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CIT Group (CIT) Stock Gains as Q1 Earnings Beat Estimates

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Shares of CIT Group Inc. gained 1.7% following the release of its first-quarter 2017 results. Adjusted earnings from continuing operations of 54 cents per share surpassed the Zacks Consensus Estimate of 52 cents. Also, the figure compared favorably with the year-ago quarter’s adjusted earnings of 28 cents.

Better-than-expected results were primarily driven by higher net-interest revenue and lower expenses. Moreover, improvement in credit quality was a positive for the company. However, a decrease in non-interest income hurt the results to some extent.

After considering several non-recurring items, net income was $180 million or 88 cents per share, compared with net income of $146 million or 72 cents per share in the prior-year quarter.

Net Interest Revenue Improved, Expenses Declined

Total net revenue (GAAP basis) was $623 million, reflecting a decline of 2.2% from the prior-year period. However, the figure surpassed the Zacks Consensus Estimate of $495.2 million.

Net interest revenue was $292.6 million, up 1.6% from the prior-year quarter. However, total non-interest income was $330.4 million, reflecting a decline of 5.3% year over year.

Net finance margin decreased 10 basis points year over year to 3.57%.

Operating expenses (excluding restructuring costs and intangible assets amortization) were $290.6 million, down 4.2% from the prior-year quarter.

Credit Quality Improves

Net charge-offs were $27.5 million, down 14.1% from the prior-year quarter. Also, provision for credit losses was $49.7 million, down 44.5% year over year.

Further, non-accrual loans decreased 5.3% year over year to $258.8 million.

Healthy Balance Sheet and Capital Ratios

As of Mar 31, 2017, interest bearing cash and investment securities amounted to $9.9 billion, comprising $5.4 billion in cash and $4.5 billion in investment securities.

As of Mar 31, 2017, Common Equity Tier 1 and Total Capital ratios were 14.3% and 15.1%, respectively, as calculated under the fully phased-in Regulatory Capital Rules, compared with 13.1% and 13.7% in the prior-year quarter.

Our Viewpoint

Sluggish growth in industries where CIT Group provides finance, together with stringent regulations, is expected to dent the company’s performance in the near term. Moreover, despite certain cost-savings measures, expenses are expected to increase in the long term due to the company’s strategic plan and continued investments in the franchise.

However, the company’s efforts toward becoming a leading regional commercial banking institution through restructuring and streamlining are commendable.
 

CIT Group Inc (DEL) Price, Consensus and EPS Surprise
 

CIT Group Inc (DEL) Price, Consensus and EPS Surprise | CIT Group Inc (DEL) Quote

Currently, CIT Group carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other stocks in this space, StoneCastle Financial Corp. (BANX - Free Report) is slated to report results on May 4, while On Deck Capital, Inc. and General Finance Corp. are likely to announce their numbers on May 8 and May 10, respectively.

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