Daily News: October 22, 2013

CIT Reports $200MM Q3 Net Income; Corporate Finance Volume $1.1B

CIT Group reported net income of $200 million, $0.99 per diluted share, for the third quarter of 2013, compared to a net loss of $299 million, $1.49 per diluted share, for the third quarter of 2012. Net income for the nine month period ended September 30, 2013 was $546 million, $2.70 per diluted share, compared to a net loss of $799 million, $3.98 per diluted share in the prior year. Prior year results include significant debt redemption charges.

“Our third quarter results reflect our progress in prudently growing assets, expanding CIT Bank, and returning capital to our shareholders,” said John Thain, chairman and chief executive officer. “We remain focused on building our franchise as we put our knowledge to work on behalf of our clients, who remain the heart of the U.S. economy.”

The following commentary on Corporate and Trade Finance was excerpted from the CIT news release:

Corporate Finance

Pre-tax earnings for the quarter were $37 million, down from $46 million in the year-ago quarter, due to higher credit provision, and from $43 million in the prior quarter reflecting lower levels of accelerated yield-related fees in the current period and the benefit of a workout-related settlement in the prior quarter.

Financing and leasing assets grew to $9.8 billion, up $0.4 billion from June 30, 2013, reflecting solid new business volumes, and up $1.9 billion from September 30, 2012, which also reflects a portfolio purchased during the first quarter of 2013. Funded loan volume, which includes a balanced mix of asset-secured and cash-flow loans, totaled $1.1 billion, up from $0.9 billion in the year-ago quarter and down from $1.3 billion in the prior quarter. During the quarter, approximately $108 million of loans were transferred to assets held for sale, which totaled $490 million at quarter-end. In October, we entered into a definitive agreement to sell our small business lending portfolio, which represented the majority of assets held for sale at quarter-end. The sale is expected to be completed in the first quarter of 2014 subject to approval by the Small Business Administration.

Credit performance remained strong. Non-accrual loans declined to $155 million (1.68% of finance receivables) from $256 million (3.28%) a year ago and $173 million (1.95%) at June 30, 2013. Net charge-offs were $9 million (0.39% of average finance receivables), compared to $5 million (0.26%) in the prior-year quarter and $22 million (0.97%) last quarter, nearly all of which was attributable to loans transferred to assets held for sale.

Trade Finance

Pre-tax earnings for the quarter were $17 million, compared to $13 million in the year-ago quarter, and $14 million in the prior quarter. Factoring volume was $6.6 billion, up 4% from the year-ago quarter, and 11% sequentially reflecting normal seasonality. Factoring commissions of $32.3 million were down slightly from the year-ago period and up 11% from the prior quarter.

Credit metrics remained favorable. Non-accrual balances of $7 million declined from $27 million a year ago, primarily due to accounts returning to accrual status and reductions in exposures, and rose from $3 million at June 30, 2013 primarily due to one additional loan classified as non-accrual. There was a net recovery of $1 million in the current quarter and modest recoveries in each of the year-ago and prior quarters.

To read the full text of the CIT news release click here.