Yahoo Finance CIT Group (CIT) Stock Down 7.8% on Q1 Loss, Provisions Rise
Shares of CIT Group Inc. CIT lost 7.8%, following the release of first-quarter 2020 results. Adjusted loss per share was $2.43 against the Zacks Consensus Estimate for earnings of 83 cents. The reported figure excludes certain noteworthy items such as the impact of the Current Expected Credit Losses accounting methodology, goodwill impairment charges related to the OneWest Bank acquisition and merger-related costs in connection with the acquisition of Mutual of Omaha Bank.
Results were primarily hurt because of a significant increase in provisions, which the company recorded in the quarter. Moreover, higher expenses were an undermining factor. However, despite lower rates, net interest revenues witnessed growth. Also, non-interest income improved. The balance sheet position remained strong.
Net loss available to common shareholders (GAAP basis) was $628.1 million or $6.40 per share compared with net income available to common shareholders of $118.9 million or $1.18 per share recorded in the year-ago quarter.
Revenues Improve, Expenses Rise
Total net revenues (non-GAAP) were $496.4 million, up 6.5% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $449 million.
Net interest revenues were $287.9 million, up 2.5% year over year.
Total non-interest income was $340.4 million, increasing 8.2% from the year-ago quarter. The rise was due to an increase in other non-interest income.
Net finance margin contracted 47 basis points to 2.73%.
Operating expenses (excluding noteworthy items and intangible asset amortization) were $309 million, up 14.4% from the prior-year quarter.
Credit Quality Deteriorates
Provision for credit losses increased significantly year over year from $33 million to $513.9 million. The rise primarily reflected the adverse impacts of the coronavirus pandemic and the effect of the Mutual of Omaha Bank acquisition.
Non-accrual loans increased 29.6% year over year to $385 million. Net charge-offs were $54 million, up 58.8% from the prior-year quarter.
Balance Sheet Strong, Capital Ratios Worsen
As of Mar 31, 2020, average interest bearing cash and investment securities amounted to $9.8 billion, comprising $1.8 billion in interest bearing cash, and $8 billion in investment securities and securities purchased under the agreement to resell.
As of Mar 31, 2020, Common Equity Tier 1 and Total Capital ratios (as calculated under the fully phased-in Regulatory Capital Rules) were 9.7% and 12.9%, respectively, compared with 12% and 14.8% at the end of the prior-year quarter.
Our Viewpoint
Business streamlining initiatives along with the acquisition of Mutual of Omaha Bank are expected to keep supporting CIT Group. However, continuously increasing expenses (as witnessed in the first quarter as well) will likely hurt bottom-line growth in the near term. As the company continues to invest in franchise, costs are expected to remain elevated. Moreover, the current global economic scenario, owing to the coronavirus outbreak, might have an adverse impact on the company’s growth prospects.
CIT Group Inc. Price, Consensus and EPS Surprise
CIT Group Inc. price-consensus-eps-surprise-chart | CIT Group Inc. Quote
Currently, CIT Group carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Upcoming Release of Other Stocks
The Bank of New York Mellon Corporation’s BK first-quarter 2020 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of 90 cents. Moreover, the figure reflects a rise of 11.7% from the prior-year quarter.
PNC Financial PNC reported first-quarter 2020 earnings per share of $1.95, surpassing the Zacks Consensus Estimate of $1.38 amid coronavirus concerns. The bottom line, however, reflects a 25.3% decline from the prior-year reported figure.
Hancock Whitney Corporation HWC is scheduled to report quarterly results on Apr 28.
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