CIT Group Inc. Wachovia 14th Annual Nantucket Conference

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Transcript of CIT Group Inc. Wachovia 14th Annual Nantucket Conference

  • Slide 1
  • CIT Group Inc. Wachovia 14th Annual Nantucket Conference
  • Slide 2
  • 2 Notices Forward Looking Statements Certain statements made in these presentations that are not historical facts may constitute "forward-looking" statements under the Private Securities Litigation Reform Act of 1995, including those that are signified by words such as "anticipate", "believe", "expect", "estimate", and similar expressions. These forward-looking statements reflect the current views of CIT and its management and are subject to risks, uncertainties, and changes in circumstances. CIT's actual results or performance may differ materially from those expressed in, or implied by, such forward-looking statements. Factors that could affect actual results and performance include, but are not limited to, potential changes in interest rates, competitive factors and general economic conditions, changes in funding markets, industry cycles and trends, uncertainties associated with risk management, risks associated with residual value of leased equipment, and other factors described in our Form 10-K for the year period ended December 31, 2003 and our Form 10-Q for the quarter ended March 31, 2004. CIT does not undertake to update any forward-looking statements. Non-GAAP Financial Measures These presentations include certain non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission. Any references to non-GAAP financial measures are intended to provide additional information and insight into CIT's financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. For a reconciliation of these non-GAAP measures to GAAP, please refer to the appendix within this presentation or access the reconciliations through CIT's Investor Relations website at Data as of March 31, 2004 unless otherwise noted. Subsequent to March 31, 2004 Structured Finance was amalgamated with Capital Finance ($1.8 billion of managed assets) and Commercial Finance-Business Credit ($1.3 billion of managed assets). Prior period data has not been restated to reflect the change.
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  • 3 Introduction The worlds largest publicly held commercial finance company Managed assets of $50 billion and roughly 6,000 employees Diverse franchise offering a full array of financial products & services Predominantly a collateralized lender Customers include the majority of the Fortune 1000 companies Listed on NYSE under the ticker symbol CIT 68% return for shareholders since the IPO (July 2002 - May 2004) Current market capitalization of approximately $8 billion
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  • 4 Business Strategy Focused Growth Emphasize businesses where we have competitive strengths and predictable performance Diversification Maintain balanced businesses and broad funding platforms that reduce risk through diversification Scale Risk Management Assume leadership positions in key businesses where operating leverage can be generated Further utilize technology and information to properly balance risks and rewards
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  • 5 Segment Overview Managed Assets - $50B Segment data excludes $250mm of equity investments held in corporate. Small-ticket commercial lending and leasing, vendor finance, SBA lending and consumer home equity loans Mid-large ticket asset based lending, factoring and other commercial services Commercial aerospace and rail equipment leasing and lending Diversified middle market equipment lending and leasing Specialized investment bank for the middle market Market Focus Commercial $13B Consumer $6B Commercial Services $7B Bus. Credit $4B Specialty Finance Equipment Finance Commercial Finance Capital Finance Structured Finance (billions)
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  • 6 Business Assessment Business Unit Managed Assets Market Position Entry BarriersCompetitive Strengths Specialty: Commercial $13B LeaderMediumTechnology, Origination and servicing, Relationships, Efficiency, Preferred and Exclusive Lender status Specialty: Consumer $6B PlayerMediumTechnology, Servicing, Relationships Equipment Finance $10B LeaderMediumRelationships, Reputation, Collateral expertise, Service Commercial Services $7B LeaderHighCredit, Relationships, Technology, Processing Efficiency Capital Finance $7B LeaderHighAsset and industry expertise, Relationships, Service, Remarketing capability Business Credit $4B LeaderMediumReputation, Relationships, Speed, Credit, Portfolio management and syndication capability Structured Finance $3B PlayerLow/MediumStructuring expertise, Relationships, Credit, Underwriting and syndication skills FLOW TRANSACTION
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  • 7 More Diverse Today Than 10 Years Ago CAGR 13.5% Managed Assets $13.7 billionManaged Assets $50 billion Commercial Services Capital Finance Equipment Finance Specialty Consumer Business Credit Equipment Finance Structured Finance Commercial Services Capital Finance Specialty Commercial Specialty Consumer Business Credit Segment data excludes $250mm of equity investments held in corporate. December 1993March 2004
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  • 8 Segment data excludes equity investments and other corporate data. $50 billion $164 million Results by Business Segment
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  • 9 Financial Scorecard * Excludes $25.5 million after-tax gain on PINES debt call 2003 Q1 2004 Q1* Long Term Targets Profitability Net Income ($ millions)127164 EPS ($)0.600.76 ROTE11.0%13.1%15% Risk Adjusted Margin2.34%3.09%3.40% - 3.60% Securitization Gain (% PT Income)14%8%Max. 15% Expenses Efficiency Ratio41.7%41.1%35% Area Credit Credit Losses - Total1.61%1.26% Balance Sheet Managed Assets ($ billions)47.550.18% - 10% Tangible Equity/Managed Assets10.4%10.7%9% Plus
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  • 10 Historic Credit Losses.80-.85% Objective
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  • 11 Sharp Improvement in Forward Markers Owned Delinquency 60+ days LiquidatingRepoNon-Accrual 3.24% 2.47% 2.05% 3.93% 2.16% Non-Performing Assets 2.07%
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  • 12 Strong Balance Sheet Tangible Capital to Managed Assets Tangible Capital ($billions) General Reserves to Fin Rec. Reserves ($millions) Telecom General Argentine
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  • 13 1998Q1-04 RatingAa3/A+A2/A Profitability: ROMA ROTE 1.48% 14.0% 1.42% 13.1% Asset Quality: Charge-offs NPAs 0.42% 1.40% 0.98%* 2.07% Capitalization: Tang Equity/MA Alt. Liquidity/STD 10.3% 43% 10.7% 86% Ratings Objective IssueCurrent Status Economic Environment Improving economy Diverse business franchises Wholesale Funding Model Expanded funding diversity Reduced refinancing risk Proven alternate liquidity Management Transition Well-defined succession plan Experienced management Comparative AnalysisOther Qualitative Factors * Core Charge-offs Focus on returning to high single A long-term debt rating
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  • 14 Balanced and Diverse Funding Mix Outstanding Debt and ABS at December 31, 2003 Commercial Paper US$5.0B program C$ 1.0B program A$ 1.0B CP/MTN program Term Debt Diverse product offerings: Institutional and Retail Public and Private US and International Strong demand across maturities Securitization Attractive funding alternative and valuable liquidity source Diverse product offerings: Public market and Private conduits Various asset classes
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  • 15 Capital Generation Return on Equity 13% Dividend Payout 17% Capital Generation 11% Asset growth target 8-10% Increased dividend 8% Stock buyback program to support employee stock option program Acquisitions that are accretive to earnings Funds
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  • 16 Growing the Business Focus on sectors growing faster than GDP Technology Healthcare Media and Communications Increase market share Deeper penetration into existing businesses Expand origination/distribution channels Supplement organic growth with acquisitions Target new (but related) markets Leverage international platforms Build vendor relationships Managed Asset Growth Target: 8-10% Grow assets consistent with GDP expansion
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  • 17 Traits of a Rising Rate Environment Volume Higher capital spending Activity picks up and growth accelerates Revenue Higher asset growth drives more margin Stronger deal flow leads to fee generation Equipment gains higher Margin Matched funding philosophy minimizes risk Credit More liquidity for customers Asset and collateral values appreciate Lower losses and improved credit metrics Competition Cyclical lenders return Capital available for new entrants Pricing pressure increases
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  • 18 Key Investment Highlights Diverse franchise with market leadership positions and 95+ years experience in commercial lending Robust capital levels position us well for economic recovery Infrastructure in place to support higher asset volumes Strong reserves and broad based credit quality improvements Deep funding model and solid liquidity position Solid single A ratings with a stable outlook by all agencies Disciplined and experienced management team
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  • Appendix
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  • 20 Corporate History CIT founded as Commercial Credit and Investment Company by Henry Ittleson in St. Louis CIT launched a 20% IPO to acquire from DKB its option to purchase the 20% interest owned by Chase Manhattan. CIT again listed on the NYSE (CIT) Albert R. Gamper, Jr., named Chairman and CEO of CIT. CIT completed 100% initial public offering (NYSE: CIT) Tyco Intl acquisition o