CIT Group (CIT)

Q2 2010 Earnings Call

July 27, 2010 8:00 am ET

Executives

Kenneth Brause - Executive Vice President of Investor Relations

Scott Parker - Chief Financial Officer and Executive Vice President

John Thain - Chairman and Chief Executive Officer

Analysts

Matthew Schultheis - Boenning and Scattergood, Inc.

Sameer Gokhale - Keefe, Bruyette, & Woods, Inc.

Moshe Orenbuch - Crédit Suisse AG

Patrick Duff

David Hochstim - Bear Stearns

Christopher Brendler - Stifel, Nicolaus & Co., Inc.

Christoph Kotowski - Oppenheimer & Co. Inc.

Mike Turner

Henry Coffey - Sterne Agee & Leach Inc.

Jordon Hymowitz

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to CIT's Second Quarter 2010 Earnings Conference Call. My name is Chanel, and I'll be your operator today. Participating in today's call are John Thain, Chairman and Chief Executive Officer; Scott Parker, Chief Financial Officer; and Ken Brause, Head of Investor Relations. [Operator Instructions] I would now like to turn the call over to Ken Brause. Please proceed, sir.

Kenneth Brause

Thank you, Chanel, and good morning, everyone. Welcome to CIT's Second Quarter 2010 Earnings Conference Call. Our call today will be hosted by John Thain, our Chairman and CEO; and Scott Parker, our CFO. Following our formal remarks, we will have a Q&A session. We ask that you please limit yourself to one question and a follow-up and then return to the queue if you do have additional questions. We'll do our best to answer as many questions as possible in the time we have this morning.

Elements of this call are forward-looking in nature and may involve risks, uncertainties and contingencies that may cause actual results to differ materially from those anticipated. Any forward-looking statements relate only to the time and date of this call. We disclaim any duty to update these statements based on new information, future events or otherwise. For information about risk factors relating to the business, please refer to our 2009 Form 10-K that was filed with the SEC in March. Any references to certain non-GAAP financial measures are meant to provide meaningful insights and are reconciled with GAAP in our press release. For more information on CIT, please visit the Investor Relations section of our website, at www.cit.com.

I'd like to now turn the call over to John Thain.

John Thain

Thank you, Ken. Good morning, everyone. Thanks for getting on the call. I'm going to make a few introductory comments and then turn the call over to Scott Parker, our new Chief Financial Officer. Scott joins us from Cerberus but he spent most of his career at GE Capital in many of the same lines of businesses that CIT is in.

As we said in our press release, we are continuing to deliver on the priorities that we discussed in the first quarter. First, we are substantially completed in building out our senior management team, many of which are in the room with me today, this morning. But just to go through, Carol Hayles, our new Controller, is here. Lisa Polsky, our Chief Risk Officer; Rob Rowe, our Chief Credit Officer; Mike Roemer, our Chief Auditor; Nelson Chai Head of Strategy and Chief Administrative Officer; Lisa Zonino, our new HR Head; and Jeff Barloes [ph] (06:49.9), our new Chief Regulatory Officer. And then we have four hires that are in the set approval process. And when those two get done, we will have completed filling out our senior management team.

In addition, later this morning, we're going to put out a press release announcing that David Moffett is joining our Board of Directors. David has extensive banking experience, and so that will be a very positive addition to our Board, and we'll put out a press release later this morning.

Second, in terms of priorities, is we are continuing to pay down our high cost debt, and we're also continuing to access the capital markets for lower-cost funding. In the second quarter, we raised about $800 million in the capital markets. And continuing on this trend, we will begin discussions this week to refinance and repay the remaining $4 billion of first lien debt. I would expect us subject to, of course, to market conditions, to pay down about $1 billion of the first lien debt and then to begin the process of refinancing with a new secured term loan, the other $3 billion.

We are also continuing the process, and you saw this in the second quarter, of both reviewing and optimizing our portfolio. We did close the sale of our Australia and New Zealand vendor business. We also sold our half of our CIBC joint venture in Canada. And then we continued the process of selling loans. We've sold an excess of $500 million of Corporate Finance loans, and we also sold about $600 million of Student Loans.

We are making progress on our written agreement with the Fed. It helps a lot to have all of our people in place now, so we can deal with a lot of the issues that the Fed has raised, particularly on the risk management front, and so that it is progressing. We are also focused very much on expenses. As our assets are shrinking, our ratio of expenses to net earning assets is going up. We are focused on that, although because of our need to invest in risk management, in compliance and in systems, that ratio will be an issue for us, at least for a little while. But we are focused on managing expenses.

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