NEW YORK (AP) -- CIT Group posted a quarterly loss Tuesday, largely because the commercial lender took a $620 million charge to prepay high-cost debt.
CIT reported a net loss of $447 million, or $2.22 per share. Last year, the company posted net income of $66 million, or 33 cents a share, during the same period last year.
Analysts had expected CIT to report a smaller loss of $1.50 per share, according to the data provider FactSet., and the company's stock dropped 4 percent to $37.50 in midday trading.
Excluding the debt refinancing charges, pretax income was $214 million, up from $178 million the year before.
John Thain, CIT's chairman and CEO, said the lender is preparing itself for a profitable future. Online deposits at CIT Bank reached $1.1 billion, while total deposits rose to $6.7 billion, up from $4.3 billion the year before. Paying off the $6.5 billion in debt resulted in a quarterly loss, but it also reduced CIT's borrowing costs, the company said.
Earlier this month, CIT paid off $1.6 billion of debt due in 2015 and announced plans to repay another $500 million in notes due in 2017 next month. These steps will reduce the average interest rate on its outstanding debt and deposits from 4.71 percent at the end of 2011 to 4.05 percent, CIT said.
The lender had to write off fewer bad loans in the first quarter. Net charge-offs were $22 million, down from $140 million the year before and $24 million in the fourth quarter.
Thain took over CIT Group a couple of months after the lender emerged from bankruptcy in December 2009. As CEO of Merrill Lynch, Thain helped arrange its sale to Bank of America during the financial crisis in 2008. Before Merrill, he ran the New York Stock Exchange and was an executive at Goldman Sachs.
CIT's stock has a market value of $7.5 billion. It has traded as low as $27.68 and as high as $44.88 over the past year. Even with its drop Tuesday, the CIT's stock is still up 7.5 percent for the year.