Transcript Document

CIT Group Inc.
Wachovia 14th Annual Nantucket
Conference
Notices
Forward Looking Statements
Certain statements made in these presentations 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", 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 period ended December 31, 2003 and our Form 10-Q for the quarter ended March 31,
2004. CIT does not undertake to update any forward-looking statements.
Non-GAAP Financial Measures
These presentations include 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, please refer to the appendix within this presentation or access the reconciliations through CIT's
Investor Relations website at [email protected].
Data as of March 31, 2004 unless otherwise noted. Subsequent to March 31, 2004 Structured Finance
was amalgamated with Capital Finance ($1.8 billion of managed assets) and Commercial Finance-Business
Credit ($1.3 billion of managed assets). Prior period data has not been restated to reflect the change.
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Introduction
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The world’s largest publicly held commercial finance company
Managed assets of $50 billion and roughly 6,000 employees
Diverse franchise offering a full array of financial products & services
Predominantly a collateralized lender
Customers include the majority of the Fortune 1000 companies
Listed on NYSE under the ticker symbol “CIT”
68% return for shareholders since the IPO (July 2002 - May 2004)
Current market capitalization of approximately $8 billion
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Business Strategy
Focused Growth
Emphasize businesses where we have competitive
strengths and predictable performance
Diversification
Maintain balanced businesses and broad funding
platforms that reduce risk through diversification
Scale
Assume leadership positions in key businesses
where operating leverage can be generated
Risk Management
Further utilize technology and information to
properly balance risks and rewards
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Segment Overview
Managed Assets - $50B
Commercial
$13B
Specialty
SF
Finance
Market Focus
Small-ticket commercial lending and leasing,
vendor finance, SBA lending and consumer
home equity loans
Consumer
$19B
$6B
Equipment
EF
Finance
Diversified middle market equipment lending
and leasing
$10B
Commercial Bus.
Credit $11B
Services
$4B
$7B
Commercial
CF
Finance
Capital
CF
Finance
Mid-large ticket asset based lending,
factoring and other commercial services
Commercial aerospace and rail equipment
leasing and lending
$7B
Structured
StF
Finance
Specialized investment bank for the middle
market
$3B
0
5
10
15
20
25
(billions)
Segment data excludes $250mm of equity investments held in corporate.
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Business Assessment
Managed
Assets
Market
Position
Entry
Barriers
Specialty: Commercial
$13B
Leader
Medium
Technology, Origination and servicing,
Relationships, Efficiency, “Preferred and
Exclusive Lender” status
Specialty: Consumer
$6B
Player
Medium
Technology, Servicing, Relationships
Equipment Finance
$10B
Leader
Medium
Relationships, Reputation, Collateral
expertise, Service
Commercial Services
$7B
Leader
High
Credit, Relationships, Technology, Processing
Efficiency
Capital Finance
$7B
Leader
High
Asset and industry expertise, Relationships,
Service, Remarketing capability
Business Credit
$4B
Leader
Medium
Structured Finance
$3B
Player
Low/Medium
TRANSACTION
FLOW
Business Unit
Competitive Strengths
Reputation, Relationships, Speed, Credit,
Portfolio management and syndication
capability
Structuring expertise, Relationships, Credit,
Underwriting and syndication skills
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More Diverse Today Than 10 Years Ago
December 1993
March 2004
Structured
Finance
Specialty
Consumer
Equipment
Finance
13%
30%
7%
14%
Equipment
Finance
Commercial
Services
Business
Credit
36%
Capital
Finance
Managed Assets $13.7 billion
CAGR
13.5%
Specialty
Commercial
6%
25%
20%
13%
15%
Capital
Finance
8%
Business
Credit
13%
Specialty
Consumer
Commercial
Services
Managed Assets $50 billion
Segment data excludes $250mm of equity investments held in corporate.
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Results by Business Segment
100%
90%
$50 billion
$164 million
6%
6%
Structured Finance
80%
70%
21%
Capital Finance
33%
Commercial Finance
60%
50%
10%
15%
20%
Equipment Finance
8%
Specialty Finance
40%
30%
20%
38%
43%
Managed Assets
Net Income
10%
0%
Segment data excludes equity investments and other corporate data.
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Financial Scorecard
2003
Q1
2004
Q1*
Long Term
Targets
Net Income ($ millions)
EPS ($)
ROTE
127
0.60
11.0%
164
0.76
13.1%
15%
Risk Adjusted Margin
Securitization Gain (% PT Income)
2.34%
14%
3.09%
8%
3.40% - 3.60%
Max. 15%
41.7%
41.1%
35% Area
1.61%
1.26%
47.5
10.4%
50.1
10.7%
Profitability
Expenses
Efficiency Ratio
Credit
Credit Losses - Total
Balance Sheet
Managed Assets ($ billions)
Tangible Equity/Managed Assets
8% - 10%
9% Plus
* Excludes $25.5 million after-tax gain on PINES debt call
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Historic Credit Losses
Liquidating, Telecom and Argentina
1.92%
Core
1.77%
1.58%
1.26%
1.26%
1.17%
0.86%
0.98% .80-.85%
0.82% 0.84% 0.77%
0.61%
1990
1991
1992
1993
1994
0.50%
1995
0.71% 0.83%
0.62% 0.59%
0.42% 0.42%
1996
1997
1998
1999
2000
2001
2002
2003
Q1 Objective
2004
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Sharp Improvement in Forward Markers
Owned Delinquency 60+ days
Non-Performing Assets
3.93%
3.90%
3.63%
3.24%
2.98%
2.47%
2.71%
2.16%
2.05%
2.07%
2.16%
1.89%
12/99
12/00
12/01
12/02
12/03
3/04
12/99
12/00
12/01
Non-Accrual
12/02
Repo
12/03
3/04
Liquidating
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Strong Balance Sheet
Reserves ($millions)
1.44%
1.64%
1.77%
Tangible Capital ($billions)
1.71%
1.68%
644
637
10.41% 10.45% 10.69%
1.40%
761
447
Dec-99
469
Dec-00
8.78%
496
Dec-01
Dec-02
General Reserves to Fin Rec.
General
Dec-03
Telecom
Mar-04
Argentine
7.69%
7.81%
4.0
4.3
4.3
Dec-99
Dec-00
Dec-01
4.8
Dec-02
5.2
5.4
Dec-03
Mar-04
Tangible Capital to Managed Assets
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Ratings Objective
Comparative Analysis
Other Qualitative Factors
1998
Q1-04
Issue
Current Status
Aa3/A+
A2/A
Economic
Environment
• Improving economy
• Diverse business franchises
ROMA
1.48%
1.42%
ROTE
14.0%
13.1%
Wholesale
Funding Model
Charge-offs
0.42%
0.98%*
• Expanded funding diversity
• Reduced refinancing risk
• Proven alternate liquidity
NPA’s
1.40%
2.07%
Management
Transition
• Well-defined succession plan
• Experienced management
Tang Equity/MA
10.3%
10.7%
Alt. Liquidity/STD
43%
86%
Rating
Profitability:
Asset Quality:
Capitalization:
* Core Charge-offs
Focus on returning to high single A long-term debt rating
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Balanced and Diverse Funding Mix
• Commercial Paper
Int'l Globals &
MTN's
3%
– US$ 5.0B program
– C$ 1.0B program
– A$ 1.0B CP/MTN program
US ABS CP
7%
US MTN
26%
• Term Debt
Private Placements
1%
– Diverse product offerings:
US Cons. ABS
6%
US Comm. ABS
11%
Int'l ABS CP
4%
US Retail
6%
Globals
27%
US CP
9%
• Institutional and Retail
• Public and Private
• US and International
– Strong demand across maturities
• Securitization
– Attractive funding alternative and valuable
liquidity source
Outstanding Debt and ABS at December 31, 2003
– Diverse product offerings:
• Public market and Private conduits
• Various asset classes
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Capital Generation
Return on Equity
13%
Dividend Payout
17%
Capital
Generation
11%
Funds
• Asset growth target 8-10%
• Increased dividend 8%
• Stock buyback program to support employee stock option program
• Acquisitions that are accretive to earnings
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Growing the Business
Grow assets consistent with GDP expansion
Focus on sectors growing faster than GDP
– Technology
– Healthcare
– Media and Communications
Increase market share
– Deeper penetration into existing businesses
– Expand origination/distribution channels
– Supplement organic growth with acquisitions
Target new (but related) markets
– Leverage international platforms
– Build vendor relationships
Managed Asset Growth Target: 8-10%
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Traits of a Rising Rate Environment
Volume
• Higher capital spending
• Activity picks up and growth accelerates
Revenue
• Higher asset growth drives more margin
• Stronger deal flow leads to fee generation
• Equipment gains higher
Margin
• Matched funding philosophy minimizes risk
Credit
• More liquidity for customers
• Asset and collateral values appreciate
• Lower losses and improved credit metrics
Competition
• Cyclical lenders return
• Capital available for new entrants
• Pricing pressure increases
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Key Investment Highlights
• Diverse franchise with market leadership positions and 95+ years
experience in commercial lending
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Robust capital levels position us well for economic recovery
Infrastructure in place to support higher asset volumes
Strong reserves and broad based credit quality improvements
Deep funding model and solid liquidity position
Solid single A ratings with a stable outlook by all agencies
Disciplined and experienced management team
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Appendix
Corporate History
Dai-Ichi Kangyo
Bank acquired 60%
of CIT from
Manufacturers
Hanover
CIT went public and
was listed on NYSE.
The company had 600
employees and assets
of $44.7 MM
1942
1924
CIT founded as
Commercial Credit
and Investment
Company by Henry
Ittleson in St. Louis
1984
1980
CIT Financial
Corporation,
company’s
industrial
financing entity,
was incorporated
CIT and Tyco
announced definitive
agreement in which
Tyco would acquire CIT
Chemical Bank merged with
Chase Manhattan. CIT
ownership was 80% by DKB
and 20% by Chase
Manhattan
RCA acquired
CIT
1908
Successful CIT secondary stock
offering reduced DKB’s stake to
approximately 44%, with balance
of shares held publicly
1987
1995
1989
Manufacturers
Hanover
purchased CIT
from RCA
March
1999
1997
1996
Dai-Ichi Kangyo Bank
acquired an additional
20% of CIT from
Chemical Bank
Albert R. Gamper, Jr.,
named Chairman and
CEO of CIT.
CIT completed 100%
initial public offering
(NYSE: CIT)
1998
June 1,
2001
July 14,
2000
March 13,
2001
July 2,
2002
CIT is added to
the S&P 500
Index
CIT announced
agreement to
acquire
Newcourt Credit
Tyco Int’l
acquisition of
CIT completed
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”)
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Board of Directors
Board Member
Member
Since
Albert R. Gamper, Jr.*
2002
Jeffery M. Peek
2003
William A. Farlinger*
2002
Thomas H. Kean*
2002
Edward J. Kelly, III
2002
Peter J. Tobin*
2002
William M. Freeman
2003
Marianne Miller Parrs
2003
John R. Ryan
2003
Lois M. Van Deusen
2003
Gary Butler
2004
Independent
Directors
Board Committees
Audit
Comp
Nom & Gov
Chairman
Lead
Chairman
Chairman
* Served on previous CIT Boards
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Office of the Chairman
Al Gamper
Chairman & CEO
Jeff Peek
President & COO
Tom Hallman
Vice Chairman
Specialty Finance
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•
Joe Leone
Vice Chairman
CFO
Larry Marsiello
Vice Chairman
Chief Credit Officer
The Office of the Chairman structure is designed to ensure a smooth succession of Senior management
Collectively within the office are deep and complementary business management skills
– Broad financial services management skills
– Operational, financial and credit expertise
– CIT history and insight
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Specialty Finance - Commercial
Vendor Finance:
• Relationships with Dell Computer, Avaya, Snap-on
Flow Business
Tools, Agilent and other Fortune 500 companies
around the globe
• State-of-the-art transaction processing technology
• Scalable platform with significant operating
$12.6B
leverage
SBA Lending:
• #1 Provider of government backed small business
loans
Point-of-Sale & Office Products:
• Provide financing for credit card terminals,
Total Managed Assets $50B
photocopiers, etc.
Data as of March 31, 2004
Customized solutions supporting businesses
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Specialty Finance - Consumer
Home Equity:
Flow Business
• 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
$6.5B
Other Consumer:
• Liquidating Portfolios including
Manufactured Housing, Recreational
Vehicle, Marine & Inventory Finance
Total Managed Assets $50B
Data as of March 31, 2004
Automated processing drives efficiency
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Commercial Services
Flow Business
• Leading commercial services / factoring
business in the U.S.
• Vital credit bridge between vendors and
retailers
• Highly efficient processor
• Annuity-like earnings
• Long-term client relationships - 10+
$6.5B
years on average
• Superb track record of navigating retail
Total Managed Assets $50B
credit cycles
Data as of March 31, 2004
Premier brand recognition
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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
$4.1B
Total Managed Assets $50B
Data as of March 31, 2004
Consistent player in the ABL market
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Capital Finance
• Portfolio Composition
– Aerospace: $4.7B
– Rail: $2.5B
• Four decades of experience in providing
Transaction Business
customized financing and leasing
services
• Experts in managing and maximizing
collateral values
$7.2B
• Strong relationships with deep market
penetration
• State-of-the-art proprietary systems
Total Managed Assets $50B
Data as of March 31, 2004
“Best-in-class” equipment management
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Equipment Finance
• Leading equipment lender with a
Flow Business
premium brand name
• Industry leader in key markets:
– Construction equipment
– Manufacturing
– Corporate aircraft
• Wide range of product offerings including
$9.9B
direct financing programs with equipment
manufacturers and dealers
• Collateral and equipment management
expertise
Total Managed Assets $50B
Data as of March 31, 2004
Industry commitment and expertise
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Structured Finance
• CIT’s specialized investment bank for the
Transaction Business
middle market
$3.1B
• Project-oriented niche business
• Expertise in structured leasing, project
finance, media and regional aircraft
• Syndication capability limits use of
balance sheet
• Strong fee generator (Advisory,
Arranging, Underwriting, and syndicating)
Total Managed Assets $50B
Data as of March 31, 2004
Significant fee generator
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Commercial Aerospace
Portfolio Statistics
Total Exposure
Aircraft – number
$ 4.7 Billion
209 Planes
Average Age
7 Years
AOG (w/out LOI)
3 Planes
Top Exposure
$267 Million
Body Type
<10% Wide body
Geography
<22% North America
Portfolio Composition
Leverage 80/20
Finance/ $219
Leveraged Other
$235
Single
Investor
$148
Loans
$107
Operating
Leases
$3,992
Data as of March 31, 2004
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Business Re-Alignment
Structured Finance
Power, Energy
& Infrastructure, Regional
Air and SD&L
Communication & Media
Power, Energy & Infrastructure
Air - Regional
Structured Debt & Leasing1
Total
$1.3
1.1
0.3
0.4
$3.1
Communication & Media
$1.3
$1.8
Capital Finance
Air
Rail
Power, Energy & Infrastructure
Structured Debt & Leasing
Other
New Capital Finance
Business Credit
$5.1
2.7
1.1
0.1
0.1
$9.1
Business Credit - Old
Communication & Media
New Business Credit
$ 4.1
1.3
$ 5.4
1 Includes $0.3 billion of product with the rail industry
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Non-GAAP Disclosure
($ in Millions)
03/31/04
12/31/03
Managed assets:
Finance receivables
Operating lease equipment, net
Finance receivables held for sale
Equity and VC investments (included in other assets)
Total financing and leasing portfolio assets
Securitized assets
Managed assets
$ 32,187.4
7,576.2
1,006.2
251.8
41,021.6
9,067.0
$ 50,088.6
$ 31,300.2
7,615.5
918.3
249.9
40,083.9
9,651.7
$ 49,735.6
Earning assets:
Total financing and leasing portfolio assets
Credit balances of factoring clients
Earning assets
$ 41,021.6 $ 40,083.9 $
(3,619.4)
(3,894.6)
$ 37,402.2 $ 36,189.3 $
Tangible stockholders' equity:
Total equity
Other comprehensive loss relating to derivatives
$
Unrealized (gain) loss on securitization investments
Goodw ill and intangible assets
Tangible common equity
Preferred capital securities
Tangible equity
$
5,492.7
102.9
$
(11.3)
(485.5)
5,098.8
255.1
5,353.9 $
5,394.2
41.3
09/30/03
$
$
$
(7.7)
(487.7)
4,940.1
255.5
5,195.6 $
30,342.6
7,485.3
1,017.9
313.9
39,159.7
10,141.0
49,300.7
06/30/03
$
$
39,159.7 $
(3,103.0)
36,056.7 $
5,180.9
106.9
$
(8.0)
(437.9)
4,841.9
255.9
5,097.8 $
28,413.6
7,560.0
1,210.0
325.4
37,509.0
10,356.5
47,865.5
03/31/03
12/31/02
$ 28,654.6
6,831.4
1,273.0
334.3
37,093.3
10,387.7
$ 47,481.0
$ 27,621.3
6,704.6
1,213.4
335.4
35,874.7
10,482.4
$ 46,357.1
09/30/02
$
$
37,509.0 $ 37,093.3 $ 35,874.7 $
(2,471.6)
(2,437.9)
(2,270.0)
35,037.4 $ 34,655.4 $ 33,604.7 $
5,057.5
122.1
$
(7.9)
(404.1)
4,767.6
256.4
5,024.0 $
4,996.6
92.6
$
(12.5)
(399.8)
4,676.9
256.8
4,933.7 $
4,870.7
118.3
$
(20.5)
(400.9)
4,567.6
257.2
4,824.8 $
28,459.0
6,567.4
1,019.5
341.7
36,387.6
11,234.7
47,622.3
06/30/02
$
$
36,387.6 $
(2,513.8)
33,873.8 $
4,757.8
120.5
$
(23.6)
(402.0)
4,452.7
257.7
4,710.4 $
27,925.4
6,689.7
730.8
362.5
35,708.4
11,967.9
47,676.3
03/31/02
12/31/01
$ 26,297.7
6,604.0
645.2
352.2
33,899.1
14,188.7
$ 48,087.8
$ 30,333.0
6,465.6
1,510.3
338.2
38,647.1
10,442.2
$ 49,089.3
35,708.4 $ 33,899.1 $ 38,647.1
(1,980.0)
(1,543.5)
(2,184.2)
33,728.4 $ 32,355.6 $ 36,462.9
4,514.3
43.2
$
(18.6)
(403.1)
4,135.8
258.1
4,393.9 $
6,500.0
32.9
$ 10,842.2
52.7
(21.7)
(2,403.2)
4,108.0
258.6
4,366.6 $
13.9
(6,857.1)
4,051.7
259.0
4,310.7
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 substitute for, GAAP and may be
different from, or inconsistent with, non-GAAP financial measures used by other companies.
32