CIT Group Inc at Barclays Capital Global Financial Services Conference

FINAL TRANSCRIPT

CIT - CIT Group Inc at Barclays Capital Global Financial Services Conference

Event Date/Time: Sep. 14. 2011 / 1:00PM GMT

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CORPORATE PARTICIPANTS John Thain CIT Group - Chairman and Chief Executive Officer Scott Parker CIT Group - Chief Financial Officer

CONFERENCE CALL PARTICIPANTS Mark DeVries Barclays Capital - Analyst

PRESENTATION Mark DeVries - Barclays Capital - Analyst Okay. Good morning.We're going to get started. I'm very pleased this morning to have the team from CIT with us. At the podium, we have CEO John Thain. Prior to joining a year and a half, ago John was the CEO of the NYSE, Merrill Lynch, and also President and CEO of Goldman Sachs. Joining him is the CFO, Scott Parker. Prior to CIT, Scott was the COO of an affiliate of Cerberus and also spent 17 years at GE in many finance roles.

Since joining a year and a half ago, John and his team have been focused on a number of ambitious targets, including building out their management team, including risk and control functions, paying down high-cost funding, strengthening the relationships with regulators, as well as restructuring the business model. And now they're -- they've expanded and are focused at this point on growth, improving profitability and satisfying open items in the written agreement.

So with that, I'll hand it over to John for his comments.

John Thain - CIT Group - Chairman and Chief Executive Officer Great.Thanks. Mark, thank you very much.Thank you to Barclays for inviting us here this morning and thank you all for coming. And for those of you on the webcast, thank you for listening this morning.

First, we have to have you all read this very quickly.Thank you.

What I thought I'd do this morning is give you a little bit of an overview of CIT and what our strategic priorities are and the progress we've made on those, and then I'll turn it over to Scott and he'll give you some more details on our financial and funding situation.

We have a very strong franchise. Just to give you an idea, we funded over $3 billion of new loans and leases in the first half of this year. And we factored over $12 billion of receivables. So our business, coming out of the bankruptcy, is strong. And actually, if you look across our different businesses, they weren't adversely impacted particularly by the bankruptcy process, I think partly because the bankruptcy was very quick.

We're making good progress on our liability structure. Hopefully you saw this morning we announced the last piece of the Series A -- the 2014 redemption. Scott will talk more about this, but that will allow us to eliminate most of the restrictive covenants that are in the Series A debt.

We're also making very good progress on our bank strategy.We are originating now -- most of our US assets are being originated in the bank, and I'll talk more about that later.

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We are continuing to invest in risk management and internal controls. All of that will help us with our written agreement with the Fed. And we believe we are very well positioned to create shareholder value. I think that's particularly true when you look at where our stock is trading versus mark-to-market tangible book value per share. And so we don't get any questions in this regard, we do not have any exposures to residential mortgages or to European sovereign debt.

Just to give you a little bit of background on CIT, we are over 100 years old. We were started in 1908. We are a bank holding company. Our main bank is called CIT Bank. We are a company that is focused on small and middle-market companies. We provide financing to those small and middle-market companies. Those small and middle-market companies in the US create about two-thirds of all jobs in the United States. Our core competency is lending against assets, whether very short-term assets like receivables in our Trade business or longer-lived assets like railcars and airplanes. We are primarily an asset-based lender, and we generate high-yielding assets because a lot of the sectors we lend into are under-served. And we'll talk more about the type of assets we've generated so far this year.

We have just under $50 billion of assets on our balance sheet as of the end of our second quarter. Our market cap is about $6.5 billion and our book value is about $9 billion. And we are running about a 20% total capital ratio, and our capital is all common stock.

We have four main businesses. Our Corporate Finance business, as I mentioned, is lending to small and middle-market companies. It is both an asset-based lending business and a cash flow business. Our Trade Finance business is our factoring business. We are the largest factor in the United States. Our Transportation business is really twofold. We are both a railcar lessor and an aircraft lessor, and we also make loans into the transportation sector. And on the Vendor Finance side, we provide financing again to mostly small and middle-market companies where we provide the financing for telephone equipment, computer equipment, and copiers. And we team up with the vendors to do that. The Consumer segment is a segment that is in run-off. Our student loan portfolio that's in our bank is really a cash alternative, and we're selling that down over time.

I started in February of last year and this goes through a little bit of what we accomplished in 2010, then I'll move into 2011. In 2010, when I started, the first thing I had to do was rebuild the senior management team. Scott Parker was one of the most important hires in that regard, but we had to hire our Chief Risk Officer, Chief Credit Officer, Head of Internal Audit, Head of HR, Head of Compliance. As a matter of fact, one of the only places that really was in good shape was our IR area, so Ken and his team were here before. But most of the corporate infrastructure needed to be rebuilt. That really was accomplished last year, and so the team's been in place now for a little over a year.

We spent part of 2010 restructuring our balance sheet.We sold off about $8 billion of non-core assets. As we shrank our balance sheet, it was important for us to keep our expenses in line, so we did bring down our headcount significantly.We also consolidated our occupancy. I know some of you may miss our headquarters building at 505 5th Avenue, but we are out of that building and put all of our people into our existing space at 11 West 42nd or in Livingston, New Jersey.

We have been very actively managing our debt structure. Scott will talk more about that, but I think it's important that if you include today's announcement, we have redeemed or refinanced about -- just under $15 billion of debt. We've also accessed the capital markets for significant amounts of funding, and we've replaced our term loan with a bank revolver, which gives us a lot more flexibility. And the path that we're on -- and we've been very straightforward about what we're doing with our debt structure. Our intention is to pay down the remaining Series A debt.That will allow the collateral to be released, and we expect to return to being an unsecured borrower.

We have been financing a significant amount of our assets in CIT Bank. I'll talk more about that later. So we both fund at our parent company and at the bank level. And we have been making significant progress on our regulatory relationship with both the Fed and the FDIC and the Utah bank examiners. As you already know, we did get the cease-and-desist lifted on the bank, so CIT Bank does not have any regulatory restrictions on it right now. And with the Fed, at our holding company level, we are making significant progress with the written agreement, and we expect to satisfy the majority of the written agreement issues by the end of this year.

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That's a good transition into what are we trying to do in 2011. One of the main focuses in 2011 is growing our businesses. Our assets -- our balance sheet has been shrinking.We want to reverse that trend. In spite of the economic environment that we're operating in, we are seeing good growth in our businesses, and I'll go through business by business. But we do absolutely want to focus on growth, and then we also want to focus on profitability and keeping our operating expenses in line, bringing our cost of capital down.

As I mentioned, we are continuing to grow our assets in the CIT Bank. We're also seeing growth outside the United States. So we have operations in Brazil and China which are growing, and we also have operations in Canada and Europe. Importantly, we are just in the process of changing the leadership of our businesses both in Canada and Europe, and so a lot of focus on opportunities there.

As I mentioned, it is important for us to continue to focus on risk management and compliance and, therefore, to satisfy most of the remaining items in the written agreement by the end of this year.

This just gives you an idea of how we look at our business long-term. So this is not where we are today. Scott will talk a little bit more about this, but this is the economics of our business that we aspire to over time. If you look at the marginal assets that we add -- so the assets just incrementally -- we actually do, on the margin, hit these targets, but obviously, our average results are not these numbers. But this gives you an idea of what the business model is that we aspire to. So we expect, based upon the type of assets that we can originate and the high-yield nature of those assets, that we can generate finance margins of 3% to 4%. We -- the 75 to 100 basis points of credit provision is what historically we have experienced across our businesses. It was obviously much worse than that in the 2007, 2008, 2009 timeframe.We also generate significant amounts of other income from our agency roles, and that's a place where we've been building up our business.We want to add more agency roles. Operating expenses -- 2% to 2.25%.We're not there yet. It's difficult as we're shrinking, but that's where we intend to get to. And then on a net income basis, we generate a double-digit return on equity with a modest amount of leverage, and we believe that return on assets, which will generate the same numbers, somewhere between 1.5% and 2%. So this is kind of the model that we aspire to and work to over time.We obviously have a lot more capital right now than the 13% number, but that's the number that we think, over the long term, that we can operate under.

Let me just cover our different businesses. Our Corporate Finance business, as I mentioned, is the lending to small and middle-market companies. It is mostly a US business, but we also have business in Canada and in Europe. It is both cash flow lending and asset-based lending. And we have seen significant growth in that business. Just to give you an idea, in the second quarter of this year, we originated a little over $1 billion of committed volume in the second quarter. 80% of that was done by CIT Bank.That's the expectation going forward is that most of that will be originated in the bank.We've seen improvement in the credit quality of the portfolio. Our non-accrual loans were down. Our net additions to non-performing assets were down. And as I mentioned, we're focusing on improving the pipeline for our agency roles, and we're seeing that improve. We're also looking to expand the business. We have historically been in the equipment finance area. We've also historically been in the commercial real estate areas, and those are places where we're looking to re-enter and to seek growth in that business.

On the Trade Finance side, we are the largest factor in the United States.The factoring business is primarily providing working capital to very small companies, manufacturers that sell primarily to the big US retailers. It's a business we've been in for a long time.We've been number one in that business for a long time. If you look at the volumes, we originated a little over $6 billion of business in each of the first two quarters of this year. If you just look at the US volume, it's up a little bit. It's up about 4%.We did have a business in Germany, which is in run-off. And we get a reasonable view of the retailing sector. And as I said, it is up a little bit, and that's a place where we did lose some clients coming out of the bankruptcy.We are actively working to win those clients back and win new clients, and over time, we also are working on funding that business more efficiently. As you probably saw in the press release today, we just put in place a new conduit facility that will give us more attractive and more stable funding for this business going forward.

Our Transportation business is really two businesses. It is an aircraft leasing business and a rail leasing business.We are one of the largest aircraft lessors in the world. We have about 300 airplanes. They're leased to a little over 100 customers. They are

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©2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FINAL TRANSCRIPT Sep. 14. 2011 / 1:00PM, CIT - CIT Group Inc at Barclays Capital Global Financial Services Conference primarily single-aisle, narrow-body airplanes -- the workhorses of the airline fleets, so A-320s and 737s. Our business strategy is to buy the planes new to keep them for generally two 5-year lease cycles and then to sell them. So the average age of our fleet is about 5 years.We look to place our planes in advance of taking delivery of them, and so if you looked at our order book, we are fully leased on all of our existing planes, and we have also already leased all of our new aircraft deliveries in the next 12 months.

We're active in the new aircraft purchase market.We announced publicly we ordered 50 new A320 Neos, the new engine option for Airbus -- A320s. And we also ordered 38 new Boeing 737s. We do see air traffic growing. This is a global business. Actually, most of our aircraft are not in the US.They are primarily outside the US. And it is a business that we expect traffic -- air traffic to grow. And also, we expect that the use of leasing to grow as a percentage of the total -- we expect the airlines to lease more aircrafts going forward.

On the railcar side, we're one of the largest railcar lessors in the United States.We have over 100,000 railcars.With the exception of the type of railcars that are used in house construction -- those are called center beams -- our railcars are 99% leased, which is a very good thing. We're seeing lease rates improving. This is certainly a more positive sign on the US economy than you would get if you read the newspapers. And even if you include the center beams, which are the housing-related cars, our railcars are 96% leased. So that's still a very good utilization rate.

And then we've also been buying new railcars. So we have ordered 8,500 new railcars. All of the railcars that we can get delivered this year are already placed.They're placed at very attractive rates and they're placed for a long term. So that business is growing and doing well. And then we also make loans into the transportation sector. So we do have a loan business and most of those loans are being originated in CIT Bank.

The last business I'm going to talk about is our Vendor Finance business. As I said, this, is a business where we provide financing to middle-market and small companies against computer equipment, office copier equipment and telephone equipment.We partner with the manufacturers to do that.This is a global business, so besides the US, we have a business in Brazil, we have a business in China. It's a business we're looking to grow. It generates very attractive, high-yielding assets. And we did sell some non-strategic portfolios, so if you looked on a same-store sales, our sales are up about 25% when you adjust for the portfolio sales. Overall, they're up about 6%. This is a business that we will continue to focus on and continue to seek to grow, both in the US and outside the US.

And then lastly, I'll just talk a moment about CIT Bank. As I said, we are focusing on originating more of our assets in CIT Bank. As you can see from the slide, $1.9 billion of new commitments for the first half of the year, $1.2 billion of funded volume. About two-thirds of our total US volume over the 6 months, a little bit higher percentage than that in the second quarter. We are -- besides adding assets to the bank, are also diversifying its funding. It has historically issued brokerage CDs and it continues to do that, but we're in the process of launching an internet deposit-taking capability that will get rolled out over the next month or two. I'm very happy to announce that we have opened the internet funding capability up to our own employees, and I successfully made an internet deposit and, over the last couple of days, I bought a 1-year CD that actually has a one-time adjustment option in it. So, we expect that to be up and running shortly.

Just to give you an idea, the bank is very well-capitalized. It has a lot of capital. It also has a fair amount of cash and, as I mentioned before, it has about $3 billion of unencumbered student loans that are just a cash substitute.

So we have plenty of funding capability to increase our assets in that bank, and once we open it up to the general public, I look forward to getting deposits from all of you.

So with that, I will stop and I'll turn it over to Scott to give you some more details.

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Scott Parker - CIT Group - Chief Financial Officer Thank you and good morning, everyone. As John mentioned, we've made a lot of progress on many fronts over the last 18 months, but in particular, I'm going to spend some time on the things that have happened in the last few weeks, mainly on the capital side or liability side. And we continue to make progress despite the challenges in the overall economy, especially in the capital markets.

The first slide I'd like to talk through is just kind of giving you year-to-date financial results in regards to the first half of the year. We've made a lot of progress on strategic and operational areas within our business. Volume is increasing, credit costs are lowering and our operating expenses are lowering. However, we think the underlying improvement in our financial results is somewhat masked by the accelerated liability actions that we've taken which have accelerated about $200 million worth of debt-related costs into our financial results.

Asset have declined, as John mentioned, as we've kind of optimized the portfolio, but we think that some time late in the fourth quarter that the new business activity will offset our normal collections.

In addition, as he mentioned, we have a very strong capital position.

We've made a lot of progress on the liability management roadmap we talked about.We continue to access the financial markets and have executed a broad range of financings over the last 18 months. And the progress continues as we announced several accomplishments in the last few weeks. John mentioned, with the support of our banking partners, including Barclays as a joint lead arranger, we established a $2-billion revolving credit facility. Not only was the pricing significantly better than the original first lien debt, but the covenants are similar to our Series C debt, including the collateral fall away provision once we repay the Series A notes.

This morning we announced that we did renew our trade facility.We've extended the term on that and also lowered the pricing. And we also announced the redemption of the remaining 2014 Series A debt, which will again make all the covenants fall away in our existing debt, except for the cash sweep mechanics.

Just to give you a sense of these accomplishments, the annualized interest expense savings resulting from the new revolver pricing, the paydown of the $1 billion term loan that we did in conjunction with that, as well as about $1.8 billion of Series A debt redemptions we've made is going to be about a $250-million benefit on a run rate basis. And the elimination of the covenants will provide us greater flexibility that we'll kind of work on starting after they're redeemed in October.

One of the questions we get asked a lot is we do maintain a lot of cash and liquidity. One, given the current environment, that's probably not a bad thing, as I think you would agree, but again, some of the things we've been doing is we've had about $4 billion of cash at the holding company and $10 billion in total. We continue to introduce new liquidity sources so that, over time, we could reduce the amount of cash we're holding based on having those committed liquidity activities. As we did in the trade facility, earlier this year we did renew our vendor business's conduits in the US and the UK, as well as the trade facility, and all of those have extended maturities in regards to the committed liquidity, which was different than when they were originally put in.They were 364 day facilities, which required us to hold additional cash in the event of those not being able to be renewed. In fact, when you combine the $2-billion revolver, the total return swap we have, as well as the conduits we put in place, we have over $6 billion of committed liquidity, and we have about $2 billion of that undrawn as of today.

These and other sources of liquidity we continue to explore have enabled us to significantly reduce the high cost of debt and pave a path to a more efficient liquidity structure. As I said, we're still mindful, given the current environment, that we'll probably continue to be prudent on our cash position.

This is a chart that I think everybody would be interested in. On the liability side, we've talked a lot about lowering the cost of debt and eliminating the restrictive covenants in our debt. However, another key objective was to extend the debt maturities.

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As you can see, once we complete our announced 2004 Series A notes in October, we will not have any notable debt maturities until 2015, providing us considerable flexibility around accessing the capital markets over the next couple years.

In addition, John mentioned we have accessed over $8 billion of cost-efficient funding in the corporate bond, bank and ABS markets since early 2010 to continue to diversify the pie chart on the bottom around our debt composition.

As you can see, through June, these actions lowered our average funding costs by about 80 basis points, and with the new announced revolver, the trade conduit and the additional debt paydowns that we've used excess cash for, the funding mix will continue to improve and our average weighted interest cost will continue to decline.

As we talked about, we maintain a really strong capital ratio at the parent company relative to our peers and well above the 13% total capital ratio we've committed at the holding company. Although CIT, as I mentioned -- we're under BASEL 1.We did implement at the beginning of the year a new economic framework for capital that has many of the tenets of the BASEL guidelines. Just mainly focused in the beginning of the year on BASEL 2, not on BASEL 3. And based on that analysis, we're currently allocating anywhere from 6% to 15% of capital on a risk-weighted asset basis to our segments. And with our commercial segment, that would average about 13%, which again, it's about 12% when you include the student loans. In our financial results, we allocate that to the segments and the excess is kept at the corporate level and it's only allocated as they use that capital.

And so, as we continued, this was something that's continued to evolve. Incorporating the new guidelines from Basel 3, we will continue to refine and enhance our capital allocation process and communicate that if there's any changes as we go forward.

I thought it'd be interesting at a high level to kind of look at the trend and the roadmap on our funding mix that we'd like to do. So John's mentioned a lot around the progress we've made on building out our CIT Bank capabilities. That will continue and will help us in this journey. Our objective is to have a diversified funding model, and of course, we would like to have a significant portion of our assets funded with deposits. However, over time, as our asset mix evolves, we will continue to have a balanced funding mix between deposits, secured debt and unsecured debt, given the asset mixes that we have.

We think by achieving this target mix it will provide us a long-term stability, competitive funding, as well as a path back to investment grades.

John has mentioned -- so this chart's kind of busy, but what we've tried to do is provide kind of where we are today. So if you look on a reported basis on each one of these metrics, these numbers include the impact of fresh start accounting, but I think directionally, it kind of gives you context of how we think about the roadmap to those long-term targets.

Assets, of course, are a significant driver in regards to our future profitability, but on this one, I'm going to spend most of it on the income statement with the assets there. And as such, finance margin is the one that we've continued to communicate on our earnings calls as well as focus on the pre-FSA margin.

As you know, the margin has been impacted significantly from the high cost of debt we got coming out of the restructuring, as well as we have a higher proportion of low-yielding assets than we'd want to on a long-term basis. Because of the cash that I talked about before, we also have $8 billion of low-yielding student loans, and also, over the last 12 months, we had a higher level of non-accruals than we would expect on a steady-state perspective.

However, as we've done the refinancings and the repayment actions just in the quarter - the ones that I mentioned -- it will have about a 40 to 50-basis-point improvement on the finance margin on a run rate basis. So it's not going to be in the third quarter. It'll be kind of more thinking more to 2012.

I talked in previous discussions, or in the previous presentations, around our credit losses. So if you look at CIT and the mix of businesses that they've had over the last 25 years, take out the consumer assets, the commercial market has run at about 100

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©2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FINAL TRANSCRIPT Sep. 14. 2011 / 1:00PM, CIT - CIT Group Inc at Barclays Capital Global Financial Services Conference basis points, kind of steady-state losses. Sometimes lower, sometimes higher, but on average, somewhere around 100 basis points. And as you see in our results, as our credit costs have come down, we're kind of getting closer to that kind of long-term target.

On the other income, this one's going to be a shift over time. Right now, because of certain aspects of fresh start accounting, as well as some of the -- kind of the portfolio optimization, other income has been driven more by kind of one-time events. Going forward, we'll get more to a steady earnings around our factoring commissions, as well as fees associated with the corporate finance business, both on an agency roles as well as the syndication of those loans.

On the expense side, as John mentioned, it's something where we're trying to build infrastructure. We're trying to kind of maintain our relationships. So it's one that, with the asset growth, we'll see the leverage that the portfolio can have versus trying to continue to reduce those, given the fact that we expect to grow.

And then on the tax line -- I know it's a general question -- as we kind of turned a corner on US profitability, we'll be able to use the significant NOL that's been built up over the last 18 to 24 months.

I did this at a previous conference and I just think it's helpful for kind of looking at the overall targets that we set.We do have four kind of distinct business units, and each one has different dynamics relative to the overall targets that we have. But I tried to make this a little bit simple relative to the corporate metrics. So we say 3% to 4% margin and we wanted to compare each one of the businesses relative to those corporate kind of targets and how we think about them. So if you look at Corporate Finance, the profitability alignment with the overall corporate goals is pretty consistent. The model kind of fits very well with that. As John mentioned, on the Vendor business, it's characterized by having assets that are very high-yielding, but also, the infrastructure, in order to provide that global platform, would be higher than our norm, as well as credit cost would be a little bit higher based on the flow nature of those. But most importantly, as John mentioned a little bit, the new business that we're originating in CIT Bank is capable of achieving these pre-ROA -- pre-tax ROA targets and, in particular, the margins that we're achieving on new business going into the bank on the Corporate Finance business is in the 3% to 4% range. And the margins -- finance margins on our Vendor business is in the 6% to 7% range. So the new business we're putting on is achieving the targets. It's a matter of how fast the kind of legacy portfolio runs off and new business is generated. But we also ultimately see that we can achieve double-digit -- low double-digit ROEs with each one of our business segments.

This chart is a little bit outdated based on a lot of the activities we did in the third quarter, but as of kind of June. As I said, the net finance margin is the most important lever, I think, in regards to turning the tide, and a lot of the focus is on that. In the year-to-date basis, our economic margin -- or if you call it the pre-FSA margin -- was about 145 basis points on a year-to-date basis. So it's about a couple hundred basis points off of the long-term target. So I think on our roadmap that we've talked about is we do continue to reduce high-cost debt, both doing that with redemptions, getting new facilities in place or renewing facilities with lower cost, but I think as you might have seen in our previous press release is that we bought about $400 million of our debt in the open market at below par as well as without paying the prepayment penalty. So again, we continue to use all angles in order to reduce our high-cost debt.

Also, with the additional platform of vendor moving into the bank, as we get more business originated into the bank, that will continue to reduce our cost of funds relative to the parent side.

The other pieces on the credit side. Our non-accrual balance has come down significantly over the last year. We were over $2 billion a year ago; we're around about $1 billion now. So reducing that also turns a non-earning asset into an ability to either pay down debt or redeploy that capital in new growth. And I just -- one other mention is around the revolving facility we put in place.The previous term loan was a LIBOR plus 4.5%, but at the same point in time, it had a floor, and so it really effectively was fixed-rate piece of paper. And so with the new revolving facility, we actually have improved our asset/liability management perspective in regards to having more floating rate debt with our assets.

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And over time, as we continue to do all the actions that we've laid out, we'll have lower cash balances over time, the student loans will diminish over time, and the non-accruals will come down to more a steady state. So the new business we're originating will help us get to those long-term targets John laid out.

So in closure, we -- as John mentioned in his remarks, the franchise remains strong. We continue to grow our businesses and achieve the volume growth expectations. We've done a lot on the liability side and continue to have many other things that we have on the docket for the next 3, 6, 12 months. Our bank strategy continues to go well, building out capabilities and diversifying the business, as well as continued focus on the infrastructure, controls and risk management so that growth is done on a prudent basis and we get to those long-term profitability targets.

So with that, I think it kind of ends our discussion and I don't know if we can take questions here or we'll just wait until we go to the next room.

Mark DeVries - Barclays Capital - Analyst We have five minutes, so I guess --

QUESTIONS AND ANSWERS Mark DeVries - Barclays Capital - Analyst Could you talk a little bit about your long-term bank strategy and whether you'll need a brick-and-mortar retail platform to support that long-term objective of funding 35% to 45% of your assets with deposits?

John Thain - CIT Group - Chairman and Chief Executive Officer Well, I think the real answer is no, we really don't -- we wouldn't need a brick-and-mortar strategy because if you look at the size of our bank and the size of our balance sheet we need to fund, between the broker deposits, internet deposits and what ultimately we want to raise through commercial deposits with our customers, I think that would be more than adequate to fund the asset growth that we see.You've seen that, particularly on the internet, you can raise billions and billions of dollars on the internet relatively easily. However, I think it is still likely, at some point, we will acquire some number of brick-and-mortar assets, in part because I think the regulators really like to see that more traditional brick-and-mortar retail deposits. And so I think that will end up being a piece of it, even though I think from a practical point of view, we probably wouldn't really need to do that.

Unidentified Audience Member (Inaudible question - microphone inaccessible)

John Thain - CIT Group - Chairman and Chief Executive Officer Well, on the transportation -- I think a lot on Corporate Finance side -- on segments we're really focused on is the C&I, energy and health care.We'll continue to look at other kind of expansions in regards to other industries, but those are kind of the core skill sets.

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Unidentified Audience Member Two questions, if I may. Just a follow-up on your comment on how much you can grow deposits without branch-originated deposits. Where do you think the cut-off is in the regulators' mind? If you're at $5 billion of deposits now, can you get to $10 billion with just brokered and internet before regulators want to see a more diverse deposit base? And then I'll just throw in the second question, which is can you just comment on kind of the directional trend in gross asset yields today, given your asset sensitivity and just given competition within the loan categories that you're in?

John Thain - CIT Group - Chairman and Chief Executive Officer I'll do the first one.You do the second one? So in terms of the regulators, there's no particular rule of thumb as to how much of any one type of deposits. The regulators want to see diversification. So they don't like relying simply on brokerage CDs in particular. So the development in the internet deposit capabilities is a significant positive from the regulators' point of view. I think they understand that that's a source of deposits that we can raise billions of dollars through. Actually, in the internet space, a few billion dollars is a relatively small amount. If you look at some of the big players in the internet space, it's many, many multiples of that. And I also think that the ability to take commercial deposits will also be an important piece. So it's more diversifying the funding than any particular rule of thumb as to how much funding we need. As we mentioned, we also have a lot of cash and cash equivalents in the bank itself. So between the actual cash positions and the student loans positions, which are just cash equivalents, we have over $3.5 billion of liquidity there. So for the foreseeable future, I don't really see any particular constraint in the funding of the bank.

Scott Parker - CIT Group - Chief Financial Officer I guess on the second question -- again, I'll have to go each business unit because otherwise there's not a generic answer. I think we'll start with probably what the perceived most competitive would be on the Corporate Finance side. I would say that what we're seeing in the middle market that we focus on, pricing has held up pretty well with respect to prior to, I guess, the events of early August, and we haven't seen that kind of change with respect to that. I think you've seen a lot more change in the what I call the higher syndicated -- or broadly syndicated loans. On the Vendor business, the core business really hasn't seen much of that with respect to that, so the yields there tend to be -- kind of continue to stay at the low kind of double digits, both on a gobal basis.When you get into the Trade business, really it's a matter of kind of the growth aspects of that. So again, we're one of the largest factorers so the pricing is not changing tremendously there.You'll see some -- we've seen a little bit of deterioration over the last year in regards to the factoring commissions as we have a mix in regards to the clients that we're factoring, but in general, there's not much pressure there. And then when you get into the aircraft and the rail business, it's really more of a supply/demand. So the railcars, as we've said, is really -- there's a shortage for certain cars so the pricing on those will be, again, above market and above kind of industry kind of trends, and there are certain other assets that a goal is to make sure that they're utilized and you're getting rents coming in on those. So I think same thing with the aircraft. We're not seeing any -- there are certain pockets of railcars that are doing very well, and the aircraft, I think, overall is holding very well.

Mark DeVries - Barclays Capital - Analyst Well, I think with that, we need to wrap it up. But the company will be hosting a breakout in the Madison Suite following this. Please join me in thanking John and Scott for their comments.

Unidentified Company Representative Thank you.

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