CIT Group Inc (DEL) (CIT)

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CIT Group (CIT)

Q4 2011 Earnings Call

January 31, 2012 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

Mark C. DeVries - Barclays Capital, Research Division

Moshe Orenbuch - Crédit Suisse AG, Research Division

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

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

David S. Hochstim - Buckingham Research Group, Inc.

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

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

John W. Stilmar - SunTrust Robinson Humphrey, Inc., Research Division

Kenneth Bruce - BofA Merrill Lynch, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Year-End 2011 Earnings -- City (sic) [CIT] Earnings Conference Call. My name is Lacey, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the presentation over to your host for today's call, Mr. Ken Brause, Director of Investor Relations. Please proceed, sir.

Kenneth A. Brause

Well, thank you, Lacey. Good morning, and just to clarify, this is the CIT Fourth Quarter and Year-End 2011 Earnings Conference Call. Our call today will be 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 2010 Form 10-K that was filed with the SEC in March 2011.

Any references to non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP in our press release. Also, please note that we have posted an updated financial data package on our website this morning. This package has been updated for fourth quarter results and reflects the prior period revisions for the time periods presented. For more information on CIT, please visit the Investor Relations section of our website at www.cit.com.

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

John A. Thain

Thank you, Ken. Good morning, everyone, and thank you for being on our call this morning. We reported a good profitable fourth quarter, and we were profitable for the full year. We originated new business volume in the quarter that was up across all 4 of our Commercial business segments. We originated $3.3 billion of new committed volume, which was up 40% sequentially. As Scott correctly predicted on earlier calls, our commercial finance and leasing assets grew for the first time this quarter. They grew about $900 million since our bankruptcy.

We continue to redeem and repurchase our high-cost debt. We redeemed and repurchased $860 million in the quarter. And as you've seen from our press releases, we are in the process of repaying $2.5 billion of high-cost debt in the first quarter of 2012, and it's our objective to pay back the remaining approximately $4 billion of Series A debt over the course of 2012.

Our credit metrics improved across the board. Charge-offs, nonaccruals and inflows to nonaccruals, all were lower. CIT Bank grew both on the asset side and on the liability side. Our commercial assets in CIT Bank were up about 35%.

The launch of our Internet deposit was very successful. As of last Friday, so not as the year end, but as of last Friday, we had over $600 million of Internet deposits. The average rate on those deposits was about 1.1%, and the average maturity was about 1.5 years.

We did, at year-end, substantially satisfy all of the written agreement items, and we're now awaiting the fed's acknowledgment of that. We ended the year with a very strong capital. Our Tier 1 capital was 8.8% with a lot of liquidity. We had $8.4 billion of cash. We also had $1.9 billion of our $2 billion revolver undrawn, and our expenses were in line with the -- with our expectations.

Just briefly across our businesses. Our Corporate Finance business, we originated new committed volume of $1.2 billion. That was up 10% sequentially in over 40 transactions.

On the Transportation side, we added 15 new airplanes in the quarter. We actually sold 4, so we're net up 11. And for the year, in terms of aircraft, we added 37 new aircraft and sold 11, so we're up net 26. We also added 1,600 new railcars in the quarter, and we delivered our first railcars to CIT Bank, which is the beginning of getting more of that business into the bank. We also scrapped most of our idle centerbeam cars. They show up in held for sale, but they -- we're in the process of scrapping those. And if you look at our utilization rates in railcars, if you include centerbeams, they were -- our cars were 97% utilized, and if you exclude centerbeams, they were 99.9%. We had about 100 railcars that were not being utilized. And at the end of the year, we did have one airplane that was off lease, but we now have an MOU to release that.

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