Q1_2007_CIT-Transcript-2007-04-18T15-00

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Q1_2007_CIT-Transcript-2007-04-18T15-00

  1. 1. The following transcript has been provided by a third party transcription service for informational purposes only. CIT has not reviewed or edited the transcript and expressly disclaims any responsibility for the accuracy of this transcription.
  2. 2. FINAL TRANSCRIPT CIT - Q1 2007 CIT Group Earnings Conference Call Event Date/Time: Apr. 18. 2007 / 11:00AM ET www.streetevents.com Contact Us © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  3. 3. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call CORPORATE PARTICIPANTS Steve Klimas CIT Group - VP, IR Jeff Peek CIT Group - Chairman, CEO Joe Leone CIT Group - Vice Chairman, CFO CONFERENCE CALL PARTICIPANTS Laura Kaster Sander O'Neill - Analyt David Hochstim Bear Stearns - Analyst Bruce Harting Lehman Brothers - Analyst Joel Houck Wachovia - Analyst Eric Wasserstrom UBS - Analyst Matt Bernell Wachovia Securities - Analyst Meredith Whitney CIBC World Markets - Analyst Evelyn Osmoye TICTET Asset Management - Analyst Jordan Hymowitz Philadelphia Financial - Analyst Chris Brendler Stifel Nicolaus - Analyst Bob Napoli Piper Jaffray - Analyst PRESENTATION Operator Good day, ladies and gentlemen, and welcome to the first quarter 2007 CIT Group earnings conference call. My name is Sharell and I will be your facilitator for today. At this time, all participants are in a listen-only mode. However, we will conduct a question and answer session towards the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host, Mr. Steve Klimas, Vice President of Investor Relations. You may proceed, sir. www.streetevents.com Contact Us 1 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  4. 4. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Steve Klimas - CIT Group - VP, IR Thank you, Sharell, and good morning, everyone. Welcome to our first quarter earnings call. Just a couple of housekeeping items before we get started today. First, following our formal remarks, we will move into Q & A. In an effort to run an efficient call and make sure we get to everyone, please limit yourself to one question. If you do have a second question, please return to the queue and we will come back to you as time permits. Second, elements of this call are forward-looking in nature and relate only to the time and date of the call. We disclaim any duty to update these statements based on new information, future events or otherwise. For information about risk factors relating to the business, please refer to our SEC reports. Any references to certain non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP in the financial tables accompanying the release. For more information on CIT, please visit the Investor Relations section of our website at www.CIT.com. With that, it is my pleasure to hand the call over to Jeff Peek, our Chairman and CEO. Jeff Peek - CIT Group - Chairman, CEO Thank you, Steve, and good morning, everyone. Thanks for joining us today. As you saw in this morning's announcement, CIT is off to a solid start in 2007 with our 16th consecutive quarter of record operating earnings. Our operating earnings EPS were $1.30 per share, up 15% from a year ago, and our return on common equity improved to 14.8%. Moreover, the key drivers of this success are broad based and they are rooted in the strategies and initiatives that are building CIT's future. Our sales force investment continues to pay dividends with new business volume increasing 24% on top of the record volume we generated last year and those increased activity levels translated into top line revenue growth of 14%. Furthermore, we're making progress in balancing our revenue streams, as non-spread revenue accounted for 41% of total revenues, up from 37% in the year ago quarter. Now each year we conduct an investor perception study and year in and year out, you tell us that portfolio credit quality is a key metric for CIT. Our overall portfolio quality today is quite strong. Total net charge-offs this quarter were essentially flat with where they were a year ago, despite a near doubling of home loan losses as commercial credit quality and recoveries have been strong. Additionally, we are being prudent with our reserves as our total provision exceeded current period losses and was more than twice that of the year ago quarter. Now, Joe will provide more detail into the numbers, but let me just say in summary that I'm very pleased with our strong financial results for this quarter. It gets us off to a very good start for 2007. Now I want to update you on the progress we've made on our broader 2007 strategic initiative of asset management, international expansion, operational excellence and capital optimization. As part of our growth strategy, we recently announced our intention to acquire Citigroup's $2 billion U.S. Business Technology Finance unit. This acquisition represents another important milestone for CIT as we work toward becoming the global leader in vendor financing. On top of January's acquisition of Barclay's German and U.K. vendor financed businesses, this acquisition increases our economies of scale and market share in the profitable vendor finance sector. Second, we had discussed with many of you our efforts to move towards an asset manager business model, as we leverage our core strengths of asset origination, risk management, and client service. This past quarter, we filed documentation with the SEC for an initial public offering of Care Investment Trust Inc, a newly organized real estate investment and finance company. If approved, it will allow us to further diversify and grow our revenue stream as we tap the full potential of our very strong healthcare origination platform. www.streetevents.com Contact Us 2 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  5. 5. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Another part of our asset management strategy is our collateralized loan obligation business. We have launched our first in a series of CLO transactions and expect to close the issue later this quarter. Now let's talk a little bit about operational excellence. Our efforts to drive operational excellence, while at the same time executing on our growth agenda, are starting to bear fruit. Sales force productivity continues to improve, up over 25% this quarter over the same quarter last year, as the investments we made in 2005 and 2006 are paying off. New originations are up across the Company and we expect continued growth in future quarters. As we convert our increased originations into top line revenue growth, we remain focused on expense management. Only expenses flat in the first quarter was a solid start to 2007. Further, in support of operational excellence, earlier this month, we completed a program to reduce our headcount by 250 individuals. In connection with that, we expect to take a severance charge in the second quarter but have an expected payback of less than 12 months on this streamlining initiative. Finally, we executed a series of transactions that increase the efficiency of our capital structure. In short, we issued 750 million of junior capital and used the proceeds to repurchase 500 million of common stock and redeem 250 million of higher cost preferred stock. We also effectively refinanced our two highest cost pieces of debt. In total, $2.5 billion from the Tyco era and that refinancing will generate a significant interest expense savings looking perspectively. Now I firmly believe that the actions we have taken with regard to our portfolio configuration and capital structure position us well to deliver sustainable earnings growth and higher risk adjusted returns. Now before I conclude with my prepared remarks, I want to address a few topical items that have garnered some interest on both the investor and media front this past quarter. First, the subprime home lending industry has obviously been under pressure. CIT is a well diversified Company and our mortgage portfolio, which maintains a conservative product set, represents less than 10% of our income. Our delinquencies and losses in home lending have trended higher, as we anticipated and planned for, but they are still running at about a third of the industry rate. Now with this downturn in home lending comes some opportunities that CIT is uniquely positioned to capitalize on. For example, following the New Century bankruptcy filing, our restructuring unit committed $50 million in financing to a total tip finance of $100 million in partnership with Greenwich Capital. This transaction drew upon the intellectual capital of our people and the diversity of the CIT franchise. It further evidences our expanded ability to generate revenue in all phases of the business cycle. Second, in conjunction with our own internal review of Student Loan Xpress, a business we acquired in 2005, and under review by the New York Attorney General's Office, we took decisive action and placed three senior SLX executives on administrative leave. Randy Chesler, President of CIT Consumer Finance, has assumed interim oversight of the organization. CIT's solid reputation for many years has been built on a foundation of integrity and trust. The keystone of that reputation remains our committment to maintaining best-in-class corporate governance practices and our internal code of business contact. We will continue to cooperate fully and closely with the Attorney General's Office as we go up to come to a timely resolution on this student lending matter. Third, with regard to the Sallie Mae buyout, we are unfamiliar with the details of the transaction and have not spent time on the underlying concepts. Yet to us, there appear to be obvious differences between the two companies in terms of the complexity of our assets, the ease of securitization, the requirement for ratings, and the optimal capital structures, and let me be clear here. Our management team is focused on building the franchise, not selling it. You've seen us demonstrate our committment to increased returns, a more disciplined view of capital, a proactive portfolio management philosophy, and the ability to structure alternative investment vehicles to leverage our strengths and increase returns. I assure you, we are working to recognize the considerable long term value of CIT for both equity and debt investors. www.streetevents.com Contact Us 3 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  6. 6. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Now with that, I'd like to turn the call over to our Vice Chairman and Chief Financial Officer, Joe Leone, for a more detailed view of our financial results this quarter. Joe? Joe Leone - CIT Group - Vice Chairman, CFO Thanks, Jeff. Good morning, everyone. I would like to give some more financial detail on some of the items Jeff covered. First of all, I'd like to say we had very strong earnings. The reported earnings per share were $1.37 and that included about a $0.07 benefit from principally two noteworthy items. First, we released $21 million of international tax reserves as the statute of limitations closed on certain tax years, and second, we paid a $15 million premium to purchase some high coupon debt that was non-callable and Jeff mentioned that earlier. Without these items, I was very happy with the results. Revenues grew double digit and EPS was up 15%, a very good quarter, and I think that's what CIT is all about -- strong balance sheet, diverse franchises, delivering quality results. Some of the financial trends and how we delivered the quarter. Spreads first. We grew revenues as spread income in dollars was driven by the strong growth Jeff mentioned, but net interest spreads were lower than I expected and they were down about 13 basis points sequentially to 2.83%. Let me explain the changes from Q4. First, we had higher leverage in the quarter as we financed the Barclay's acquisition with debt, and we, in effect, swapped common equity for junior subordinated debt, and we did that earlier in the quarter than we had planned. Those two items compress spreads by about six basis points. We saw title loan and lease pricing in a couple of areas, principally rail car leasing and factoring, and that cost us about four basis points, and we continued to have some mix shift with some good growth in student lending and that lowered spreads by three basis points. More recently we took a few funding actions that I think will help margins. Specifically, we refinanced some high cost debt and as you know, we measure the financial performance of our segments using a matched money cost approach and the high relative cost of these securities caused distortion in the measurements and evaluation of performance. So, we made a tender offer for a $1.250 billion of high cost fixed rate debt and we received a very responsive, very positive, response rate leading to retiring 78% of that debt and related hedges. We refinanced that debt with five year floating rate debt and we think we'll save about 235 basis points on that trade. Additionally, we refinanced another $1.250 billion of debt that matured on April at a savings of about 200 basis points , and combined with all the refinancings we did in Q1, we think the savings will be about $50 to $60 million annually with the benefit showing up in Q2 and that will improve margins by about 7 to 8 basis points. Continuing on with revenues but moving on to non-spread revenues, Jeff said we had a particularly strong quarter and we did and we continue to work on asset manager strategies and using the balance sheet more efficiently, and non-spread revenue was up 26% year-over-year. Great progress and a couple of highlights. Fees and Other Income were up $50 million and we had strength in Vendor Finance versus last year, particularly from joint venture returns, and we had higher Other Income in Corporate Finance on strong lending fees and on other revenue from highly structured lending transactions. Sequentially, non-spread was down. We had lower gains on syndication and receivable sales, some seasonality, and in some cases, we decided not to sell certain assets, construction and home lending in particular, as we did not feel the pricing was attractive to other alternatives. Looking forward, the syndication and fee pipelines look pretty good. www.streetevents.com Contact Us 4 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  7. 7. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Productivity. We out performed my expectation. Jeff gave you some detail. Last quarter I said expenses would be higher in Q1 due to the acquisition and FICA, and those factors did add $10 million to Q1 expenses. Having said that, overall dollars spending sequentially was unchanged. We contained headcount. We were essentially flat, excluding the impact of the acquisition. We had lower levels of incentive comp and we reduced discretionary expenditures including third party fees. Jeff described that our expense management efforts continue into Q2 and other initiatives slated for the year are evaluation of offshoring of back office and consolidating common support areas, all with the focus on improving efficiency. Capital Management, another positive quarter. In addition to the refinancings, we used the proceeds from a junior subordinated note to buy back 7.5 million common shares, and we should get another million shares or so in Q2. That brings our non-common equity content to about 15% of total capital, about where we expect to manage that. On the rating agency front, both [Fitch] and S&P reaffirm their positive long term ratings outlook and while this was not the immediate upgrade we were hoping for, it was a step in the right direction, certainly supportive of our strategy and an endorsement of our strong operating performance in a business environment that had some challenges, particularly in housing. My comment on ratings, strong debt ratings, continue to be a very important element of CIT's strategy and an A-plus debt rating continues to be our objective. Credit was outstanding. Outside of home lending, credit quality was terrific. Charge-offs for all other areas was only 22 basis points, and recoveries were particularly strong, about 30 basis points, and our credit workout staff did a terrific job, particularly the aerospace team on Northwest and the Energy Group on [Calpine,] and delinquency in non-performing trends were good in all commercial businesses, vendor and all other commercial businesses compared to last year. A little detail by segment. With the consumer segment first, then I'll focus on the home lending business. As Jeff said, we think our portfolio looks good compared to the industry. That said, we saw weakening. Portfolio losses in the quarter were about 120 basis points, about where we expected them to be, and gains on receivables were down. We sold $500 million of receivables at a premium of 2.3% in the quarter compared to $1.2 billion in Q4. While the liquidity was available to us, we chose to sell less. What actions are we taking in home lending? On the operating front, many. Our team is focused on the back end. We tightened home lending underwriting, we raised minimum FICA requirements, we lowered certain LTVs and we eliminated certain products, including certain elements of non-owner occupied. We raised pricing, and as we always do when delinquencies arise, we added more collection and loss mitigation resources. We increased our frequency of contact and calling efforts and we targeted more finally borrowers more likely to default. We continue to refine our models and are very comfortable with what our models and forecasting strategies are, and we are reducing upfront origination costs. We did close some offices. On the financial side, I think Jeff mentioned, reserves continue strong and in the home lending area, we did increase our related loss reserves and continue to be very vigilant about updating our portfolio role rates and estimates. Moving on to small business lending, we had an excellent first quarter, record volume and returns in excess of 25%, and once again, we're very proud to be recognized as the number one small business administration lender as well as the top lender to women and minorities. Consumer lending fundamentals continue strong. Volumes were up 17% and returns doubled from a year ago. Vendor finance, very successful quarter, ROE close to 20%. This is our highest returning segment and Jeff mentioned we put more capital into it. The lower returns in Q1 reflect the impact of the international acquisition and we are working through the integration, tax structure, and synergies and expect to realize them over the course of the year. Once the Citi capital acquisition closes, we'll have a $17 billion high returning global vendor business with thousands of vendor partners. www.streetevents.com Contact Us 5 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  8. 8. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Quick update on Microsoft. We rolled out our financing programs now into six countries, five in Europe and one in Asia, and that will continue to grow, I hope. Transportation, air and rail. Profitability improved nicely from a year ago. Aerospace first. Lease rates, utilization and values are solid. Demand remains strong, all 2007 deliveries and 75% of 2008 deliveries have been placed. Very good returns in the quarter, strong fundamentals, and the northwest loan recovery, and we continue to build the order book and recently committed to purchase five Boeing 737s. In rail, returns continue very strong, but we did see some softening and it was principally correlated to the housing market. Demand for cars that carry lumber and cement were down as the housing slowdown had an impact. Less than 10% of our cars are in that part of the fleet, but we do see some offsets, particularly in the increased demand for ethanol cars, and while we have 2000 of those today, we expect to have more of those with orders forward over the next two years. Overall, the business returns are excellent and utilization is at 98%, still excellent. On the aerospace asset manager vehicle, we are on schedule in our initiative to attract third party capital, and we continue to evaluate private offers and public market execution. I still expect the time frame to be late summer. Trade Finance. We saw pricing compression in commissions and lending spreads due to the liquidity in the marketplace, the benign credit environment and some mix change. Our efforts here are in cost efficiencies and growing the business internationally and credit remains outstanding. Finally, Corporate Finance had an outstanding quarter. There's a lot on the agenda and a lot of our growth agenda is focused here. Returns were strong, 16%. Volumes were high, up 36%, and non-spread revenue is terrific, up 46% year-over-year. Reflects traction in our industry verticals, healthcare and communications to name two, and fees and other revenue, particularly in sponsor finance and our general middle market lending business capital unit were very good. It's a very competitive landscape, however. Loan covenants continue light and we need to look at many more loans to get what we want. Having said that, the new business pipeline looks very good. So when I add all of that up, we had a very solid quarter , very strong top line growth, very strong earnings, and as Jeff said, a very strong ROE at 14.8%, and that's good progress and I think it reflects CIT, the diversity of CIT, our strong origination platforms, our outstanding risk in capital management and a clear strategic focus, and I think that these strengths that allow us to operate well in all parts of the business cycle. So with that, let me turn it back to the operator to open up the line for questions. QUESTIONS AND ANSWERS Operator Thank you. We will now begin the question and answer session. Each questioner is asked to limit themselves to one question and one follow-up question and then return to the queue if you wish to ask additional questions as a courtesy to others waiting in queue. [OPERATOR INSTRUCTIONS] Your first question comes from the line of Laura Kaster of Sandler O'Neill. You may proceed. Laura Kaster - Sander O'Neill - Analyt Hi, Jeff. Thanks for taking my question. I have one question on student lending and then a follow-up on your CLO business. So can we infer from your comments that you are definitively not selling your student lending business despite the premium that Sallie Mae received for their LBL? www.streetevents.com Contact Us 6 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  9. 9. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Jeff Peek - CIT Group - Chairman, CEO Well, good morning. Our process on evaluating these businesses really hasn't changed much. We continue to review them on an annual basis as to whether they can get to our corporate hurdle rates and we try to tack back to that on a continuous basis. I think, as you know and a number of other close observers of the Company, SLX has really done a terrific job in terms of growth. They've really exceeded all of our growth objectives. We bought it two years ago. The Company is more than twice the size of when we bought it , so we continue to review all our businesses and are very committed to fixing or divesting those that we don't think can get through the corporate hurdle rate within a reasonable period of time, and that will really apply to SLX just the same way it applies to all of the other business units. Laura Kaster - Sander O'Neill - Analyt Okay, great. And then just a follow-up on your CLO business which seems to be coming of an increased focus. Can you just remind me, do you originate the loans that you put in these vehicles and do you retain any equity and if so, what percentage? I know that some firms retain 6% to 8%. Middle market lenders are usually higher than that and can you outline what type of return, if you do retain equity, you would get on that? Jeff Peek - CIT Group - Chairman, CEO Because we're right in the market now, it's hard for me to really talk about that without basically forcing us to entirely retreat from the market and reapproach it, so the next earnings call we'll be delighted to take you through that. We're quite happy with where it's going. I just can't really give you the detail on that for kind of security provision reasons if you can understand that. Laura Kaster - Sander O'Neill - Analyt Okay, thank you. Operator Next question comes from David Hochstim of Bear Stearns. You may proceed. David Hochstim - Bear Stearns - Analyst Yes, hi. My question is really about home lending and if you could give us an update on your forecast for the on loss rate which seems in my sense got to your prior forecast a little earlier than I thought, and then also about the decision to grow the portfolio in the first quarter. What kind of assets were you buying and are you likely to continue to grow that book? And then the follow-up question is just if somebody could comment on Rick Wolfert's resignation and what the implications of that are in terms of the organization and I guess his former activities. Jeff Peek - CIT Group - Chairman, CEO Sure, David. Why don't I just, why don't we handle that in reverse order. Let me talk about Rick and then I'll pass it to Joe to really give you the update with some quantitative highlights on home lending. I think Rick's decision was pretty much for personal reasons. There certainly was nothing happening at the Company that would have precipitated that. It was certainly his decision, not our decision, and I think it may have been for family reasons also, so that I would kind of extract that from any kind of corporate situation. If you look at it really, Rick was responsible for our larger ticket businesses, Trade Finance, www.streetevents.com Contact Us 7 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  10. 10. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Transportation, and in Corporate Finance, and really two of those three businesses have for a number of years been run by the people that run them currently, John Daly on Trade Finance and Jeff Knittel and George Cashman for Aerospace and Rail, and so those people report to me now directly. There hasn't been a big change in terms of what's going on there. The businesses are doing well, and the third business, Corporate Finance, where there is a lot of growth and a lot of activity. In January, I think as you know, we had moved Walter Owens, our Chief Sales Officer, over to oversee the Corporate Finance segment, partially because we just felt there were too many people reporting to Rick, and so in some ways, not knowing anything, it looks like we anticipated something which probably was just more serendipity than anything else. But Walter, John, Jeff Knittel, all report directly to me, and those businesses are doing well, so I don't really think we've missed a beat there on the so-called Commercial Finance part of the platform. Let me pass it over to Joe to talk a little bit about home lending. Joe Leone - CIT Group - Vice Chairman, CFO A little detail on home lending, David, if I remember all you asked. The assets were a little higher than we expected at quarter end, and two of the principal reasons were number one, I mentioned earlier, we did sell somewhat less, the amount of portfolio than we expected to, given the fact that we thought we were better off economically holding than selling. Having said that, we did sell some portfolios in the month of March. The second is prepayments have slowed down and they slowed down more than our forecast coming into the plan year, and those were two of the principal reasons the portfolio was higher in addition to some higher origination. In terms of the loss number, the losses at 120 basis points, as you know, are, I think it was a premise of your question is about our guidance for the year. I think I said last quarter that I expected losses in home lending to be in the 120 basis points area, and Q1 came in at 120. So as we looked at the quarterly close, our loss reserve and our roll rates and what we would say in response to the question that you asked, we took a hard look at our forecast for dollars for home lending losses in '07 and we continue to think that losses that would equate to about 120 basis point area is still the number we're looking at and forecasting. So we could have a slightly higher denominator than we thought but having said that, the amount of dollar losses hasn't changed in any significant way from our earlier in the quarter forecast. Did I get everything that you asked? David Hochstim - Bear Stearns - Analyst Pretty much. I guess do we expect the portfolio to grow during the year from here or -- ? Joe Leone - CIT Group - Vice Chairman, CFO Well, that's right. You did ask that. I think we're taking a close look at that and it's a debate and the question is when is the right time to buy more portfolios? As we look at it, prices have come down and the question that we have is, is it an opportunistic time to buy portfolios and what I mean by that is the risk in return profile significantly better and attractive to us at this point to buy more portfolios? And we haven't reached a definitive statement on that. I would expect us to continue to analyze that as we go into Q2, but we haven't made any decisions to not buy anything nor to go in and buy significant. We're continuing to debate that, but as you know, we look at the risk adjusted returns and we're sort of questioning whether they are quite where we expect them to eventually land at the current time. David Hochstim - Bear Stearns - Analyst Okay, thanks. www.streetevents.com Contact Us 8 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  11. 11. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Steve Klimas - CIT Group - VP, IR Next question, please? Operator Thank you. Our next question comes from the line of Bruce Harting of Lehman Brothers. You may proceed. Bruce Harting - Lehman Brothers - Analyst It's probably the first time in a little while Vendor Finance has popped up as one of the highlights. Could you just talk about some of the wins there and what's driving that? And just a point of reference on subprime, I think Joe, you said in the past that you really haven't done a securitization out of the subprime pool for a number of years and it's mostly financed on balance sheet. Is that correct and I'm just curious which type of funding you put against those ones? Thanks. Joe Leone - CIT Group - Vice Chairman, CFO Well, I'll take the financing question first, Bruce. We have not done a home lending securitization since 2002, and we don't have any near term plans to do so. All the assets that we book are on balance sheet and all the metrics that we show you, or principally the metrics we show you reflect our on balance sheet portfolio. We do have some remnants of the securitized portfolio that we did in 2002. Having said that, one of the concerns is retained interest assumptions in home lending. Our retained interest in home lending securitization is $40 million or less. Those loans go back to 2002, are very seasoned and the retained interest is currently performing in accordance with our assumptions and expectations. So I think that's, well and the way we finance it, we finance it on balance sheet with unsecured debt. Jeff Peek - CIT Group - Chairman, CEO Bruce, on Vendor Finance, it's really been one of our best performing businesses and when we saw the opportunity first to do the Barclay's deal in Europe, and then basically to acquire Citi's vendor finance unit here in the States, those were just two very attractive acquisitions for us. The brand names we picked up, the programs we picked up, all really fit for us, so that, I think that continues to be a high performance unit for us. It really augments a lot of our strategy of building market share in a particular sector as well as expanding internationally, so I think you'll see us continue to work on that, and right now, we've obviously got two integration programs going on between Barclay's and Citigroup, but the expenses will come down. We've built a lot of operating leverage into our global platform so we're quite excited about it. Bruce Harting - Lehman Brothers - Analyst Jeff, what's the, so it's much less concentrated now than when Dell was such a big part. What is the Dell contribution at this point and -- ? Jeff Peek - CIT Group - Chairman, CEO Well -- www.streetevents.com Contact Us 9 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  12. 12. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Bruce Harting - Lehman Brothers - Analyst -- is that in growth or shrink mode? Jeff Peek - CIT Group - Chairman, CEO Well I think we put out something, the way we handled that was we said I think this year, it suggests that no one manufacturer will account for more than 20% of our volume. Steve Klimas - CIT Group - VP, IR We'll take the next question, please. Operator Next question comes from the line of Chris Brendler of Stifel Nicolaus. You may proceed. Chris Brendler - Stifel Nicolaus - Analyst Hi. Good morning, gentlemen. Jeff Peek - CIT Group - Chairman, CEO Good morning. Chris Brendler - Stifel Nicolaus - Analyst I've got a couple just quick questions. Joe, if you could give us a little more color on the fee and other income. It looks like $185.5 million is extremely impressive. It's almost a quarter of your revenues and if you can just help me think about what's driving that. I'd like to think it's the M&A investment advisory initiatives that you've been adding talent to over the last couple years and trying to grow that. Is there any impact from the servicing component and I guess the most important question on this front, is it sustainable at this kind of level? Joe Leone - CIT Group - Vice Chairman, CFO Wow, Chris, as usual, good question. So, fees and other income were up very nicely. We're very happy with that level. Flip side, syndication gains were down and I think I mentioned earlier that was a little bit due to seasonality, selling less, a little lower in pipeline coming into the year, but on the fees and other income side, I'll give you a couple of things. Vendor Finance, which Jeff just described and an earlier question asked about, had a very good quarter and we got very nice earnings from some of our joint ventures so that was helpful. On the Corporate Finance side, fees and other income were particularly strong and that related to just strong fees from our upfront lending and structuring expertise, as well as getting some revenues from back end activities from loans that we've done over the years where we have back end profits built in and by that I mean sometimes we might take a line, so we had a little bit of that flavor in the quarter and we were to continue to expect as we add value in industry verticals, structure transactions in a significant way, to have more than money over money profits in the earnings stream. Now you asked another element of dimension. In terms of sustainability, we think that some things haven't hit. Some of those things happen one quarter and don't happen the next month but some of the things have not hit yet. For example, your premise www.streetevents.com Contact Us 10 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  13. 13. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call about M&A. We have not gotten any significant M&A fees in that quarter. The pipeline is beginning to build. There's a long gestation period for those fees, as you know, but I would say that the significant increase there is not due to M&A. The other thing is that we have not cranked up again, in a very significant way, our servicing fees but part of our asset manager activities and objectives are to build those servicing fees. So if we do A and when we do our healthcare and aerospace initiatives, we expect, fully expect that not only would we have earnings coming from our proportionate share of ownership of those entities but also servicing fees to the value-added services we have. So not only do I think we have good momentum there, I think we have a lot of good strategic objectives that should help. Chris Brendler - Stifel Nicolaus - Analyst Okay. Maybe in the future we can get a little more breakout because I think the syndication in sale breakout you started last near has been very helpful and maybe we can get another component there. On home equity, I just have to ask one question at least on home equity. Are you able to, you bought 1 billion, I think or so, of portfolios this quarter. Are you able to buy those at a discount or are you being that sort of selective where you're selling at a gain and buying portfolios at a discount so you can sort of take advantage of the disruption? And then I'm still not clear on how you get comfortable with 120 basis points when delinquencies are still increasing and not modestly. I think they are rising being pretty quickly and it seems like it's only going to get worse from here but help me think about that. Joe Leone - CIT Group - Vice Chairman, CFO Yeah. On the portfolios, I think that's a strategy we -- I mentioned earlier we would evaluate on home lending. We have not done that. We haven't bought deeper down on the quality or the price and then flipped for gains. We have not done that. That's something that, as I said, we have a debate and a discussion and an evaluation going on. Chris Brendler - Stifel Nicolaus - Analyst So the purchase you made this quarter was earlier in the quarter? Joe Leone - CIT Group - Vice Chairman, CFO Yes. Chris Brendler - Stifel Nicolaus - Analyst Okay. Joe Leone - CIT Group - Vice Chairman, CFO And secondly, your question was -- Chris Brendler - Stifel Nicolaus - Analyst Losses. www.streetevents.com Contact Us 11 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  14. 14. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Joe Leone - CIT Group - Vice Chairman, CFO Losses. Losses. What we did on the losses is took all the delinquency, well clearly the delinquency as we saw it at the end of March and continued in April, and took all our roll rates and stressed our roll rates, so took the delinquencies, how much roll to non-performing , how much roll to repo and applied what we think our appropriate, based upon history and our expectation severity rates are. So we put -- it sounds like something you should do every quarter and we do but there was a lot more iterations, a lot more rigor and a lot more views of it, so we continue to remain comfortable with 120 basis point area in terms of our forecast. Having said that, we did come out of that box at 120 basis points and we continue to have work to do and that's why I mentioned some of the initiatives that the unit has ongoing to improve the quality and efficiency of our servicing and take some costs out of the front end, so there's other ways to get the economics. Chris Brendler - Stifel Nicolaus - Analyst Great, thanks, Joe. Steve Klimas - CIT Group - VP, IR Next question, please? Operator Next question comes from the line of Joel Houck of Wachovia. You may proceed. Joel Houck - Wachovia - Analyst Thanks. Just a quick question on the home lending sales I guess have being down in the quarter. I guess you assume that occurred before the end of February and can you tell us, Joe, what the margin of those sales were on those home loans? Joe Leone - CIT Group - Vice Chairman, CFO I don't know the latter answer to the latter part of that , but I mentioned we sold 500 at a premium of 2.3 or so, and as I mentioned earlier, not all of that was done in January and February. Some of that was in March. Joel Houck - Wachovia - Analyst Okay. Joe Leone - CIT Group - Vice Chairman, CFO So that answers the other part of the question. Joel Houck - Wachovia - Analyst So generally, for your type of product, I mean, it's still liquidity I guess is the underlying thought there? www.streetevents.com Contact Us 12 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  15. 15. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Joe Leone - CIT Group - Vice Chairman, CFO Well, I think so. We'll see what the second quarter brings but we have an additional advantage, a couple of additional advantages, over others. One, we've been selling product into the marketplace for a period of time. The portfolios have performed very well, and lastly, CIT stands behind obviously the reps and warranties within an A, A-plus rating so I think we've got some advantages. Joel Houck - Wachovia - Analyst Okay, thanks, guys. Steve Klimas - CIT Group - VP, IR Thanks, Joel. Next question, please? Operator Next question comes from Eric Wasserstrom of UBS. You may proceed. Eric Wasserstrom - UBS - Analyst Thanks. Joe, can we just go back to the NIM for a moment? I appreciate the breakout you did and I think you indicated that you expect it to maybe recapture something like 78 basis points because of some of the refinancing activities, but can you just give us a sense of where you think that the sustainable margin is for the remainder of the year? Joe Leone - CIT Group - Vice Chairman, CFO Yes. I just want to make sure I heard you right or you heard me right. Eric Wasserstrom - UBS - Analyst Okay. Joe Leone - CIT Group - Vice Chairman, CFO It was 728 basis points, not 78 basis points. Eric Wasserstrom - UBS - Analyst Yes, yes. 78 would be impressive. Joe Leone - CIT Group - Vice Chairman, CFO Yes, I know. If it were 78, you wouldn't ask me the other question, I guess. Just want to make sure I had that right. We were targeting margins to be in the flat to where we ended the year at 2.95% to 3%, and I would say we are going to pick up seven or eight of that from the financing, but the environment is tough. Liquidity is still pretty ample in the market. Pricing is still under pressure. We did see, as I mentioned before, in two areas where we hadn't seen this particular pressure, in rail leasing www.streetevents.com Contact Us 13 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  16. 16. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call rates and somewhat in factoring commissions, because of the environment whether it's housing and/or benign credit, so I would say pricing remains tough. Having said that, the thing that we're real happy about in the first quarter, other than delivering the bottom line and the revenue growth, is credit was outstanding so that's the flip side of the margin pressure in the benign credit environment is we still see relatively good credit metrics, particularly in our Commercial Finance portfolio. So while that's not specific, we work hard to maximize our margin but I do see more pressure as we sit here in April than I did when we sat here in January, but credit seems a little bit better as well. Eric Wasserstrom - UBS - Analyst And just to follow-up on that last point, is the level of recoveries that you saw in the quarter, is that sustainable or did that just represent a particularly good period? Joe Leone - CIT Group - Vice Chairman, CFO Well, I think it was one of our higher quarters of recovery. I would love to have 30 basis points of recovery every quarter but that's not going to happen. Having said that, we work hard on those counts and I have to say the credit team did an outstanding job on both of those loans but particularly in Calpine, which if you dial back 18 months ago, we had a lot of exposure thinking about a loss exposure on an amount of $60 million and here we end up getting a recovery here in the second quarter. I still see some recoveries in the future but I think 30 basis points is a high number. Eric Wasserstrom - UBS - Analyst Thanks a lot. Steve Klimas - CIT Group - VP, IR Thank you, Eric. May we have the next question, please? Operator Next question comes from the line of Matt [Bernell] of Wachovia Securities. You may proceed. Matt Bernell - Wachovia Securities - Analyst Good morning, gentlemen. Just a quick question, I guess about a comment that Joe made in his prepared remarks about it sounds as if you're dedicating more resources, both financial and otherwise, to credit mitigation in the current environment and certainly makes a lot of sense but I guess I'm just trying to get a size for what impact that might have on expenses or if you can give us some historical perspective in terms of when commercial losses started rising back in '01 and '02, sort of what the dynamic in terms of costs and manpower was in terms of that, in that business? Joe Leone - CIT Group - Vice Chairman, CFO I can't give you specifics in terms of dollars. I can talk you through it in terms of concept, Matt, but when commercial credit quality turned down, we do add some people to the back end from the front end that's sort of a transfer of resources, not move the shortstop and make the shortstop a pitcher, but you do trade off resources in terms of taking down some of the front end costs and moving them to the back end. And in commercial, you see a big pickup when you have a downturn in third party costs. We call it credit and collection costs and it's sort of a way of talking about legal fees and the like, repossession fees and www.streetevents.com Contact Us 14 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  17. 17. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call the like. On the consumer side, we're doing the same thing, moving more resources to the back end, being smarter about our collection. We did close some offices. That's going to be a way of paying for some of the back end we have in consumer in terms of increased collection costs, and overall, I would say that we factored into our beginning of the year plan the fact that in certain areas we would have to build credit resources and collection resources, so I can't dimension if -- whether it's $5 million or $10 million. I would tell you that it's factored into our thinking for the year and it has been since January. Steve Klimas - CIT Group - VP, IR Thanks, Matt. May we have the next question, please, Operator? Operator Yes, sir. We have a question from the line of Meredith Whitney of CIBC World Markets. You may proceed. Meredith Whitney - CIBC World Markets - Analyst Good morning. I have a few questions. If I look at your loan growth and I take out the Barclay's deal, I've got a high percentage of loan growth from student and home equity and I was under the impression that you were sort of capping the growth of your home equity, your, yes, your home equity portfolio, your mortgage portfolio. Is that not the case and then if I missed something, maybe I just need clarification. And then the other question I had was in terms of the ramp rate and the fee income, again, if I missed something I apologize, could you further clarify that? Joe Leone - CIT Group - Vice Chairman, CFO Yes, Meredith, I think we did try to cover those. I would just say on home lending, just so everybody is clear, we did have higher assets than we expected to in the quarter and two of the reasons were we had lower prepayments and we sold less in terms of portfolio sales and that was of our choice. We had -- we thought we had better economics than by holding for awhile, then selling in March. In terms of the fees and other income, we continue to see, and I'll just abbreviate this and you can follow-up with IR. We saw strong fees, particularly fees in other income in Vendor Finance due to some of our joint venture programs and in Corporate Finance more broadly speaking in our healthcare , communication media, sponsor finance, and business capital middle market lending groups on fees, and other structuring profits that we get when we do a highly structured value-added financing. Meredith Whitney - CIBC World Markets - Analyst Okay so on the flip side then, were other areas of portfolio growth disappointing to you? Joe Leone - CIT Group - Vice Chairman, CFO I think in the first quarter, as we talk about, there's seasonality in our business and in the first quarter, generally volumes coming into the year are a little weaker than they are coming into the subsequent quarters. So I think we were generally happy overall with the platforms, the way the pipeline built into the second quarter. Now we've got to realize on the plat -- on the pipeline, I'm sorry. www.streetevents.com Contact Us 15 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  18. 18. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Meredith Whitney - CIBC World Markets - Analyst All right. Thanks. Steve Klimas - CIT Group - VP, IR Thanks, Meredith. May we have our next question, please? Operator Next question comes from the line of [Evelyn Osmoye] of [TICTET] Asset Management. You may proceed. Evelyn Osmoye - TICTET Asset Management - Analyst Thanks. Could you further elaborate about the complexity of your assets and your ability to securitize and the ratings expectations in this regard? I mean the requirements, and how important is the unsecured debt access for you and your committment to your ratings actually? Joe Leone - CIT Group - Vice Chairman, CFO I'll take the complexity of the asset side and I think you're referring to a comment Jeff made a little earlier. Evelyn Osmoye - TICTET Asset Management - Analyst Yes, okay. Joe Leone - CIT Group - Vice Chairman, CFO Yes. When we look, to put it in contrast, we have a lot of different asset classes in our portfolio, some which are more homogeneous and therefore a lot more easily securitizable. For example, we have student loans and mortgages, and the primary way those are financed in the marketplace is through securitization because of their homogeneous nature, the small ticket nature, but CIT Commercial Finance businesses does totally different kinds of lending. For example, we do airplane operating lease business where we own an aircraft and then would have a rental stream so we would have an aircraft that we pay full -- a price for that has an expected life of 30 years and then we have lease streams that are five years, so there's a complexity in terms of financing that through securitization. Rail cars, the same. Their operating leases where we buy the rail car and then there's shorter term or relative to life in terms of leases. On the Commercial Finance side, what our strength is is sitting down with the borrower and structuring a financing that meets their needs so it's customized financing. In Vendor Finance, what we have is highly customized programs with vendors where we take back end leasing residual risks on which we realize very good profits so it's not only money over -- money lending that we do is what we do is manage equipment and make leases and that type of lending is a little less efficiently financed in the secured market and so that's what we meant by the complexity of our assets and the difference in securitization programs. For example, our securitization programs at CIT generally are limited to our smaller ticket money-over-money lending, not in our leasing or our highly structured Commercial Finance lending, and that's for a reason. It's very expensive to finance it a different way. It's much more efficient to finance it the way we do. Hopefully that helps. www.streetevents.com Contact Us 16 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  19. 19. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Evelyn Osmoye - TICTET Asset Management - Analyst Okay. Steve Klimas - CIT Group - VP, IR Thank you, Evelyn. May we have the next question, please? Operator Next question comes from the line of Jordan Hymowitz of Philadelphia Financial. You may proceed. Jordan Hymowitz - Philadelphia Financial - Analyst Hi, guys. A couple questions. One, what was the repricing on the rail this quarter? You didn't give the number, I don't believe. Joe Leone - CIT Group - Vice Chairman, CFO The repricing. No, I don't think I did give -- I didn't give a number. I just said that certain car types -- Jordan Hymowitz - Philadelphia Financial - Analyst Right, but the stuff on this quarter was put on on new lease rates at what percent higher than were wrote off? Joe Leone - CIT Group - Vice Chairman, CFO No. I'll just repeat what I said because I don't know exactly what the prices did per car type, but the utilization went down by 1% from 99% of our cars rolling and paying to 98%, so that was a 1% decline in the numbers of cars that we have operating, and then secondly what I said was particularly in the center beam car class, which moves lumber around the country, there we saw our weakness in rates but more so in utilization of those cars. So part of the margin decline was not lease rates declining per se but also utilization declining. Jordan Hymowitz - Philadelphia Financial - Analyst Okay, maybe Steve, you could get back to me with the pricing because I think it was 19% last quarter. Secondly, $11.5 million which is 2.3% of of the $500 billion sold , did that go through the net finance revenue line or which line item does that go through? Joe Leone - CIT Group - Vice Chairman, CFO I don't -- you have to clarify that. I'm not clear. What $11.5 million? Jordan Hymowitz - Philadelphia Financial - Analyst You sold $500 million of subprime loans at a 2.3% premium. www.streetevents.com Contact Us 17 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  20. 20. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Joe Leone - CIT Group - Vice Chairman, CFO When we break that out, we break out the gains that we have on both syndication and receivable sales as a separate line item on the bottom of our income statement, okay? Jordan Hymowitz - Philadelphia Financial - Analyst Okay. And finally what do you think the tax rate is for the rest of the year? Joe Leone - CIT Group - Vice Chairman, CFO Well, we're at 30% now and we want to continue to see strategies like buying international assets and moving more planes to Dublin but 30% or better is what I said in the beginning of the year and 30% or better is what I feel now. Jordan Hymowitz - Philadelphia Financial - Analyst Okay, thank you very much. Steve Klimas - CIT Group - VP, IR Thank you, Jordan. We'll take the next question and maybe make this our last question, Operator? Operator Okay. Our final question will come from the line of Bob Napoli of Piper Jaffray. You may proceed. Bob Napoli - Piper Jaffray - Analyst Thank you. A question on subprime, then a follow-up on rail as well. And thank you for the disclosure, 40% fixed rate in subprime. I was wondering if you could give me a feel or give us a feel for what the -- is the other 60% primarily 228s and what is the credit quality difference on the fixed versus the ARMs, if you can give some feel for that and then a follow-up on rail? Joe Leone - CIT Group - Vice Chairman, CFO Yes, well, the fixed rate portfolio is a little over 40% and the ARM portfolio is a little over 55%, and I don't have the specific 228 percentages but we do have 228 loans in there. In terms of the delinquency performance, I don't have it handy. You'll have to follow-up with IR, but I believe the ARM portfolio has a higher delinquency that you would expect than the fixed but I don't have it handy with me, Bob. I'm sorry. Bob Napoli - Piper Jaffray - Analyst Have you seen any improvement in the capital markets environment over the last week or two in the home equity business, in the subprime business? www.streetevents.com Contact Us 18 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  21. 21. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call Joe Leone - CIT Group - Vice Chairman, CFO No. I think it sort of continued the trends we saw towards the tail end of March is my understanding, so right now, it seems to be more of the same. We are seeing more opportunities presented to us to buy portfolios but as I said, that's something we're considering and debating very carefully. Bob Napoli - Piper Jaffray - Analyst And then on rail, the center beam cars or the lumber/cement cars where, which obviously with home building down, that's where you would expect to see some pressures outside of that like in the chemical car sector or other areas, are you seeing any weakness outside of the center beam cars? Joe Leone - CIT Group - Vice Chairman, CFO No. I pointed out where we saw weakness, and at a 98% utilization with weaknesses in those other two car types, you can do the arithmetic. The overall portfolio is performing very well, and I would say in the downturn that we saw in the early 2000's, lease -- rail car utilization rates were much lower than 98%. We always thought full utilization was somewhere 95%, 96% so the business continues to perform very well at 98%, because think about it. There's always cars coming back for refurbishing, moving to other lessees, etc, so 98% is a pretty full utilization rate. Bob Napoli - Piper Jaffray - Analyst Great. Thank you, Joe. Operator Ladies and gentlemen, this concludes the question and answer session. I will now turn the call over to Mr. Jeff Peek for any closing remarks. Jeff Peek - CIT Group - Chairman, CEO Thank you very much. I want to just thank everybody for joining us today. Thanks for your questions. Just to recap, CIT had an excellent first quarter. I thought we delivered solid financial results at the same time that we're making quite a bit of progress on our longer term strategic initiative. As we look ahead, we do remain aligned with our brand, capital redefined, we're out there providing customized solutions with the relationship intellectual and financial capital that they've come to expect from CIT. And I want to thank our more than 7,300 employees around the globe for all their hard work during the first quarter and also all of you out there, our investors, for your continued support. Thanks very much. Have a good day. Operator Ladies and gentlemen, this concludes the presentation. You may now disconnect and have a wonderful day. www.streetevents.com Contact Us 19 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.
  22. 22. FINAL TRANSCRIPT Apr. 18. 2007 / 11:00AM, CIT - Q1 2007 CIT Group Earnings Conference Call DISCLAIMER Thomson Financial reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES THOMSON FINANCIAL OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. ©2007, Thomson Financial. All Rights Reserved. 1511491-2007-04-18T13:25:15.937 www.streetevents.com Contact Us 20 © 2007 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

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