CIT Group reported net income for the quarter ended March 31, 2011 of $66 million, $0.33 per diluted share, down from $145 million, $0.72 per diluted share a year ago on reduced fresh start accounting (FSA) benefits. Analysts polled by Thomson Reuters had estimated earnings at $0.28 per share.

CIT said first quarter results reflected lower funding and credit costs, gains on asset sales, reduced operating costs and an increase in income tax provision. Net income declined from first quarter 2010 primarily due to a $364 million decrease in net FSA accretion, reflecting fewer asset prepayments and the accelerated repayment of debt carried at a discount. Current quarter debt prepayment fees of $35 million were more than double those in the 2010 first quarter.

The provision for credit losses was $123 million, a decrease of 32% from the prior quarter and 45% from the same quarter last year, reflecting reduced charge-offs, lower non-accrual balances and stable credit quality trends.

Funded new business volume decreased modestly from the prior quarter and increased 47% from the 2010 first quarter to $1.3 billion, with increases primarily in the Corporate Finance and Transportation Finance segments.
Vendor Finance new business volume in the first quarter was $538.8 million, which compared to $$584.4 sequentially and $532.3 million in the first quarter 2010.

“We continue to make progress rebuilding CIT,” said John A. Thain, chairman and chief executive officer. “We are advancing our bank strategy, optimizing our portfolio, managing expenses and reducing our cost of capital. We will continue to focus on prudently growing our core businesses and remain committed to creating long-term shareholder value.”

The following commentary on Vendor Finance and Transportation Finance was excerpted from the news release:

Vendor Finance pre-tax earnings were $14 million, down from $49 million in the prior quarter and $114 million for the 2010 first quarter, reflecting increased pre-FSA asset yields, offset by lower asset levels and reduced FSA accretion income. Total financing and leasing assets declined to $5.2 billion from $5.4 billion at December 31, 2010 and were down $2.7 billion from March 31, 2010, as sales and net portfolio collections outpaced new business volume. We funded $539 million of new business volume in the first quarter, which was down modestly from the prior quarter and up slightly from the 2010 first quarter. Excluding volume associated with the Australia and New Zealand platforms sold in 2010, volume rose 16% from the 2010 first quarter. Yields on newly originated assets declined slightly from last quarter but remained double-digit. Provision for credit losses increased $42 million from the prior quarter’s low level due to refined reserve estimates. Non-accrual loans were down 5% from December 31, 2010, while net charge-offs were down significantly.

Transportation Finance pre-tax earnings were $43 million, up from $10 million in the prior quarter and $15 million for the 2010 first quarter. Results reflect lower interest expense due to changes in segment allocations. (See Corporate and Other below.) The first quarter also benefited from improved equipment utilization and lease rates. All aircraft were leased at March 31, 2011, including commitments. Rail fleet utilization, including commitments, increased to above 95% from 94% at December 31, 2010. During the quarter, aircraft renewal rates improved modestly, while rentals in rail continued their sequential increase off cyclical lows. Net charge-offs were down from the 2010 fourth quarter and non-accrual loans were unchanged from December 31, 2010. Assets held for sale increased as we transferred 8 aircraft to held-for-sale during the quarter. We placed 7 new aircraft in the first quarter and have lease commitments for all aircraft to be delivered during the next 12 months. In addition, our rail business entered into a commitment to purchase 3,500 railcars to be delivered beginning in the 2011 second quarter through the 2012 second quarter.

To read the full text of the CIT Group news release:

click here.