CIT Reports Q3 Net Loss of $305MM; NBV up 16%
CIT reported a net loss for the quarter ended September 30, 2012 of $305 million, compared to a net loss of $32.8 million for the third quarter of 2011. The current period includes charges of $471 million related to the redemption of $4.6 billion of high cost debt, while the year-ago period included charges of $169 million related to the redemption of the $3 billion first lien term loan and approximately $1.5 billion of high cost debt.
Pre-tax income excluding debt redemption charges was $170 million, down modestly from $176 million in the year-ago quarter. The net loss for the nine months ended September 30, 2012 was $822 million, including debt redemption charges of $1.4 billion, compared to a net loss of $17 million, including debt redemption charges of $0.4 billion, in the comparable 2011 period.
CIT said funded new business volume of $2.2 billion increased 16% from the prior-year quarter, while committed new business volume of $2.5 billion increased 7% reflecting strong increases in Corporate Finance and Vendor Finance. Compared to the second quarter, volume decreased in Corporate Finance and Vendor Finance, as well as in Transportation Finance, which had fewer scheduled deliveries. Trade Finance factoring volume of $6.4 billion increased 8% sequentially, reflecting seasonal trends, but declined by approximately 6% from the year-ago quarter.
“We achieved several strategic milestones this quarter that will lower our funding costs and better position CIT for future profitability,” said John Thain, chairman and chief executive officer. “We eliminated the last of our $31 billion of restructuring-related debt, grew commercial assets for the fourth consecutive quarter, and exceeded $3.5 billion in Internet deposits at CIT Bank. We will continue to focus on achieving our financial targets as we meet the needs of our small business and middle market clients.”
Financing and leasing assets grew to $5.2 billion, representing increases of 3% from June 30, 2012 and 7% from a year ago. Funded new business volume was $705 million, a 9% increase from the prior-year quarter but down sequentially. Essentially all U.S. funded volume in the current quarter was originated by CIT Bank. Non-accrual loans and delinquencies declined from a year ago and were essentially unchanged from June 30, 2012. Net charge-offs rose modestly from prior periods due in part to lower recoveries.
Excluding accelerated FSA interest expense, pre-tax earnings rose 35% from the prior-year quarter and 4% sequentially primarily reflecting asset growth and lower funding costs. Equipment utilization remained strong with 99% of commercial air and 98% of rail equipment on lease or under a commitment at September 30, 2012. The sequential quarter increase in provision for credit losses reflects the establishment of reserves on a loan secured by commercial aircraft that was placed on non-accrual in September 2012.
Financing and leasing assets grew approximately $1.7 billion from September 30, 2011, and $0.2 billion from June 30, 2012, to $14.0 billion. New business volume of $563 million reflects the addition of six aircraft and over 1,700 railcars to our operating lease portfolio, and nearly $200 million of loans. All of the current quarter’s loan volume and over 95% of the rail volume was originated by CIT Bank. All but two of the 18 aircraft scheduled for delivery in the next 12 months and over 95% of the approximately 5,800 railcars scheduled for delivery through December 2013 have lease commitments.
Non-accrual loans declined to $256 million from $316 million at June 30, 2012 and $674 million a year ago, and net charge-offs were $5 million, down significantly from the prior-year quarter and down slightly from the second quarter of 2012.
To read the full CIT earnings news release click here.