CIT Group Inc.’s (CIT - Free Report) second-quarter 2017 adjusted earnings from continuing operations of 68 cents per share compared favorably with the year-ago quarter’s adjusted earnings of 46 cents.
Results benefitted from lower expenses and a fall in provision for credit losses. The quarter witnessed overall improvement in credit quality. However, a decline in revenues hurt the results to quite an extent.
Upon considering several non-recurring items, net income was $157 million or 85 cents per share, compared with $17 million or 8 cents per share in the prior-year quarter.
Revenues & Expenses Declined
Total net revenue (GAAP basis) was $604.8 million, reflecting a decline of 6.7% from the prior-year period.
Net interest revenue was $269 million, down 6.3% from the prior-year quarter. Also, total non-interest income was $335.8 million, reflecting a decline of 6.9% year over year.
Net finance margin decreased 56 basis points year over year to 3.07%.
Operating expenses (excluding restructuring costs and intangible assets amortization) were $286 million, down 2.5% from the prior-year quarter.
Credit Quality Improves
Net charge-offs were $27.7 million, down 19.5% from the prior-year quarter. Also, provision for credit losses was $4.4 million, decreasing 81.1% year over year.
Further, non-accrual loans decreased 2.9% year over year to $256.8 million.
Strong Balance Sheet, Capital Ratios Improved
As of Jun 30, 2017, interest bearing cash and investment securities amounted to $10.3 billion, comprising $4.8 billion in cash and $5.5 billion in investment securities.
As of Jun 30, 2017, Common Equity Tier 1 and Total Capital ratios were 14.4% and 16.2%, respectively, as calculated under the fully phased-in Regulatory Capital Rules, compared with 13.4% and 14.0% in the prior-year quarter.
Sluggish growth in industries where CIT Group provides finance 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, Moody's Corporation (MCO - Free Report) reported second-quarter 2017 adjusted earnings of $1.51 per share, which handily outpaced the Zacks Consensus Estimate of $1.33. Better-than-expected results were attributable to impressive revenue growth, reflecting strong issuance in the quarter. However, higher expenses were on the downside.
On Deck Capital, Inc. (ONDK - Free Report) is slated to report results on Aug 7, while StoneCastle Financial Corp. (BANX - Free Report) is expected to report its numbers on Aug 9.
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