CIT - Earnings call transcript Q1 2020

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Operator

Good morning and welcome to CIT’s First Quarter 2020 Earnings Conference Call. My name is Elisa and I will be your operator today. At this time, all participants are in a listen-only mode. There will be a question-and-answer session later in the call. [Operator Instructions] As a reminder, this conference call is being recorded.

to Investor call Relations. like Callahan, to now of Head would turn over the Barbara I Please ma’am. proceed,

Barbara Callahan

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

and hosted Our will for Marisa the our CFO. by Harney. CEO; is us and discussion Credit Ellen Also call joining John be Alemany, Chief today Q&A our Fawcett, Chairwoman Officer,

Both the our During a supplemental as Relations presentation as preparedness response our cit.com. this in well website call, on we’ll be referencing are to of section COVID-XX. that Investor earnings describes available the at presentation

statements Our segment materials, questions-and-answers in SEC prepared and and filings. forward-looking earnings our the and of disclosure included today’s non-GAAP reconciliations within presentation comments today’s call. are These our cover materials

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

Ellen Alemany

morning, Wherever and the hope Good joining I from, everyone, you’re in safe for call. and you’re well. thanks Thank you, tuning Barbara.

presented periods for values. related economic quarter new test Oftentimes, unprecedented. COVID-XX first of The strength, the an provide the and to a clearly personal company’s And and challenges to agility opportunity us. of challenge has also great been the have paradigm all pandemic

a supporting less a team sufficient management in expertise and leading for past them capacity, to channels, seasoned deep capital, to these before with the months And enterprise multiyear how risk CIT demonstrated us with has diversified and substantially core of liquidity, to in transformation environment. ample the us. result is a navigate operational today the portfolio, that franchises nimble issues the have dynamic that navigate have that we stable organization and knows led few fortitude tested an deposit

to well stronger presented the initiatives some much our as by the key XXXX us this with We foundation to which as a challenges quarter. has in of strategic advance pandemic respond entered actively enabled

and first other Let from I’ll response share touch on our highlights the COVID quarter. then me

and communities. of effectively matter customers while health, the way financial transformed and needs we we a the our In safety operate weeks, have of employees, prioritizing also

banks foremost, we process and workplace were of we safe and available in First our enact in York outbreak We protocols to the model New Chicago one guidance healthy ensure fully to as to best City like in the distancing. to number working employees and urban key a early of took progress in the work centers the were remote started social to mid-March. steps first shift on

a place our remotely Currently, our in result working is investments standard our business digital are of technology years. best-in-class and This the effectively as and in part XX% of continuity. of over employees a in vital transformation we a recent industry our put

continue best as spread available We to our evolve measures. protocols and also to workplace more ways understanding virus the this the from the current isolation emerge is on ultimately information of reducing

are ongoing employees programming enhanced the of and offering help COVID new isolation these health testing stress as to well We wellness as and benefits requirements. care, for lifestyle through

ours We of remain I’m to implemented in remotely to that but remain enhanced open not open say customers. we for and an all enhanced And to are services modified proud business. safety work pay plan able serve and vital of our our for employees support able that We and branches providing business. are protocols,

We’re relief focused providing when and we customers working the by who pandemic also have been with affected on can. our

stood primarily working order process loans existing in capital provide with operational new leases. in an their than small in and participate Paycheck the Program. government’s are X,XXX more to up them on businesses, to We quickly deferrals our position entirely Protection business We

We’re forbearance mortgage to borrowers. providing

and continue penalty. during without our customers period. And ongoing assistance and We’re with banking commercial waiving deposits could navigating fees this we access our dialogue them have expertise clients, and to so offer in structuring

to and we’re partners for our remains Commitment $X relief important customers. efforts to time challenging support as committed a well million is it our very markets. to with communities in key has our with know many We non-profit COVID-XX and working committed CIT

is evolving way the our situation, able adapt I’m been and team, and we’ve our and our to an demonstrate right do to communities, ultimately, our While of still commitment customers, the shareholders. proud for to landscape, what’s this our resilience

quarter, our results primarily the impact credit the dramatically to the impairment; led environment, the by of macroeconomic the on to of an CECL, Turning were which and affected changed deposits, increased and and amid goodwill our results $X impacted acquisition, reserves of period; which the credit adoption Bank and pandemic periods. of comparability Omaha of prior billion billion added $X a versus completion which model about volatile Mutual of the reserve of the assets the

touch I and January kicked to which expected track wanted the a key on few $XXX of the net first common drivers due will and diluted underlying loss completed acquisition immediately detail the go highlights. of completed on performance. by John impairment. on share integration We per reserves We yearend. more and posted million goodwill or to But be $X.XX on are a our remain off credit increased X into to efforts,

their The improved the basis of costs drives banking division growth deposit business, association is which the We in the HOA channel a growth quarters further also our off Homeowners deposit start deposits, ever. had one been the that through and community and consumer to efforts funding through strong best our optimize to addition of has channel. XX the and points quarter Association by the in

another and CIT’s base. deposit the business that billion portfolio and $X bolstered growth cost profile in funding Between added our the lower quarter, of further existing deposits, the

in size suite, years. business already expanded product sales doubling to as the and expect launched have deposit in this made investments reserve team. the X on And of in we We new our as business well this remain track

billion quarter deposits remains in more assets. in the $X.X billion liquid $XX sheet ending strong, than and with balance Our

loans the Our prior core leases quarter, up from and X% the were acquisition. excluding average

we expense deposit bank slightly on Our loan lease target with and to and our remain ratio the increased to initiatives. XX% at

important remain some for been our has as risk Managing it time. critically

are opportunities. have there are believe standards in and We maintained underwriting we originating areas business prudent thoughtfully where

we shifted more to lending. and disclosure and of portfolios economic based high proactively collateral still we the some others, know to reduced in have more the are and we will response than there deck our stress feel more manage that have years, the disruption posted our today. continue that was or We We shared risk over COVID portfolios significantly recent portfolio sold

areas on will energy I X and are retail. touch which key

we and As in of about a most is in of are and have $X exposure and and funded business. of you the our And oil our X% energy about though. We and to power grow know, it part comprised gas represents billion is secured loans. of leader to loan that renewables continued which do exposure, still space, power have total

the our of half that of up near is exposure in business companies. factoring to retail Our our primarily top-XX are is and which factoring exposure or sector investment-grade investment-grade made customers,

segments continue Our clients to and client have and with closely them with our diversified is dialogue consumer frequent base period. fairly through work we across this

gowns items clients their efforts. in produce much or Some against masks, the procure and also support needed we’re other to business them the help fight coronavirus, and for those shifted have pleased to

monitoring portfolios We economic result environment. that be as and are may a impacted further of other closely these the current

stress reserves at CECL, of robust capabilities view As built best and mentioned this process bank. were was we that environment conducted we CCAR we quarter, set Don as also when a we call. that testing shortly. our process leverage the economic the we what We a details Marisa potential we reflected for in adopted available our of you Chief point later its forward. And and our in that we Q&A will Credit portfolio walk the Harney the impact mentioned have through time as on the Officer, going capital

to testing liquidity we even a have ample process stress To and ensure stressed robust our environment. needs funding a summarize, can meet we in

stress adverse the levels. severely no capital even CCAR which run subject longer scenarios to have we informs continue We though process, our to

and an $XXX allowance Our for off-balance of credit are exposures. million reserves we covering sheet of strong, X.X% additional have loans

our work recent weather We economic and ability for respond are to before has the us in positioned us confident this we challenges period. best The have this downturn. years to and done

We are and facet the company our every continuity actively the business. managing of of

I’ll that, John. with And over it turn to

John Fawcett

everyone. and Ellen, you, good Thank morning,

impacts Our financial key quarter the during Bank adopted this events first, to on of acquisition our CECL which of X. comparability Mutual X second, of results we quarters; January the reflect January Omaha on quarter: prior results X, the

the the pandemic increased assessment third, provision the process, an resulted significantly standard interim Given deterioration forecasting and end that losses; into environment of the credit goodwill credit the at for CECL quarter for introduced that of COVID-XX loss the allowance impairment. first triggered our goodwill impact economic quarter a this macroeconomic in

ahead focused criticized our collateral-based our of well of risk assets, eliminated our higher funding, a our portfolio strengthened strengthened risk our year-ago. crisis, loans indicated, more our We Ellen significantly now stable were as decreased transformation balance priorities. and our risk As shifted total XX% deposits business and to significant sheet funding completed XX% strengthened a wholesale sources we down we and that of and management from of sold which practices, constitute less profile this our portfolios, we

of As clients, challenging our our and to we support communities balance we customers, this sheet a result navigate with as environment this a employees entered transformation, period. through stronger

position. COVID-XX, and our transformation, our our presentation capital corporate of We on descriptions a liquidity, website supplemental describe and response in provided to including have preparedness funding to and operational our response,

I current I the we levels liquidity believe for cycle. results and out to endure to strong get quarter, our the remain the want funding into sufficient point and Before that

and to ensure and to a XX% needs to of cash up endure contingent HQLA testing able is approximately comprised Our of stressed the maintain combined quarter, total securities process idiosyncratic of we on funding expected positioned $X.X we well environment. liquid billion market stresses. are And position and unencumbered end liquidity assets under based the assets. robust stress we the meet available making At of are

contingent $X.X secured under our our corporate through in had of billion revolver. also sources availability We facilities liquidity

across the record our acquisition, of HOA substantially added which deposit of have deposit including multiple quarter channel deposits lower cost Mutual growth. and our a In based mix funding from addition, diversified channels new Omaha stable, is Bank

next remain to As a channels to good the X deposit years. doubling are off Ellen this indicated, over start and committed we

a loan stands at XXX% lease Our at basis. and and deposit bank on consolidated the XX% to ratio

unsecured and have markets debt access company. at the holding also We both bank to bank the

schedule, have our unsecured maturity debt Over our maturity due and debt flattened the March years, until XXXX. not only we result is staggered next million a as $XXX of and

Our capital that and to stresses. idiosyncratic both adverse market severely position scenario a sufficient includes is stress withstand

with X, quarter using stress approximately of ratio X to on the macroeconomic added While of to Federal provided we of Omaha forecast, which Bank continue a is our are reflecting equity $XXX to severely run common the Reserve. million models Mutual ended reduced X provision. Tier CCAR common adverse adoption scenario credit of January Tier the XX%. result current We the which And ratio with acquisition CECL, the equity longer our X.X% the no we own bank,

scenario in We globally. developments analyzed continue of the as ACL, We from took modeled scenarios the the into forecast. from Quantify March, credit to an into used of the the widely loss various baseline allowance macroeconomic for downside Throughout impact COVID-XX or scenarios and and is XX, consideration, utilized month added accelerated additional ultimately updated that in that reflected in of changes expectations the changes of third-party sensitivity we assess the industry. the with an for macroeconomic as economic to impacts adjustment underlying quarter-end. March heading pandemic

to growth through GDP growth this prolonged rate assumed incorporated while in real well The assumed stressful more annualized V-shaped that less the the assumed early late U-shaped and quarter recession XXXX. return economic more as baseline scenarios XX% as downside the the additional adjustment elevated recession scenarios. more volatile, XXXX, of with in a in but second unemployment of reduction to close These scenario year

to equity about XX provided new Interagency transition highlights of impact scenario We We the basis the results, models prior earnings limitation X Interim when the reserve adjusting support, forecast. appendix a into of capital for took and common of the macro of reduced probabilities, walk We high Final the after in also introduced the that estimate Tier potential the government of X-year volatilities by degree that of impact the the for testing transition presentation impact Rule. the consideration points stress a capital additional rule.

buffer expected. Federal of on equity our to capital common initially conservation buffer achieve when X target may a to levels. our We timing current regulators billion now our capital that the than level our on the Tier compared to capital levels, Based commitment of although RWA maintain ratio to minimums, goal $X.X including our Reserve we XX.X%, have be longer our to raise

to scenario severely respect rate To the sufficiency the XXXX This unemployment some leveraging GDP sensitivity cumulative around XX%. and X additional ongoing loans. our with of for our provide an consecutive rate CECL and a loss except the for with levels current our X loan We of stress excess all in to scenario in period recession adverse context reserves reflected losses. levels peaking quarters, conducted economic declines in deep of uncertainty a our from capital at environment X% for X-quarter and quarter prolonged first analysis for

Based current reserve compared implied the of X-quarter of on XX% XX the March billion million reported increase over of this to sensitivity, level a about amount. period reserve implying be our the an $XXX stressed $X.X would in approximately losses CECL

our update as year will intend run stress stress normalize We capital later this the banks. severely scenario Federal to test and XXXX also of Reserve’s markets CCAR adverse

get want COVID-XX let the the pandemic on created by to that macroeconomic you we the given I into the details, Before environment. current know uncertainties

target. full our the We tangible year are XXXX outlook our term medium on return equity and common withdrawing for

to first X on presentation, a or result net GAAP $X.XX the environment XXXX a of results driven pandemic. loss quarter I by driven of reported refer the per share We impairment higher deck. will financial goodwill and the $XXX COVID-XX by credit a to of Turning diluted both the million provision, the slide earnings Slide market

an not on of goodwill is listed it rate CIT The charge Mutual environment the not is interim – capital. prices and impacts goodwill $XXX in of regulatory charge items The non-cash the an include environment, in and non-cash particular, bank Omaha in acquisition are impairment Bank, after-tax that low goodwill million. on the impairment a stock of charge. and, any impairment Slide recognized of did assessment charge, included macroeconomic have the resulted the did triggered Noteworthy in deterioration from decrease and peer X,

both of flowed the acquisition. credit non-PCD a represents through from of price charge included acquired a on noteworthy after-tax Other of P&L allowance Omaha risk million and and credit reserve loans day the the items Mutual purchase resulted counting acquisition build. the $XX provision in Bank double on as the the that The CECL

after-tax In addition, integration and we recognized merger costs. in $XX million

reported million after-tax million a is million Excluding $XXX credit noteworthy by per we forecasted environment. $X.XX of reflecting share, items, macroeconomic or $XXX which $XXX net provision, of driven loss or the

X Slide and on reflecting prior grew the finance acquisition Mutual and revenue higher X in margin. Omaha growth the assets finance highlights X and revenue our January quarter from from our Net leases. of core net loans and Bank

rates yields resulted point and lower on However, rate net finance margin the funds in declined – in this swift reduction Fed basis to cut X.XX% our significant rate as the a quarter securities. loans Fed floating levels in XXX LIBOR and

addition and lower The – loans reduction the in yield asset Bank yields also Omaha Mutual that are yielding. the of securities reflects of

premium We also result reducing margin as prepayment environment of X portfolio of significantly levels recognized in fell reflecting And MBS $X resulting basis prepayment a points. lower loan current by million our benefits. accelerated amortization related in the

of cost down XX% higher, off-lease from than operating net to business, revenues were expected storage rates Omaha actions Rail some average, declined impact cost yields deposit our Mutual Renewal declined a as resulted our rates the increased from market Bank, further costs in across on costs priced addition XX% reduction In HOA about offset of as from Lower lease and utilization were deposits maintenance the all lower asset including deposit XX% in quarter. pricing borrowing last and on lower cars. of rates. channels

challenges association Capital before COVID-XX business pandemic. increased of Improvements from improved continued as The last community quarter to in momentum illustrate on income assets. included sales of build from Omaha higher X. quarter of in is our Mutual the reflects net to on acquired non-interest we earlier Slide $XXX gains increase and the Other income Bank. fees modestly markets the million activity from fee the

a positions quarter appropriate clear and we took is at had position a to coming which months. the minimum million the mark, believe these end in of We $X the loan

Given business the historic a volatility, level had derivatives of record interest quarter. rate customer our

negative However, on mark the spreads. increase adjustments credit widening $X was more than a credit given offset by million of valuation

income the the of took Factoring resulting sale quarter volume on from Mutual we some million commissions securities later gains opportunities including from non-HQLA acquired market in of the current advantage securities, as Omaha and seasonality We of reflecting down of the environment. of in investment were lower generated sold our macroeconomic about slowdown fixed securities in and the $XX factoring Bank.

ongoing As portfolio. we loans part Legacy portfolio the management activities, Consumer opportunistically Mortgage our sold risk of from PCD

million gains, we While generated reduced profile reserves. higher risk released yielding, and approximately in further $XX our

the which into significantly. commissions will COVID-XX significant quarter, second retail U.S. trends. Looking the impact shutdown, a we The reflecting volume see full factoring following the quarter reduction the in impact and from

management million $XX portfolio rail our running of activity been sale As of quarter. $XX fleet, gain between railcars part per our of have and million on

that we the in likely in gains lower dislocation market. of some the to as delay the quarter, will expect We later given activity year next

to We will the prune for may opportunities continue in this current portfolio, although selectively look challenging near-term. environment the to the make LCM

markets continue lead current terms capital this are protections environment, see opportunities likely activity, These our more to we and less In in transactions impacted deals in have structural wider to to of pursuing the industries are core environment. arrangements stronger although we spreads. by

strong capital uncertain. is together predicting reasonably is Our pipeline markets when come those will deals industries, still in although

expenses of Omaha to from lesser to million benefit X, in reductions focused Mutual a on $XX in expenses from to Bank continue along the to and net seasonality, remain of restarts. we Omaha the primarily operating Slide and $XX our be additional million addition committed cost this on extent acquisition. and reflects the management with the we quarter Turning XXXX, disciplined cost synergies of Bank of in achieving increase additional The first quarter in the Mutual

achieve still $XX in to acquisition. of For Mutual related synergies we the to Bank expect million cost XXXX, the Omaha

leases and division. loans provides more on Slide average by XX detail

from Bank. the the of loans Omaha Excluding acquired $X.X Mutual in billion

quarter, March for in dramatically were In our loans core deals shifted while market leases sentiment X%. pipelines we heading into clients. by following commercial banking, pandemic, strong average acceleration our close the and COVID-XX continue the of the and Our to increased

from had quarter, of and March towards to Finance utilization March compared flat growth. to Revolver asset to uncertainty, week the end since Origination started volumes lines the in third the April. business as draws essentially Commercial contributing and the Finance fourth and second up of slowed modest in considerably quarter. Estate on were drew XX% clients moderate and Real although increased year-ago March, prepayments the of defensive their given beginning increased In been

our loans, don’t as revolving of draws revolver generally we funded middle market regional a rest and last draws the we defensive see A clients over bank across week, of services, were business, in draws larger some Banking. Finance little and with of have little half level commercial across Given don’t the our of to we Estate of peers. same Finance. focus, for in more our participate of than Commercial expect our Commercial rest X/X $XXX therefore, Real the million those factoring Through

us helped Our in retain businesses. and services increased of significant treasury a these focus to draws payment commercial as portion

deferrals qualified the upon we working impacted economic to to indicated, events by small COVID-XX. customers customers by X up Ellen with business months are brought As provide for for payment

meet We to requirements expect in classification any suspend for the TDR the accounting modifications to loan these purposes. impairment related

has the oil of sectors have on industry. generally low more macroeconomic industrial have prices car Railcar declined also American sector. impact as The has COVID-XX North environment that rail and put the to in reduced pressure demand added loadings pressure

carrying and resiliency grains our demand seeing for are cars We plastics. in more

our could lower months utilization deterioration we XX% expect COVID-XX of on to and duration reprice now the will rates pandemic. and decline area further the and mid- over lease Given to prices XX the the high-XX% next in oil XXXX, environment, depending think the macroeconomic down

and this rail We through in ready with to close communication our crisis. them are staying customers support stand

a diversely market broad wide servicing industries. of We have range a with coverage,

the the readiness that to asset in demand we of and The is have vigilant North ensure requirements. youngest strategy Our years, meet on America. customer our is average age fleet our remain cars that XX

management the our navigate as service We our shipping current market have customers. well as well team positions to the us more higher And customer maximizes position load our capacity which strong for and environment. cars, optimization

lower-cost deposits on HOA good Moving over are off focus XX, the to next we on in years. channels Page our as on doubling we X these new to start deposits a

growth team year, high, highest growth to quarter tends their First this and be ever. seasonally the had rate

We expect well cost $X billion the ended just points, overall cost deposit mix in deposits and of acquisition, the re-pricing other expectations further growth in all the with XXX Average basis the reflecting continued from quarter line declined into XX as basis lower points as move as in continued year. deposits we downward over to with channels.

continue in we remain We as In the align strategy, funding we that costs the products bank, our optimize needs. to with and market. direct monitor competitive

bank of and basis start a a over deposit $X lowered on April rates billion non-maturity quarter direct Our XX. little since XX the X in basis X grown by have and deposits points we the our points April another

funds their ourselves, including but included. seen rates see reductions rate said, not the in we in time reduction reduced for in over we have ourselves non-maturity CDs That Direct we banks, alignment a significant and reduction will products, have rates. larger sharp deposits banks, savings online from Fed with expect

Net charge quarter most gas to were our Slide by highlights acquisition and an trends. in oil business Bank of Omaha credit the were Mutual acquired increase and driven capital related primarily which in offs transportation. increased mostly loans, division, and XX of this

PCD adoption non-PCD the increase of relates CECL as same presentation the are loans, in the to disclosure loans, for banking the accounting as upon presentation non-accrual subject which to loans. For consumer now

loans. did due and first reserves not significantly the quarter, to of environment, of X%. ratio CECL the therefore, of to that COVID-XX our increase about coverage the adoption The a billion by to impact of coverage X.X% X this bringing $XXX ACL In we representing million on the Note Mutual loans, Bank our ratio $X.X increased of acquisition impact to total January increased of Omaha million, PCD and those capital. relates $XXX

total credit reserves to our over billion. off-balance-sheet We added to for exposures, off million $XX balance-sheet and on also $X.X allowance exposures for bringing

detail on in the included have the of provide reserve. a some components the page the We appendix presentation more of to

continue ever-changing measure a is be variables. that that conditions ACL Note and will macroeconomic to by reserve point in our impacted informed time

based opposed to is borrowers sponsors also our by commodity are prices it to principally be provided strong predominantly to constitute division, exposure Ellen, to major reserve hotel of have with are and factoring into exposure long-term highlight quick-serve turn hedged which exposures wanted majority which COVID-XX are tourist business, loans, exposures retail who we gaming I to loans; to living industry. within is which backed XXXX we more lines strong within brands half that is finally, exposure, environment, expected I information estate franchised the where additional and on current oil senior investment-grade exposure with and restaurants is of with which regional to regional as geographically including Before the retail our our – unsecured relationships; finance and information, near-investment-grade; the exposure portfolio XXXX; supplemental portions our and which back real geographically about more our are borrowers basins whom national consists short-term customers, across producing and where our more gas diversified by exposure only discretionary finance, XX% or destinations; top-XX diversified; in and about loan impacted to

in We fleet. number rail including cash of information on flow the portfolio a and of presentation loan the also provide portfolios to pages collateral-backed appendix portfolios, our additional some added of our

airlines long-term LTV based sponsors of is oceangoing strong XX% loan maritime leased the as portfolio and mainstream which that by aircraft financial include secured commercial contracts. collateral-backed Our collateral quality by are and in the to of financial year to well-diversified the primarily exposure, end is with includes assets to the our strong XX% area. loans sponsors and commercial airlines; backed primarily which exposure, with These

have no exposure We to lines. cruise

of And finally, exposure rail about on transformation. diversification the our to car-count to which by included reduced fleet we additional We both loans, flow also added net of page a our the disclosure lease highlight loan cash our and investment. our and we XX% in describe some to fleet,

watching and flows, on collaterals all we portfolio. are within closely with applying our as communication close the the vulnerabilities monitor cash analyzing these We sectors and in staying clients stresses sector-specific

call will over I the back turn with And to Ellen. that,

Ellen Alemany

Thanks, John.

are completely these to navigate have that with care. expertise that to the today environment than and diligence economic mentioned, I have company through As unprecedented is disruption. times, confidence the went rigor we of and and resources, continue CIT this the last different

national We stable are a of diverse sources funding. with and back

strong practices. liquidity levels management risk We robust have and

gives will We our sheet believe through and and us stabilizing this period. to focus the to of liquidity whether continue this ample we on volatile capital ensuring strength force have environment balance

where in also focused the to our on of them are could other pursuing align see banking the segment channel that We opportunities and we HOA commercial areas strengths.

thing take your in remain that, the with for shareholders. to questions. happy We steadfast our and customers, employees, communities And we’re doing right

Operator

the We Instructions] from question-and-answer ahead. will [Operator Credit go now question begin session. first Please The Suisse. Orenbuch today of comes Moshe

Moshe Orenbuch

about bad the there I thanks. than effects worse ones needs what great, about guess, and performance could reserve and you discussion that, potentially in you today know that disclosure adverse severely I’m Hi, there could in would I saw talk the the trends? whether think perform and the the this adverse and scenario. wondering perform you severely than if less that portfolios current given are about

Ellen Alemany

turn line. Officer Marisa. going one we Marisa to know You Credit the that Harney, over to what, have our Moshe, I’m on

Moshe Orenbuch

Great. Thanks. Thanks.

Marisa Harney

bad terms, Good the current morning. Ellen. Less relative environment. and thanks, Sure, more are bad in obviously,

that bad to than less I is duration, by think more specific going be necessarily dictated industry. a

We have a business. pretty broad-based middle-market

of technology I would greener more have being positive the in also that I the environment. businesses energy, renewable We is side on and put think current

$XXX of which I is gas, as identified, about disclosed exposure, we identified, and territory, that’s with in I clearly need oil negative closely. the into have additional John watch million material oil think And to E&P and think that, and Ellen falling we obviously, something

the of unpredictable is again, the on duration us closed. by, environment going retail, there a which be very in dictated then, government And U.S. government keeping will the –

to as as that indicated, investment-grade companies not is be retail our think impacted. our I of in also in I and those portfolio expect factoring Ellen XX%

Moshe Orenbuch

of you Okay, go potentially bit a as repositioning on that higher of there – is follow-up, about to thanks. we kind impact of maybe about talked think and a the and kind portfolio John, talked forward? about a way as do for finance revenue rail you Maybe the as net potential costs

John Fawcett

withdrew point, I well, as did. as a I we Yeah, most starting think think, obviously, banks look, guidance

think I there is of a visibility. not lot just

when then on little of in stage at year. utilization the end XX% sat back of maybe Moshe, we down talked think, at I going back starting around the bit the bounce the rest a about with I February Suisse you Conference, to and Credit

parked got North be to American and You’ve still XX% is increasing. that seems fleet stores in

just on in week auto rail-loadings do week are Auto this, bright don’t spots obviously, paper down XX% And economy. If but weekly that products. on but on week, global the tracks. to and reflecting look, the down and you we agriculture light week. we’re Chemicals likely continue is light obviously, we’re in were usually petroleum with are the oil. X% that’s And, and

so, tough. it’s And

guidance cost high think rail I into and into right expect the our mid beyond utilization mid that, go storage. that the going is of to And now. as could at the then, XXs where XX%s utilization that we of cars more is, incremental you’ve got from we’re storage declines

it’s challenging. to So be just going

much U-shaped If in these it’s quickly. it’s longer. expect that, to to have like and on it’s fairly else, to margin still everything it’s impact finance to going be the might an you than trends or recovery net could recovery, recovery [ph] start pace factored] it be forward. reverse [or other going tied adverse But to of going of whether a V-shaped kind what terms largely If it’s think the V-shaped. see I of we

Ellen Alemany

Yeah, also rigorous a to that doing there portfolio but that just management. is things One we’re this. about want I of lot is add

for requests these restructuring We and are And we lease rental have received on case-by-case addressing a basis. relief. some

repurpose to opportunities sand for looking are We cars.

including going continuing have use a repair initiatives and managing units. down increasing on to our of also working lot process, drive our repair maintenance mobile costs the of there, We’re we

bit. pricing script has offset that the his expect this so, a probably trend allowed us strategies next over And John to then, as gain, a mentioned as quarter. older we’ll lower the cars that little And in gains other selling before

cycle, or thought with with their we remember But just want should I reviewed along in should the over to performance that do railcars everybody time. leave the be and this point not assets that

Moshe Orenbuch

thanks. Marisa, Got Good it. luck. Ellen, and John

John Fawcett

you. Thank

Operator

UBS. go of Please today ahead. question comes next Wasserstrom The Eric from

Eric Wasserstrom

Can Right, right? you. all me hear thank you

Ellen Alemany

Yes, we can.

Eric Wasserstrom

All right, great, thanks.

is John, us this Moving just outlook what of frame scenario your whatever help for you start, base-case as could – horizon your point? economic to

John Fawcett

Yeah.

third think the an describe way So baseline scenario And use scenarios. I it’s in and of cut quarter. – We quarter is, our line a about recovery more the preparation X easiest we baseline. it a a which scenario, and had Moody’s volatile had second scenario quarter V-shaped from had on we March into We end. cocktail. deeper into of XX, We the kind terms the pandemic that’s snapped kind think way the to more spontaneous of was updated the I which when for

leveraged we which scenario, as which label then, severely And is SX, adverse scenario. another a we

of some if of of our on scenarios, X.X%. kind then quarter give had So terms X% you looked in you GDP, context baseline, just the third it just to down the down terms and in different to moderating GDP in

we quarter, the the we’re GDP but X% quarter. quarter kind If case, an adverse X% you of base covering almost then you severely almost down in second look at down in the and And against you XX% in the GDP the second overlay that third applied more had XX%, in scenario the quarter. down in scenario, had also the as third V-shaped another volatile

of together. little in And all out so – a of to bit the it’s me terms pulling numbers

decline recovery. you on quarter, you’d again, Moody’s but bounced guess in I by look new at XX, April provided we second think baseline if GDP I in back that has the a But that, it’s another portends it quarter, the XX%. XX%, have And third V-shaped

the of process. manage mean, we I through that’s kind kind way the of – around thoughts the So

in of government going obviously, capacity think level some more we’ll continue monitor it the of real we the programs of own refinement have quarter, to but of into the very and experience we’re recovery this as And into scenarios, get terms provide going think sense portfolios economy. I fluid. second obviously our to the to better I the

Eric Wasserstrom

Great. Thank you for that.

or be relative say, more which expense question, was if you the central being preface let’s the side today, my your real around about think and vulnerability where provision And the so revenue more if what on the to to the financial move, potentially the in is to to I we from provision, would that position most side? guess categories on SX really to around around revenue, X scenario, is operating vulnerabilities as were that scenario acute

John Fawcett

clearly into fluid quite so X behind you thinking for this could more if halfway mean, way very fine. we’re million charge, Well, rate remains mean, are revenue $XXX kind were expect quarter. it’s is we’re and part January March. And already almost side. that to think take we’re actually quarter, of months – provision side, the mean, first forecasting at we run of we March, us. difficult, February and we’re that the us March very and about even it has wouldn’t another And into on through in good I the because In I obviously, of the I challenge the look going second rate. that and feeling absent, is Part to I at started now. in it’s the bill is you feed

incremental March and larger in provision. to on potentially of some going the then is the having challenge provision, rating think, a run terms we’re basis element But of really go forward it’s what face I

Ellen Alemany

of our Yeah. over for million] to side, reductions all and expense cost from the would on cost above just [$XX target for cost on that we’re reductions. I XXXX saves million $XX had that the of the We Omaha. the in in Mutual [ph] add

Fees into we growth. really opportunities some do the and opportunities expense of there’s XX%. like the business the of we we’re the And a actually the markets up with organic I good track, had pandemic, we more believe, So going on see we side business. think, there were quarter capital revenue on feel in side some potential on

deposit momentum good of on the very having business. We’re the side

look when commercial of business, X/X defensive from at fact, those keep the In able the drawdowns you deposits. we were to

like of focus do relationship deposits. which expand on customer it trying a really had – accomplishment really strategy our for and really shows that, Now think for that’s to big to CIT been CIT, I company

of industry home trend the which I And And In going is technology. to the at been spots has for working at think that had recover we’ve in lot market first here on and also leasing, our places our the schooling technology expertise strengths well volumes to of one the going going position a home, in capital, and really the in restructuring construction, ABL business. of us bright one of the good in restructures of will I business for we’re activity. is because think, bear and well

some it. see of out do spots here coming we bright So

Eric Wasserstrom

much very Thanks my taking question. for Okay.

Operator

Chris from comes Please of & today Oppenheimer go ahead. question Company. next Kotowski The

Chris Kotowski

it and in there, million revenues only look we I from Yeah. the pre-provision like I you durability if went just mean of a how and at the $XX – at Good cost down the rail the But that see the morning. we I linked quarter, to seems impact when XQ. mentioned impact weeks – rates coming question of I all couple because you guess, my mean your overall like we $XX have would is it maintenance net and seen, lease net looking million. like key had have utilization the of And leasing business durability revenues. of increased guess, that.

net lease for in any should Or that expect in So you that meaningful can revenue? us way? we size another drop

John Fawcett

sized a the period. Hey, because it recovery it Chris, just say I it’s mean, really also, I I Yeah. of, what guess, can would it’s be probably guess, I John. function depends.

kind obviously, rates are cars fundamentally you’ll X,XXX cars renewing depends impact, it forward. quarter, the That’s X,XXX, given any renewal between X,XXX, are renewing. going that in have So going on of and what to

all And weren’t down the of recovery or XX.X% in pace saw. Clearly, the so tied to the XX% to this to we quarter. recovery or back going it’s we anticipating utilization kind

come back If to the start online, online. the it’s you’re could distancing economy work, an going protocols economy, quickly, a if back economy especially social start absent we the see to back abate that clear people and actually V-shaped all recovery gets pretty bounce not what starts But to shipping.

all And I’m there I answer. answer, can’t is so clear And no interrelated. give sorry, but it’s better you

Chris Kotowski

it for Okay. you. All right. That’s me. Thank

Operator

next today The go Instructions] ahead. question Cyganovich Please comes from [Operator Citi. of Arren

Arren Cyganovich

Thanks.

bit COVID the concerned be pretty the when a you little the at that put the area about I’d size look you that – I out, found is areas I’d useful deck I various think here. highlight XX, that Looking at Slide that of you only the say

and gaming? excluding bit of at level $X.X comfort looking books. loss do problem different oil You’re a these large not $X.X where going buffer. that give you billion, have seemingly us the there’s more to of all those in of little above capital your severity subsectors of There’s of you have XX% and kind your hotel and How billion you’re kind factoring areas like a from capability gas, where potential

Ellen Alemany

Marisa, you want to take that one?

Marisa Harney

Sure.

equal so I not in are again, think the – that these severity.

in portion that factoring As the investment receivables, grade. we a mentioned of considerable is

levels of we for anticipating customers actually XX% over finger number, we’re us. in $XX considerably oil going are a So gas our column, that considerably not look and cases result the that’s sector down is of year barrel. at XX% this than negative. material higher in year running you at oil believe exposed anything next they’re to higher But about the left-hand half E&P any your only hedged you’re prices. When in I issues that know into is and I many and guess, that

sponsors, – negotiating good we collateralized estate with real we’re strong and with those properties individually. is The and so

for on We’re construction and strong lodging, side partners hotels really on the key. management focused is the be side. going and like things again, on duration And to

– and exposure than different. living every the is the And tourist-based resilient more well. senior cycle in duration gaming downturn pretty obviously, Our although was side, regional last is much as diversified, on gaming gaming, collateralized gaming again, actually

an our And sure the have to companies – which this serve in really to is because that drive-through. then, have small, relatively industry, the liquidity a sufficient actually fast and business, is casual quick take-out weather than them easier dining, making do casual, it’s so, about to little bit is franchised more opening. food finance these industry more And they than for certainly resilient lot through

levels I severity and I the a case-by-case as again, think, basis. And taken is are different on key. they’re said So before, duration very

Arren Cyganovich

a have book have more on customers don’t I have of because amount it is the you an Is that is? appreciate. could volume actually Maybe you deep on the of that issue obviously, numbers struggling? those to a And fact receivables book, a maybe in more smaller helpful. part that counterparties when you of what risk credit risks a here half this strong bit side, a associated from people area of factoring the may the of just book and with have total where the just or I there, that the large retailers of lose about it significant is understanding had just this understanding and be dig that are, talk look those of at you the you Okay. just That’s think business. the we little more other credit

Marisa Harney

secular was credit portfolio out clear is The the particular this question. take customers, these customers in been very remainder our well, XX,XXX a And I’ll are Well, spread in bricks-and-mortar for of that about that since – since of when time, there book the a we’ve clients. was monitoring but it individual retail. over aggressively retail XXXX, long issue

letters had other been that we also in manage have techniques was credit the terms so, taking and could through risks to And available cash we in actions considerable exposures. of we’ve those where how the context receivables where we we that our collateral, of of mitigate either it us, to and client

reduce to in engage we mitigating said, And as lines, purchased so, and under techniques. work of we’ve done factored amount other I considerable a receivables, risk lines which

short-term. expect trade trade Typically, receivables. in is to liquidation, credit. They’re would someone we are their that unless exposures want Our would they protect

– of we’ve terms been this. had monitoring thought so way survivability And before that the in ones retailers we and the

good be in to It’s going this as duration. we unpredictable. I So it’s crisis But by said, entered extremely driven shape.

top-XX industry. in so out the last issued months, to markets open the the markets capital clients of X in of are But several the our XX

Ellen Alemany

and Great. like daily that are And, And contact this lot one period. during advice in to add just is providing them we’re clients, open. XX%. China with of that, factoring I want running at back our They’re expertise factories a

We reopening, which customers in obligations. anticipation to meet have of observed could our intention portend are really gathering that certain their of vendor liquidity

this But an We with who such certain them and continuing to closely exposure time. open, navigating have them, stores. discount online to as evolving remain retailers it’s also we’re work the with and during situation

John Fawcett

but only is a be challenge. add the as second is China would to this and in well Retailers not commissions coming as quarter. really just opening start be is I challenge have down demand thing to And we world. to around shipments in the the do supply have clear expect factoring mean, to just I start from

So to standing. to a has lot happen for us back get in

Ellen Alemany

Yeah.

Arren Cyganovich

thank Yeah, you.

Operator

over session. This conference to like question-and-answer to any I back would management turn our concludes the closing for remarks.

Ellen Alemany

Great. Thank And for thank Elisa. joining morning. this you, you, everyone,

free follow-up the any to have contact feel please questions, Investor team. you If Relations

safe Our healthy, contact and information again is Stay a day. time. on for the website. have and Thank great your you

Operator

has presentation. concluded. Thank today’s now conference for The you attending

disconnect. now may You

Cit (CIT) 21 Apr 202020 Q1 Earnings call transcript