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CIT Group (CIT) Stock Up 6.1% on Q1 Earnings Beat, Costs Down

Zacks Equity Research

Shares of CIT Group Inc. CIT gained 6.1%, following the release of first-quarter 2019 results. Earnings from continuing operations of $1.18 per share surpassed the Zacks Consensus Estimate of $1.09. In the prior-year quarter, the company recorded adjusted earnings from continuing operations of 74 cents. Notably, the reported quarter did not have any noteworthy items.

Results benefited from a decline in operating expenses, lower provisions and higher net interest revenues. However, lower non-interest income was a headwind. Moreover, capital ratios deteriorated during the quarter.

Net income available to common shareholders (GAAP basis) was $118.9 million in the reported quarter, up from $97 million registered in the prior-year quarter.

Revenues & Expenses Decline

Total net revenues (non-GAAP) were $466.2 million, down 5.9% year over year. Moreover, the figure lagged the Zacks Consensus Estimate of $479 million.

Net interest revenues were $280.9 million, up 3.8% year over year.

Total non-interest income was $314.5 million, decreasing 12.2% from the year-ago quarter.

Net finance margin contracted 25 basis points year over year to 3.20%.

Operating expenses (excluding intangible asset amortization) were $270 million, down 1.8% from the prior-year quarter. The decline was primarily due to a fall in professional fees and insurance costs.

Credit Quality: A Mixed Bag

Provision for credit losses was $33 million, down 52% from the year-ago quarter end. Moreover, net charge-offs were $34 million, down 32% year over year.

However, non-accrual loans increased 25.3% from the prior-year quarter end to $297 million.

Strong Balance Sheet, Capital Ratios Worsen

As of Mar 31, 2019, interest bearing cash and investment securities amounted to $9.8 billion, comprising $2.6 billion in interest bearing cash, and $7.2 billion in investment securities and securities purchased under the agreement to resell.

As of Mar 31, 2019, Common Equity Tier 1 and Total Capital ratios (as calculated under the fully phased-in Regulatory Capital Rules) were 12% and 14.8%, respectively, down from 14.1% and 16.8% in the prior-year quarter end.

Share Repurchase Update

During the reported quarter, CIT Group repurchased 3.7 million shares for $181.9 million.

Our Viewpoint

CIT Group’s business-streamlining initiatives along with the improving economy, rise in demand for financing of inventories and capital equipment will continue to support profitability. However, mounting operating expenses and worsening credit quality remain major near-term concerns.

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

Performance of Other Banks

Washington Federal’s WAFD second-quarter fiscal 2019 (ended Mar 31) earnings were 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.5%.

Hancock Whitney Corporation’s HWC first-quarter 2019 operating earnings per share of $1 surpassed the Zacks Consensus Estimate of 98 cents. Further, the reported figure was 11.1% higher than the year-ago figure.

Ally Financial Inc.’s ALLY first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

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