KBW Slaps Rating On CIT Group, Talks 'New Chapter'

In a report published Monday, Keefe, Bruyette & Woods analysts initiated coverage of

with a Market Perform rating and a price target of $50. CIT has successfully emerged from bankruptcy and rebuilt its core profitability, de-risked its balance sheet and taken steps to fortify its capital base. The company has also regained a strong share of the aerospace and leasing markets. The analysts mentioned, however, "…we believe there is still more work to be done and it may take a few years before the company can right-size its tangible common equity (TCE) level and deliver more consistent and transparent returns on tangible common equity (ROTCE). Investment Positives." The company could benefit from GE Capital divestitures by bidding for smaller blocks of assets in the Americas. Also, the closure of the OneWest deal could act as a catalyst for CIT's shares in the near future. "After initially reacting positively to the announcement of the OneWest acquisition last summer, the shares have underperformed relative to benchmarks. We believe the actual closing of the deal could be a catalyst for the shares," the analysts said. "Additionally, with the OneWest deal the company could recapture the $0.7 billion ($3.86/share) deterred-tax-asset (DTA) valuation allowance, which could more than offset the tangible-book-value (TBV) dilution from the acquisition," the report added. The company's stock is expected to be range bound in the near terms as investors wait for the closure of the OneWest deal and emergence of more consistency and transparency in the company's earnings.