Housing Losses Nail CIT - TheStreet

Housing Losses Nail CIT

It swings to a loss as it exits the U.S. home lending business.
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CIT (CIT) - Get Report posted a second-quarter loss, as the company took a big charge to leave the U.S. home lending and construction businesses.

The New York-based financial firm lost $135 million, or 70 cents a share, for the quarter ended June 30, reversing the year-ago profit of $236 million, or $1.16 a share.

The latest quarter included a loss of $495 million, or $2.58 a share, on the decision to leave the U.S. home lending business, as the company made a $10.6 billion fair value adjustment on related receivables. The quarter included a gain of 71 cents a share on the sale of the construction portfolio but was hit by an 11-cent charge on workforce cuts, a 7-cent charge on disposition of a waste-to-energy plant and 4 cents a share in home lending operating losses.

"Although we made progress executing on our business strategy, it was a challenging quarter where we had to make some tough decisions," said CEO Jeffrey M. Peek. "All CIT's businesses must meet rigorous return standards. As a result, we decided to exit home lending and construction enabling us to redeploy resources to higher returning businesses. While we believe exiting home lending is the right decision, it significantly impacted our current results."

CIT also cut its second-half earnings guidance by a quarter a share to a range of $2.60 to $2.70 a share, citing the home lending weakness.

The news comes as the housing sector's decline has begun weighing on shares of the big brokerages and regional banks.

Bear Stearns

(BSC)

was hit hard late Tuesday by the news that two of its hedge funds were essentially worthless after bad bets on the subprime mortgage market, and

Pulte

(PHM) - Get Report

last evening joined other homebuilders in forecasting bleak times ahead.