CIT Group (CIT) Beats on Q4 Earnings as Expenses Decline

CIT Group Inc.’s CIT fourth-quarter 2017 adjusted earnings from continuing operations of 99 cents per share surpassed the Zacks Consensus Estimate of 82 cents. Also, the figure compared favorably with the prior-year quarter’s figure of 62 cents per share.

Results benefited from lower expenses, higher non-interest income and a decline in provision for credit losses. A strong balance sheet lent further support. However, a decline in net interest revenues hurt results to quite an extent.

After considering several non-recurring items along with the impact of the Tax Act, the company reported net loss of $97.8 million or 74 cents per share compared with loss of $1.14 billion or $5.65 per share in the prior-year quarter.

For 2017, adjusted earnings from continuing operations came in at $3.07 per share, increasing 61.6% from the prior year. Also, the figure surpassed the Zacks Consensus Estimate of $2.92 per share. After considering one-time items, net income applicable to common shareholders was $458.4 million or $2.80 per share against net loss of $848 million or $4.20 per share in 2016.

Revenues Improve, Expenses Decline

Total net revenues for the quarter were $536.6 million, reflecting an increase of 77% from the prior-year period. Also, the figure surpassed the Zacks Consensus Estimate of $472 million.

For 2017, net revenues came in at $1.97 billion, increasing 5.6% from 2016. Also, the figure surpassed the Zacks Consensus Estimate of $1.91 billion.

Net interest revenues were $279 million for the quarter, down 5.7% from the prior-year quarter. Total non-interest income was $389.8 million, increasing significantly from $134.6 million reported in the year-ago quarter.

Net finance margin increased 1 basis points year over year to 3.59%.

Operating expenses (excluding restructuring costs and intangible assets amortization) were $266 million, down 19.6% from the prior-year quarter.

Credit Quality Improves

Net charge-offs were $18 million, decreasing 25% from the prior-year quarter. Also, provision for credit losses came in at $30.4 million, decreasing 17.2% year over year. Further, non-accrual loans decreased 20.8% year over year to $221 million.

Strong Balance Sheet, Capital Ratios Strengthens

As of Dec 31, 2017, interest bearing cash and investment securities amounted to $8.1 billion, comprising $1.4 billion in cash and $6.6 billion in investment securities.

As of Dec 31, 2017, Common Equity Tier 1 and Total Capital ratios were 14.4% and 16.1%, respectively, as calculated under the fully phased-in Regulatory Capital Rules, comparing favorably with 13.8% and 14.6% in the prior-year quarter.

Our Viewpoint

The company's business-streamlining initiatives are expected to improve efficiency, going forward. Also, its efforts toward becoming a leading regional commercial banking institution through restructuring are commendable. A solid balance sheet position is another tailwind for the company.

However, despite certain cost-savings measures, expenses are expected to increase in the long term due to the company’s strategic initiatives and continued investments in the franchise.

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

Performance of Other Stocks

Among other stocks in the finance space, Capital One Financial Corporation COF reported fourth-quarter 2017 adjusted earnings of $1.62 per share, lagging the Zacks Consensus Estimate of $1.83. However, it compared favorably with the year-ago quarter’s earnings of $1.58. Results benefited from an increase in revenues and easing margin pressure. Also, the quarter witnessed a rise in loan and deposit balances. However, increase in provisions and expenses were the undermining factors.

Sallie Mae’s SLM fourth-quarter 2017 adjusted core earnings of 19 cents per share was in line with the Zacks Consensus Estimate. The reported figure increased 22% from the prior-year quarter. Earnings growth was supported by an increase in net interest income. The private education loan portfolio and deposits grew considerably. However, these positives were offset by lower non-interest income, elevated expenses and poor credit quality.

Navient Corporation’s NAVI fourth-quarter 2017 adjusted core earnings per share of 43 cents surpassed the Zacks Consensus Estimate by a penny. The reported figure matches the year-ago quarter tally. Results reflected higher non-interest income. However, on the downside, the company registered lower net interest income and higher expenses.

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