CIT Group Inc (DEL) (CIT)

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CIT Group, Inc. (CIT)

Q4 2008 Earnings Call

January 22, 2008 9:00 am ET


Kenneth A. Brause - Executive Vice President, Investor Relations

Jeffrey M. Peek - Chairman of the Board, Chief Executive Officer

Alexander T. Mason - President, Chief Operating Officer

Joseph M. Leone - Vice Chairman, Chief Financial Officer


David Hochstim – Buckingham Research Group

Christopher Brendler - Stifel Nicolaus & Company

Sameer Gokhale - Keefe, Bruyette & Woods

Unknown Analyst

Matthew Burnell - Wachovia

Louise Pitts – Goldman Sachs



Welcome to CIT’s fourth quarter 2008 earnings call. (Operator Instructions) Participating in today’s call from the company are Jeff Peek, Chairman and Chief Executive Officer; Joe Leone, Vice Chairman and Chief Financial Officer; Alex Mason, President and Chief Operating Officer and Ken Brause, Executive Vice President of Investor Relations. (Operator Instructions)

I would now like to turn the call over to Ken Brause, Executive Vice President of Investor Relations.

Kenneth Brause

Good morning everyone. Welcome to CIT’s fourth quarter conference call. Our call today will be hosted by Jeff Peek, our Chairman and CEO; Joe Leone, our CFO and Alex Mason, our President and Chief Operating Officer.

Following our formal remarks we’ll have a Q&A session. We ask that you limit yourself to one question and then return to the queue if you have additional questions. We will do our best to answer as many questions as possible in the allotted time.

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 SEC reports.

Any references to certain non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP in the financial tables accompanying our press release. For more information on CIT please visit the Investor Relations section of our website at

With that it’s my pleasure to hand the call over to Jeff Peek.

Jeffrey Peek

Thank you Ken. Good morning everyone and welcome to our fourth quarter conference call, our first for CIT as a bank holding company. With me this morning are Alex Mason, our President and Chief Operating Officer and Joe Leone, our Chief Financial Officer.

Each of us will share some thoughts with you on the quarter and the year and then we will open the call to your questions.

First, let’s take a little bit of a look at the year 2008 in review and talk a little bit about some of CIT’s accomplishments.

I think with some certainty we can all say 2008 will be a year for the history books. As we look back on the year it is hard to believe how much has transpired both for the market broadly and for CIT specifically but also how much we got done and how much we accomplished.

CIT faced a series of challenges but I believe by being decisive and acting quickly we successfully guided the company through a difficult period. Over the course of the year I spoke many times about the need to manage for liquidity versus profitability as we preserve the value of our core commercial finance franchises.

While I am certainly disappointed by our financial results and that we reported another loss this quarter, I firmly believe that we enter 2009 better positioned to navigate the worst of this economic downturn. Let me take a few minutes to review last year’s accomplishments.

I will start with liquidity. We generated over $14 billion of incremental liquidity despite being completely closed out of the unsecured debt market for all 12 months of the year. We did so through secured financing, asset sales, balance sheet management and the issuance of deposits at our CIT Bank.

Over the course of the year we also paid off nearly $10 billion of maturing debt and $2.1 billion of bank lines that we drew down last March. Next, we improved our risk profile. We sold our home lending business in June completely removing any risk to us from that asset class, we stopped originating student loans and we closed our commercial real estate business.

Third, we raised capital, nearly $6 billion over the course of the year and built reserves for a stronger balance sheet. We issued $1.6 billion of common equity and convertible preferred in April and another $4 billion plus in September through our two successful exchange offers, the common equity raised and of course the TARP preferred which we received on New Year’s eve.

We ended the year as a well-capitalized bank holding company with a tangible equity to managed asset ratio of over 14% and risk based capital ratios of nearly 10% for tier-1 and well over 13% for total capital. We also streamlined our operations. For the year we reduced headcount by 20% or 1,400 people to end the year below 5,000 employees for CIT worldwide.

We previously told you we were targeting $200 million of annualized expense savings and we achieved this goal through staff reductions and other initiatives. While much of these savings are already in our run rate, a portion will be reinvested as we build our bank infrastructure in 2009.

Next, and most importantly we kept our businesses open and continued to serve our clients. While down compared to 2007 we still did nearly $20 billion of commercial finance volume and over $40 billion of factoring volume. Again, once again, proving the importance of the relationships we have built with our clients over many years and a number of cycles.

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