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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (29660)1/11/2008 7:26:51 PM
From: rich evans  Read Replies (1) of 78748
 
CIT should be going up from here based on press release today.

The writeoff on Student Lending was intangible and means nothing. Student lending was 13% of managed assets but only 3% of net income. 95% of the loans are guaranteed by the Government. Home lending is only 4% of net income.

CITs normal credit provisions for reserves was about 70 mill. They are taking a 300 mill credit provision this quarter. I would wager their actual performance on their loans including the home loans held for investment is much better. So in the future the better performance will fall into the income statement making higher profits.

Their regular businesses this quarter did well earning about $1.20 it would seem without these chargeoffs.

Their main problem as I see it is funding. The securitization windows are closed which was about 25% of their funding. They claim to be funded for 2008 but this includes using the bank LOC which is 7.5 bill. So they still need funding of about 1.5 bill in Q1 and 4.5 bill in Q2 if they wish follow their old means of term loans, CP etc. Most of their funding is now secured.

I am underwater with this stock big time having bought at 34 and 28. But I expect if I hold, then by end of year I should be back in the black. I always underestimate Mr. Market especially on the downside. The EMS industry which I know you remember well is another example.
Rick
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