CIT reports fourth quarter 2013 net income of $130 mn

Tyco International spinoff CIT Group Inc, a leading provider of financing and advisory services to small businesses and middle market companies, has reported net income of $130 million, or $0.65 per diluted share, for the fourth quarter of 2013, compared to net income of $207 million, $1.03 per diluted share, for the fourth quarter of 2012.

Net income for the year ended 31 December 2013 was $676 million, $3.35 per diluted share, compared to a net loss of $592 million, $2.95 per diluted share, which included $1.5 billion of debt redemption charges, for the year ended 31 December 2012.

''In 2013, we returned CIT to profitability, grew CIT Bank and our commercial assets, while rationalising our global platforms and returning capital to shareholders,'' said John Thain, chairman and chief executive.

"We remain focused on enhancing the value of our franchise as we put our knowledge to work to meet the lending, leasing and advisory needs of our small business, middle market and transportation clients.''

Fourth quarter results reflect growth in earning assets, aided by higher levels of new business activity, and continued strong credit metrics. Net income was reduced by a $45 million charge related to the Tyco Tax Agreement settlement, CIT said, referring to the December 2013 under whch CIT agreed to pay its former parent Tyco International Ltd. (TYC) to settle a tax dispute.

In addition, the decline in net income from the year-ago quarter largely reflected lower interest income and net FSA accretion, which were partially offset by lower debt redemption charges, it added.

Total assets as of 31 December 2013 stood at $47.1 billion, up $0.9 billion from the quarter ended 30 September 2013, and $3.1 billion from 31 December 2012. Commercial financing and leasing assets increased to $32.7 billion, up $0.6 billion from 30 September 2013 and $2.5 billion from 31 December 2012.

Total loans of $18.6 billion decreased $3.2 billion sequentially and $2.2 billion from a year ago, reflecting the transfer of the $3.4 billion student loan portfolio into assets held for sale during the current quarter.

Operating lease equipment increased $0.5 billion from 30 September 2013 and $0.6 billion from a year ago to $13.0 billion, reflecting the addition of aircraft and railcars. Cash and investment securities increased to $8.8 billion from $8.5 billion at 30 September 2013 and $7.9 billion at 31 December 2012.

Net finance revenue was $337 million compared to $312 million in the year-ago quarter, which included approximately $83 million of debt redemption costs, and $357 million in the prior quarter.

Average earning assets were $34.2 billion in the fourth quarter, up from $32.3 billion in the year-ago quarter and $33.9 billion in the prior quarter.

Net finance revenue as a percentage of average earning assets (net finance margin) was 3.95 per cent in the fourth quarter, improved from 3.86 per cent in the year-ago quarter and down from 4.22 per cent in the prior quarter.

Excluding the impact of debt redemptions, net finance margin was 4.00 per cent in the current quarter, down from 4.88 per cent in the year-ago quarter and 4.22 per cent in the prior quarter, primarily reflecting the sale of higher-yielding vendor finance assets and a decline in operating lease margin and net FSA accretion.

Other income of $128 million declined from $172 million in the year-ago quarter, primarily due to lower counterparty receivable accretion, and increased $23 million sequentially.

Other income benefited from several items, including a $29 million gain on the sale of the remaining Dell Europe portfolio, a $19 million gain on a workout-related claim, a $17 million gain on the sale of a leveraged lease (on which there was also a $13 million expense in the tax provision), which were partially offset by $22 million of impairment charges on assets held for sale related to our international platform rationalisation efforts.

Operating expenses were $288 million, up from $232 million in both the year-ago and prior quarters. Excluding restructuring charges, operating expenses were $269 million in the current period, up $49 million from the year-ago quarter and $40 million from the prior quarter.

The current period includes a $45 million charge related to the Tyco Tax Agreement settlement and a benefit from the recovery of legal expenses. Headcount at 31 December 2013 was approximately 3,240 down from 3,560 a year ago and 3,380 at 30 September 2013.

The provision for income taxes in the fourth quarter was $31 million, down from $44 million in the year-ago quarter and up from $14 million in the prior quarter. The current quarter includes a $13 million expense related to the sale of a leveraged lease. In addition to the impact of discrete items, which increased the provision by $12 million in the year-ago quarter and decreased it by $4 million in the prior quarter, the tax provision reflects the recognition of tax expense on international earnings and state tax expense in the US.