CIT Group's (CIT) Q2 Earnings Improve Y/Y on Lower Costs
CIT Group Inc.’s CIT second-quarter 2017 adjusted earnings from continuing operations of 68 cents per share compared favorably with the year-ago quarter’s adjusted earnings of 46 cents.
Results benefitted from lower expenses and a fall in provision for credit losses. The quarter witnessed overall improvement in credit quality. However, a decline in revenues hurt the results to quite an extent.
Upon considering several non-recurring items, net income was $157 million or 85 cents per share, compared with $17 million or 8 cents per share in the prior-year quarter.
Revenues & Expenses Declined
Total net revenue (GAAP basis) was $604.8 million, reflecting a decline of 6.7% from the prior-year period.
Net interest revenue was $269 million, down 6.3% from the prior-year quarter. Also, total non-interest income was $335.8 million, reflecting a decline of 6.9% year over year.
Net finance margin decreased 56 basis points year over year to 3.07%.
Operating expenses (excluding restructuring costs and intangible assets amortization) were $286 million, down 2.5% from the prior-year quarter.
Credit Quality Improves
Net charge-offs were $27.7 million, down 19.5% from the prior-year quarter. Also, provision for credit losses was $4.4 million, decreasing 81.1% year over year.
Further, non-accrual loans decreased 2.9% year over year to $256.8 million.
Strong Balance Sheet, Capital Ratios Improved
As of Jun 30, 2017, interest bearing cash and investment securities amounted to $10.3 billion, comprising $4.8 billion in cash and $5.5 billion in investment securities.
As of Jun 30, 2017, Common Equity Tier 1 and Total Capital ratios were 14.4% and 16.2%, respectively, as calculated under the fully phased-in Regulatory Capital Rules, compared with 13.4% and 14.0% in the prior-year quarter.
Our Viewpoint
Sluggish growth in industries where CIT Group provides finance is expected to dent the company’s performance in the near term. Moreover, despite certain cost-savings measures, expenses are expected to increase in the long term due to the company’s strategic plan and continued investments in the franchise.
However, the company’s efforts toward becoming a leading regional commercial banking institution through restructuring and streamlining are commendable.
CIT Group Inc (DEL) Price, Consensus and EPS Surprise
CIT Group Inc (DEL) Price, Consensus and EPS Surprise | CIT Group Inc (DEL) Quote
Currently, CIT Group carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other stocks in this space, Moody's Corporation MCO reported second-quarter 2017 adjusted earnings of $1.51 per share, which handily outpaced the Zacks Consensus Estimate of $1.33. Better-than-expected results were attributable to impressive revenue growth, reflecting strong issuance in the quarter. However, higher expenses were on the downside.
On Deck Capital, Inc. ONDK is slated to report results on Aug 7, while StoneCastle Financial Corp. BANX is expected to report its numbers on Aug 9.
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