Can The Uptrend Continue for American Equity Investment Life Holding (AEL)?
CIT Group Inc.’s CIT third-quarter 2018 adjusted earnings from continuing operations of $1.15 per share were in line with the Zacks Consensus Estimate. Also, the bottom line was above the prior-year quarter’s figure of $1.02.
Results benefited from an increase in non-interest income and lower operating expenses. However, drastic rise in provision for credit losses and lower net interest income were on the downside. This was perhaps the reason for 1.2% decline in the company’s share price.
After considering several non-recurring items, net income was $132 million or $1.15 per share, down from $220 million or $1.61 per share in the prior-year quarter.
Revenues Rise, Expenses Decline
Total net revenues for the quarter were $475.6 million, up 3% year over year. However, the figure missed the Zacks Consensus Estimate of $492 million.
Net interest revenues were $259.7 million, down 6% year over year.
Total non-interest income was $350.5 million, increasing 11% from the year-ago quarter.
Net finance margin decreased 10 basis points to 3.43%. The fall was largely owing to higher funding costs and lower net purchase accounting accretion.
Operating expenses (excluding restructuring costs and intangible assets amortization) were $257.3 million, down 4% from the prior-year quarter.
Credit Quality: A Mixed Bag
Provision for credit losses was $38.1 million, up 27% from the year-ago quarter. The rise was mainly due to asset growth. Also, non-accrual loans increased 20% to $318.1 million.
However, net charge-offs were $26 million, down 38% from the prior-year quarter.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2018, interest bearing cash and investment securities amounted to $7.7 billion, comprising $1.2 billion in interest bearing cash and $6.5 billion in investment securities. Further, there was approximately $0.2 billion of non-interest-bearing cash.
As of Sep 30, 2018, Common Equity Tier 1 and Total Capital ratios were 12.3% and 15.1%, respectively, as calculated under the fully phased-in Regulatory Capital Rules compared with 14.0% and 15.7% in the prior-year quarter.
Share Repurchase Update
During the reported quarter, CIT Group repurchased 5.5 million shares for $291 million.
CIT Group’s business streamlining initiatives are impressive. Also, exemption from annual stress tests will provide the company financial flexibility to some extent. However, steady rise in credit costs is expected hamper its bottom-line growth to some extent. Also, sluggish growth in the industries, to which the company provides finance, is a concern.
CIT Group Inc. Price, Consensus and EPS Surprise
CIT Group Inc. Price, Consensus and EPS Surprise | CIT Group Inc. 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.
Earnings Release Dates of Peers
Among the stocks in the same industry, Jefferies Financial Group Inc. JEF, Moody’s MCO and LendingClub Corporation LC are slated to announce results on Oct 25, Oct 26 and Nov 6, respectively.
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