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Barron's Likes CIT Group


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CIT trades for 0.9 times estimated 2012 tangible book value of $43.54 per share, and some investors think book value is understated, as CIT was overly conservative in writing down bad loans during its bankruptcy proceedings. One hedge-fund manager who owns the shares estimates tangible book is $52 or more.


"You can assume that things have gotten better, and the marks they took seem pretty aggressive in hindsight," says Benjamin Ram, a portfolio manager with Oppenheimer Funds, another CIT investor. "That gives me a lot of confidence in the actual value of the balance sheet. When you look at a lot of financials, you have to just believe what they tell you."


Many hedge funds own CIT because they think it eventually will be acquired for a significant premium by one of many banks starved for commercial assets and access to the middle market. Also appealing are the lender's $8.4 billion in cash and $4 billion in deferred-tax assets. By some estimates the company could fetch north of $50 a share in a takeout.


They liked CIT a year and a half ago too...




CIT has stripped down its loan portfolio by selling noncore assets. Pretax earnings of $353.1 million for the first six months of 2010 were boosted by a $130 million gain on the sale of about $3 billion in assets and operations in Australia and Canada, as well as $113 million of recoveries in pre-2010 charge-offs. The company has also laid off about 7% of its work force. Reports have the company subletting its office space at 505 Fifth Avenue in New York.
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European bank woes equals bargain buying for American banks like CIT...




Nelson Chai, president of CIT Group Inc. said, "As a result of the changing priorities among European financial institutions, we were able to opportunistically acquire this portfolio of U.S.-based aircraft loans that offer attractive returns."
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