John A. Thain, the former Merrill Lynch & Co. executive leading a turnaround of CIT Group Inc., told analysts he didn’t take the job to wind down the company, according to KBW Inc.
“It appears unlikely that a sale of the company will occur in the near term,” said a report today by analyst Sameer Gokhale of New York-based KBW Inc., describing a meeting that Thain, CIT’s chief executive officer, hosted for analysts yesterday. “John Thain’s mandate when he joined the company was not to pursue a sale of the company and he would not have joined were it simply in runoff.”
Thain’s comments may quell speculation that the New York-based lender, which survived a bankruptcy last year, will be forced to find a buyer because it needs lower-cost financing. CIT told investors July 27 it’s selling assets to pay down debt left over after its reorganization concluded in December.
To preserve tax benefits tied to prior losses, CIT will have to decide by September whether to keep open the option of selling itself within the following two years, the analysts were told, according to Gokhale. CIT spokesman Curt Ritter declined to comment.
CIT dropped 14 cents to $36.36 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has gained 32 percent this year.
The commercial lender collapsed last year because of bad loans and dependence on the credit market for financing its assets. Thain was hired in February to run the company.
Company executives predicted CIT assets will continue “to shrink for another quarter or two” and then resume growth “in the not-too-distant future,” Gokhale wrote.
It could take CIT “at least 12 months” to bring its risk management and information systems up to a level that regulators will decide is good enough for them to remove curbs on banking activities, Thain said in a conference call with investors July 27. The time required “could be disappointing to some investors who were hoping for more immediate positive catalysts,” Gokhale wrote in today’s report.
More than a dozen analysts attended the meeting, including some who don’t write about the company, Gokhale said in a telephone interview. “The company is clearly interested in getting more analyst coverage,” he said.