CIT Group Inc (DEL) (CIT)

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CIT Group (CIT)

Q4 2010 Earnings Call

February 15, 2011 8:00 am ET


Kenneth Brause - Executive Vice President of Investor Relations

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

John Thain - Chairman and Chief Executive Officer


Michael Taiano - Sandler O’Neill & Partners

John Stilmar - SunTrust Robinson Humphrey Capital Markets

Sameer Gokhale - Keefe, Bruyette, & Woods, Inc.

Bruce Harting - Barclays Capital

Michael Turner

Bradley Ball - Evercore Partners Inc.

Moshe Orenbuch - Crédit Suisse AG

Donald Fandetti - Citigroup Inc

Matthew Kelley - Morgan Stanley

Henry Coffey - Sterne Agee & Leach Inc.



Good morning. And welcome to the CIT Fourth Quarter 2010 Earnings Conference Call. My name is Eric, and I will be your operator today. Participating in today's call are John Thain, Chairman and Chief Executive Officer; Scott Parker, Chief Financial Officer; and Ken Brause, Head of Investor Relations. [Operator Instructions] I would now like to turn your call over to Ken Brause. Please proceed, sir.

Kenneth Brause

Thank you, Eric. And good morning, everyone. Welcome to CIT's year-end 2010 earnings conference call. Our call today is hosted by John Thain, our Chairman and CEO; and Scott Parker, our CFO. Following our formal remarks, we will have a Q&A session. We do ask that you limit yourself to one question and a follow-up, and then return to the queue if you do have additional questions. We will 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 our business, please refer to our 2009 Form 10-K that was filed with the SEC in March of last year. Any references to certain non-GAAP financial measures are meant to provide meaningful insights and are reconciled with GAAP in the press release. And for more information on CIT, please visit the Investor Relations section of our website I'd like to now turn the call over to John Thain.

John Thain

Thank you, Ken. Good morning, everyone. And thank you all for being on our call this morning. I'd like to make some opening comments and then I'll turn it over to Scott.

I am pleased with our progress that we made in 2010. We completed the build out of our senior management team. We sold over $5 billion of non-core assets. We repaid over $7 billion of high-cost debt, including $4.5 billion of first-lien debt and we refinanced the remaining $3 billion of first-lien debt. We repaid $2.1 billion of Series B debt, the last piece was actually done in January. And we started the process of dealing with the Series A debt with $500 million.

We also raised nearly $3 billion of new secured financing at attractive rates, and we established CIT Bank as a major originator of assets. We originated $1.2 billion of commitments in CIT Bank over the course of the year. Just in the fourth quarter alone, CIT Bank originated $675 million of commitments, including almost all of our U.S. Corporate Finance new originations.

We've made progress on our regulatory relationships. We have built out our risk management functions, our internal audit functions, our loan review functions and our compliance functions. And we have made meaningful progress on our written agreement, although there is still much we need to do on the written agreement.

We've been effective in bringing our costs down, and I'm pleased with the growth that we've seen in our new volume. We originated $4.5 billion of new volume over the course of the year. But importantly, we originated $1.5 billion of new volume in the fourth quarter and we've seen consecutive quarter-over-quarter growth in our new originations. Our credit portfolio had stabilized, and Scott will cover that in more detail.

So as I look forward into 2011, I want to share some of our priorities for this year. First, we will substantially satisfy the remaining open items in the Fed written agreement. Second, we will continue to expand the role of CIT Bank, both in terms of adding assets and diversifying its funding base. Third, we will focus on growth in our four core businesses, both domestically and internationally. And as I mentioned, the trend is positive across our businesses.

We will make significant progress in refinancing the Series A debt, and that's what’s going to be our focus on the debt side. We will continue to strengthen our risk management functions, our compliance, our internal audit and our loan review functions. And we will continue to actively manage our expenses. So that will be our focus for this year. And now, let me turn it over to Scott to give you some more details on the fourth quarter and 2010.

Scott Parker

Thank you, John. Good morning. While the fourth quarter results were impacted by several AUMs, the restructuring charge, debt prepayments and a favorable tax settlement, the underlying trends of increased business activity, lower borrowing costs and stabilizing credit quality continued. This morning, I will review the consolidated quarterly results, touch on the segment highlights, funding progress and then comment on fresh-start accounting. All of my comparisons will be to the restated figures that were provided in the press release today.

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