CIT Group Inc. Wachovia Securities 13th Annual Nantucket Conference

Transcription

1 CIT Group Inc. Wachovia Securities 13th Annual Nantucket Conference June 24, 2003 Joseph M. Leone Executive Vice President and Chief Financial Officer

2 Forward-Looking Statement Certain statements made in these presentations that are not historical facts may constitute forward-looking statements, as defined in the Private Securities Litigation Reform Act of These forward-looking statements reflect the current views of the Company and its management. Because these statements are subject to risks, uncertainties, and changes in circumstances, the Company 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 transition period ended December 31, The Company does not undertake to update any forward-looking statements. 2

3 Introduction The world s largest publicly held commercial finance company Established in 1908 Experienced management team Serves clients across a wide array of industries Currently doing business with more than 80% of Fortune 1000 Managed assets of $48 billion Focused international presence Approximately 6,000 employees world wide Current market capitalization roughly $5 billion (211.6mm shares outstanding) 3

4 CIT Attributes Consistency Quality Diversification Scale Efficiency Experience Long-term track record Best-in-class risk management culture and high credit ratings Ability to deliver in all economic environments Franchises with #1 or leadership positions Low cost operator Strong, proven management team 4

5 CIT Business Overview Diverse Franchises Structured Finance Leadership Positions Equipment Lending & Leasing Equipment Finance 23% 7% 27% Specialty Commercial Vendor Finance Asset Based Lending Factoring Capital Finance 13% 8% Business Credit 10% 12% Commercial Services Specialty Consumer SBA Lending Aerospace & Railcar Leasing Broker Originated Home Equity Managed Assets - $47.5B (March 31, 2003) 5

6 Highly Diversified Business Characteristics Efficient Flow Businesses Equipment Finance Vendor Finance Factoring Home Equity Steady volume and growth Diverse origination channels Highly efficient processing Highly effective service Value-Added Transaction Businesses Capital Finance Asset Based Lending Structured Finance Deal oriented with value-added structures Higher returns Credit and asset management focus Lower labor intensity 6

7 Competitive Advantage Banks Orientation: Market Players: CIT Advantage: Captives Orientation: Market Players: CIT Advantage: Commitment to commercial finance varies Bank of America, Citibank (Associates), Fleet, First Union, Wachovia, Wells Fargo Consistent market presence through economic cycles Product offerings & customer solicitation limited by parental relationships Caterpillar Finance, GE Capital, GMAC, ILFC (AIG) Independence and dealer relationships allows full product offering without conflicting competitive interests Independents Orientation: Barriers to entry make critical mass difficult to attain Market Players: Financial Federal, GATX CIT Advantage: Market expertise backed by significant financial resources 7

8 Key Long-Term Targets Risk Adjusted Margin Efficiency Ratio Securitization Gains Return on Tangible Equity Leverage Selected Financial Targets 3.40% % ~ 35% Max 15% pretax Mid Teens 9%+ Tangible Equity to Managed Assets Strong Internal Capital Generation Organic Targets of 10% EPS Growth and 15% ROTE 8

9 First Quarter Results Accomplishments Over $1.0B of Asset growth Charge-offs declined Credit markers improved Delinquency Non-Performing Assets SFAS 114 Analysis Loan Loss Reserves were strong Operating Expenses improved Capitalization remained solid Challenges Volumes lower year-over-year Net Finance Margin declined Yield Related Fees Aerospace Revenue Funding Costs Solid quarter in a difficult operating environment 9

10 Credit Losses Better but Still High Q1-03 Detail Core $ % Liquidating % Telecom % Total $ % 1.44% 1.58% 1.79% 1.99% 2.32% Core Liquidating Telecom 1.61%.87% 9/01 12/01 3/02 6/02 9/02 12/02 3/03 Charge-offs (as % of Finance Rec.) 10

11 Improving Forward Credit Markers Managed Delinquency (60+) 4.02% 4.09% Non-Performing Assets 4.01% 3.93% 3.77% 3.24% 3.32% 3.51% 3.29% 3.74% 3.78% 3.55% 3.38% 2.05% 2.47% 2.84% 12/99 12/00 12/01 3/02 6/02 9/02 12/02 3/03 12/99 12/00 12/01 3/02* 6/02 9/02 12/02 3/03 Non-Accrual Repo Liquidating * Includes $3.4B of previously securitized trade receivables 11

12 Capital Markets Update Excess liquidity provides financial flexibility $5.0B C/P Program continues to be met with strong demand Re-paid $7.7B of the $8.5B of Bank Debt drawn in February 2002 Strong institutional demand for LTD across the maturity spectrum Retail MTNs providing $ MM per month at attractive all-in costs Securitization remains an attractive funding alternative Amended indenture provides flexibility in structuring securitizations Significant progress since IPO in July

13 Funding/Liquidity Profile Historic Commercial Paper $8-10 billion Bank line Coverage (85-100% coverage) Committed ABS facilities $6 billion Current $4 5 billion (100%+ coverage) $7.7 billion Cash $0 -.5 billion $1 2 billion Commercial Paper 20-25% 7-15% Long Term Debt 55-60% 60-70% ABS 20-25% 20-30% Diverse Liquidity Sources & Prudent Funding Profile 13

14 Bond Spread Performance CIT 5-year LB Financial 2.60% 2.77% 2.86% 3.02% 2.12% 1.80% 1.46% 1.26% 1.46% 1.15% Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q

15 Capitalization 7.69% 7.82% 8.72% 9.14% 9.25% 9.93% 10.44% 10.42% Tang Capital to Managed Assets /99 12/00 12/01 3/02 6/02 9/02 12/02 3/03 Tangible Capital ($ Billions) Tangible Capital = Equity + Preferred Goodwill +/- OCI adjustments 15

16 Landscape Favors CIT Economic Indicators Wall Street consensus forecast of 3% GDP growth in 2003 Economic growth should strengthen demand for CIT products Competitive Indicators Tighter bank liquidity provides expanded growth opportunities for CIT More rational competition with disciplined pricing parameters Company Specific Factors Largest public commercial finance company Infrastructure in place to support higher business volumes Credit metrics have stabilized and are poised to strengthen CIT well positioned in this environment to provide financing solutions to middle market companies 16

17 Appendix June 24, 2003

18 Specialty Finance - Commercial Vendor Finance: Relationships with Dell Computer, Avaya, Snap-on-Tools, Agilent and other Fortune 500 companies around the globe State-of-the-art transaction processing technology Scalable platform with significant operating leverage SBA Lending: #1 Provider of government backed small business loans Point-of-Sale & Office Products: Provide financing for credit card terminals, photocopiers, etc. Flow Business $12.5B Total Managed Assets $47.5B Customized Solutions Supporting Businesses 18

19 Specialty Finance - Consumer Home Equity: ($4.0B) Mortgage broker driven business Highly efficient origination and credit approval systems Scalable best-in-class servicing and collection High credit quality and geographically diverse portfolio Other Consumer: ($1.8B) Liquidating Portfolios Managed: Manufactured Housing, Recreational Vehicle, Marine & Inventory Finance Flow Business $5.8B Total Managed Assets $47.5B Automated Processing Drives Efficiency 19

20 Commercial Services Leading factoring business in the U.S. ($80 billion market) Flow Business Vital credit bridge between vendors and retailers Highly efficient processor Annuity-like earnings Long-term client relationships years on average Superb track record of navigating retail credit cycles $4.7B Total Managed Assets $47.5B Premier Brand Recognition 20

21 Business Credit Asset based lender to multiple industries Transaction Business Leading provider of working capital to the middle market Strong debtor-in-possession (DIP), turn around and expansion financing capabilities Deal-oriented and collateral protected Long standing referral relationships Significant fee generator $4.0B Total Managed Assets $47.5B Consistent Player in the ABL Market 21

22 Capital Finance Portfolio Composition Aerospace: $4.3B Rail: $1.9B (services another $.4B of assets) Four decades of experience in providing customized financing and leasing services Experts in managing and maximizing collateral values Strong relationships with deep market penetration State-of-the-art proprietary systems Transaction Business $6.2B Total Managed Assets $47.5B Best-in-Class Equipment Management 22

23 Equipment Finance Leading equipment lender with a premium brand name Industry leader in key markets: Construction equipment Manufacturing Corporate aircraft Wide range of product offerings including direct financing programs with equipment manufacturers & dealers Collateral and equipment management expertise Flow Business $10.9B Total Managed Assets $47.5B Industry Commitment and Expertise 23

24 Structured Finance CIT s specialized investment bank for the middle market Project-oriented niche business Expertise in structured leasing, project finance, media and regional aircraft Transaction Business $3.3B Syndication capability limits use of balance sheet Strong fee generator (Advisory, Arranging, Underwriting, and syndicating) Total Managed Assets $47.5B Significant Fee Generator 24

25 Business Performance Metrics 2003 Q1 Profitability Net Income ($MM) 127 ROMA 1.13% ROTE 11% Revenue Risk Adjusted Margin 2.44% Securitization Gain-on-Sale 15% Expenses Expenses ($MM) 234 Efficiency Ratio 42.5% Tangible Equity/Mgd. Assets 10.4% Long Term Targets Mid-Teens 3.40% % Max. 15% ~ 35% 9% Plus 25

26 Loan Loss Reserves General Reserve ($482MM)* 3/02 6/02 9/02 12/02 3/03 Reserves as a % of Finance Rec. 1.91% 1.87% 1.81% 1.86% 1.82% Annualized Charge-off Coverage 1.5x 1.1x 1.1x 1.0x 1.4x FAS 113 Impairment Coverage 3.5x 3.1x 4.2x 8.9x 9.1x Reserves as a % of Non-Accrual 72% 77% 66% 68% 75% * Excludes specific reserves of $135 million for Argentine exposure and $140 million for Telecommunications exposure. Bottoms-Up Approach Yields Adequate Reserves 26

27 Solid Start to Manageable 2003 Funding Short Term Debt US Commercial Paper approximately $5B Analyzing re-accessing International CP Markets Long Term Debt ($ millions) Full Year 2003 Q1 Actual Q2 Actual-to-Date Institutional Globals 3,000 4,000 1, MTN s 3,000 4,000 2,600 1,000 Retail 1,500 2, ,500 10,000 4,400 1,750 Securitization ($ millions) Full Year 2003 Q1 Actual Q2 Actual-to-Date Volume 3,000 4,500 1,237 27