The Problem With CIT Group's Buybacks

CIT Group plans to return capital through a combination of buybacks and special dividends and will be determinant on market forces.

Analysts at Barclays are unsure, however, about the potential of the buybacks, especially given the speed the company is expected to execute them at.

"Share accretion is limited and we estimate 2018 EPS would be $3.66, implying an NPV per share for CIT stock at ~$38. CIT could generate closer to an extra $1/share of NPV through a more gradual approach, but we expect management will likely trade some NPV for a more immediate reduction in the sharecount," according to Barclays analysts.

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Furthermore, the analysts explained, the rule of thumb for open market repurchases is that "it is difficult to buy more than 5–10 percent of the average daily volume without putting upward pressure on the share price." With CIT Group's expected $3 billion buyback, it would take approximately 400–800 days to buy back that many shares at that rate.

Barclays has an Equal-Weight rating on the stock with at $35 price target.

At last check, CIT Group was down 0.49 percent at $36.39.

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