January 31, 2012 / 3:28 PM / in 7 years

CIT earnings beat expectations, shares rise

(Reuters) - CIT Group Inc (CIT.N), the business lender led by former Merrill Lynch Chief Executive John Thain, said fourth-quarter net income fell 59 percent, but a decline in problem loans and borrowing costs helped it beat analysts’ expectations.

CIT, which in late 2009 emerged from a brief bankruptcy, said it made progress in increasing loan volume across its four business segments and redeemed about $860 million of high-cost debt in the quarter.

Its commercial finance and airplane and railcar leasing assets grew for the first time since the end of 2009, and it continued to sell student loans and other impaired assets.

“The U.S. economy is growing, it’s growing slowly, and we see that across all our business segments,” Thain said in a conference call with analysts.

CIT operates under an agreement subjecting it to close scrutiny from the Federal Reserve Bank of New York. Thain said CIT has submitted documentation to the regulator showing it has met requirements relating to capital and credit improvement.

With regulatory approval, CIT may be allowed to use excess cash for shareholder-friendly actions such as share repurchases or a dividend restoration in 2013, Chief Financial Officer Scott Parker told analysts.

The company has attracted more than $600 million of deposits and certificate of deposit purchases since opening an online bank in October to attract low-cost funding. The deposits pay an average of 1.1 percent and mature on average in 18 months, Thain said.

The New York-based commercial finance company reported fourth-quarter net earnings of $33.9 million, or 17 cents a share, down from $83.2 million, or 41 cents a share, a year earlier. Analysts’ average forecast was 2 cents a share, according to Thomson Reuters I/B/E/S.

Pretax income, a metric that excludes costs related to early payment of high-cost debt and bankruptcy-related accounting benefits, was $140 million, compared with a loss of $160 million a year earlier.

CIT said it was restating financial results for the first three quarters of 2011 and all of 2009 and 2010 due to about $68 million of refunds to retailing and other clients in its trade finance unit. The restatement decreased its tangible book value by 32 cents a share and was reflected in its end-of-year book value of $42.35.

Shares of CIT were up 2.2 percent at $38.85 in morning trading on the New York Stock Exchange. The stock price over the past year had a high of $48.77 and a low of $27.68.

Reporting by Jed Horowitz in New York and Tanya Agrawal in Bangalore; Editing by Supriya Kurane and John Wallace

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