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Originally published Tuesday, April 27, 2010 at 4:26 AM

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CIT Group turns profit after exiting bankruptcy

The business lender CIT Group Inc. said Tuesday it turned a profit in its first quarter since emerging from bankruptcy protection.

AP Business Writer


The business lender CIT Group Inc. said Tuesday it turned a profit in its first quarter since emerging from bankruptcy protection.

The performance by CIT Group could bode well for small and midsize businesses, many of which rely on CIT Group for financing. The New York company is one of the nation's largest lenders to small and midsize businesses.

As CIT Group struggled last year to restructure its mounting debt, analysts said a failure of the company could significantly hurt an economic recovery since it is such an integral source of funding for other companies.

It sped through bankruptcy in the fall, emerging with restructured debt in December.

CIT Group earned $97.3 million, or 49 cents per share, during the three months ended March 31. Analysts polled by Thomson Reuters, on average, forecast a loss of 25 cents per share for the quarter.

Its shares rose 80 cents, or 2 percent, to $41.50 in morning trading after rising to a new high of $42.94 earlier in the session.

CIT Group did not provide any detailed financial results in Tuesday's report from quarters before the bankruptcy filing. But, previous filings show CIT Group's loss available to common shareholders was $504.5 million, or $1.30 per share, during the first quarter in 2009.

CIT Group generated $900 million in new loans and leases during the first quarter, which it said in a statement was slightly below the fourth quarter's results. Vendor finance started to recover and corporate finance began to stabilize, the company said in a statement.

Loans from CIT Group's factoring business fell in the first quarter because of seasonal trends and the residual effect of some clients ending their agreements with the company last year.

Factoring is short-term financing that guarantees that suppliers get paid by merchants. The loans provide cash to suppliers that can't afford to wait the 60 to 90 days it takes to get paid for shipments to retailers.

Because of the bankruptcy reorganization, CIT Group had to re-establish some loan-loss reserves during the first quarter. The bank set aside $186.6 million during the quarter to cover loan losses and provide some protection against future defaults. Mounting loan losses were a primary reason CIT Group was forced to file for bankruptcy protection.

CIT Group entered bankruptcy last fall and quickly emerged after reorganizing its mounting debt. Bondholders had approved the reorganization plan ahead of the bankruptcy filing.

It spent much of last summer trying to reduce its debt burden to avoid bankruptcy. However, it was unable to do so. The government turned down the lender for a second bailout and lost the $2.3 billion it invested in CIT Group as part of the $700 billion Troubled Asset Relief Program.

Common shareholders also were wiped out last year during the bankruptcy process.

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