Times are tough for commercial banks, but they're even tougher for multinational, systemically important, energy-dependent lenders looking to double down in the middle market.

The weak performance of the commercial banking division at CIT Group — the core of its latest turnaround plan — made that clear. Pretax commercial banking income plunged 58% to $44 million from Dec. 31 to March 31, while expenses rose.

The sharp decline reflected broader market trends. Lending to companies with revenue of $50 million to $1 billion fell by some counts more than 40% during the three-month period. Big swings in the equity markets stifled demand at CIT and elsewhere, Chief Executive Ellen Alemany said during a conference call with investors.

Still, the dismal results cast a shadow — though perhaps a temporary one — over the CIT's highly publicized plan to reinvent itself. Under pressure to boost returns, the company plans to focus on lending to midsize companies. During the call analysts pressed Alemany on CIT's outlook for growth in its core business.

Her response was simple: Just give it time.

"I would say that it was a slow first quarter, but I think that we've got a pretty good pipeline," Alemany said.

CIT has found "pockets of activity" in several industries, including heath care and power, Alemany said. She also noted that, despite the difficult market conditions, commercial lending assets increased 2% to about $22 billion.

The commercial asset growth was a "net positive," said Arren Cyganovich, an analyst with D.A. Davidson.

Cyganovich added that the first-quarter declines were likely just a short-term blip, as middle-market lending has begun to pick up across the industry.

"You're always going to run into periods where there is heightened volatility," he said. But the market "is opening back up."

Overall, total profits at the $67 billion-asset company edged up about 2% from the fourth quarter, to $146.9 million. Year-over-year comparisons were distorted by the acquisition of OneWest Bank in August.

The lackluster quarter comes as Alemany begins what is expected to be a long, uphill battle to revamp the company's business model. She took over as CEO on April 1, replacing John Thain during a trying period for the bank.

CIT's controversial purchase of OneWest resulted in a series of accounting woes, culture clashes and heightened compliance costs. During a conference call in March, Alemany outlined a plan to turn the company around — and refocus it as a "national leading middle-market bank."

To that end, CIT has begun spinning off various high-cost lines of business, including its $10 billion-asset aircraft financing unit. It also sold its U.K.-based equipment financing unit during the first quarter and will shed businesses in Canada and China by the end of the year.

But some of CIT's biggest challenges in the first quarter came in its bread-and-butterbusiness units.

For instance, its factoring business declined as clients struggled with "soft" market conditions in the retail sector, the company said. Commissions from that division declined 9% to $26 million.

Credit costs also increased. CIT boosted its provision for loan losses by 72% amid ongoing deterioration in its oil and gas portfolio.

"Market conditions aren't great right now," said Carol Hayles, the company's chief financial officer.

Still, the company said it expects its commercial banking division to grow in the coming year as the market begins to turn around.

"They're enhancing their capabilities," Cyganovich said. He noted that Alemany has recently added several executives with strong track records in commercial banking.

CIT recently hired nine new equipment finance lenders from GE Capital and will continue "strategically updating the team" in certain markets, Alemany said.

Additionally, the company has begun the process of mining its database of 205,000 companies that use factoring as it looks to cross-sell additional products and services.

"We want to be the lead bank in the small- and middle-market space nationally, and the customer base in our factoring business is a really crucial part of that strategy," Alemany said.

CIT also hired John Erickson, a former executive with the Japanese-owned MUFG Union Bank, to lead the company's California offices. Erickson will be primarily responsible for consumer banking, but he will also help the company grow its middle-market business along the West Coast.

Notably, during the first quarter the company closed a small-business financing deal through an online-lending platform in one of its retail branches for the first time.

"We've got a lot of new business initiatives going," Alemany said.

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