UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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Form 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number: 001-31369

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CIT Group Inc.
(Exact name of Registrant as specified in its charter)

Delaware 65-1051192
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

1 CIT Drive, Livingston, New Jersey, 07039
(Address of Registrant's principal executive offices)

(973) 740-5000 (Registrant's
telephone number)

(Former name, former address and former fiscal year, if changed
since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [X] No [ ]

As of October 29, 2004, there were 210,181,847 shares of the Registrant's
common stock outstanding.

================================================================================

CIT GROUP INC. AND SUBSIDIARIES
TABLE OF CONTENTS

Page
----
Part I--Financial Information:

Item 1. Consolidated Financial Statements ............................. 1
Consolidated Balance Sheets (Unaudited) ....................... 1
Consolidated Statements of Income (Unaudited) ................. 2
Consolidated Statements of Stockholders' Equity (Unaudited) ... 3
Consolidated Statements of Cash Flows (Unaudited) ............. 4
Notes to Consolidated Financial Statements (Unaudited) ........ 5-19

Item 2. Management's Discussion and Analysis of Financial Condition
and and Results of Operations and Quantitative and Qualitative
Item 3. Disclosure about Market Risk .................................. 20-48
Item 4. Controls and Procedures ....................................... 49

Part II--Other Information:

Item 1. Legal Proceedings ............................................. 50
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds ......................................... 51
Item 6. Exhibits and Reports on Form 8-K .............................. 51
Signatures ............................................................. 53

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

CIT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)
($ in millions -- except share data)

September 30, December 31,
2004 2003
------------ -----------
ASSETS

Financing and leasing assets:
Finance receivables .............................. $34,542.8 $31,300.2
Reserve for credit losses ........................ (637.9) (643.7)
--------- ---------
Net finance receivables .......................... 33,904.9 30,656.5
Operating lease equipment, net ................... 7,932.9 7,615.5
Finance receivables held for sale ................ 1,757.3 918.3
Cash and cash equivalents ........................... 2,160.1 1,973.7
Retained interest in securitizations and
other investments ................................ 1,188.4 1,380.8
Goodwill and intangible assets ...................... 594.4 487.7
Other assets ........................................ 2,475.7 3,310.3
--------- ---------
Total Assets ........................................ $50,013.7 $46,342.8
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
Commercial paper ................................. $ 4,496.5 $ 4,173.9
Variable-rate senior notes ....................... 11,507.7 9,408.4
Fixed-rate senior notes .......................... 21,022.2 19,830.8
Preferred capital securities ..................... 254.2 255.5
--------- ---------
Total debt .......................................... 37,280.6 33,668.6
Credit balances of factoring clients ................ 3,929.9 3,894.6
Accrued liabilities and payables .................... 2,925.5 3,346.4
--------- ---------
Total Liabilities ................................ 44,136.0 40,909.6
Commitments and Contingencies (Note 10)
Minority interest ................................... 40.7 39.0
Stockholders' Equity:
Preferred stock: $0.01 par value, 100,000,000
authorized, none issued ........................ -- --
Common stock: $0.01 par value, 600,000,000
authorized, 212,092,592 issued, 209,870,336
outstanding .................................... 2.1 2.1
Paid-in capital, net of deferred compensation
of $44.8 and $30.6 ............................. 10,672.2 10,677.0
Accumulated deficit .............................. (4,675.6) (5,141.8)
Accumulated other comprehensive loss ............. (81.1) (141.6)
Less: Treasury stock, 2,222,256 and 43,529 shares,
at cost ........................................ (80.6) (1.5)
--------- ---------
Total Stockholders' Equity ....................... 5,837.0 5,394.2
--------- ---------
Total Liabilities and Stockholders' Equity ....... $50,013.7 $46,342.8
========= =========

See Notes to Consolidated Financial Statements.

CIT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($ in millions -- except per share data)

Quarters Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------
2004 2003 2004 2003
----------- ----------- ------------- -----------

Finance income ........................................... $ 963.1 $ 921.2 $ 2,781.2 $ 2,803.6
Interest expense ......................................... 315.4 333.7 913.4 1,026.2
----------- ----------- ----------- -----------
Net finance income ....................................... 647.7 587.5 1,867.8 1,777.4
Depreciation on operating lease equipment ................ 245.7 252.4 716.5 804.1
----------- ----------- ----------- -----------
Net finance margin ....................................... 402.0 335.1 1,151.3 973.3
Provision for credit losses .............................. 60.2 82.9 211.5 286.5
----------- ----------- ----------- -----------
Net finance margin after provision for
credit losses ......................................... 341.8 252.2 939.8 686.8
Other revenue ............................................ 212.5 232.0 676.4 701.6
Gain (loss) on venture capital investments ............... 4.2 (11.3) 7.9 (27.8)
----------- ----------- ----------- -----------
Operating margin ......................................... 558.5 472.9 1,624.1 1,360.6
Salaries and general operating expenses .................. 256.7 230.3 764.3 676.4
Gain on redemption of debt ............................... -- -- 41.8 --
----------- ----------- ----------- -----------
Income before provision for income taxes ................. 301.8 242.6 901.6 684.2
Provision for income taxes ............................... (117.7) (94.6) (351.6) (266.8)
Minority interest, after tax ............................. (0.2) (0.2) (0.2) (0.3)
Dividends on preferred capital securities,
after tax ............................................. -- -- -- (5.4)
----------- ----------- ----------- -----------
Net income ............................................... $ 183.9 $ 147.8 $ 549.8 $ 411.7
=========== =========== =========== ===========
Earnings per share
Basic earnings per share ................................. $ 0.87 $ 0.70 $ 2.60 $ 1.95
=========== =========== =========== ===========
Diluted earnings per share ............................... $ 0.86 $ 0.69 $ 2.56 $ 1.94
=========== =========== =========== ===========
Number of shares - basic (thousands) ..................... 210,489 211,735 211,286 211,633
=========== =========== =========== ===========
Number of shares - diluted (thousands) ................... 214,179 213,529 215,116 212,498
=========== =========== =========== ===========
Dividends per common share ............................... $ 0.13 $ 0.12 $ 0.39 $ 0.36
=========== =========== =========== ===========

See Notes to Consolidated Financial Statements.

CIT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
($ in millions)

Accumulated Total Total
Common Paid-in Treasury Earnings/ Comprehensive Stockholders'
Stock Capital Stock (Deficit) Income/(Loss) Equity
--------- ------------- ----------- ------------ -------------- --------------

Balance December 31, 2003 .............. $ 2.1 $ 10,677.0 $ (1.5) $ (5,141.8) $ (141.6) $ 5,394.2
Net income ............................. -- -- -- 549.8 -- 549.8
Foreign currency translation
adjustments .......................... -- -- -- -- 72.8 72.8
Change in fair values of
derivatives qualifying as
cash flow hedges ..................... -- -- -- -- (11.2) (11.2)
Unrealized losses on equity
and securitization
investments, net ..................... -- -- -- -- (1.1) (1.1)
----------
Total comprehensive income ............. -- -- -- -- -- 610.3
----------
Cash dividends ......................... -- -- -- (83.6) -- (83.6)
Restricted common stock grants ......... -- 17.8 -- -- -- 17.8
Treasury stock purchased,
at cost .............................. -- -- (137.9) -- -- (137.9)
Exercise of stock option awards ........ -- (22.6) 58.8 -- -- 36.2
------ ----------- -------- ---------- -------- ----------
Balance September 30, 2004 ............. $ 2.1 $ 10,672.2 $ (80.6) $ (4,675.6) $ (81.1) $ 5,837.0
====== =========== ======== ========== ======== ==========

See Notes to Consolidated Financial Statements.

CIT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in millions)

Nine Months Ended
September 30,
----------------------------------
2004 2003
----------------------------------

Cash Flows From Operations
Net income (loss) .................................................................... $ 549.8 $ 411.7
Adjustments to reconcile net income to net cash flows from operations:
Depreciation and amortization ..................................................... 747.5 831.4
Provision for credit losses ....................................................... 211.5 286.5
Provision for deferred federal income taxes ....................................... 274.2 229.6
Gains on equipment, receivable and investment sales ............................... (174.3) (158.9)
Gain on debt redemption ........................................................... (41.8) --
Decrease/(increase) in other assets ............................................... 133.5 (161.6)
(Decrease) increase in accrued liabilities and payables ........................... (258.1) 162.4
Other ............................................................................. (74.7) (55.2)
----------- -----------
Net cash flows provided by operations ................................................ 1,367.6 1,545.9
----------- -----------
Cash Flows From Investing Activities
Loans extended ....................................................................... (41,984.7) (38,740.8)
Collections on loans ................................................................. 35,665.6 32,794.5
Proceeds from asset and receivable sales ............................................. 5,587.0 5,693.7
Purchase of finance receivable portfolios ............................................ (2,027.4) (961.9)
Purchases of assets to be leased ..................................................... (874.3) (1,672.1)
Acquisitions, net of cash acquired ................................................... (724.8) --
Net decrease in short-term factoring receivables ..................................... (416.1) (529.4)
Goodwill and intangibles acquired .................................................... (114.1) --
Other ................................................................................ 69.2 23.0
----------- -----------
Net cash flows (used for) investing activities ....................................... (4,819.6) (3,393.0)
----------- -----------
Cash Flows From Financing Activities
Proceeds from the issuance of variable and fixed-rate notes .......................... 10,071.7 8,608.9
Repayments of variable and fixed-rate notes .......................................... (6,549.8) (6,316.3)
Net increase (decrease) in commercial paper .......................................... 322.6 (38.8)
Net repayments of non-recourse leveraged lease debt .................................. (38.6) (96.8)
Cash dividends paid .................................................................. (83.6) (76.3)
Other ................................................................................ (83.9) (1.2)
----------- -----------
Net cash flows provided by financing activities ...................................... 3,638.4 2,079.5
----------- -----------
Net increase in cash and cash equivalents ............................................ 186.4 232.4
Cash and cash equivalents, beginning of period ....................................... 1,973.7 2,036.6
----------- -----------
Cash and cash equivalents, end of period ............................................. $ 2,160.1 $ 2,269.0
=========== ===========
Supplementary Cash Flow Disclosure
Interest paid ........................................................................ $ 911.7 $ 1,110.3
Federal, foreign, state and local income
taxes paid, net .................................................................... $ 74.4 $ 53.1

See Notes to Consolidated Financial Statements.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 -- Summary of Significant Accounting Policies

CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"), is
a global commercial and consumer finance company that was founded in 1908. CIT
provides financing and leasing capital for companies in a wide variety of
industries, offering vendor, equipment, commercial, factoring, consumer, and
structured financing products. CIT operates primarily in North America, with
locations in Europe, Latin America, Australia and the Asia-Pacific region.

These financial statements, which have been prepared in accordance with
the instructions to Form 10-Q, do not include all of the information and note
disclosures required by accounting principles generally accepted in the United
States ("GAAP") and should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 2003. Financial statements
in this Form 10-Q have not been audited by independent registered public
accountants in accordance with the standards of the Public Company Accounting
Oversight Board (U.S.), but in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of CIT's financial position and results of operations. Certain
prior period amounts have been reclassified to conform to the current
presentation.

Stock Based Compensation

CIT has elected to apply Accounting Principles Board Opinion 25 ("APB 25")
rather than the optional provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as
amended by SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition
and Disclosure" in accounting for its stock-based compensation plans. Under APB
25, CIT does not recognize compensation expense on the issuance of its stock
options because the option terms are fixed and the exercise price equals the
market price of the underlying stock on the grant date. The following table
presents the pro forma information required by SFAS 123 as if CIT had accounted
for stock options granted under the fair value method of SFAS 123, as amended ($
in millions, except per share data):

Quarters Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Net income as reported ................................................. $ 183.9 $ 147.8 $ 549.8 $ 411.7
Stock-based compensation expense -- fair value method, after tax ....... 5.1 6.8 15.6 18.5
--------- --------- --------- ---------
Pro forma net income ................................................... $ 178.8 $ 141.0 $ 534.2 $ 393.2
========= ========= ========= =========
Basic earnings per share as reported ................................... $ 0.87 $ 0.70 $ 2.60 $ 1.95
========= ========= ========= =========
Basic earnings per share pro forma ..................................... $ 0.85 $ 0.67 $ 2.53 $ 1.86
========= ========= ========= =========
Diluted earnings per share as reported ................................. $ 0.86 $ 0.69 $ 2.56 $ 1.94
========= ========= ========= =========
Diluted earnings per share pro forma ................................... $ 0.83 $ 0.66 $ 2.48 $ 1.85
========= ========= ========= =========

For the quarters ended September 30, 2004 and 2003, net income includes
$3.4 million and $2.1 million of after-tax compensation cost related to
restricted stock awards. These costs for the nine months ended September 30,
2004 and 2003 totaled $10.9 million and $3.3 million, after tax.

Recent Accounting Pronouncements

In March 2004, the SEC issued Staff Accounting Bulletin 105, "Application
of Accounting Principles to Loan Commitments" ("SAB 105"). SAB 105 requires that
certain mortgage loan commitments issued after March 31, 2004 be accounted for
as derivatives until the loan is made or they expire unexercised. The adoption
of SAB 105 did not have a material financial statement impact on the Company.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

In January 2004, the FASB issued FASB Staff Position No. FAS 106-1,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug Improvement and Modernization Act of 2003" ("FSP 106-1"). For the third
quarter of 2004, the Company accounted for the effects of the Medicare
Prescription Drug and Modernization Act of 2003 by recognizing the impact of the
Medicare prescription drug subsidy prospectively from July 1, 2004. The subsidy
reduced the July 1, 2004 Accumulated Post Retirement Benefit Obligation and 2004
annual related expense by $3.5 million and $0.3 million, respectively.

In December 2003, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 03-3, "Accounting for Certain Loans or
Debt Securities Acquired in a Transfer" ("SOP 03-3"). SOP 03-3, which is
effective for fiscal years beginning after December 15, 2003, requires acquired
loans to be carried at fair value and prohibits the establishment of credit loss
valuation reserves at acquisition for loans that have evidence of credit
deterioration since origination.

In December 2003, the FASB revised SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This revision requires
interim disclosures regarding certain components of net periodic pension costs
and the employer's contribution paid, or expected to be paid during the current
fiscal year, if significantly different from amounts previously disclosed for
interim periods beginning after December 15, 2003. The additional required
disclosures are included in Note 9 -- Post Retirement and Other Benefit Plans.

In December 2003, the SEC issued Staff Accounting Bulletin 104, "Revenue
Recognition" ("SAB 104"), which revises or rescinds portions of related
interpretive guidance in order to be consistent with current authoritative
accounting and auditing guidance and SEC rules and regulations. The adoption of
SAB 104 as of January 1, 2004 did not have a material financial statement impact
on the Company.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
pronouncement establishes standards for classifying and measuring certain
financial instruments as a liability (or an asset in some circumstances). This
pronouncement requires CIT to display the Preferred Capital Securities
(previously described as "Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely debentures of the Company") within
the debt section on the face of the Consolidated Balance Sheets and show the
related expense with interest expense on a pre-tax basis. There was no impact to
net income upon adoption. This pronouncement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. Prior period restatement is not permitted. On November 7, 2003, certain
measurement and classification provisions of SFAS 150, relating to certain
mandatorily redeemable non-controlling interests, were deferred indefinitely.
The adoption of these delayed provisions, which relate primarily to minority
interests associated with finite-lived entities, is not expected to have a
material financial statement impact on the Company.

Note 2 -- Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. The diluted
EPS computation includes the potential impact of dilutive securities, including
stock options and restricted stock grants. The dilutive effect of stock options
is computed using the treasury stock method, which assumes the repurchase of
common shares by CIT at the average market price for the period. Options that do
not have a dilutive effect (because the exercise price is above the market
price) are not included in the denominator and averaged approximately 18.2
million shares and 17.6 million shares for the quarters ended September 30, 2004
and 2003, and 18.1 million shares and 18.0 million shares for the nine months
ended September 30, 2004 and 2003, respectively.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented ($ in millions, except per share amounts, which are
in whole dollars; weighted-average share balances in thousands):

Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- -------- ----------- ------------- ----------
Quarter Ended September 30, 2004 Quarter Ended September 30, 2003
------------------------------------ -------------------------------------
Basic EPS:

Income available to common stockholders ..... $ 183.9 210,489 $ 0.87 $ 147.8 211,735 $ 0.70
Effect of Dilutive Securities:
Restricted shares ........................... -- 649 -- -- 284 --
Stock options ............................... -- 3,041 $ 0.01 -- 1,510 $ 0.01
-------- ------- -------- -------
Diluted EPS .................................... $ 183.9 214,179 $ 0.86 $ 147.8 213,529 $ 0.69
======== ======= ======== =======

Nine Months Ended September 30, 2004 Nine Months Ended September 30, 2003
------------------------------------ -------------------------------------

Basic EPS:
Income available to common
stockholders .............................. $ 549.8 211,286 $ 2.60 $ 411.7 211,633 $ 1.95
Effect of Dilutive Securities:
Restricted shares ........................... -- 650 -- -- 355 --
Stock options ............................... -- 3,180 $ 0.04 -- 510 $ 0.01
-------- ------- -------- -------
Diluted EPS .................................... $ 549.8 215,116 $ 2.56 $ 411.7 212,498 $ 1.94
======== ======= ======== =======

Note 3 -- Business Segment Information

The selected financial information by business segment presented below is
based upon a fixed leverage ratio across business units and the allocation of
most corporate expenses. ($ in millions).

Total
Specialty Commercial Equipment Capital Business Corporate
Finance Finance Finance Finance Segments and Other Consolidated
--------- --------- --------- -------- --------- ------- ---------

Quarter Ended September 30, 2004
Operating margin ......................... $ 238.7 $ 173.4 $ 54.6 $ 71.1 $ 537.8 $ 20.7 $ 558.5
Income taxes ............................. 52.0 47.8 12.2 13.5 125.5 (7.8) 117.7
Net income (loss) ........................ 84.1 78.3 19.1 25.8 207.3 (23.4) 183.9

Quarter Ended September 30, 2003
Operating margin ......................... $ 218.7 $ 142.0 $ 35.8 $ 63.0 $ 459.5 $ 13.4 $ 472.9
Income taxes ............................. 45.7 37.5 5.8 15.8 104.8 (10.2) 94.6
Net income (loss) ........................ 71.6 58.8 9.0 24.4 163.8 (16.0) 147.8

At or for the Nine Months Ended
September 30, 2004
Operating margin ......................... $ 697.1 $ 494.9 $ 154.6 $ 211.3 $ 1,557.9 $ 66.2 $ 1,624.1
Income taxes ............................. 139.6 132.6 33.7 44.4 350.3 1.3 351.6
Net income (loss) ........................ 244.0 217.6 52.6 78.6 592.8 (43.0) 549.8
Total financing and leasing assets ....... 15,716.8 12,463.6 6,844.6 9,394.2 44,419.2 -- 44,419.2
Total managed assets ..................... 20,787.0 12,463.6 9,769.3 9,394.2 52,414.1 -- 52,414.1

At or for the Nine Months Ended
September 30, 2003
Operating margin ......................... $ 613.6 $ 429.1 $ 111.8 $ 158.1 $ 1,312.6 $ 48.0 $ 1,360.6
Income taxes ............................. 119.3 115.8 17.7 35.4 288.2 (21.4) 266.8
Net income (loss) ........................ 186.8 181.3 27.6 55.3 451.0 (39.3) 411.7
Total financing and leasing assets ....... 12,126.9 11,192.1 6,732.6 9,108.1 39,159.7 -- 39,159.7
Total managed assets ..................... 18,763.4 11,192.1 10,237.1 9,108.1 49,300.7 -- 49,300.7

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 4 -- Concentrations

The following table summarizes the geographic and industry compositions
(by obligor) of financing and leasing portfolio assets ($ in millions):

September 30, 2004 December 31, 2003
-------------------- ------------------------
Geographic
North America:

Northeast ............................................... $ 8,749.9 19.7% $ 8,319.8 20.8%
West .................................................... 8,386.0 18.9% 7,485.5 18.7%
Midwest ................................................. 6,749.3 15.2% 5,996.2 14.9%
Southeast ............................................... 6,232.1 14.0% 5,558.6 13.9%
Southwest ............................................... 4,976.3 11.2% 4,423.1 11.0%
Canada .................................................. 2,189.3 4.9% 2,055.5 5.1%
--------- ----- --------- -----
Total North America ........................................ 37,282.9 83.9% 33,838.7 84.4%
Other foreign .............................................. 7,136.3 16.1% 6,245.2 15.6%
--------- ----- --------- -----
Total ................................................... $44,419.2 100.0% $40,083.9 100.0%
========= ===== ========= =====

Industry
Manufacturing(1) ........................................... $ 7,279.7 16.4% $ 7,340.6 18.3%
Retail(2) .................................................. 6,363.4 14.3% 5,630.9 14.0%
Commercial airlines (including regional airlines) .......... 5,317.9 12.0% 5,039.3 12.6%
Consumer based lending -- home mortgage .................... 4,186.4 9.4% 2,679.6 6.7%
Service industries ......................................... 3,116.1 7.0% 2,608.3 6.5%
Transportation(3) .......................................... 2,833.6 6.4% 2,934.9 7.3%
Consumer based lending -- non-real estate(4) ............... 2,206.1 5.0% 1,862.1 4.7%
Wholesaling ................................................ 1,760.1 3.9% 1,374.7 3.4%
Construction equipment ..................................... 1,587.8 3.6% 1,571.2 3.9%
Communications(5) .......................................... 1,312.1 2.9% 1,386.5 3.5%
Automotive Services ........................................ 1,184.6 2.7% 1,152.3 2.9%
Other (no industry greater than 3.0%)(6) ................... 7,271.4 16.4% 6,503.5 16.2%
--------- ----- --------- -----
Total ................................................... $44,419.2 100.0% $40,083.9 100.0%
========= ===== ========= =====

- ----------
(1) Includes manufacturers of apparel (3.2%), followed by food and kindred
products, textiles, transportation equipment, chemical and allied
products, rubber and plastics, industrial machinery and equipment, and
other industries.

(2) Includes retailers of apparel (6.6%) and general merchandise (4.1%).

(3) Includes rail, bus, over-the-road trucking industries and business
aircraft.

(4) Includes receivables from consumers for products in various industries
such as manufactured housing, recreational vehicles, marine and computers
and related equipment.

(5) Includes $347.6 million and $556.3 million of equipment financed for the
telecommunications industry at September 30, 2004 and December 31, 2003,
respectively, but excludes telecommunications equipment financed for other
industries.

(6) Included in "Other" above are financing and leasing assets in the energy,
power and utilities sectors, which totaled $1.0 billion, or 2.3% of total
financing and leasing assets at September 30, 2004. This amount includes
approximately $659.3 million in project financing and $258.5 million in
rail cars on lease.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 5 -- Retained Interests in Securitizations and Other Investments

The following table details the components of retained interests in
securitizations and other investments ($ in millions):

September 30, December 31,
2004 2003
------------- ------------

Retained interests in commercial loans:
Retained subordinated securities.......................................... $ 405.7 $ 536.6
Interest-only strips...................................................... 301.4 366.8
Cash reserve accounts..................................................... 293.7 226.3
-------- --------
Total retained interests in commercial loans.............................. 1,000.8 1,129.7
-------- --------
Retained interests in consumer loans:
Retained subordinated securities.......................................... 78.3 86.7
Interest-only strips...................................................... 29.6 58.9
Cash reserve accounts..................................................... 16.2 34.0
-------- --------
Total retained interests in consumer loans................................ 124.1 179.6
-------- --------
Total retained interests in securitizations.................................. 1,124.9 1,309.3
Aerospace equipment trust certificates....................................... 63.5 71.5
-------- --------
Total..................................................................... $1,188.4 $1,380.8
======== ========

Note 6 -- Accumulated Other Comprehensive Loss

The following table details the components of accumulated other
comprehensive loss, net of tax ($ in millions):

September 30, December 31,
2004 2003
------------- ------------

Foreign currency translation adjustments..................................... $(33.0) $(105.8)
Changes in fair values of derivatives qualifying as cash flow hedges......... (52.5) (41.3)
Unrealized gain on equity and securitization investments..................... 5.2 6.3
Minimum pension liability adjustments........................................ (0.8) (0.8)
-------- --------
Total accumulated other comprehensive loss................................ $(81.1) $(141.6)
======== ========

Note 7 -- Derivative Financial Instruments

As part of managing exposure to interest rate, foreign currency, and, in
limited instances, credit risk, CIT, as an end-user, enters into various
derivative transactions, all of which are transacted in over-the-counter markets
with other financial institutions acting as principal counterparties.
Derivatives are utilized for hedging purposes only, and our policy prohibits
entering into derivative financial instruments for trading or speculative
purposes. To ensure both appropriate use as a hedge and to achieve hedge
accounting treatment, whenever possible, substantially all derivatives entered
into are designated according to a hedge objective against a specific or
forecasted liability or, in limited instances, assets. The notional amounts,
rates, indices, and maturities of our derivatives closely match the related
terms of the underlying hedged items.

CIT utilizes interest rate swaps to exchange variable-rate interest
underlying forecasted issuances of commercial paper, specific variable-rate debt
instruments, and, in limited instances, variable-rate assets for fixed-rate
amounts. These interest rate swaps are designated as cash flow hedges and
changes in fair value of these swaps, to the extent they are effective as a
hedge, are recorded in other comprehensive income. Ineffective amounts are
recorded in interest expense. Interest rate swaps are also utilized to convert
fixed-rate interest on specific debt instruments to variable-rate amounts. These
interest rate swaps are designated as fair value hedges and changes in fair
value of the swaps are effectively recorded as an adjustment to the carrying
value of the hedged item, as the offsetting changes in fair value of the swaps
and the hedged items are recorded in earnings.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The following table presents the notional principal amounts of interest
rate swaps by class and the corresponding hedge designation ($ in millions):

Notional Amount
--------------------------------------
September 30, December 31,
2004 2003
--------------------------------------

Effectively converts the interest
rate on an equivalent amount of
Floating to fixed-rate swaps -- commercial paper, variable-rate notes
cash flow hedges................... $ 5,637.5 $2,615.0 and selected assets to a fixed rate.

Effectively converts the interest
rate on an equivalent amount of
Fixed to floating-rate swaps -- fixed-rate notes and selected assets
fair value hedges.................. 8,363.1 6,758.2 to a variable rate.
--------- --------
Total interest rate swaps............ $14,000.6 $9,373.2
========= ========

In addition to the swaps in the table above, in conjunction with
securitizations, CIT has $2.3 billion in notional amount of interest rate swaps
outstanding with the related trusts to protect the trusts against interest rate
risk. CIT entered into offsetting swap transactions with third parties totaling
$2.3 billion in notional amount at September 30, 2004 to insulate the related
interest rate risk.

CIT utilizes foreign currency exchange forward contracts to hedge currency
risk underlying foreign currency loans to subsidiaries and the net investments
in foreign operations. These contracts are designated as foreign currency cash
flow hedges or net investment hedges and changes in fair value of these
contracts are recorded in other comprehensive income along with the translation
gains and losses on the underlying hedged items. CIT utilizes cross currency
swaps to hedge currency risk underlying foreign currency debt and selected
foreign currency assets. These swaps are designated as foreign currency cash
flow hedges or foreign currency fair value hedges and changes in fair value of
these contracts are recorded in other comprehensive income (for cash flow
hedges), or effectively as a basis adjustment (including the impact of the
offsetting adjustment to the carrying value of the adjusted item) to the hedged
item (for fair value hedges) along with the translation gains and losses on the
underlying hedged items. CIT also utilizes Treasury locks (bond forwards) to
hedge interest rate risk associated with planned debt issuances. These
derivatives are designated as cash flow hedges of a forecasted transaction, with
changes in fair value of these contracts recorded in other comprehensive income.
Gains and losses recorded in other comprehensive income are reclassified to
earnings in the same period that the forecasted debt issuance impacts earnings.

The components of the adjustment to Accumulated Other Comprehensive Loss
for derivatives qualifying as cash flow hedges are presented in the following
table ($ in millions):

Fair Value Total
Adjustments Income Tax Unrealized
of Derivatives Effects Loss
---------------- ----------- -----------

Balance at December 31, 2003 -- unrealized loss..................... $64.6 $(23.3) $41.3
Changes in values of derivatives qualifying as cash flow hedges.... 18.4 (7.2) 11.2
----- ------ -----
Balance at September 30, 2004 -- unrealized loss.................... $83.0 $(30.5) $52.5
===== ====== =====

The unrealized loss as of September 30, 2004, presented in the preceding
table, primarily reflects our use of interest rate swaps to convert
variable-rate debt to fixed-rate debt, followed by lower market interest rates.
For the quarter ended September 30, 2004, the ineffective portion of changes in
the fair value of cash flow hedges amounted to $0.2 million and has been
recorded as an increase to interest expense and for the nine months ended
September 30, 2004, the ineffective portion amounted to $0.5 million and has
been recorded as a decrease to interest expense. Assuming no change in interest
rates, approximately $12.8 million, net of tax, of Accumulated

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Other Comprehensive Loss is expected to be reclassified to earnings over the
next twelve months as contractual cash payments are made. The Accumulated Other
Comprehensive Loss (along with the corresponding swap liability) will be
adjusted as market interest rates change over the remaining life of the swaps.

During 2004, CIT entered into credit default swaps, with a combined
notional value of $98.0 million and terms of 5 years, to economically hedge
certain CIT credit exposures. These swaps do not meet the requirements for hedge
accounting treatment and therefore are recorded at fair value, with both
realized and unrealized gains or losses recorded in other revenue in the
consolidated statement of income. The cumulative fair value adjustment as of
September 30, 2004 amounted to a $2.4 million pretax loss.

Note 8 -- Certain Relationships and Related Transactions

CIT is a partner with Dell Inc. ("Dell") in Dell Financial Services L.P.
("DFS"), a joint venture that offers financing to Dell's customers. The joint
venture provides Dell with financing and leasing capabilities that are
complementary to its product offerings and provides CIT with a steady source of
new financings. On September 8, 2004, CIT and Dell agreed to extend the current
agreement beyond October 2005 and to modify certain contractual terms of the
relationship. The new agreements provide CIT with the right to purchase a
minimum percentage of DFS's finance receivables on a declining scale through
January 2010. Dell also has the option to purchase CIT's 30% interest in DFS in
February 2008 based on a formula tied to DFS profitability, within a range of
$100 million to $345 million.

CIT regularly purchases finance receivables from DFS at a premium,
portions of which are typically securitized within 90 days of purchase from DFS.
CIT has limited recourse to DFS on defaulted contracts. In accordance with the
joint venture agreement, net income and losses generated by DFS as determined
under GAAP are allocated 70% to Dell and 30% to CIT. The DFS board of directors
voting representation is equally weighted between designees of CIT and Dell,
with one independent director. DFS is not consolidated in CIT's financial
statements and is accounted for under the equity method. At September 30, 2004
and December 31, 2003, financing and leasing assets related to the DFS program
(included in the CIT Consolidated Balance Sheet) were $2.4 billion and $1.4
billion, and securitized assets included in managed assets were $2.0 billion and
$2.5 billion. In addition to the owned and securitized assets acquired from DFS,
CIT's investment in and loans to the joint venture were approximately $192
million and $205 million at September 30, 2004 and December 31, 2003.

CIT also has a joint venture arrangement with Snap-on Incorporated
("Snap-on") that has a similar business purpose and model to the DFS arrangement
described above, including credit recourse on defaulted receivables. The
agreement with Snap-on extends until January 2006. CIT and Snap-on have 50%
ownership interests, 50% board of directors' representation, and share income
and losses equally. The Snap-on joint venture is accounted for under the equity
method and is not consolidated in CIT's financial statements. At September 30,
2004 and December 31, 2003, the related financing and leasing assets and
securitized assets were $1.1 billion and $0.1 billion, respectively. In addition
to the owned and securitized assets purchased from the Snap-on joint venture,
CIT's investment in and loans to the joint venture were approximately $17
million at both September 30, 2004 and December 31, 2003. Both the Snap-on and
the Dell joint venture arrangements were acquired in a 1999 acquisition.

Since December 2000, CIT has been a joint venture partner with Canadian
Imperial Bank of Commerce ("CIBC") in an entity that is engaged in asset-based
lending in Canada. Both CIT and CIBC have a 50% ownership interest in the joint
venture, and share income and losses equally. This entity is not consolidated in
CIT's financial statements and is accounted for under the equity method. As of
September 30, 2004 and December 31, 2003, CIT's investment in and loans to the
joint venture were $175 million and $119 million.

CIT invests in various trusts, partnerships, and limited liability
corporations established in conjunction with structured financing transactions
of equipment, power and infrastructure projects. CIT's interests in certain of
these entities were acquired by CIT in November 1999, and others were
subsequently entered into in the normal course of business. At September 30,
2004 and December 31, 2003, other assets included $18 million and $21 million of
investments in non-consolidated entities relating to such transactions that are
accounted for under the equity or cost methods.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Certain shareholders of CIT provide investment management services in the
normal course of business in conjunction with CIT's employee benefit plans.

Note 9 -- Post retirement and Other Benefit Plans

The following table discloses various components of pension expense ($ in
millions):

For the Quarters For the Nine Months
Ended September 30, Ended September 30,
------------------- --------------------
Retirement Plans 2004 2003 2004 2003
------- ------ ------- -------

Service cost.............................................. $ 4.4 $ 3.9 $ 13.3 $ 11.7
Interest cost............................................. 3.9 3.6 11.7 10.8
Expected return on plan assets............................ (4.0) (2.4) (12.1) (7.0)
Amortization of net loss.................................. 0.7 0.9 2.1 2.6
----- ----- ----- -----
Net periodic benefit cost................................. $ 5.0 $ 6.0 $ 15.0 $ 18.1
===== ===== ===== =====
Postretirement Plans
Service cost.............................................. $ 0.5 $ 0.3 $ 1.4 $ 1.1
Interest cost............................................. 0.8 0.8 2.5 2.3
Amortization of net loss.................................. -- -- 0.5 0.1
----- ----- ----- -----
Net periodic benefit cost................................. $ 1.3 $ 1.1 $ 4.4 $ 3.5
===== ===== ===== =====

Note 10 -- Commitments and Contingencies

In the normal course of meeting the financing needs of its customers, CIT
enters into various credit-related commitments, including commitments to provide
financing and leasing capital, letters of credit and guarantees. Standby letters
of credit obligate CIT to pay the beneficiary of the letter of credit in the
event that a CIT client to which the letter of credit was issued does not meet
its related obligation to the beneficiary. These financial instruments generate
fees and involve, to varying degrees, elements of credit risk in excess of the
amounts recognized in the consolidated balance sheets. To minimize potential
credit risk, CIT generally requires collateral and other credit-related terms
and conditions from the customer. At the time credit-related commitments are
granted, the fair value of the underlying collateral and guarantees typically
approximates or exceeds the contractual amount of the commitment. In the event a
customer defaults on the underlying transaction, the maximum potential loss will
generally be limited to the contractual amount outstanding less the value of all
underlying collateral and guarantees.

Guarantees are issued primarily in conjunction with CIT's factoring
product, whereby CIT provides the client with credit protection for its trade
receivables without actually purchasing the receivables. The trade terms are
generally sixty days or less. In the event that the customer is unable to pay
according to the contractual terms, then the receivables would be purchased. As
of September 30, 2004, there were no outstanding liabilities relating to these
credit-related commitments or guarantees, as amounts are generally billed and
collected on a monthly basis.

The accompanying table summarizes the contractual amounts of
credit-related commitments ($ in millions):

December 31,
September 30, 2004 2003
------------------------------------ ------------
Due to Expire
--------------------
Within After Total Total
One Year One Year Outstanding Outstanding
-------- -------- ----------- -----------

Financing and leasing assets............................ $1,010.4 $6,403.6 $7,414.0 $5,934.3
Letters of credit and acceptances:
Standby letters of credit............................. 422.7 189.4 612.1 508.7
Other letters of credit............................... 614.4 46.7 661.1 694.0
Acceptances........................................... 25.0 -- 25.0 9.3
Guarantees.............................................. 112.9 12.3 125.2 133.2
Venture capital fund commitments........................ 3.4 93.6 97.0 124.2

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Commitments to purchase commercial aircraft from both Airbus Industrie and
The Boeing Company are detailed below ($ in millions):

September 30, 2004 December 31, 2003
-------------------- -------------------
Calendar Year Amount Units Amount Units
- ------------- ------ ----- ------ -----

2004 (Remaining)........................................ $ 279.0 7 $ 634.0 15
2005.................................................... 906.0 18 952.0 20
2006.................................................... 1,002.0 20 1,088.0 21
2007.................................................... 260.0 5 260.0 5
-------- -- -------- --
Total................................................... $2,447.0 50 $2,934.0 61
======== == ======== ==

The commitment amounts above are based on appraised values. Actual amounts
will vary based upon market factors at the time of delivery.

Outstanding commitments to purchase equipment, other than the aircraft
detailed above, totaled $280.9 million at September 30, 2004 and $197.2 million
at December 31, 2003. CIT is party to a railcar sale-leaseback transaction under
which it is obligated to pay a remaining total of $457.8 million, comprised of
approximately $28.5 million per year through 2010 and declining thereafter
through 2024, which is more than offset by scheduled payments from CIT's
re-lease of the assets, contingent on our ability to maintain railcar usage. In
conjunction with this sale-leaseback transaction, CIT has guaranteed all
obligations of the related consolidated lessee entity.

CIT has guaranteed the public and private debt securities of a number of
its wholly owned, consolidated subsidiaries, including those disclosed in Note
14 -- Summarized Financial Information of Subsidiaries. In the normal course of
business, various consolidated CIT subsidiaries have entered into other credit
agreements and certain derivative transactions with financial institutions that
are guaranteed by CIT. These transactions are generally used by CIT's
subsidiaries outside of the U.S. to allow the local subsidiary to borrow funds
in local currencies. In addition, CIT has guaranteed, on behalf of certain
non-consolidated subsidiaries, $11.9 million of third party debt, which is not
reflected in the consolidated balance sheet at September 30, 2004.

Note 11 -- Legal Proceedings

On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities Act of 1933, was filed in the United States District Court for
the Southern District of New York against CIT, its former Chief Executive
Officer and its Chief Financial Officer. The lawsuit contained allegations that
the registration statement and prospectus prepared and filed in connection with
CIT's 2002 initial public offering ("IPO") were materially false and misleading,
principally with respect to the adequacy of CIT's telecommunications-related
loan loss reserves at the time. The lawsuit purported to have been brought on
behalf of all those who purchased CIT common stock in or traceable to the IPO,
and sought, among other relief, unspecified damages or rescission for those
alleged class members who still hold CIT stock and unspecified damages for other
alleged class members. On June 25, 2003, by order of the United States District
Court, the lawsuit was consolidated with five other substantially similar suits,
all of which had been filed after April 10, 2003 and one of which named as
defendants some of the underwriters in the IPO and certain former directors of
CIT. Glickenhaus & Co., a privately held investment firm, has been named lead
plaintiff in the consolidated action.

On September 16, 2003, an amended and consolidated complaint was filed.
That complaint contains substantially the same allegations as the original
complaints. In addition to the foregoing, two similar suits were brought by
certain shareholders on behalf of CIT against CIT and some of its present and
former directors under Delaware corporate law.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

businesses. The Exquisite Caterers lawsuit is pending in the U.S. District Court
for the District of New Jersey. Exquisite Caterers based its complaint on
allegations that NorVergence misrepresented the capabilities of the equipment
leased to its customers and overcharged for the equipment. The complaint asserts
that the NorVergence Leases are unenforceable and seeks rescission, punitive
damages, treble damages and attorneys' fees. In addition, putative class action
suits in Florida and Texas and several individual suits, all based upon the same
core allegations and seeking the same relief, have been filed by NorVergence
customers against CIT and the other financial institutions.

On July 14, 2004, the U.S. Bankruptcy Court ordered the liquidation of
NorVergence under Chapter 7 of the Bankruptcy Code. Since then, the Attorneys
General of Florida, New Jersey, New York, Illinois and Texas commenced
investigations of NorVergence and the financial institutions, including CIT, who
purchased NorVergence Leases. CIT has cooperated with the Attorneys General and
agreed to refrain from collection activities related to the NorVergence Leases
in each of these States pending the outcome of the investigations.

In addition, there are various proceedings against CIT, which have arisen
in the ordinary course of business. While the outcomes of the above mentioned
and ordinary course legal proceedings and the related activities are not
certain, based on present assessments, management does not believe that they
will have a material adverse effect on the financial condition of CIT.

Note 12 -- Severance and Facility Restructuring Reserves

The following table summarizes previously established purchase accounting
liabilities (pre-tax) related to severance of employees and closing facilities,
as well as 2004 restructuring activities during 2004 ($ in millions):

Severance Facilities
-------------------- ---------------------
Number of Number of Total
Employees Reserve Facilities Reserve Reserves
--------- ------- ---------- ------- --------

Balance December 31, 2003......................... 43 $ 2.3 12 $ 7.2 $ 9.5
Additions......................................... 217 14.7 4 4.5 19.2
Utilization....................................... (82) (4.2) (2) (5.1) (9.3)
--- ----- -- ----- -----
Balance at September 30, 2004..................... 178 $12.8 14 $ 6.6 $19.4
=== ===== == ===== =====

The beginning reserves relate largely to the restructuring of the European
operations and include amounts payable within the next year to individuals who
chose to receive payments on a periodic basis. The facility reserves relate
primarily to shortfalls in sublease transactions and will be utilized over the
remaining lease terms, generally 6 years. The additions to restructuring
reserves in 2004 relate to two initiatives: (1) the second quarter combination
of the former Structured Finance with Capital Finance and the transfer of the
communications and media portfolio to Commercial Finance ($3.6 million) and (2)
the third quarter acquisition of a Western European vendor finance and leasing
business ($15.6 million). Costs related to the Capital Finance combination were
included in current period earnings, while restructuring liabilities related to
the vendor finance and leasing acquisition were established under purchase
accounting in conjunction with fair value adjustments to purchased assets and
liabilities.

Note 13 -- Goodwill and Intangible Assets

Goodwill and intangible assets totaled $594.4 million and $487.7 million
at September 30, 2004 and December 31, 2003, respectively. The Company
periodically reviews and evaluates its goodwill and other intangible assets for
potential impairment. Effective October 1, 2001, the Company adopted SFAS No.
142, "Goodwill and Other Intangible Assets" ("SFAS 142"), under which goodwill
is no longer amortized but instead is assessed for impairment at least annually.
As part of the adoption, the Company allocated its existing goodwill to each of
its reporting units as of October 1, 2001. Under the transition provisions of
SFAS 142, there was no goodwill impairment as of October 1, 2001.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The most recent goodwill impairment analysis was performed during the
fourth quarter of 2003, which indicated that the fair value of goodwill was in
excess of the carrying value. During the September 2004 quarter, goodwill
increased in Specialty Finance due to the Western European vendor finance and
leasing business acquisition. The following table summarizes the goodwill
balance by segment ($ in millions):

Specialty Commercial
Finance Finance Total
------- ------- -----
Balance at December 31, 2003............... $12.7 $370.4 $383.1
Additions.................................. 49.2 -- 49.2
----- ------ ------
Balance at September 30, 2004.............. $61.9 $370.4 $432.3
===== ====== ======

The Western European vendor finance and leasing acquisition increased
goodwill and intangibles by approximately $80 million. Management is in the
process of finalizing additional integration plans relating to this acquisition.
Accordingly, additional purchase accounting refinements may result in an
adjustment to goodwill and acquired intangibles.

Other intangible assets, net, are comprised primarily of acquired customer
relationships (Specialty Finance and Commercial Finance balances), as well as
proprietary computer software and related transaction processes (Commercial
Finance). The following table summarizes the intangible asset, net balances by
segment ($ in millions):

Specialty Commercial
Finance Finance Total
------- ------- -----
Balance at December 31, 2003............... $ -- $104.6 $104.6
Additions.................................. 64.9 0.4 65.3
Amortization............................... (1.0) (6.8) (7.8)
----- ------ ------
Balance at September 30, 2004.............. $63.9 $98.2 $162.1
===== ====== ======

The increase was primarily related to two acquisitions, the Western
European vendor finance and leasing business in the third quarter of 2004 and a
technology business in the second quarter of 2004. Other intangible assets are
being amortized over their corresponding respective lives ranging from five to
twenty years in relation to the related revenue streams, where applicable.
Amortization expense totaled $3.3 million and $7.8 million for the quarter and
nine months ended September 30, 2004 versus $1.1 million and $3.3 million for
the respective prior year periods. Accumulated amortization totaled $18.2
million and $10.4 million at September 30, 2004 and December 31, 2003. The
projected amortization for the years ended December 31, 2004 through December
31, 2008 is: $12.2 million for 2004; $17.2 million for 2005; $16.1 million for
2006; and $12.8 million for 2007 and 2008.

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14 -- Summarized Financial Information of Subsidiaries

The following presents condensed consolidating financial information for
CIT Holdings LLC and Capita Corporation (formerly AT&T Capital Corporation). CIT
has guaranteed on a full and unconditional basis the existing debt securities
that were registered under the Securities Act of 1933 and certain other
indebtedness of these subsidiaries. CIT has not presented related financial
statements or other information for these subsidiaries on a stand-alone basis.
($ in millions)

CIT
CONSOLIDATING CIT Capita Holdings Other
BALANCE SHEETS Group Inc. Corporation LLC Subsidiaries Eliminations Total
-------------- ----------- ----------- ---------- ------------ ------------ -----------
September 30, 2004
ASSETS

Net finance receivables ................... $ 1,118.5 $ 3,268.6 $ 1,439.9 $ 28,077.9 $ -- $ 33,904.9
Operating lease equipment, net ............ -- 512.3 127.4 7,293.2 -- 7,932.9
Finance receivables held for sale ......... -- 85.2 77.7 1,594.4 -- 1,757.3
Cash and cash equivalents ................. 1,465.3 550.9 252.6 (108.7) -- 2,160.1
Other assets .............................. 7,930.9 (298.7) 448.6 2,014.7 (5,837.0) 4,258.5
----------- ---------- ---------- ----------- ---------- -----------
Total Assets ........................... $ 10,514.7 $ 4,118.3 $ 2,346.2 $ 38,871.5 $ (5,837.0) $ 50,013.7
=========== ========== ========== =========== ========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ...................................... $ 34,771.6 $ 476.9 $ 1,364.1 $ 668.0 $ -- $ 37,280.6
Credit balances of
factoring clients ...................... -- -- -- 3,929.9 -- 3,929.9
Accrued liabilities and payables .......... (30,093.9) 3,135.7 (311.3) 30,195.0 -- 2,925.5
----------- ---------- ---------- ----------- ---------- -----------
Total Liabilities ...................... 4,677.7 3,612.6 1,052.8 34,792.9 -- 44,136.0
Minority interest ......................... -- -- -- 40.7 -- 40.7
Total Stockholders' Equity ................ 5,837.0 505.7 1,293.4 4,037.9 (5,837.0) 5,837.0
----------- ---------- ---------- ----------- ---------- -----------
Total Liabilities and
Stockholders' Equity ................... $ 10,514.7 $ 4,118.3 $ 2,346.2 $ 38,871.5 $ (5,837.0) $ 50,013.7
=========== ========== ========== =========== ========== ===========

December 31, 2003
ASSETS
Net finance receivables ................... $ 1,581.3 $ 3,755.4 $ 1,208.8 $ 24,111.0 $ -- $ 30,656.5
Operating lease equipment, net ............ -- 580.3 146.4 6,888.8 -- 7,615.5
Finance receivables held for sale ......... -- 80.0 163.8 674.5 -- 918.3
Cash and cash equivalents ................. 1,479.9 410.6 227.5 (144.3) -- 1,973.7
Other assets .............................. 8,308.2 198.1 174.1 1,892.6 (5,394.2) 5,178.8
----------- ---------- ---------- ----------- ---------- -----------
Total Assets ........................... $ 11,369.4 $ 5,024.4 $ 1,920.6 $ 33,422.6 $ (5,394.2) $ 46,342.8
=========== ========== ========== =========== ========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ...................................... $ 30,656.7 $ 1,003.5 $ 1,407.7 $ 600.7 $ -- $ 33,668.6
Credit balances of
factoring clients ...................... -- -- -- 3,894.6 -- 3,894.6
Accrued liabilities and payables .......... (24,681.5) 3,412.0 (701.2) 25,317.1 -- 3,346.4
----------- ---------- ---------- ----------- ---------- -----------
Total Liabilities ......................... 5,975.2 4,415.5 706.5 29,812.4 -- 40,909.6
Minority interest ......................... -- -- -- 39.0 -- 39.0
Total Stockholders' Equity ................ 5,394.2 608.9 1,214.1 3,571.2 (5,394.2) 5,394.2
----------- ---------- ---------- ----------- ---------- -----------
Total Liabilities and
Stockholders' Equity ................... $ 11,369.4 $ 5,024.4 $ 1,920.6 $ 33,422.6 $ (5,394.2) $ 46,342.8
=========== ========== ========== =========== ========== ===========

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

CIT
CONSOLIDATING CIT Capita Holdings Other
STATEMENTS OF INCOME Group Inc. Corporation LLC Subsidiaries Eliminations Total
-------------------- ----------- ----------- ---------- ------------ ------------ -----------

Nine Months Ended September 30, 2004
Finance income ............................ $ 24.5 $ 534.6 $ 143.8 $ 2,078.3 $ -- $ 2,781.2
Interest expense .......................... (62.5) 157.1 10.9 807.9 -- 913.4
----------- ---------- ---------- ----------- ---------- -----------
Net finance income ........................ 87.0 377.5 132.9 1,270.4 -- 1,867.8
Depreciation on operating
lease equipment ........................ -- 236.3 32.5 447.7 -- 716.5
----------- ---------- ---------- ----------- ---------- -----------
Net finance margin ........................ 87.0 141.2 100.4 822.7 -- 1,151.3
Provision for credit losses ............... 13.9 36.2 8.5 152.9 -- 211.5
----------- ---------- ---------- ----------- ---------- -----------
Net finance margin, after provision
for credit losses ...................... 73.1 105.0 91.9 669.8 -- 939.8
Equity in net income of
subsidiaries ........................... 533.5 -- -- -- (533.5) --
Other revenue ............................. (3.0) 109.6 70.3 499.5 -- 676.4
Gain on venture capital
investments ............................ -- -- -- 7.9 -- 7.9
----------- ---------- ---------- ----------- ---------- -----------
Operating margin .......................... 603.6 214.6 162.2 1,177.2 (533.5) 1,624.1
Operating expenses ........................ 94.5 109.9 69.7 490.2 -- 764.3
Gain on redemption of debt ................ 41.8 -- -- -- -- 41.8
----------- ---------- ---------- ----------- ---------- -----------
Income (loss) before provision for
income taxes ........................... 550.9 104.7 92.5 687.0 (533.5) 901.6
Provision for income taxes ................ (1.1) (40.8) (36.1) (273.6) -- (351.6)
Minority interest, after tax .............. -- -- -- (0.2) -- (0.2)
----------- ---------- ---------- ----------- ---------- -----------
Net income ................................ $ 549.8 $ 63.9 $ 56.4 $ 413.2 $ (533.5) $ 549.8
=========== ========== ========== =========== ========== ===========
Nine Months Ended September 30, 2003
Finance income ............................ $ 73.4 $ 592.1 $ 142.0 $ 1,996.1 $ -- $ 2,803.6
Interest expense .......................... (37.2) 244.5 12.2 806.7 -- 1,026.2
----------- ---------- ---------- ----------- ---------- -----------
Net finance income ........................ 110.6 347.6 129.8 1,189.4 -- 1,777.4
Depreciation on operating
lease equipment ........................ -- 287.2 53.6 463.3 -- 804.1
----------- ---------- ---------- ----------- ---------- -----------
Net finance margin ........................ 110.6 60.4 76.2 726.1 -- 973.3
Provision for credit losses ............... 30.6 33.9 12.2 209.8 -- 286.5
----------- ---------- ---------- ----------- ---------- -----------
Net finance margin, after provision
for credit losses ...................... 80.0 26.5 64.0 516.3 -- 686.8
Equity in net income of
subsidiaries ........................... 363.0 -- -- -- (363.0) --
Other revenue ............................. 4.2 86.8 74.2 536.4 -- 701.6
Gain on venture capital
investments ............................ -- -- -- (27.8) -- (27.8)
----------- ---------- ---------- ----------- ---------- -----------
Operating margin .......................... 447.2 113.3 138.2 1,024.9 (363.0) 1,360.6
Operating expenses ........................ 30.0 134.4 73.3 438.7 -- 676.4
Gain on redemption of debt ................ -- -- -- -- -- --
----------- ---------- ---------- ----------- ---------- -----------
Income (loss) before provision for
income taxes ........................... 417.2 (21.1) 64.9 586.2 (363.0) 684.2
Provision for income taxes ................ (5.5) 8.2 (25.3) (244.2) -- (266.8)
Minority interest, after tax .............. -- -- -- (0.3) -- (0.3)
Dividends on preferred capital
securities, after tax .................. -- -- -- (5.4) -- (5.4)
----------- ---------- ---------- ----------- ---------- -----------
Net income ................................ $ 411.7 $ (12.9) $ 39.6 $ 336.3 $ (363.0) $ 411.7
=========== ========== ========== =========== ========== ===========

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

CIT
CONSOLIDATING STATEMENT CIT Capita Holdings Other
OF CASH FLOWS Group Inc. Corporation LLC Subsidiaries Eliminations Total
----------------------- ----------- ----------- ---------- ------------ ------------ ----------

Nine Months Ended September 30, 2004
Cash Flows From Operating Activities:
Net cash flows provided
by (used for) operations ............... $ (177.8) $ 975.7 $ (91.9) $ 661.6 $ -- $ 1,367.6
----------- ---------- ---------- ----------- ---------- -----------
Cash Flows From
Investing Activities:
Net (increase) decrease in financing
and leasing assets ..................... 490.9 333.0 (147.0) (5,565.7) -- (4,888.8)
Decrease in inter-company loans
and investments ........................ (4,359.0) -- -- -- 4,359.0 --
Other ..................................... -- -- -- 69.2 -- 69.2
----------- ---------- ---------- ----------- ---------- -----------
Net cash flows (used for) provided
by investing activities ................ (3,868.1) 333.0 (147.0) (5,496.5) 4,359.0 (4,819.6)
----------- ---------- ---------- ----------- ---------- -----------
Cash Flows From
Financing Activities:
Net increase (decrease) in debt ........... 4,114.9 (526.6) (43.6) 261.2 -- 3,805.9
Inter-company financing ................... -- (641.8) 307.6 4,693.2 (4,359.0) --
Cash dividends paid ....................... (83.6) -- -- -- -- (83.6)
Other ..................................... -- -- -- (83.9) -- (83.9)
----------- ---------- ---------- ----------- ---------- -----------
Net cash flows provided by
(used for) financing activities ........ 4,031.3 (1,168.4) 264.0 4,870.5 (4,359.0) 3,638.4
----------- ---------- ---------- ----------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents ....................... (14.6) 140.3 25.1 35.6 -- 186.4
Cash and cash equivalents,
beginning of period .................... 1,479.9 410.6 227.5 (144.3) -- 1,973.7
----------- ---------- ---------- ----------- ---------- -----------
Cash and cash equivalents,
end of period .......................... $ 1,465.3 $ 550.9 $ 252.6 $ (108.7) $ -- $ 2,160.1
=========== ========== ========== =========== ========== ===========

CIT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Nine Months Ended September 30, 2003
Cash Flows From Operating Activities:
Net cash flows provided
by (used for) operations ............... $ (949.9) $ 648.9 $ 186.4 $ 1,660.5 $ -- $ 1,545.9
----------- ---------- ---------- ----------- ---------- -----------
Cash Flows From
Investing Activities:
Net increase in financing and
leasing assets ......................... (904.6) (174.7) (254.8) (2,081.9) -- (3,416.0)
Increase in inter-company loans
and investments ........................ (235.8) -- -- -- 235.8 --
Other ..................................... -- -- -- 23.0 -- 23.0
----------- ---------- ---------- ----------- ---------- -----------
Net cash flows (used for) provided
by investing activities ................ (1,140.4) (174.7) (254.8) (2,058.9) 235.8 (3,393.0)
----------- ---------- ---------- ----------- ---------- -----------
Cash Flows From
Financing Activities:
Net increase (decrease) in debt ........... 2,540.0 (63.3) (573.1) 253.4 -- 2,157.0
Inter-company financing ................... -- (242.7) 533.2 (54.7) (235.8) --
Cash dividends paid ....................... (76.3) -- -- -- -- (76.3)
Other ..................................... -- -- -- (1.2) -- (1.2)
----------- ---------- ---------- ----------- ---------- -----------
Net cash flows provided by
(used for) financing activities ........ 2,463.7 (306.0) (39.9) 197.5 (235.8) 2,079.5
----------- ---------- ---------- ----------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents ....................... 373.4 168.2 (108.3) (200.9) -- 232.4
Cash and cash equivalents,
beginning of period .................... 1,310.9 231.1 293.7 200.9 -- 2,036.6
----------- ---------- ---------- ----------- ---------- -----------
Cash and cash equivalents,
end of period .......................... $ 1,684.3 $ 399.3 $ 185.4 $ -- $ -- $ 2,269.0
=========== ========== ========== =========== ========== ===========

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations and Quantitative and Qualitative Disclosure about Market
Risk

The following discussion uses financial terms that we believe to be
relevant to our business. A glossary of other key terms used in our business can
be found following the "Introduction" section.

Introduction

CIT is a global commercial and consumer finance company that was founded
in 1908. We provide financing and leasing capital for companies in a wide
variety of industries, offering vendor, equipment, commercial, factoring,
consumer, and structured financing products.

Our primary sources of revenue are interest and rental income related to
collateralized lending and equipment leasing. Finance receivables (loans and
capital leases) and operating lease equipment (operating leases) are the two
major asset types that generate this revenue. In the case of finance receivables
(which are financial assets), the substantive risks and rewards of equipment and
other collateralized asset ownership belong to the customer and we retain
predominantly the borrower credit risk. With operating lease equipment, we
retain the substantive risks and rewards of equipment ownership, including the
right to take depreciation and the risk of damage or obsolescence. We fund our
leasing and lending activity via the global capital markets, using commercial
paper, unsecured term debt, and securitizations. We refer to the excess of our
interest and rental income over our interest expense as "net finance margin."
This revenue is supplemented by other "non-spread" sources of revenue such as
syndication fees, gains from dispositions of equipment, factoring commissions,
servicing of loans and other fees.

We measure our overall level of profitability with the following metrics:

o Net income as a percentage of average earning assets (AEA);

o Net income per common share (EPS);

o Net income as a percentage of average tangible equity (ROTE); and

o Net income as a percentage of average equity (ROE).

We believe that the keys to enhancing profitability in our business are as
follows:

Net Interest Margin -- Our ability to lend money at rates in excess of our cost
of borrowing. We measure this with the following ratios:

o Finance income as a percentage of AEA; and

o Net finance income as a percentage of AEA.

Funding and Market Rate Risk Management -- Our ability to access funding sources
at competitive rates, which depends on maintaining high quality assets, strong
capital ratios and high credit ratings. This profitability key is also a
function of interest rate and currency rate risk management, where the goal is
to substantially insulate our interest margins and profits from movements in
market interest rates and foreign currency exchange rates. We gauge our funding
and interest rate risk management activities with various measurements,
including the following:

o Interest expense as a percentage of AEA;

o Net finance margin as a percentage of AEA; and

o Various interest sensitivity and liquidity measurements that are
discussed in Risk Management.

Credit Risk Management -- Our ability to evaluate the creditworthiness of our
customers, both during the credit granting process and periodically after the
advancement of funds, and to maintain high quality assets. We assess our credit
risk management activities with the following measurements:

o Delinquent assets as a percentage of finance receivables;

o Non-performing assets as a percentage of finance receivables; and

o Net charge-offs as a percentage of average finance receivables.

Expense Management -- Our ability to maintain efficient operating platforms and
infrastructure in order to run our business at competitive cost levels. We track
our efficiency with the following measurements:

o Efficiency ratio, which is the ratio of salaries and general
operating expenses to operating margin excluding the provision for
credit losses; and

o Operating expenses as a percentage of average managed assets (AMA).

Equipment and Residual Risk Management -- Our ability to evaluate collateral
risk in leasing and lending transactions and to remarket equipment at lease
termination. We measure these activities with the following:

o Operating lease margin as a percentage of average leased equipment;

o Gains and losses on equipment sales; and

o Equipment utilization/value of equipment off lease.

Asset Generation and Growth -- Our ability to originate new business and build
our earning assets in a focused and prudent manner. We measure our performance
in these areas with the following:

o Origination volumes;

o Levels of financing and leasing assets, and managed assets
(including securitized finance receivables that we continue to
manage); and

o Levels of non-spread and other revenue.

Capital Management -- Our ability to maintain a strong capital base and adequate
credit loss reserve levels. We measure our performance in these areas with the
following:

o Tangible equity to managed assets ratio;

o Reserve for credit losses as a percentage of finance receivables, of
delinquent assets, and of non-performing assets; and

o Debt to tangible equity ratio.

Glossary of Key Terms

Term Description
- ----- ----------

Average Earning Assets (AEA)................ "AEA" is the average during the reporting period of finance
receivables, operating lease equipment, finance receivables held
for sale and certain investments, less credit balances of
factoring clients. The average is used for certain key
profitability ratios, including return on AEA and margins as a
percentage of AEA.

Average Finance Receivables (AFR)........... "AFR" is the average during the reporting period of finance
receivables and includes loans and finance leases. It excludes
operating lease equipment. The average is used to measure the rate
of charge-offs for the period.

Average Managed Assets (AMA)................ "AMA" is the average earning assets plus the average of finance
receivables previously securitized and still managed by us. The
average is used to measure the rate of charge-offs on a managed
basis for the period to monitor overall credit performance, and to
monitor expense control.

Derivative Contracts........................ Derivatives are entered into to reduce interest rate or foreign
currency risks and more recently to hedge credit risk. Derivative
contracts used by CIT include interest rate swaps, cross currency
swaps, foreign exchange forward contracts and credit default swaps.

Term Description
- ----- ----------

Efficiency Ratio............................ The efficiency ratio measures the level of expenses in relation to
revenue earned, and is calculated as the percentage of salaries
and general operating expenses to operating margin, excluding the
provision for credit losses.

Finance Income.............................. Finance income includes both interest income on finance
receivables and rental income on operating leases.

Financing and Leasing Assets................ Financing and leasing assets include loans, capital and finance
leases, leveraged leases, operating leases, assets held for sale
and certain investments.

Leases -- capital and finance............... Lease designation describing financing structures whereby
substantially all of the economic benefits and risks of ownership
are passed to the lessee.

Leases -- leveraged......................... Similar to capital leases except a third party, long-term creditor
is involved and provides debt financing. CIT is party to these
lease types as creditor or as lessor, depending on the transaction.

Leases -- tax-optimized leveraged........... Leveraged leases where we are the lessor and have increased risk
in comparison to other leveraged lease structures, as the creditor
in these structures has a priority recourse to the leased equipment.

Leases -- operating......................... Lease designation where CIT maintains ownership of the asset,
collects rental payments, recognizes depreciation on the asset,
and assumes the risks of ownership, including obsolescence.

Managed Assets.............................. Managed assets are comprised of finance receivables, operating
lease equipment, finance receivables held for sale, certain
investments, and receivables securitized and still managed by us.
The change in managed assets during a reporting period is one of
our measurements of asset growth.

Non-GAAP Financial Measures................. Non-GAAP financial measures are balances that do not readily agree
to balances disclosed in financial statements presented in
accordance with accounting principles generally accepted in the
U.S. These measures are disclosed to provide additional
information and insight relative to historical operating results
and financial position of the business.

Non-performing Assets....................... Non-performing assets include loans placed on non-accrual status,
due to doubt of collectibility of principal and interest, and
repossessed assets.

Non-spread Revenue.......................... Non-spread revenues include syndication fees, gains from
dispositions of equipment, factoring commissions, loan servicing
and other fees and are reported in Other Revenue.

Operating Margin............................ The total of net finance margin after provision for credit
losses (risk adjusted margin) and other revenue.

Retained Interest........................... The portion of the interest in assets sold in a securitization
transaction that is retained by CIT.

Residual Values............................. Residual values represent the estimated value of equipment at the
end of the lease term. For operating leases, it is the value to
which the asset is depreciated at the end of its useful economic
life (i.e., "salvage" or "scrap value").

Term Description
- ----- ----------

Return on Equity or Tangible Equity......... Net income expressed as a percentage of average equity or average
tangible equity. These are key measurements of profitability.

Risk Adjusted Margin........................ Net finance margin after provision for credit losses.

Special Purpose Entity (SPE)................ Distinct legal entities created for a specific purpose in order to
isolate the risks and rewards of owning its assets and incurring
its liabilities. SPEs are typically used in securitization
transactions, joint venture relationships and certain structured
leasing transactions.

Tangible Equity............................. Tangible stockholders' equity excludes goodwill and other
intangible assets, and certain other comprehensive income items
and includes preferred capital securities. Tangible equity is
utilized in leverage ratios and return ratios.

Yield-related Fees.......................... In certain transactions, in addition to interest income,
yield-related fees are collected for the assumption of
underwriting risk. Yield-related fees are reported in Finance
Income and are recognized over the life of the lending transaction.

Profitability and Key Business Trends

Net income for the nine months ended September 30, 2004 increased to
$549.8 million from $411.7 million for the same 2003 period. The current year
results included a $25.5 million after-tax gain recognized in the first quarter
on the early redemption of debt. Our improved profitability reflected higher
asset levels, lower charge-offs and lower borrowing costs, which were partially
offset by higher operating expenses.

Our profitability measurements for the respective periods are presented in
the table below:

Quarters Ended September 30,
----------------------------
2004 2003
----- -----
Net income per diluted share................. $0.86 $0.69
Net income as a percentage of AEA............ 1.88% 1.64%
Return on average tangible equity............ 14.1% 12.2%
Return on equity............................. 12.8% 11.3%

Nine Months Ended September 30,
------------------------------
2004 2003
----- -----
Net income per diluted share................. $2.56 $1.94
Net income as a percentage of AEA............ 1.92% 1.54%
Return on average tangible equity............ 14.3% 11.7%
Return on equity............................. 13.0% 10.7%

- --------------------------------------------------------------------------------
For the nine months ended September 30, 2004, net income per diluted share, net
income as a percentage of AEA, return on average tangible equity and return on
average equity excluding gain on redemption of debt were $2.44, 1.83%, 13.6% and
12.4%, respectively.

Total financing and leasing portfolio assets grew to $44.4 billion at
September 30, 2004 from $40.1 billion and $39.2 billion at December 31, 2003 and
September 30, 2003. Managed assets were $52.4 billion at September 30, 2004,
versus $49.7 billion and $49.3 billion at December 31, 2003 and September 30,
2003. New business volumes for the quarter and the nine months, increased 10%
and 11% from 2003, with strength across most business lines. Increased asset
levels included seasonal factoring and home equity portfolio growth for the
quarter. We also acquired a European vendor leasing business with approximately
$700 million in financing and leasing assets during the quarter.

This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Quantitative and Qualitative Disclosure about Market
Risk" contain certain non-GAAP financial measures. See "Non-GAAP Financial
Measurements" for additional information. The sections that follow analyze our
results by financial statement caption and are referenced back to the
profitability keys that are discussed in "Introduction."

Net Finance Margin

An analysis of net finance margin is set forth below ($ in millions):

Quarters Ended September 30, Nine Months Ended September 30,
---------------------------- -------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Finance income.................................. $ 963.1 $ 921.2 $ 2,781.2 $ 2,803.6
Interest expense................................ 315.4 333.7 913.4 1,026.2
--------- --------- --------- ---------
Net finance income............................ 647.7 587.5 1,867.8 1,777.4
Depreciation on operating lease equipment....... 245.7 252.4 716.5 804.1
--------- --------- --------- ---------
Net finance margin............................ $ 402.0 $ 335.1 $ 1,151.3 $ 973.3
========= ========= ========= =========
Average Earnings Asset ("AEA").................. $39,195.6 $36,072.4 $38,119.0 $35,559.0
========= ========= ========= =========

As a % of AEA:
Finance income.................................. 9.83% 10.22% 9.73% 10.51%
Interest expense................................ 3.22% 3.70% 3.20% 3.84%
---- ----- ---- -----
Net finance income............................ 6.61% 6.52% 6.53% 6.67%
Depreciation on operating lease equipment....... 2.51% 2.80% 2.50% 3.02%
---- ----- ---- -----
Net finance margin............................ 4.10% 3.72% 4.03% 3.65%
==== ===== ==== =====

For the quarter ended September 30, 2004, net finance margin improved by
$66.9 million or 38 basis points (as a percentage of AEA) from 2003, while the
improvement for the nine months ended September 30, 2004 totaled $178.0 million
or 38 basis points over the prior year period due primarily to reduced borrowing
costs. Year over year growth in financing and leasing assets was offset by lower
finance income, as the portfolio continued to reprice in the relatively low rate
environment. Lower operating lease rentals reduced nine-month finance income by
$72.7 million or 25 basis points from the prior year period. See "Operating
Leases" for additional information regarding operating lease margin.

The trend in net finance margin as a percentage of AEA, excluding the
impact of operating lease rentals, reflects a greater decline in interest
expense than in finance income yield, primarily due to the narrowing
(improvement) of our credit spreads and the refinancing of higher-cost debt. The
increase in AEA reflects growth in the latter part of 2003 and in 2004.

Additional information regarding our borrowing costs is shown in the
following table. Debt balances represent the average outstanding for the
applicable period. ($ in millions):

Before Swaps After Swaps
--------------------- ------------------------

Quarter Ended September 30, 2004
Commercial paper, variable-rate senior
notes and bank credit facilities........................ $15,855.5 1.78% $17,661.7 2.54%
Fixed-rate senior and subordinated notes.................. $19,357.5 5.76% 17,551.3 4.96%
--------- ---------
Composite................................................. $35,213.0 3.97% $35,213.0 3.75%
========= =========
Quarter Ended September 30, 2003
Commercial paper, variable-rate senior
notes and bank credit facilities........................ $11,728.3 1.77% $15,917.6 2.58%
Fixed-rate senior and subordinated notes.................. 20,297.9 6.04% 16,108.6 5.78%
--------- ---------
Composite................................................. $32,026.2 4.48% $32,026.2 4.19%
========= =========
Nine Months Ended September 30, 2004
Commercial paper, variable-rate senior
notes and bank credit facilities........................ $14,742.5 1.69% $17,842.5 2.43%
Fixed-rate senior and subordinated notes.................. 19,206.0 5.72% 16,106.0 5.16%
--------- ---------
Composite................................................. $33,948.5 3.97% $33,948.5 3.72%
========= =========
Nine Months Ended September 30, 2003
Commercial paper, variable-rate senior
notes and bank credit facilities........................ $12,154.3 1.87% $15,412.0 2.69%
Fixed-rate senior and subordinated notes.................. 20,092.9 6.17% 16,835.2 5.94%
--------- ---------
Composite................................................. $32,247.2 4.55% $32,247.2 4.39%
========= =========

Operating Leases

The table below summarizes operating lease margin, both in amount and as a
percentage of average operating lease equipment ($ in millions):

Quarters Ended September 30, Nine Months Ended September 30,
---------------------------- -------------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------

Rental income................................... $ 366.6 $ 364.3 $1,051.0 $1,123.7
Depreciation expense............................ 245.7 252.4 716.5 804.1
-------- -------- -------- --------
Operating lease margin........................ $ 120.9 $ 111.9 $ 334.5 $ 319.6
======== ======== ======== ========
Average operating lease equipment............... $7,873.2 $7,458.9 $7,720.1 $7,151.1
======== ======== ======== ========
As a % of Average Operating
Lease Equipment:
Rental income................................... 18.62% 19.54% 18.15% 20.95%
Depreciation expense............................ 12.48% 13.54% 12.37% 14.99%
-------- -------- -------- --------
Operating lease margin.......................... 6.14% 6.00% 5.78% 5.96%
======== ======== ======== ========

Depreciation expense for the nine months ended September 30, 2004 included
a $14.8 million impairment charge to reduce the carrying value of certain older,
out of production aircraft to estimated fair value. The additional depreciation
expense primarily relates to aircraft with a single lessee with upcoming lease
terminations and for which market rental rates have declined. Therefore, the
projected cash flows no longer supported the corresponding carrying value,
resulting in the additional depreciation charge.

The decline in operating lease margin and its components from 2003 for the
nine months also reflects lower rentals on the Capital Finance aerospace
portfolio due to the commercial airline industry downturn and the change in
equipment mix to a greater proportion of aircraft and rail assets with an
average depreciable life of 25 and 40 years, respectively, compared to
smaller-ticket assets with lives generally of 3 years in the Specialty Finance
and Equipment Finance portfolios. This trend was partially reversed during the
current quarter by last quarter's small-ticket technology portfolio acquisition.
Aerospace rentals trended downward following the terrorist attacks on September
11, 2001, but have recently shown some improvement.

The following table summarizes the total operating lease portfolio by
segment ($ in millions):

September 30, June 30, December 31, September 30,
2004 2004 2003 2003
------------- -------- ------------ -------------

Capital Finance -- Aerospace....................................... $4,247.3 $4,161.7 $4,141.1 $3,905.1
Capital Finance -- Rail and Other.................................. 2,227.6 2,212.5 2,095.3 2,075.1
Specialty Finance.................................................. 1,057.0 1,084.0 959.5 1,043.4
Equipment Finance.................................................. 401.0 380.6 419.6 461.7
-------- -------- -------- --------
Total............................................................ $7,932.9 $7,838.8 $7,615.5 $7,485.3
======== ======== ======== ========

o The increase in the Capital Finance aerospace portfolio reflects
deliveries of new commercial aircraft.

o The Specialty Finance and Equipment Finance operating lease
portfolios reflect the continued trend toward financing equipment
through finance leases and loans, rather than operating leases,
although the Specialty Finance runoff was offset by the
above-mentioned second quarter 2004 technology portfolio
acquisition.

Maximizing equipment utilization levels is a prime component of operating
lease portfolio profitability. Equipment not subject to lease agreements totaled
$172.8 million and $265.9 million, at September 30, 2004 and December 31, 2003,
respectively. The reduction was due to fewer commercial aerospace and rail
assets off lease as well as the sale of a test equipment rental business in the
second quarter of 2004. Weakness in the commercial airline industry could
adversely impact prospective rental and utilization rates.

Net Finance Margin after Provision for Credit Losses (Risk-adjusted Margin)

The following table summarizes risk-adjusted margin, both in amount and as
a percentage of AEA ($ in millions):

Quarters Ended September 30, Nine Months Ended September 30,
---------------------------- -------------------------------
2004 2003 2004 2003
------ ------ ------- ------

Net finance margin ................................................ $402.0 $335.1 $1,151.3 $973.3
Provision for credit losses ....................................... 60.2 82.9 211.5 286.5
------ ------ ------- ------
Risk-adjusted margin ............................................ $341.8 $252.2 $ 939.8 $686.8
====== ====== ======= ======
As a Percentage of AEA:
Net finance margin ................................................ 4.10% 3.72% 4.03% 3.65%
Provision for credit losses ....................................... 0.61% 0.92% 0.74% 1.07%
------ ------ ------- ------
Risk-adjusted margin ............................................ 3.49% 2.80% 3.29% 2.58%
====== ====== ======= ======

The improvement for both periods of 2004 compared to 2003 primarily
reflects the previously discussed improvement in net finance margin, as well as
incremental benefit from lower charge-offs, which is discussed further in
"Credit Metrics".

Other Revenue

The components of other revenue are set forth in the following table ($ in
millions):

Quarters Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------------
2004 2003 2004 2003
------ ------ ------- ------

Fees and other income ............................................. $119.6 $151.5 $ 387.3 $430.8
Factoring commissions ............................................. 59.5 47.6 168.0 139.3
Gains on sales of leasing equipment ............................... 23.5 14.6 77.9 48.7
Gains on securitizations .......................................... 9.9 18.3 43.2 82.8
------ ------ ------- ------
Total other revenue ............................................. $212.5 $232.0 $ 676.4 $701.6
====== ====== ======= ======
Other revenue as a percentage of AEA .............................. 2.17% 2.57% 2.36% 2.63%
====== ====== ======= ======

We continue to emphasize growth and diversification of other revenues to
improve our overall profitability, though in relation to 2003, our reduced level
of securitization has shifted certain securitization-related revenues from other
revenue back to interest margin.

o Fees and other income include syndication fees, gains from asset
sales, miscellaneous fees, accretion on retained securitization
interests and servicing fees related to securitized assets. Both
securitization accretion and servicing fees declined in 2004,
corresponding to the reduction of approximately 20% in securitized
assets during the period. Structuring and syndication fees in
Capital Finance and Commercial Finance declined due to fewer
transactions. Miscellaneous fees were down in all segments compared
to prior periods.

o Higher factoring commissions reflect strong volumes and year over
year portfolio growth, benefiting from two large acquisitions
completed during the latter part of 2003.

o Gains on sales of leasing equipment increased in 2004 due to
stronger equipment collateral values, including construction
equipment in Equipment Finance and computer related equipment in the
International unit of Specialty Finance.

o Third quarter securitization gains were down considerably in 2004,
due primarily to a decline in commercial (vendor finance)
securitization volume in Specialty Finance. Additionally, we
continue to fund home equity loan growth entirely on-balance sheet,
which effectively transfers securitization accretion and servicing
fees from fees and other income in 2003 to margin in 2004. Prior
year volume included $0.5 billion of home equity loans that were
securitized during the nine month period in 2003.

The following table presents information regarding securitization activity
($ in millions):

Quarters Ended At or for the Nine Months
September 30, Ended September 30,
------------------------- --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Volume securitized ................................. $783.8 $1,317.5 $2,867.4 $ 4,207.4
Gains .............................................. $ 9.9 $ 18.3 $ 43.2 $ 82.8
Gains as a percentage of volume securitized ........ 1.26% 1.39% 1.51% 1.97%
Gains as a percentage of pre-tax income ............ 3.28% 7.54% 4.79% 12.10%
Securitized assets ................................. $7,994.9 $10,141.0
Retained interest in securitized assets ............ $1,124.9 $ 1,297.3

Venture Capital Investments

On January 15, 2004, we announced the signing of a purchase and sale
agreement for the disposition of the direct investment portfolio at an amount
approximating the carrying value at December 31, 2003. During 2004, we closed
the sale of approximately $68 million of this portfolio under the existing sales
contract. We are working toward satisfying the outstanding closing conditions
for remaining assets of $32 million at September 30, 2004.

Our remaining portfolio of direct and private fund venture capital equity
investments is summarized in the following table ($ in millions):

September 30, December 31,
2004 2003
------------- ------------
Direct investments.......................... $ 31.9 $101.1
Number of companies......................... 10 47
Private equity funds........................ $154.3 $148.8
Number of funds............................. 52 52
Remaining commitments....................... $ 97.0 $124.2
Total investment balance.................... $186.2 $249.9

The remaining commitments at September 30, 2004 relate to the private
equity funds.

Reserve for Credit Losses

Our provision for credit losses and reserve for credit losses is presented
in the following table ($ in millions):

At or for the
Quarters Ended Nine Months Ended
September 30, September 30,
----------------------- -------------------------
2004 2003 2004 2003
-------- -------- -------- --------

Balance beginning of period ........................ $621.0 $754.9 $ 643.7 $760.8
------ ------ ------- ------
Provision for credit losses -- Finance receivables.. 60.2 82.9 224.0 286.5
-- Argentine reserve ... -- -- (12.5) --
------ ------ ------- ------
Total provision for credit losses .................. 60.2 82.9 211.5 286.5
Reserves relating to acquisitions and other ........ 29.0 5.3 37.9 18.5
------ ------ ------- ------
Additions to reserve for credit losses, net ...... 89.2 88.2 249.4 305.0
------ ------ ------- ------
Net credit losses:
Specialty Finance ................................ 42.5 38.6 114.6 122.5
Commercial Finance ............................... 21.6 28.9 76.2 83.9
Equipment Finance ................................ 7.8 23.1 49.6 99.8
Capital Finance .................................. 0.4 -- 14.8 7.1
------ ------ ------- ------
Total net credit losses .......................... 72.3 90.6 255.2 313.3
------ ------ ------- ------
Balance end of period .............................. $637.9 $752.5 $ 637.9 $752.5
====== ====== ======= ======
Reserve for credit losses as a percentage of
finance receivables ........................... 1.85% 2.48%
Reserve for credit losses as a percentage of
past due receivables (60 days or more)(1) ..... 111.3% 87.2%
Reserve for credit losses as a percentage of
non-performing assets(2) ...................... 120.7% 86.8%

- ----------
(1) The reserve for credit losses as a percentage of past due receivables (60
days or more), excluding telecommunication and Argentine reserves and
corresponding delinquencies, was 100.7% and 62.0% at September 30, 2004
and 2003, respectively.

(2) The reserve for credit losses as a percentage of non-performing assets,
excluding telecommunication and Argentine reserves and corresponding
non-performing assets, was 113.5% and 64.4% at September 30, 2004 and
2003, respectively.

The decreased provision for 2004 in relation to 2003 reflects lower
charge-offs and improving credit metrics. The increase in reserves relating to
acquisitions during 2004 is due primarily to the European vendor leasing
business and home equity bulk purchases. See "Credit Metrics" for further
discussion.

The following table presents the components of the reserve for credit
losses, both in amount and as a percentage of corresponding finance receivables
($ in millions):

September 30, 2004 December 31, 2003
------------------ -----------------
Finance receivables................. $572.2 1.67% $524.6 1.71%
Telecommunications(1)............... 65.7 18.90% 106.6 19.16%
Argentina(2)........................ -- -- 12.5 55.07%
------ ------
Total............................... $637.9 1.85% $643.7 2.06%
====== ======

- ----------
(1) Percentage of finance receivables in telecommunications portfolio.

(2) Percentage of finance receivables in Argentina.

The decline in the reserve for credit losses at September 30, 2004 from
2003, in both amount and percentage, was due to telecommunication charge-offs
taken against the previously established specific reserve and the improving
credit metrics. The decline in the specific Argentine reserve resulted largely
from the fourth quarter 2003 charge-off of $101.0 million, and the sale of that
business during the second quarter of 2004.

Reserve for Credit Losses -- Finance Receivables

The reserve for credit losses is determined based on three key components:
(1) specific reserves for collateral dependent loans which are impaired under
SFAS 114, (2) reserves for estimated losses inherent in the portfolio based upon
historical and projected credit trends and (3) reserves for general economic
environment and other factors.

The reserve includes specific reserves relating to impaired loans
(excluding telecommunication and Argentine) of $27.1 million at September 30,
2004, compared to $66.4 million at December 31, 2003. The portion of the reserve
related to inherent estimated loss and estimation risk reflect our evaluation of
trends in our key credit metrics, as well as our assessment of risk in certain
industry sectors, including commercial aerospace.

The consolidated reserve for credit losses is intended to provide for
losses inherent in the portfolio, which requires the application of estimates
and significant judgment as to the ultimate outcome of collection efforts and
realization of collateral values, among other things. Therefore, changes in
economic conditions or credit metrics, including past due and non-performing
accounts, or other events affecting specific obligors or industries may
necessitate additions or reductions to the consolidated reserve for credit
losses. Management continues to believe that the credit risk characteristics of
the portfolio are well diversified by geography, industry, borrower and
equipment type. Refer to "Concentrations" for more information. Based on
currently available information, management believes that our total reserve for
credit losses is adequate.

Reserve for Credit Losses -- Telecommunications

The telecommunications reserve was $65.7 million at September 30, 2004. We
have recorded net write-offs of $134.3 million against this specific reserve
since $200.0 million was added to the reserve for credit losses during the
quarter ended June 30, 2002 (in light of the continued deterioration in the
telecommunications sector at that time, particularly with respect to our
competitive local exchange carrier ("CLEC") portfolio).

Our telecommunications portfolio is included in "Communications" in the
industry composition table included in Note 4 -- Concentrations to the
Consolidated Financial Statements. This portfolio includes lending and leasing
transactions to the telecommunications sector. Lending and leasing of
telecommunication equipment to non-telecom companies is conducted in our
Specialty Finance business and is categorized according to the customer's
("obligor's") industry in the industry composition table. Certain statistical
data is presented in the following table ($ in millions):

September 30, December 31,
2004 2003
------------- ------------
CLEC accounts.................................. $117.4 $197.8
Other telecommunication accounts............... 230.2 381.2
------ ------
Total telecommunication portfolio.............. $347.6 $579.0
====== ======
Portfolio as a % of total financing
and leasing assets........................... 0.79% 1.5%
Number of accounts............................. 29 44
Top 10 accounts................................ $206.4 $253.4
Largest account exposure....................... $ 29.3 $ 31.0
Non-performing accounts........................ $ 24.5 $ 57.2
Number of non-performing accounts.............. 5 6
Non-performing accounts as a
percentage of portfolio...................... 7.0% 9.9%

Reserve for Credit Losses -- Argentina

During the second quarter of 2004, we completed the previously announced
sale of our Argentine portfolio to an Argentine bank at a modest gain. With the
completion of this transaction, we transferred the remaining specific reserve of
$12.5 million to the Reserve for Credit Losses -- Finance Receivables.

In the first half of 2002, we established a $135.0 million specific
reserve for Argentine exposure to reflect the geopolitical risks associated with
collecting our peso-based assets and repatriating them into U.S. dollars that
resulted from the Argentine government instituting certain economic reforms.
When established, the reserve was about two-thirds of our combined currency and
credit exposure. During the fourth quarter of 2003, based on the substantial
progress with collection and work out efforts, we recorded a $101.0 million
charge-off against this specific reserve and transferred $21.5 million to the
Reserve for Credit Losses -- Finance Receivables.

Credit Metrics

Net Charge-offs

Net charge-offs, both in amount and as a percentage of average finance
receivables, are shown in the following tables ($ in millions):

Before
Liquidating and Liquidating and
Total Telecommunications Telecommunications
----------------- ------------------ ------------------

Quarter Ended September 30, 2004
Specialty Finance -- commercial ........... $ 28.1 1.49% $ 28.1 1.49% $ -- --
Commercial Finance ........................ 21.6 0.72% 10.5 0.36% 11.1 11.63%
Equipment Finance ......................... 7.8 0.49% 8.0 0.52% (0.2) (0.96)%
Capital Finance ........................... 0.4 0.05% 0.4 0.05% -- --
------ ------ -----
Total Commercial Segments .............. 57.9 0.81% 47.0 0.67% 10.9 9.03%
Specialty Finance -- consumer ............. 14.4 1.30% 10.6 1.12% 3.8 2.41%
------ ------ -----
Total .................................. $ 72.3 0.88% $ 57.6 0.72% $14.7 5.25%
====== ====== =====

Quarter Ended September 30, 2003
Specialty Finance -- commercial ........... $ 25.6 1.47% $ 25.2 1.45% $ 0.4 --
Commercial Finance ........................ 28.9 1.08% 17.7 0.75% 11.2 7.39%
Equipment Finance ......................... 23.1 1.52% 18.1 1.26% 5.0 6.53%
Capital Finance ........................... -- -- -- -- -- --
------ ------ -----
Total Commercial Segments .............. 77.6 1.17% 61.0 0.95% 16.6 7.13%
Specialty Finance -- consumer ............. 13.0 1.80% 6.6 1.26% 6.4 3.22%
------ ------ -----
Total .................................. $ 90.6 1.23% $ 67.6 0.98% $23.0 5.33%
====== ====== =====

Nine Months Ended September 30, 2004
Specialty Finance -- commercial ........... $ 63.3 1.15% $ 63.2 1.15% $ 0.1 --
Commercial Finance ........................ 76.2 0.86% 34.5 0.41% 41.7 13.36%
Equipment Finance ......................... 49.6 1.05% 42.9 0.93% 6.7 6.49%
Capital Finance ........................... 14.8 0.73% 14.8 0.73% -- --
------ ------ -----
Total Commercial Segments .............. 203.9 0.97% 155.4 0.75% 48.5 11.09%
Specialty Finance -- consumer ............. 51.3 1.67% 30.9 1.22% 20.4 3.87%
------ ------ -----
Total .................................. $255.2 1.06% $186.3 0.80% $68.9 7.15%
====== ====== =====

Nine Months Ended September 30, 2003
Specialty Finance -- commercial ........... $ 80.5 1.51% $ 79.7 1.49% $ 0.8 15.92%
Commercial Finance ........................ 83.9 1.10% 52.9 0.73% 31.0 6.54%
Equipment Finance ......................... 99.8 2.14% 73.9 1.70% 25.9 8.34%
Capital Finance ........................... 7.1 0.33% 1.8 0.08% 5.3 --
------ ------ -----
Total Commercial Segments .............. 271.3 1.37% 208.3 1.10% 63.0 7.81%
Specialty Finance -- consumer ............. 42.0 2.23% 23.1 1.81% 18.9 3.10%
------ ------ -----
Total .................................. $313.3 1.45% $231.4 1.14% $81.9 5.79%
====== ====== =====

Total charge-offs continued to decline during 2004, reflecting
improvements across most segments:

o Specialty Finance -- commercial charge-offs increased largely due to
charge-offs taken with respect to leases to customers of
NorVergence, Inc., a bankrupt vendor currently subject to regulatory
investigations. At September 30, 2004, after taking into account
charge-offs and loan loss reserves, the remaining outstanding
receivables to NorVergence customers were approximately $6 million.

o Commercial Finance charge-offs fell well below the prior year in
both the asset-based lending and factoring business, reflecting the
stronger economy, retail in particular. In conjunction with the
combination of the former Structured Finance into Capital Finance,
the communications and media portfolio was transferred to the
Commercial Finance segment. As a result, charge-offs against the
specific telecommunications reserve are reflected in this segment.
See "Results by Business Segment" for further discussion.

o Equipment Finance improvement was considerable in relation to the
prior year due to broad-based reductions across all product lines in
both the U.S. and Canada, reflecting lower non-performing assets and
strengthening collateral values.

o Specialty Finance -- consumer charge-offs, while up in absolute
amounts, were down as a percentage of average finance receivables
from the prior year reflecting the return to on-balance sheet
funding of the home equity portion of this portfolio.

Past Due and Non-performing Assets

The following table sets forth certain information concerning our past due
(sixty days or more) and non-performing assets and the related percentages of
finance receivables ($ in millions):

September 30, 2004 December 31, 2003
----------------- ----------------

Past Dues:
Specialty Finance -- commercial.................................... $212.3 2.60% $226.4 3.17%
Commercial Finance................................................. 106.0 0.85% 131.9 1.14%
Equipment Finance.................................................. 66.6 1.05% 137.9 2.18%
Capital Finance.................................................... 28.4 1.04% 30.5 1.11%
------ ------
Total Commercial Segments....................................... 413.3 1.39% 526.7 1.90%
Specialty Finance -- consumer...................................... 159.9 3.31% 149.6 4.26%
------ ------
Total .......................................................... $573.2 1.66% $676.3 2.16%
====== ======
Non-performing assets:
Specialty Finance -- commercial.................................... $87.8 1.08% $119.8 1.68%
Commercial Finance................................................. 96.9 0.78% 132.5 1.15%
Equipment Finance.................................................. 164.9 2.60% 218.3 3.46%
Capital Finance.................................................... 11.5 0.42% 49.7 1.81%
------ ------
Total Commercial Segments....................................... 361.1 1.22% 520.3 1.87%
Specialty Finance -- consumer...................................... 167.6 3.47% 156.2 4.45%
------ ------
Total .......................................................... $528.7 1.53% $676.5 2.16%
====== ======
Non accrual loans.................................................. $427.9 $566.5
Repossessed assets................................................. 100.8 110.0
------ ------
Total non-performing assets....................................... $528.7 $676.5
====== ======

The September 30, 2004 delinquency rate of 1.66% marked the eighth
consecutive quarter of improvement.

o Specialty Finance -- commercial delinquency improvement from both
prior year periods was driven by declines in the Small Business
Lending portfolio and the international portfolios, most notably in
our European operations, where servicing was centralized during
2003.

o Commercial Finance past due levels were down considerably from 2003
due to improvements in the Commercial Services (factoring) and
Business Credit (asset-based lending) units as well as in the
telecommunications portfolio.

o Equipment Finance delinquency improved across virtually all product
lines in relation to 2003.

o Capital Finance improvement from 2003 included lower delinquency in
the project finance portfolio, though delinquency was up in the
regional aerospace portfolio from last quarter.

o Specialty Finance -- consumer delinquency was up in dollar amount
but down as a percentage of finance receivables from 2003,
reflecting a return to on-balance sheet funding of the home equity
portfolio. Consumer delinquency on a managed basis has been
relatively stable in percentage terms over the periods presented.

Likewise, non-performing assets also declined for the eighth consecutive
quarter, reflecting the same trends discussed above. Non-performing
telecommunications accounts (in Commercial Finance) totaled $24.5 million and
$57.2 million September 30, 2004 and December 31, 2003, respectively.

Managed past due loans in dollar amount and as a percentage of managed
financial assets are shown in the table below ($ in millions):

September 30, 2004 December 31, 2003
------------------ -----------------
Past Dues:
Specialty Finance -- commercial..... $294.8 2.29% $ 321.2 2.77%
Commercial Finance.................. 106.0 0.85% 131.9 1.14%
Equipment Finance................... 116.2 1.24% 243.6 2.49%
Capital Finance..................... 28.4 1.04% 30.5 1.11%
------ --------
Total Commercial Segments........ 545.4 1.46% 727.2 2.04%
Specialty Finance -- consumer....... 304.9 4.44% 294.8 4.78%
------ --------
Total ........................... $850.3 1.92% $1,022.0 2.44%
====== ========

Managed past due loans decreased both in dollar amount and as a percentage
of managed financial assets, reflecting the same factors that are discussed in
the owned delinquency analysis.

Salaries and General Operating Expenses

The efficiency ratio and the ratio of salaries and general operating
expenses to average managed assets ("AMA") are summarized in the following table
($ in millions):

Quarters Ended September 30, Nine Months Ended September 30,
---------------------------- -------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Efficiency ratio (1)............................ 41.5% 41.4% 41.6% 41.1%
Salaries and general operating expenses as a
percentage of AMA (2)......................... 2.18% 2.00% 2.18% 1.98%
Salaries and general operating expenses ........ $ 256.7 $ 230.3 $ 764.3 $ 676.4
Average Managed Assets.......................... $47,166.8 $46,052.0 $46,737.1 $45,648.4

- --------------------------------------------------------------------------------
(1) Efficiency ratio is the ratio of salaries and general operating margin,
excluding the provision for credit losses.

(2) "AMA" means average managed assets, which is average earning assets plus
the average of finance receivables previously securitized and still
managed by us.

Salaries and general operating expenses for the quarter and nine months
ended September 30, 2004 increased from the prior year periods primarily due to
higher incentive-based compensation, including restricted stock awards,
acquisition activities and higher corporate expenses reflecting increased
advertising, governance and compliance-related costs. Personnel decreased to
approximately 5,700 at September 30, 2004, from 5,780 at September 30, 2003.

Expenses are monitored closely by business unit and corporate management,
and are reviewed monthly. An approval and review procedure is in place for major
capital expenditures, such as computer equipment and software, including
post-implementation evaluations. We continue to target an improved efficiency
ratio in the mid 30% area and an AMA ratio of under 2.00%, as: (1) we have
existing capacity to grow assets without commensurate expense increases; (2) we
expect payback on our restructuring activities; (3) we have additional plans for
platform consolidation technology investment; and (4) we expect
compliance-related expenses to decline from the current level.

Gain on Redemption of Debt

In January 2004 and December 2003, we called at par $1.25 billion of term
debt securities. These notes were listed on the New York Stock Exchange under
the ticker symbols CIC and CIP and are commonly known as PINEs ("Public Income
Notes"). The securities carried coupon rates of 8.25% and 8.125%, but were
marked down to a market interest rate yield of approximately 7.5% in our
financial statements through purchase accounting. In light of the high coupon
rates, we called the securities for redemption pursuant to the terms outlined in
the prospectuses.

The call of $512 million on January 15, 2004 resulted in a pretax gain of $41.8
million ($25.5 million after tax) in the first quarter of 2004. The December
call of $735 million resulted in a pretax gain of $50.4 million ($30.8 million
after tax) during the fourth quarter of 2003.

Income Taxes

The following table sets forth certain information concerning our income
taxes ($ in millions):

Quarters Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Provision for income taxes................................ $117.7 $94.6 $351.6 $266.8
Effective tax rate........................................ 39.0% 39.0% 39.0% 39.0%

The effective tax rate exceeds the U.S. Federal tax rate of 35% primarily
due to state and local, and foreign income taxes.

At September 30, 2004, CIT had U.S. federal net operating losses of
approximately $1.9 billion, which expire in various years beginning in 2011. In
addition, CIT has various state net operating losses that will expire in various
years beginning in 2004. Federal and state operating losses may be subject to
annual use limitations under section 382 of the Internal Revenue Code of 1986,
as amended, and other limitations under certain state laws. Management believes
that CIT will have sufficient taxable income in future years and can avail
itself of tax planning strategies in order to fully utilize these losses.
Accordingly, we do not believe a valuation allowance is required with respect to
these net operating losses.

CIT has open tax years in the U.S., Canada and other jurisdictions that
are currently under examination by the applicable taxing authorities, and
certain later tax years that may in the future be subject to examination. CIT
periodically evaluates the adequacy of our related tax reserves, taking into
account our open tax return positions, tax law changes and third party
indemnifications. We believe that our tax reserves are appropriate. The final
determination of tax audits and any related litigation could affect our tax
reserves.

Results by Business Segment

The tables that follow summarize selected financial information by
business segment, based upon a fixed leverage ratio across business units, and
the allocation of most corporate expenses ($ in millions):

Quarters Ended Nine Months Ended
September 30, September 30,
-------------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Net Income (Loss)
Specialty Finance......................................... $ 84.1 $ 71.6 $244.0 $186.8
Commercial Finance........................................ 78.3 58.8 217.6 181.3
Equipment Finance......................................... 19.1 9.0 52.6 27.6
Capital Finance........................................... 25.8 24.4 78.6 55.3
------ ------ ------ ------
Total Segments............................................ 207.3 163.8 592.8 451.0
Corporate, including certain charges...................... (23.4) (16.0) (43.0) (39.3)
------ ------ ------ ------
Total .................................................... $183.9 $147.8 $549.8 $411.7
====== ====== ====== ======
Return on AEA
Specialty Finance......................................... 2.31% 2.34% 2.38% 2.04%
Commercial Finance........................................ 3.74% 2.94% 3.54% 3.14%
Equipment Finance......................................... 1.11% 0.53% 1.02% 0.53%
Capital Finance........................................... 1.12% 1.11% 1.15% 0.88%
Total Segments............................................ 2.13% 1.83% 2.09% 1.71%
Corporate, including certain charges...................... (0.25)% (0.19)% (0.17)% (0.17)%
Total .................................................... 1.88% 1.64% 1.92% 1.54%

Results by segment were as follows:

o Specialty Finance profitability improvement reflected strong
earnings in the international and home equity units.

o Commercial Finance earnings remained strong, benefiting from
continued high returns in both the factoring and asset-based lending
businesses. The current year results also benefited from last year's
factoring acquisitions. Current year profitability on the
communications and media portfolio (transferred from Capital
Finance) included higher levels of syndication activity.

o Equipment Finance returns, while still below management's
expectations, increased from the prior year, reflecting lower
charge-offs, lower funding costs and higher equipment gains.
Profitability improvement was broad-based across business lines in
both the U.S. and Canada.

o Capital Finance nine-month earnings reflected improved rail rentals
and second quarter syndication gains in the project finance
portfolio done largely for risk management purposes. Aerospace lease
margins and profitability was dampened by a $14.8 million additional
depreciation charge during the second quarter to reduce the carrying
value of certain older leased aircraft, which are no longer
manufactured, to estimated fair value.

For all periods shown, Corporate includes unallocated corporate operating
expenses and the results of the venture capital business including gains and
losses on venture capital investments (losses of $0.5 million and $12.9 million
after tax for the quarters ended September 30, 2004 and 2003 and losses of $5.4
million and $35.0 million after tax for the nine months ended September 30, 2004
and 2003). For the nine months ended September 30, 2004, Corporate also includes
the gain on the early redemption of debt ($25.5 million after tax).

Financing and Leasing Assets

The managed assets of our business segments and the corresponding
strategic business units are presented in the following table ($ in millions):

September 30, December 31, Percentage
2004 2003 Change
------------ ----------- ---------

Specialty Finance Segment
Commercial
Finance receivables................................................. $ 8,166.3 $ 7,150.0 14.2%
Operating lease equipment, net...................................... 1,057.0 959.5 10.2%
Finance receivables held for sale................................... 1,447.9 548.1 164.2%
--------- ---------
Owned assets........................................................ 10,671.2 8,657.6 23.3%
Finance receivables securitized and managed by CIT.................. 3,251.1 3,915.4 (17.0)%
--------- ---------
Managed assets...................................................... 13,922.3 12,573.0 10.7%
--------- ---------
Consumer
Finance receivables -- home equity.................................. 3,996.4 2,513.1 59.0%
Finance receivables -- other........................................ 840.2 997.7 (15.8)%
Finance receivables held for sale................................... 209.0 150.0 39.3%
--------- ---------
Owned assets........................................................ 5,045.6 3,660.8 37.8%
Home equity finance receivables securitized and
managed by CIT.................................................... 1,352.6 1,867.6 (27.6)%
Other finance receivables securitized and managed by CIT............ 466.5 642.5 (27.4)%
--------- ---------
Managed assets...................................................... 6,864.7 6,170.9 11.2%
--------- ---------
Commercial Finance Segment
Commercial Services
Finance receivables................................................. 6,764.0 6,325.8 6.9%
Business Credit
Finance receivables................................................. 5,699.6 5,247.1 8.6%
--------- ---------
Owned assets........................................................ 12,463.6 11,572.9 7.7%
--------- ---------
Equipment Finance Segment
Finance receivables ................................................ 6,343.2 6,317.9 0.4%
Operating lease equipment, net...................................... 401.0 419.6 (4.4)%
Finance receivables held for sale................................... 100.4 220.2 (54.4)%
--------- ---------
Owned assets........................................................ 6,844.6 6,957.7 (1.6)%
Finance receivables securitized and managed by CIT.................. 2,924.7 3,226.2 (9.3)%
--------- ---------
Managed assets...................................................... 9,769.3 10,183.9 (4.1)%
--------- ---------
Capital Finance Segment
Finance receivables................................................. 2,733.1 2,748.6 (0.6)%
Operating lease equipment, net...................................... 6,474.9 6,236.4 3.8%
--------- ---------
Owned assets........................................................ 9,208.0 8,985.0 2.5%
--------- ---------
Other -- Equity Investments............................................ 186.2 249.9 (25.5)%
--------- ---------
Total
Finance receivables................................................. $34,542.8 $31,300.2 10.4%
Operating lease equipment, net...................................... 7,932.9 7,615.5 4.2%
Finance receivables held for sale................................... 1,757.3 918.3 91.4%
--------- ---------
Financing and leasing assets excluding equity investments........... 44,233.0 39,834.0 11.0%
Equity investments (included in other assets)....................... 186.2 249.9 (25.5)%
--------- ---------
Owned assets...................................................... 44,419.2 40,083.9 10.8%
Finance receivables securitized and managed by CIT.................. 7,994.9 9,651.7 (17.2)%
--------- ---------
Managed assets.................................................... $52,414.1 $49,735.6 5.4%
========= =========

The increase in owned assets from 2003 was driven by: the combination of a
strong mortgage refinancing market and bulk receivable purchases in the
Specialty Finance home equity portfolio; strategic acquisitions in Specialty
Finance-commercial including a European vendor leasing business and technology
leasing business; two factoring acquisitions in Commercial Services in late
2003; and deliveries of aerospace assets in Capital Finance. The decline in
receivables securitized reflects our return to funding home equity growth
on-balance sheet and a lower level of commercial equipment securitizations.

The following table presents new business volume by segment ($ in
millions):

Quarters Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
2004 2003 2004 2003
--------- --------- --------- ---------

Specialty Finance....................................... $3,823.4 $3,445.0 $10,677.6 $ 9,455.3
Commercial Finance...................................... 671.8 726.0 2,117.4 2,111.8
Equipment Finance....................................... 1,115.1 898.0 3,086.4 2,584.4
Capital Finance........................................ 357.2 334.0 1,007.3 1,100.0
-------- -------- --------- ---------
Total new business volume............................. $5,967.5 $5,403.0 $16,888.7 $15,251.5
======== ======== ========= =========

New origination volume for the quarter and nine months ended September 30,
2004 included stronger volume from our Specialty Finance vendor finance,
international and home equity units, as well as improved demand for financing in
Equipment Finance.

Home equity new business volume in Specialty Finance was $1.2 billion and
$3.0 billion for the quarter and nine months of 2004, up 54% and 13% from 2003.
Volume was particularly strong in the third quarter, as the interest rate
environment remained relatively low, and that resulted in strong production from
our broker origination channel. Softness in the home equity securitization
markets afforded us the opportunity for bulk portfolio purchases during the
third quarter.

The table below summarizes the targeted non-strategic business lines.
During the third quarter, we sold virtually all of the remaining recreational
marine and recreational vehicle receivables, following the prior quarter's
decision to pursue a more rapid liquidation of these portfolios. In addition,
during 2001 we ceased making new venture capital investments beyond existing
commitments, and during the first quarter of 2004 we entered into an agreement
to sell our direct investment portfolio. We will consider additional
opportunities for more rapid liquidation of non-strategic assets to the extent
available. See "Losses on Venture Capital Investments" for more information. ($
in millions)

September 30, December 31,
2004 2003
------------ -----------
Portfolio
Manufactured housing............................ $576 $584
Franchise finance............................... 59 102
Owner-operator trucking......................... 38 91
Recreational marine............................. 1 86
Recreational vehicle............................ 1 58
Wholesale inventory finance..................... -- 2
---- ----
Total on-balance sheet
financing and leasing assets................. $675 $923
==== ====

Concentrations

Ten Largest Accounts

Our ten largest financing and leasing asset accounts in the aggregate
represented 5.0% of our total financing and leasing assets at September 30, 2004
(the largest account being less than 1.0%) and 5.2% at December 31, 2003.

Leveraged Leases

As of September 30, 2004, net investments in leveraged leases totaled $1.3
billion, or 3.7% of finance receivables, with the major components being: (i)
$553.2 million in commercial aerospace transactions, including $219.9 million of
tax-optimization leveraged leases (which generally have increased risk for
lessors in relation to conventional lease structures due to additional leverage
in the transactions); (ii) $331.7 million of project finance transactions,
primarily in the power and utility sector; and (iii) $232.3 million in rail
transactions.

Joint Venture Relationships

Our strategic relationships with industry-leading equipment vendors are a
significant origination channel for our financing and leasing activities. These
vendor alliances include traditional vendor finance programs, joint ventures and
profit sharing structures. Our vendor programs with Dell, Snap-on and Avaya Inc.
are among our largest alliances. On September 8, 2004, CIT and Dell agreed to
extend and modify the terms of the relationship. The new agreements provide CIT
with the right to purchase a percentage of DFS's finance receivables through
January 2010 and Dell also has the option to purchase CIT's 30% interest in DFS
in February 2008. The joint venture agreement with Snap-on runs until January
2006. The Avaya agreement, which relates to profit sharing on a CIT direct
origination program, extends through September 2006.

At September 30, 2004, our financing and leasing assets included $3,723.8
million, $1,107.5 million and $700.8 million related to the Dell, Snap-on and
Avaya programs, respectively. These amounts include receivables originated
directly by CIT as well as receivables purchased from joint venture entities.
Securitized assets included $2,018.5 million, $67.1 million and $590.3 million
from the Dell, Snap-on and Avaya origination sources, respectively. The Dell
amounts include $1,287.8 million in financing and leasing assets and $7.2
million in securitized assets originated by CIT in Canada and other countries
outside of the U.S.

A significant reduction in origination volumes from any of these alliances
could have a material impact on our asset and net income levels. For additional
information regarding certain of our joint venture activities, see Note 8 --
Certain Relationships and Related Transactions.

Home Equity Portfolio

The Specialty Finance home equity portfolio totaled $4.2 billion (owned)
and $5.6 billion (managed) at September 30, 2004, representing 9.9% and 10.6% of
owned and managed assets, respectively. The average loan size approximated $109
thousand. The top 5 state concentrations (California, Texas, Ohio, Pennsylvania
and North Carolina) represented an aggregate 44% of the managed portfolio at
September 30, 2004. Our home equity loan portfolio is 68% fixed-rate and 86%
first mortgages with an average loan-to-value of 76% and an average FICO score
of 637. Managed delinquencies (sixty days or more) were 3.91% and 4.22% at
September 30, 2004 and September 30, 2003, while charge-offs on a managed basis
for the nine-months ended September 30, 2004 and September 2003 were 1.04% and
0.96%.

Geographic Composition

The following table summarizes significant state concentrations greater
than 5.0% and foreign concentrations in excess of 1.0% of our owned financing
and leasing portfolio assets. For each period presented, our managed asset
geographic composition did not differ significantly from our owned asset
geographic composition. During the third quarter, the state of Florida
experienced significant weather-related damage. Our geographic concentration in
Florida is approximately 4.0% and we do not expect resulting weather-related
losses to be significant.

September 30, December 31,
2004 2003
------------- ------------
State
California.................................... 10.2% 10.2%
Texas......................................... 8.1% 7.7%
New York...................................... 7.1% 7.4%
All other states.............................. 53.6% 54.0%
---- ----
Total U.S........................................ 79.0% 79.3%
==== ====
Country
Canada........................................ 4.9% 5.1%
England....................................... 3.6% 2.8%
France........................................ 1.4% 1.1%
Australia..................................... 1.2% 1.3%
Mexico........................................ 1.2% 1.0%
Germany....................................... 1.2% 1.0%
China......................................... 1.0% 0.9%
All other countries........................... 6.5% 7.5%
---- ----
Total Outside U.S................................ 21.0% 20.7%
==== ====

Industry Composition

The following discussions provide information with respect to selected
industry compositions.

Commercial Aerospace

Our commercial aerospace portfolio, which includes financing and leasing
transactions with commercial airlines and regional carriers, is managed in our
Capital Finance segment.

At September 30, 2004, our commercial airlines portfolio consists of
financing and leasing assets with an average age of approximately 6 years (based
on a dollar value weighted average). The portfolio was comprised of 89
customers, with the majority placed with major airlines around the world. The
portfolio at December 31, 2003 consisted of 84 customers, and aircraft with a
weighted average age of approximately 6 years. The commercial aircraft all
comply with stage III noise regulations.

The following table summarizes the composition of the commercial airline
portfolio ($ in millions):

September 30, 2004 December 31, 2003
------------------------ -------------------------
Net Number of Net Number of
Investment Planes Investment Planes
---------- ---------- ---------- ----------

By Geography:
Europe......................................... $2,175.1 72 $1,991.0 65
North America(1)............................... 926.9 62 1,029.7 72
Asia Pacific................................... 1,129.3 43 1,013.6 40
Latin America.................................. 618.8 25 612.7 28
Africa/Middle East............................. 55.1 3 69.1 4
-------- --- -------- ---
Total............................................. $4,905.2 205 $4,716.1 209
======== === ======== ===

By Manufacturer:
Boeing......................................... $ 2,540.4 132 $2,581.7 140
Airbus......................................... 2,329.5 64 2,114.6 57
Other.......................................... 35.3 9 19.8 12
-------- --- -------- ---
Total............................................. $4,905.2 205 $4,716.1 209
======== === ======== ===

By Body Type(2):
Narrow......................................... $3,657.1 161 $3,415.7 159
Intermediate................................... 848.8 18 877.0 18
Wide........................................... 364.0 17 403.6 20
Other.......................................... 35.3 9 19.8 12
-------- --- -------- ---
Total............................................. $4,905.2 205 $4,716.1 209
======== === ======== ===

By Product:
Operating Lease................................ $4,113.6 160 $4,011.7 159
Leverage Lease (Other)......................... 333.3 12 232.5 12
Leverage Lease (Tax optimized)................. 219.9 9 217.9 9
Capital Lease.................................. 142.0 6 135.6 7
Loan........................................... 96.4 18 118.4 22
-------- --- -------- ---
Total............................................. $4,905.2 205 $4,716.1 209
======== === ======== ===

- --------------------------------------------------------------------------------
(1) Comprised of net investments in the U.S. and Canada of $744.2 million (56
aircraft) and $182.7 million (6 aircraft) at September 30, 2004, and
$822.7 million (66 aircraft) and $207.0 million (6 aircraft) at December
31, 2003.

(2) Narrow body are single aisle design and consist primarily of Boeing 737
and 757 series and Airbus A320 series aircraft. Intermediate body are
smaller twin aisle design and consist primarily of Boeing 767 series and
Airbus A330 series aircraft. Wide body are large twin aisle design and
consist primarily of Boeing 747 and 777 series and McDonnell Douglas DC10
series aircraft.

The top five commercial aerospace exposures totaled $1,064.7 million at
September 30, 2004, the largest of which was $288.4 million. All top five
exposures are to carriers outside of the U.S., and three are to European
carriers. The largest exposure to a U.S. carrier at September 30, 2004 was
$132.0 million. Of the 205 aircraft, three are off-lease and covered by signed
letters of intent. Future revenues and aircraft values could be impacted by the
actions of the carriers, management's actions with respect to re-marketing the
aircraft, airline industry performance and aircraft utilization.

The regional aircraft portfolio at September 30, 2004 consists of 127
planes with a net investment of $351.9 million, up from $291.6 million at
December 31, 2003. The carriers are primarily located in North America and
Europe. Operating leases account for about 38% of the portfolio, with the rest
capital leases or loans.

The following is a list of our exposure to bankrupt aerospace carriers and
the current status of the related aircraft at September 30, 2004:

o UAL Corp. -- United Airlines leases 4 CIT-owned narrow body aircraft
(2 Boeing 757 aircraft and 2 Boeing 737 aircraft) with a net
investment of $82.8 million. Additionally, we hold Senior A tranche
Enhanced Equipment Trust Certificates ("EETCs") issued by United
Airlines, which are debt instruments

collateralized by aircraft operated by the airline, with a fair
value of $42.5 million. In connection with the United Airlines'
filing under Chapter 11, as of September 30, 2004, we have an
outstanding balance of $53.1 million (with a commitment of $75
million) relating to a debtor-in-possession facility. During the
third quarter, as co-arranger with three other lenders, CIT
committed to $250 million of an aggregate $1.0 billion facility,
which is secured by unencumbered aircraft, among other collateral.
CIT syndicated its exposure down to $75 million, with further
reduction to $50 million expected to close in the fourth quarter.

o Air Canada -- Our net investment in aircraft is approximately $47.5
million, relating to one CIT-owned Boeing 767 aircraft.

o Avianca Airlines -- Avianca is a lessee of one MD 80 aircraft and
one Boeing 757, with a combined net investment of $30.9 million.

o US Airways -- On September 11, 2004, US Airways Group, Inc.
announced that it had filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. Under existing agreements, CIT has
operating leases where US Airways is the lessee of two 737-300,
CIT-owned aircraft, for a total net investment of $13.6 million.

Our aerospace assets include both operating leases and capital leases.
Management monitors economic conditions affecting equipment values, trends in
equipment values, and periodically obtains third party appraisals of commercial
aerospace equipment, which include projected rental rates. We adjust the
depreciation schedules of commercial aerospace equipment on operating leases or
residual values underlying capital leases when required. Aerospace assets are
reviewed for impairment annually, or more often when events or circumstances
warrant. An aerospace asset is defined as impaired when the expected
undiscounted cash flow over its expected remaining life is less than its book
value. Both historical information and current economic trends are factored into
the assumptions and analyses used when determining the expected undiscounted
cash flow. Included among these assumptions are the following:

o Lease terms

o Remaining life of the asset

o Lease rates supplied by independent appraisers

o Remarketing prospects

o Maintenance costs

An impairment loss is recognized if circumstances indicate that the
carrying amount of the asset may not be recoverable. Depreciation expense for
the nine months ended September 30, 2004 included a $14.8 million impairment
charge taken in the second quarter to reduce certain older, out of production
aircraft to estimated fair value. The additional depreciation expense primarily
related to aircraft with a single lessee with upcoming lease terminations and
for which market rental rates have recently declined. Therefore, the projected
cash flows no longer supported the corresponding carrying value, resulting in
the additional depreciation charge.

Commercial airline equipment utilization is high, with only three aircraft
off-lease (with a book value of $30.5 million) at September 30, 2004, which
demonstrates our ability to place aircraft. However, current placements are at
compressed rental rates, which reflects current market conditions. Generally,
leases are being written for terms between three and five years. Within the
regional aircraft portfolio at September 30, 2004, there were 12 aircraft
off-lease with a total book value of approximately $41.6 million. See table in
"Risk Management" section for additional information regarding commitments to
purchase additional aircraft.

Other Assets

Other assets totaled $2.5 billion at September 30, 2004 and $3.3 billion
at December 31, 2003. The decline in other assets is primarily due to lower
receivables from derivative counterparties in 2004.

Other assets primarily consisted of the following at September 30, 2004:
investments in and receivables from non-consolidated subsidiaries of $0.7
billion, deposits on commercial aerospace flight equipment of $0.4 billion,

accrued interest and receivables from derivative counterparties of $0.3 billion,
direct and private fund equity investments of $0.2 billion, prepaid expenses of
$0.1 billion and repossessed assets and off-lease equipment of $0.1 billion. The
remaining balance includes furniture and fixtures, miscellaneous receivables and
other assets.

Risk Management

Our risk management process is described in more detail in our 2003 Annual
Report on Form 10-K. Our processes remain substantially the same as outlined in
our 2003 Form 10-K.

Interest Rate Risk Management -- We monitor our interest rate sensitivity
on a regular basis by analyzing the impact of interest rate changes upon the
financial performance of the business. We also consider factors such as the
strength of the economy, customer prepayment behavior and re-pricing
characteristics of our assets and liabilities.

We evaluate and monitor various risk metrics:

o Value at Risk (VAR), which measures the net economic value of assets
by assessing the duration of assets and liabilities.

Our asset portfolio is generally comprised of loans and leases of short to
intermediate term. As such, the duration of our asset portfolio is generally
less than three years. We target to closely match the duration of our liability
portfolio with that of our asset portfolio. As of September 30, 2004, our
liability portfolio duration was slightly longer than our asset portfolio
duration.

o Margin at Risk (MAR), which measures the impact of changing interest
rates upon interest income over the subsequent twelve months.

At the date that interest rate sensitivity is modeled, net interest income
is derived considering the current level of interest-sensitive assets and
related run-off (including both contractual repayment and historical prepayment
experience), the current level of interest-sensitive liabilities and related
maturities, and the current level of derivatives. Market interest rates are then
raised 100 basis points instantaneously and paralleled across the entire yield
curve, and a "rate shocked" simulation is run.

An immediate hypothetical 100 basis point parallel increase in the yield
curve on October 1, 2004 modeled against interest rate sensitive assets and
liabilities as shown in the table below would reduce net income by an estimated
$15 million after-tax over the next twelve months. A corresponding decrease in
the yield curve would cause an increase in net income of a like amount. Although
management believes that this measure provides an estimate of our interest rate
sensitivity, there are certain limitations inherent in this sensitivity
analysis, as it is unlikely that rate movements would be instantaneous or
parallel, nor would our assets and debt reprice immediately. Additionally, it
does not consider any potential remedial actions that management could take such
as the pre-funding of liabilities and other business developments consistent
with an increasing rate environment that may affect net income, for example
asset growth and changes to our liability durations. Further, it does not
account for potential changes in the credit quality, size, composition and
prepayment characteristics of the balance sheet. Accordingly, no assurance can
be given that actual results would not differ materially from the estimated
outcomes of our simulations. Such simulations do not represent management's
current view of future market interest rate movements.

The following table summarizes the composition of our interest sensitive
assets (including operating leases) and liabilities (excluding equity) before
and after derivatives:

Before Swaps After Swaps
----------------------------- -------------------------------
Fixed rate Floating rate Fixed rate Floating rate
---------- ------------- ---------- -------------

September 30, 2004
Assets.................................................... 57% 43% 57% 43%
Liabilities............................................... 60% 40% 50% 50%

December 31, 2003
Assets.................................................... 57% 43% 57% 43%
Liabilities............................................... 63% 37% 49% 51%

Total interest sensitive assets were $40.8 billion and $36.7 billion at
September 30, 2004 and December 31, 2003, while total interest sensitive
liabilities were $35.3 billion and $31.5 billion at September 30, 2004 and
December 31, 2003. Certain December 31, 2003 amounts have been adjusted to
conform to the current period presentation.

Liquidity Risk Management -- Liquidity risk refers to the risk of being
unable to meet potential cash outflows promptly and cost-effectively. Factors
that could cause such a risk to arise might be a disruption of a securities
market or other source of funds. We actively manage and mitigate liquidity risk
by maintaining diversified sources of funding and committed alternate sources of
funding, and we maintain and periodically review a contingency funding plan to
be implemented in the event of any form of market disruption. The primary
funding sources are commercial paper (U.S., Canada and Australia), long-term
debt (U.S. and International) and asset-backed securities (U.S. and Canada).

Outstanding commercial paper totaled $4.6 billion at September 30, 2004
and $4.2 billion at December 31, 2003. Our targeted U.S. program size remains at
$5.0 billion with modest foreign programs aggregating $500 million to be
maintained in Canada and Australia. Our goal is to maintain committed bank lines
in excess of aggregate outstanding commercial paper. We have aggregate bank
facilities of $6.3 billion with $4.2 billion in multi-year facilities.

We maintain registration statements with the Securities and Exchange
Commission ("SEC") covering debt securities that we may sell in the future. At
September 30, 2004, we had $0.5 billion of registered, but unissued, debt
securities available under a shelf registration statement. Subsequent to
September 30, 2004, we registered and now have available a $15 billion program
under which we may issue debt securities and other capital market securities.
Term-debt issued during 2004 totaled $9.6 billion: $5.8 billion in variable-rate
medium-term notes and $3.8 billion in fixed-rate notes.

To further strengthen our funding capabilities, we maintain committed
asset-backed facilities and shelf registration statements, which cover a range
of assets from equipment to consumer home equity receivables and trade accounts
receivable. While these are predominantly in the U.S., we also maintain
facilities for Canadian domiciled assets. As of September 30, 2004, we had
approximately $4.4 billion of availability in our committed asset-backed
facilities and $2.4 billion of registered, but unissued, securities available
under public shelf registration statements relating to our asset-backed
securitization program.

Our committed asset-backed commercial paper programs in the U.S. and
Canada provide a substantial source of alternate liquidity. We also maintain
committed bank lines of credit to provide backstop support of commercial paper
borrowings and local bank lines to support our international operations.
Additional sources of liquidity are loan and lease payments from customers,
whole-loan asset sales and loan syndications.

We also target and monitor certain liquidity metrics to ensure both a
balanced liability profile and adequate alternate liquidity availability as
outlined in the following table:

September 30, December 31,
Liquidity Measurement Current Target 2004 2003
- --------------------- -------------- ------------- ------------

Commercial paper to total debt............................. Maximum of 15% 12% 13%
Short-term debt to total debt.............................. Maximum of 45% 35% 36%
Bank lines to commercial paper............................. Minimum of 100% 141% 149%
Aggregate alternate liquidity* to short-term debt.......... Minimum of 75% 101% 93%

- --------------------------------------------------------------------------------
* Aggregate alternative liquidity includes available bank facilities,
asset-backed conduit facilities and cash.

Our credit ratings are an important factor in meeting our margin targets
as better ratings generally correlate to lower cost of funds (see Net Finance
Margin, interest expense discussion). The following credit ratings have been in
place since September 30, 2002:

Short-Term Long-Term Outlook
---------- --------- -------

Moody's.......................................................... P-1 A2 Stable
Standard & Poor's................................................ A-1 A Stable
Fitch............................................................ F1 A Stable

The credit ratings previously stated are not a recommendation to buy, sell
or hold securities and may be subject to revision or withdrawal by the assigning
rating organization. Each rating should be evaluated independently of any other
rating.

We have certain covenants contained in our legal documents that govern our
funding sources. The most significant covenant in CIT's indentures and credit
agreements is a negative pledge provision, which limits granting or permitting
liens on our assets, but provides for exceptions for certain ordinary course
liens needed to operate our business. In addition, our credit agreements also
contain a minimum net worth requirement of $4.0 billion.

The following tables summarize various contractual obligations, selected
contractual cash receipts and contractual commitments as of September 30, 2004
($ in millions):

Payments and Collections by Period(3)
----------------------------------------------------------------------------------
Remaining
Total 2004 2005 2006 2007 2008(3)
--------- --------- -------- -------- --------- ---------

Commercial Paper .......................... $ 4,496.5 $ 4,496.5 $ -- $ -- $ -- $ --
Variable-rate term debt ................... 11,507.7 1,117.4 3,331.3 3,667.2 2,551.0 840.8
Fixed-rate term debt ...................... 21,022.2 1,723.0 4,444.6 2,729.2 3,448.0 8,677.4
Preferred capital security ................ 254.2 -- -- -- -- 254.2
Lease rental expense ...................... 149.6 12.9 45.4 35.0 27.3 29.0
--------- --------- -------- -------- --------- ---------
Total contractual obligations .......... 37,430.2 7,349.8 7,821.3 6,431.4 6,026.3 9,801.4
--------- --------- -------- -------- --------- ---------
Finance receivables(1) .................... 34,542.8 8,148.1 5,618.2 4,656.9 3,266.4 12,853.2
Operating lease rental income ............. 2,817.6 270.9 908.6 624.1 366.0 648.0
Finance receivables held for sale(2) ...... 1,757.3 1,757.3 -- -- -- --
Cash -- current balance ................... 2,160.1 2,160.1 -- -- -- --
Retained interest in securitizations
and other investments .................... 1,188.4 174.5 451.6 264.8 167.1 130.4
--------- --------- -------- -------- --------- ---------
Total projected cash availability ...... 42,466.2 12,510.9 6,978.4 5,545.8 3,799.5 13,631.6
--------- --------- -------- -------- --------- ---------
Net projected cash inflow (outflow) ....... $ 5,036.0 $ 5,161.1 $ (842.9) $ (885.6) $(2,226.8) $ 3,830.2
========= ========= ======== ======== ========= =========

- --------------------------------------------------------------------------------
(1) Based upon contractual cash flows; amount could differ due to prepayments,
extensions of credit, charge-offs and other factors.

(2) Based upon management's intent to sell rather than contractual maturities
of underlying assets.

(3) Projected proceeds from the sale of operating lease equipment, interest
revenue from finance receivables, debt interest expense and other items
are excluded. Obligations relating to postretirement programs are also
excluded.

Commitment Expiration by Period
----------------------------------------------------------------------------------
Remaining
Total 2004 2005 2006 2007 2008+
--------- --------- -------- -------- --------- ---------

Credit extensions ....................... $ 7,414.0 $1,010.4 $ 624.2 $1,114.8 $ 794.0 $3,870.6
Aircraft purchases ...................... 2,447.0 279.0 906.0 1,002.0 260.0 --
Letters of credit ....................... 1,273.2 1,037.1 232.8 3.3 -- --
Sale-leaseback payments ................. 457.8 -- 28.5 28.5 28.5 372.3
Manufacturer purchase commitments ....... 280.9 280.9 -- -- -- --
Venture capital commitments ............. 97.0 3.4 0.5 -- 3.1 90.0
Guarantees .............................. 125.2 112.9 -- -- 10.5 1.8
Acceptances ............................. 25.0 25.0 -- -- -- --
--------- -------- -------- -------- -------- --------
Total contractual commitments ........... $12,120.1 $2,748.7 $1,792.0 $2,148.6 $1,096.1 $4,334.7
========= ======== ======== ======== ======== ========

Internal Controls

The Internal Controls Committee is responsible for monitoring and
improving internal controls and overseeing the internal controls attestation
mandated by Section 404 of the Sarbanes-Oxley Act of 2002 ("SARBOX"), for which
the implementation year is 2004. The committee, which is chaired by the
Controller, includes the CFO, the Director of Internal Audit and other senior
executives in finance, legal, risk management and information technology. The
documentation phase of the SARBOX project is complete and we are concluding the
testing and remediation phases. Our management self-assessment is targeted to be
completed during the fourth quarter of 2004.

Off-Balance Sheet Arrangements

Securitization Program

We fund asset originations on our balance sheet by accessing various
sectors of the capital markets, including the term debt and commercial paper
markets. In an effort to broaden funding sources and provide an additional
source of liquidity, we use an array of securitization programs, including both
asset-backed commercial paper and term structures, to access both the public and
private asset-backed securitization markets. Current products in these programs
include receivables and leases secured by equipment as well as consumer loans
secured by residential real estate. The following tables summarizes data
relating to our securitization balance and activity ($ in millions):

September 30,
------------------------
2004 2003
-------- ---------

Securitized Assets:
Specialty Finance -- commercial................................................... $3,251.1 $ 3,876.8
Specialty Finance -- consumer..................................................... 1,819.1 2,759.7
Equipment Finance................................................................. 2,924.7 3,504.5
-------- ---------
Total securitized assets.......................................................... $7,994.9 $10,141.0
======== =========
Securitized assets as a % of managed assets....................................... 15.3% 20.6%
======== =========

Quarters Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2004 2003 2004 2003
------ -------- -------- --------

Volume Securitized:
Specialty Finance -- commercial................. $458.4 $ 936.0 $1,897.2 $2,546.3
Specialty Finance -- consumer................... -- -- -- 489.2
Equipment Finance............................... 325.4 381.5 970.2 1,171.9
------ -------- -------- --------
Total volume securitized........................ $783.8 $1,317.5 $2,867.4 $4,207.4
====== ======== ======== ========

Under our typical asset-backed securitization, we sell a "pool" of secured
loans or leases to a special-purpose entity, typically a trust. The
special-purpose entity, in turn, issues certificates and/or notes that are
collateralized by the pool and entitle the holders thereof to participate in
certain pool cash flows. We retain the servicing of the securitized contracts,
for which we earn a servicing fee. We also participate in certain "residual"
cash flows (cash flows after payment of principal and interest to certificate
and/or note holders, servicing fees and other credit-related disbursements). At
the date of securitization, we estimate the "residual" cash flows to be received
over the life of the securitization, record the present value of these cash
flows as a retained interest in the securitization (retained interests can
include bonds issued by the special-purpose entity, cash reserve accounts on
deposit in the special-purpose entity or interest only receivables) and
typically recognize a gain.

In estimating residual cash flows and the value of the retained interests,
we make a variety of financial assumptions, including pool credit losses,
prepayment speeds and discount rates. These assumptions are supported by both
our historical experience and anticipated trends relative to the particular
products securitized. Subsequent to recording the retained interests, we review
them quarterly for impairment based on estimated fair value. These reviews are
performed on a disaggregated basis. Fair values of retained interests are
estimated utilizing current pool demographics, actual note/certificate
outstandings, current and anticipated credit losses, prepayment speeds and
discount rates.

The key assumptions used in measuring the retained interests at the date
of securitization for transactions completed during 2004 were as follows:

Commercial Equipment
-----------------------
Specialty Equipment
Finance Finance
--------- ---------

Weighted average prepayment speed................................................ 49.4% 12.1%
Weighted average expected credit losses.......................................... 0.51% 0.80%
Weighted average discount rate................................................... 6.48% 9.00%
Weighted average life (in years)................................................. 1.22 1.92

Key assumptions used in calculating the fair value of the retained
interests in securitized assets by product type at September 30, 2004 were as
follows:

Commercial Equipment Consumer
--------------------------- ------------------------------
Home Equity and Recreational
Specialty Equipment Manufactured Vehicles
Finance Finance Housing and Boat
-------------- ---------- ---------------- ------------

Weighted average prepayment speed.............. 29.1% 12.1% 26.9% 20.3%
Weighted average expected credit losses........ 1.28% 1.57% 1.36% 1.90%
Weighted average discount rate................. 7.64% 9.58% 13.08% 14.48%
Weighted average life (in years)............... 1.06 1.30 3.11 2.72

The Specialty Finance -- commercial securitized assets include receivables
originated to consumers through DFS.

Securitization and Joint Venture Activities

We utilize special purpose entities ("SPEs") and joint ventures in the
normal course of business to execute securitization transactions and conduct
business in key vendor relationships.

Securitization Transactions -- SPEs are used to achieve "true sale"
requirements for these transactions in accordance with SFAS No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." Pools of assets are originated or acquired and sold to SPEs, which
in turn issue debt securities to investors solely backed by asset pools.
Accordingly, CIT has no legal obligations to repay the securities in the event
of a default by the SPE. CIT retains the servicing rights and participates in
certain cash flows of the pools. The present value of expected net cash flows
that exceeds the estimated cost of servicing is recorded in other assets as a
"retained interest." Assets securitized are shown in our managed assets and our
capitalization ratios on a managed basis. Under the recently issued rules
relating to consolidation and SPEs, non-qualifying securitization entities have
to be consolidated. We believe that all of our existing asset-backed SPE
structures meet the definition of a qualifying special purpose entity ("QSPE")
as defined by SFAS No. 140 and therefore will continue to qualify as off-balance
sheet transactions. As part of these related activities, CIT entered into $2.3
billion in notional amount of hedge transactions to protect the related trusts
against interest rate risk. CIT is insulated from this risk by entering into
offsetting swap transactions with third parties totaling $2.3 billion in
notional amount at September 30, 2004.

Joint Ventures -- We utilize joint ventures organized through distinct
legal entities to conduct financing activities with certain strategic vendor
partners. Receivables are originated by the joint venture and purchased by CIT.
The vendor partner and CIT jointly own these distinct legal entities, and there
is no third-party debt involved. These arrangements are accounted for using the
equity method, with profits and losses distributed according to the joint
venture agreement. See disclosure in Item 1. Financial Statements, Note 8 --
Certain Relationships and Related Transactions.

Capitalization

The following table presents information regarding our capital structure
($ in millions):

September 30, December 31,
2004 2003
------------ ------------

Commercial paper................................................................. $ 4,496.5 $ 4,173.9
Term debt........................................................................ 32,529.9 29,239.2
Preferred Capital Securities..................................................... 254.2 255.5
Stockholders' equity(1).......................................................... 5,882.3 5,427.8
--------- ---------
Total capitalization............................................................. 43,162.9 39,096.4
Goodwill and other intangible assets............................................. (594.4) (487.7)
--------- ---------
Total tangible capitalization.................................................... $42,568.5 $38,608.7
========= =========
Tangible stockholders' equity(1) and Preferred Capital Securities to
managed assets................................................................. 10.57% 10.45%
Tangible stockholders' equity(1) and Preferred Capital Securities................ 6.38x 6.14x

- --------------------------------------------------------------------------------
(1) Stockholders' equity excludes the impact of the accounting change for
derivative financial instruments described in Note 7 to the Consolidated
Financial Statements and certain unrealized gains or losses on retained
interests and investments, as these amounts are not necessarily indicative
of amounts that will be realized. See "Non-GAAP Financial Measurements."

The European vendor finance acquisition increased goodwill and acquired
intangibles by approximately $80 million and treasury stock increased to $81
million.

The preferred capital securities are 7.70% Preferred Capital Securities
issued in 1997 by CIT Capital Trust I, a wholly-owned subsidiary. CIT Capital
Trust I invested the proceeds of that issue in Junior Subordinated Debentures of
CIT having identical rates and payment dates. Consistent with rating agency
measurements, preferred capital securities are included in tangible equity in
our leverage ratios. See "Non-GAAP Financial Measurements" for additional
information.

See "Liquidity Risk Management" for discussion of risks impacting our
liquidity and capitalization.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires
management to use judgment in making estimates and assumptions that affect
reported amounts of assets and liabilities, the reported amounts of income and
expense during the reporting period and the disclosure of contingent assets and
liabilities at the date of the financial statements. We consider accounting
estimates relating to the following to be critical in applying our accounting
policies:

o Investments

o Charge-off of Finance Receivables

o Impaired Loans

o Reserve for Credit Losses

o Retained Interests in Securitizations

o Lease Residual Values

o Goodwill and Intangibles

o Income Tax Asset and Liability Accounts

There have been no significant changes to the methodologies and processes
used in developing estimates relating to these items from what is described in
our 2003 Annual Report on Form 10-K.

Statistical Data

The following table presents components of net income as a percent of AEA,
along with other selected financial data ($ in millions):

Nine Months Ended
September 30,
-----------------------
2004 2003
--------- ---------
Finance income..................................... 9.73% 10.51%
Interest expense................................... 3.20% 3.84%
--------- ---------
Net finance income............................... 6.53% 6.67%
Depreciation on operating lease equipment.......... 2.50% 3.02%
--------- ---------
Net finance margin............................... 4.03% 3.65%
Provision for credit losses........................ 0.74% 1.07%
--------- ---------
Net finance margin after provision
for credit losses............................... 3.29% 2.58%
Other revenue...................................... 2.36% 2.63%
Gain (loss) on venture capital investments......... 0.03% (0.11)%
--------- ---------
Operating margin................................... 5.68% 5.10%
Salaries and general operating expenses............ 2.67% 2.54%
Gain on redemption of debt......................... 0.14% --
--------- ---------
Income before provision for income taxes......... 3.15% 2.56%
Provision for income taxes......................... (1.23)% (1.00)%
Minority interest, after tax....................... -- --
Dividends on preferred capital
securities, after tax........................... -- (0.02)%
--------- ---------
Net income....................................... 1.92% 1.54%
========= =========
Average Earning Assets............................. $38,119.0 $35,559.0
========= =========

Non-GAAP Financial Measurements

The SEC adopted Regulation G, which applies to any public disclosure or
release of material information that includes a non-GAAP financial measure. The
accompanying Management's Discussion and Analysis of Financial Condition and
Results of Operations and Quantitative and Qualitative Disclosure about Market
Risk contain certain non-GAAP financial measures. The SEC defines a non-GAAP
financial measure as a numerical measure of a company's historical or future
financial performance, financial position, or cash flows that excludes amounts,
or is subject to adjustments that have the effect of excluding amounts, that are
included in the most directly comparable measure calculated and presented in
accordance with GAAP in the financial statements or includes amounts, or is
subject to adjustments that have the effect of including amounts, that are
excluded from the most directly comparable measure so calculated and presented.

Non-GAAP financial measures disclosed in this report are meant to provide
additional information and insight relative to historical operating results and
financial position of the business, are used by management in its analysis and,
in certain cases, to provide financial information that is presented to rating
agencies and other users of financial information. 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.

Selected non-GAAP disclosures are presented and reconciled in the table
below ($ in millions):

September 30, December 31,
2004 2003
------------ ------------

Managed assets(1)
Finance receivables .................................................................. $34,542.8 $31,300.2
Operating lease equipment, net ....................................................... 7,932.9 7,615.5
Finance receivables held for sale .................................................... 1,757.3 918.3
Equity and venture capital investments (included in other assets) .................... 186.2 249.9
--------- ---------
Total financing and leasing portfolio assets ......................................... 44,419.2 40,083.9
Securitized assets ................................................................... 7,994.9 9,651.7
--------- ---------
Managed Assets ....................................................................... $52,414.1 $49,735.6
========= =========
Earning assets(2)
Total financing and leasing portfolio assets ......................................... $44,419.2 $40,083.9
Credit balances of factoring clients ................................................. (3,929.9) (3,894.6)
--------- ---------
Earning assets ....................................................................... $40,489.3 $36,189.3
========= =========
Tangible equity(3)
Total equity ......................................................................... $ 5,837.0 $ 5,394.2
Other comprehensive loss relating to derivative financial instruments ................ 52.5 41.3
Unrealized gain on securitization investments ........................................ (7.2) (7.7)
Goodwill and intangible assets ....................................................... (594.4) (487.7)
--------- ---------
Tangible common equity ............................................................... 5,287.9 4,940.1
Preferred capital securities ......................................................... 254.2 255.5
--------- ---------
Tangible equity ...................................................................... $ 5,542.1 $ 5,195.6
========= =========
Debt, net of overnight deposits(4)
Total Debt ........................................................................... $37,280.6 $33,668.6
Overnight deposits ................................................................... (1,651.7) (1,529.4)
Preferred capital securities ......................................................... (254.2) (255.5)
--------- ---------
Debt, net of overnight deposits ...................................................... $35,374.7 $31,883.7
========= =========
Earnings per share, excluding certain items(5)
GAAP Earnings per share .............................................................. $ 0.86 $ 0.72
Gain on debt redemption .............................................................. -- (0.14)
--------- ---------
Adjusted earnings per share .......................................................... $ 0.86 $ 0.58
========= =========

- --------------------------------------------------------------------------------
(1) Managed assets are utilized in certain credit and expense ratios.
Securitized assets are included in managed assets because CIT retains
certain credit risk and the servicing related to assets that are funded
through securitizations.

(2) Earning assets are utilized in certain revenue and earnings ratios.
Earning assets are net of credit balances of factoring clients. This net
amount, which corresponds to amounts funded, is a basis for revenues
earned, such as finance income and factoring commissions.

(3) Tangible equity is utilized in leverage ratios, and is consistent with our
presentation to rating agencies. Other comprehensive losses and unrealized
gains on securitization investments (both included in the separate
component of equity) are excluded from the calculation, as these amounts
are not necessarily indicative of amounts that will be realized.

(4) Debt, net of overnight deposits, is utilized in certain leverage ratios.
Overnight deposits are excluded from these calculations, as these amounts
are retained by the Company to repay debt. Overnight deposits are
reflected in both debt and cash and cash equivalents.

(5) The EPS related to the items listed are shown separately, as the items are
not indicative of our on-going operations.

Forward-Looking Statements

Certain statements contained in this document are "forward-looking
statements" within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. All statements contained herein that are not clearly historical in
nature are forward-looking and the words "anticipate," "believe," "expect,"
"estimate" and similar expressions are generally intended to identify
forward-looking statements. Any forward-looking statements contained herein, in
press releases, written statements or other documents filed with the Securities
and Exchange Commission or in communications and discussions with investors and
analysts in the normal course of business through meetings, webcasts, phone
calls and conference calls, concerning our operations, economic performance and
financial condition are subject to known and unknown risks, uncertainties and
contingencies. Forward-looking statements are included, for example, in the
discussions about:

o our liquidity risk management,

o our credit risk management,

o our asset/liability risk management,

o our funding, borrowing costs and net finance margin,

o our capital, leverage and credit ratings,

o our operational and legal risks,

o our growth rates,

o our commitments to extend credit or purchase equipment, and

o how we may be affected by legal proceedings.

All forward-looking statements involve risks and uncertainties, many of
which are beyond our control, which may cause actual results, performance or
achievements to differ materially from anticipated results, performance or
achievements. Also, forward-looking statements are based upon management's
estimates of fair values and of future costs, using currently available
information. Therefore, actual results may differ materially from those
expressed or implied in those statements. Factors that could cause such
differences include, but are not limited to:

o risks of economic slowdown, downturn or recession,

o industry cycles and trends,

o risks inherent in changes in market interest rates and quality
spreads,

o funding opportunities and borrowing costs,

o changes in funding markets, including commercial paper, term debt
and the asset-backed securitization markets,

o uncertainties associated with risk management, including credit,
prepayment, asset/liability, interest rate and currency risks,

o adequacy of reserves for credit losses,

o risks associated with the value and recoverability of leased
equipment and lease residual values,

o changes in laws or regulations governing our business and
operations,

o changes in competitive factors, and

o future acquisitions and dispositions of businesses or asset
portfolios.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company evaluated
the effectiveness of the design and operation of its disclosure controls and
procedures. The Company's disclosure controls and procedures are designed to
ensure that the information that the Company must disclose in its reports filed
under the Securities Exchange Act is communicated and processed in a timely
manner. Jeffrey M. Peek, President and Chief Executive Officer, and Joseph M.
Leone, Vice Chairman and Chief Financial Officer, participated in this
evaluation.

Based on this evaluation, Messrs. Peek and Leone concluded that, during
the last fiscal quarter covered by this report, the Company's disclosure
controls and procedures were effective, except as noted below. Since the date of
the evaluation described above, there have not been any significant changes in
the Company's internal controls or in other factors that could significantly
affect those controls.

In connection with the June 2001 acquisition by Tyco, our income tax
compliance, reporting and planning function was transferred to Tyco. Following
our 2002 IPO, we classified our tax reporting as a "reportable condition", as
defined by standards established by the American Institute of Certified Public
Accountants.

As previously reported, we have made substantial progress with respect to
the reportable condition by hiring and training personnel, rebuilding tax
reporting systems, preparing amendments to prior period U.S. Federal income tax
returns, and implementing processes and controls with respect to income tax
reporting and compliance.

During the quarter ended September 30, 2004, we continued to develop the
processes and data to complete the analysis of our income tax asset and
liability accounts, including the refinement of and reconciliation to
transactional level detail of book to tax differences. In conjunction with these
efforts, we incorporated the effects of filing our 2003 U.S. Federal income tax
return and based thereon, made adjustments to the December 31, 2003 tax basis
balance sheet. We also identified additional amendments relating to prior period
income tax returns. Work is continuing to validate income tax asset and
liability accounts.

In addition, we prepared the initial documentation relating to our tax
processes and internal controls over related financial reporting in connection
with our Sarbanes-Oxley section 404 initiative, and performed initial tests of
key controls. The results of these tests and our work indicated that further
improvements are required with respect to tax reporting processes and controls.

We are continuing to focus significant effort and resources in this regard
with our objective being to remediate the income tax reporting processes and
controls in connection with our December 31, 2004 financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On September 9, 2004, Exquisite Caterers v. Popular Leasing et al.
("Exquisite Caterers"), a putative class action, was filed against 13 financial
institutions, including CIT, who had acquired equipment leases ("NorVergence
Leases") from NorVergence, Inc., a reseller of telecommunications and Internet
services to businesses. The Exquisite Caterers lawsuit is pending in the U.S.
District Court for the District of New Jersey. Exquisite Caterers based its
complaint on allegations that NorVergence misrepresented the capabilities of the
equipment leased to its customers and overcharged for the equipment. The
complaint asserts that the NorVergence Leases are unenforceable and seeks
rescission, punitive damages, treble damages and attorneys' fees. In addition,
putative class action suits in Florida and Texas and several individual suits,
all based upon the same core allegations and seeking the same relief, have been
filed by NorVergence customers against CIT and the other financial institutions.

In addition, there are various legal proceedings against CIT, which have
arisen in the ordinary course of business. While the outcomes of the above
mentioned and ordinary course legal proceedings and the related activities are
not certain, based on present assessments, management does not believe that they
will have a material adverse effect on the financial condition of CIT.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table details the repurchase activity of CIT common stock
during the September 2004 quarter:

Total Number of
Shares Purchased Maximum Number
Total as Part of of Shares that May
Number of Average Publically Yet Be Purchased
Shares Price Paid Announced Plans Under the Plans
Purchased per Share or Programs or Programs
--------- --------- ---------------- ---------------

Balance at June 30, 2004 ............................ 896,730 $36.40 2,060,000
---------
July 1 - July 31, 2004 ...................... 420,000 $36.69 420,000 1,640,000
August 1 - August 31, 2004 .................. 880,000 $35.60 880,000 760,000
September 1 - September 30, 2004 ............ 486,500 $36.96 486,500 273,500
---------
Total Purchases ............................. 1,786,500
---------
Reissuances(1) ...................................... (460,974)
---------
Balance at September 30, 2004 ....................... 2,222,256
=========

- ----------
(1) Includes the issuance of shares of our common stock upon exercise of stock
options and the vesting of restricted stock.

On October 20, 2004, our Board of Directors approved a continuation of the
common stock repurchase program to acquire up to an additional three million
shares of our outstanding common stock in conjunction with employee equity
compensation programs. These are in addition to the shares remaining from the
previously approved program on April 21, 2004. The program authorizes the
company to purchase shares on the open market from time to time over a two-year
period beginning October 21, 2004. The repurchased common stock is held as
treasury shares and may be used for the issuance of shares under CIT's employee
stock plans. Acquisitions under the share repurchase program will be made from
time to time at prevailing prices as permitted by applicable laws, and subject
to market conditions and other factors. The program may be discontinued at any
time and is not expected to have a significant impact on our capitalization.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Form 10-Q filed by CIT on August 12,
2003).

3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Form 10-Q filed by CIT on August 12, 2003).

4.1 Indenture dated as of August 26, 2002 by and among CIT Group Inc.,
Bank One Trust Company, N.A., as Trustee and Bank One NA, London
Branch, as London Paying Agent and London Calculation Agent, for the
issuance of unsecured and unsubordinated debt securities
(incorporated by reference to Exhibit 4.18 to Form 10-K filed by CIT
on February 26, 2003).

10.1 Amendment to Employment Agreement by and among CIT Group Inc. and
Jeffrey M. Peek dated as of July 22, 2004.

10.2 Employment agreement by and among CIT Group Inc. and Thomas B.
Hallman dated as of August 1, 2004.

10.3 Employment agreement by and among CIT Group Inc. and Joseph M. Leone
dated as of August 1, 2004.

10.4 Employment agreement by and among CIT Group Inc. and Lawrence A.
Marsiello dated as of August 1, 2004.

10.5 Employment agreement by and among CIT Group Inc. and Frederick E.
Wolfert dated as of August 1, 2004.

10.6 2004 Extension and Funding Agreement dated September 8, 2004, by and
among Dell Financial Services L.P., Dell Credit Company L.L.C.,
DFS-SPV L.P., DFS-GP, Inc., Dell Inc., Dell Gen. P. Corp., Dell DFS
Corporation, CIT Group Inc., CIT Financial USA, Inc., CIT DCC Inc.,
CIT DFS Inc., CIT Communications Finance Corporation, and CIT Credit
Group USA Inc. (incorporated by reference to Form 8-K filed by CIT
on September 9, 2004).

12.1 CIT Group Inc. and Subsidiaries Computation of Earnings to Fixed
Charges.

31.1 Certification of Jeffrey M. Peek pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification of Joseph M. Leone pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 Certification of Jeffrey M. Peek pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 Certification of Joseph M. Leone pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

(b) Reports on Form 8-K

Current Report on Form 8-K filed July 22, 2004, reporting (i) that
CIT declared a dividend of $0.13 per share, payable August 30, 2004
to stockholders of record on August 13 2004, (ii) the financial
results of CIT as of and for the quarter ended June 30, 2004 and
(iii) the election of Jeffrey M. Peek as CEO of the Company.

Current Report on Form 8-K filed August 17, 2004, reporting the
election of Frederick E. Wolfert as Vice Chairman, Commercial
Finance.

Current Report on Form 8-K filed September 9, 2004, reporting the
extension and modification of the Dell Financial Services joint
venture.

Current Report on Form 8-K filed September 14, 2004, reporting the
Company's current financing relationship with US Airways Group Inc.

Current Report on Form 8-K filed September 21, 2004, reporting the
Company's Financial results for prior periods revised to reflect
CIT's new segment reporting.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CIT GROUP INC.

By: /s/ Joseph M. Leone
-----------------------------------------
Joseph M. Leone
Vice Chairman and Chief Financial Officer

By: /s/ William J. Taylor
-----------------------------------------
William J. Taylor
Executive Vice President, Controller
and Principal Accounting Officer

November 9, 2004