Commercial loan charge-off put a dent in CIT's 1Q

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Profits at CIT Group in New York took a hit in the first quarter after it charged off a commercial credit and mustered only spotty loan growth.

The $52 billion-asset company’s net income declined 46% from a year earlier to $97 million. Earnings per share of 74 cents were 21 cents lower than the mean estimate of analysts compiled by FactSet Research Systems.

The charge-off was $22 million. CIT did not name the borrower but said it took the loss on a single commercial loan. The company also raised its loan-loss provision 38% to $69 million primarily to bolster reserves in its commercial finance division.

Total loans and leases rose 2% to $39 billion.

Net finance revenue fell 6% to $391 million. Lower purchase accounting accretion and lower gross yields in CIT’s European railroad business were the main culprits, though the blow was cushioned by higher interest income on investment securities and commercial loans.

Chairwoman and CEO Ellen Alemany downplayed any concerns about the increase in the loan-loss provision.

“In terms of the broader increase [in reserves] that we had, there's no one industry, no one product type,” Alemany said during a Tuesday conference call to discuss earnings. “It was just a number of names in our performing book that we decided to build reserves on during the first quarter.”

However, CIT reported improvements in fee income and expenses.

Noninterest income rose 32% to $105 million on higher returns from bank-owned life insurance and higher gains from asset sales.

Noninterest expense dropped 10% to $281 million on lower professional fees and deposit insurancce insurance premiums. CIT also benefited from a favorable comparison, as the year-ago quarter included $15 million in restructuring charges and $6 million in intangible asset amortization.

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Earnings Commercial lending Commercial banking Credit quality Loan-loss provisions Ellen Alemany CIT Group