Shares of CIT Group Inc. (CIT - Free Report) 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.
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.
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. (ONDK - Free Report) and General Finance Corp. (GFN - Free Report) are likely to announce their numbers on May 8 and May 10, respectively.
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