CIT Group Inc (DEL) (CIT)

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CIT Group (CIT)

Q4 2012 Earnings Call

January 29, 2013 8:00 am ET

Executives

Kenneth A. Brause - Executive Vice President of Investor Relations

John A. Thain - Chairman and Chief Executive Officer

Scott T. Parker - Chief Financial Officer, Chief Accounting Officer and Executive Vice President

Analysts

Bradley G. Ball - Evercore Partners Inc., Research Division

Moshe Orenbuch - Crédit Suisse AG, Research Division

Henry J. Coffey - Sterne Agee & Leach Inc., Research Division

Bill Carcache - Nomura Securities Co. Ltd., Research Division

Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division

Mark C. DeVries - Barclays Capital, Research Division

Kenneth Bruce - BofA Merrill Lynch, Research Division

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

David S. Hochstim - The Buckingham Research Group Incorporated

Christoph M. Kotowski - Oppenheimer & Co. Inc., Research Division

Michael Turner - Compass Point Research & Trading, LLC, Research Division

Presentation

Operator

Good morning, and welcome to CIT's Fourth Quarter 2012 Earnings Conference Call. My name is Mike, and I will be your operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Mr. Kenneth Brause, Director of Investor Relations. Please proceed, sir.

Kenneth A. Brause

Thank you, Mike, and good morning, everyone. Welcome to CIT's Fourth Quarter 2012 Earnings Conference Call. Our call today is hosted by John Thain, our Chairman and CEO; and Scott Parker, our CFO. After their prepared remarks, we will have a question-and-answer session. [Operator Instructions] We'll do our best to answer as many questions as possible in the time we have this morning.

Elements of this call are forward-looking in nature and may involve risks, uncertainties and contingencies that may cause actual results to differ materially from those anticipated. Any forward-looking statements relate only to the time and date of this call. We disclaim any duty to update these statements based on new information, future events or otherwise. For information about risk factors relating to the business, please refer to our 2011 Form 10-K that was filed with the SEC last February. Any references to non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP in the press release.

For more information on CIT, including the slides that will be referenced in today's call, please visit the Investor Relations section of our website at www.cit.com.

I'll now turn the call over to John Thain.

John A. Thain

Thank you, Ken. Good morning, everyone. And thank you, all, for being on the call this morning.

We had strong fourth quarter results. We earned $252 million pretax, $207 million after tax or $1.03 a share. We originated over $3 billion of funded volume in the quarter. Our commercial assets grew and our total assets grew quarter-over-quarter a little bit. The credit quality in our portfolio has been stable, with charge-offs and provisioning at cyclical lows, and our core expenses were essentially flat to third quarter. Our headcount -- we brought our headcount down in the fourth quarter. And Scott will talk more about our expense management program.

All 4 of our commercial businesses were solidly profitable. Our Corporate Finance business generated funded volume of $1.5 billion. This was the seventh consecutive quarter where our Corporate Finance business generated over $1 billion of new commitments. In the fourth quarter, just to give you an idea of the volume of transactions, we were involved in 105 different transactions.

Our commercial real estate business and our equipment finance business both grew nicely. And then as you saw, we completed -- we've signed a portfolio purchase at the end of the year, which fit nicely into our business. It was $1.3 billion of commitments, just under $800 million of funded volume.

Our transportation business continues to perform well. Our commercial air business is over 99% utilized of our aircraft. And on our commercial rail side, we have over 98% utilization. And as we've previously announced, we really relaunched -- because we were in the maritime finance business before, but we've relaunched the maritime finance business and intend to grow that business as well.

Our trade business, their factoring volume was up 8% quarter-over-quarter. And our vendor business, the vendor volume was up 23% sequentially quarter-over-quarter. So if you look at our 4 main businesses, they were profitable, they were growing, and we are maintaining our credit discipline in those businesses.

CIT Bank ended up the year at over $12 billion of assets. We generated over $4.5 billion of online deposits over the course of the year, so we -- that's -- we ended up at the year a little over $4.5 billion of online deposits. And in the fourth quarter, we originated over 95% of our U.S. lending and leasing volume in the bank.

For the full year 2012, if you exclude the debt repayment expenses, CI turn -- CIT earned about $1 billion pretax. We ended up the year with a strong balance sheet and strong liquidity position. We ended the year with $7.6 billion of cash and short-term investments. Our capital position, we had 17% capital at the end of the year. We had 16.2% Tier 1 capital at the end of the year. We did file our capital plan with the Fed, which Scott will talk briefly about later.

And when we look at our businesses and we look at where we see the economy going -- growing, in the U.S., the U.S. economy is growing. It's growing slowly, but the outlook is more positive, the sentiment seems better. And I, at least, think that 2013, absent some new disaster in Washington, will be a year of improvement.

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