had
approximately $1.9 billion of unused and committed liquidity
under a $2 billion revolving credit facility as of Jun 30, 2013.
Capital ratios were stable as of Jun 30, 2013, with Tier 1
capital ratio of 16.3% and a total capital ratio of 17.0%, both
almost unchanged from the end of the prior quarter. Book value
per share was $43.16 as of Jun 30, 2013 compared with $41.79 as
of Jun 30, 2012.
In Jun 2013, CIT repurchased approximately 280,000 shares at an
average price of $44.36 per share. In May, the company had
announced a repurchase authorization of shares worth up to $200
million. The buyback program is expected to be completed by the
end of 2013.
We expect CIT's liability restructuring initiatives and access to
low-cost debts to support its growth. Moreover, the company is
meaningfully deploying capital. However, sluggish growth in the
industries where CIT provides finance, stringent regulations and
a weak economic recovery could dent the company's growth
CIT currently carries a Zacks Rank #2 (Buy).
Among other miscellaneous services finance stocks,
Euronet Worldwide, Inc.
) is scheduled to announce results on Jul 24,
) on Jul 30 and
Financial Engines, Inc.
) on Aug 1.