The Wall Street Journal-20080112-CIT Signals Likely Loss And Bolsters Provisions
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CIT Signals Likely Loss And Bolsters Provisions
CIT Group Inc. indicated it will post a fourth-quarter loss, saying it is boosting loan-loss provisions by $300 million and writing off the remaining goodwill from getting into the student-loan business.
Despite the write-offs, shares in CIT rose $2, or 8.9%, to $24.52 at 4 p.m. in New York Stock Exchange composite trading.
Standard & Poor's reaffirmed CIT's credit rating, and said the balance-sheet positioning allows the company to move past the losses associated with its home-lending business in 2007.
The New York commercial finance company forecasts a net loss of 65 cents to 70 cents a share, after taking one-time items totaling nearly $355 million, or $1.87 a share.
CIT cited the "continued weakness in home-lending markets" as the chief reason for the loan-loss-reserve increase.
The company also will take a $300 million charge to write off the remaining goodwill and intangibles from its $318 million acquisition of Education Lending Group Inc. in 2005. The deal got CIT into the education-finance market. The company on Friday blamed "recent decreases in market valuations for student lending businesses, and lower profit expectations for this business as a result of higher funding costs."
CIT also forecast a $25 million loss on home-lending receivables held-for-sale as of Sept. 30. As of Dec. 31, such receivables were expected to total $350 million.
The company also will record a $160 million gain on the sales of its interest in the Dell Financial Services joint venture with Dell Inc. and disposing of its U.S. Systems Leasing business. Dell last month agreed to purchase CIT's 30% interest in the venture for $306 million.
