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You are at:»»CIT Group Inc. (NYSE:CIT) Reports Higher-Than-Expected Q2 EPS, $3.4 Bln Deal to Buy OneWest Bank, $500 Mln Buyback Plan

CIT Group Inc. (NYSE:CIT) Reports Higher-Than-Expected Q2 EPS, $3.4 Bln Deal to Buy OneWest Bank, $500 Mln Buyback Plan

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By on Financial

CIT Group Inc. (NYSE:CIT) shares jumped in Tuesday’s pre-market session, after the commercial lender reported Q2 earnings well above analysts’ expectations while unveiling plans to acquire IMB Holdco LLC, the parent company of regional bank OneWest Bank, for $3.4 billion in cash and stock.

The company also said its board approved the repurchase of up to $500 million of common stock through June 30, 2015. The company also has approximately $55 million remaining under its previously authorized programs.

CIT was up 12% at $49.13 in recent pre-market trading, in a 52-week range of $41.06 to $52.72. Under the terms of the deal, IMB Holdco shareholders will receive $2.0 billion in cash and 31.3 million shares of CIT Group common stock currently valued at $1.4 billion, assuming a CIT stock price of $44.33.

CIT said it expects the transaction to boost its 2016 earnings per share by 20%, generating an internal rate of return of 15%. “The transaction diversifies and lowers the cost of CIT’s deposits, broadens the products we can offer to our middle-market clients, is accretive to earnings and return on equity, and accelerates the utilization of our NOL, while maintaining a strong capital position,” said CIT CEO John Thain.

CIT reported its Q2 net income rose to $246.9 million, or $1.29 per share, from $183.6 million, or $0.91 per share, a year earlier. Excluding discontinued operations, CIT earned $1.02 per share in the latest quarter, up from $0.87 per share in the prior-year period. The per-share comparison was affected by a 5.6% reduction in the number of shares outstanding. Analysts polled by Capital IQ were expecting a profit of $0.71 per share. Net interest revenue slipped to $47.6 million from $56.5 million, while noninterest income climbed to $613.3 million from $563.5 million.

“We had a solid second quarter and made good progress strengthening our franchise,” Thain said. “We grew our commercial assets by 3%, repurchased 9.4 million common shares and announced the acquisition of Direct Capital Corporation while completing the sale of certain non-strategic portfolios. We continue to focus on building long-term value by growing our earning assets, expanding CIT Bank, achieving our profitability targets and returning capital to our shareholders.”

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