Barbara A. Callahan - Senior Vice President & Head-Investor Relations John A. Thain - Chairman & Chief Executive Officer Scott T. Parker - Chief Financial Officer & Executive Vice President.

Sameer Shripad Gokhale - Janney Montgomery Scott LLC Eric Wasserstrom - Guggenheim Securities LLC Mark C. DeVries - Barclays Capital, Inc. David S. Hochstim - The Buckingham Research Group, Inc. Henry J. Coffey - Sterne, Agee & Leach, Inc. Eric Beardsley - Goldman Sachs & Co. Chris M. Kotowski - Oppenheimer & Co., Inc. (Broker) Chris C.

Brendler - Stifel, Nicolaus & Co., Inc. Vincent Albert Caintic - Macquarie Capital (USA), Inc..

Good morning, and welcome to CIT's First Quarter 2015 Earnings Conference Call. My name is Kate, and I will be your operator today. At this time, all participants are in a listen-only mode. There will be a question-and-answer session later in the call. As a reminder, this conference call is being recorded.

I would now like to turn the call over to Barbara Callahan, Head of Investor Relations. Please proceed, ma'am..

Thank you, Kate. Good morning, and welcome to CIT's first quarter 2015 earnings conference call. Our call today will be hosted by John Thain, our Chairman and CEO; and Scott Parker, our CFO. After John and Scott's prepared remarks, we will have a question-and-answer session.

As a courtesy to others on the call, we ask that you limit yourself to one question and a follow-up, and then return to the call queue if you have additional questions. We will do our best to answer as many questions as possible in the time we have this morning.

Elements of this call are forward-looking in nature, and may involve risks, uncertainties and contingencies that may cause actual results to differ materially from those anticipated. Any forward-looking statements relate only to the time and date of 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 2014 Form 10-K. Any references to non-GAAP financial measures are meant to provide meaningful insights and are reconciled with GAAP in our press release.

Also, as part of the call this morning, we will be referencing a presentation that is available in the Investor Relations section of our website at www.cit.com. Now, I'll turn the call over to John Thain..

Thank you, Barbara. Good morning, and thank you all for being on the call. We reported pre-tax income for the quarter of $148 million and net income of $104 million. The pre-tax income was higher than the prior year, but below our fourth quarter 2014 number.

This quarter was impacted by lower profitability in our North American Commercial Finance business and by lower utilization rates in our transportation businesses. The utilization rate in commercial air declined to 97%, as we took aircraft back early from three troubled airlines. We are actively working to redeploy these aircraft.

We completed the second piece of the sale of aircraft into TC-CIT Aviation, which is our joint venture with Century Tokyo Leasing. Utilization in rail declined to 98%, which is still a very attractive level, and renewal rates remain above expiring levels. We ordered 2,200 new railcars to be delivered in 2016 and 2017.

And we purchased approximately 1,000 railcars in Nacco, which is our European rail business. Our Corporate Finance business experienced lower originations and lower portfolio yields; the lower portfolio yield primarily due to the absence of interest recoveries.

The completion of the OneWest transaction with its lower deposit cost and expanded commercial banking capabilities should improve the profitability of this business. Both Direct Capital and our equipment finance businesses generated strong new business volumes. The overall credit quality of our portfolio remains stable.

The consecutive quarterly increase in non-accrual loans was primarily due to one energy-related account. We continue to review our energy loans on a name-by-name basis to monitor the impact of lower energy prices. Our capital and liquidity positions remain strong, and we will return additional capital to our shareholders.

We continue to target the completion of our OneWest transaction in the middle of this year. And we are exploring the various opportunities created by the GE announcement to divest much of GE Capital. However, we will have nothing specific to discuss on this call. With that, I'll turn it over to Scott..

Thank you, John, and good morning to everyone. CIT reported first quarter net income of $104 million or $0.59 per diluted share. On a pre-tax income basis, we made $148 million. Our GAAP tax provision is now around 30%, up from around 10% last year, given the reversal of the valuation allowance.

As we have highlighted in the past, our quarterly earnings will be somewhat variable given the transactional nature of some of our businesses and the impact of executing on our strategic initiatives.

This quarter's operating performance was impacted by a lower level of activity in the middle market and the absence of interest recoveries on loans in our North American Commercial Finance segment, as well as additional aircraft off-lease and losses related to our UK business in the Transportation & International Finance segment.

As John just mentioned, we continue to proactively monitor our energy portfolios. This quarter we increased our reserve slightly for one account. We've included a slide in the appendix of the earnings presentation with some additional details. We made progress in some key areas as we position the company to achieve our near-term targets.

Assets in our commercial franchise grew 7% from a year ago. Deposits are now over 50% of our fundings, which has helped reduce our interest cost by 8 basis points. Credit metrics remain at cycle lows. And we've returned nearly $360 million through share repurchases and dividends.

And our board of directors recently approved an additional $200 million repurchase authorization. Turning to page three of the presentation, excluding the portfolio repositioning, the pre-tax return on assets of our commercial franchise was 1.9%, slightly below our near-term outlook and down from prior quarters.

We continue to find ways to prudently grow our franchises despite the challenges of a sustained low interest rate environment and growing competition. The impact from our portfolio repositioning activities was relatively small this quarter, while the Mexico and Brazil assets are still on track.

The regulatory process related to Mexico is taking a little longer than anticipated, and we now expect both to close in the second half of the year. Also, we made good progress towards the sale of the UK equipment finance platform this quarter.

Details on the timing and the expected CTA impact of these transactions are included in the earnings presentation appendix. As I've said before, these platform exits will reduce operating expenses by around $15 million a quarter and improve our return on equity.

Turning to slide four of the presentation, the fourth quarter 2014 contained benefits from several discrete items that are shown on the box on the left hand side of the slide. The decline in this quarter in pre-tax ROA also reflects several items, which are listed on the right hand side of the slide.

I'll elaborate on these items as part of my review of the segment results. I'll start with Transportation & International Finance which generated $157 million of pre-tax income, which is a 3.3% pre-tax ROA in line with the 3.4% ROA for the full year 2014.

TIF assets declined sequentially, reflecting $400 million of asset sales, including the remaining $225 million of aircraft to complete the seeding of the joint venture and fewer deliveries of new aircraft. The sequential decline in net finance margin was driven by the lower asset utilization.

And losses related to our UK business also contributed to decline in pre-tax income. We had a higher number of aircraft off-lease during the quarter, due to a few carriers that had performance issues as John just mentioned. As a result, utilization fell from 99% to 97%, still a strong level. We are working on re-leasing these aircraft.

This process may take a little longer than usual given they were taken back on short notice, and therefore maybe a headwind to net finance margin in the near-term. The fundamentals in our aircraft leasing market remain positive supported by continued financial health of the airlines as well as consistent growth in demand for air travel.

Lease rates on new aircraft also remain attractive and renewal rates are generally stable. And our current order book positions us well for the shift to new technologies. Moving to Rail, Rail utilization also remained strong at 98%, but declined modestly from last quarter's peak of 99%.

Renewals continue to average above expiring rents, although that differential is narrowing. As I mentioned last quarter, fewer than 2,000 of our railcars that service the oil sector expired this year. In summary, our Transportation & International Finance segment continues to deliver returns in line with the target pre-tax ROA.

North American Commercial Finance reported pre-tax income of $36 million, which represents about a 1% return on asset, which is below prior periods. We originated about $1.4 billion of loans and leases, down sequentially in line with seasonal trends, but at similar levels to first quarter of last year.

Assets were down slightly from year-end, as growth in commercial real estate partially offset declines in other NACF divisions. The sequential quarter decline in net finance margin primarily reflects the absence of interest recoveries, given our low level of non-accruals.

The middle market has the slowest start to the year since the financial crisis with M&A and LBO activity down about 50% from the fourth quarter. Private equity deal flow has been impacted by the higher cost of second lien debt, and the continuing disconnect between buyer and seller expectation on valuation.

On a positive note, new business pricing remained stable and is generally in line with the current portfolio yields. The pipeline is improving, but second quarter volume will likely be below a year ago period. Our real estate finance team continues to leverage its relationships to underwrite deals with strong, attractive risk adjusted returns.

The market remains competitive, and we continue to see an elevated level of pre-payments, both of which will challenge the rate of growth in the portfolio. Equipment finance had a strong new business volume for the quarter, and growth in originations at Direct Capital offset lower yields in other channels.

Commercial services also had a good quarter with factoring volume up 4% from the first quarter of last year, as it continues to maintain its leadership in its core industries, while expanding into non-apparel sectors.

Over the course of 2015, we will continue to prudently manage through the difficult lending market while maintaining underwriting discipline. We expect to achieve a pre-tax ROA of between 1.3% and 1.4% consistent with the near-term target for this segment. Turning to the slide nine.

We anticipate asset growth of around 5%, with growth on our commercial franchises partly offset by the platform assets. Net finance margin will remain pressured in the second quarter given the headwinds I just discussed.

The operating expense ratio will continue to be above the high-end of the range until we complete the platform exits in the second half of the year, and as we incur OneWest integration costs. Given the current environment, we are targeting a pre-tax ROA of approximately 2% excluding the impact of CTA charges.

We will revisit our profitability targets after OneWest closes.

In summary, we continue to focus on our strategic priorities to improve our return on equity, by maintaining disciplined growth of our commercial franchises, exiting low return businesses, returning excess capital to our shareholders as well as closing OneWest, which will lower our overall funding cost, accelerate the realization of our U.S.

DTA and enable us to achieve our target capital ratios. With that, I'll turn it back over to Kate and we'll take your questions..

We will now begin the question-and-answer session. The first question comes from Sameer Gokhale of Janney Montgomery. Please go ahead..

Hi. Thank you for taking my questions. The first question I just had was about your buyback authorization, the $200 million.

And I'm just trying to get a sense for whether you would be inclined to use that buyback on top of any potential asset purchases from GE Capital or should we assume that if you purchase assets from GE Capital that you wouldn't be pursuing the buyback.

I'm just trying to find out if the two are mutually exclusive or do you think you have the capacity to do both together?.

Well, one I think Sameer the buyback is really consistent with what we've been doing. We have some asset sales that we've done both in the UK portfolio and the Hibernia sales that generated cash and capital that we wanted to return to shareholders.

In regards to any potential on the GE Capital that would be bought in the bank or that would be our expectation is buy in the bank. And as you can see with our financials, we have liquidity and capital depending again on the size and magnitude. But I don't think they're linked together..

Okay. That's very helpful. Thanks for clarifying that. And then the other question I had was, Scott, I thought I heard you say in terms of the private equity yields that somehow volumes being negatively affected by the higher cost of second-lien debt, maybe I didn't get that correct.

But if that's true, it seems to me a little bit strange given all the spread compression, all the competition which you've seen in the market, so if you can help us reconcile that commentary around the higher cost of second-lien debt, whether it's all the competitive forces we are seeing elsewhere on the market?.

Sameer, it's a good point.

I think part of it is, given the – we are five years from the last cycle and I think a lot of the losses as you remember kind of happen in that part of the capital structure, and I think that given the current environment that the expectations around pricing are for a little bit longer period of time than some of this pressure you see in some of the other asset classes in the market.

So, there is a little bit of stability there given the experiences of five years, six years ago..

Okay. That's helpful. And just my last question is on the yield side, it was just a little bit lighter than we had anticipated, you gave some color on the aircraft side, it seemed like there were some three carriers and that affected your utilization rate. And the railcar, sequentially there were some trends that negatively affected yields.

But it still sounds like overall when you look at your leasing portfolio, you're still pretty comfortable in terms of the yield dynamic going forward. It doesn't sound like you were anticipating a significant amount of margin – yield compression going forward because of any sort of market forces.

So is that fair to say, that it just looked like there were more idiosyncratic things going on this quarter and you're fairly comfortable in kind of the yield trends going forward?.

Yeah. So, I guess I'll answer. If we take rail for specifically, there is a seasonal process of true-ups in the fourth quarter. So, yes, our yield, and we called that out in the margin, was elevated on a sequential basis.

If you look at the trend of the rail leasing over the last five quarters, if you take that out, it's been as we've talked about an upward trend. And as I mentioned, we see the differential between expiring rents and new rents kind of narrowing. And so, at some point in time, that trend will kind of slow down and plateau off on the rail side.

Then it's really the utilization that we talked about. On the aircraft, we've talked about that we had some above market yields on some of our aircraft from many years ago, and that we've had that re-pricing happening.

So, absent the aircraft we took back, there is still some pressure on those yields to get back to market norms, but most of that has taken place as you mentioned..

Okay. Perfect. Thank you..

The next question comes from Eric Wasserstrom of Guggenheim. Please go ahead..

Sorry. Excuse me. Thanks very much..

Good morning, Eric..

Yeah, good morning. Good morning. I've learned to use my mute button.

John, can you just remind us what is left to accomplish in terms of platform exits or portfolio sales beyond the Brazil and Mexico equipment leasing exits and what is the timeframe for those remaining exits?.

Eric, this is Scott. So, Brazil and Mexico, we were hoping that Mexico would've been done on the second quarter, and I mentioned we have a little bit of delay in the process. So, we say second half, but I'd like it to be probably in the third quarter.

Brazil is subject to a much more rigorous because of the bank acquisition process similar to what we go through here in the U.S. So as we we've said, it'd probably be later in the – in 2014 (sic) [2015?] (19:51).

And then the other business that's in process is our UK leasing business, equipment leasing business, and as I mentioned previously in the call that we're making very good progress on that and we hope to get a signed agreement this quarter and hope to close in the second half. Earlier is better, but I'd say second half is a good expectation..

All right.

And that represents the entirety of the remaining portfolio exits?.

Yeah. That's the extent of it, yes..

Okay. And then finally, can you just give us some sense of sort of your confidence interval around the timing of the OneWest closing, it's good to hear that you're reiterating the same timeframe, but I think the recent experience has been that these deals always take longer than even your longest expectation.

So how do we frame what would be sort of a worst case regulatory scenario in terms of the closing of that transaction?.

Well, given the only other example that's out there which is M&T, I guess I can't give you a worst case scenario. But all I can tell you is we're continuing to target mid-year..

Okay. Thanks very much..

The next question comes from Mark DeVries of Barclays. Please go ahead..

Thanks. Yeah, first question on the OneWest acquisition.

Can you give us any kind of update on how they're doing with their balance sheet runoff and particularly with kind of their higher yielding assets and what that may mean for your accretion expectations post close?.

Well, Mark I would say that they published a call report and if you look at some of the trends there, their new asset origination is exceeding the run-off of the legacy portfolio. I think as mentioned in the past is the legacy portfolio has a fairly high coupon and the new business that they are putting is not at that same level.

But from a perspective of the overall business dynamics of the businesses transforming and doing a very good job and growing their commercial franchise. And as we've talked about in the past, we've factored in the difference between the legacy book run-off and new business as part of our pro forma..

Okay, great. And just a follow up, I just wanted to ask a question about capital deployment a slightly different way.

Is there any way you can give a sense of how much dry powder you would have for GE Capital acquisitions, I mean given what you have today and what you expect to deploy around the OneWest acquisition?.

I think I prefer not to kind of get into the specifics of the deal, the one company itself. But I think overall as we talked about our focus is on OneWest. When we did the OneWest transaction, we talked about the debt got us down to our target capital ratio based on where we were at that point in time.

And I think we have to focus on closing that deal, integrating that deal well. In regards to speculating about how big of an asset we could buy, I think it's probably premature at this time..

Okay. Fair enough. Thanks..

The next question is from David Hochstim of Buckingham Research. Please go ahead..

Yeah. Hi, thanks. I'm wondering could you give us an update on what's happening with Nacco and talk about the railcars you bought this quarter? And then also talk about what's – apologize for the construction noise here. If you could talk about the railcars you bought in the U.S.

and kind of the portfolio mix, now it's shifting away from oil to oil again?.

I'd say on Nacco, it's performing well, kind of in line with what we kind of expected when we underwrote the transaction a year ago. The order that John mentioned was really to expand our market presence. We thought it was a very good opportunity to put some earning assets on the books with customers that wanted those assets.

So we think it's performing well. We're kind of being prudent in regards to the growth of the platform given kind of building the right infrastructure to scale it, but you'll see continued growth in our Nacco business from where we originally purchased it.

In regards to the cars we ordered in the U.S., it's a continuation of, as we have been is to continue to order product that our customers are looking for the future, not just for the next couple of years. So a lot of these purchases we make in railcars are as you know, we keep the assets for 20 years, 30 years.

And so that's more of an overall kind of sense of where customers are requesting product from us.

As you see in the back of the decks, yes, over the last couple of years, the proportion of tank cars in our portfolio has increased, but it's still a very diversified fleet that we have that caters to many segments and many industries outside of just the oil sector..

And what's happening with the upgrades, the improvements to the tank cars?.

Well, as you probably know, Canada has come out with its proposed regulations, the U.S. has not done that yet, we are expecting the U.S. to come out with its regs soon. We're anticipating that they are likely to be similar to Canada, but we don't know that until they actually come out..

Okay. Thanks..

The next question is from Henry Coffey of Sterne Agee. Please go ahead..

Yeah. Good morning everyone. When I look at your slide deck, obviously in the end, we can get a sense of the drag from the non-strategic portfolios.

If we roll forward, call it 6 months or 12 months, does that drag go to zero? And I guess we could also assume that we get back to more like 98%, 99% utilization rate, maybe you can give me a sense of what some of those numbers might look like?.

Yeah, Henry. So at least in the non-strategic side, when we close those activities, there might be a little bit of tail – the assets may go, there might be a little bit of tail on the operating expense, but the majority of the P&L will be gone – with the CTA going through the charges as part of that.

And then on the UK business, again that's part of Jeff's business. So you all will see is we'll have some reduction in assets, and for the quarter that it happens there will be a decline because those are higher yielding assets, but the performance of the business is a negative. So it actually will improve Jeff's profitability..

And then the impact of – I know it's only a couple of 100 basis points, but what would the impact of getting back to a more robust utilization rate be on the air and leasing – the air and rail business?.

Well, as we've said, I think at least in the air, let's make that more discrete because those aircraft if you look at the run rates in the fourth quarter, outside some of the comments I've already made about the aircraft portfolio, some of the yields are still coming off at lower rates or being re-leased at lower rates than they were coming off.

Overall, if utilization gets back up, which is really the aircraft we took back proactively, that we'll see that pick up once they get back on rentals. So, we think that that could be later in the second quarter or maybe goes to third quarter depending on what it takes to get the right new lease agreement. So that would be the air.

I think on rail, 98%, 99% is kind of – I'm not so sure it's going to kind of move the needle that much. It would be great to go back to 99%, but I think we're – the markets had a very high level of utilization even past based on historical norms. So, I think that's probably – it's really probably air and then the NSP exits will be the main driver..

And then Direct Capital, by our reckoning, you have the second or third largest online lender there.

Can you give us a sense of what the growth rates on that business has been since you've acquired it?.

We've grown it very well since we acquired it back in August. I don't know if we'll put the numbers out right now. But we're very happy with the franchise. We continue to kind of leverage the platform as we talked about. They had a lot of growth initiatives. We continue to invest in the platform.

And as you mentioned, we think there is a lot of runway because of the underserved nature of the small, medium sized businesses up in the U.S..

Yeah. Let me just add, the team we have there is doing a great job, and we're very, very happy with how they're doing..

Okay. Thank you..

The next question comes from Eric Beardsley of Goldman Sachs. Please go ahead..

Hi, thank you. I was just wondering if you could expand a little bit more on what you're seeing in terms of competition in loan yields.

Are you seeing more pressure in the cash flow or asset base and are there any signs of stabilization?.

Yeah. So, I think I've mentioned the cash flow in the middle market has stabilized for the last few quarters. So, that piece is beneficial.

There is still very much a lot of competition in the ABL side especially as you get into the we call more rate retail ABL, and some of that's actually drifted up into the capital equipment financing side of the house as people are trying to find ways to deploy liquidity.

But overall, as I mentioned, we see the stabilization in pricing which is good for where we are in the cycle.

From a perspective of competitors outside of the banks given the other non-bank enterprises, this is a area where a lot of people want to get into and we have to focus on our underwriting expertise and our industry expertise and our longevity in the marketplace, because that does play a role in decisions that are made by our customers, not just kind of liquidity..

Got it.

In terms of your outlook for the 5% asset growth, is that a net of the disposition, so I think the comparable number you might have had in last quarter's presentation was 5% to 10%?.

Yes, what I said on the fourth quarter is we said that we're targeting the core commercial franchise to be consistent with 2014, which was around 8% and if you take in the platform exits plus we knew Hibernia was going to happen, that's a lot of headwind.

So, yes, that's how we get back to around the 5% in total, but the commercial franchise we expected that has similar performance to 2014..

Got it.

So has anything changed relative to last quarter in terms of your growth outlook?.

The only thesis, as I laid out, our middle market Corporate Finance business, first quarter was pretty light on volume. We see the pipeline picking up a little bit, and our best estimate right now is it's probably going to be a little bit below second quarter of last year.

So that might be an area that if that continues – it picked up several years ago. First quarters have been light before, so if that picks up that would help us to get to that target. But I think that's the main one, because we don't have a lot of aircraft deliveries this year.

So we know the deliveries on rail and air, so it's really the Corporate Finance business will be the driver of the variability around asset growth..

Great. Thank you..

The next question comes from Chris Kotowski of Oppenheimer. Please go ahead..

Yes. Good morning.

On the aircraft that you took back, I'm wondering is there a geographic pattern to it and/or is there a risk in a given region or softness? And can you give us a size of the pool of aircraft that are at risk for this kind – for take back?.

Yes, Chris, it's clearly not a regional. Though, as I mentioned in my remarks that the overall trends in the marketplace are doing fine. We have a lot of customers, and I would say that these are discrete items. There is no trend or linkage about any change in that outlook. It's just part of our business model.

We're an asset manager, and so we'll redeploy those aircraft. Jeff and the team have done a great job over time. This one just happens to be multiple in one quarter, where usually it's one or two customers..

Okay.

But it's not like they're all in one region of the world?.

No, no..

Okay..

As a matter of fact they are in fact spread around the world..

Yes..

Okay..

It's more that the customer itself, the nature of the customer itself, not that it has any inclination on the overall aircraft leasing market at all..

Okay. And then when you indicated that the rail utilization was down about two percentage points this quarter, you said there are 2,000 tanker cars up for re-lease this year. That's in addition to the 2% that we lost.

So you'd be at risk there of another 2%?.

We went from 99% to 98%. The 2% utilization was in the air side, Chris..

Okay..

But on the railcar side, the one point decline from fourth quarter actually was not related to energy or the oil sector. It was actually a little bit of softness in steel and coal. So the 2,000 tanker cars that I mentioned was, is we don't have a lot of cars re-leasing that have exposure to the oil sector.

We haven't had any of those come up for renewal in the first quarter. Those are in the second half of the year. And so there could be some impact on pricing or utilization as those cars come up for renewal in the second half of the year. So yes, that's true..

Okay.

And then can you give us an idea on a year-over-year basis how much direct capital contributed to both revenues and expenses, or was it an accretive or dilutive acquisition as we stand back and look at it here in the first quarter?.

It was very accretive to us..

In terms of revenues more than expense?.

Both – both profitability and revenue..

Right, I guess what I'm getting at also is just at one point a year or two ago I remember you talking about expenses in the like $215 million a quarter, give or take, range and it just seems like we're trending way above that now..

Yes, the $215 million when we gave it, unfortunately, Chris, as you know, we did that back I think at the end of 2012 and that was based on what we knew at that point and really was around exiting some of the international platforms.

Since that time, some of the cost that we have taken out of from the exit of the sub-performing platforms, we've re-invested in growth franchises.

So back from there, we invested in the Maritime team that has produced over $1 billion of assets, we bought Nacco and so that cost base comes on to our income statement and balance sheet, and then Direct Capital, clearly they have expenses in order to generate the revenue and the profitability they have.

So really it was a re-shifting from low returning businesses to redeploy some of those expenses to continue to grow our commercial franchise.

And so where we are, unfortunately we still have three platforms left to kind of – once those are gone that helps us on our run rate expenses, but I think those investments we've made in both Direct Capital, Nacco and the Maritime business since I think I put that guidance out there I think has been very successful and very accretive for the company.

But unfortunately, we still have the tail of getting out of the remaining three platforms we talked about..

Okay. Thank you. That's it for me..

The next question comes from Chris Brendler of Stifel. Please go ahead..

Hi, thanks. Good morning. Can we talk a little more? I guess some of the asset growth weakness this quarter looked to me though that the prepayment activity actually slowed a little bit sequentially.

Can you just talk about the level of prepayment activity and then I have a follow up?.

Yes, Chris, so I'd say most of the prepayment pressure we'd been under for the last few quarters really was on the Corporate Finance. And so that's why there was a lot of refinancing volume. And so that was the one where we were getting most of the pressure. That has kind of subsided. As we said, we had a soft first quarter.

So asset growth was muted, but it didn't decline.

So the area that we had some re-pricing now is really in the Real Estate business because that was new business we originated over the last couple years, and some of that activity is now refinancing given one of the prior questions around liquidity in the marketplace, a lot of people are coming back into the real estate market that had exited when Matt and team built a very good portfolio.

So we still see growth in the Real Estate business. It just won't be at the rate that we've experienced for the last couple years. So that's really where the – what I'll call the re-pricing pressures had moved from really the Corporate Finance business into the Real Estate business based on the shift in liquidity..

Yes, great. I guess the only true follow-up there is on the Corporate Finance side. Volumes down year-over-year. Yield looks like they fell 60 basis points, almost 10% sequentially. Anything one-time going on that yield decline? And I just wanted to ask again, obviously, first quarter was one of the weakest you've seen for a while.

What gives you optimism that this business will grow this year?.

So, on the yield one, especially sequentially, is really driven almost exclusively by the lack of interest recoveries. So it's been something that we've talked about.

But as we've mentioned, our non-accruals after last year, we've cleaned up our non-accruals to a level that there is not much left in regards to deferred revenue, which is really the nature of what that is. So I think the yields on the portfolio around where – it's trended back to what the market yields are for new business.

As I mentioned, Chris, the first quarter we don't want to over read the softness in the first quarter. We have seen some pickup, but my optimism would be is that the macros of the growth in the economy and what the business has been able to achieve would get us to the fact that we would get asset growth in 2015.

And the only change to that would be is if the market continues to be like it was in the first quarter, then no, that that will put pressure on us achieving asset growth in the Corporate Finance business..

Okay, thanks. That's helpful. Just quickly on the oil exposure, I saw the slides in the slide deck where you do a good job of delineating exactly where you're exposed. Any update on the lending side? It didn't look there was any credit issues this quarter..

Yes. There was just, Chris, the one that I called out, we had one account that we've put in on non-accrual and we did put up a specific reserve on that particular credit.

But other than that, it was just part of the credit team reviewing all of our exposures and if there's any adjustments, it will show up – unless it's a specific action like that, it will just show up in our general reserve.

And I called out in the fourth quarter that we did provide some additional general reserves on our energy exposure based on what we knew in the fourth quarter. And so that will just be part of our normal quarterly process. But this quarter was just one account for a specific reserve..

Excellent. I have one last question that's more of a broader strategic question maybe for John or you Scott. I've covered CIT for a long time and I've always thought of GE Capital as your strongest and broadest competitor in most of your businesses there, right there or ahead of you.

How much of a strategic positive for the CIT Commercial franchise is their exit of this business? They've seemed to have had a funding cost advantage for years over CIT.

Is this a significant strategic positive that they're exiting the business and the size of the asset portfolio wise, are there other – is there talent or teams that you potentially could be interested in as well? It seems like the OneWest transaction was much more by the right side of the balance sheet, but I think what we'd really like to see is something on the left side of the balance sheet continue to have some (42:15) strength, higher asset growth.

How much of an opportunity is there with GE Capital repositioning?.

So, I think the answer is we're still evaluating it. We do believe there will be some very interesting opportunities I think both on the asset side and on the people side. Whether or not it's an overall competitive advantage or not depends a little bit on where the businesses go.

So it's certainly possible that they would go to someone else who had equal strength in terms of funding. So I think it's really too early to say competitively what the impact is..

Okay. Thanks, gentlemen..

The next question comes from Vincent Caintic of Macquarie. Please go ahead..

Hey, thanks so much. Good morning, guys. I'm going to piggy-back on that last question with one question with the near-term focus and then one with a more philosophical one.

For GE, has GE announcing its exit from commercial lending, has that had a more immediate impact or been beneficial to any of your business organically like, for example, if your sales folks have gotten more calls from current GE customers? I just want to get a perspective there?.

Since I guess it happened a couple weeks ago, so I think – are we getting phone calls? Sure, based on the size and magnitude of a transaction, clearly people would like us to come visit them and talk to them about what we bring to the table.

But I don't think that's any different than any other transaction would happen, but it is something clearly we're focused on. If there is something we can do to help support the customers, we will focus on that for them..

Got it.

And then the longer-term question, and this is assuming OneWest or after OneWest is complete, but how do you envision CIT looking like going forward? Do you think about it as a – it will be half transportation and then half the commercial lending business with a small personnel lending side? Would you see it as a full service regional bank with transportation being a smaller contribution? Just trying to get a sense of you have a lot of moving parts here and what you strategically envision CIT being like going forward? Thanks..

Sure. So I think there is no question that we want to be more commercial banking like, and so part of the rational for the OneWest transaction, besides lowering our deposit cost and getting retail deposits and also creating U.S. taxable income which is all good for us, is to expand our commercial banking capabilities.

So, for instance, today when we lend into the middle market space, we don't capture the commercial deposits that are available, we don't have the cash management capabilities that some of our competitors can cross sell.

So, I think from our perspective, we definitely want to expand our commercial banking capabilities and OneWest is going to help us do that..

Got it.

And so – sorry, and so it would be with your existing – your franchise just being a lot bigger with more capabilities, is that kind of reading it fairly?.

Yes, and I think also as has been mentioned, the funding cost allows us to play in also other asset classes and customer basis that aren't as attractive today to us because of our overall ROE targets. So that's another area that is a benefit, as John mentioned, around growing that commercial franchise.

Having those capabilities helps diversify our portfolio mix and product mix..

Okay. Thanks very much guys..

There are no other questions at this time. This concludes our question and answer session. I would now like to turn the conference back over to Barbara Callahan for any closing remarks..

Great. Thank you, Kate. And thank you, everyone, for joining this morning. If you have any follow-up questions, please feel free to contact me or any member of the Investor Relations team. You can find our contact information along with other information on CIT in the Investor Relations section of our website at www.cit.com.

Thanks again for your time today and have a great day..

That concludes today's call. Thank you for participating..