CIT Group Inc (DEL) (CIT)

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CIT Group (CIT)

Q1 2011 Earnings Call

April 27, 2011 8:00 am ET

Executives

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

Analysts

Michael Taiano - Sandler O’Neill & Partners

Matthew Schultheis - Boenning and Scattergood, Inc.

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

Michael Turner

Kenneth Bruce - BofA Merrill Lynch

Donald Fandetti - Citigroup Inc

Bradley Ball - Evercore Partners Inc.

Moshe Orenbuch - Crédit Suisse AG

John Stilmar - SunTrust Robinson Humphrey, Inc.

Christopher Brendler - Stifel, Nicolaus & Co., Inc.

David Hochstim - Buckingham Research Group, Inc.

Fred Woollard

Henry Coffey - Sterne Agee & Leach Inc.

Presentation

Operator

Good morning, and welcome to CIT's First Quarter 2011 Earnings Conference Call. My name is Veronica, 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 call over to Ken Brause, Director of Investor Relations. Please proceed, sir.

Kenneth Brause

Thank you, Veronica, and good morning, everyone. Welcome to CIT's first quarter 2011 earnings conference call. Our call today will be 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 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 the business, please refer to our 2010 Form 10-K that was filed with the SEC in March. 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, www.cit.com.

I'd now like to turn the call over to John Thain.

John Thain

Thank you, Ken. Good morning, everyone, and thank you all for being on the call. I'm going to make a few introductory comments and then turn the call over to Scott.

Our first quarter results reflect continued progress on our strategic objectives. We continued to expand the role of CIT Bank. We're very pleased that the FDIC and the Utah State banking regulators lifted their cease and desist on CIT Bank. We did move our Small Business Lending platform into the bank, and we're now originating new loans for small business lending in CIT Bank. We expect to move our vendor origination platform in the U.S. into the bank later this year subject, of course, to regulatory approval. And we saw a 15% sequential growth in committed loan volume in CIT Bank, including almost 100% of U.S. Corporate Finance being originated in the bank. So the strategic objective of growing the bank, growing the bank's assets and ultimately growing the bank's deposit base will continue.

Second, we made progress on our liability restructuring and lowering our funding costs. Earlier in the quarter, we repaid $1.75 billion of our high-cost debt. We issued $2 billion of new 3- and 7-year debt with lower cost and with better covenants. And as we've already announced, we will repay $2.5 billion of our high-cost debt during this quarter, the second quarter.

In the first quarter, we originated $1.3 billion of new funded volume. I would characterize our credit portfolio as stable and then you've seen the nonperforming loan balances come down, so that's a good sign. We are continuing to focus on expenses, and our expenses were in line with what we were budgeting for the quarter.

Our book value, you saw it grow to $44.85. And you saw us complete the sale of our Dell -- or finalized the agreement to sell our Dell Canada and European assets, which substantially completes the vendor portfolio restructuring. So it's a good quarter from my perspective. We made good progress.

And I'll now turn it over to Scott to get into the details. Scott?

Scott Parker

Thank you, John, and good morning, everyone. We had a good start for the year, reporting $0.33 of earnings and building book value to $ 44.85. And while our reported earnings are lower than prior period, our economic performance is improving driven by solid levels of business activity, stable credit quality and lower borrowing costs. The first quarter also benefited from gains on asset sales and favorable foreign exchange marks.

As with past calls, I will walk you through the key drivers of our consolidated results, review each business segment and update you on funding before turning the call over for questions.

Total assets were essentially flat at $51 billion as the $900 million decrease in finance and leasing assets was largely offset by increased cash and investments. Commercial finance leasing assets declined $500 million and a liquidating consumer book contracted roughly $400 million of which $250 million was from asset sales.

With respect to cash, you may recall we did close the $2 billion Series C issuance right before the quarter end, so we'll not complete the announced $2.5 billion Series A redemption John just mentioned until May.

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