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CIT Group Ratings Upgraded by Moody's, Outlook Stable
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Moody's Investors Service, the rating services arm of Moody's Corporation (MCO - Free Report) , upgraded the senior unsecured rating of CIT Group Inc. from B1 to Ba3. Notably, the outlook for the ratings is stable.
Moody's also assigned a Baa3 long-term deposit rating, a Prime-3 short-term deposit rating, a Ba3 Issuer rating, and a ba2 baseline credit assessment (“BCA”) and adjusted BCA to CIT Bank.
The ratings upgrade comes on the heels of the company’s efforts to improve its funding profile, divest its non-core businesses and integrate the operations of OneWest Bank, which was acquired in 2015.
Also, the improved ratings reflect the company's operating strategy and the credit enhancement steps taken to meet the elevated regulatory requirements. CIT Group has become subject to more stringent regulatory capital requirements by surpassing $50 billion in total assets.
CIT Group has gradually transitioned its funding composition, lowering its exposure to confidence-sensitive market sources in favor of more stable deposit funding. The company’s increased deposit funding has lowered its funding costs by nearly 70 basis points, helping to shore up margins against heightened competitive pressure on asset yields.
However, the company’s bank deposits cost higher than the peer average, and include a high proportion of rate-sensitive online and brokered certificates of deposit and branch-based time deposits.
Given rigorous regulatory requirements, CIT Group needs to develop a living will and participate in the Comprehensive Capital Analysis and Review (“CCAR”) process, which Moody's expects will strengthen the company's risk management and capital planning discipline.
Moreover, CIT Group’s plan to spin-off or sell its aircraft leasing unit by the end of this year in order to simplify operations and focus more on domestic banking will aid in reducing asset performance risks and operating expenses.
Over time, Moody's expects that CIT Group will grow its banking products and services to diversify its revenues from finance company sources.
The stable outlook takes into account the anticipated positive effects of its lower cost funding profile and expense management efforts on the company's performance, given competitive pressures on asset yields. Moody's also expects good asset quality performance and sufficient capital levels in the near term, considering the company's business composition.
Currently, CIT Group carries a Zacks Rank #5 (Strong Sell). Some better-ranked companies in the same space include Apollo Residential Mortgage, Inc. , and Euronet Worldwide, Inc. (EEFT - Free Report) . Both these stocks hold a Zacks Rank #2 (Buy).
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CIT Group Ratings Upgraded by Moody's, Outlook Stable
Moody's Investors Service, the rating services arm of Moody's Corporation (MCO - Free Report) , upgraded the senior unsecured rating of CIT Group Inc. from B1 to Ba3. Notably, the outlook for the ratings is stable.
Moody's also assigned a Baa3 long-term deposit rating, a Prime-3 short-term deposit rating, a Ba3 Issuer rating, and a ba2 baseline credit assessment (“BCA”) and adjusted BCA to CIT Bank.
The ratings upgrade comes on the heels of the company’s efforts to improve its funding profile, divest its non-core businesses and integrate the operations of OneWest Bank, which was acquired in 2015.
Also, the improved ratings reflect the company's operating strategy and the credit enhancement steps taken to meet the elevated regulatory requirements. CIT Group has become subject to more stringent regulatory capital requirements by surpassing $50 billion in total assets.
CIT Group has gradually transitioned its funding composition, lowering its exposure to confidence-sensitive market sources in favor of more stable deposit funding. The company’s increased deposit funding has lowered its funding costs by nearly 70 basis points, helping to shore up margins against heightened competitive pressure on asset yields.
However, the company’s bank deposits cost higher than the peer average, and include a high proportion of rate-sensitive online and brokered certificates of deposit and branch-based time deposits.
Given rigorous regulatory requirements, CIT Group needs to develop a living will and participate in the Comprehensive Capital Analysis and Review (“CCAR”) process, which Moody's expects will strengthen the company's risk management and capital planning discipline.
Moreover, CIT Group’s plan to spin-off or sell its aircraft leasing unit by the end of this year in order to simplify operations and focus more on domestic banking will aid in reducing asset performance risks and operating expenses.
Over time, Moody's expects that CIT Group will grow its banking products and services to diversify its revenues from finance company sources.
The stable outlook takes into account the anticipated positive effects of its lower cost funding profile and expense management efforts on the company's performance, given competitive pressures on asset yields. Moody's also expects good asset quality performance and sufficient capital levels in the near term, considering the company's business composition.
Currently, CIT Group carries a Zacks Rank #5 (Strong Sell). Some better-ranked companies in the same space include Apollo Residential Mortgage, Inc. , and Euronet Worldwide, Inc. (EEFT - Free Report) . Both these stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>