Credit Suisse Financial Services Conference February 8, 2006

Transcription

1 Credit Suisse Financial Services Conference February 8, 2006

2 Notices Forward Looking Statements Certain statements made in this presentation that are not historical facts may constitute "forward-looking" statements under the Private Securities Litigation Reform Act of 1995, including those that are signified by words such as "anticipate", "believe", "expect", "estimate", target, and similar expressions. These forward-looking statements reflect the current views of CIT and its management and are subject to risks, uncertainties, and changes in circumstances. CIT's actual results or performance may differ materially from those expressed in, or implied by, such forward-looking statements. Factors that could affect actual results and performance include, but are not limited to, potential changes in interest rates, competitive factors and general economic conditions, changes in funding markets, industry cycles and trends, uncertainties associated with risk management, risks associated with residual value of leased equipment, and other factors described in our Form 10-K for the year ended December 31, 2004 and our Form 10-Q for the quarter ended September 30,. CIT does not undertake to update any forward-looking statements. Non-GAAP Financial Measures The data provided in this presentation have been modified from our previously reported periodic data, including but not limited to, exclusion of certain non-core transactions and non-recurring events, because management believes that the data presented herein better reflects core operating results. As such, the data may vary from comparable data reported in CIT s forms 10-K and 10-Q. This presentation includes certain non-gaap financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission. Any references to non-gaap financial measures are intended to provide additional information and insight into CIT's financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP and may be different from or inconsistent with non-gaap financial measures used by other companies. For a reconciliation of these non-gaap measures to GAAP and a list of the transactions and events excluded from the data herein, please refer to the appendix within this presentation or access the reconciliations through CIT's Investor Relations website at investor.relations@cit.com. Data as of or for the period ended December 31, unless otherwise noted. 2

3 A Compelling Investment Opportunity Differentiated strategy focused on global middle-market opportunities Well positioned to grow in a fragmented market place Reinvigorated sales and marketing platform focused on high quality revenue growth World class credit and risk management capabilities Strong business momentum heading into

4 A Record Year Metric 2004 Comment Volume $24 B $32 B Record new business originations Managed Assets $53 B $63 B Record asset levels Net Charge-offs 0.91% 0.60% Very strong credit performance Net Income $720 M $882 M Record earnings, up 23% ROTE 13.9% 16.5% Exceeded 16% target ROE 12.6% 14.2% Increased 160 basis points 4

5 A Strategic Year Performed rigorous strategic assessment of our business Realigned portfolios around market sectors Invested in high return / high growth opportunities Acquired three businesses Ordered 39 aircraft valued at $2.8 billion Created Strategic Advisory Services group to accelerate fee income growth Divested $1.7 billion of low return / low growth businesses Reinvigorated sales culture Enhanced shareholder value Completed $500 million share repurchase program Increased quarterly dividend by 25% 5

6 A Year of Improving Returns Segment 2004 Comment Trade Finance 25.7% 27.1% Exceeds hurdle Corporate Finance 22.2% 19.3% Exceeds hurdle Transportation Finance 10.5% 11.3% Improving Equipment Finance 8.0% 10.5% Improving Specialty Finance Commercial 21.8% 23.8% Exceeds hurdle Specialty Finance Consumer 14.9% 9.4% Reflects student lending Overall CIT ROE 12.6% 14.2% Improving 6

7 New Alignment Better Serves Customers Commercial Finance ($34 Billion) Specialty Finance ($29 billion) Trade Finance Transportation Finance Corporate Finance Vendor Finance Consumer/ SBL Provides factoring and other trade products to companies in retail supply chain, with increasing international focus Provides longer-term, large ticket equipment, leases and other secured financing to companies in rail and aerospace industries Provides lending, leasing and other services to middle-market companies, with a focus on specific industries Provides financing solutions to manufacturers and distributors around the globe Provides secured loans to consumers and small businesses, leveraging broker and intermediary relationships 7

8 Specialty Finance Tom Hallman

9 Specialty Finance Overview Vendor Finance ($13 billion / 30+ countries) Consumer / Small Business ($16 billion / 50 U.S. states) Healthcare Industrial Equipment Office Products Technology Home Lending Student Loan Xpress Small Business Lending Global Insurance Services CIT Bank 9

10 Consumer and Small Business Characteristics Match Our Core Competencies Markets Capabilities Value to CIT Scalable Fragmented Government guaranteed Intermediary relationship management Technology / credit scoring Servicing expertise Attractive returns Counter-cyclical with commercial businesses Liquid assets 10

11 Home Lending: At-a-Glance We deliver value-added lending solutions to mortgage brokers via a national network of sales offices providing a comprehensive set of competitive products through superior customer facing technology and servicing capabilities 236 sales professionals Over 4,600 relationships $6.9 B volume $9.2 B managed assets 11

12 Home Lending Portfolio Strategy Broker Originations Hold target demographics in portfolio Disciplined Risk Management Secondary Market Sales Sell non-target demographics Secondary Market Purchases Acquire portfolios opportunistically 12

13 Focused Target Market Total Market = $286 B 2004 Sub-prime Broker Originations Average FICO: % owner-occupied 100% appraisal review 92% of loans are first liens CIT Target Market ( $80 B) No negative amortization loans Disciplined lending standards define a sustainable target market Source: SMR 13

14 Strong Portfolio Demographics 12/31/99 12/31/03 12/31/05 Borrower characteristics: FICO Debt to income 37% 38% 40% Length of employment Length of residence Loan characteristics: Loan size $61K $87K $118K % Fixed 86% 72% 43% Loan to Value 77% 80% 81% Updated Loan to Value at 7/31/05 72% 14

15 Low Delinquency vs. Competitors 60+ Delinquency Comparison by Geography 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% New England Mid- Atlantic South Atlantic SE Central SW Central NE Central NW Central Mountain Pacific Sub-prime industry CIT Source: Loan Performance Service 15

16 Well-Positioned Against Market Risks Decrease in Housing Values Impact Primary impact on higher value areas and coastal regions CIT Position Average loan size = $118K CLTV = 72%* Geographic diversification Low participation in resort markets Rise in Interest Rates Defaults due to increasing payments (for floating loans) Disciplined ARM underwriting No option ARM or negative amortization products Increase in Unemployment Increased delinquency and defaults Average customer 9 years in residence 9 years in current job *Updated loan to value at 7/31/05 16

17 Student Loan Xpress: At-a-Glance We deliver a broad range of student lending products and services with distinctive borrower benefits to educational institutions through a network of dedicated relationship managers supported by an efficient centralized processing and servicing capability 45 sales professionals 881 partner schools; direct channels $2.7 B volume* $5.3 B managed assets *Reflects full year 17

18 Student Loan Xpress Strategy Drive growth in school channel Enhance web leadership Broaden direct-to-consumer product offering Build best-in-class servicing capabilities Capitalize on cross-sell opportunities 18

19 Strong Growth Volume $2.7B $1.6 B 2004 School Channel Direct Channel $0.5 B $1.1 B $1.0 B $1.7 B 19

20 Regulatory Update Key 2006 student loan reauthorization provisions Increases loan limits Extends PLUS loans to graduate and professional students Maintains current fixed rate structure Eliminates School as Lender rule Reduces lender insurance by 1 percentage point Positive Positive Neutral Positive/Negative Negative Open legislative items Elimination of Single Lender rule Fair Credit Reporting Act Very Positive Positive 20

21 2006 Expectations Reach partner schools Increase school channel volume by 50% Double school channel assets Complete servicing transfer Continued improvement in returns 21

22 Specialty Finance: Strategic Summary Vendor Finance Broaden vendor base Penetrate and expand existing relationships globally Scale global servicing platforms Expand vendor business in China by leveraging our market-leading expertise Consumer/ Small Business Lending Increase organic originations in Home Lending Continue expansion of Student Loan Xpress school channel Accelerate growth in Small Business Lending Leverage CIT Bank deposit-taking capability Broad-based build out of global sales capabilities 22

23 Continuing The Momentum Jeff Peek

24 2006 Priorities Execute upon our growth strategies Focus on productivity through technology Maintain traditional disciplines 24

25 Sales Force Execution is Key to Growth Established a corporate sales office providing direction and oversight Designated Chief Sales Officers in all business units Implemented a company wide customer management system, Salesforce.com Aligned our sales incentive plans with growth strategies 25

26 2006 Growth Drivers Aerospace Healthcare Asset Generation Communications, Media & Entertainment Global Sponsor Finance International Student Loan Xpress Fee Generation Global Insurance Restructuring Strategic Advisory Services Syndications 26

27 International Growth Agenda Continue to build upon aerospace platform Scale pan-european vendor operations Expand Trade Finance (factoring) in Asia Leverage recently acquired UK banking license Build upon our leading equipment leasing position in China 27

28 Supporting Our Growth Investing in technology to maximize the customer relationship Salesforce.com (customer relationship database) Credit adjudication and risk analysis software Web-based applications Re-directing investment from back-end to front-end 2004 Longer Term 70% 30% 65% 35% 50% 50% Front-end Back-end 28

29 Furthering Commitment to Traditional Disciplines Credit Maintain prudent reserve position Expand syndication and portfolio management activities to manage excess risk Expect 2006 credit losses to be less than 80 basis points Funding Continue to match fund the portfolio Increase funding from international capital markets Leverage CIT Bank s deposit-taking capability Capital Drive portfolio optimization Explore further capital structure efficiencies Continue to return capital to shareholders 29

30 2006 The Year of Execution Actions 2006 Drivers Clearly defined our strategic imperatives by business Augmented leadership Re-aligned around the customer Rounded out our products and service offerings Energized the sales force Organic volume benefits from the hiring of sales professionals Non-spread income reflects addition of Strategic Advisory Services Efficiency improves as revenue growth accelerates Funding diversity enhanced by deposit base growth Portfolio initiatives result from capital discipline 30

31 2006 Earnings Guidance Target** EPS* ROE $ $ % *Includes estimated stock options expense of $0.08-$0.10 per share **Guidance as provided on January 18, Reproduction of this slide should not be construed as an affirmation or update of that guidance. 31

32 Continuing The Trend 18.0% $ % $ % 15.0% $1.00 ROTE 14.0% 13.0% $0.90 $0.80 EPS 12.0% $ % 10.0% $ % Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 $0.50 ROTE Earnings Per Share 32

33 Appendix 33

34 Corporate History CIT went public and was listed on NYSE. The company had 600 employees and assets of $44.7 MM RCA acquired CIT 1984 Albert R. Gamper, Jr., named Chairman and CEO of CIT. Dai-Ichi Kangyo Bank acquired an additional 20% of CIT from Chemical Bank 1989 CIT launched a 20% IPO to acquire from DKB its option to purchase the 20% interest owned by Chase Manhattan. CIT again listed on the NYSE ( CIT ) CIT acquired Newcourt Credit July 2000 Tyco International acquired CIT July 2002 Jeff Peek named President & CEO October 2004 Jeff Peek named Chairman & CEO CIT founded as Commercial Credit and Investment Company by Henry Ittleson in St. Louis 1924 CIT Financial Corporation, company s industrial financing entity, was incorporated 1980 Manufacturers Hanover purchased CIT from RCA Dai-Ichi Kangyo Bank acquired 60% of CIT from Manufacturers Hanover 1997 Chemical Bank merged with Chase Manhattan. CIT ownership was 80% by DKB and 20% by Chase Manhattan 1999 Successful CIT secondary stock offering reduced DKB s stake to approximately 44%, with balance of shares held publicly CIT was added to the S&P 500 Index June 2001 CIT completed 100% initial public offering (NYSE: CIT) July 2004 CIT was added to the S&P 500 Index January 34

35 Board of Directors Board Member Jeffery M. Peek Member Since 2003 Independent Directors Audit Board Committees Compensation Nominating & Governance Thomas H. Kean 2002 Chair Peter J. Tobin 2002 Lead Chair William M. Freeman 2003 Marianne Miller Parrs 2003 John R. Ryan 2003 Chair Lois M. Van Deusen 2003 Gary Butler 2004 Timothy M. Ring Seymour Sternberg 35

36 Executive Leadership Jeffrey M. Peek Chairman & CEO Joined CIT September 2003 Thomas B. Hallman Vice Chairman Specialty Finance Joined CIT in 1995 Joseph M. Leone Vice Chairman Chief Financial Officer Joined CIT in 1983 Lawrence A. Marsiello Vice Chairman Chief Credit Officer Joined CIT in 1974 Walter J. Owens EVP & Chief Sales and Marketing Officer Joined CIT March Frederick E. Wolfert Vice Chairman Commercial Finance Joined CIT September 2004 Vendor Finance Consumer/Small Business Lending Treasury Accounting Tax Investor Relations M&A Information Technology Corporate Credit Risk Management Sales Marketing Trade Finance Corporate Finance Transportation Finance Seasoned, balanced management team 36

37 Broad and Diverse Portfolio Geography Industry Europe and Asia 15% Canada 6% Southwest 10% Southeast 14% 17% 19% 19% Northeast West Other* 16% Construction Wholesale 3% 3% Consumer Other 3% Healthcare 4% 5% Transportation 6% Services 10% Home Lending 15% 13% Manufacturing 12% Commercial Air 11% Midwest Education Lending Retail *No other collateral type or industry served greater than 3% 37

38 Growth Indicators Vendor Finance Home Lending Small Business Lending Student Loan Xpress Factoring Asset Based Lending Equipment Finance Air Rail Capital Spending GDP Interest Rates Consumer Confidence Consumer Confidence Cost of Education Retail Sales Consumer Credit Growth Restructuring Activity LBO Activity C & I Loan Growth Construction Spending Revenue Passenger Miles Global Economic Growth Coal Production Grain Yield Key Data Points PC Sales IP Telephony Sales Home Prices Mortgage Applications 7(a) Funding Levels Switch Government Sponsorship Consumer Confidence C & I Loan Growth Bankruptcy Filings Capacity Utilization Capital Spending Oil Prices Industrial Production Car Loadings 38

39 Commercial Aerospace Portfolio Statistics Portfolio Composition Category Grouping % Net Investment Aircraft Body type Manufacturer Narrow Intermediate Wide Other Boeing Airbus Other 72.8% 22.6% 4.0% 0.6% 44.5% 54.9% 0.6% Operating Leases Leveraged Leases Loans Tax-Op. Leveraged Leases Capital Leases $ millions 5, % 89.5% 3.9% 3.2% 2.3% 1.1% Number % 84.6% 4.7% 6.0% 3.3% 1.4% Geographic diversity Europe Asia Pacific North America Latin America Africa / Middle East 39.4% 26.4% 20.9% 9.0% 4.3% Year 5, % Remaining Order Book Amt ($B) Number % Placed Weighted average age Years Aircraft on the ground Planes Top exposure Millions Top US exposure Millions Total $

40 International Operations Country Canada Europe Asia Australia Other Total Managed Assets (billions) $4.7 $4.7 $1.8 $0.6 $1.4 $13.2 (21% of CIT) Primary Businesses Aerospace Corporate Finance Equipment Finance Trade Finance Vendor Finance Aerospace Corporate Finance Vendor Finance Aerospace Trade Finance Vendor Finance Aerospace Vendor Finance Aerospace Vendor Finance 1,500 employees servicing international operations 40

41 Effective Matched Funding Assets Funding (after swaps) Amount Portfolio Term Amount Portfolio Term Floating $26B 51% 3.2 years $26B Debt 56% 4.3 years Fixed $26B 49% 2.8 years $20B Debt 44% 3.4 years $6B Equity Risk Metrics* Margin at Risk Value at Risk After-tax impact of $15 million (liability sensitive) After-tax impact of $51 million (asset sensitive) *Sensitivity to immediate 100 basis point rate increase 41

42 Income Taxes (E) Effective Tax Rate 39% 35% 33% Why it is decreasing Dublin Aerospace Initiative Improved International Vendor Profitability Efficient Tax Management Accounting Provision for Taxes Cash Taxes Paid $483 $115 $479 $100 (E) Why cash is lower Leasing Businesses Utilization of Net Operating Loss 42

43 Non-Core Items Item Description P&L Line Item Group Impact on Income Pre-Tax After-Tax EPS Impact Q4 Q4 Gain on call of PINEs debt Loss on venture capital investments Gain on redemption of debt Other revenue Corporate Corporate 50.4 (60.5) 31.2 (37.5) 0.15 (0.17) 2004 Q1 Gain on call of PINEs debt Gain on redemption of debt Corporate Q4 Q4 Q4 Release of telecom reserves (Loss) on venture capital investments (Loss) on sale of manufactured housing Provision for credit losses Other revenue Other revenue Corporate Corporate Specialty Finance 43.3 (14.0) (15.7) 26.8 (8.7) (9.3) 0.12 (0.04) (0.04) Q1 Gain on Restatement of select derivative transactions Other revenue Corporate Q2 Q2 Q2 Gain on sale of business aircraft Provision for restructuring Gain on Restatement of select derivative transactions Other revenue Provision for restructuring Other revenue Commercial Finance Corporate Corporate 22.0 (25.2) (16.5) (0.08) 0.13 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Reserves for hurricanes Katrina and Rita Retained interest impairment from hurricanes Katrina and Rita Gain on sale of real estate investment (Loss) on sale of commercial and business aircraft (Loss) on sale of manufactured housing Release of international tax reserves Loss on Restatement of select derivative transactions Provision for credit losses Other revenue Other revenue Other revenue Other revenue Provision for income taxes Other revenue Corporate Corporate Corporate Commercial Finance Specialty Finance Commercial Finance Corporate (35.9) (6.8) (86.6) (20.0) 0.0 (14.3) (23.3) (4.4) 69.7 (52.9) (11.9) 17.6 (5.7) (0.11) (0.02) 0.34 (0.25) (0.06) 0.08 (0.04) Q4 Q4 Q4 Q4 Gain on sale of micro-ticket leasing point of sale unit Early termination fee on NYC lease / Legal Settlement Loss on select derivative transactions Reversal of deferred tax liability Other revenue Operating expenses Other revenue Provision for income taxes Specialty Finance Corporate Corporate Commercial 44.3 (11.0) (22.7) (6.7) (12.9) (0.03) (0.06)

44 Non-GAAP Reconciliation Managed assets: Finance receivables Operating lease equipment, net Finance receivables held for sale Equity and venture capital investments (included in other assets) Total financing and leasing portfolio assets Securitized assets Managed assets Earning assets: Total financing and leasing portfolio assets Credit balances of factoring clients Earning assets Total Tangible stockholders' equity: Total common stockholders' equity Other comprehensive loss relating to derivative financial instruments Unrealized (gain) loss on securitization investments Goodwill and intangible assets Tangible common stockholders' equity Preferred Stock Preferred capital securities Total Tangible stockholders' equity 12/31/ $ 44, , , , ,285.7 $ 62,866.4 $ 55,580.7 (4,187.8) $ 51,392.9 $ 6,462.7 (27.6) (17.0) (1,011.5) 5, $ 6, /31/2004 $ 35, , , , ,309.7 $ 53,470.6 $ 45,160.9 (3,847.3) $ 41,313.6 $ 6, (8.5) (596.5) 5, $ 5,731.0 Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to trends in the business to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a subsitute for, GAAP and may be different from, or inconsistent with, non-gaap financial measures used by other companies. 44

45 Financial Statements Balance Sheet December 31, ASSETS Financing and leasing assets: Finance receivables $ 44,294.5 Reserve for credit losses (621.7) Net finance receivables 43,672.8 Operating lease equipment, net 9,635.7 Finance receivables held for sale 1,620.3 Cash and cash equivalents 3,658.6 Retained interests 1,139.9 Goodwill and intangible assets, net 1,011.5 Other assets 2,647.8 Total Assets $ 63,386.6 LIABILITIES AND STOCKHOLDERS' EQUITY Debt: Commercial paper $ 5,225.0 Variable-rate senior unsecured notes 15,485.1 Fixed-rate senior unsecured notes 22,853.6 Non-recourse, secured borrowings 4,048.8 Preferred capital securities Total debt 47,864.5 Credit balances of factoring clients 4,187.8 Accrued liabilities and payables 4,321.8 Total Liabilities 56,374.1 Minority interest 49.8 Stockholders' Equity: Preferred Stock Common stock 2.1 Paid-in capital 10,632.9 Accum. deficit (3,691.4) Accum. other comprehensive income (loss) Less: Treasury stock, at cost (596.1) Total Stockholders' Equity 6,962.7 Total Liabilities and Stockholders' Equity $ 63,386.6 December 31, 2004 $ 35,048.2 (617.2) 34, , , , , ,713.7 $ 51,111.3 $ 4, , , , , , , ,674.3 (4,499.1) (58.4) (63.8) 6,055.1 $ 51,111.3 Income Statement Year Ended December 31, December 31, 2004 Finance income $ 4,515.2 $ 3,760.8 Interest expense 1, ,260.1 Net finance income 2, ,500.7 Depreciation on op. lease equipment Net finance margin 1, ,535.3 Provision for credit losses Net finance margin after provision 1, ,321.1 Other revenue 1, Operating margin 2, ,208.2 Salaries and general operating expenses 1, ,012.1 Provision for restructuring Gain on redemption of debt Income before provision for income taxes 1, ,237.9 Provision for income taxes (464.2) (483.2) Minority interest, after tax (3.3) (1.1) Net income before preferred stock $ $ Preferred stock dividends (12.7) - Net income $ Earnings per share Basic earnings per share $ 4.54 $ 3.57 Diluted earnings per share $ 4.44 $ 3.50 Number of shares - basic (thousands) 206, ,017 Number of shares - diluted (thousands) 210, ,054 45