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pd58

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  • Just Out Of Bankruptcy, CIT Group Is Being Pressured Again [View article]
    Timely article David since the company hosted it's first analyst day in six years this morning. I'm still trying to figure out how you came to focus on CIT as a way to express a negative outlook on Europe. Nearly 80% of their portfolio is US based with only 6% of loan exposure to Europe. The largest exposure is to Great Britain at 2.7%. Total exposure to the PIIGS is $180 million out of $34 billion of assets, not exactly a problem. Bottom line, CIT is a US lender and it's fortunes will be primarily determined by the health of the US economy.

    I also hope you realize their loans to the airline industry are leases of aircraft which are secured by the equipment. In addition, much of the aircraft leasing portfolio is to government owned airlines.

    Lastly, you reference their cost of debt which is dated story at this point. The company has been lowering their funding costs since emerging from bankruptcy. In the first quarter, the net interest margin (adjusted for FSA) was 1.97% up from 1.41% last year. Management indicated this morning, they expect the margin to be 2.50 percent in the second quarter, over 100 basis points wider then the same period last year.

    Bottom line, the company is trading at 75% of tangible book value; has sold off low earnings assets; lowered the cost of funding by 120 basis points; and has $5 to $7.50 in earnings power.

    If I were you, I would hedge my short position
    Jun 14, 2012. 03:59 PM | 1 Like Like |Link to Comment
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