DBRS Assigns Preferred Stock Rating of B (high), Stable Trend to CIT Group Inc.

DBRS, Inc. (DBRS) has today assigned a rating of B (high) with a Stable trend to CIT Group Inc.’s (CIT or the Company) preferred stock. The rating is applicable to the recently announced $325 million of Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series A issuance. The rating is positioned three notches below CIT’s Issuer Rating of BB (high), which also carries a Stable trend. This notching is consistent with DBRS’s base notching policy for preferred shares issued for BB (high) rated entities.

CIT expects to use the net proceeds from the sale of the preferred stock for general corporate purposes, including returning capital to shareholders.

RATING DRIVERS
Further progress on the Company’s strategic evolution to becoming a commercial bank for the middle market evidenced by growing volumes and share while maintaining CIT’s sound commercial credit performance and improving earnings would have positive rating implications. Continued progress in expanding the contribution of funding from deposits, while improving the overall quality of the deposit base would be viewed favorably. Conversely, a sustained deterioration in the Company’s operating results; especially if driven by weakening results in commercial banking or an outflow of deposits resulting in a reversal of the improvement in the funding profile could have negative ratings implications. Rising credit costs beyond DBRS’s tolerance levels indicating weakness in risk management and servicing, or an increase in risk appetite could potentially result in ratings being lowered. Further, an aggressive return of capital to shareholders or a deployment of excess capital via an acquisition not viewed as consistent with CIT’s commercial lending focus to middle market companies would be viewed negatively by DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Global Methodology for Rating Finance Companies (October 2016) and Global Methodology for Rating Banks and Banking Organisations (May 2017), which can be found on our website under Methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: David Laterza, Senior Vice President, Head of U.S. Non-Bank FIG – Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of NA FIG – Global FIG
Initial Rating Date: May 27, 2010
Last Rating Date: October 14, 2016

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.