BTIG Affirms CIT Group (CIT) at 'Buy' Following Commercial Air Unit Sale
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The firm noted the following on Friday:
- The sale, which is expected to close by the end of 1Q17, would enable CIT to return up to $3.3bn ¡V more than a third of its tangible common equity ¡V to shareholders through buybacks and special dividends. The company said it had received a "non objection" to its amended capital plan from the Federal Reserve Bank of New York (FRBNY), which had rejected its initial capital plan in June.
- The sale would also allow CIT to repurchase about $6bn of its unsecured debt, which would reduce the company's reliance on wholesale funding, which had been the primary reason why it had been forced to file for bankruptcy during the financial crisis. Deposits, a much more stable source of funding, would represent 75% of CIT's funding after the deal's closing.
- The deal also would move CIT closer to management's stated goal of transforming the company into a simpler, U.S.-focused middle-market lender that could command a significantly fuller valuation than the 0.66x its tangible book as of June 30 at which it had traded prior to the deal's announcement.
- We are reiterating our Buy recommendation on CIT and price target of $52 based on 1.0x the company's 2017 tangible book value discounted back at 10%. We view the sale of the commercial air leasing unit as a game-changer for CIT that should help it to narrow the gap between its valuation and those of U.S. regional banks.
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