cit 2004%20q3

CIT Moderator: Valerie Gerard

10-21-04/10:00 am CT Confirmation # 1133893

The following transcript has been provided by a third party transcription service for informational purposes only. CIT has not reviewed or edited the transcript and expressly disclaims any responsibility for the accuracy of this transcription.

CIT

Moderator: Valerie Gerard October 21, 2004

10:00 am CT

Operator: Good morning. My name is (Dawn) and I will be your conference facilitator.

At this time I would like to welcome everyone to the CIT third quarter

earnings conference call. All lines have been placed on mute to prevent any

background noise.

After the speaker’s remarks there will be a question and answer period. If you

would like to ask a question during this time, simply press star then the

number 1 on your telephone keypad. If you would like to withdraw your

question, press star then the number 2 on your telephone keypad.

Thank you.

Miss Gerard, you may begin your conference.

Valerie Gerard: Thank you (Dawn). Good morning everyone.



During this call any forward-looking statements made by management relate

on to the time and date of this call. We expressly disclaim any duty to update

these statements based on new information, future events, or otherwise.

For information about the risk factors relating to our business, please refer to

our quarterly and annual reports filed with the SEC. Any references to certain

non-GAAP financial measures are meant to provide meaningful insight and

are reconciled with GAAP in the investor relations section of our website at

www.cit.com.

And with that, it’s my pleasure to introduce our CEO Jeff Peek.

Jeffrey Peek: Thanks Valerie and good morning to everyone.

We’re delighted to be reporting strong earnings and a solid quarter of growth.

Now in last quarter’s conference call, I talked about what you could expect of

me as CEO. And one of the items I mentioned was that you should expect us

to implement a series of initiatives designed not only to energize CIT but also

to instill a high performance culture. And during this quarter we launched

several important initiatives.

Each initiative was aligned with three principal concepts that I still believe are

fundamental to our growth, ROE, RPM, and one CIT. Now, while I discussed

these concepts at our investor day in June, I just want to take a moment and

talk about these and refresh your memory.

First ROE, which is measuring our success by what truly creates value for our

shareholders and for all of us, return on equity. And RPM, which is revving

up our velocity as a company. Engaging CIT in a mindset that’s pro-growth,



pro-marketing, and proactive. And one CIT, which is aggressively leveraging

our strengths across business units to build the CIT brand, its visibility and

value for its customers.

Now I think momentum is building throughout CIT as these principles are

becoming infused into our consciousness and everyday life. And each

initiative that I’m going to talk about is a direct output of these concepts.

They play a very active role in our decision making process and our resource

allocations.

First in corporate governance. In September, we established the CEO council

with the express purpose of identifying and solving the key issues across the

businesses. Instituting collaborative projects and communicating initiatives

and results to the organization. The group is comprise of approximately 25

senior leaders across the company and meet monthly to exchange a variety of

viewpoints and expertise.

Secondly, sales and marketing. This summer we brought together sales

professionals from all the business units to identify organic opportunities to

build a stronger, more profitable, and cohesive CIT. And also address the

business challenges we face and discussed how we can build a proactive

marketing culture to complement our credit and risk management cultures.

The meetings resulted in a series of enterprise wide activities that are focused

on making cross marketing and cross business collaboration a core

competency at CIT.

There are also some cultural initiatives. These important initiatives include

the establishment of the women’s advisory council, the corporate after leave

program, and the strategy and leadership forum. Now each of these programs

has been designed to encourage thought leadership, optimize peer interaction,



and strengthen CIT through both diversity and collaboration. I firmly believe

that by investing in these types of programs, we’re investing in employees

who in turn better serve our customers and position us for future prosperity.

And our change agenda at CIT is anchored by this collection of initiatives.

From governance to diversity, which drives us to be a better, stronger, and

more responsive organization for our customers and our stakeholders.

I also want to highlight an addition to our team. In mid-September we added

a new member to the executive management team, Rick Wolfert, our new

Vice Chairman. Rick joins us from GE and before that he was President of

(Walter Hober). He brings a wealth of industry experience, strong strategic

and operational skills, and a very strong team based leadership style. All of us

feel that we’re very fortunate to have Rick on our team.

Now he’s responsible for several business units, Capital Finance, Equipment

Finance, Business Credit, and Commercial Services. Rick will work closely

with Tom Hallman our Vice Chairman of Specialty Finance in running our

day-to-day business operations and together they will drive our growth

strategy and expand existing customer relationships across the frontier of our

businesses.

During his first month at CIT, Rick’s been busy getting acclimated, meeting

folks, and visiting key locations. So from an internal perspective, the energy

level is quite high as a result of these initiatives and Rick’s appointment. That

energy translated into continued momentum for our business and financial

performance in the third quarter.

Now let’s turn to the quarter results. Something you’ve all been waiting for.

The financial highlights. We posted an extremely solid third quarter and I can



tell you it’s particularly gratifying to deliver such a strong performance to all

of our stakeholders. The earnings release does a good job of outlining the

quarter’s highlights and Joe is going to discuss the details behind the numbers

in just a moment.

But let me tell you what I think are the important take aways from the quarter.

First, our risk adjusted margin of 3.5% reached the target range, which we

established at the IPO. Second, new business volumes were strong in three of

our four business segments, which reflect an expanding economic recovery as

well as additional focus and intensity on the sales function.

Managed assets grew more than 5% or $2.6 billion from last quarter. A rather

impressive performance. That one quarter increase in asset levels had always

been on our radar screen, even from the beginning of the year. And total

footings were stronger than forecast as we pushed for the earlier closing of our

international acquisition from Citi Group.

Liquidating portfolios are down some $140 million driven by the sale of

slightly more than $100 million in recreational vehicle and marine assets.

Most of the remaining $675 million in liquidating assets is in manufactured

housing loans. And we’ll continue to seek bids on these assets as we look to

shed non core, low yielding assets and redeploy capital into more profitable

opportunities, which as all of you know is one of our key strategic goals.

If you put all these items together, you get an ROE of $14.1%. That’s 190

basis point improvement over the last four quarters and a 40 basis point

improvement from the second quarter of 2004. And that clearly puts us within

striking range of our ROE target of 15%.



So in my view, there’s lots of good news on the financial performance side.

While we did make encouraging progress on our efficiency ratio, the only

major disappointment in our financial results was probably the stubbornness

of our operating expenses. Joe is going to talk to OPEX levels and our

expense initiatives in a moment. But let me say this, each of our businesses

has to realize further operational efficiencies and all of us on the senior

management team are committed to bringing down our operating costs in

2005.

Now let’s talk a little bit about the business highlights, now that we’ve

reviewed the financial metrics. Let’s start with Tom Hallman’s businesses.

Major vendor. Now the big news here is the September announcement of the

extension and modification of our U.S. joint venture with Dell computer.

The new agreement extends the joint venture relationship into January 2010.

So congratulations to Tom and (Jeff Simon) for the RPM here in negotiating

extending relationship well in advance of the October 2005 expiration date of

the existing agreement.

Moreover this unit enjoyed a solid quarter. Volumes were strong and rose

from second quarter levels led by higher (Dell) volumes and strong consumer

demand for technology. As we look ahead, the fourth quarter volumes for this

unit should be strong given the higher end of year equipment spending by

businesses and, of course, the holiday demand for personal computers.

On the international front, the integration of our European vendor leasing

business is ahead of schedule and that enabled us to close the acquisition of

Citi Capital Europe early, ahead of schedule. We quite encouraged by this

acquisition. It’s an excellent strategic fit. It adds scale to our European



portfolio. Diversifies our customer and dealer base. And of course,

accelerates our international expansion, which is one of our initiatives.

Even with this acquisition, the international management team was not

distracted. The quarter was a good one with nice volume laterals. Our

business in Europe is improving through a combination of greater volumes

and scale due to the acquisition as well as improved credit performance. This

adds up to a significant overall improvement in profitability for this unit.

Now another highlight in specialty finance comes from our SBA, Small

Business Administration unit, which was recognized as the number one SBA

lender in the United States for the fifth straight year. And we’re particularly

encouraged by the business outlook here. Our recently published small

business survey cites the small businesses have a positive outlook for business

growth despite the challenges facing them.

For us, it implies that these businesses are investing in new technologies and

financing their growth plans. And we do see a very strong pipeline going into

the end of 2004. Also as a sidelight, the credit quality of this portfolio is in

the best shape it’s ever been.

Also home equity is shaping up to have a very good year. Volumes are up

nicely and when enhanced by the routine bulk purchases, which are part of the

unit’s multi-channel origination strategy. Most importantly, credit metrics

remain strong and in fact, are actually improving. So the profitability of the

home equity unit continues to improve and it is within striking distance of

achieving our 15% hurdle rate for return on equity given our risk based capital

allocations.



The small to mid ticket leasing business grew modestly in the quarter after

realizing substantial growth in the second quarter as a result of the acquisition

of GTS, (GATX) Technology leasing business. Credit metrics are good here

overall but we’re pressured somewhat by one particular account that Joe will

discuss in his presentation.

As mentioned earlier, we closed on the previously announced $100 million

divestiture of our marine and recreational vehicle portfolios, which again is

part of our effort to redeploy capital into our core higher return businesses.

Overall, I think you’d have to say that the profitability of specialty finance,

which is already very high, continued to improve.

Now let’s turn to Rick Wolfert’s set of businesses. We’ll stat with equipment

finance, which I think is really turning the corner. Net income doubled

compared to a year ago. Returns are twice the levels seen last quarter. Credit

quality is in its best shape in several years with net charge offs half of last

quarter’s level due to a strong surge of recovery.

Clearly as we look forward the challenge for this unit will be to keep its focus

on asset quality. Volume trends are good in the construction, healthcare,

corporate aircraft, and gaming businesses. And while pricing remains tight,

opportunities are on the upswing as are the vital economic signs of our

customer’s prosperity.

Our factoring business enjoyed a great third quarter with asset levels

benefiting from the seasonality inherent in factoring and the positive impact of

the GE and HSBC acquisitions. Credit metrics are also in great shape. This

remains our highest returning business. Retail sales have been spotty of late

so we are closely watching retailers as some are slipping on their deliveries.



Business credit is having a very nice year, although as the economy has

strengthened the complexion of its lending activities have shifted from debt

financings and restructurings to the traditional working capital refinancing and

buyout businesses. However, its pipeline is good in all regions and credit

quality is much stronger.

That said, pay downs are pretty high given the liquidity today provided by

hedge funds and the high yield market. So while tough to predict, we’re

confident that the level of terminations is starting to trend down.

And finally the integration of the communications and media portfolio has

been smooth and business flows in this sector are very good.

Now let’s move on to Capital Finance. Demands for rail cars is extremely

strong given the large amount of goods moving throughout the U.S..

Utilization rates here remain quite high, approximately 99% and lease rates

continue to trend up as a result.

As you know, we order new rail cards each year in an effort to keep our fleet

young, modern, and efficient. Given the extraordinary demand for cars,

combined with the appealing nature of our fleet, customers have essentially

locked up our existing cars.

Looking in the next year, we’re quite confident that our cars on order, will be

placed well ahead of their delivery dates. So a nice profitable year for the rail

team.

Aerospace is seeing some encouraging signs despite the challenges facing the

US airline. Lease rates on newer model aircraft, are up on average by about



20% year to date and lease rates on older, out of production models are still

10% higher year to date.

We delivered three airbus aircraft to three airlines during the quarter. And the

balance of this year’s deliveries are committed. Fourteen of the 18 deliveries

for next are placed, with the open positions falling into the fourth quarter of

2005.

Now while this unit’s vital signs are improving, profitability in the business

remains under pressure, given a combination of the financial uncertainty

facing many of the US legacy carriers, as well as the impact from the higher

cost of fuel.

The power, energy, and infrastructure unit is performing well and its new

business pipeline is strong. Specifically we have a number of mandates to

arrange financing for public and private partnerships in the UK and Canada.

And the structured debt and leasing unit continues to focus on servicing the

other units in capital finance. So you would have to say that return for capital

finance are stable.

Now I want to offer just a couple words on our earnings outlook for 2005. As

many of you know, we’re in the early stages of our annual financial planning

process. From our current vantage point, we see the continuation of our

favorable business climate, and we’re confident that we’ll meet or exceed our

financial targets of 10% growth in earnings per share and ROE of 15%.

Now we’ll update you more specifically when we get to the conference call in

January and we’ll have a more developed view of the outlook for 2005.



Now in summary, the third quarter performance reflects the financial and

operational momentum in the organization. We do have challenges, but we

feel those are clearly outweighed by today’s market opportunity.

So that leads to my high degree of confidence that we’ll close out 2004

strongly. And my expectation is that 2005 will be a year of opportunity for

CIT. Our management team is committed to adding value to the company,

building momentum and making significant progress toward our financial

targets.

Now with that, I’m pleased to hand over the discussion of our financial results

to our Vice Chairman and Chief Financial Officer, Joe Leone. Joe.

Joseph Leone: Thank you Jeff, and again good morning to everyone.

I agree, very strong financial results this quarter and very good momentum as

a company.

Let me share some additional financial analytics with you. And it’s easy to

see, from what you may have read or what you heard from Jeff, that

profitability was solid and asset growth was very strong.

And what I’d like to help you on is the analysis on the quality of the earnings,

which I think is very, very high.

Jeff mentioned we made progress in our financial target, better return on

equity, better margins, which was significant, and even better credit quality

coming off of a very good credit market in Q2.



Net income levels exceeded $180 million and the earnings per share, as you

can see, was 86 cents, which was up nicely from the last quarter.

Our strategic initiatives are paying off, we talked about this a little in the last

quarter. New business was solid at up almost $6 billion, that’s up 7%

sequentially and 10% year over year.

Jeff mentioned managed asset growth. It was across all segments, but most of

the growth was centered in our higher returning businesses, specialty finance

and commercial finance. Even equipment finance had some growth, albeit it

modest, and that was the first quarter of any growth in over three years.

As Jeff said profitably in that unit, equipment finance improved again and

credit performance improved considerably. Charge-offs in that unit were 50

basis points, a level we haven’t seen in four years. So real good performance

in equipment finance.

Going the other way up a little bit, capital finance had a slight decrease in

profitability. The second quarter we had very, very high levels of syndication

fees, and we had very low levels of syndication fees in that unit this quarter.

Yet, Jeff mentioned a little of this, we’re seeing stronger lease margins this

quarter in both rail and air on better rental rates and the very strong utilization

Jeff mentioned.

Some more color on asset growth, managed assets are up $2.6 billion

sequentially, 2.5 to 2.6 billion sequentially, and that brings the year to date

growth rate from year end to 5% in managed assets and over 10% in on

balance sheet assets.



Commercial services, very strong at $1 billion, a very strong quarter of

growth. Jeff mentioned business credit accrued $300 million and the

opportunity to challenges we have there. But we saw a good demand in asset

base lending, some seasonal increase in retail industry loans – in loans to the

retail industry.

The $700 million in loans, the Citi Capital European acquisition helped. The

remainder of that transaction should close by the end of the year.

Specialty finance to consumer, very good growth, $350 million, most of the

growth was in home equity, both good volume out of a broker network and

bulk purchases. This offset the decline that Jeff mentioned in the RD and

(rein asset) sale, but that decline in liquidation – liquidating assets helped our

credit markers as well.

Margins – risk adjusted margins, just about up to 3.5% target we set two years

ago. And net finance margin was up $23 million, that’s 11 basis points form

the second quarter. And while I’ve said before, margin is dynamic it has a lot

of moving parts. Let me give you some of the parts.

Operating lease margin improved. We talked about aerospace rental rates

being up, rail improvement in margins, and as they reprice into a strong

demand and strong economy in that sector.

Overall rental income for the company on operating leases, net of

depreciation, increased about $20 million sequentially. If you remember last

quarter we took about a $15 million impairment charge. So we had growth

and improvement in rental rates over and above the depreciation rate, with the

depreciation charge we took last quarter.



When you look at (lending spreads), basically flat quarter to quarter. We did

have benefit from refinancing some higher cost debt that we’ve spoken about.

That was somewhat mitigated by higher short-term rates with LIBOR

increasing. And we did again have a very high liquidity level and there is a

cost to that.

Margin improvement because of the mix, we had asset growth so we had more

dollars of margin, we bought the DACX technology portfolio, we sold TRS,

and that mix to higher margin business helped the overall margin, including

the sale of the liquidating portfolios.

So essentially there we replaced the liquidating, the TRS rental business, with

the DACX acquisition, and that helped margins.

Yield related fees were very strong last quarter. They were down 3 million

this quarter, or sequentially down 3 million. And that depressed margins by

about four basis points, which we made up from the other factors I just

discussed.

Credit volume was very strong. Total charge-offs were 88 basis points, core

charge-offs were 73. The improvement in losses versus the prior quarter

reflected lower charge-offs from the liquidating portfolios, basically because

of the sales we’ve been executing.

Recoveries as we expected, declined a bit. They’re still strong, 17 basis points

from about 25 basis points from last quarter. Losses were down in all areas

except specialty finance commercial, where we took charge-offs and some

reserves against their exposure to clients of (Norvirgin) a bankrupt vendor.



Our remaining investment with (Norvirgin) customers, net of the reserves and

provisions, is approximately $6 million.

Our forward credit markers look very good. Delinquencies and non-

performance, declining to the lowest levels in about five years.

Reserves, total reserves increased about 17 million and general reserves

increased 28 million and that was due to reserves from acquisition. We

provided $60 million through the P&L, and that was slightly higher than the

core charge-offs of $58 million. We applied $11 million of telecomm charge-

offs against the dedicated telecomm reserves.

The dollar increase in reserves reflects asset growth. The decline in reserves

on a percentage basis, reflects portfolio quality, improvements specifically in

past due to non-performing. Our charge off coverage ratios remain very

strong, as our reserve analysis reflects non-accrual levels, our risk estimation

on impaired loans, charge off rates and economic and industry trends.

Operating expenses, they’re down $3.5 million from the prior quarter, with

employee related costs down $10 million. Now if you remember last quarter

we put up about a $5 million restructuring charge and therefore employee

costs, sort of on a comparable basis, we’re down $5 million sequentially.

Partially offsetting the savings we got, we’re higher legal and professional

fees relating to continuing compliance areas like Sarbanes-Oxley. Our ratio

did improve a little bit, 41.5% efficiency ratio and 2.18 percentage of

expenses to managed assets. That’s not enough.

We have been controlling head count. Head count is down slightly from the

second quarter, and about 80 from a year ago. We continue to gain



efficiencies from the organizational realignments we announced last quarter in

capital finance and business credit. And Jeff mentioned the positive business

momentum.

We continue to focus on efficiency initiatives in Q4 and we are working on

more efficiency initiatives in our ’05 planning analysis.

The charge to the businesses and all support groups is to develop further

efficiencies using technology. To process more volume and asset increases

with the same head count.

Looking forward, I see lower costs relating to compliance initiates like (Sar-

Ox) and tax compliance, as we become more efficient in achieving the

objectives in those areas.

I see some of those savings being reallocated to technology investments and

marketing efforts to support the growth initiatives Jeff just described.

I continue to see strong controls over head count, particularly in support areas

staying in place.

Other revenue declined 21 million from the prior quarter, it was down

somewhat from last year. Why? We had significantly lower syndication

activity this quarter and significantly lower securitization activity, particularly

versus the prior year.

On the deal side, we had large deal syndication fees last quarter. And we had

very few syndication fees this quarter.



On the securitization side, we had lower securitization gains, you can see that

from our release. With the strategies we have in place, we have lower

securitization servicing fees because we have lower outstanding securitized

assets, and we have lower accretion on retained interest relating to

securitization as our securitization program declines.

Those earnings from the assets that are replacing those are now in margin.

Just specifically on securitization gains, they were less than $10 million, 3%

of pretax income. And that’s basically because of the strategy shift of funding

home equity receivables on balance sheet.

The 3% is below the level we expect to run over time as we expect volume

increases in our equipment and vendor finance areas.

Factoring commissions were very strong, up double digit. And that reflects

great volumes and year over year portfolio growth. We want to do better on

the fee income side, our strategic initiatives on the fee generation side,

including investing in additional areas that utilize our credit and risk

management skills, combining syndication skills, and generate fees without

using the balance sheet.

The partly the rationale in the capital finance and structured finance

combination last quarter, where we combined syndication and structuring

skills with industry asset expertise, and we’re starting to gain some business

momentum there.

Funding, capitalization remains very strong, leverage ratio at 10.5%. We

employed some capital this quarter to core asset growth including the strategic

acquisition of Citi Capital, which Jeff described its strategic merit, it expands



our European operations. Our internal capital generation rate, is strong at

11%.

Quick update on the share repurchase program. Through the end of the

quarter we had purchased 2.7 million shares of the 3 million shares authorized

by the board about a quarter ago. On October 20, the board yesterday, the

board authorized an additional 3 million shares for repurchase to cover

employee options as well.

We had $2 billion in cash on hand, plenty of CP capacity in our programs.

Six billion of capacity or back up committed bank facilities and over $4

billion of committed ABS facilities. Liquidity is very strong.

We had great execution in the fixed income market and we did some pre-

funding at the end of the third quarter. We issued about $3.5 billion of debt

this quarter and we refinanced a 1.2 billion in maturities and we covered

growth.

The issuance’s that – the large issuance’s included a 750 million Euro, seven

year fixed rate note, over subscribe. We issued 1.6 billion in two to three year

floating rates notes at LIBOR plus 19and $750 million of ten year notes at

treasuries plus 100.

How does that translate into looking ahead? In the next quarter, fourth

quarter, we have $2 billion or so of maturities, a billion one of fixed rate

maturing at spreads of over 150 over treasuries and a billion of floating

maturing at LIBOR plus eight basis points. So there will be some pickup on

the refinancing of the (fix) and some neutrals to slightly more expense on the

floating side.



As you model and look at us going forward into ’05 let me give you some

2005 debt maturity numbers. We have about $7.5 billion of debt that’s

maturing next year. We have been lengthening our maturities (a bit) so $7.5

billion is lower than the maturities we saw this past year. Four billion or so is

fixed and that’s priced at about treasuries plus 125 and about $3.3 billion is

floating at LIBOR plus 60.

So we still continue to expect to see some benefits from refinancing on the

debt side.

With that want to turn it back to the operator and we’ll get to your questions.

Operator: At this time I would like to remind everyone in order to ask a question please

press star then the number one on your telephone keypad. We’ll pause for just

a moment to compile the Q&A roster.

Your first question comes from Mark Girolamo with Barclays Capital.

Mark Girolamo: Hi good morning gentlemen.

Jeffrey Peek: Good morning.

Mark Girolamo: Quick question on possible acquisitions or bolt-ons and certainly have done a

nice job with the ones thus far. Would you consider any in say the capital

finance areas, specifically the rail business which seems to be, you know, very

much in demand at this point?

Jeffrey Peek: We would consider acquisitions in that – in the rail area provided they met,

you know, our acquisition criteria. I mean we’re very disciplined about that.

Our pricing model is pretty conservative. We try to fund all the premium with



equity and then in its first full year of operation it’s got to have a 15% return

on equity including the equity that’s implicit in the premiums.

So that’s our pricing guideline and it keeps us, you know, it keeps us pretty

conservative in terms of what we’ll pay for acquisitions. But we like that

sector and our guys are having a terrific year there and there’s a real shortage

of cars. The flex acquisition, the timing of that was just superlative, you

know, got – we got that before the ramp up in lease rates and before the 30%

spike in steel prices.

Mark Girolamo: Thank you.

Jeffrey Peek: Thanks.

Next question.

Operator: Your next question comes from Joel Houck with Wachovia Securities.

Joel Houck: All right thanks good morning.

Jeffrey Peek: Good morning Joel.

Joel Houck: I want to focus a little bit on the growth in the quarter. You know, $6 billion

in new business buying five six last quarter. Last quarter was no growth, this

quarter I think was a billion nine organically. Is that all just a function of

lower repayments and/or asset sales?

And in kind of looking forward if Q3 is more representative of the normal

level of repayment should we, you know, is this quarter a good indicator of



kind of a run rate for organic growth as we look out over the next five

quarters?

Jeffrey Peek: Joe why don’t you start on that one.

Joseph Leone: Sure. Yeah we had $6 billion of buy in this quarter. It’s up from last quarter

as you mentioned Joel. Last quarter I think we outlined in rather detailed

schedule the other items that went through the asset line. We had some sales

and we had some large syndications. We had a large prepayment in our

commercial service in our factoring area.

As I mentioned earlier and I think you see it in many comments this morning

you don’t – we didn’t have any significant syndications this quarter so there’s

- prepayments come in a variety of ways. On the home equity front we

continue to see a rather high level of prepayment because where rates have

settled back down to. But since we’re balance sheeting those out that doesn’t

have a significant financial consequence to us in terms of prepayment.

Jeff said we continue to see a high level of prepayment in the business credit

area and we’re hopeful and thoughtful that that is starting to abate. But

liquidity in that market (continues to be) very strong and borrowers have a lot

of options.

I would say that in summing up its hard to normalize a prepayment, you

know, expectation. This quarter’s active growth was strong, it was

supplemented by the $700 million of City Capital acquisition and I would say

the volume for the third quarter is gen – the fourth quarter is generally a little

bit better than the third quarter.



So hopeful particularly in some of the equipment finance areas we’ll continue

to see increased volume that should translate into better growth in some of the

hard equipment areas.

I don’t know if I touched on all the aspects to your question. It had a few

dimensions.

Joel Houck: Yeah I guess I mean if you look at the organic growth annualized this quarter

is 15%. That seems a little strong but I guess what I’m hearing is that 10%

organic growth rate it seems like the right number for kind of how your

businesses are positioned (say) going forward.

Joseph Leone: Well we’re sticking with our 8% to 10% long term growth rate so I’ll say that.

But also this quarter does have some seasonality in that factoring receivables

as Jeff mentioned in his script, the shipments occur now for the holiday

seasons and we expect to start colleting in December and January into

February from those receivables.

So there is some seasonality increase in the factoring lines so I wouldn’t want

you to annualize the third quarter asset growth rate because it does have some

seasonality to it.

Jeffrey Peek: Yeah the on - Joel the only thing I’d add there I think is there is some

seasonality and that showed up in the second quarter versus the third quarter.

But as we step back and kind of look at managed assets and owned assets over

the past four quarters, you know, as Joe said I think we feel comfortable kind

of reaffirming our, you know, our growth and asset targets that we’ve laid out

there.



And I do feel some sales momentum in the organization and that’s

developing. It’s not 100% but its better than it was a quarter ago or two

quarters ago.

Joel Houck: But Jeff you would say and (that’s the worst thing rather) is there incremental

leverage from the sales calls aren’t turned around in a quarter or two I think

you’d agree so is there incremental leverages we had in ’05?

Jeffrey Peek: I would hope we’ll see more of that in ’05 than we’ve seen ’04 just as an

anecdotal, you know. Yesterday they briefed me on two corporate aircraft

that we got the mandate on and it took three different business units of CIT

coordinating to get that, you know, to get that mandate.

Joel Houck: Okay thanks guys.

Jeffrey Peek: Next question.

Operator: Your next question comes from David Hochstim from Bear Stearns.


David Hochstim: Hello. What I’d – are you at a point yet where you would change your formal

goals on recognizing gains on sale? They keep declining and become less and

less of a factor but would you say that you just sort of phase them out or keep

them at these lower lower levels?

Joseph Leone: I don’t know David. What – our thinking on that is to continue with what

we’ve done, continue to balance sheet home equity. And if we did do a home

equity securitization for, you know, for market reasons meaning hitting the



market and testing our collateral and our underwriting and, you know, proving

to ourselves that we’re as good as we think we are.

I would think if we did (another) home equity securitization we probably

would do that on balance sheet without gain on sale because now as you recall

a year or so ago we amended our addentures and the accounting rules have

changed and we can do that.

David Hochstim: Right.

Joseph Leone: I can – I see us continuing on our equipment and vendor finance programs.

Some of – there’s some other financial reasons why in certain jurisdictions

that securitization financing would gain on sale is a better strategy for us than

on balance sheet funding and are on balance sheet securitization.

So I see us continuing our program as is right now with gain on sale in modest

ways being taken on equipment finance and vendor finance securitizations.

David Hochstim: But can we expect then that we won’t see 10% or 15% of income or whatever

the old rule was?

Joseph Leone: Yeah I would say I think we shared this on the last call. I think 3% is on the

low end and I think a higher single digit is probably on the high end so, you

know, the maximum is 15 but I don’t see us in the near term moving towards

that. I would see us more in the single digit area.

David Hochstim: Okay and another question just about commercial aircraft finance. I mean to

the extent that you’re allocating capital to businesses that meet your returns

and that business is still underperforming and you said you’re not going to

order any new aircraft.



I mean is it conceivable that we just won’t see any orders again for a long long

time if ever? Or would you take kind of a longer view at some point and say

gee, we do expect the returns eventually to improve and so we need to get in

the pipeline from new planes?

Jeffrey Peek: Well never is a long, long time.

David Hochstim: Right. Yes I wouldn’t say never.

Jeffrey Peek: And never doesn’t leave one much flexibility.

David Hochstim: Right.

Jeffrey Peek: But I think we just reaffirm and I don’t want this to get into a (quarterly

loyalty kind of vote). But I think we just reaffirm at this point that we haven’t

signed any new orders and we – the business is making progress, the lease

rates are improving as both Joe and I talked about. But at this point we don’t

anticipate signing any new order books.

David Hochstim: Okay thank you.

Joseph Leone: Thanks David.

Operator: Your next question comes from Matthew Vetto with Smith Barney.

Matthew Vetto: Good morning.




Matthew Vetto: A couple of things. I guess one more broad in nature is just, you know,

looking at some of the banks that have reported it seems like we’re seeing a

fairly mixed characterization of demand for capital from corporations in

general. Your quarter seems to be showing a little bit stronger momentum and

is it – I mean any thoughts on why that might be?

Is it a function of the products that you’re in, is it a function of size of

companies or geography or any color you might have on kind of why you

might be at the stronger end of what we seem to be hearing out there?

And then the second question is in Europe that seems to be running ahead of

schedule obviously you closed the acquisition early. Can you talk a little bit

about kind of what’s going right there and what the next, you know, 12

months specifically in Europe might look like?

Jeffrey Peek: Sure. Joe why don’t you take that – do you want to talk a little bit about (C&I

growth)?

Joseph Leone: Yeah. You know I guess there’s different theories out there that I hear all the

time that, you know, we are – you can correlate us to it or you can’t. I can

only talk about us. I can’t talk about everybody else so I’ll talk about us.

Where we saw the growth this quarter I think, you know, why we were

successful our factoring business is, you know, is a market leader. And it’s a

strong quarter and we had decent retail sales numbers in the quarter so, you

know, we expected the growth, we got the growth and the people delivered.

On the home equity side we saw some opportunities as the – some of the

funding markets that some use in terms of, you know, funding their balance

sheet were extremely less liquid this quarter than in prior quarters. So we saw



some opportunity to bolster our broker network originations with some bulk

purchases.

Additionally the home equity volumes stayed strong, probably a function of

interest rates remaining pretty low. The strength – I think the strength in our

vendor finance programs as our customer’s business improves with the

economic expansion our model pulls in that growth along with them.

So those are a few reasons that I can think of that maybe are different than

what you’re seeing in banking land as to why we could put up better numbers

in this quarter than some of the comparables that you discussed earlier.

Jeff you want to add?

Jeffrey Peek: No I think that’s – I think that’s good. (Matt) I’d say on the – on what’s going

on in Europe I think one of our big advantages is we spent a fair amount of

2002, 2003 trying to get our back office, our servicing platform there

centralized. And one of the big advantages that we had in the acquisition of

City Capital was just the cost takeout that we could pro forma for the business

we were buying.

And I think that’s why the thing was so strategic for us. Once we were able to

get it at a good price but it increases the receivables we’re going to service out

of our Dublin facility by about 30%, 30% to 40% its still costing us too much

to service. In Dublin we still have a lot of capacity we’re not using.

So I think what you’ll see over the next 12 months is, you know, we’ll

continue to look for portfolios there that make sense for us and that meet our

criteria. It also allows us to go out and organically, you know, sign vendor

agreements with, you know, people in the office technology area.



We got a couple – we’ve signed on a couple new brand names over the last

three months so I think it moves us forward in terms of assets and, you know,

assets on the books and servicing costs just works real well for us. And then

we’ll continue to look for those things.

Matthew Vetto: Okay great thanks and congratulations.

Jeffrey Peek: Thank you.

Operator: Your next question comes from Michael Hodes with Goldman Sachs.

Michael Hodes: Yeah hi and good morning guys.


Michael Hodes: Question is on the yield side of the margin equation. It seems like you’ve

made great progress on the cost of funds. And I was hoping you could give us

a little bit of an update as to what you’re seeing in terms of pricing and how

that’s kind of pulsing through the balance sheet?

Joseph Leone: Well we took up some the area, you know, we’re seeing in the operating lease

side we’re seeing better rates so that’s starting – that’s pulling through the

income statement. I would say the pricing side is tough. There’s a lot of

liquidity in certain of our markets. I don’t think it’s at its all time height in

terms of pricing. I still think I we continue to see pressure in certain areas.

Jeff mentioned one in the business credit commercial stance area. And there’s

a lot capital moving into financing middle market borrowers secured,

unsecured subordinated scene here. And we continue to see fees in pricing

under pressure there.



But I think over all when we put the whole equation together for CIT our yield

have held relative to cost of funds moving. Some of that is because the cost of

funds is very efficient today relative to the companies we need to compete

against. When we look at credit cards we’re within 25 bases points, 30 bases

points of triple A competitors. And that makes our sales force very

competitive and we’re able to win on skill. Win on reputation. And win on

relationship.

So I think there is pressure on you. But I think we’ve done a good job of with

our risk adjustment pricing discipline with our new and improved capital

disciplines. I see us doing a good job on bringing in the loans and bringing in

the loans at the spreads that we need. So that’s a little bit of what I can feel.

Jeffrey Peek: Yes I think it’s hard to generalize Michael. And as Joe was talking I was I

was thinking about rail. You know, where depending on the type of car we’re

talking about, you know, we’ve seen some lease renewals this year that were,

you know, 100% increase. You know, on the other end we think about

factoring a little bit about where it’s one of our highest returning businesses.

And we probably haven’t been able to move the needle on commissions very

much. Even though -- even as we’ve increased our marketing share -- our

share of market.

So I think it’s hard to generalize overall. I would say it’s very competitive out

there. That’s probably one generalization we can make.

Michael Hodes: Yes and then just secondly -- and I know you’ve addressed this to a certain

degree already -- in terms of potential port folio purchases, you know, the last

few quarters you’ve flagged immanent transactions, you know. Could you

give us a sense of, you know, what’s in the pipeline in your term. Whether



that’s the pipelines of potential opportunities is about the same or bigger than

it was a few months back or.

Jeffrey Peek: I’d say it’s about the same. I mean we’re seeing some interesting

opportunities. The (M&A) market been good to us the last four or five

quarters. We don’t always win. So it’s a little hard to predict. And -- but

we’ve been pretty disciplined in the prices we’re putting up. You know,

we’re very committed to getting to 15% return on equity. And we think it’s a

little full (unintelligible) to buy something that’s going to make it harder to get

there.

But our M&A team’s very busy. And we’re seeing some interesting things.

But they all have to kind of fit within our acquisition strategy, which I think

we’ve laid out to you several times.

Michael Hodes: Okay. Thanks a lot guys.


Operator: Your next question comes from Michael Cohen with Susquehanna Financial

Group.

Michael Cohen: Hi. This (unintelligible) financial group.


Michael Cohen: Good morning. Wonder if you guys to talk a little bit about -- not to delve to

deep into the guidance for next year but you’ve mentioned sort of, you know,

10% -- you feel good about your financial targets of 10% earnings growth and

15% ROE. If I put the two together I get something sort of more than 10%.



Can you talk about what kind of capital base you’re thinking of in terms of

equity to manage assets over that time period?

Jeffrey Peek: I’ll just say one thing Michael and then maybe Joe can talk a little bit about

the metric you want specialized on. You know, we’re -- I mean we see a

continuation of the present to a certain extent. We do think there’s some, you

know, one of the reasons that that we wanted to talk more about it in January

is just we feel like the fourth quarters got some big events here, which could

have an impact on the economy. Whether it’s the election or continuation of

oil at $55 a barrel. So, you know, that’s why we felt that once we got through

those we’d be a little bit more expansive on how we were seeing our business

for, you know, for 2005.

Michael Cohen: Okay.

Jeffrey Peek: If that’s helpful at all.

Michael Cohen: Yes that’s helpful. I mean in the context of things I mean, you know, one

would think that there’s probably some growth of sort of the intangible. You

know, that flows through it. That enables you -- you can get to sort of 15%,

you know, return on tangible equity, you know, somewhere north of --

obviously 10% earnings growth. But in any case I can take this off line.

Jeffrey Peek: Okay.

Joseph Leone: Thank you.

Michael Cohen: Thank you.

Operator: You next question comes from (David Chamberland) with (Trofolett).



(David Chamberland): Just to rephrase it sounds like you’re saying on the leverage -- your

current leverage and what your potential leverage could be your going to wait

until, you know, (unintelligible) to decide where you want them to go.

Jeffrey Peek: Well we think so. We also, you know, there’s some seasonality in our

quarters if you look back over the years. So I mean the fourth quarter tends to

be good for us. The first quarter then we have a little bit of paid out in some

of our businesses so. But I think we’ll have a better handle on that when we

talk to you in January.

(David Chamberland): Okay. And can I ask a little bit differently if you -- if the status for

what it is today in this quarter was were today kind of what they were for the

next three to six months, you know, where would you be comfortable bringing

your leverage ratio?

Joseph Leone: I’m sorry I didn’t -- could you repeat that.

(David Chamberland):Sorry. Yes I was just asking if the current conditions were to remain the

same going into fourth quarter, you know, going to the fourth quarter where

would you feel comfortable bringing the leverage ratio?

Joseph Leone: You know, we’re generating in -- we’re internally generating capital at the

rate of 11% or so I said. And, you know, we have reiterated several times to

you all including on this call that we continue to see our long term after

growth target at 8 to 10%. So, you know, if we -- if business conditions

improve a little bit or stay the same we think we’re good at 8 to 10%. And

our internal capital generates at 11%. And we just said we’d buy back a little

bit more stock. So I think that tells you it’s a little bit more of the same ratio

that we’re thinking of.



But more in January as we see how the economy and some of the bigger

events in the macro environment develop over the next several months.

(David Chamberland):Okay. Thanks.


Operator: Your next question comes from (Mike) Hughes with Merrill Lynch.

Michael Hughes: Hi guys.

Jeffrey Peek: Good morning (Mike).

Michael Hughes: Clearly everything’s going very well for you guys right now. And the

economy is your friend. But for those of who witnessed you guys for a long

time how do you keep this from not just being a (cyclical) recovery when

eventually the economy rolls back over?

Jeffrey Peek: Well I think one thing is just the, you know, if you look -- and I think Joe

mentioned this -- some of the greater asset growth, the bigger volumes where

in some of the specially financed businesses. So if you, you know, if you look

at the vendor financed -- particularly the Dow relationship, home equity --

places where we made acquisitions like small to mid ticket leasing, you know,

we are trying to build out a little bit more to the flow businesses. A little bit

more to the consumer exposure there probably. I think that’s (cyclical) but

probably a little bit different cycle than our traditional commercial financed

business oriented cycles.



So I think that’s one way we’re looking at it (Mike). I think the other way is,

you know, I -- about a year ago we took (Larry) Marsiello from running

commercial finance made him Chief Lending Office head of Risk. And, you

know, (Larry) plays a very important part here. He spends -- talks to Joe and

myself everyday. He’s one of the vice Chairman’s so. We’re -- at the time

that we’re enjoying this and the momentum seems good we’re also trying not

to make some mistakes that we’ll have to deal with two years from now.

Michael Hughes: Is that one of the reasons -- I guess I would have expected that equipment to

maybe even a little stronger. You guys mentioned that if that turned out for

the first time in a couple of years but some of the results that you saw -- some

of the manufacturers put up being really, really strong.

Joseph Leone: Yes well you know when you -- when we look at equipment finance for us

Michael you’re looking at, you know, a $10 billion number that has a lot of

industry. And I think some of the stronger manufacturers your talking about,

you know, may be in construction where the construction growth was greater

than the overall, you know, blended growth.

Equipment finance has some portfolios that were, you know, we are not

investing in. And the liquidating category and we’re not focusing a lot of

resources on today. So I would say the construction area had better than --

had better growth than you could see from the consolidated equipment finance

numbers. I -- so I would add that.

Michael Hughes: Okay. (Unintelligible)…

Joseph Leone: And I’m sorry what was your earlier question before you jumped? I had

another thought on that.



Michael Hughes: It was on the how do you keep this from being a just another typical recovery.

Joseph Leone: Oh yes. (Unintelligible) the point I wanted to add Jeff mentioned, you know,

(Larry) is now the keeper of the credit keys. But in -- I had mentioned before

we are going to take some of the dollar savings that we’re getting from our

initiatives and invest in technology. And some of that’s on the marketing

front and some of the Sales Force Automation front. But a lot of that is on the

back end so that we have better predictive and analytical tools so that the radar

screen sees the storm clouds earlier than they did in the past. So that’s in our

technology spending in ’04 and continuing in ’05.

Michael Hughes: Okay. Thank you.


Operator: Your next question comes from Chris Brendler with Legg Mason.

Chris Brendler: Hi. Good afternoon again.

Jeffrey Peek: Good afternoon Chris.

Chris Brendler: Couple of quick questions for you. I guess this is probably more Joe related.

Sorry Jeff. I have the strategy…

Joseph Leone: You mean sorry Joe.

Chris Brendler: That’s right. Can you refresh my memory Joe what is the -- other than

syndication income what you mentioned in your remarks on the fee and other

income line -- one are other major components I would have thought that

would have moved more with your volume. Your volume looked very strong



this quarter especially in the special finance businesses and factoring as well.

(Unintelligible) part of that separated out.

So what’s causing that number to see the weakness. It’s actually I think the

lowest we’ve ever seen or at least since (prenew) court we’ve seen in that line.

And after maybe 2 Q ’01 is maybe the lowest, you know, I’ve seen their

income line. And can we get a seasonal bounce going forward.

Joseph Leone: Yes. I tried to discuss some of this already. Let me repeat some of it and then

maybe add some additional color. Securitization (change) is a big change.

Chris Brendler: I’m looking without securitization. Just that one…

Joseph Leone: Okay let me just try to -- securitization change is a (big change). You’ve got

the take the securitization gain out. That’s number one. But there’s two other

components of securitization accounting that goes into other income that when

you balance sheet the asset that goes into margins. One is the servicing fee. If

you look year to year our securitized assets are down $2 billion from $10

billion to $8 billion in round numbers. We get a servicing fee on those assets.

So whatever it was a year ago it’s 20% lower this year. Follow me?

Chris Brendler: Okay.

Joseph Leone: So that’s number 2 on securitization. Number 3 on securitization you set up a

retained interest and then you accrete earnings over the securitization line and

you take that income. That number meaning our retained interest is also down

about 20% year over year. So we have 20% lower earnings being accreted on

the retained interest, you know, some of that is in (IO) if you know that (is

inaccurate).



So one of the major changes year to year is securitization accounting.

Particularly equity assets are now benefiting our margin line rather than our

other income line. So that’s one thing, you know, you had two questions.

Securitization and what goes into fee?

Servicing fees generically goes into fees. Structuring fees and the syndication

fees. In the second quarter we had a very strong syndication. We had some

risk management initiatives you want to take care of. The market was very

strong and we took advantage of a strong market to sell-down some

exposures.

And we were able to realize some income on selling down our exposure at an

opportune time. We did not take that opportunity in the third quarter. We did

most of it in the second quarter and so we did not have some of those

syndication fees in the third quarter.

That is the, you know, it’s miscellaneous. You know, if you get a -- if you

have a back end equity kicker on a deal that you book five years ago you

could have a gain -- a small gain that comes through periodically. So those

are the, you know, those are the late fees would go in. There’s a lot of fees we

do in commercial financing and commercial lending where the customer pays

us a fee for either upfront or back end services. So all that goes in.

But I think the -- the thing I’d like you to take away David is that

securitization from year to year and quarter to quarter had a lot of impact on

the other income line. Servicing fees, gain on sales, securitization, and

accretion income on the IO.

Chris Brendler: Okay that is helpful. Would you say then that sequentially then if you back

out the securitization affects and the syndication affects your more flattish?



Joseph Leone: I would say that.

Chris Brendler: I think the misconception I have was that it was value -- it was volume that

really sounds -- some of it’s fine if you doing some big deals. But you (draw)

some of these late fees and some of the back end stuff is welcome in that line.

Joseph Leone: Yes. And on the volume related if you dial back six or nine months ago when

we talked about this over time in the business credit areas the bigger deals

were more (invoked). They were restructuring, they were debts. Those come

with big fees. Now we’re more to core working capital lending which comes

with smaller fees -- some back end fees -- but smaller front end fees.

Chris Brendler: Okay. Another quick question would be on the depreciation side -- I don’t

know if you mentioned any special one timers this quarter -- but the

depreciation expense is flatting out as a percentage of operating leases. The

mix is still -- well at least it looks like the mix is still tilting a little bit towards

capital finance. Anything I should know about in appreciation?

Joseph Leone: Yes. There were no impairment charges -- last quarter we had a $15 million

impairing charge on Aerospace. There was nothing, you know, there was fine

tuning but nothing significant. However, the mix is changing again. And I

think when we file the Q we’ll give some more detail on this as we always do.

And that’s why I gave you the rental income increase this quarter. The

(GATX) acquisition came with operating lease assets. So we sort of changed

the mix a little bit towards a lower end smaller ticket operating leases as

opposed to capital financed larger ticket leases.

So if you look at the depreciation line quarter to quarter, it’s actually up

quarter-to-quarter, you know, even after factoring in the $15 million



impairment charge last quarter. You may have expected it to go down. It

went up because the mix changed a bit.

And I think you’ll see that, all that detail when we file the Q. But I think the

important takeaway is the net rental income quarter-to-quarter was up $20

million, and $15 million of that was because of last quarter’s impairment

charge and the other was because of business improvement.

Chris Brendler: Okay. That’s very helpful.

Joseph Leone: Hopefully that was helpful.

Chris Brendler: Very helpful, thanks.

Operator: Your next question comes from Eric Wasserstrom with UBS.

Eric Wasserstrom: Thanks. And good afternoon.

Jeffrey Peek: Good afternoon.

Eric Wasserstrom: The - in your discussions with the rating agencies, how are they reacting to the

improvements that you’ve shown sequentially over the past several quarters?

And what are their concerns (these days)?

Joseph Leone: We have a very active dialogue Eric with the rating agencies. As a matter of

fact yesterday we reviewed the results with them.

And I think their reaction was the same as the market’s reaction, very, very

strong quarter.



The continued focus that we have with them is continued improvement of

fundamentals in franchise value. And a couple of important metrics that they

focus are one of the ones that Jeff focuses on and that’s ROE. They’re

focused on core profitability improvement. We’re making very good progress

there.

So and, you know, you can read their reports but they’re focused on the credit

quality and the strength of the franchise.

And when we line up the numbers that we have put up today versus the

numbers that we put up a quarter ago, a year ago, they see us making

significant progress.

And I would again reiterate we’re very strongly positioned in our ratings

category.

Eric Wasserstrom: And but from a (prospect) perspective if in fact there were to be, you know,

some positive commentary from them, would that actually benefit your

funding costs given that they seem to be trading better than your current credit

rating?

Joseph Leone: I don’t know. You know, right now I’m happy, you know, with their ability

to access, the demand for our offerings, as well the relative pricing of our

offering. You know, I would expect that this quarter would be viewed

positively by the fixed income community as well. So we will see. I don’t

want to speculate.

Eric Wasserstrom: Thanks very much.



Operator: Your next question comes from (Michael Graham) with Philadelphia

Financial.

(Jordan Huntingwood): Hey guys. Congratulations on a very good quarter.

Two questions, one is the impact of securitization income which I think was

already asked for I show a comment that I think it’s excellent that it continues

to go down. I think the quality of earnings continues to improve.

Second…

Joseph Leone: What is your name? You’re not (Michael Graham).

(Jordan Huntingwood): No, it’s (Jordan Huntingwood).

Joseph Leone: How are you (Jordan Huntingwood).

(Jordan Huntingwood): Yeah. Good, and yourself?

Joseph Leone: Good.

(Jordan Huntingwood): The second question is Joe can you comment as you look for ‘05

when the aircraft leasing issue what percentage is filled and what is still

available?

Joseph Leone: Yeah. I think in ’05 the delivery book I think is 18 planes. And we placed 14

of them, if I have that right.

Okay, (Jordan)?



(Jordan Huntingwood): Thank you very much. Congratulations. Everything else has been

asked.

Operator: Your next question comes from Kristina Clark with Wachovia Securities.

Jeffrey Peek: Good afternoon. Hello.

Joseph Leone: Kristina?

Operator: That question has been withdrawn.

Your next question comes from Bruce Harting with Lehman Brothers.

Bruce Harting: Hi. The - pretty amusing call there, the last couple. Anyway the equipment

finance, you know, turn is really significant. I mean, can you talk about what

you’re hearing from your customers there?

And if this turn is for real - I missed some of your prepared remarks and, you

know, talk about the granularity and what CEOs are saying. I mean is it true a

lot of your commercial customers were holding off for the election?

I mean, you’ll hear all kinds of things. Can you just talk anecdotally about

that sort of important inflection point on what was your biggest business and

if we may actually equipment finance segment participate with the overall

loan growth rate that you’re talking about for the whole company.

And then the incredible decline in the non-performers there and what you’re

seeing at auction.

Thanks.



Jeffrey Peek: Let me just make a couple of general comments. And then I’ll turn it over to

Joe for specifics.

First I think one on the decline or the improvement of credit metrics, I think

the team down there has done a terrific job. They worked at it doggedly. And

they, you know, quarter by quarter they charted their progress. It’s very much

a team effort.

Joe and I just spent - we just had one of our larger customer events this past

weekend. And we spent time with the equipment dealers. And one of the

advantages CIT has is we go back decades with some of these folks.

And I would say they were certainly in a much, much better mental

framework than they were a year ago.

A lot of it I think has to do with increasing real estate development, from a

number of these people the big road projects have not kicked in year. And

that would, you know, when you - if you size the forward opportunity, the

potential in ’05 and ’06, if we start to see some large scale infrastructure

builds out of the public sector, you know, that would be quite nice.

But they seem to be doing much better. And as I said a lot of it seems to do

with large scale real estate development in the home building arena.

Joseph Leone: On a another (accrual) the word that comes to mind, the phrase that comes to

mind I heard a few weeks ago somewhere, it was hard work Bruce. And Jeff

and I didn’t do it.



But (Roy Keller) and (Ivan Brooks) and their team and equipment finance

have been working very hard at getting these non-accrual levels down. So not

only are they going down but the recoveries, I think Jeff mentioned earlier, the

recoveries are going up, up and up. So that’s good.

Having said that we all have work there yet to do there because the (ROA) is

not quite where we want it to be. Still have a long ways to go. But people did

a lot of hard work at the Center. And that’s why the non-accruals are there.

Bruce Harting: And should we expect that to participate with the overall growth rate or we’re

just going to be happy to see it stabilize for the next, you know, three to five

quarters.

Thanks.

Joseph Leone: Growth rate and what?

Bruce Harting: On what, pardon me?

Joseph Leone: Growth rated assets or…

Bruce Harting: No, the equipment finance division.

Joseph Leone: Oh, in terms of profitability?

Bruce Harting: No the managed receivables, you know, top line growth.

Joseph Leone: You know, we had slight growth in the quarter as I mentioned earlier. And

normally the fourth quarter is the best quarter in that business. We will see.



We’re hopeful, you know, it’s got good momentum, the pipeline looks good.

We will see.

Bruce Harting: Okay. Thank you.

Jeffrey Peek: I think the only thing I’ll say Bruce on that is some of their - you know

they’ve got a couple small important portfolios that they’re liquidating. So,

you know, it probably - it’s a net, you know, what you’re seeing in someone’s

is probably a net figure versus what they’re trying to grow versus the

liquidation. So it maybe understated.

Bruce Harting: Okay.

Jeffrey Peek: Why don’t we make this the last question. I know some of you want to -

would like to probably get to lunch.

Is there a next question?

Operator: There are no further questions, sir.

Jeffrey Peek: Well thank you all very much. We’ll see you next quarter.


Operator: Thank you for participating in today’s conference call. You may disconnect

at this time.

END