CIT1Q2008TranscriptFINAL

FINAL TRANSCRIPT

CIT - Q1 2008 CIT Group Earnings Conference Call
Event Date/Time: Apr. 17. 2008 / 9:00AM ET

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Apr. 17. 2008 / 9:00AM, CIT - Q1 2008 CIT Group Earnings Conference Call

CORPORATE PARTICIPANTS
Ken Brause
CIT Group - Executive VP of Investor Relations
Jeffrey Peek
CIT Group - CEO
Joseph Leone
CIT Group - Vice Chairman and CFO

CONFERENCE CALL PARTICIPANTS
Eric Wasserstrom
UBS - Analyst
Sam Gokhale
KBW - Analyst
Bruce Hartin
Lehman Brothers - Analyst
Matt Burnell
Wachovia Securities - Analyst
Moshe Orenbuch
Credit Suisse - Analyst
Chris Brendler
Stifel Nicolaus - Analyst
Howard Shapiro
Fox-Pitt Kelton Cochran Caronia Waller - Analyst
Michael Cohen
SuNOVA Capital - Analyst
David Hochstim
Bear Stearns - Analyst

PRESENTATION
Operator
Good day, ladies and gentlemen and welcome to the CIT's first quarter 2008 earning call. My name is Nakita, and I will be your
operator today. Participating in the call are Jeffrey Peek, Chairman and Chief Executive Officer, Joseph Leone, Vice Chairman
and Chief Financial Officer, and Ken Brause, Executive Vice President of Investor Relations. (OPERATOR INSTRUCTIONS) I will
now turn the call over to Mr. Ken Brause, Executive Vice President of Investor Relations. Please go ahead, sir.

Ken Brause - CIT Group - Executive VP of Investor Relations
Thank you, Nakita, and good morning to everyone. Welcome to the CIT's first quarter earnings call. Let me just mention two
items before we get started today. First, following our formal remarks, we'll have a Q&A session. We ask that you limit yourself
to one question and return to the queue if you have additional questions. We'll do our best to answer as many of your questions
as possible in the allotted time.

Second, elements of this call are forward-looking in nature and may involve risks, uncertainties, contingencies that may cause
actual results to differ materially from those anticipated. Any forward-looking statements, relate only to the time and date of

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this call. We disclaim any duty to update these statements based on new information, future events or otherwise. For information
about risk factors relating to the business please refer to our SEC reports. Any references to certain non-GAAP financial measures
are meant to provide meaningful insight and are reconciled with GAAP in the financial tables accompanying the press release.

For more information on CIT, please visit the investor relations section of our Web site at www.CIT.com. With that, it's my pleasure
to hand the call over to Jeff Peek, our Chairman and CEO.

Jeffrey Peek - CIT Group - CEO
Thank you, Ken, and good morning everybody. Welcome to our first quarter earnings call. What I want to do is update you on
a number of strategic issues, including the progress we've made on liquidity, since our last call on March 20th. Then Joe will
review the quarter and provide you with more detail on the liquidity position. Finally, we'd be delighted to take your questions.

I just want to make a few quick comments on the quarter before I turn to strategy. We have market-leading franchises in the
middle market. That's our value proposition, and that's why CIT has been around for 100 years. Given the current market
dynamics, our own funding costs and the results of other commercial financial providers, I believe that the first quarter results
of our commercial finance franchises at 12% ROE are certainly respectable. The home lending portfolio at 28 months continues
to season. Delinquencies appear to have stabilized there, and our current model projects charge-offs peaking in the next quarter
or two. We did take additional provisions this quarter due to the decline in value in the housing market and believe that provisions
may level off for the remainder of the year absent continued decline in housing values.

Student lending is now a liquidating portfolio that predominantly consists of 97% government-guaranteed self-loans. We've
taken reserves on the private loan portfolio, particularly the helicopter school, and have begun work on our collection strategy.
We will continue to service this portfolio ourselves.

Now, let's move to issues of strategy and funding. When we last spoke with you on March 20th, the day we drew down our bank
lines, we provided our actionable next steps in anticipation of returning to a more normalized funding program. Having excess
cash gives us some flexibility, which should enable us to maximize value. Now, first and foremost in that message was the
acknowledgement we need to operate a smaller, more focused franchise.

In the quarter, we took significant action to reduce staff. We eliminated over 500 employees, almost 8% of the global work force
above the 5% target that we share with you last quarter. ,And closing our student loan origination platform recently will result
in a reduction of another 150 employees in the second quarter. Now we continue to pursue a dual path with regard to these
action plans. In that dual path would be -- first, preliminary discussions with a number of highly-regarded financial institutions
that are well-positioned to make an ongoing investment in CIT. And secondly, a detailed analysis of our diverse business portfolio,
assessing the value we would receive for the asset in today's market along with the long-term strategic value that asset plays
in terms of the overall franchise.

This week we had our annual two day Board of Directors Planning Session, during which we reviewed our recommendations
and today's announcements outline the first wave of action we have undertaken. First, let's talk about asset sales. In March, we
discussed the possibility of asset sales in the range of $5 to $7 billion. We completed a little over $0.5 billion of asset sales in the
first quarter and have a good line of sight on the remaining sales. We are selling about $800 million of aircraft at a 10% asset
gain. We have sold $1.4 billion of middle market loans at a price near par. And in addition, we have sold an additional $3.2 billon
of unfunded loan commitments, which could be drawn down.

So that reduces not only assets, but also potential calls on our liquidity going forward. We've also identified another $2 billion
of loans that we will either fund or sell. In these transactions and the pricing we're getting, continue to demonstrate the quality
of our portfolio in our opinion. Next, let's talk about the dividend cut. We decided to reduce the quarterly dividend to $0.10 per
share, a 60% cut. This results in an excess of $100 million of capital savings for the year. We believe that retaining additional


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capital is the prudent course, and it will ultimately lead to enhanced shareholder value. The third aspect of the plan we're talking
about today, our decision to explore strategic alternatives for the Rail business. I have to admit, this was a difficult decision for
us because the rail business has been a solid performer for CIT in it's whole 20-year history.

In rail, we have an attractive fleet, oil customers and a strong management team. All of which bode well for the franchise value
of the business looking forward. However, the rail business is capital intensive, and it does not lend itself well to alternative
funding structures outside of the balance sheet. The rail business is also fairly self-contained, which lends itself well to several
strategic options, from a minority investment to a joint venture to an outright sale.

Now, the market intelligence we have suggests that this is a very attractive property, hard assets in a liquidity-challenged market,
but we'll look to maximize our options here over the next several months. And finally, our desire to secure additional liquidity
and/or capital. We continue to pursue some form of long-term committed liquidity. We are having ongoing discussions with
several parties about funding and/or capital structure.

As we've told you before, we would benefit more from access to additional funding than from access to additional capital. But
in this environment, there are clearly benefits to being over-capitalized, and we will continue to explore alternatives for both
additional liquidity and additional capital. Now, before getting into the operating results for the businesses, I do want to highlight
the success we've had financing in the capital markets this quarter. In the first quarter, we raised over $3 billion, including $2.7
billion raised through secure financing against several asset classes and about $600 million of unsecured debt gathered through
our retail note program (sic - see Press Release). We've also advanced our funding strategies out of our Utah bank. And Joe will
talk about this in greater deal shortly, but we still have today about $1.4 billion of cash at that bank, which is being used to fund
new corporate finance volume.

Now moving up to the operating results for the businesses. Businesses env - environment has not only remained challenging,
but probably gotten even more challenging since we last spoke to you. Obviously, all of us here are disappointed in reporting
another loss this quarter. At CIT, we continue to have a tale of two companies. Our market leading, middle market commercial
finance business, which remains profitable in earning double digit returns on capital, and our liquidating consumer business,
home loaning and student loaning, both of which are in runoff mode, but contributed to our loss this quarter.

But first, let's focus on our core commercial finance franchises, corporate finance, transportation, trade and vendor. As you saw
in our earnings announcement this morning, these four segments combined earned $0.82 per share in this quarter. And this
equates to about a 12% return on equity, which we think we deem to be quite respectable in the current environment and
again demonstrates the long-term franchise value of these four commercial finance franchises. That clearly, funding costs are
higher, and market activity is down, particularly for some of our non-spread revenue activities like syndications, asset sales and
securitizations. More over, credit costs are normalizing as expected given the weaker economy. We have purposely constrained
growth and exercised extreme discipline in evaluating opportunities and in putting on new business volume. Let me share a
few highlights from the quarter with you this morning.

First, let's talk about Transportation Finance. Transportation Finance had a terrific quarter, an ROE close to 20%. On the aerospace
side, demand for aircraft remains strong. Credit looks exceptional, and we have the right planes at the right time. The average
age of our fleet at year-end was just slightly over five years. Now there's been lots of press on commercial aerospace lately,
particularly with some of the marginal startup airlines, and we have not leased planes to any of the carriers that have stop flying
recently. And there are no indications that these current events have impacted the demand for our fleet or our assets, particularly
given that over 90% of our planes fly outside of the United States.

Now in rail, the overall utilization is around 95%, and that remains a good barometer by historic standards. We saw some
improvement during the first quarter for demand of non-construction related cars. In fact, March was a record month for us in
rail. We placed 4,000 cars, 2,500 renewals and 1,500 new cars. Now also notable for Transportation Finance in the quarter was
a deal we did for Wiley labs, a company which is active in defense and government contracting. We were a joint lead arranger,
book [ranker] and syndi - syndication agent on a $230 million senior secured facility.


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Now, let's move on to Trade Finance. Trade Finance as always remains a steady performer, ROE near 16%. Here in this business,
the weaker economy is having an impact on volumes, which are down, and we did see some margin compression. However,
in Trade Finance, credit remains strong, and we are managing it very closely. There are a handful of retain names that have been
concerned - of concern to us, and we have been successful in reducing our exposure to them. And, we're also continuing to be
active here. We executed several interesting deals for clients this quarter, including a revolving line of credit to Como Fred
David, a women's clothing apparel company, and acting as a lead arranger for G-III, a manufacturer and distributor for several
high profile brands.

Let's move on to corporate finance. In looking at Corporate Finance, it is important to separate $118 million of the marks on
the assets we are selling from the ongoing corporate finance business. Corporate Finance's results this quarter were also impacted
by the $22 million write-off, related to a coal mine that filed for bankruptcy during the quarter. If you exclude the marks and
the coal mine, the ROE for corporate finance was around 12%, pretty good considering that syndication activity is almost
nonexistent. Although we did originate new loans during the quarter, including financing for Black Eagle Partners and their
acquisition of Rockford Products and Palladium Equity Partners for their acquisition of American Gilsonite Company.

Looking forward, this remains a great time to originate assets in corporate finance as deals are getting done which have
historically very attractive pricing, low leverage and full convanent packages. We are actively new business volume here through
CIT bank. We funded new business of over $300 million in the quarter and have an excellent pipeline going forward to utilize
the $1.4 billion of cash sitting in the bank.

Finally, Vendor Finance. We were disappointed with the Vendor Finance results this is quarter, which were impacted by a $33
million impairment charge related to the Dell buyout. Also the continued illiquidity and syndication and the securitization
markets, and, of course, the lack of equity income from the DS - DFS joint venture all contributed to the results for Vendor
Finance. We have initiated several changes in this business, including a reduction in operating expense levels. In the quarter,
we reduced staff in vendor globally about by 7%, which would be 150 positions, and we will take additional actions going
forward to better align operating expenses with revenues, particularly in some of our business in Europe.

Within Vendor Finance though, our major relationships are doing quite well, noticeably Microsoft and Avaya. Vendor Finance
clearly remains one of our marquee franchises, and we expect ROEs here should return to more normalized levels next quarter.
So we would expect Vendor Finance to generate mid- to high-double digit ROEs on a go-forward basis. So while we have a
range of results among our commercial finance franchises, overall, we think for the commercial finance franchises, it's a pretty
good story in the current environment.

Finally, I want to spend a few minutes on our relationships. Customer attention is solid. We're committed to our customers
through good times and bad, and, from the top down, we're communicating and strategizing with our customers. For many
of our customers, CIT is an integral part of their operation. We help main street, and they want us to make it. I urge you to check
the press release section of our Web site. There you'll see a steady stream of deal announcements, debtor-in-possession financing,
new airline leases with new customers, merger advisory assignments and lead agent roles on new loan facilities. Even in these
difficult environments, we're making every effort to serve our customers and keep our businesses working and moving forward.
Now our employees, they are engaged, and they understand what needs to be done to realize our vision for the future. As many
of you know, it's never easy managing employee morale during challenging times, but it certainly is critical, and it's a priority
I've set for every manager in the company. And obviously, we're spending a lot of time with other stakeholders, including the
rating agencies, our bank group and many of you. In these difficult times, we believe that the best course of action is to increase
communication and enhance disclosure, not the opposite, as is often the natural tendency.

Now along those lines, I'd like to remind everyone that uncertain environments generate and lead to speculation, and we've
certainly had our fair share. And we commit to you that we will update you whenever appropriate. Whenever we have information,
we will try and pass it along. At CIT we've never shied away from a challenge, and we certainly won't going forward. Now, let
me hand it over to Joe.


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Joseph Leone - CIT Group - Vice Chairman and CFO
Thank you, Jeff. Good morning, everyone. Thank you for joining us this morning. What I plan to talk about is funding first, as
that has been the key area of focus for the company and for many of you, and then review certain elements of the quarterly
financial results. I agree with Jeff, in summary, our commercial businesses performed reasonably well in one of the most difficult
market environments I've seen. Our overall financial results were disappointing to me as our liquidating consumer finance
businesses continued to underperform. Having said that, we spent a great deal of time this quarter, a great deal of focus, on
building the strongest liquidity position we can. And I think we made very good progress on a number of the initiatives, Jeff
described some, I'll give you a little more color on others, that better position us in the future and for the future. Yet, we have
more initiatives in progress, and I'll give you some of my thoughts there.

As Jeff said, last month we shared with you some of our initial liquidity thoughts following our decision to utilize the bank lines.
We've been focused on building out that plan and more importantly creating an execution strategy, timeline and milestones.
In a few weeks, we've made good progress. As we go forward, I think we'll do even more. Jeff went over the asset sales. Just to
reiterate, one, we agreed to sell $4.6 billion of asset- based loan businesses where we're a participant, and those loans will come
out of our corporate finance segment. At quarter end, there was roughly $1.4 billion drawn under those facilities. As we said,
not only significant in terms of balance sheet financing, but also the elimination of future liquidity draws. More little later on
the pricing on that.

We were quite happy with the execution of our aerospace team had in a very difficult environment in selling $300 million of
aircraft at a gain premium to book, and we continue to look and do more. One of the reasons for the sale was not -- another
reason for the sale was not only liquidity enhancement, but also strategic as, we managed the amount of capital we have
deployed in the aerospace business. Jeff described our game plan on business dispositions and our strategic intent with regard
to rail. Let me say that we continue to review businesses thoughtfully in the portfolio, based upon criteria we've shared with
you in the past, returns through cycles, ability to source alternative financing, the likelihood of garnering fair value in today's
market and an overall fit with long-term strategy. Finally, our financing game plan contemplates a full range of debt in
capital-raising initiatives that we are analyzing. We are focused on continuing to build liquidity and maintaining the strongest
capital ratio as we can in face of this persistent market volatility. I think we've had tremendous success tapping into different
pockets of liquidity across our business, the secured financing I mean. And we are working and continuing to work on that.

In the quarter, some of the specifics, we had cash at quarter end of about $10.3 billion, those balances include $1.5 billion or
so of reported cash that is not in the U.S. or is associated with securitization financing. And a similar amount in our U.S. - Utah
bank.

In terms of financing, just to give you a little bit of detail on what Jeff described, we did $2.7 of secured financing, the cost was
about LIBOR to $100 to $125. And we executed against our rail assets, vendor receivables, middle market loans, some student
loans and trade receivables, and ,as Jeff said, we did tap the unsecured retail note program earlier in the quarter. On the outflow
side we paid off a $1.5 billion of commercial paper so far since the bank line draw and over $1.5 billion of unsecured term debt.
The asset portfolio grew as we had commitments to satisfy in certain units during the quarter. We did see certain pay-down
trends lower in certain other units. Jeff described the progress we're making in the Utah bank, principally booking out all of our
originations in corporate finance in the bank, and we've roughly recorded about $400 million, $350 to $400 million of loans
there. Once the cash is substantially utilized, we will start raising broker deposits again out of that vehicle.

In terms of our liquidity position, clearly the primary focus of the company, our current baseline liquidity forecast, including
debt maturities, expected volumes, scheduled, regularly scheduled asset sales, use of our bank, depicts an ample cash through
the end of '08. Our goal is to further build a liquidity cushion, successful execution ii the initiatives, we outline today are designed
to take us through 2009 as we'll continue to assume in our liquidity planning the capital market stay very difficult. We have a
great deal of unincumbered assets, approximately $50 billion. We continue to work on additional asset-backed financings in a
variety of asset classes, whether they be aircraft, middle-market loans, vendor and certain consumer assets. I think we could


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get a couple of these transactions done this quarter. And I would hope that our progress in managing down the asset-side of
the balance sheet will improve capital ratios and eventually lead us to more attractive, unsecured access.

I'd like to spend a minute on the company's outstanding commercial loan commitments. I think IRs have received a lot of
questions on this. It's been an area of focus of yours and ours, and we've reduced it. At this quarter end, we had approximately
$7 billion of commercial loan commitments that were available to be drawn based upon covenants and asset availability. The
sale we announced, the agreement, we announced today, cuts that number approximately in half. So we're making progress
on that overhang contingent liability.

Finally, with regard to capital, we ended the quarter just shy of our target of 8.5% tangible to managed assets. As we've stressed,
we are committed to maintaining a strong capital base. The Board's action with regard to the dividend reflects that. And couple
that with the asset dispositions and funding initiatives Jeff spoke about, we'll strive to operate the company in excess of our
target.

A few items in the quarter I'd like to spend a couple of minutes on. Let me start with the loss on hedge accounting. That was
the largest noteworthy item. It was about $148 million pre-tax charge. And the reason for the charge is, when we lost our
commercial paper program due to the bank line draw, we lost the hedge accounting on swaps associated with that portfolio.
Effectively, we were swapping floating rate commercial paper to a fixed rate interest rate to fund fixed rate assets. Given our
expectation for the CT running off, these swaps no longer qualified for hedge accounting, resulting in this mark-to-market going
to P&L. Previously, it had been in equity. The mark was negative because interest rates have declined since the swaps were
initiated.

Since hedge accounting was no longer possible, and we would then be subject to future mark-to-market volatility through the
margin, we decided to unwind those swaps. In order to maintain our interest rate balance and interest rate management
positions, and the discipline we've had that over the years, we've also decided to terminated a like amount of swaps going the
other way, swap-to-flow for example. These were in a favorable mark-to-market position.

So there is no real economic impact to the actions, but the accounting treatment is different. The losses on the terminated
swaps are recognized through P&L. The gains on the swaps - on the swaps to float will be recognized in margin over the terms
of the swap. Combined, these actions have little impact on the balance sheet, no impact to shareholder's equity,a slight positive
impact to cash. And we have not changed our asset liability management position.

Another noteworthy item was our -- the by-product of eliminating the overhang on the commercial asset-based loans. We
recorded $118 million evaluation charge on that agreement on both the loans and the commitments. We did transfer those
loans to asset held for sale at March 31st and marked them to our expected price.

Finally, the restructuring charge Jeff spoke about, $69 million came in a little higher than we expected. The head count reduction
was about 500 positions. In terms of payback, we expect the annual cost to save about $80 million, with $7 million in Q1 rising
to about $18 million in Q2. We have more right sizing to do, and we promised $100 million in savings. And we have more to do
on that, and we have to right size the expenses for the revenue stream. Going the other way, we did benefit on the tax line. As
we look forward, we assume a more normalized earnings pattern. We had high losses in the U.S. this quarter, more earnings
internationally. A more normalized earning pattern should give us a tax rate in the low 20s.

Moving on to consumer lending, we built our reserves significantly. And home lending we reported a net loss of $150 million,
due to $150 million reserve build. We did take $68 million of charge-offs, $23 million of lower cost to market adjustments and
some securitization impairment. Outside of these credit marks, the operation basically broke even.

Royally speaking, the portfolio performed - performed in line with what we thought the delinquency trends would do. However,
the charge-offs in provisioning are greater than we thought when we came into the quarter as we adjusted our assumptions


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for severity higher on both first and second mortgages. Currently reserving assumptions resume 50% or so on firsts and almost
100% on seconds.

On the manufactured housing front, we continue to see interest in that portfolio, however buyers have not been able to get
financing, so we took an additional charge of $23 million pre-tax, and we moved that pool back into assets held for investments.
It's carried at about a 30% discount. Including the manufacturing housing loans, the contractual balance, unpaid principal
balance of a mortgage portfolio is about $9.4 billion. Against that we're holding $400 million of loss reserves, $400 million plus
of discounts and $280 million of cash-due valuation reserves. That's 10%, 11% reserves against it. Over time, since July of 2007,
we've taken about 16% write-downs against this pool. As we look forward, we expect additional loss provision as the portfolio
liquidates. Jeff mentioned that a little earlier.

Moving on to student lending, we had a loss, largely due to the credit provisioning Jeff described. Now, we are - we are continuing
to work on collecting that portfolio. Finally, we announced that we will take some restructuring charges in the second quarter
in the magnitude of about $20 million. We expect front-end savings or annualized savings of about $25 million. Just a few words
on some line items, margins first. Margins declined 32 basis points. Oftentimes, I give you some of the impacts. We had the
impact of the financing we did in November that was three to five basis points. Higher conduit costs and repricing of auction
rate securities was four to five basis points. We had negative carry on the cash we had, and that was four or five basis points.
Some mixed shift, higher non-accruals and some slight benefits from the rate cuts.

As for the outlook, we continue to see some compression. Should be at a slower pace than we saw in Q1. That said, we will
continue to have negative carry on the cash investments as we have -- carry heavy cash investments in through -- probably
through the rest of the year.

On portfolio quality, the commercial businesses are performing well. Jeff described the uptick in corporate finance. Without
that the charge-offs were 42 basis points.

We did see some increase in non-performings. Having said that, we do not see anything systemic. I should also not that no
planes, any of those airlines that filed for bankruptcy, were in our fleet. We do expect higher commercial losses in credit margins
to continue to inch higher. Although non-accruals are up, they are net of expected losses, our FAS 114 reserves and remaining
balances are largely covered by collateral or core value. I would sum up, as Jeff opened, I've been meeting with many of our
business people, certain of our customers, and there is a clear need for what CIT does in this market. There is a clear need for
capital for the middle market for the company, country to grow. Our factory clients, our small business entrepreneurs, our
vendor finance partners are all looking for capital to grow in the U.S. and over seas.

So we are anxious to get back to our normalized funding profile. That's why we work so hard on what we announced today,
and we'll continue to work on hard -- on new initiatives in terms of having more secured financing initiatives for us to announce
to you so that we can get back to a more balanced funding formula. With that, I turn it over to the operator for questions and
answers.

QUESTIONS AND ANSWERS

(OPERATOR INSTRUCTIONS)

Operator
Your first question comes from the line of Eric Wasserstrom of UBS. Please go ahead, sir.


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Eric Wasserstrom - UBS - Analyst
Thanks. Actually, just two points of clarification, please, Joe. The first is when you say you've agreed to these asset-based sales
does that mean there's a firm commitment to occur and the transaction just hasn't been executed?

Yes, we have not executed on the transaction.

We have an agreement on the terms, and the agreement on terms is on price and size of the loan commitments, loans, outstanding
loans and loan agreements we're agreeing to sell.

Okay. And the other quick clarification, the negative $118 million mark, to which assets does that relate?

That relates to the transaction we just described.

Okay.

We did sell at a slight discount, but the discount applies to both the outstanding and the commitment.

Great. Thanks very much.

Operator
Your next question comes from the line of Sam Gokhale of KBW. Please go ahead, sir.

Sam Gokhale - KBW - Analyst
Hi, just a couple of questions. I just want to clarify, the $300 million that you closed on in the aircraft business, that gain was
also at 10%? I know you referenced that $770 million was for a gain of 10% but the $300 million also we should assume a 10%
gain?

I think it was about 9%.


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Okay, thank you. And, then the other question that I had, Joe, you spent a fair amount of time talking about liquidity asset sales,
but it seemed like based on the disclosures, you guys had in your 10-K that the company seemed to have enough liquidity even
without the asset sales. And now we're -- you've been talking about -- some time about pursuing those asset sales, and that's
clearly going to add to the liquidity cushion, but then on top of that there is the discussion about potentially exploring the
issuance of equity securities to these levels would be dilutive to shareholders so is that issuance of equity like a remote possibility
at this point or you can just provide some color on that, that would be helpful.

Well, just first on the liquidity side. When we prepared our disclosures for the year-end in the 10-Q, we were continuing to have
access to the commercial paper market, the $3.5 to $4 billion, so that's one change.

Secondly, the - we always had a secured financing plan. And, thirdly, we did continue to expect in that plan to have some access
to the unsecured markets. Given where we sit in April, we've taken out of our plan any access to the unsecured markets and
any access to the commercial paper market. In terms of capital, we continue to explore all options that would enable us to
return to a more normal funding profile. And that entails having a lot of liquidity, having you have the confident that we have
enough liquidity in'08 - '08 and into '09. So that's how we're thinking about it.

Okay. Thank you.

Operator
Your next question comes from the line of Bruce Harting of Lehman Brothers. Please proceed, sir.

Bruce Hartin - Lehman Brothers - Analyst
Yes, hi, Joe. I'm just, on the home lending, can you do a remedial for me? I'm confused on the -- sort of the charge-offs coming
through managed versus some of the discounts and how you're actually marking that down. If I look at finance receivables
past-due 60 days or more, you have $1.2 billion of home lending 60 days or more past due. So, I'm just wondering, can you talk
about the roll rates in terms of the going from 60 to 90 for foreclosure, what your expectations are there, and then just remind
us exactly what the total allowance is on the home equity portfolio. And why -- am I sort of misunderstanding to focus on the
$76 million of managed charge-offs versus the much larger provision you took in the quarter. So I'm sort of trying to model out
the next five, six quarters in terms of actual charge-offs, if you will.

That's quite a task. Let me tell what I can tell you, Bruce. Clearly, we'll have follow-up sessions with IR.

First of all, our roll rates generally from January and February into March, as we rolled to 30 to 60, 60 to 90, et cetera, had
improved. That was generally true. In the last week in March, we saw that stop. We saw the payments slow down in the last
weekend in March. But that was one factor, we factored into our loss reserving.


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Secondly, I mentioned earlier, that we increased the severity rates on both first and second. Third, the remedial I think you just
asked for earlier, to the extent we had set up a discount in September on the loans, and the loan went bad, that charge-off went
against that discount and did not go through the charge-off numbers that you are describing. Let me try that again. The extent
alone, because we had to put the discount loan-by-loan, loan-by-loan, to the extent a loan went bad that we had to discount
against, the charge-off went against that discount to the extent it was adequate. The extent we thought a loan was good if
September when it did this, and it turned out to be bad, it went through the charge-off and reserving process. In terms of the
reserving process, we look at the roll rates, we adjust them to the severity as we just said, and we look out to what is the losses
inherit in the portfolio. And generally we're looking out over a 12-month horizon as to how the delinquent loans will perform.

I don't know if I got all of the aspects of your question, but that was a little remedial at least in my head, Bruce. Hopefully that's
helpful, and we can expand on it later.

Okay. And then with regard to -- should we expect the overall balance sheet shrink in subsequent quarters rather than the
linked quarter increase?

Yes, I think that's true, Bruce. We've got the billion dollars that we're selling that we announced. Depending on whether we
finance or sell these other $2 billion of assets we've identified, clearly, we've spoken about a business that we would be looking
to sell. Clearly, we've shrunk the commitments outstanding that we have to fund against, and that was one of the reasons for
the growth.

Some of the wild cards are customer pay-downs. We had lower customer pay-downs in the first quarter that we seasonally and
historically expect. And I do not think that's only true for us, I think that's true in the economy as borrowers have who liquidity
and need more liquidity in a slower environment. So my expectation is yes, the asset levels would come down because we've
announced some sales that we are working on. Some have already -- will already happen in the second quarter, some may
move into the third quarter. But we're also looking to lighten up the balance sheet in other ways.

Okay, thanks.

Operator
Your next question comes from the line of Matt Burnell of Wachovia. Please proceed, sir.

Matt Burnell - Wachovia Securities - Analyst
Good morning, Joe, I have a question specifically related to the corporate finance portfolio and the managed past-due levels.
You mentioned the increase in the non-performers in the corporate finance business. But there seemed to be an acceleration
of the -0 day past due in corporate finance. Could you provide a little more color on what is driving that?


FINAL TRANSCRIPT

Sure. We -- there were several accounts, I would say one or two in the gaming and the media industry, where the outstandings
are $10 to $15 million. And we also saw a couple of asset-based loans in the area of about $20 million each.

I think the - if you're looking at an increase of about $75 million, they were isolated or mostly concentrated at about four loans,
in communications and media for one and then in our traditional asset-based lending business for two.

Matt Burnell - Wachovia Securities - Analyst
Thanks.

Operator
Your next question comes from the line of Moshe Orenbuch of Credit Suisse. Please proceed, sir.

Moshe Orenbuch - Credit Suisse - Analyst
Thanks. You mentioned both on the call, when you drew down on the lines and, today, kind of establishing relationships with
other financial institutions. Could you just expand a little bit on what they're goals might be in that and kind of -- how that
would reflect with respect to CIT as well?

Sure, Moshe. I we - we've certainly over the last three to six months had quite a number of discussions with other financial
institutions, predominantly depositories, who were deposit rich and asset for, particularly dollar-dominated asset for, and we
continue to have those types of discussions with our primary. And I think we've been pretty consistent on this. Our primary
objective being access to more finely-priced deposit funding.

And from time-to-time, people have said well, if I'm going to provide that, I would love to have a little piece of the equity also.
And so we've had those discussions. And those discussions continue, continue on to this day with three or four counter-parties.
I think the deterioration in the liquidity environment has consistently raised the odds on some of those discussions. But, there
continues to be quite a bit of interest in our franchises in the middle market, the ones that have records of profitability and, as
Joe said, are really central to serving the middle-market customer. So those continue on. And we look forward to adding to our
liquidity through doing one or two of those.

Moshe Orenbuch - Credit Suisse - Analyst
Okay, thank you.

Operator
Your next question come there's the line of Chris Brendler of Stifel Nicolaus. Please proceed, sir.


FINAL TRANSCRIPT

Chris Brendler - Stifel Nicolaus - Analyst
Hi. Thanks. Good morning. Can we rewind on a question? On the impression after you pulled the backup lines that you felt your
baseline forecast got you through year-end, and I'm wondering with the progress you made this quarter or the announcement
you were making today, are you into the first quarter of '09 without -- as a baseline forecast.? I would think it would extend past
year-end, giving the progress you've made this quarter or this month.

Yes, I think that's fair, Chris. We said, I guess in the March 20th call that we thought our cash forecast was good through the
year-end with the asset sale, let's say $1.1 billion for example, that was not in our forecast when we spoke to you three weeks
ago. So that would be incremental.

Having said that, there is a lot of moving pieces, and we run, not only a base-line case, but an upside and downside case, and
we've spent more time making sure we have the downside covered. So for example, we put in our baseline forecast expected
draws on lines that we have outstanding. And then in our downside case, we stressed that. And so we wanted to build enough
liquidity that we could cover, somebody described the potholes or bumps in the road as you hit them. But I think if you dial
back to March and connect the dots to today, we've improved the baseline forecast based upon the actions we took. That would
in effect, to be more direct, get us into '09. What we would like to get is through '09.

Okay. And can you just handicap for us in terms of the rail business, I think that's an appropriate carve out. It's obviously not
the greatest time in the world, probably one of the worst times in the world to be selling assets like this, but how attractive is
the portfolio? Are there other transactions that have happened recently in that sector? I would imagine you would not have
put it up for sale if you couldn't do it so just give us a little color around that.

And then, just this discussion of capital raising. Can you just talk about your appetite before some sort of convertor? I mean it
seems like the optionality of your stock and the positive impact on your stock that a large debt issuance with some equity kicker,
I think that would be the best option, but I haven't heard much decision to that on this call, just wondering if that is the most
likely path? Or is there other financing, capital marketing financing alternatives that you're considering for strongly?

Chris, let me try a couple of those, and then I can pass it off to Joe. I think, first, on your first question, we think that in this
environment, you have to have multiple initiatives because you have to really build in optionality. And, so to the extent that
your reaction was we're overdoing it on potential liquidity, we just feel like we have to have quite a few initiatives because you
can't count on all of them coming through, and the ones that come through all take longer. So that's one thing.

I think on rail, what we are finding, since the March 20th call that we had, is quite a bit of incoming inquiry on various asset
classes. As you might expect in this kind of environment, there is quite a bit of interest in hard assets as opposed to financial
assets. And we think the rail operation, as I said, is quite high quality, very good in the area. And we've had a lot of incoming
calls on tha,t and, as we said in our prepared remarks, we continue to look for ways to optimize the value coming out of that
portfolio. And it's one of our primary liquidity opportunities.

I think on the capital raising side, we look at a number of various alternatives in conjunction with the sale of assets. But, I think,
like a lot of financial institutions in this environment, more capital may be more prudent, and we may find we need higher
equity levels going into the future at every rating level. So that's the way we're looking at that. And I would say we're exploring
a number of options with the Board and with our advisors.


FINAL TRANSCRIPT

Okay. Just one last one. If, would it be your goal, and do you think it's achievable, every time you report a quarter, that you
handle liquidity for the next 12 months? Is that the way your thinking about in terms of your liquidity goals?

I think in this current environment, 12 months plus.

Okay, great. Thanks.

And, Chris, I think there was another aspect of your question if I had it right, was capacity to issue equity link or hybrids or
whatever they're called these days. The rating agencies have some guidelines on that. We we do have some capacity, but we
do not have unlimited capacity to use that capital instrument.

Thanks, Joe.

Operator
Your next question comes from the line of Howard Shapiro of Fox-Pitt. Please go ahead sir.

Howard Shapiro - Fox-Pitt Kelton Cochran Caronia Waller - Analyst
Hi. Thanks. Just another question on credit if I could, Joe. You guys aren't seeing anything systemic, but I'm wondering as you
look out, you have a good sense of what is going on in a number of markets. Prospectively, Are there any geographies or
products that your particularly concerned about right now? And in terms of Trade Finance, do you have any exposure to some
of the companies that have recently announced bankruptcies or restructuring like Talbots or Linens 'N Things.

Okay, I'll try some of that. Nothing geographically. And, as we've spoken to you over the last year, we seem to have our storied
credit of the year, whether it's a coal mine or other kind of energy account or water bottler. But if I look across the portfolio with
- as we do with Nancy Foster, our Chief Credit Risk Officer, consumer-related names are where the softness is popping up, even
in gaming. Even in gaming because the consumer is keeping the wallet or the money in the wallet a little closer. So I would say
that would be a trend.

Matt Burnell asked me about the increase in corporate finance earlier. One area that is in corporate finance that had some
delinquency increase that I didn't mention was in our small business lending area. So those entrepreneurs act like consumers
so to speak. So I think that's what I would say about where we see delinquency trends in the commercial book. Businesses that
are pretty closely tied to a consumer.


FINAL TRANSCRIPT

For example, we had a loan to some sort of home sale search engine site, I forget exactly the technicalities of that, but that was
in the Telecommunications and Media area, and that's one on the watch list. And there was another aspect to your question,
and I lost it -.

In terms of Trade Finance, any exposure to some of the merchants having any difficulties right now, like Talbot or Linens 'N
Things or any of the others?

I would say, Howard, on that, we're such a big player there, and I don't think we're going to get into specific accounts or exposures
here, but for John Daly and his people who run that business, this is their best part of the cycle. They are ahead of the curve,
and the names that are stressed over the last six to 12 months, they've moved either to -- in certain cases to cut our exposure
in half, or in a couple of other cases, actually get stand-by letters of credit from third parties, where we have no exposure. So, I
think as a rule, some of the LBOed retailers are probably going to be stressed in this environment, but we've been quite
encouraged by the actions that Trade Finance took maybe six or nine months ago in terms of trying to get other collateral and
reduce the exposure. So like I said, this is really their best part of the cycle, which is have their clients keep shipping, but behind
the scenes really dramatically reduce our exposures.

Okay. Thank you.

Operator
Your next question comes from the line of Michael Cohen of SuNOVA Capital. Please proceed, sir.

Michael Cohen - SuNOVA Capital - Analyst
Hi. Just a couple of very quick questions. What type of planes did you sell, which kind of generation, which model and generation?
And then second on the rail car releasing that you did this quarter, can you talk about sort of what comp was, were you leasing
at higher or lower rates relative to four years ago when some of those cars were leased originally on the renewals? And then I
have one small follow-up.

I think on the airplanes in general, Michael, I think it was about 30 planes. I think they were not our best planes. They were
predominantly U.S.-based. They tend to have a average -- they were on average older than the average age of the fleet. And
we sold them to I would say seven or eight different parties. We were able to maximize proceeds by not selling them all to one
buyer.

But these would not be -- in general these were not our best airplanes. I think we did season in maybe three or four of the
Dublin-based planes to get -- so that has been one asset class, where values have held. I mean these were not our best planes,
yet I think, when we're done with the sale of all 30 ,we'll have about a 10% gain on that asset value from the fleet. So, we think
with our best planes there is primarily significantly more value in the fleet and particularly our order book. I think the next plane
we lease will take us into 2011, so we'll be close to three years preleased in the order book.


FINAL TRANSCRIPT

On rail, I would say that the releasing rates, I think on average are probably about at the lease rate coming off or they're about
that. We have eight or nine different types of cars, so it really varies. Some of your cold cars, some of your Ethanol cars are
probably holding value pretty well. I think anything in the residential construction area like your center beam is -- you're pushing
out the cars to stay with them. So I think in some of the weaker classes, you're probably releasing at maybe 90% of the expiring
lease rate, if that's helpful.

Okay. Great.

Michael, I have a schedule on the planes we sold in the quarter with everything except the model number. So, I can give you
the contract number, who bought it and the gain. So if you want to follow-up with IR, we can give you some color on the planes.

Superb, and one clarification follow-up. And that is, Joe, I think you said on the home equity provision on a go-forward basis
you said a leveling off. Does that imply that kind of, or can you just be more specific about what that implies?

Yes, I guess our thinking on the provisioning, and this hasn't been the most accurately predicted number in corporate America,
we thought -- I'll give you -- we thought that when we provided 250 that we would be significantly less. And the number we
were modeling was 150 or so. And it turned out to be 200 plus with most of the variance being due to severity rates. Let's home
severity rates do not get any worse.

I think Jeff may have said this a little earlier. Based upon our roll rates, our roll rates are performing based upon the way we
expected, except for that the last week in March. We expect leveling off and maybe them peaking in the second half of the year.
I think that's what we said.

I think, Michael just to add, we're feeling more confident in our ability to predict roll rates than we are in housing values. And
so I think the big change is that to make sure everybody gets this, and I think like a lot of people, is just the number of mortgages
going to foreclosure is pretty much within our model. It's just the loss we're taking when they go to foreclosure because of the
decline in housing prices around the country. And that's what is -- that's -- I think that's largely the reason that the provisions
have been larger than we would have suggested six - a couple of quarters ago.

Maybe I didn't say this earlier in my script, but our number of houses and dollar value of houses in foreclosure has not increased.
It's actually decreased quarter-to=-quarter. Whether that means anything or not, whether we went out and got the houses fast
enough is the skeptics way of looking at it. But, we think we're getting the houses in and moving them out, and that could have
contributed to the increase in the severity. But we think we would rather take the first loss and get the stuff moving.

So the fact that the foreclosure -- the amount of inventory we had did not increase, we took that as a positive this quarter.


FINAL TRANSCRIPT

I think we have time for one more question.

Operator
Your final question comes from the line of David Hochstim of Bear Stearns. Please proceed.

David Hochstim - Bear Stearns - Analyst
Hi. Most of my questions were answered, and I had a couple of more on rail. Can you remind us what the utilization rate was -
has moved to this quarter? And then you can give us a sense of what the capital allocated to that business is, and some I guess
indication of what the earnings might be currently? So if you sell it, what we lose ,and we could think about what it might be
worth?

Well, I'll give you a couple of three.

Okay.

We're at 95% or so utilization, which we still think is terrific. Jeff gave you a little color on that before.

And that was, what, about '98?

Oh, the peak was about '98, '99 actually.

A year ago or so.

Yes.

Capital allocation varies a little bit. But it's between 10% and 12%. And, I thin,k we gave you the ROE's are mid-teenish. That's
about as far as I'm going.


FINAL TRANSCRIPT

Yes, okay. All right. Thanks.

Thank you. Well, let me just close here and reiterate a couple of the major points. First, we certainly feel a sense of urgency
around the plans that we laid out for you on March 20th, and the four or five aspects of liquidity plan dot one that we presented
today, I think - we hope reflect that. Certainly, the senior management and our Board, which we just spent Monday and Tuesday
with on our annual off-site. All of us are focused and engaged on the task at hand. We are progressing at cross dual paths, and
that may be confusing to you from certain points, but we feel like we have to work down these two paths simultaneously. One
is near-term liquidity actions to build liquidity well into 2009, and second would be what are the longer-term strategic solutions
based on what do you think the future's going?

We fully recognize that you want to see demonstrated progress in the form of action. So do we. We're working on that. And,
one of the reasons we drew down the bank lines in their entirety, was to give ourselves the flexibility to act in a timely manner
and really focus on maximizing value. So, as I said, we feel like we need to move quickly, but we also need to look down the
road and make sure what we're doing doesn't rob the future of all of its value. A core commercial finance franchises, we think
they're doing well. We think they remain very valuable. Their results are acceptable given our own funding costs and just the
market environment. As we covered home lending delinquencies, we think appear to have stabilized in our current model
projects the charge-offs staying around this level and peaking over the next quarter or two. And student lending is, of course,
a liquidating portfolio. We've closed down the origination platform, and it's almost all 97% government-guaranteed self-loans.

We know these are unsettling, volatile times. They're not easy for anybody. But, we do have the confidence that we'll come
through this as a stronger more nimble CIT, which we poise for a profitable future. And we want to thank you all of your investors
for your support and certainly our 6,000 employees around the world that keep us going every day.

Operator
Thank you for participating in today's call. You may disconnect now. Have a great day.

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