OREANDA-NEWS. Fitch Ratings has affirmed the 'BB+/B' long- and short-term Issuer Default Ratings (IDRs) for CIT Group Inc. and CIT Bank, N.A. (CIT Bank), collectively CIT. The Rating Outlook is Stable. A full list of ratings follows at the end of this release.

The IDRs and Viability Ratings (VRs) take into account CIT's transition towards a U.S. commercial bank business model following the August 2015 merger with IMB Holdco LLC and other entities (OneWest transaction). The OneWest transaction resulted in deposit funding increasing to 62.6% of CIT's total debt as of Sept. 30, 2015 from 46.2% as of Dec. 31, 2014 and reduced CIT's interest costs by 70 basis points sequentially in 3Q2015.

KEY RATING DRIVERS - IDRs, VRs, Senior Unsecured Debt and Revolving Credit Facility

Credit strengths include the company's position as a leading middle market lender with strong franchises in key business segments including large equipment leasing and factoring. The IDRs and VRs are further supported by CIT Group Inc. and CIT Bank's tier 1 capital to risk weighted assets ratios of 12.5% and 13.1%, respectively, as of Sept. 30, 2015, which are high relative to peers, the company's strong liquidity position, and demonstrated access to capital since the company's recapitalization in 2009.

The ratings also incorporate the company's appropriate risk management framework, focus on asset-backed transactions, and sound asset quality, although the latter is at least partially a function of a currently benign credit environment.

These strengths are counterbalanced by elevated execution risk as CIT is simultaneously managing the transition to a new chief financial officer (effective Nov. 1, 2015) and new chief executive officer (effective April 1, 2016), the continued integration of OneWest, and pursuit of strategic alternatives for its commercial aerospace business. The company has also publicly indicated that the new management team intends to present their strategic plan in 1Q16, which could potentially introduce further change.

Other rating constraints include CIT's exposure principally to middle market companies, historically a higher risk customer segment, heightened asset risk associated with cyclical leasing businesses, and a moderate earnings profile. Pre-tax return on average earning assets (ROAEA) averaged 1.3% YTD ended Sept. 30, 2015, after trending averaging 1.7% in 2014, 2.4% in 2013 and (1.6%) in 2012. CIT's oil and gas exposure, which comprised 3% of total loans as of Sept. 30, 2015, contributed to a moderate increase in net charge offs to 0.86% in 3Q2015 after trending in the 0.43%-0.48% range in 1H2015. Non-accrual loans were 0.66% of total loans as of Sept. 30, 2015.

Fitch believes CIT will continue to face elevated regulatory scrutiny as it exceeded the $50 billion systemically important financial institution (SIFI) threshold as of Sept. 30, 2015 and is required to comply with certain regulations including capital planning and company-run and supervisory stress testing requirements and other requirements.

With respect to CIT's announcement that it is pursuing strategic alternatives for its commercial aircraft leasing business, Fitch views this as understandable given the punitive capital charges on the owned aircraft and order book along with statutory limitations on high residual assets that limit funding such assets through the bank. The mode of the divesture of the aircraft leasing business, such as a sale or spin-off, is unclear at this time, as the company is considering tax implications, treatment of CIT debt, and prospective levels of debt repayment and/or return of capital to shareholders. Fitch's Stable Rating Outlook indicates that Fitch does not, at this time, believe the divestiture will impact CIT's ratings.

CIT's IDR of 'BB+' is equalized with its VR of 'bb+', reflecting Fitch's view that external support cannot be relied upon.

The senior unsecured debt rating is equalized with CIT's IDR of 'BB+', reflecting that existing notes are senior unsecured obligations of the company that rank equally in payment priority with all existing and future unsubordinated unsecured indebtedness of CIT.

The revolving credit facility is unsecured and is guaranteed by eight of CIT's domestic operating subsidiaries. In general, the revolving credit facility ranks equal in right of payment with all existing unsecured indebtedness of CIT, and as such, the rating of the revolving credit facility is equalized with CIT's IDR. The revolving credit facility also includes customary covenants that are not shared by CIT's senior unsecured notes, including but not limited to, a guarantor asset coverage ratio, a consolidated net worth covenant and limits on CIT's operating flexibility in an event of default. Fitch believes these covenants do not provide sufficient additional protection to the facility to provide uplift to the revolving credit facility's ratings relative to CIT's IDR and senior unsecured debt rating.

KEY RATING DRIVERS - Support Ratings and Support Rating Floors

The Support Ratings (SRs) of '5' reflect Fitch's view that external support cannot be relied upon. The Support Rating Floors (SRFs) of 'No Floor' reflect Fitch's view that there is no reasonable assumption that sovereign support will be forthcoming to CIT.

KEY RATING DRIVERS - Long- and Short-term Deposit Ratings

CIT Bank's uninsured deposit ratings of 'BBB-/F3' are rated one notch higher than the bank's IDR because U.S. uninsured deposits benefit from depositor preference in the U.S. Fitch believes depositor preference in the U.S. gives deposit liabilities superior recovery prospects in the event of default.

RATING SENSITIVITIES IDRs, VRs, Senior Unsecured Debt and Revolving Credit Facility
Fitch views upward rating momentum as limited given current modest pre-tax operating performance levels and elevated execution risk while CIT seeks to complete the management transition, integrate OneWest and explore strategic alternatives for its commercial aerospace business and the sale of certain international businesses.

Positive rating momentum could develop over a longer-term horizon as a result of improved and consistent operating performance, demonstrated credit performance through market cycles in line with expectations, maintenance of appropriate capital levels relative to the company's risk profile and regulatory minimums, an enhanced funding profile characterized by less reliance on wholesale funding sources, and demonstrated durability of deposits in a rising interest rate environment.

Negative rating momentum could be driven by a sustained weakness in operating performance which results in insufficient capital generation or a material change in risk appetite or strategic objectives. Expansion into new business verticals outside CIT's core commercial lending and leasing expertise or outsized growth in new commercial businesses may lead to negative rating momentum. Challenges during the OneWest integration process or an inability to successfully manage the increased regulatory requirements associated with assets exceeding the $50 billion threshold would also be viewed negatively.

The senior unsecured debt rating and the revolving credit facility rating are equalized with CIT's long-term IDR, and therefore are sensitive to any changes in CIT's IDR.

RATING SENSITIVITIES - Support Ratings and Support Rating Floors

CIT's Support Rating and Support Rating Floor are sensitive to Fitch's assumptions around capacity to procure extraordinary support in case of need.

RATING SENSITIVITIES - Long- and Short-Term Deposit Ratings

CIT Bank's uninsured deposit ratings are rated one notch higher than the company's IDR and therefore are sensitive to any changes in CIT Bank's IDR. The deposit ratings are primarily sensitive to any change in CIT Bank's long- and short-term IDRs.

Fitch has affirmed the following ratings with a Stable Outlook:

CIT Group Inc.
---Long-term IDR at 'BB+';
---Short-term IDR at 'B';
---Viability Rating at 'bb+';
---Senior Unsecured Debt at 'BB+';
---Revolving Credit Facility at 'BB+';
---Support Rating at '5';
---Support Rating Floor at 'NF'.

CIT Bank, N.A.
---Long-term IDR at 'BB+';
---Short-term IDR at 'B';
---Viability Rating at 'bb+';
---Long-Term Deposit Rating at 'BBB-';
---Short-Term Deposit Rating at 'F3';
---Support Rating at '5';
---Support Rating Floor at 'NF'.