CIT Reports Q3 Net Loss of $305MM; NBV up 16%
CIT reported a net loss for the quarter ended September 30, 2012 of $305 million, compared to a net loss of $32.8 million for the third quarter of 2011. The current period includes charges of $471 million related to the redemption of $4.6 billion of high cost debt, while the year-ago period included charges of $169 million related to the redemption of the $3 billion first lien term loan and approximately $1.5 billion of high cost debt.
Pre-tax income excluding debt redemption charges was $170 million, down modestly from $176 million in the year-ago quarter. The net loss for the nine months ended September 30, 2012 was $822 million, including debt redemption charges of $1.4 billion, compared to a net loss of $17 million, including debt redemption charges of $0.4 billion, in the comparable 2011 period.
CIT said funded new business volume of $2.2 billion increased 16% from the prior-year quarter, while committed new business volume of $2.5 billion increased 7% reflecting strong increases in Corporate Finance and Vendor Finance. Compared to the second quarter, volume decreased in Corporate Finance and Vendor Finance, as well as in Transportation Finance, which had fewer scheduled deliveries. Trade Finance factoring volume of $6.4 billion increased 8% sequentially, reflecting seasonal trends, but declined by approximately 6% from the year-ago quarter.
“We achieved several strategic milestones this quarter that will lower our funding costs and better position CIT for future profitability,” said John Thain, chairman and chief executive officer. “We eliminated the last of our $31 billion of restructuring-related debt, grew commercial assets for the fourth consecutive quarter, and exceeded $3.5 billion in Internet deposits at CIT Bank. We will continue to focus on achieving our financial targets as we meet the needs of our small business and middle market clients.”
Excluding accelerated FSA interest expense, pre-tax earnings increased 21% from the prior-year quarter, primarily due to lower funding costs. Factoring volume was $6.4 billion, up 8% sequentially reflecting seasonal trends, but down 6% from the prior-year quarter. Factoring commissions of $33 million experienced similar trends as factoring volume.
Non-accrual balances decreased substantially from a year ago, primarily due to accounts returning to accrual status and reductions in exposures, and also decreased from June 30, 2012. Recoveries equaled charge-offs for the quarter.
Excluding accelerated FSA interest expense, pre-tax earnings increased 49% from the prior-year quarter, as a lower credit provision and higher net finance revenue more than offset lower non-spread revenue, which decreased primarily due to lower gains on sales and recoveries. The sequential quarter decline is attributable to reduced benefits from net FSA accretion, prepayments and gains on asset sales, which were partially offset by a lower credit provision. Gains on asset sales totaled $12 million in the current quarter, down from approximately $20 million in the prior-year quarter and $17 million last quarter.
Financing and leasing assets grew $0.8 billion from September 30, 2011, and $0.3 billion from June 30, 2012, to $7.9 billion. New committed loan volume rose 9% from the prior-year quarter to $1.2 billion, while new funded volume increased 37% to $0.9 billion. Current period volumes, both funded and committed, declined sequentially. Approximately 95% of U.S. funded volume this quarter was originated by CIT Bank, up from 90% in the year-ago quarter.
Non-accrual loans declined to $256 million from $316 million at June 30, 2012 and $674 million a year ago, and net charge-offs were $5 million, down significantly from the prior-year quarter and down slightly from the second quarter of 2012.
To read the full CIT earnings news release, click here.