CIT Reports Third Quarter Results

Business Wire, Oct 17, 2007

Quarterly Financial Highlights

* Net loss per share of $0.24

* Home lending pre-tax charge of $465 million

* Commercial businesses performed well

* Strong asset growth

* Solid commercial credit quality

* Moderating expenses

NEW YORK -- CIT Group Inc. (NYSE: CIT), today reported diluted net loss per share of $0.24 for the third quarter of 2007, due to the home lending charge, versus $1.44 of earnings per share for the 2006 quarter. Net loss attributable to common shareholders was $46.3 million for the current quarter, versus net income of $290.8 million last year.

The Company took the following actions on its home lending liquidation strategy:

* Recorded a lower of cost or market ("LOCOM") charge relating to home lending of $465.5 million, or $290.5 million after-tax (EPS decrease of $1.53)

* Closed the origination operations (as previously announced) and recorded a pre-tax charge of $39.6 million (EPS decrease of $0.12);

* Retained $9.7 billion of the portfolio to be liquidated under contractual terms over time (now classified as held-for-investment), of which approximately $7.5 billion of collateral was securitized (proceeds of $4.3 billion in September and $0.8 billion in October, accounted for as on-balance sheet non-recourse, secured borrowing);

* Contracted to sell approximately $875 million of non-performing and delinquent loans in October at prices approximating the September 30, 2007 adjusted carrying value. Continuing to market the balance of loans in held-for-sale; and

* Generated $23 million of income in the home lending segment, excluding the aforementioned charges, (EPS contribution of $0.12).

Excluding the home lending segment, results were driven by improved finance revenue on higher earning assets, stable net finance revenue as a percentage of average earning assets, continued strong commercial credit quality, lower expense levels and a lower effective tax rate.

"We made good strategic progress this quarter in a very challenging market environment which highlights the value of our model and the resilience of our franchise," said Jeffrey M. Peek, Chairman and Chief Executive Officer of CIT. "CIT's commercial businesses continued to perform well with strong asset growth, increased revenues and stable credit quality. We also advanced our home lending liquidation strategy and mitigated risk through plans to sell $875 million worth of non-performing loans, all while raising $10 billion in asset-backed financing."

As required under generally accepted accounting principles, the Company reduced the home lending receivables portfolio to the lower of cost or market. The aforementioned charge reflects further deterioration in the market value of home lending receivables during the quarter based on observable market transactions and other market data. At September 30, 2007, the $11.1 billion mortgage portfolio (excluding repossessed assets) was valued at $10.0 billion, a 9.7% discount to the unpaid principal balance compared to 6.4% at June 30, 2007.

Consolidated Financial Highlights:

Net Finance Revenue

* Net finance revenue was up 1% from last quarter and 19% from last year. Average earning assets declined from the prior quarter due to the construction sale last quarter and the LOCOM adjustment on the home lending receivables, but increased from last year on strong asset growth.

* Net finance revenue as a percentage of average earning assets was 2.96% versus 2.89% last quarter and 2.99% last year. Funding costs increased over the prior quarter and last year, but were more than offset by higher home lending yields (the elimination of amortization of capitalized origination costs due to the LOCOM adjustment on that portfolio).

* Operating lease net revenue was 6.90% of average operating leases, down from 6.97% last quarter, due to lower railcar utilization, and up from 6.54% last year due to strength in aerospace rental rates.

Other Income

* Other income decreased from last quarter, primarily reflecting: (1) a significant gain on the sale of construction assets last quarter, (2) lower gains on receivable sales and syndication fees (3) higher fees and (4) higher factoring commissions. The current quarter also includes $9.5 million of post-closing income from the prior quarter's sale of the construction business. The year-over-year decline in other income was due to reduced loan sales and syndication activity.

* Fees and other income improved from last quarter, largely due to higher advisory fees and other income in our healthcare unit.

* Factoring commissions increased this quarter on seasonal volume increases, and were essentially flat with the prior year.

* Gains on receivable sales and syndication fees were down sharply from last quarter and last year, due to the lack of liquidity and lower activity in the syndicated loan markets and no home lending sales. Loan sale and syndication volume was $1.2 billion (13% of origination volume), down from $5.7 billion (52%) and $3.6 billion (33%) in the prior quarter and prior year quarter.