NEW YORK (AP) -- Shares in CIT Group Inc. plunged Thursday after an analyst slashed its earnings target for the lender on concerns that the company will take a massive charge to write down its student loan portfolio.
CIT shares lost $4.50, or 22.1 percent, to $15.86 Thursday. Earlier in the session the stock hit a 52-week low of $15, well below the previous mark of $19.05.
Keefe, Bruyette & Woods analyst Sameer Gokhale now expects the company to earn 8 cents per sharein the first quarter instead of his previous estimate of 76 cents per share.
"We believe there is increased risk that the company will have to charge off $179 million of private student loans made to students of a flight school which recently filed for bankruptcy," he wrote in a note to investors.
He said the students did not receive their licenses and are less likely to be able to repay the loans. Because the loans are private, they cannot be written off in personal bankruptcy, he said.
the above may be why. I think all all financials should carry a warning " Buying this stock may be hazardous to your portfolio".
Other than buying lottery tickets I dont think its advisable to put any money into financials, insurance companies, or builders, until there is some light at the end of this tunnel.
These companies are all pretty leveraged and its clear to me that the risk management, if it was anything like my former employer, was a case of heavy reliance upon rating agencies and
credit scoring. We see now that this was a poor strategy resulting in banks following each other like lemmings off a cliff. There is now a shortage of qualified people capable of working out these problem loans because banks have not invested in training qualified personnel as opposed to marketers and syndicators. I remember trying to obtain an interview with a high ranking credit officer at Citibank a decade ago. He told me he was no longer hiring workout officers because Citi had all their loans under control. |
