CIT Says Fed Objected to Its Capital Plan
July 28 2016 - 10:30AM
Dow Jones News
CIT Group Inc. said Thursday that the Federal Reserve had a
qualitative objection to its capital plan, while also reporting a
sharp drop in quarterly profit tied to its acquisition of OneWest
Bank NA.
The bank crossed the $50 billion threshold that subjects it to
the regulator stress tests when it bought California lender OneWest
Bank, a deal that closed last year. The bank had to submit a
capital plan but didn't have to participate in the formal
stress-test process this year, so its results weren't disclosed
during the release in June. No other U.S.-based bank got a
qualitative objection to its capital plans when their results were
announced.
In its results Thursday, the lender included a $230 million
charge related to a reverse mortgage business that was a part of
OneWest. That business is being investigated by the Department of
Housing and Urban Development.
CIT lends to the small business, middle market and
transportation sectors. It unveiled a turnaround plan in March that
involves the firm focusing on domestic banking and getting out of
the commercial-air business.
CIT executives are trying to right the bank's course after a
number of changes in strategy and leadership over the past year. A
major part of the effort is to complete a sale or spinoff of its
$11 billion commercial-air business. CIT said the process had
advanced to the second round of bidding.
Ellen Alemany officially became CIT's chief executive on April 1
to replace John Thain, who announced his departure in October.
In all, CIT reported a quarterly profit of $14.1 million, or 7
cents a share, down from $115.3 million, or 66 cents a share, a
year prior. Earnings from continuing operations, which excludes the
reverse mortgage charge, increased to 90 cents a share from 66
cents.
Revenue increased 59% to $645.1 million, driven by higher
interest income. Analysts polled by Thomson Reuters expected 77
cents in adjusted per-share earnings on $620.9 million in
revenue.
Noninterest income, which for CIT mainly comes from rent charged
on operating leases, grew 13% in the quarter to $673.6 million.
Interest income grew to $212.8 million from $18.6 million.
Total noninterest expenses increased to $582.9 million from
$442.3 million a year prior.
The bank had $283 million in nonaccrual loans, up from $198
million a year prior, but down from $295 million last quarter. Much
of the year-over-year increase was due to the energy sector, which
has been hurt by low energy prices. The provision from credit
losses was $28 million, up from $18 million last year, but down
from $99 million last quarter.
Write to Austen Hufford at austen.hufford@wsj.com and Rachel
Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 28, 2016 10:15 ET (14:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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