CIT Angling To Steal Share From Big Banks
05/30/2012| 03:55pm US/Eastern
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By Andrew R. Johnson
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More than two years after emerging from bankruptcy, CIT Group Inc. (>> CIT Group Inc.) is no longer shy about its aspirations to wrangle more financing deals from competing lenders like Wells Fargo & Co. (WFC) and GE Capital.
"This firm for a period of time was not as aggressively marketing itself for obvious reasons and now is in a position where it can," Neil Wessan, who joined CIT earlier this month as managing director and group head of capital markets, said in a recent interview.
Wessan, a former capital-markets executive at investment bank Gleacher & Co. Inc. (>> Gleacher & Company, Inc.), will oversee CIT's efforts to develop offerings used to raise capital for its clients--primarily small and mid-sized companies.
A chief goal for Wessan will be to help CIT increase share of "lead agent transactions," said Pete Connolly, co-head of CIT's corporate finance group. Wessan reports to Connolly and corporate finance co-head Jim Hudak.
"A lot of financial sponsors will put together five or six lenders to close a transaction as opposed to picking a lead agent and having them syndicate a transaction," Connolly said. "We think that's going to change over time. Neil was brought on board to help us win a greater share of lead agent transactions," or those deals in which CIT acts as the lead arranger.
CIT lends money to businesses for everything from office equipment to mergers and acquisitions. It is also the largest U.S. provider of factoring, a form of short-term financing commonly used by retailers, and leases railcars and airplanes.
A major focus for the company has been backing more of its loans with deposits out of CIT Bank, its bank subsidiary, to lower its financing costs. Bank deposits are a cheaper source of financing than raising debt, the strategy that it primarily relied upon prior to its bankruptcy in 2009.
CIT competes partly against traditional lenders like Wells Fargo and Bank of America Corp. (>> Bank of America Corp), which have larger deposit bases, and therefore typically enjoy much lower funding costs.
"You can never compete away these larger banks" on funding costs, said Don Fandetti, an analyst with Citigroup Inc. But "there's a lot to go around, and they will play in areas where banks ... may not be as active."
CIT's strength lies in its focus on specific industries, such as retail and energy, and it's close attention to small and mid-sized businesses, clients who have gone in and out of fashion with other traditional bank lenders, analysts say.
"This is a firm that understands issues associated with middle-market companies and it's not as if we're normally doing $2 billion deals" and now are going after smaller deals "because there aren't enough $2 billion deals," Wessan said. "This is the natural segment for CIT. As a result we face off much better against competitors."
CIT's commercial loans totaled $15.9 billion in the first quarter, up 4.6% from the fourth quarter, which it attributed partly to growth in corporate finance loans.
"CIT has turned the corner on asset growth and appears to be gaining ground in corporate finance and vendor finance given industry specific expertise," Brad Ball, an analyst with Evercore Partners Inc., wrote in a recent research note.
CIT filed for Chapter 11 bankruptcy in November 2009 as it faced challenges raising funds to make loans and many borrowers drew down their lines of credit. Its filing wiped out $10 billion in debt and a $2.3 billion government bailout.
The company exited bankruptcy the following month and has been led by Wall Street veteran John Thain since February 2010, when the former Merrill Lynch and New York Stock Exchange executive took over as chairman and chief executive officer.
While Thain and other executives have been focused on slashing high-cost debt CIT took on upon exiting bankruptcy, the lender more recently has been trying to raise its competitive profile. In March, the company unveiled a new global advertising campaign that includes print and online media, radio spots and other platforms.
CIT's shares were down 2.8%, at $33.99 in recent trading on a day of broader market declines. Its shares are down 2.6% this year.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com
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