CIT Group reported net income for the second quarter of 2010 of $142.1 million, or $0.71 per diluted share, up from $97.3 million and $0.49 per diluted share in the first quarter. Results aren’t directly comparable with those before CIT’s bankruptcy reorganization.

The company’s earnings far exceeded analysts’ expectations. Thompson/Reuters was forecasting income of $0.33 per share, while the average estimate of five analysts surveyed by Bloomberg was $0.36 cents.

CIT said gains on sales of assets and recoveries of pre-FSA charged-off receivables more than offset a higher provision for credit losses and costs for an employee retention program announced last quarter.

Reported net charge-offs of $106 million were up $64 million from the first quarter. Non-accrual loans of $2.1 billion increased $120 million from the first quarter, driven primarily by Corporate Finance.

The provision for credit losses increased from the first quarter, reflecting the recording of non-specific reserves and some incremental deterioration on loans previously discounted in FSA.

The sequential quarter improvement in Corporate Finance earnings was driven by higher gains on asset sales and recoveries on pre-FSA loan balances. Corporate Finance completed sales of a joint venture and other assets totaling approximately $890 million, the proceeds of which were used to pay down debt. Corporate Finance new business volume increased from the first quarter.

Trade Finance narrowed its loss, which is being driven by high cost of funds. At the end of the quarter, the business closed a new committed conduit facility, which will reduce the future cost of funds. The existing client base stabilized and the rate of attrition subsided. Factoring volume totaled $6.3 billion, flat with the first quarter, contributing to level factoring commissions. Credit metrics remained comparable with the first quarter as charge-offs and non-accrual loans remain at relatively low levels.