CIT Regulators Lift Cease-and-Desist Orders; Shares Surge

CIT Group Inc. Chief Executive Officer John Thain
CIT Group Inc. Chief Executive Officer John Thain. Photographer: Jonathan Fickies/Bloomberg

CIT Group Inc., the business lender run by John Thain, said regulators lifted cease-and-desist orders against its Utah bank unit that prevented the company from boosting deposits or paying dividends. CIT shares rose the most in more than 11 months.

The orders, issued in July 2009 by the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions, also prevented Salt Lake City-based CIT Bank from extending credit or engaging in certain transactions without prior approval, CIT said in a filing with regulators today.

CIT filed for bankruptcy in November 2009 after racking up losses on home loans and being shut out of short-term capital markets. A five-week reorganization cleared away $10.5 billion of debt, and the government lost its $2.3 billion bailout investment. The lifting of the cease-and-desist orders may not immediately result in CIT taking on more deposits, said Michael Taiano, an analyst at Sandler O’Neill & Partners LP.

“It’s more of a perception issue as opposed to an operational issue,” Taiano said in an interview. “It’s more of a shot of confidence that the regulators are becoming more amiable to CIT’s transformation.”

The bank doesn’t need to increase deposits because it has enough cash to meet current demand for loans, Taiano said. CIT could eventually transfer its small-business lending and vendor-finance units to the bank, which would require approval from the Federal Reserve, he said.

Shares Surge

CIT climbed $2.81, or 7 percent, to $43.26 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest gain since May 10, 2010. The shares fell 14 percent this year through yesterday.

CIT is still required to submit to tighter supervision by Federal Reserve Bank of New York regulators.

“This is one piece of the regulatory puzzle, the second being the Federal Reserve’s written agreement, which is probably more significant,” Taiano said.

Thain, the former Merrill Lynch & Co. chief executive officer who joined CIT in February 2010, shrunk total assets by 15 percent last year, selling off non-core businesses to help recover from bankruptcy.

“We are pleased with this decision, which serves as another example of the progress we have made in CIT’s restructuring efforts,” Thain said in a statement today.

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