CIT Reports Fourth Quarter Results

Business Wire, Jan 17, 2008

Quarterly Financial Highlights

* Net loss for the quarter of $131 million, $0.69 per share

* Commercial businesses post solid new business volume and double digit returns

* Bolstered credit loss reserves - mortgage and other portfolios

* Wrote off goodwill in student lending business

* Balance sheet strong; tangible capital ratio of 8.8% - above target

NEW YORK -- CIT Group Inc. (NYSE: CIT) today reported a net loss of $130.7 million, or $0.69 per share, for the fourth quarter of 2007, reflecting the impact of several noteworthy items discussed below, versus net income of $259.3 million, or $1.28 of diluted earnings per share, for the 2006 quarter. For the full year, the net loss attributable to common shareholders was $111.0 million for 2007, versus net income of $1,015.8 million last year.

"We were not pleased with our reported loss this quarter, which primarily related to charges on our home lending and student lending businesses -- two sectors that have recently experienced significant change. However, our commercial finance businesses performed well and continue to demonstrate the value of the CIT franchise in our core markets," said Jeffrey M. Peek, Chairman and Chief Executive Officer of CIT. "We ended the year with strong capital ratios. Our strategic focus for 2008 is centered on our core commercial finance segments and maintaining balance sheet strength.

"We expect overall market conditions to remain challenging for some time. Key to our success this year will be our ability to reduce expenses through improved efficiencies and further diversify our funding sources. To that end, we are right-sizing the business to better support our core commercial finance segments and creating a more streamlined organization focused on delivering value to our customers and shareholders.

"As we enter our centennial year with many challenges before us I am confident that our established position as a leader in middle market financing will allow us greater success in 2008 and beyond."

Fourth quarter results include the following previously disclosed items:

* A $297 million increase in reserves for credit losses, including the establishment of a $250 million reserve for the held-for-investment home lending portfolio and increased general reserves primarily for unsecured consumer loans (decrease to EPS of $0.96);

* Charges of $42 million related to home lending receivables held for sale, including those sold during the quarter (decrease to EPS of $0.14);

* A $313 million goodwill and intangible asset impairment charge related to the Company's student lending business, reflecting decreased market valuations for student lending businesses, and lower profit expectations as a result of higher funding costs (decrease to EPS of $1.59); and

* A pre-tax gain of $268 million on the sales of CIT's interest in its Dell Financial Services (DFS) joint venture and of its U.S. Systems Leasing portfolio (increase to EPS of $0.85).

Other noteworthy items impacting the fourth quarter include:

* A pre-tax loss of $13 million in Home Lending, excluding the above-mentioned items, principally due to impairment of retained interests on past off-balance sheet securitization transactions (decrease to EPS of $0.04).

* A release of $27 million of tax liabilities relating to our international operations (increase to EPS of $0.14); and

* A write-off of $16 million of capitalized expenses related to the terminated capital raise initiative of an aerospace leasing company (decrease to EPS of $0.05).

In addition, the Company expects to record a pre-tax restructuring charge of approximately $50 million in the first quarter of 2008 for severance and related costs, with expected annual savings of $60 million.

Consolidated Financial Highlights:

Net Finance Revenue

* Net finance revenue was down 9% from last quarter due to higher funding costs and up 4% over last year on higher asset levels. Average earning assets increased slightly from the prior quarter and strongly over last year due to commercial finance loan and leasing volumes.

* Net finance revenue as a percentage of average earning assets was 2.67% down from 2.96% for both last quarter and last year, reflecting higher funding costs in the current market, including the securitization of home lending assets late in the third quarter and the decision to maintain excess cash balances.

* Operating lease net revenue was 7.22% of average operating leases, up from 6.90% last quarter and 7.09% last year due to strength in aerospace rental rates, partially offset by lower railcar utilization.

Other Income

* Other income includes the gain of $247 million on the sale of our interest in the DFS joint venture and the gain on sale of the U.S. Systems Leasing business of $21 million.

* Other income for the quarter as a percentage of total net revenue (net finance revenue plus other income) was 29% (excluding the DFS and systems leasing sales gains), down from 43% in the prior year quarter, principally on lower syndication fees and receivable sales gains.