Daily News: June 27, 2014

CIT’s Thain Looking to Buy a Bank

According to a report posted by TheStreet, CIT CEO John Thain said CIT is looking to acquire a bank of significant size as the firm tries to broaden its funding sources. Thain comments were made at a recent investor day conference.

A review of the presentation slides from the conference revealed the following:

In his presentation, Thain showed how virtually all U.S. loan and lease volume could be funded especially if CIT could expand its online deposit products and perhaps even deploy a bank branch strategy.

The presentation showed that CIT Bank assets had surpassed $16.5 billion as of March 31, 2014 with deposits exceeding $13 billion. CIT said that significant progress was being made transitioning it U.S. portfolio to CIT Bank, and noted that essentially all of U.S. loan originations that were housed in the CIT Bank portfolio would benefit from margin improvement from lower cost deposit funding. CIT noted in its presentation that the weighted average deposit rate in Q1/14 was 1.58%.

In its presentation on its “Path to Improving Credit Ratings,” CIT noted that the role of CIT Bank would be to accommodate nearly all of CIT’s U.S. lending and leasing volume being originated in CIT Bank. Strong growth in deposits, which now account for 42% of CIT’s total funding, would continue to expand by growing its online deposit product offerings.

In slide presentation, CIT noted that its net finance margin in Q1/14 of 3.3% had declined from 3.5% in Q1/13. The net portfolio yield of 7.0% had dropped from 8.0% a year earlier. However the average cost of funds over the same period was shown as 3.7%, which was down from 4.4% in Q1/13.

In its near term outlook, CIT said overall net finance revenue is expected to decline slightly in Q2 given continued pricing pressure and higher operating lease expenses due to aircraft re-leasing.

To read the full TheStreet report, click here.

To read the full CIT Group presentation, click here.