CIT Group Inc.

International Directory of Company Histories, Volume 76 (2005) by A. Woodward

CIT Group Inc.

1211 Avenue of the Americas New York, New York 10036 U.S.A. Telephone: (212) 536-1211 Web site: http://www.citgroup.com

Public Company Incorporated: 1908 as Commercial Credit and Investment Company Employees: 6,000 Sales: $46.7 billion (2004) Stock Exchanges: New York Ticker Symbol: CIT NAIC: 522220 Sales Financing; 522290 Other Nondepository Credit Intermediation

CIT Group Inc. is one of the nation's leading specialty and commercial finance companies. It specializes in lending, leasing, and financing for small- to mid-sized companies. CIT is an expert in some of the more arcane aspects of corporate borrowing, using intimate knowledge of its client companies to arrange successful deals for equipment leasing, factoring, lending for acquisitions and expansion, and credit management. The company's clients include more than 700,000 companies, with specializations in the transportation industry, the apparel industry, and the construction equipment industry. CIT operates across North and South America, in Europe and the Pacific Rim. The company was a subsidiary of RCA and then Manufacturers Hanover Bank in the 1980s, after being a freestanding public company for many years. CIT went public again in 1997. It was briefly owned by Tyco International Ltd. in 2001 and then was spun off to the public again in 2002.

Early Years

CIT began life with a longer name, the Commercial Credit and Investment Company. It was founded in St. Louis in 1908 by businessman Henry Ittleson. Ittleson was first interested in financing receivables for area companies. Receivables are cash amounts due a company from its customers or other companies with which it does business. With managing cash flow sometimes a problem for small businesses or those in certain industries, a third-party financial company like Commercial Credit and Investment may be welcome to step in. So from its very earliest years, CIT was involved in this kind of behind-the-scenes commercial financing. After working in the St. Louis area for a few years, Ittleson significantly expanded the business by signing an agreement with the automobile maker Studebaker in 1915. Commercial Credit and Investment became the nation's first specialized financer of wholesale and retail automobile sales. With this move to a nationwide business, Commercial Credit moved its headquarters to New York City. It also changed its name to Commercial Investment Trust, and became known thereafter by the initials C.I.T.

In 1924, C.I.T. sold stock to the public and was listed on the prestigious New York Stock Exchange. By that year it had assets of almost $50 million and 600 employees. It continued its focus on automobile financing, in 1933, buying Universal Credit Corporation, the financing subsidiary of the Ford Motor Company. C.I.T. explored other forms of industrial financing as well. Lending money and financing equipment leases to companies too small to attract big banks was a profitable niche in the overall financial services industry. C.I.T. incorporated a new subsidiary, CIT Financial Corporation, in 1942, to focus on industrial financing. The company was also long involved in a financial service called factoring. Factoring is when a financial services company buys a manufacturer's invoices at a discount. C.I.T. would pay cash for the discounted invoices, and then proceed to collect the owed amount. Factoring is deeply embedded in the apparel and textile industries in the United States, and C.I.T. was a major player from early on. The company had several subsidiaries involved principally in factoring. In 1964, C.I.T. combined its factoring units into a new subsidiary called Meinhard-Commercial Corporation. At the same time, it maintained another factoring company called William Iselin and Co. By the end of the 1960s, C.I.T. poured more of its energies into factoring as well as into financing of industrial equipment leases. It began to diminish its automobile financing business.

Subsidiary Company in the 1980s

Manufacturers Hanover was the country's fourth largest bank at that time, with $62 billion in assets. It paid $1.5 billion for C.I.T. According to the banking industry journal American Banker (November 25, 1983), Manufacturers Hanover was willing to pay a steep price for C.I.T. because it liked the financial services company's "hold on the national middle market." C.I.T. was in a high-growth, high-margin niche. RCA was willing to let C.I.T. go not only because the electronics company was returning to its core business but because it had not been able to make money out of C.I.T. RCA had taken on too much debt in acquiring C.I.T., and even though C.I.T. contributed half of RCA's net income of $223 million in 1983, cash flow had not been enough to offset debt. So both RCA and Manufacturers Hanover seemed pleased with the sale.

In 1986, C.I.T. changed its name to simply the CIT Group. The next year, Manufacturers Hanover senior executive vice-president Albert Gamper, Jr., became chairman and chief executive of the acquired company. In the mid-1980s, CIT was a leader in so-called asset-based financing, and was one of the largest U.S. companies in industrial and commercial financing. It targeted companies with sales from $1 million to $250 million, a vast and growing market of small- to mid-sized firms often too small or too risky to attract other lenders. By that time, CIT had approximately 100 offices around the United States, and handled roughly 50,000 accounts. The company prided itself on its knowledge of its core market of small businesses. It was able to charge from 1 to 2 percent more than regular bank lenders by doing so-called asset-based financing. This means CIT gave out loans secured by a lien on assets, which could be accounts receivable, inventory, or even things like trademark and franchise rights. CIT also continued to provide factoring and traditional commercial financing.