CIT Group (CIT) Ratings Affirmed by Moody's, Outlook Positive
CIT Group Inc. CIT and its subsidiary’s ratings have been affirmed by Moody's Investors Service, the rating arm of Moody's Corporation MCO. The rating agency affirmed the company's standalone baseline credit assessment (BCA) at baa3.
While its senior unsecured and subordinate shelf ratings stand at Ba1, non-cumulative preferred shelf rating is Ba3. Moreover, the company’s outlook remains positive.
The rating affirmation comes as Moody’s believes that CIT Group’s deal to acquire Omaha, NE-headquartered Mutual of Omaha’s savings bank subsidiary, Mutual of Omaha Bank, will help the company in diversifying and improving its funding profile through low-cost deposits that the Mutual of Omaha Bank provides.
Moreover, CIT Group's ratings reflect its competitive position in commercial finance operations, revenue diversity, robust liquidity and rational “capital targets”, per Moody’s.
Apart from these, the rating affirmation follows Moody’s belief that CIT Groups’ financial transformation target remains on track.
As part of its plan to become a leading commercial bank, CIT Group already divested more than $14 billion worth of non-core assets.
Additionally, it lowered operating expenses by $150 million over the last three years, and plans to further cut roughly $50 million in annual expenses by 2020. These efforts, together with the acquisition of Mutual of Omaha Bank, will likely boost CIT Group’s financials in the days ahead.
Notably, following the completion of the Mutual of Omaha Bank deal, CIT Group’s common equity tier 1 (CET) ratio is expected to decline from 11.6% as of Jun 30, 2019, to 10%. Nevertheless, the company intends to rebuild its CET1 ratio toward 10.5%, which Moody’s feels is reasonable enough, given the current BCA of baa3. The company has suspended its share buyback until it meets the CET 1 target.
What Can Lead to a Rating Upgrade?
The ratings of CIT Group could be upgraded if the company can sustain an annualized net income to tangible assets ratio of 1%, maintain a CET1 ratio at or above 10.5%, and continuously strengthen the stability and quality of its deposits.
When Can the Ratings be Downgraded?
The company’s ratings can be downgraded if its net finance margin or net income weakens materially or its capital position declines to less than 10%.
Shares of CIT Group have gained 8.2% so far this year, underperforming the industry’s growth of 18.3%.
Currently, the company carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks from the finance space are mentioned below.
T. Rowe Price Group, Inc. TROW currently flaunts a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2019 have moved 4.1% upward over the past 60 days. The stock has gained 14.2% year to date.
Over the past 60 days, TriplePoint Venture Growth BDC Corp. TPVG has witnessed an upward earnings estimate revision of 1.2% for the current year. Additionally, the stock has gained around 43.2% so far this year. It also sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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