CIT Reports Second Quarter Results

Business Wire, July 18, 2007

Exiting Home Lending Business

Asset Manager and Portfolio Management Strategies Progress

Quarterly Financial Highlights

* Loss of $0.70 per share, with $2.58 per share loss on home lending business exit

* $0.71 per share gain on sale of U.S. construction portfolio

* Completed Healthcare REIT and CLO transactions

* Commercial credit metrics remain favorable

NEW YORK -- CIT Group Inc. (NYSE: CIT), today reported a diluted loss per share of $0.70 for the 2007 quarter, versus $1.16 of earnings per share for the 2006 quarter. The net loss attributable to common shareholders was $134.5 million for the current quarter, versus $236.0 million income for the prior year quarter.

The net loss included noteworthy items related to executing active portfolio management and other operating initiatives as follows:

* a pretax charge of $765 million (net of pre-existing credit reserves of $228 million, but including unamortized origination costs) relating to a fair value adjustment on $10.6 billion of receivables transferred to assets held for sale in connection with the planned exit of our home lending business ($495.3 million after tax, $2.58 per share loss);

* a pretax gain of $228.7 million, from the sale of our $2.6 billion U.S. construction portfolio ($136.9 million after tax, $0.71 per share gain); and

* a pretax charge of $34.9 million for employee termination benefits in conjunction with non-home lending work force reductions ($21.1 million after tax, $0.11 per share loss).

"Although we made progress executing on our business strategy, it was a challenging quarter where we had to make some tough decisions," said Jeffrey M. Peek, Chairman and Chief Executive Officer of CIT. "All CIT's businesses must meet rigorous return standards. As a result, we decided to exit home lending and construction enabling us to redeploy resources to higher returning businesses. While we believe exiting home lending is the right decision, it significantly impacted our current results."

"In terms of strategic progress, we advanced our business through active portfolio management and asset manager initiatives. We acquired Citigroup's $2 billion U.S. Business Technology Finance unit and Edgeview Partners, further building our core franchise. The completion of our CLO and a healthcare REIT reflect solid progress in building an asset manager model. We have also decided to pursue a public offering option for a portion of our Aerospace portfolio. We are confident that our actions in this difficult quarter will deliver long-term shareholder value."

Excluding the noteworthy items described above, quarterly earnings improved over the prior year on higher finance revenue, due to higher earning assets, a lower effective tax rate and strong year over year volume growth. The current quarter was also negatively impacted by a $22.5 million charge ($0.07 EPS) in non-spread revenue relating to the disposition of a waste-to-energy plant previously acquired in a loan workout and $14.6 million of home lending operating losses ($0.04 EPS).

Consolidated Financial Highlights:

Net Finance Revenue

* Net finance revenue was up 17% from last year and 9% from last quarter on higher assets and spread expansion from last quarter.

* Net finance revenue as a percentage of average earning assets was 2.89%, versus 2.83% last quarter and 3.16% last year. The decline from last year is primarily due to competitive pricing, capital initiatives, and lower yield-related fees, while benefits from refinancing debt earlier this year contributed to the sequential increase.

* Operating lease net revenue, driven primarily by aerospace and rail equipment rentals, was 7.24% of average operating leases, up from 6.48% last year and 6.82% last quarter.

Other Revenue

* Other revenue increased over last year and last quarter, driven by the previously-mentioned construction sale gain. Excluding this item, non-spread revenue declined from both periods, as higher syndication fees and gains from receivable sales were offset by lower fees and other income during the quarter. The year over year decline in fee income primarily reflected a Transportation Finance commercial aircraft insurance recovery in the prior year, while the sequential decrease reflected lower joint venture profits and reduced structuring fees.

* Excluding the construction sale, during the quarter we sold or syndicated receivables of $3.1 billion (28% of origination volume), compared to $2.2 billion (22%) last year.

Credit Quality

* Net charge-offs as a percentage of average finance receivables were up from last quarter and last year, due to home lending and lower commercial recoveries. Excluding home lending, charge-offs were 0.34% and 0.24% for the current and prior year quarters.

* Second quarter home lending net charge-offs were $38.4 million (1.37% of average finance receivables), up from $30.8 million (1.20%) and $18.8 million (0.84%) last quarter and last year.

* Total 60 day owned delinquencies as a percentage of finance receivables were up from last quarter and a year ago, primarily due to home lending. Excluding both home lending and student lending, delinquencies were 1.16%, versus 1.15% last quarter and 1.47% last year.