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CIT Group Inc.
Wachovia 14th Annual Nantucket Conference
2
NoticesForward Looking StatementsCertain 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 MeasuresThese 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.
3
Introduction
• 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
4
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
Risk Management
Assume leadership positions in key businesses where operating leverage can be generated
Further utilize technology and information to properly balance risks and rewards
5
$3B
$7B
$11B
$10B
$19B
0 5 10 15 20 25
StF
CF
CF
EF
SF
Segment Overview
Managed Assets - $50B
Segment data excludes $250mm of equity investments held in corporate.
Small-ticket commercial lending and leasing, vendor finance, SBA lending and consumer home equity loans
Mid-large ticket asset based lending, factoring and other commercial services
Commercial aerospace and rail equipment leasing and lending
Diversified middle market equipment lending and leasing
Specialized investment bank for the middle market
Market Focus
Commercial$13B
Consumer$6B
Commercial Services
$7B
Bus.Credit$4B
SpecialtyFinance
EquipmentFinance
CommercialFinance
CapitalFinance
StructuredFinance
(billions)
6
Business Assessment
Business UnitManagedAssets
Market Position
Entry Barriers Competitive Strengths
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 Reputation, Relationships, Speed, Credit, Portfolio management and syndication capability
Structured Finance $3B Player Low/Medium Structuring expertise, Relationships, Credit, Underwriting and syndication skills
FLO
WTR
AN
SAC
TIO
N
7
More Diverse Today Than 10 Years Ago
CAGR13.5%
Managed Assets $13.7 billion Managed Assets $50 billion
13%7%
14%
36%
30%Commercial
Services
Capital Finance
EquipmentFinance
SpecialtyConsumer
BusinessCredit
25%
13%
13%8%15%
20%
6%EquipmentFinance
StructuredFinance
CommercialServices
Capital Finance
SpecialtyCommercial
SpecialtyConsumer
BusinessCredit
Segment data excludes $250mm of equity investments held in corporate.
December 1993 March 2004
8
38% 43%
20% 8%
21% 33%
15%10%
6% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Managed Assets Net Income
Structured Finance
Capital Finance
Commercial Finance
Equipment Finance
Specialty Finance
Segment data excludes equity investments and other corporate data.
$50 billion $164 million
Results by Business Segment
9
Financial Scorecard
* Excludes $25.5 million after-tax gain on PINES debt call
2003Q1
2004Q1*
Long Term Targets
Profitability Net Income ($ millions) 127 164EPS ($) 0.60 0.76ROTE 11.0% 13.1% 15%
Risk Adjusted Margin 2.34% 3.09% 3.40% - 3.60%Securitization Gain (% PT Income) 14% 8% Max. 15%
Expenses Efficiency Ratio 41.7% 41.1% 35% Area
CreditCredit Losses - Total 1.61% 1.26%
Balance SheetManaged Assets ($ billions) 47.5 50.1 8% - 10%Tangible Equity/Managed Assets 10.4% 10.7% 9% Plus
10
0.71%
0.42%0.42%
0.59%0.62%0.50%
0.61%
0.77%0.84%0.82%0.86%
0.83%
1.58%
1.17%
0.98%
1.26%
1.92%
1.77%
1.26%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Q12004
Liquidating, Telecom and Argentina
Core
Historic Credit Losses
.80-.85%
Objective
11
12/99 12/00 12/01 12/02 12/03 3/04
Sharp Improvement in Forward Markers
1.89%
2.16%
3.63%
3.90%
2.98%
2.71%
12/99 12/00 12/01 12/02 12/03 3/04
Owned Delinquency 60+ days
LiquidatingRepoNon-Accrual
3.24%
2.47%
2.05%
3.93%
2.16%
Non-Performing Assets
2.07%
12
Strong Balance Sheet
4.0 4.3 4.34.8
5.2 5.4
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Mar-04
7.69% 7.81%
8.78%
10.41% 10.45% 10.69%
Tangible Capital to Managed Assets
Tangible Capital ($billions)
644761
496447 469
637
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Mar-04
1.44% 1.40%1.64% 1.77% 1.71% 1.68%
General Reserves to Fin Rec.
Reserves ($millions)
Telecom General Argentine
13
1998 Q1-04
Rating Aa3/A+ A2/A
Profitability:
ROMA
ROTE
1.48%
14.0%
1.42%
13.1%
Asset Quality:
Charge-offs
NPA’s
0.42%
1.40%
0.98%*
2.07%
Capitalization:
Tang Equity/MA
Alt. Liquidity/STD
10.3%
43%
10.7%
86%
Ratings Objective
Issue Current Status
Economic Environment
• Improving economy• Diverse business franchises
Wholesale Funding Model
• Expanded funding diversity • Reduced refinancing risk• Proven alternate liquidity
Management Transition
• Well-defined succession plan• Experienced management
Comparative Analysis Other Qualitative Factors
* Core Charge-offs
Focus on returning to high single A long-term debt rating
14
Balanced and Diverse Funding Mix
US MTN26%
Globals27%
US CP9%
US Retail6%
Int'l ABS CP4%
US Comm. ABS11%
US Cons. ABS6%
Int'l Globals & MTN's
3%
US ABS CP7%
Private Placements 1%
Outstanding Debt and ABS at December 31, 2003
• Commercial Paper– US$ 5.0B program
– C$ 1.0B program
– A$ 1.0B CP/MTN program
• Term Debt– Diverse product offerings:
• Institutional and Retail
• Public and Private
• US and International
– Strong demand across maturities
• Securitization– Attractive funding alternative and valuable liquidity source
– Diverse product offerings:• Public market and Private conduits
• Various asset classes
15
Capital Generation
Return on Equity 13%
Dividend Payout 17%
Capital Generation
11%
• Asset growth target 8-10%
• Increased dividend 8%
• Stock buyback program to support employee stock option program
• Acquisitions that are accretive to earnings
Funds
16
Growing the Business
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%
Grow assets consistent with GDP expansion
17
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
18
Key Investment Highlights
• Diverse franchise with market leadership positions and 95+ years experience in commercial lending
• 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
Appendix
20
Corporate History
CIT founded as Commercial Credit
and Investment Company by Henry Ittleson in St. Louis
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”)
Albert R. Gamper, Jr., named Chairman and
CEO of CIT.
CIT completed 100% initial public offering
(NYSE: CIT)
Tyco Int’l acquisition of
CIT completed
CIT and Tyco announced definitive agreement in which
Tyco would acquire CIT
CIT announced agreement to
acquire Newcourt Credit
Successful CIT secondary stock offering reduced DKB’s stake to approximately 44%, with balance
of shares held publicly
1997
Chemical Bank merged with Chase Manhattan. CIT
ownership was 80% by DKB and 20% by Chase
Manhattan
Dai-Ichi Kangyo Bank acquired an additional
20% of CIT from Chemical Bank
Dai-Ichi Kangyo Bank acquired 60%
of CIT from Manufacturers
Hanover
Manufacturers Hanover
purchased CIT from RCA
CIT Financial Corporation, company’s industrial
financing entity, was incorporated
CIT went public and was listed on NYSE.
The company had 600 employees and assets
of $44.7 MM
July 2, 2002
June 1, 2001
July 14, 2000
CIT is added to the S&P 500
Index
March 13,2001
March1999
19981996
1995
1989
19871984
1980
RCA acquired CIT
1942
1924
1908
21
Board of Directors
* Served on previous CIT Boards
Board MemberMember
SinceIndependent
Directors
Board Committees
Audit Comp Nom & Gov
Albert R. Gamper, Jr.* 2002
Jeffery M. Peek 2003
William A. Farlinger* 2002
Thomas H. Kean* 2002 Chairman
Edward J. Kelly, III 2002
Peter J. Tobin* 2002 Lead Chairman
William M. Freeman 2003
Marianne Miller Parrs 2003
John R. Ryan 2003 Chairman
Lois M. Van Deusen 2003
Gary Butler 2004
22
Office of the Chairman
• 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
Tom H a llm anV ice C ha irm an
Specia lty F inance
Joe LeoneV ice C ha irm an
C FO
Larry M ars ie lloV ice C ha irm an
C h ie f Cred it O fficer
Jeff P eekP resident & COO
A l GamperChairm an & CEO
23
Customized solutions supporting businesses
Flow Business
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.Total Managed Assets $50B
$12.6B
Data as of March 31, 2004
24
Automated processing drives efficiency
Specialty Finance - Consumer
Home Equity:• 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:
• Liquidating Portfolios including Manufactured Housing, Recreational Vehicle, Marine & Inventory Finance
Total Managed Assets $50B
$6.5B
Flow Business
Data as of March 31, 2004
25
Premier brand recognition
Commercial Services
• 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+ years on average
• Superb track record of navigating retail credit cycles Total Managed Assets $50B
$6.5B
Flow Business
Data as of March 31, 2004
26
Consistent player in the ABL market
Business Credit
• Asset based lender to multiple industries
• 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
Total Managed Assets $50B
$4.1B
Transaction Business
Data as of March 31, 2004
27
“Best-in-class” equipment management
Capital Finance
• Portfolio Composition
– Aerospace: $4.7B
– Rail: $2.5B
• 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 systemsTotal Managed Assets $50B
$7.2B
Transaction Business
Data as of March 31, 2004
28
Industry commitment and expertise
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 and dealers
• Collateral and equipment management expertise
$9.9B
Total Managed Assets $50B
Flow Business
Data as of March 31, 2004
29
Significant fee generator
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
• Syndication capability limits use of balance sheet
• Strong fee generator (Advisory, Arranging, Underwriting, and syndicating)
Total Managed Assets $50B
$3.1B
Transaction Business
Data as of March 31, 2004
30
Commercial Aerospace
Portfolio CompositionPortfolio Statistics
Total Exposure $ 4.7 Billion
Aircraft – number 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
Data as of March 31, 2004
Leveraged - Other$235
Loans$107
Finance/ Single Investor$148
Leverage - 80/20$219
Operating Leases$3,992
31
Business Re-Alignment
Power, Energy & Infrastructure, Regional
Air and SD&L
$1.8
Communication & Media
$1.3
Structured FinanceCommunication & Media $1.3Power, Energy & Infrastructure 1.1Air - Regional 0.3Structured Debt & Leasing1 0.4Total $3.1
Capital FinanceAir
$5.1Rail
2.7Power, Energy & Infrastructure
1.1Structured Debt & Leasing
0.1Other
0.1New Capital Finance
$9.1
Business CreditBusiness Credit - Old
$ 4.1Communication & Media
1.3New Business Credit
$ 5.41 Includes $0.3 billion of product with the rail industry
32
Non-GAAP Disclosure
Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to trends in the business to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
($ in Millions) 03/31/04 12/31/03 09/30/03 06/30/03 03/31/03 12/31/02 09/30/02 06/30/02 03/31/02 12/31/01Managed assets:Finance receivables 32,187.4$ 31,300.2$ 30,342.6$ 28,413.6$ 28,654.6$ 27,621.3$ 28,459.0$ 27,925.4$ 26,297.7$ 30,333.0$ Operating lease equipment, net 7,576.2 7,615.5 7,485.3 7,560.0 6,831.4 6,704.6 6,567.4 6,689.7 6,604.0 6,465.6 Finance receivables held for sale 1,006.2 918.3 1,017.9 1,210.0 1,273.0 1,213.4 1,019.5 730.8 645.2 1,510.3 Equity and VC investments (included in other assets) 251.8 249.9 313.9 325.4 334.3 335.4 341.7 362.5 352.2 338.2 Total f inancing and leasing portfolio assets 41,021.6 40,083.9 39,159.7 37,509.0 37,093.3 35,874.7 36,387.6 35,708.4 33,899.1 38,647.1
Securitized assets 9,067.0 9,651.7 10,141.0 10,356.5 10,387.7 10,482.4 11,234.7 11,967.9 14,188.7 10,442.2 Managed assets 50,088.6$ 49,735.6$ 49,300.7$ 47,865.5$ 47,481.0$ 46,357.1$ 47,622.3$ 47,676.3$ 48,087.8$ 49,089.3$
Earning assets:Total f inancing and leasing portfolio assets 41,021.6$ 40,083.9$ 39,159.7$ 37,509.0$ 37,093.3$ 35,874.7$ 36,387.6$ 35,708.4$ 33,899.1$ 38,647.1$
Credit balances of factoring clients (3,619.4) (3,894.6) (3,103.0) (2,471.6) (2,437.9) (2,270.0) (2,513.8) (1,980.0) (1,543.5) (2,184.2) Earning assets 37,402.2$ 36,189.3$ 36,056.7$ 35,037.4$ 34,655.4$ 33,604.7$ 33,873.8$ 33,728.4$ 32,355.6$ 36,462.9$
Tangible stockholders' equity:Total equity 5,492.7$ 5,394.2$ 5,180.9$ 5,057.5$ 4,996.6$ 4,870.7$ 4,757.8$ 4,514.3$ 6,500.0$ 10,842.2$
Other comprehensive loss relating to derivatives 102.9 41.3 106.9 122.1 92.6 118.3 120.5 43.2 32.9 52.7
Unrealized (gain) loss on securitization investments (11.3) (7.7) (8.0) (7.9) (12.5) (20.5) (23.6) (18.6) (21.7) 13.9 Goodw ill and intangible assets (485.5) (487.7) (437.9) (404.1) (399.8) (400.9) (402.0) (403.1) (2,403.2) (6,857.1)
Tangible common equity 5,098.8 4,940.1 4,841.9 4,767.6 4,676.9 4,567.6 4,452.7 4,135.8 4,108.0 4,051.7 Preferred capital securities 255.1 255.5 255.9 256.4 256.8 257.2 257.7 258.1 258.6 259.0
Tangible equity 5,353.9$ 5,195.6$ 5,097.8$ 5,024.0$ 4,933.7$ 4,824.8$ 4,710.4$ 4,393.9$ 4,366.6$ 4,310.7$