CIT Group Inc (DEL) (CIT)

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CIT Group, Inc. (CIT)

Q1 2010 Earnings Call

April 27, 2010 8:00 am ET

Executives

Ken Brause – Executive Vice President of Investor Relations.

John Thain – Chairman, Chief Executive Officer

Joe Leone – Chief Financial Officer

Analysts

Sameer Gokhale – Keefe, Bruyette & Woods

Chris Brendler – Stifel Nicolaus

Henry Coffee – Stern Agee

Brian Charles – RW Pressprich

Kevin Star – CRT Capital

[Joseph Bonmeister – Bennett Management]

[Louis Kiboski – Mass Capital]

Larry Vitale – Moore Capital

David Richards – GoldenTree Asset Management

Fred Willard – Samuel Terry Asset Management

Presentation

Operator

Welcome to CIT’s first quarter 2010 earnings conference call. Participating in today’s call are John Thain, Chairman and Chief Executive Officer, Joe Leone, Chief Financial Officer, and Ken Brause, Executive Vice President of Investor Relations. (Operator Instructions) I’d now like to turn the presentation over to Ken Brause, Executive Vice President of Investor Relations.

Ken Brause

Good morning everyone. Welcome to CIT’s first quarter 2010 earnings conference call. Our call today will be hosted by John Thain, our Chairman and CEO and Joe Leone, our Chief Financial Officer. Following our formal remarks, we will have a Q&A session. We ask that you limit yourself to one question and a follow-up and then return to the queue if you have additional questions. We’ll do our best to answer as many as possible in the time we have this morning.

Elements of the 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 2009 Form 10-K that was filed with the SEC in March.

Any references to certain non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP in our press release. For more information on CIT please visit the investor relations section of our website at www.cit.com.

With that, it’s my pleasure to turn the call over to our Chairman and CEO, John Thain.

John Thain

Thank you, Ken. Good morning everyone. I’m very pleased to announce a profitable first quarter with net income of $97 million or $0.49 a share. We grew our capital base in the quarter. Our book value rose to $42.63 a share and our holding company both tier one and total capital ratios are in excess of 15%, and our cash position rose to approximately $10 billion.

We’re seeing encouraging signs on credit. Delinquencies quarter over quarter improved. Charge offs were significantly lower even before Fresh Start accounting and although non-accruals were up, they were up at a much slower rate than in the past quarters. So we are encouraged by the trend we’re seeing on the credit side.

We’re making good progress on our funding. We raised $667 million in equipment lease securitization at a coupon at a little bit north of 3.3%. We put in place a $1 billion vendor conduit with a similar cost and as we announced already in the press release, we intend to pay down an additional $1.5 billion of first lien debt.

In terms of the businesses, on the Trade Finance side, we are adding a new business. We added about $700 million of annual factoring volume with Lee & Fung and we’re seeing clients return to us with factoring volumes of about $1.5 billion annually.

We’re seeing activity gradually improving on the vendor side. We announced yesterday, we have an agreement to sell Australia and New Zealand vendor business. This sale is part of the optimization process we’re going through with our different businesses.

In corporate finance, we are starting to see increased demand. Just one small example, in small business lending, applications were up 70% in terms of dollar volume. We are beginning to book corporate loans in CIT banks. We’re starting to utilize the cash in that bank. And as you also saw, we previously announced, we spun off Edgeview, which is a further attempt to reduce head count and expenses.

On the Transportation side, our commercial air fleet is 100% leased. All of our 2010 deliveries have been leased. Of our 2010 expirations, we’re about 75% leased and on our 2011 deliveries, we are about half leased. So very good results on that side.

In the Rail business, we’re running at about a 90% utilization rate, although we are starting to see rail car loadings improve.

In terms of the priorities that I talked about on our first call, we are actively working on lowering our financing costs and you see that as a combination of new securitization, optimizing both our businesses and our loan portfolios and paying down the first lien debt.

We have made progress on hiring key executives. There’s an approval process we have to go through with the Fed which is why we haven’t announced anything publicly, but of our key slots, we’re about 50% done in terms of new hires.

We continue to work on our regulatory relationships. As I said on our first call, this is going to be a long process, but we are working on improving our relationships with the Fed and the FDIC and the Utah regulators.

And then as I also mentioned on our first call, we will continue to focus on expenses and at least near term, as our balance sheet shrinks, we will work to keep our expenses in line with our revenue base.

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