Commercial Finance. Rick Wolfert Vice Chairman, Commercial Finance

Transcription

1 Commercial Finance Rick Wolfert Vice Chairman, Commercial Finance

2 A Recognized Leader in Commercial Finance Managed Assets: $39 Billion Large and loyal customer base - Over 57,000 2,450 employees - Large direct sales force: ~400 Preeminent brand - 98 years of middle market lending experience - Superior risk underwriting experience and skill Global scope - Operating in over 30 countries Data as of September 30, 2006.

3 Broad Portfolio of Scaled Businesses in Attractive Markets Commercial Finance Group Net Revenue: $1.2 Billion Net Income: $551Million ROE: 17.9% Trade Finance Transportation Finance Corporate Finance Net Revenue: $331 Million Net Revenue: $266 Million Net Revenue: $603 Million Net Income: $129 Million Net Income: $182 Million Net Income: $240 Million ROE: 26% ROE: 17% ROE: 16% Commercial Services Commercial Credit Commercial Services Int l Commercial Services Asia Commercial Services Europe Aerospace Aerospace and Defense Finance Business Aircraft Commercial Aircraft Rail Business Capital Comm, Media & Entertainment Commercial Real Estate Construction Equipment Finance Energy Healthcare Mergers and Acquisitions Sponsor Finance Syndicated Loan Group Data as of or for the nine months ended September 30, 2006.

4 Clear Traction in Executing the New Strategy Net Income ROE Volume Managed Assets 2006 $551 Million 17.9% $12.5 Billion $39 Billion vs % 220 bps 59% 15% Accomplishments Successfully launched customer-centric, market-focused growth strategy Attracted over 150 top commercial finance professionals Enhanced state-of-the-art risk management system Executed well on new growth initiatives Net Revenue $1.2 Billion 22% Challenges Net Margin 3.23% 26 bps Aggressive market pricing Net Charge-offs 0.16% 9 bps Liberal credit structures Efficiency Ratio 33% 290 bps Data as of or for the nine months ended September 30.

5 : A Dramatically Changed Competitive Landscape Banking Commercial Finance Banks consolidating and moving up-market Disrupted client relationships Shifting middle market and industry strategies

6 : A Dramatically Changed Competitive Landscape Banking Commercial Finance Banks consolidating and moving up-market Disrupted client relationships Shifting middle market and industry strategies

7 Where We Compete $100B+ Revenue $1B Middle Market ~$1.8 Trillion Large Banks Investment Banks Hedge Funds $50M Local Banks Finance Companies Regional Banks Hedge Funds $10M Finance Companies Junk B- B+ BB- BBB AAA Credit Rating

8 Positioned for Global Growth North America Atlanta Boston Charlotte Chicago Dallas Houston Los Angeles New York Tempe Toronto Europe London Dublin Frankfurt Asia-Pacific Shanghai Singapore Hong Kong Loans $930 Billion $330 Billion $147 Billion Equipment Finance $410 Billion $420 Billion $183 Billion Market $1.34 Trillion $750 Billion $330 Billion Aerospace global headquarters opened in Dublin, 2005 Expanding European factoring platform German Factoring acquisition Q Fortifying Asian expansion New Singapore Aerospace office Q4 2006

9 Market-Focused Model Driving Organic Growth Products and Services Equipment Finance & Leasing Factoring Asset Based Lending Corporate Finance Relationship Managers Industry thought leaders Consultative approach Develop / manage CIT relationship Coordinate execution Target Industries Aerospace Communications, Media & Entertainment Construction Energy Structured / Project Finance Healthcare M&A Advisory Commercial Real Estate Advisory & Finance Channel Partners Rail Retail Private Equity Sponsors Intermediaries Hedge Funds Financial Institutions

10 Performance Driven by Strong Talent Communications, Media & Entertainment Sponsor Finance Commercial Services Syndicated Loan Group Energy Canada Business Capital Capital Markets Sales Risk Construction M&A Advisory Equipment Finance Healthcare Europe Rail Aerospace Commercial Real Estate

11 New Strategy is Driving Strong Originations Growth New Business Volume ($ Billions) CAGR: 6% CAGR: ~40% Q4 9 months (E)

12 Cross-Selling Strategy is Working Tremendous growth in referral activity in 2006 Incentive compensation drives behaviors Lowest cost origination lever Cross-Sell Volume ($ Millions) $967 YTD 324% $ Transactions 22 72

13 An Originations Powerhouse $61 Billion Proposed YTD $12.5 Billion Booked YTD $9.3 Billion $3.2 Billion 2007 Initiative Balance Sheet Capital Markets Syndications Investment Vehicles

14 Driving Non-Spread Revenue and Improving Earnings Mix Revenue Composition ($ in Millions) 1,500 NSR Growth 22% 1, Spread Non-Spread (NSR)

15 Best-in-Class Risk Management Owned Credit Losses (% of Average Finance Receivables) 0.25% % Risk-Adjusted Margin (% of Average Earning Assets) 2.75% % Risk Management Expertise 660 person risk team lead by seasoned veterans Sophisticated systems provide early warning detection State-of-the-art risk-adjusted pricing discipline Risk philosophy driven by diversification and supported by strong collateral positions

16 Model Designed to Deliver Earnings Through All Cycles Strong Economy Competitors enter, margins decline Acquisition Finance Growth Capital Mergers and Acquisitions Real Estate Construction Down Cycle Competitors exit, margins improve Factoring Restructuring DIP Financing Distressed Debt Advisory Services

17 What do Middle Market Customers Really Want? Understand their business Stand with them through cycles Deliver solutions for complex financing needs Respond quickly and always deliver on commitments

18 How We Win in the Middle Market Banks Finance Companies Hedge Funds Deep & Dedicated Industry Focus / Expertise Relationship Orientation Long-Term Commitment to Middle Market Structuring Expertise Broad Product Offering Middle Market Advisory Capabilities Direct Access to Decision Makers Agility Limited Limited Limited Limited Limited

19 Business Overview Trade Finance Transportation Finance Corporate Finance

20 Trade Finance: Commercial Services #1 factoring position in the U.S. - ~$45 Billion volume Average client relationship - Over 10 years Actively cross-selling insurance, commercial credit and M&A International expansion - Following our clients to Europe and Asia Factoring Volume ($ Billions) CAGR: 12%

21 Transportation Finance: Rail Youngest major fleet in the industry - Average age of 10 years versus industry average of 19 years #3 franchise position with over 100,000 car fleet Over 99% utilization rate Smart bolt-on acquisitions Attractive pricing on renewals Favorable railcar delivery positions with manufacturers in 2007 / Managed Assets ($ Billions) CAGR: 22%

22 Transportation Finance: Aerospace #3 franchise position 40 years of industry experience Over 120 customers International platform: over 80% of aircraft are outside North America Modern, fuel efficient fleet Commercial Aircraft: Over $2 trillion requirement for aircraft financing in the next 20 years Business Aircraft: $156 billion of aircraft deliveries in the next 10 years Aerospace and Defense Finance: Supply chain finance 4.2 Managed Assets ($ Billions) 4.8 CAGR: ~15%

23 Corporate Finance Leveraging industry expertise, specialty lending acumen, balance sheet and capital market capabilities Focused One CIT approach to channel partners Collaborative deal teams driving organic growth Advisory services enhance capabilities and fee revenue Expanding lead generation through Piper Jaffray alliance New Business Volume ($ Billions) CAGR: ~30% Sponsor-Backed Transactions Number of Deals Lead Deals Commitments $4.0 B $7.3 B Fundings $2.2 B $4.0 B

24 Advancing Lead Arranger Status Q Q Rank Company Volume ($) Rank Company Volume ($) 1 JP Morgan 5,212,900,000 1 Bank of America 4,382,850,000 2 Bank of America 4,113,300,000 2 JP Morgan 4,204,800, UBS AG Credit Suisse First Boston Wells Fargo & Company Wachovia Securities Citigroup General Electric Capital Corporation BNP Paribas Bank of New York Company Merrill Lynch & Company SunTrust Bank Royal Bank of Scotland Plc Lehman Brothers ABN AMRO Bank N.V. CIBC World Markets Bear Stearns Companies PNC Bank Antares Capital Corporation RBC Capital Markets Deutsche Bank KeyBank CIT Group Zions First National Bank National City Corporation 2,067,250,000 1,602,300,000 1,487,500,000 1,221,674,000 1,205,000,000 1,178,750, ,000, ,000, ,500, ,000, ,000, ,500, ,241, ,500, ,000, ,000, ,300, ,000, ,000, ,000, ,000, ,000, ,500, Citigroup Wachovia Securities Credit Suisse PNC Bank Goldman Sachs & Company BNP Paribas UBS AG CIT Group Lehman Brothers Wells Fargo & Company SunTrust Bank General Electric Capital Corporation Bear Stearns Companies CIBC World Markets Bank of New York Company BMO Capital Markets Merrill Lynch & Company ABN AMRO Bank N.V. Regions Bank TD Securities National City Corporation KeyBank U.S. Bancorp 1,852,500,000 1,809,750,000 1,473,500,000 1,061,100,000 1,000,000, ,297, ,500, ,200, ,000, ,500, ,000, ,797, ,500, ,500, ,500, ,000, ,000, ,000, ,000, ,500, ,500, ,000, ,500,000 Source: Reuters Loan Pricing Corporation / DealScan.

25 New Strategic Initiatives are Growth Engines for the Future Overall Investment vs. Return ($ Millions) Healthcare Mergers & Acquisition Commercial Real Estate Capital Markets Global Sponsor International Trade Finance Commercial Credit Business Capital Restructuring Syndicated Loan Investment phase Revenue positive Structured Equipment Finance Energy Aerospace & Defense Finance Q Q Q Q Q Q Q Q

26 New Strategic Initiatives are Growth Engines for the Future 150 Overall Investment vs. Return ($ Millions) Revenue Expense Net Revenue Q Q Q Q Q Q Q Q

27 Healthcare Vertical Driving Growth 2005 Healthcare Financings: ~$170 Billion Managed Assets ($ Billions) 12% 6% 31% CAGR: 144% 2.5 9% 16% 5% Hospitals Speciality Pharma / Meditech Long Term Care Life Sciences 5% 16% Dental Physician Practices Outpatient Managed Care Vendor Dec 2004 Dec 2005 Sep 2006 Healthcare as a growth engine Launched industry vertical in 2005 Hired best-in-class team Organized sales force around large healthcare sub-segments

28 Healthcare - Rapid Payback on Investment Accelerating Productivity ($ Millions) Efficiency Ratio (%) Q Q Q Q Q Q Q Revenues Expenses Efficiency Ratio

29 Building Scale Through Bolt-On Acquisitions Acquisitions are a core competency Accretive from inception All are tracking at or above plan Trade Finance Corporate Finance Transportation Finance Factoring Assets ($ Millions) Healthcare Finance Assets ($ Millions) Rail Fleet (Railcars) German Factoring 166 SunTrust 864 HBCC 515 PLM 5,845 DJ Joseph 2,100 Bombardier 15,000

30 Construction: Transformation Success Story Refocused on core strategy Restructured the business - $11 million cost take-out headcount reduction Re-deployed sales force Effective use of capital markets distribution capabilities The result: - Improved front-end and operational efficiency - Sales productivity more than doubled - Achieving ROE hurdle rate Non-Spread Revenue Volume Efficiency Ratio ROE 2006 Net Income $32 M 66% $28 M $1.2 B 27.2% 15.1% VS % 23% 1,098 bps 667 bps

31 Investment Phase in Growth Initiatives is Nearly Complete Funded 25% by exiting slow-growth / low-return businesses Rigorous focus on productivity and expense management Platforms built without incurring goodwill Investment for Growth ($ Millions) Majority of investment has been Focused on the Front-End 20% Back-end Front-end 80% 134 (33) Cost and Revenue Correlated 101 5% Fixed Variable 95% Investment Restructuring savings Net Investment

32 Balancing Size of Sales Force with Productivity Sales Force Size * + Sales Productivity ($ Millions) = Volume * ($ Billions) % % % 12.1 Sep 2005 Sep * Excludes Trade Finance volume and headcount.

33 Delivering Strong Growth and Returns 14.4% 16.0% 16.8% 16.8% 17.2% 18.5% 18.0% 4,568 4,892 2,097 3,087 2,705 3,531 3,065 Q Q Q Q Q Q Q Volume ($ Millions) ROE Profitability Drivers Record new business volumes Stable risk-adjusted margins Increasing levels of fee income Strong credit quality

34 Focus for 2007: Accelerating Growth and Productivity Revenue Build on our growth momentum Harvest investment in new initiatives Focus on fee income growth Build asset management complement Expense Operational excellence driving productivity Accelerate sales productivity Optimize back-office platforms Efficiencies driven through IT enhancements

35 Commercial Finance Panel Flint Besecker Healthcare Gregg Smith M&A Jim Hudak Communications, Media & Entertainment

36 Healthcare Team Leads with Trusted Advisor Approach Top 5 healthcare leaders have over 100 years of industry experience Applies intellectual capital to drive value for clients Healthcare is huge market representing 16% of GDP Added 289 new relationships in past 12 months $55,000,000 Senior Secured Credit Facility Supporting the Acquisition of Tarrant Dialysis Centers by US Renal Relationship Case Study Widely respected middle market private equity firm with long standing healthcare investment track record 4 Closed lead mandate financings in Pending commitments due to fund 2 Buy-side advisory engagements $47,100,000 Senior Secured Credit Facilities Acquisition Finance Sole Lead Arranger CIT Healthcare is preferred source for private equity firm s activities Sole Lead Arranger

37 M&A Advisory Team Executes Mandates Across CIT s Platform Over 90 opportunities have been reviewed: Aerospace & Defense (1) Communication, Media & Entertainment (14) Consumer Products (5) Diversified Industrials (20) Energy (5) Healthcare (30) Rail (1) Retail & Apparel (15) Common Characteristics In Process and Sanus Holdings, LLC have acquired Long-term relationships Leverage CIT s balance sheet Deep industry expertise PROJECT YELLOW JACKET A leading distributor of women s apparel The undersigned initiated the transaction and acted as exclusive financial advisor to Arcapita Inc. and Sanus Holdings, LLC CIT initiated Exclusive sell-side advisor September 2006

38 Communications, Media & Entertainment Validation of Industry Vertical Strategy Strategic Group with Great Growth and New Potential Case Studies Proof of Concept Industry experts with long term relationships in each sub-vertical $212,500,000 Revolving line of credit and mezzanine facility for the purpose of film production Volume ($ Billions) 114% 1.5 Deliver multiple products for a total financing solution Expanded into contiguous areas - Sports and Entertainment Repositioned team for stronger underwritings and lead positions 27 co-lead or sole lead arranger transactions to date in 2006 Successful genre film label Administrative Agent (Senior) Documentation Agent (Mezzanine) $222,000,000 First Lien Revolving Line of Credit, First Lien Term Loan B and Second Lien Term Loan used for acquisition 0.7 Syndication Volume ($ Millions) 250% 219 Fee Income ($ Millions) 140% Casino and hotel operator 10.2 Sole Arranger, Administrative Agent and Acquisition Advisor

39 Commercial Finance The Right Model at the Right Time Market and industry focused Customer-centric End-to-end solutions Relationship driven Enables cross-selling Originate and distribute model Focus on Large and Attractive Markets Industry expertise valued Capital expenditures increasing Complex and growing financing needs Fragmented competitive landscape Global scope Benefits Improved go-to-market synergies Focus on major growth opportunities Greatly enhanced fee income generation Enhanced risk management domain expertise Scalable model Deliver consistently through all cycles