CIT Group Inc., the commercial lender run by John A. Thain, rose in New York trading after posting a surprise profit for its first full quarter since emerging from bankruptcy.
CIT gained 79 cents, or 1.9 percent, to $41.49, as of 10:28 a.m. in New York Stock Exchange composite trading and sold for as much as $42.94, a new high since its December reorganization. The shares advanced 47 percent this year through yesterday.
Thain told investors during a conference call today that credit losses are easing and that CIT is pushing ahead with plans to cut funding costs and use its banking unit to make more loans. New York-based CIT posted a first-quarter profit of $97 million, or 49 cents a share, according to a statement.
“We’re seeing encouraging signs on credit,” Thain, 54, said during the conference call. Write-offs of bad loans were “significantly lower” even before the impact of “fresh start” accounting used to emerge from bankruptcy, he said.
Thain has said CIT’s recovery is being held back by the cost of its bond and bank loan financing, which carry interest rates as high as 13 percent. He’s trying to persuade bank regulators to lift curbs on using federally insured deposits so he can reduce financing costs, and planning to pay down the most expensive debt.
Debt Payments
The lender intends to prepay $1.5 billion of first-lien debt, citing improved liquidity and cash flow, CIT said. Total cash increased to $10 billion from $9.83 billion at year-end, including $5.5 billion available to repay debt. Deposits decreased 7 percent to $4.85 billion.
CIT will make the $1.5 billion repayment “very soon,” Joseph Leone, CIT’s chief financial officer said during the conference call.
“The sooner they can pay that down, the better,” Sameer Gokhale, an analyst at KBW Inc., said before the results were released. He rates CIT stock “market perform.”
Loans and leases on which CIT is no longer accruing interest increased 23 percent to $1.93 billion at the end of December, CIT said. Almost half of the increase was tied to the unit’s transportation finance unit, which leases airplanes and railroad equipment.
Officials are “comfortable that we don’t have a lot of risk exposure” on the transportation loans, Leone said. “The collateral value is very good.”
Fresh Start
Results benefited from accounting adjustments, which were greater than forecast because more customers repaid loans faster than anticipated, Leone said. Under “fresh start accounting” that the company was required to adopt on its exit from bankruptcy, CIT marked its loans to fair value, discounting many loans to less than what customers owed. As more of those loans were repaid than expected, the discounts were reversed, which contributed to income.
The impact of those changes, along with some changes in depreciation, amounted to $421 million before tax, according to the statement.
Without the accounting adjustments, CIT’s real profit margins are “unacceptable,” Leone said. The company is making only 0.65 percentage points between its cost of money and what it makes on loans and leases, he said. The accounting adjustments caused the company to report profit that reflected interest margins about five times higher, at 4.09 points, according to the company’s statement.
The accounting adjustments aren’t entirely non-cash, Thain said in the conference call. He pointed out that they reflect repayments of loans that provide CIT cash which it can use to pay down expensive borrowings.
Book Value
Book value per common share, a gauge of what’s left for investors after all liabilities are covered, rose 1.5 percent to $42.63 a share. Tangible book value, which excludes goodwill, was $40.43 a share.
The results aren’t directly comparable to past quarters because the lender’s financial structure was changed when it emerged from bankruptcy Dec. 10, analysts said. CIT issued 200 million new shares to creditors at the conclusion of the bankruptcy and canceled existing stock. Debt was reduced by $10.4 billion.
CIT has $23.2 billion of outstanding bonds, which haven’t been rated by Standard & Poor’s or Moody’s Investors Service since they were issued in the bankruptcy. If the bonds were rated junk, or speculative grade, the amount owed would be more than the total dollar-denominated bonds outstanding for all but three of more than 900 companies listed in the Bank of America Merrill Lynch High-Yield Master II index.
CIT filed for bankruptcy court protection in November with agreements from creditors to restructure its debts. The case was the fifth-largest U.S. commercial bankruptcy.
The action came after CIT failed to convince the government that it should receive an additional round of bailout money following a $2.3 billion infusion in exchange for preferred stock and warrants in December 2008. The government lost its entire investment.
By David Henry
Tags: economy, financial, financial markets, financial system, Global Economy, interest rates, investors, lender, us economy
Impressive writing style…
Intriguing content. All the things i must make contributions would be the fact private cognizance essential to can be obtained when your home pc can not make it through find out what you do with this can. Email newsletter can release couple of Ram memo…
absconds…
I would argue that most people who go looking for help (on any website) don’t want to *know* something, they want to *do* something. (Yes, I recognize “doing” requires some “knowing, but that’s secondary at best.) Whether it’s in the Getting Star…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]… …
Recommended websites…
[...]Here are some of the sites we recommend for our visitors[...]……
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
[...]Sites of interest we have a link to[...]……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
natural remedies for hemorrhoids…
[...]Sites of interest we’ve a link to[...]…
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
Links…
[...]Sites of interest we have a link to[...]……
Wow!…
A very awesome post. …
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
open office…
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose open office[...]……
Perspex box…
[...]The information mentioned in the report are a number of the top out there [...]…
[...]Sites of interest we have a link to[...]……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
Another Website likes your page…
[...]one your visitors recently recommended the subsequent website[...]…
Wow!…
A very fascinating post. …
present herbal smoke as “legal” marijuana. this…
could leave the impression that they support legalizing it. it also gives rise to the belief that herbal smoke products are going to provide the same kind of high that you get with street drugs. this is not the case. they…
and manufacture; much is at stake. big…
tobacco has responded by shifting their marketing emphasis into the lucrative and largely unregulated third world market.smoking bans in historyof course smoking bans are not a new phenomenon. soon after tobaccos discovery by the west in the 1500’s, g…
the integration of twitter. others include the…
newsstand app for magazine and newspaper subscriptions and imessage which offers a similar facetime function but over text based messaging to other apple devices also. the reminders app also provides a simple interface which allows you to keep control …
Buy Yankee Candles Cheap…
[...]below you’ll find the link to some sites that we think you should visit[...]…
to the paperwork that most people try…
avoiding. it is good to store your property tax records in soft copy online, but always remember to download a compressed hard copy to file. this article is the first of two that will cover the various aspects of buying real…
day and night, to address their concerns….
after all, problems do not just happen during the period when you are operating. do not miss a single opportunity by implementing 24/7 live answering service.*hire skilled live operators. the entire program will be put to nothing if live operators do…
abraders…
Ethnicity hebrew Jewish Judaism Marc Ostrick Two Live Jews Yiddish language Related Videos Two Live Jews Episode 1eG Live Pick Up the Phone!Two Live Jews Without JewsThe B Side Live Episode…
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
2011…
I’d have to examine with you here. Which is not one thing I usually do! I take pleasure in reading a post that may make folks think. Additionally, thanks for permitting me to comment!…
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
ablegate…
My entire web site is 100% data-driven. If I lock the tables, it will bring the entire web site down for a while. The Googlebots are hitting my web site every 30 to 90 seconds. If the site is down when the Googlebot comes and the bot sees that the site…
Windows 8…
[...]we like to honor other sites on the web, even if they aren’t related to us, by linking to them. Below are some sites worth checking out[...]…
Another Website Recommends Your Page…
[...]check below, are а few totally unrelated websites tо ours, however, these are moѕt trustworthy sources that anу оf uѕ use[...]…