CIT Chief Thain Sees ‘Obvious’ Logic of Selling to Bank
“The big banks are awash in deposits and they can’t generate attractive assets,” Thain said today in a Bloomberg Television interview with Erik Schatzker and Sara Eisen. “We, in all our businesses, are able to generate very high-yielding, attractive assets, so the logic of that is obvious.”
Thain, 58, declined to say if a deal for the New York-based commercial lender has been discussed. Regulators last month lifted sanctions that restricted dividends, buybacks and hiring, which analysts said would make CIT more attractive to suitors.
“We’re doing very well by ourselves,” he said.
CIT named Thain CEO in 2010 after he sold Merrill Lynch & Co. to Bank of America Corp. His new employer, which once was the biggest independent U.S. commercial lender, had emerged from a bankruptcy that wiped out $2.3 billion of government bailout funds.
Thain led Merrill Lynch as the world’s financial system unraveled in 2008 and said today he had to sell the firm to save employees and investors. While Merrill has helped buttress earnings at Bank of America, the second-biggest U.S. lender, it would have been better for the brokerage if it could have stayed independent, he said.
A crisis like the one in 2008 could “absolutely” happen again, Thain said. The Dodd-Frank Act hasn’t solved the problem of lenders that are “too big to fail,” and the biggest firms are now more concentrated, he said.
With mounting regulations and stricter capital standards, it would be “totally unrealistic” for larger, global banks to achieve returns on equity of the mid-teens to 20 percent, Thain said. Return on equity measures how well banks reinvest shareholder money and is closely watched by investors as a gauge of management’s performance.
“It’s different for different institutions,” he said. In the current environment, it would be good just to get “into double-digits, so low-teen returns,” he said.
Speculation about CIT’s future revived on May 30 when the Federal Reserve Bank of New York lifted sanctions imposed since 2009. The new freedom and Thain’s turnaround of CIT’s fortunes make the lender a good fit for a healthy bank with cheaper funding, analysts have said.
CIT dropped 1 cent to $45.77 at 1:39 p.m. in New York, bringing its gain for 2013 to 18 percent. The firm has a market value of about $9.2 billion and the stock sells for little more than book value, a theoretical measure of what a company would be worth if liquidated.
Founded in 1908, CIT employed more than 3,500 people at the end of 2012, serving customers in more than 30 industries.
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