The brokerage sees CIT Group's net finance margin dropping 14 basis points on a quarter-over-quarter basis to 3.6 percent due to pressures from continued weakness in rail partly. The two analysts also see credit costs to remain elevated levels and might come at the higher end of the guidance range, possibly 0.25–0.50 percent of AEA.
"Overall, we expect few surprises this quarter from CIT. The near-term focus for us continues to be the progress of the commercial air separation. Form 10 related to the separation was filed, which revealed a commercial aviation leasing business (C2 Aviation) with comparable returns (~2.5 percent ROA) to publically traded air lessors and ~$3 billion in equity, both of which were relatively in line with our expectations and what was communicated by the company initially," according to the research note.
As far as Credit quality, Barclays expects CIT Group to make credit provisions of ~$60 million, or 0.40 percent AEA. The brokerage recalled the management's comments in the last quarter indicating that if oil price continued its weakness, i.e. ~$40–45/bbl oil, then its non-accruals could jump to ~$100 million. As a result, it would be forced to boost additional provisions of $30–40 million for the reminder of the year.
At time of writing, CIT Group was up 0.86 percent on the day at $34.05.
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