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CIT Group (CIT) Q4 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

Shares of CIT Group Inc. CIT gained 7.7%, following the release of its fourth-quarter and 2019 results. Quarterly earnings from continuing operations of $1.27 per share surpassed the Zacks Consensus Estimate of $1.11. The figure compares favorably with the prior-year quarter’s earnings from continuing operations, excluding noteworthy items of $1.21. Notably, there were no noteworthy items in the quarter under review.

Results benefited from an improvement in revenues and a decline in provisions. The balance sheet position remained strong in the quarter. However, marginally higher expenses hurt results to some extent.

Net income available to common shareholders was $121.1 million, up from $82.3 million recorded in the prior-year quarter.

For 2019, adjusted earnings from continuing operations of $5.06 per share lagged the Zacks Consensus Estimate of $5.08. The figure compares favorably with $4.04 per share recorded in 2018. Net income available to common shareholders (GAAP basis) for the year was $511 million or $5.27 per share, up from $428.2 million or $3.61 per share recorded in 2018.

Revenues Improve, Expenses Rise

Total quarterly net revenues (non-GAAP) were $461.1 million, up 9.4% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $442 million.

For 2019, total net revenues (non-GAAP) were $1.85 billion, down 3.6% year over year. However, the figure surpassed the Zacks Consensus Estimate of $1.83 billion.

Net interest revenues in the quarter were $251.6 million, down 9% year over year.

Total non-interest income was $326.6 million, increasing 17.8% from the year-ago quarter. The rise was due to an increase in other non-interest income.

Net finance margin contracted 38 basis points to 3.01%.

Operating expenses (excluding noteworthy items and intangible asset amortization) were $253 million, marginally up from the prior-year quarter.

Credit Quality: Mixed Bag

Provision for credit losses was $22.6 million, down 27.6% from the year-ago quarter.

However, non-accrual loans increased 15.6% year over year to $326 million. Net charge-offs were $32 million, up 33.3% from the prior-year quarter.

Balance Sheet Strong, Capital Ratios Mixed

As of Dec 31, 2019, average interest bearing cash and investment securities amounted to $9.4 billion, comprising $1.7 billion in interest bearing cash, and $7.7 billion in investment securities and securities purchased under the agreement to resell.

As of Dec 31, 2019, Common Equity Tier 1 and Total Capital ratios (as calculated under the fully phased-in Regulatory Capital Rules) were 12% and 15.4%, respectively, compared with 12% and 14.8% at the end of the prior-year quarter.

Our Viewpoint

CIT Group’s business streamlining initiatives, and rise in demand for financing of inventories and capital equipment will likely continue to support profitability. Moreover, the acquisition of Mutual of Omaha Bank is expected to be accretive to earnings. However, rising expenses (as witnessed in the fourth quarter) due to continued investments in franchise will likely hurt bottom-line growth in the near term.

CIT Group Inc. Price, Consensus and EPS Surprise
 

CIT Group Inc. Price, Consensus and EPS Surprise

CIT Group Inc. price-consensus-eps-surprise-chart | CIT Group Inc. Quote

Currently, CIT Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Washington Federal’s WAFD first-quarter fiscal 2020 (ended Dec 31) adjusted earnings were 58 cents per share, missing the Zacks Consensus Estimate of 60 cents. Results excluded the net positive impact of two significant non-recurring items.

Hancock Whitney Corporation’s HWC fourth-quarter 2019 adjusted earnings per share of $1.06 beat the Zacks Consensus Estimate of $1.04. However, the bottom line fell 5.4% from the year-ago quarter’s reported figure.

Ally Financial Inc.’s ALLY fourth-quarter 2019 adjusted earnings of 95 cents per share were in line with the Zacks Consensus Estimate. The figure reflects an increase of 3.3% from the year-ago quarter.

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