CIT Reports Third Quarter Results; Continued Progress on Liquidity Initiatives

Business Wire, Oct 16, 2008

* Loss from continuing operations of $1.13 per share driven by goodwill and intangible impairment charges

* Operating expenses reduced

* Tangible capital ratio improved

* Credit reserves increased

NEW YORK -- CIT Group Inc. (NYSE: CIT) today reported a loss from continuing operations of $301.6 million ($321.7 million after preferred dividends), or $1.13 per share, for the third quarter of 2008, compared to income of $208.5 million ($201.0 million after preferred dividends), or $1.05 per share for the comparable 2007 quarter. The loss included a $455 million pre-tax ($364 million after-tax) non-cash write-down of goodwill and other intangible assets of the Vendor Finance business segment, which does not affect the tangible capital of the Company.

"In the face of unprecedented market disruption, our Transportation and Trade Finance segments continued to earn double-digit returns, and Corporate Finance remained profitable despite the challenging marketplace. Vendor Finance returns were disappointing and we are undertaking a restructuring of that unit," said Jeffrey M. Peek, Chairman and CEO.

"During the quarter, we advanced our liquidity initiatives and made progress on our long-term funding strategy. We procured new funding arrangements, refinanced existing borrowing facilities, and grew deposits at CIT Bank. We continue to explore opportunities to expand our deposit taking capabilities and stabilize our funding model, and the recent government actions support the timeliness of this initiative. As we evaluate our options, we remain committed to maintaining significant cash balances, a large pool of unencumbered assets, and solid credit reserve and capital positions. Additionally, in response to current market conditions, we have further tightened our underwriting and origination strategies while continuing to support our key clients."

During the quarter, we prepaid $2.1 billion in bank borrowings and repaid $1.5 billion of unsecured term debt and the remainder of outstanding commercial paper. We ended the third quarter with $7.7 billion of cash, including $4.5 billion of corporate cash, $1.0 billion of cash and short-term investments at CIT Bank (available to fund commercial originations by the bank), $1.3 billion of other cash balances and $0.9 billion of restricted cash (largely related to securitizations). The amounts above include approximately $600 million held in the Reserve Primary Fund, a money market fund investment in orderly liquidation.

We continued our strong focus on liquidity by executing on a number of initiatives during the quarter including:

* Closed on the sale of the home lending business and manufactured housing portfolio in early July, with substantially all of the $1.8 billion in cash proceeds received and all $4.3 billion of the related secured debt transferred. The Company no longer has direct exposure to this asset class.

* Refinanced $6 billion of secured funding facilities including approximately $4 billion of conduit facilities that finance government-guaranteed student loans and a $2 billion conduit facility to finance equipment loans and leases.

* Received approximately $1.3 billion of the $3 billion long-term, committed financing facility from Goldman Sachs, with the remainder expected to be funded by year-end.

* Issued approximately $800 million of deposits, consisting of $700 million of time deposits and the remainder in brokerage sweep accounts through CIT Bank, our Utah-based industrial bank.

* Borrowed approximately $400 million under a secured aircraft financing facility, under which we expect to finance an additional $1.1 billion of Airbus plane deliveries.

* Limited asset growth during the quarter, as seasonal factoring growth was offset by lower origination volume, and the sale of approximately $500 million of assets (primarily commercial aircraft and commercial loans).

* Signed a commitment letter with Wells Fargo for a $500 million secured lending facility that is subject to due diligence and closing conditions.

We maintain a plan that we expect will satisfy our funding requirements for the next twelve months without accessing the unsecured debt markets. Our estimated funding needs for the next twelve months, including unsecured debt and bank line maturities and equipment purchase commitments, approximate $13 billion. We anticipate satisfying these needs through a combination of cash on hand, existing borrowing facilities, additional secured financings and balance sheet reduction strategies including portfolio run-off, volume reductions and asset sales.

Consolidated Financial Highlights of Continuing Operations:

Our third quarter results reflect the liquidity actions, as well as a focus on efficiency and credit risk management. During the quarter we increased the reserve for credit losses by approximately $75 million, due to weakening economic conditions and higher non-performing asset balances. We also reduced expenses by approximately $12 million from last quarter and initiated further cost savings actions. The ratio of total tangible equity to managed assets at September 30, 2008 improved to 9.16% from 9.02% at June 30, 2008. This ratio is not impacted by the goodwill and intangible impairment charges. Approximately 76% of commercial assets remain unencumbered ($42 billion).