The CIT Group Inc., a New York based business lender, announced it turned a profit its first quarter since it went through its bankruptcy protection process. This can mean a lot to both the small and midsized businesses which receive financial assistance from CIT Group.
As it is, the company itself is one of the country’s biggest lenders to businesses. Consequently, last year, financial analysts warned everyone, any major failure, on the part of the company, would be certain to hinder any form of economic recovery. Again, this is because CIT Group grew to become a majority of small and midsized businesses’ best friend and funder. The company filed for bankruptcy towards the end of last year, and restructured its debt by December.
Though CIT Group fought to lower its growing debt and avoid bankruptcy, it failed and was denied a second government bailout—as the government already lost its $2.3 billion investment in CIT Group during the $700 billion Troubled Asset Relief Program. You don’t have to be a financial analyst to realize these are huge numbers.
During its “new” first quarter, CIT Group produced roughly $900 million (new loans and leases), though according to a recent statement from the company, this number was a hair under fourth quarter results. The company, overall, earned $97.3 million (49 cents per share) during three months—ending March 31st. CIT shares rose 80 cents to $41.50.
CIT Group has yet to relinquish any information regarding its quarters, pre-bankruptcy filing. Additionally, CIT Group’s factoring business loans fell in the first quarter for various reasons (“factoring,” trendy as it may be (especially these days), can prove helpful: short-term financing which promises suppliers will get paid, eventually, by merchants. The cash loans go to suppliers who, for one reason or another, can no longer wait 60-90 days to get paid for its shipments).
As part of its bankruptcy reorganization, the CIT Group re-established its loan loss reserves, during the first quarter. $186.6 million has been nestled away during the quarter, in effort to cover loan losses and save itself from any future defaults. For CIT Group, its rather large, accumulative loan losses were the catalysis behind filing for bankruptcy protection to begin with.
CIT Group spent much of last summer trying to reduce its debt burden and avoid bankruptcy. However, it was unable to do so. Then, the government turned down the lender for a second bailout as it had lost the $2.3 billion it initially invested in CIT Group, as part of the $700 billion Troubled Asset Relief Program.