By Andrew R. Johnson 

Business lender CIT Group Inc. said profit declined 37% in the fourth quarter on a charge from a tax-related settlement with its former parent, Tyco International Ltd.

The company, which specializes in providing financing to small and midsize businesses, said it earned $129.9 million, or 65 cents a share, down from $206.8 million, or $1.03 a share, a year earlier.

Analysts polled by Thomson Reuters were expecting the company to earn 81 cents per share, on average.

In December, CIT said it reached a deal to pay Tyco $60 million to resolve issues surrounding a tax agreement the companies entered into when Tyco spun the business lender off in 2002. The settlement resulted in a $45 million charge in the quarter.

The company, led since 2010 by Wall Street veteran John Thain, makes loans to businesses for everything from mergers and acquisition to office equipment. It has clawed its way back to profitability since emerging from Chapter 11 bankruptcy in late 2009 by paying down or refinancing more than $31 billion of high-cost debt, selling troubled loan portfolios and increasing its reliance on deposits to fund its loans, which has helped to lower its costs.

CIT's outstanding loan portfolio fell to $18.6 billion in the quarter, down $2.2 billion from a year earlier as it classified a portfolio of student loans as held for sale. The company funded $3.14 billion of new business volume during the quarter, up from $2.58 billion in the previous quarter and $3.06 billion a year earlier.

The company has been working to fund more of its loans through CIT Bank, its Utah-based bank. In the fourth quarter, the bank funded nearly all of the U.S. loan volume originated in the company's corporate, transportation and vendor finance units.

CIT launched a consumer online bank in fall 2011 that offers savings accounts, certificates of deposit and other products in an effort to boost its deposit base. CIT Bank's deposits totaled $12.5 billion in the quarter, up from $9.6 billion a year earlier.

The company saw improvement in its net finance margin--a key measure of lending profitability--which increased to 3.95% from 3.86% a year earlier.

While lenders have struggled to boost revenue amid persistently low interest rates and cautious borrowing activity by borrowers, banks such as J.P. Morgan Chase & Co., BB&T Corp. and KeyCorp have recently said that improved economic conditions could lead to an increase in activity this year. Zions Bancorp., a Salt Lake City-based regional lender, said Monday that it is noted an uptick in sentiment by small businesses, which may translate to higher loan originations this year.

In May, CIT marked a key milestone when the Federal Reserve Bank of New York lifted limits the regulator placed on the lender in 2009 that curbed the company's ability to return capital to shareholders.

Last week CIT announced a $300 million share repurchase program for 2014, and said its board approved the purchase of $7 million of shares remaining under an existing $200 million buyback program announced in May.

The lifting of the regulatory limits and CIT's improved performance have fanned speculation a larger bank will try to acquire the company.

CIT's shares closed down 1.5% at $47.22 on Monday and were inactive in premarket trading Tuesday. The shares are up more than 16% over the past year.

Write to Andrew R. Johnson at andrewr.johnson@wsj.com

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