CIT - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to CIT’s Second Quarter 2018 Earnings Conference Call. My name is Keith and I will be your operator today. At this time, all participants are in listen-only mode. There will be a question-and-answer session after today’s call. [Operator Instructions] As a reminder this conference call is being recorded. like of the Investor now Barbara over I Head Callahan, Relations. Instructions] to call turn to [Operator Please proceed, ma’am.

Barbara Callahan

Thank you, XXXX quarter to CIT’s Keith. Good morning, earnings and conference welcome second call.

and be Ellen After John’s prepared have Ellen today our will and hosted we question-and-answer call John Fawcett, will Alemany, Our Chairwoman a CEO; remarks, and CFO. by session.

have courtesy you and one you to a follow-up questions. limit then queue, to to additional question on call call, the others a yourself As we that the return ask and if

only We disclaim time time morning. as forward-looking call. future to of this in results new this will cause involve duty based to questions any date many may answer are that the anticipated. actual may from materially relate to and We do our we differ best risks, update or as otherwise. information, those possible on contingencies uncertainties in call these Elements to events the nature and this statements statements and Any have of forward-looking

For measures to financial our reconciled information XX-K. business, please provide non-GAAP Form to relating refer factors with Any references meant insights about and XXXX to meaningful are the are to risk the our the of referencing Also, release. in part this at www.cit.com. available as website be our GAAP we morning, Investor will a of is press that section presentation call on Relations

Now over I’ll now turn call Ellen Alemany. to the

Ellen Alemany

and the second per thank $X.XX joining or We in reflect results progress million call. available the plan. quarter our expenses, markets. the businesses continued share. and items, for some and common in income lower I capital with income share, despite core you our from diluted including plan Results noteworthy morning structure provide competitive operations, then per of the excluding optimizing diluted strategic and of highly advances operating growth of million $XXX $X continuing to on Good some an net or $XXX start Barbara. overview you, updates in Thank posted shareholders strategic will on

which expertise key the core real with up loans delivering and progress divisions are by help we we on loan servicing adding reverse by the as to go efficiency are well-positioned in business. business mortgage was related simplify want year-over-year forward the Additionally Small business. the the John and X% touch These up leases This and shortly, was non-core that and business will grow very results finance confidence estate exiting mortgage volume and greater quarter-over-quarter. business value level their had XX% growth, on CIT board, which completed by driving for and about operations. further details about verticals well and and our mortgage Business to a more asset an our making finance as to forward marketplace customers. core commercial strong offset you first quarter in elements demonstrates of the plan, portfolio, our in actions sale I operations of financial few but up our outsource strengthen capital was are volume strong the X%. another X. Slide elevated through is across strong X% key prepayments and affected walk year-over-year, which our we Origination customers somewhat on

position now imaging office our leading in Our integrated that digital a from year healthcare gain Northbridge The finance volume also up up Factoring is the industry equipment. knowledge product by have values has CIT division the verticals. expertise commercial in in announced space, market. versus we is and in enable will and technology which to aviation, their software leasing us residual also Most when customers key a and year-over-year with experience technology, gives the largely equipment started a of driven XX% increases strong was sector. prior recently, JV Origination to the automated flexibility completely dealers volume finance traction. platform the energy the

At seen the basis we still over the our America surplus been North to be in fleet level has equipment estate transactions but competitive, also and business is and of experienced finance to continues several rail uptick leverage same up fueled are the be expected structures. In market, last commercial we to is time our in softening seeing has to prepayments. continues this aggressive points is of industrial sector. which The close some loading of quarter. which successful rail-car last XX%, pipeline half XXX is points industry increasing quarters from have being remain NACCO by basis seen second team our but real the progress by and a The higher XXX in improvement past an levels approach finance to disciplined from continues a Our in utilization prudent year and some Likewise year. of strong. our There to the spots. in transaction picking this and we overall rail, our

with quarter additional and posted ago to we the as proposition. deposits and and to We offer deposits of added account continue initiatives has quarter year. savings $XXX small achieving to strategic had money build deposit Operating as XX,XXX and compared strategically customers. market a in our which options deposits middle strengths the X% new strong been The to contributor value our core committed the another we average of expense competitive key second Bank, we the customer business a growth for a our at new We total average consumers our of remain expenses in growth and in Direct Bank. quarter deposit to market. The the decreased billion advance business $X.X prior is million on quarter deposit grew year target in broker the the compared Direct decreased growth cornerstone

plan million plan. capital the we return the We $XXX continue additional creating and to and advance make purchased to shares of capital our shareholders. quarter $XXX in value strides common to as We structure for optimizing up million in of

announced our recently increase per-share in to dividend a $X.XX. also XX% common stock We

processes. As the to DFAST the Relief no Regulatory or longer disclosed passage with subject we of CCAR legislation, previously is the CIT

Our capital to maintaining supervisory remain while reach to continue planning the CFO, it process, to target With turn capital reviewed John. levels. committed risk And strong. be risk also and management working regular capital planning through our practices that reserves our practices strong we and me to our will let are credit lastly and

John Fawcett

morning, Thank you, everyone. Ellen, and good

a million the GAAP down on The average results from and operating credit shares operations from a the $XXX operating posted modestly $X.X second this also per from Total provision. net quarter $X.XX was in year $X.XX commercial our core real million from quarter. excluding business We an prior share presentation. of portfolio $XXX X% grew finance. common expenses $X dividend, common per our which all common continuing We of the diluted loans were and normal for outstanding and per and share. lower unusually $XX estate highlights ago to $XXX and common despite Turning share included continued reflecting quarter, items, of mortgage increases tax almost high in million current increase share sale of million reverse more average last and which credit lower book. share million also legacy income our benefited the or in strong income quarter ago ago quarter The and posted quarter $XXX X of prior offset average and the common consumer in $XXX year noteworthy runoff or quarter million leases the dividend. by expenses quarter the net up in mortgage modestly Earnings a income the higher to no in last low Page from higher X finance Page million reflect the or of decline The portfolio the provision million quarter, common in businesses, rate. $X.XX lower or preferred new per was from $XXX quarter from quarter. prepayments stock number preferred reflects the and year per activity

had a number an of impacted differently. sale reverse sale while presentation operations from included $XX X additional of the our of of Page freedom another, items financial costs, operations the to of one operations after-tax and from offset that bit noteworthy loss related discontinued benefit As but shown reserves continuing The initiatives from and included resulting financial we transaction on continuing discontinued the million after-tax strategic mortgages business freedom in a servicing the a $XX million transaction.

liability unless I of discussion, related to we financial our quarter. million continuing $XX NACCO costs our after-tax now close from million actions noteworthy the after-tax results in operations, further noted. suspended debt the go this our depreciation will that into benefit on and expect also which year. disposition, Please I otherwise from pending $X refer management We this to will excluding later incurred items results from note for to extinguishment detail

a Page Net estate in which the our finance net flat and to from year compared million basis quarter negative in the decrease to a Net $XX was the leases the expense. income interest finance from quarter, X by finance quarter, by on was the last accounting margin Turning relatively unchanged margin offset on as reflects declined banking. was revenue was of higher while flat quarter accretion Compared decline and The in finance offset investments, to revenue prior basis indemnification by was our interest division finance prior consumer down X ago revenue in loans, the purchase points. higher income points. net presentation. declined real XX $X net million assets accretion

are to $XXX reduction as mortgage which million see purchase to next $XXX now relates of off. accrete to to accretion at approximately remaining estate a purchase finance to relates finance XX% quarters. almost which off $XX it portfolios million XX% accretion about and and continue We four over consumer of total million accounting remaining, commercial We the have XX% forecasting run to The we in portfolio, annually. accounting real in legacy runs the XX%

the was our was rates quarter the money upward needs net to our driven by mix savings strong by growth although basis product debt we higher from points points in interest and quarter benefited margin ahead to The partially flat, rates, a XX X of of on assets. yield X, the II investments overall reducing contributed average earning of to margin. which to of tier prior X.XX%, loans reflecting XX in issued March. subordinated compared year. by half which margin increased quarter basis market funding change a half revenue impact this qualifying Deposit X by Direct full due about was reduced increase rate Page to projected margin and rest most basis Turning increase of was the About which trends driven finance basis declined in market in in the Higher Bank’s second points. net points costs of a of got the finance due some costs, to an as borrowing was mostly our FHLB and the

offset by However, of reverse and management about bearing cash this the average mortgage capital of timing X from the as as basis resulting was liability level a points sale from actions, the well of interest during our the quarter portfolio. higher

This quarter benefited prepayment. from customer rail a yields

margin to rail finance the net other trends just In net benefits accretion, yields. quarter addition pre-payment the ago I year described, decline in reflected purchase lower accounting the also from

the at is Turning compared to gains which to from $X up has was Compared more consistent relatively two non-interest which income activity, over quarter. when been relatively year, to last non-interest income derivative Page prior other on million BOLI, other flat quarters reflecting and X, episodic. significantly income past was the

As activity of portfolio that mortgage other the quarters, noted related to on non-interest was elevated XXst. included last sold May reverse couple in I the income

prior was from $X the $X income and commissions ago reserves quarter the in lower down revenues, recognized can million relatively acquisition. the were the throughout be were from a predominantly sector, to year year primarily uneven year we from the income prior included other continued Fee the to quarter quarter to OneWest mix quarters. down non-interest fees, million flat in volumes services from $X resulting the relatively equipment of benefit Gain which capital of markets a when included also in factoring related Factoring to shift release year. quarter. and lower quarter a million from in pricing while Other This last relatively from management flat quarter increasing our has a activities technology in compared commissions by provided. reflecting the rail ago, lower on seasonally portfolio ago Compared flat second the offset leasing remained sale reflecting volumes. of

compensation professional Turning fees. expenses quarter to decreased the and Page X, from prior reflecting operating lower costs

related a reserve. primarily as insurance fees, an and from international reversal benefited year international operating quarter a recorded to million]. current the target tax We of lower declined ago, operating in annual Compared reversal reserve costs $X track expenses the of addition, In originally remain of million our reflecting that professional to was expense quarter. the the on XXXX tax related achieve as well [$XXXX ago year

As this intangibles reminder, costs. a excludes and restructuring

of decline investment operating quarters, to and average interest-bearing and which describes This expect portfolio, wholesale two in million were our portfolio funded year by management actions $XXX actions. almost with the extend redemption the we balance II debt reverse through prior issuance allowed structure. approximately cash of the average incremental from equity and XX of and cash well build actions expenses runs reduced $X of liability year increase debt The qualifying the These the division. continue average returning book impact improve debt past from the lower to $XXX billion in of the Page a the over in XXst, modest liability more the liabilities unsecured senior which reduction of the million half losses to to of to XX and We and repurchases from our debt debt our reduction securities benefits sheet. leases consolidated our and maturities timing costs. nearly in reducing senior made unrealized loans management deposit page that a have significant over our much our progress earning subordinated tier and Page unsecured reflects growth second to assets compensation resulting out March million quarter, reflects a the billion relating demonstrates April, of the stock of the as full past also repositioning shareholders. the investment overall sale million on the at of $XXX in capital average us Compared The decline higher cost reflecting in capital $XX provides May mortgage as on efficiency and OCI. quarter to loans. of capital detail up included $X our our

finance. be saw businesses, growth finance most and we were leases a origination which average banking’s core finance. partially a mentioned business average by our business in average quarter, loans quarter reduction real volumes spreads borrowers in in highly year I remaining As commercial we to finding high Commercial pressured compared a Compared and earlier, quarter. ago finance the prior estate in our and flat taking this environment, quarter, year market continues spreads to competitive and commercial of up the prepayments prior commercial we challenging In X% average The growth banking as the Compared resulted were year and from portfolios reflecting tighter grow. refinancing. the strong in in were finance. capital, quarters are Origination X% real where to to in capital opportunities of ago advantage offset this ago increased in by estate middle remain up prepayments disciplined commercial can rail grew estate strong leases and leases and despite X%. X% volumes real quarter and and offset by significantly while commercial reduction loans by driven loans finance, were down finance with

energy origination We with continue the healthcare strong to find verticals. volumes and opportunities in

down and our portfolio asset finance quarter new excluding higher finance reflecting lower X% addition, XX% the prepayments. into estate In of based legacy over efforts. driven non-SFR total Real our runoff volumes volume, and reposition this business remain originations re-entry Aviation by was

debt as CMBS and market I the mentioned active. has last are more become more As funds competitive quarter,

compressing seeing aggressive result, to we are including a structures incentive the and for As borrowers more debt spreads refinance.

market remaining new are by originations assets to new the were We conditions. business were disciplined, pick continue real modestly up North there depreciation. and are as response American amid deliveries offset

up. to quarter. and at been and America year loadings utilization renewing. mix down of across but remains lease General environment this improved XX%. team current We where XX% cars last industrial are reflecting sector the surplus from in in rates some and are the the Overall equipment of equipment grew increasing quarter real The this which persistent surplus seeing XX% the has has momentum high successful North re-priced of

such seeing in cement certain are cars Boxcars, sand gondolas We on improvement freight mill cars, plastics. as renewal rates and and

rates, servicing In average continued markets products reprise which markets. refined expect equipment have and opportunities leases through it from strong for from and quarter compared pace rates car by optimism to Business XX% pressure levels. our addition, are in lease cars Mexico constraints retrofitted pipeline volume XXXX car all on stabilized growth small prior said, tank tank at developing the remains capacity Origination across down to XX% driven continue quarter we high. for overall of tank with was in That X% faster from to businesses. Canada a peak multiple lending grew from renewing with XX% and are to down business capital up last

We continue it along in difficult relatively has Pricing to as is rate from loans that and as platforms we to all rate in gain are predominantly the increases Salesforce more made our as the fixed pass constant well leases momentum space. investments and our the in remained differentiates across this this industry. us technology

our the loans In from in increasing continue Page Compared Funding SBA deposits build selective by the more to continued channels. in increase average our portfolio has funds in basis from recently and this average prior Average have the in funding our of retail by reverse our rates businesses, other the this increased or upon face lending expertise mortgages. increased to continue correspondent competitive we than banking, over pressure And business of areas borrowed points. banking not lending the quarter conditions highlights sale legacy mix. market funding by strong opportunities mix as $XXX heeded. consumer assets emphasizing lending and in be offset increased to was and over disciplined the of loans earning on to percent the quarter the mortgage we consumer the the to consumer in XX% mortgage lending experience million all originations grow the the markets. In margins seek our in of and select stable. quarter result, cost platform. a a As increased businesses we costs that put but growth current are total XX, XX overall while and remains runoff

last brokered and cycle of As cost I lower federal deposit have to deposit our year Quarter-over-quarter, this our market in optimize million, timing management XX% commercial risk beta channel Page total timing of past rate basis approximately X in the home borrowing within conjunction was more highlights hike quarter market the in with broker up CDs. debt ramp charge-off the we year-ago the basis in first XX% than discipline. in and cycle remains our channel. credit loan been in $XX lack outlook deposits mix contributed $XX only The of December this deposits XX% XX by quarter stable the model Page our primarily by mentioned, approximately line in of the episodic while a reserves credit our due deposits a low matrix in generally quarter’s in a this was our our and betas of increased of offset with of high million trends. added money resulting The to cost the points ago’s pricing was current deposits near unusually XX, million, product cost current $XX to points finance the The normal XX run Credit this the XX% of within $XX The non-maturity our We’ve type growing below to strategy the exposure and on in bank Actual deposit compared this runoff end nature in to a primarily quarter to quarter. a contributed to The million approximately on while division. March the million and million reflecting working million costs continued level been well increased provision basis list in our our cumulative results beta XX, $XXX to credit prior reduction XX XXXX. average $X the that is savings while was higher single by was quarter or our current deposits. around in high term discipline the $XX commercial deposits over XX% of costs cost Growth million point to actions $XX commercial in year. higher million a growth illustrates and higher bar and year retail XX% online normal and quarter savings pressure, $X.X force. provision reflected and provisions. the our quarter. trailing of included provision beta in our expect higher rate. month pay quarter

finance ratings variability on also non-accrual the an risk provision points charge-offs near have quarter’s not I and deterioration overall we new resulting out within would within in than in a credit with portfolio. have our guidance been our also reflected come term continues overall reserves included remained non-accrual point some level in XX low at below provision and environment running that rating commercial better of are of the lows levels. the in from origination performing of risk business changes an historically cycle and The loans businesses. to basis increased This seeing higher a most outlook that

with Turning a ratio down capital strong we ended equity from points the of to page of capital common year. basis XXX end quarter XX.X% our on last X levels Tier remains and XX, this

term. to and XX% equity capitals target X of level common to the medium reducing to ratio committed a are shareholders Tier our We to in a returning XX%

CCAR, be even of DFAST a longer market total XXX framework with no target with the though second mentioned, process risk $X.XX. shares by recent planning increased of repurchases. capital the return process. We our the the In And We repurchase will reviewed to million regulatory passage of are ended through Bank. subject representing $XXX legislation, to per average XX% with our the our no quarter our tender in supervision which we $XXX sound common common regulatory $XX.XX through continue capital quarter XX.X share and reflect Ellen we CIT relief Brining desire equity to shares maintain longer levels the repurchase we are As of the last an week first dividend in open outstanding. the and year, million million million price share. half per to share management

XX% If per our as you of quarter increase dividend past over recall, last resulting a we year the dividend Xrd in well year. share raised cumulative

X addition board intend authorized to XX.X% guidance Tier ratio to by common achieve XX%. return $XXX the a return capital end dividend our In and of our equity of we has a a increase, this sufficient to capital of year the million of to

as committed supervisory confines XXth, continue within items. So efficiently in end quarter key July review possible in capital X we at as excluding will process. working $XX.XX of the Page common our to both review achieving of XX, return and XX% highlights as share. reported $XXX on matrix performance noteworthy common repurchased our to prudently well million options of the basis that XXXX average as the as while through to XX% remain ratio far, equity We price the an our upper per of Friday, in to Tier third shares

with effective rate of tax XX%. our discrete XX% Our XX% excluding was updated to consistent guidance items

was return common equity Our our have tangible on tangible semi-annual, been dividend normalize equity being would noteworthy return excluding if and for X.X% items X.X%. common the you on preferred

back some thoughts on you it is the to Before I page to wanted I which turn outlook give in quarter third Ellen, XX.

portfolio. consumer total core with full legacy expect by relatively growth average single-digit mortgage impact runoff quarterly flat earning mostly our portfolios low portfolio the reverse mortgage in the sale quarter the assets of the on offset We in and be to the

sale flat by reverse be impact offset remain to included by from of re-pricing quarter We higher XXXX and expect the middle current the net rail mortgages relatively target the finance in of impact months in the interest which a the range rates. the margin two activity reduction of net of and driven of

target We as our expenses trend we operating down XXXX the for expect achieve to year.

charges basis and With Ellen. expect basis the to me be to XX We through be within XX% rate XX% the annual turn points before tax to impacts effective continue items XX we impact to expect back tax of of it the the over target that, to let changes. net and to continue discrete range to of work points we state

Ellen Alemany

our John. our tangible I Thanks, reiterate to want to commitment on equity return common goals.

optimize XX% As previously risk In capital management. efficiency; maximize equity maintain on to the are common a at cost; core to enhance operational our structure; our strong funding tangible that, and over targeting of happy mentioned, we’re year we medium X.X% XX% businesses; progress to our XX% are the end return With the this question. term. optimize our to your we potential our plan closing, of on steady delivering take and

Operator

with from Suisse. Thank morning’s And this comes Orenbuch first you. [Operator question Instructions] Credit Moshe

Moshe Orenbuch

pull it told guess an it was got you like seems rates mean, pressure kind interest some quarter. it it about is to sensitivity kind that? I I you’ve of and some you will the essentially this seems or but the higher asset can it of XX I result just offset together is to to talked a and at margins get to mean alluded point walk a high for in of talked pieces the us kind what said what the of you’ve we’ve because kind of I And you flush yet of demonstrating that hoping point I’m looking basis of margin of sensitive and that about as company like asset take hit yields out this thanks. been the Great, fact you but on of that is actually the pieces can that

John Fawcett

Yes.

Moshe, John. So

crack So, this. I’ll at take

mix and a the is in competition it lot business. think change I space of in of

lot the asset accretion a the creates. what puts think you is of half drag of I back through in run work as way it accounting the also is a that purchase line revenue which finance the of terms there takes off of indemnification all year. know, last net and was The

storage I maintenance. terms up. you little think you so that’s start bit bit the other out come is as maintenance lease of cars out of lease and utilization a there of go see in little to see thing our of of some kind drives That the a and

storage cars there’s setting out, And a so, take as cars into cars we volume service. pulling and higher with of re-marketing

part And so, it. that’s also of a

quarter of the our the in that element a the that’s margin had probably probably coupon launched is ran are build the mention, were online market net a interest February probably to with And at We rate it as probably the of capital and their the money full of quarter XXX second great impacted And other which this other little where drivers think we of had quarter debts. and proportionate this big the in two this the unique way. course a bank circumspective quarter. I cash The level I north elevated XXX overtly that first actions in out of that subordinated that of million. through late and of way through all to part on was $XXX work of we success in bit

So, hopefully in colour more of what’s going on. bit a that terms gives little you

Moshe Orenbuch

’XX XX% the of renewal. on still of lease you wash? to you kind will be do that when closer renewing Can that’s that you and more the and down percentage be the ’XX in talk And book about of XX% number changes in that a about how talked think rates could to being the okay. where Right,

John Fawcett

Yes.

the the of this question is and python. the pig So,

so, two And book you as pieces. think the have the into I break and almost

kind of have you’ve it, way you it’s I the have at cars. look book got straightening the and infrastructure the So, you then tank it;

trend kind of XX, re-pricing ’XX starts XX. is related so, in And XX broad to and know strokes, you and sub-XX what’s ’XX tank is XX% in down. of probably sub-XX, is sub, that cars

continues it through. way So, work to its

are that well we on stabilizes I can of move terms the oil the off re-price the that at That XX also depends to rates vintage Similarly, side that. of or tank cars think it moved on both extent that higher. coming lease. the the in continues to

you’re so, modestly move. the off to space tank that starting tanks lease high cars time And same lease a see rates are the of convergence coming starting at to and and

terms other I business. in too is thing in rail of the think utilization the

think terms favours to have the a of back go you’d you in the to and out as increase last horizon; mid-XXs probably of before utilization probably X% utilization other utilization. in year ’XX to I quarter-on-quarter in ever of mid-XXs gone lights on has coal of terms bright something see from cars kind

through the feels it have a challenges that to things lot rail work still going on are So, there of space we that the potentially we space. But to face the going like in is good. again tank are in

Moshe Orenbuch

think do takes how just that about But Right. you to? long

John Fawcett

infrastructure. has what Look, tax ’XX I talking think, turn. to do reform. to certainly able this to the with and through of with probably as for again, the of same he has lot starts as then to about did lot do a a infrastructure do it’s it it thing he’s see with cars, been of mix we’re ’XX a But

I think would that be potentially decent lift. fairly a

see just to we plays So, out. have how it

Moshe Orenbuch

thanks. Great,

John Fawcett

welcome. You’re

Operator

Thank question UBS. you. Eric the from with comes And Wasserstrom next

Eric Wasserstrom

for points I’m at question And sheet income, benefits side, look these benefits slide of the of of of know I’m which deposit is benefit a net but couple much. afraid basis you looking there’s line second going the there interest left from cash I’m in continued along of suggested this largely that Page very the assume end Thanks that quarter. suggest second to the walk investment would from is I’m And flat the still sort is margin at to if on margin. where in to the guess the balance first be couple struggling third of also couple increase that a just I of and maybe with the you of my deck cost contemplating of the categories X the pressure. that’s and guidance. lines example you and beta the has

just net flat finance to I’m how that reconciles wondering a of so, margin. And all quarter-over-quarter

John Fawcett

question the a the a And We’ll levels of in see that to or introduce in so, started we’ve high largely script, mean to of also goes capital how It very my prepayments the pricing. have second business I pace call that the highly on some fact quarter. of alluded becomes in space. to the left-hand the side, prepayment,

going is little tender Spot through. repeats a news So, cash good the efficient given that to a if we’ll some there. probably work expect that bit, more that have sheet bit there’s and balance we to already we’re down a become not little on

hand the flattish. Fed depending But timing costs, modestly of of the actions, side that be On terms expect deposit subsequent that at in some least space. should the on in upon borrowing moderation you’d right costs,

of of So, I rate. range finance The net terms part comfortable with to XXX think margin. mill we’re that of XXX our in pretty is

Eric Wasserstrom

if leverage where us benefits maybe script. I’m primary mentioned emanating from and what, you I sense strong from is that one hiring on that could then, give know announcements just the is see just trying a calling I the that within a these cost. driver I that ask competition two The can follow-up and –- two But you also the organization of And cost because the together. the to very put it’s from

John Fawcett

well, –- sorry. so I’m Yes,

Ellen Alemany

Yes.

just So, John. I’ll take this,

costs, lot still the we and year end to are a the really So, XX of billion committed compensation professional declines at coming from lower cost fees. are

otherwise business rebalancing passage with reduction. just back. lot on we’re business I expense further a the have a operational And legislation, we’re that there the also in release for saves to regulatory some more investments potential what We’re efforts is and using then lot across digitization of going And these some add would the cost getting cost the is of the doing resulting is in which efficiency. make saves of

re-balancing a here. bit it’s So, little of

Eric Wasserstrom

Thanks, very much.

Operator

And with Thank Donald you. Fargo. question next from Wells the Fandetti comes

Donald Fandetti

event talk that there Is the about little And bit up. commercial. are side. you seems I a thinking had have Hi, about if you maybe part you Could non-accruals and non-accruals X) where little how John. any forward. that two It that quarter last take the it’s drove a you in bit softening you credit, the industry like about more commercial mentioned question. guess particular credit going episodic the in generally speaking

John Fawcett

Yes.

was in So, industry scene. on the or increase really common the specific non-accruals

And of the presented five basis points, commercial I that low again, where last in the terms XX in average non-accruals very third loans, increase The any of were across it first in finance are if particular The variability. going at matrix reserves points of that’s the quarter demonstrating are offs kind of of average episodic. ’XX low primarily charge one at by sounds. that XX top and credit the had fourth to loans quarter again have So, challenge the net house, for good. a mean, point non-accruals look of charges at related basis pockets most you some with we the bad. and second quarter. across episodic was quarters, us provision against consistent being low if and But it’s ridiculously look

allowance. good at our you loans, we feel pretty trends look see If in breaking And any to X% then, still end-of-period again nonperforming about loans there. of to kind below out

needs script, And portfolio. out ratings new overall across I there call the particular business origination that risk in come performing book better there in said a rating and the the So, the is as than risk it of challenges. then, any to business, nothing causes the of

we feel So, cycle. we the point, at about good are in this pretty where credit

Donald Fandetti

Thanks.

John Fawcett

welcome. You’re

Operator

from & you. Company. Oppenheimer Thank with And the comes next Chris Kotowski question

Chris Kotowski

open say, a do the said authorization I’m were capital Should expect through additional returns in or you so complete morning. far. million wondering it you indicated in good did to you tenders? the you I believe of we the $XXX market you your Hi, in terms market you if that can

John Fawcett

Yes.

at of march the the XX% by a targeting it We at reality special do the a do in And at the see end a and basis we’re more the or the I we But these all time it to like through started look which that basis cash dividend but million, going I feels and kind market going between in target is of XXX to points wouldn’t terms when open everything are arithmetic to and could XXX points basis a a XX.X%, so the the XX.X% points. year. you regular a or we another basis market I year and XX% table. repurchase think at thing arithmetic. the so XX% open it’s there on you So, is to options you’re points XXX ASR $XXX and all the expect the return. everything whole XXX mean, do if tender. call get XX.X% continue at year we’re the an is if half to deliver we started any

authorized targets bulk front And the the can So, points year and board you of XXX the we’re those do across much to end. arithmetic, delivered have loaded discern it going was of points year, you the to are kind if of the like between by feels Tier that of reduced that get basis XXX course very common XXX the basis is to equity X.

Chris Kotowski

the loans to just it big Right, then, or mean a one okay. multiple couple over non-accruals, of a million. Was XX back going And it I was a they increased relationships? little

John Fawcett

its it’s but a It’s multiple all that more literally loans; loans and There’s any not non-accrual. industry. of at no single correlation It’s the between credit different not. are it’s

Chris Kotowski

Okay. That’s it from me, thank you.

John Fawcett

You’re welcome.

Operator

Valentin next And you. Compass Scott question from comes with Thank Point.

Scott Valentin

and thanks morning taking for Good question. my

remarks Just, heard and this half planned of John, there second said deposit some initiatives half I anything were assets? for about kind you prefunding quarter’s think guys correct. in you Is growth: you prepared you were earlier maybe second terms specific I in the there the in if of have

John Fawcett

it steady as It’s No. goes.

Scott Valentin

And alright. --. Okay,

John Fawcett

Scott. the welcome, by way, And

Scott Valentin

on And capital then you. the just return. Thank

Now that you guys SIFI.

submissions like and capital structured additional SIFI other if and return in the pretty current a timeframes or lot now more process finish in Just structured was requesting In of terms specific that. capital. capita? going a go timing words, There’s wondering can forward things request. to terms guys to capital it’s request I back assume that no with you in and you SIFI regard can calendar and of return, terms kind fit any of just return flexibility

John Fawcett

Yes. I --.

Ellen Alemany

that’s right, simple. being think Yes. Scott. regulator I I the that But mean said I think

our management risk be planning supervisory sure to practices. be the and to et through request, and make our They’ll regular be prudent continue that capital but. we clear reviewed got cetera maybe that to in So, process

John Fawcett

regulation, add applied I are only have then they they would to out be have converted the for look the to be is here, And into laws supervision.

over and think I the capital people XXX CCAR governing gone, capital playing in in there’s sight. season the open impression well. be alive is dividend. payment of that specific the that SRO lot It’s a there of still rules there And remains are of terms said may to reality and still but of others supervisory Ellen under subject are as place are

terms very which Federal Reserve to we pacing the so, and and And of capital our would is the closely that with to in ability return to what of timing work continue expect happen.

Scott Valentin

very Thanks, helpful. that’s much. Okay,

John Fawcett

welcome. You’re

Operator

And you. question Thank the Stephens. comes next Vincent with from Caintic

Vincent Caintic

A or couple Good rail thanks. of in morning, questions car two Hi, questions business. guys. the

rate. then to this I would the been being So so a have am the just the yield And alluded secondly, XX% you yield by prepayment. the utilization first, supported wondering prepayment. quarter without with

into a the So, great dip having after low-XXs. number

wondering sustainable that Thanks. go. pricing of think kind when is can think you how that about Just do where and versus utilization, particularly you

John Fawcett

was on of prepayment; in number it of things. the scheme of the overall impact will modest a the get kind back probably Rob Yes. you to

rates. the on side car terms On lease feels we’re in like against it cars, pretty the good of freight infrastructure in place renewals

happens market. maybe so, depends to just it’s course. And potentially run there, And going the it bit of in tanks, what upside again a on there’s on little its broader

that much terms in what don’t can said I So, is I I that more of visibility give before. you

all kind I think it’s still wait it see. falls and true; of

quarter doesn’t there are the one make of the horizon but think on I trend. glimmers hope necessarily

lot the a to of Loadings infrastructure oil economy seeing so. of I good loadings some were pace ’XX that But got The of themselves. the void see right. flow. It’s be to to a terms of kind loadings going. are signs we’re sustain there go back support up, to has to to have right up, think or being keep have of in you’d prices ’XX now, to

Vincent Caintic

Great. question. a relating Okay, maybe separate helpful. And bit but got then, little it,

could you more. bit If prepayment a the little activity discuss

expect quarter. other and Is something to was that tie the know Just going prepayment activity for competition Thanks. that in wondering it’s of the prepayment activity kind driver is rising and forward is is that we two? whether a you second things. elevated do it But real-estate something that the and commercial in high or where the generally say business just should rates don’t I be you the

Ellen Alemany

But many of us This business. side challenge on lighter an out quarter is That’s it’s deal for a structure prepayment little Ellen. place. at other the of the in We institutions. a a the funds to year in been really And firm had we’re erosion and also of really year. predict hard the And It’s for there. it’s this it’s the quarter. been credit lot of really the staying last of market side rate. past the at rates was the just last prepayment It a debt of combination

as we’ll ever say just the but of But activity. how were I really would, riding volume I new that would the the see it I’ve terms seen prepayment hard in that to strong So, is volume predict business as it’s otherwise, goes.

Vincent Caintic

very Thanks, it. got Okay, much.

Operator

next the with And you. Cyganovich Arren comes Thank Citi. question from

Arren Cyganovich

Thanks.

acquire else them that or some are improving higher actually So, think the returns because you on other so return somebody but cheaper with to What’s maybe or of to do your comparable deposits cost peers, largely, on deposit equity other banks. more I tangible below banks. make sell continues of to the improve of funding thoughts compared to need to somehow

on M&A thoughts there? Your

Ellen Alemany

its it’s execution think the I mean, against continued plans. I just

the revenue et that quarter-over-quarter have progress. So, the we the continuous on momentum improvement what’s it’s is line, expense combination And core, which it’s at just a business cetera. in we’re whole going operating of basically just it factors

of going may common et all having lot of on to a for drive of to equity. be help. every direct that that it’s tangible aggressively maybe it’s some improvement market the quarter. on going the and running we’re some these a going deposits CD on we’re But But growing it’s the at deposits. paying the just it it’s purchases success cetera portfolio the So, brokerage combination factors And looking return

John Fawcett

out return that Yes. And on add just tangible I we walked, the it’s of kind equity to look committed common there. remained would

and in quarter targeting medium on then to ’XX fourth we XX% the have XX% So, tangible And a not common equity return XX%. term.

And commitment would a remain and so, all. here committed there is working the made. against we’re of say I leverage we to deliver lot we’ve And work them

Arren Cyganovich

you. thank Okay,

John Fawcett

welcome. You’re

Operator

Thank you. the America And next Merrill [Operator comes with question Hewett Bank instructions] Lynch. of from Derek

Derek Hewett

XX the I Good you morning, Could billion further guidance to discuss operating XXXX SIFI don’t opportunities status? expense? the in change contemplated Ellen and in improve John. think

Ellen Alemany

investment what This doing we saves. is No, with it didn’t are didn’t. but expense balancing future is It the really Ellen.

saves. So, over expense

lot also the material over front hand where origination expertise; capability; been in expense would fees; the et XX compensation other investing investing I the past lower side of months So, on new office whether cetera. professional air; we’ve say a lower logistics the And in on costs. company. But handling; in technology it’s

layers We’re looking doing locations. and all exercise the you call expanse would at

there still So, is in initiatives works. a lot of expense the

after cost looking to guidance of year out we’re the have said of be we I as won’t example, rebalance regulatory and reach expenses. some do kind won’t to and are or for come will some But we just out after Reserve for at outs. of Federal release, resolution put target We we’ll But on CCAR. is assessments. have more supervisory how to this certain Bank that probably XX with There number future in subject expense take required investment some some reports we take business that. DFAST later with the billion We We the won’t the of have to planning some the passage potential just anymore.

Derek Hewett

And in financed North is outside housed opportunities in current the this rail at into great. move that’s then, American Okay, are portfolio point? And additional there the bank what percentage portfolio bank. of the bank to the CIT

Ellen Alemany

more rail company roughly the in is half the holding portfolio And into have then rail able up the holding the within the then, think to rail we’ll to bank, level. the we after bank. continue reduce And other grow half; we I be bank NACCO, we’ll better assets the of sale at today, as Well, cut the company. a

Derek Hewett

you. Thank Okay, great.

Operator

are like present the the call there comments. management for closing time, to at any as questions And to more you. I Thank no turn would

Ellen Alemany

of everyone Investor you any joining questions, member thank So, And team. for morning. or me have if you any this Relations feel to please contact follow-up the free

of Investor website Relation You contact and Thanks the along a information day. at cit.com. have can find time section great our again information on other for our your with

Operator

That todays participating. concludes for call. you, Thank

Cit (CIT) 24 Jul 182018 Q1 Earnings call transcript