Cit Group (NYSE:CIT)
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5 Years : From Jan 2013 to Jan 2018
CIT Group Inc. (CIT) said Wednesday it expects to use its bank's deposits to fund loans for its vendor finance business later this year.
Flexibility to fund different types of loans through its bank deposits will help CIT increase its shrinking asset base and spur revenue. Total assets as of March 31 were $51 billion, down 13.5% from a year earlier and unchanged from the fourth quarter.
CIT has been employing the existing brokered deposits at its bank to make corporate loans. But CIT still needs approval from regulators to use these deposits to fund loans for its vendor finance and trade finance businesses--important components of CIT's lending business.
CIT expects to move its vendor business platform to CIT Bank later this year, subject to regulatory approval, Chief Executive John A. Thain said on a conference call discussing CIT's first-quarter results.
Earlier this month, regulators lifted a cease-and-desist order, allowing the company to increase its brokered deposits. The go-ahead bolsters the small business lender's access to deposits, a cheap funding source, and underscores CIT's progress in winning back the confidence of regulators.
Winning back the confidence of regulators has been a primary goal for Thain, the former Merrill Lynch CEO, who took the CIT helm in February 2010. CIT is focused on increasing deposits at its bank and using these deposits to fund more types of loans, Thain said Wednesday.
Earlier Wednesday, CIT, a lender to small and mid-sized businesses, reported a first-quarter profit of $65.6 million, down from $144.6 million a year earlier. Net income declined from a year earlier on reduced accounting benefits and as prepayment fees took a bite out of income.
Founded in 1908, CIT relied on bonds and commercial paper to raise funds, which it then lent out at a higher interest rate. The credit crisis made it difficult for CIT to raise capital cheaply, and unable to restructure its debt, the lender filed for bankruptcy protection in November 2009. CIT emerged from bankruptcy protection in December that same year. The bankruptcy court wiped out about $10 billion of CIT's outstanding debt, as well as a $2.3 billion investment from the U.S. Treasury Department's Troubled Asset Relief Program.
CIT shares, at $42.40, were flat in pre-market trading activity.
-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; email@example.com