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CIT Group (CIT) Beats on Q4 Earnings as Expenses Decline

Zacks Equity Research

CIT Group Inc.’s CIT fourth-quarter 2017 adjusted earnings from continuing operations of 99 cents per share surpassed the Zacks Consensus Estimate of 82 cents. Also, the figure compared favorably with the prior-year quarter’s figure of 62 cents per share.

Results benefited from lower expenses, higher non-interest income and a decline in provision for credit losses. A strong balance sheet lent further support. However, a decline in net interest revenues hurt results to quite an extent.

After considering several non-recurring items along with the impact of the Tax Act, the company reported net loss of $97.8 million or 74 cents per share compared with loss of $1.14 billion or $5.65 per share in the prior-year quarter.

For 2017, adjusted earnings from continuing operations came in at $3.07 per share, increasing 61.6% from the prior year. Also, the figure surpassed the Zacks Consensus Estimate of $2.92 per share. After considering one-time items, net income applicable to common shareholders was $458.4 million or $2.80 per share against net loss of $848 million or $4.20 per share in 2016.

Revenues Improve, Expenses Decline

Total net revenues for the quarter were $536.6 million, reflecting an increase of 77% from the prior-year period. Also, the figure surpassed the Zacks Consensus Estimate of $472 million.

For 2017, net revenues came in at $1.97 billion, increasing 5.6% from 2016. Also, the figure surpassed the Zacks Consensus Estimate of $1.91 billion.

Net interest revenues were $279 million for the quarter, down 5.7% from the prior-year quarter. Total non-interest income was $389.8 million, increasing significantly from $134.6 million reported in the year-ago quarter.

Net finance margin increased 1 basis points year over year to 3.59%.

Operating expenses (excluding restructuring costs and intangible assets amortization) were $266 million, down 19.6% from the prior-year quarter.

Credit Quality Improves

Net charge-offs were $18 million, decreasing 25% from the prior-year quarter. Also, provision for credit losses came in at $30.4 million, decreasing 17.2% year over year. Further, non-accrual loans decreased 20.8% year over year to $221 million.

Strong Balance Sheet, Capital Ratios Strengthens

As of Dec 31, 2017, interest bearing cash and investment securities amounted to $8.1 billion, comprising $1.4 billion in cash and $6.6 billion in investment securities.

As of Dec 31, 2017, Common Equity Tier 1 and Total Capital ratios were 14.4% and 16.1%, respectively, as calculated under the fully phased-in Regulatory Capital Rules, comparing favorably with 13.8% and 14.6% in the prior-year quarter.

Our Viewpoint

The company's business-streamlining initiatives are expected to improve efficiency, going forward. Also, its efforts toward becoming a leading regional commercial banking institution through restructuring are commendable. A solid balance sheet position is another tailwind for the company.

However, despite certain cost-savings measures, expenses are expected to increase in the long term due to the company’s strategic initiatives and continued investments in the franchise.

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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Stocks

Among other stocks in the finance space, Capital One Financial Corporation COF reported fourth-quarter 2017 adjusted earnings of $1.62 per share, lagging the Zacks Consensus Estimate of $1.83. However, it compared favorably with the year-ago quarter’s earnings of $1.58. Results benefited from an increase in revenues and easing margin pressure. Also, the quarter witnessed a rise in loan and deposit balances. However, increase in provisions and expenses were the undermining factors.

Sallie Mae’s SLM fourth-quarter 2017 adjusted core earnings of 19 cents per share was in line with the Zacks Consensus Estimate. The reported figure increased 22% from the prior-year quarter. Earnings growth was supported by an increase in net interest income. The private education loan portfolio and deposits grew considerably. However, these positives were offset by lower non-interest income, elevated expenses and poor credit quality.

Navient Corporation’s NAVI fourth-quarter 2017 adjusted core earnings per share of 43 cents surpassed the Zacks Consensus Estimate by a penny. The reported figure matches the year-ago quarter tally. Results reflected higher non-interest income. However, on the downside, the company registered lower net interest income and higher expenses.

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