Ken Brause - EVP of IR Jeff Peek - Chairman and CEO Joe Leone - Vice Chairman and CFO

Eric Wasserstrom - UBS Sameer Gokhale - KBW Bruce Harding -- Lehman Brothers Matt Burnell - Wachovia Moshe Orenbuch - Credit Suisse Chris Brendler - Stifel Nicolaus Howard Shapiro - Fox-Pitt Michael Cohen - Sinova Capital David Hochstim - Bear Stearns

Good day, ladies and gentlemen, and welcome to the CIT's first quarter 2008 earnings call. My name is Nikita and I will be your operator today. Participating in today's call from the company are Jeffrey Peek, Chairman and Chief Executive Officer; Joseph Leone, Vice Chairman and Chief Financial Officer; and Ken Brause, Executive Vice President of Investor Relations. At this time all participants are in a listen-only mode. We will be having a question-and-answer session later in the call. (Operator Instructions) I would now turn the call over to Mr. Ken Brause, Executive Vice-President of Investor Relations. Please proceed, sir.

Thank you, Nikita, and good morning to everyone. Welcome to the CIT's first quarter earnings call. Let me just mention few items before we get started today. First, following our formal remarks we will have a Q&A session. We ask you to limit yourselves to one question and then return to the queue if you additional questions. We'll do our best to answer as many of your questions as possible in the allotted time. Second, elements of this call are forward-looking in nature and may involve risk, uncertainties, 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 see refer to our SEC reports. Any references to certain non-GAAP financial measures are meant to provide meaningful insight and are reconciled with GAAP and the financial tables accompanying the press release. For more information on CIT, please visit the investor relations section of our website at www.cit.com. With that it's my pleasure to hand the call over to Jeff Peek, our Chairman and CEO.

Thank you Ken, and good morning everybody. Welcome to our first quarter earnings call. What I want to do is update you on a number of strategic issues including the progress we've made on liquidity since our last call on March 20th. Then Joe will review the quarter and provide you with more detail on the liquidity position. Finally, we will be delighted to take your questions. I want to just make a few quick comments on the quarter before, I turn to strategy. We have market leading franchises in the middle market that's our value proposition and that's why CIT has been around for a 100 years. Given the current market dynamics, our own funding costs and the results of other commercial finance providers, I believe that the first quarter results of our commercial finance franchises at 12% ROE are certainly respectable. The home lending portfolio at 28 months continues to season. Delinquencies appeared to have stabilized there, and our current model projects charge-offs peaking in the next quarter or two. We did take additional provisions this quarter due to the decline in value in the housing market and believe that provisions may level off for the remainder of the year, absent continued deterioration in housing values. Excluding lending, it's now our liquidating portfolio that predominantly consist of 97% government guaranteed self loans. We've taken reserves on the private loan portfolio, particularly the helicopter school and it begun work on a collection strategy. We will continue to service this portfolio ourselves. Now, let's move to issues of strategy in funding. When we last spoke with you on March 20th, the day we drew down our bank lines, we provided our actionable next steps in anticipation of returning to a more normalized funding program. Having excess cash gives us some flexibility, which sure enabled us to maximize value. Now, first and foremost in that message was the acknowledgment that we need to operate a smaller, more focused franchise. In the quarter, we took significant action to reduce staff. We eliminated over 500 employees, almost 8% of the global workforce, above the 5% target that we shared with you last quarter. And closing our student loan origination platform recently, will result in a reduction of another 150 employees in the second quarter. Now, we continue to pursue a dual path with regard to these action plans. In that dual path would be, first, preliminary discussions with a number of highly regarded financial institutions that are well-positioned to make an ongoing investment in CIT, and secondly, a detailed analysis of our diverse business portfolio. Assessing the value we would receive for the assets, in today’s market along with the long-term strategic value that asset plays in the terms of the overall franchise. This week we had our annual two day Board of Directors planning session, during which we reviewed our recommendation and today’s announcement outlined the first wave of actions we have undertaken. First, let us talk about asset sales. In March, we discussed the possibility of asset sales in the range of $5 billion to $7 billion. We completed a little over $0.5 billion of asset sales in the first quarter and have a good line of sight on the remaining sales. We are selling about $800 million of aircraft at a 10% asset gain. We have sold $1.4 billion of middle market loans at a price near par and in addition we have sold an additional $3.2 billion of unfunded loan commitments, which could be drawn down, though that reduces not only assets, but also potential COGS, on our liquidity going forward. We have also identified another $2 billion of loans that we would have fund against or sell. And these transactions and the pricing we are getting, continues to demonstrate the quality of our portfolio in our opinion. Next, let us talk about the dividend cut. We decided to reduce the quarterly dividend to $0.10 per share, a 60% cut. This results in an excess of $100 million of capital savings for the year. We believe that retaining additional capital is the prudent course and it will ultimately lead to enhanced shareholder value. The third aspect of the plan we are talking about today; our decision to explore strategic alternatives for the Rail business. I have to admit this was a difficult decision for us because the Rail business has been a solid performer for CIT in its whole 20-year history. In Rail, we have an attractive fleet, oil customers and a strong management team. All of which bodes, well for the franchise value of the business looking forward. However the Rail business is capital intensive, and it does not lend itself well to alternative funding structures outside of the balance sheet. The Rail business is also very self-contained, which lends itself well to several strategic options for a minority investment through a joint venture to an outright sale. And the market intelligence we have, suggests that it is a very attractive property, hard assets in a liquidity challenged market. But we will look to maximize our options here over the next several months. And finally, our desire to secure additional liquidity and our capital; we continue to pursue some forms of long-term committed liquidity. We are having ongoing discussions with several parties about funding and our capital structure. As we told you before, we would benefit more from access to additional funding, than from access to additional capital. But in this environment there are clearly benefits to being overcapitalized and we will continue to explore alternatives for both additional liquidity and additional capital. But before getting into the operating results, I do want to highlight the successes we've had financing the capital markets this quarter. In the first quarter, we raised over $3 billion, including $2.7 billion raised through secured financing against several asset classes and about $600 million of unsecured debt gathered through our retail note program. We've also advanced our funding strategies out of our Utah Bank. And Joe will talk about this in greater detail shortly, but we still have today about $1.4 billion of cash at that bank, which is being used to fund new corporate finance volume. Now, moving on to the operating results for the businesses; Business environment has not only remained challenging but probably gotten even more challenging since we've last spoke to you. Obviously, all of us here are disappointed in reporting another loss this quarter. At CIT, we continue to have a tale of two companies; our market leading middle market commercial finance business, which remains profitable and earning double-digit returns on capital and our liquidating consumer business. Home-lending and student lending, both of which are in runoff mode but contributed to our loss this quarter. So, first let us focus on our core commercial finance franchises; corporate finance, transportation, trade and vendor. As you saw in our earnings announcement this morning, these four segments combined, earned $0.82 per share in this quarter and this equates to about 12% return on equity, which we think, we deem to be quite respectable in the current environment and again demonstrate the long-term franchise value of these four commercial finance franchises. Now clearly, funding costs are higher and market activity is down particularly for some of our non-spread revenue activities like syndications, asset sales and securitization. Moreover, credit costs are normalizing as expected, given the weaker economy. We have purposely constrained growth, and exercised extreme discipline in evaluating opportunities and in putting on new business volume. Now let me share a few highlights from the quarter with you this morning. First, let's talk about Transportation Finance. Transportation Finance had a terrific quarter, an ROE close to 20%. On the Aerospace side, demand for aircraft remained strong, credit looks exceptional and we have the right planes at the right time. The average age of our fleet at year end was just slightly over five years, and there has been lots of press on commercial Aerospace lately, particularly with some of the marginal startup airlines. And we have not leased planes to any of the carriers that have stopped flying recently, and there are no indications that these current events have impacted the demand for our fleet or our assets, particularly given that over 90% of our planes fly outside of the United States. Now in Rail, the overall utilization is around 95% and that remains a good parameter by historic standards. We saw some improvement during the first quarter in demand for non-construction related cars. In fact, March was a record month for us in Rail. We placed 4,000 cars, 2,500 renewals and 1,500 new cars. Also notable for Transpiration Finance in the quarter, was a deal we did for Wyle Labs, a company which is active in defense and government contracts. We were a joint lead arranger, bookrunner, and syndication agent on a $230 million senior secured facility. Now let's move on to Trade Finance. Trade Finance, as always, remains a steady performer, ROE near 16%. Here in this business, the weaker economy is having an impact on volumes, which are down, and we did see some margin compression. However, in Trade Finance, credit remains strong and we are managing it very closely. There are a handful of retail names that have been of concern to us, and we have been successful in reducing our exposure to them, and we also continue to be active here. We executed several interesting deals for clients this quarter, including a revolving line of credit to Como Fred David, a women's apparel company and acting as lead arranger for $250 million credit for G3, a manufacturer and distributor for several high profile brands. Now let's move on to Corporate Finance. In looking at Corporate Finance, it is important to separate the $118 million of marks on the assets we are selling, from the ongoing Corporate Finance business. Corporate Finance's results this quarter were also impacted by the $22 million write-off related to a coal mine that filed for bankruptcy during the quarter. If you exclude the marks and the coal mine, the ROE for Corporate Finance was around 12%. Pretty good, considering that syndication activity is almost non-existent. Although we did originate new loans during the quarter, including financing for Black Eagle Partners and their acquisition of Rockford Products and Palladium Equity Partners for their acquisition of American Gilsonite Company. Looking forward, this remains a great time to originate assets in Corporate Finance, as deals are getting done which have historically very attractive pricing, low leverage and full covenant packages. We are actively funding new business volume here through CIT Bank. We funded new business of over $300 million in the quarter and have an excellent pipeline going forward to utilize the $1.4 billion of cash sitting in the bank. Finally, Vendor Finance. We were disappointed with the Vendor Finance results this quarter, which were impacted by a $33 million impairment charge related to the Dell buyout. Also the continued illiquidity in syndication and securitization market, and of course the lack of equity income from the DFS joint venture, all contributed to the results for Vendor Finance. We have initiated several changes in this business, including a reduction in operating expense level. In the quarter, we reduced staff and vendor globally by about 7%, which would be 150 positions, and we will take additional actions going forward to better align operating expenses with revenues, particularly in some of our business in Europe. Within Vendor Finance though, our major relationships are doing quite well, noticeably, Microsoft and Avaya. Vendor Finance clearly remains one of our marquee franchises and we expect that ROEs here should return to more normalized levels next quarter. So we would expect Vendor Finance to generate mid to high double digit ROEs on a go forward basis. So while we have range of results among our commercial finance franchises, overall, we think for the commercial finance franchises, it’s a pretty good story in the current environment. Finally, I want to spend a few minutes on our relationships. Customer retention is solid. We are committed to our customers through good times and bad and from the top-down, we are communicating and strategizing with our customers. For many of our customers, CIT is an integral part of their operation. We help Main Street and they want us to make it. I urge you to check the press release section of our website. There you'll see a steady stream of deal announcement. Debtor-in-possession financing, new airline leases with new customers, merger advisory assignments and lead agent roles are new loan facility. Even in these difficult environments, we're making every effort to serve our customers and keep our businesses working and moving forward. Now, our employees, they are engaged and they understand what needs to be done to realize our vision for the future. As many of you know, it's never easy managing employee morale during challenging time. It's certainly is critical and it's a propriety I've set for every manager in the Company. And obviously, we're spending a lot of time with other stakeholders including the rating agencies, our bank group and many of you. In these difficult times, we believe that the best course of action is to increase communication and enhance disclosure, not the opposite as is often the natural tendency. Along those lines, I'd like to remind, everyone that uncertain environments generate and lead to speculation, and we've certainly had our fair share. And we commit to you, that we will update you whenever appropriate. Whenever we have information, we will try and pass it along. The CIT would never slide away from a challenge and we certainly won't, going forward. Now, let me hand it over to Joe.

Thank you, Jeff. Good morning, everyone. Thank you for joining us this morning. What I plan to talk about is funding first as that has been the key area of focus for the company and for many of you. And then, we'll review certain elements of the quarterly financial results. I agree with Jeff, in summary, our commercial businesses performed reasonably well in one of the most difficult market environments I've seen. Our overall financial results were disappointing to me as our liquidating consumer finance businesses continue to under perform. Having said that, we spend a great deal of time this quarter, a great deal of focus on building the strongest liquidity position we can. And I think we made very good progress on a number of the initiative, Jeff described some. I'll give a little more color on others, that better position us in the future and for the future. Yet, we have more initiatives in progress, and I'll give you some of my thoughts there. As Jeff said last month, we shared with you some of our initial liquidity thoughts following our decision to utilize the bank lines. We've been focused on building out that plan and more importantly, creating an execution strategy timeline and milestones. In a few weeks, we've made good progress. As we go forward, I think, we'll do even more. Jeff went over the asset sale, just to reiterate, one that we agree to sell $4.6 billion of asset-based loan commitments where we're a participant. And those loans will come out of our corporate finance segment at quarter end, which is roughly $1.4 billion drawn under those facilities. As we said, not only significant in terms of balance sheet financing, but also the elimination of future liquidity drops. There will be more a little later on the pricing on that. We're quite happy with the execution of aerospace team heading a very difficult environment in selling 300 million of aircraft at a gain premium to book and we continue to look and do more. Another reason for the sale was not only liquidity enhancement, but also strategic, as we managed the amount of capital we have deployed in the aerospace business. Jeff described our game plan on business dispositions and our strategic intent with regard to real. Let me say that we continue to review businesses thoughtfully in the portfolio based upon criteria we've shared with you in the past; returns through cycles, ability to source alternative financing, the likelihood of garnering fair value in today's market, and an overall fit with long-term strategy. Finally, our financing game plan contemplates the full range of debt in capital raising initiatives that we are analyzing. We are focused on continuing to build liquidity and maintaining the strongest capital ratios we can, in face of this persistent market volatility. I think we've had tremendous success tapping into different pockets of liquidity across our business, matured financing, I mean. And we are working and continuing to work on that. In the quarter some of the specifics, we had cash at quarter end of about $10.3 billion. Those balances include $1.5 billion or so of reported cash that is not in the US or is associated with securitization financing and a similar amount in our Utah Bank. In terms of financing, just to give you a little bit of detail on what Jeff described, we did 2.7 of secured financing, the cost was about LIBOR 100 to 125, and we executed against our real assets, vendor receivables, middle-market loans, some student loans and trade receivables. And as Jeff said we did tap the unsecured retail note program earlier in the quarter. On the outflow side, we paid off $1.5 billion of commercial paper so far, since the bank line draw and over $1.5 billion of unsecured term debt. The asset portfolio grew as we had commitments to satisfying certain units during the quarter. We did see certain pay-down trends lower in certain other units. Jeff described the progress we are making in the Utah Bank, principally booking out all our originations in corporate finance in the bank and we have roughly recorded about $350 million to $400 million of loans there. Once the cash is substantially utilized, we will start raising broker deposits again out of that vehicle. ': We have a great deal of unencumbered assets, approximately $50 billion. We continue to work on additional asset-backed financing in a variety of asset classes. Whether it be aircraft, middle-market loans, vendor and certain consumer assets. I think we could get a couple of these transactions done this quarter. And I would hope that our progress in managing down the asset side of the balance sheet will improve capital ratios and eventually lead us to a more attractive unsecured access. I would like to spend a minute on the company’s outstanding commercial loan commitments. I think IR has received a lot of questions on this, and it is an area of focus of yours and ours, and we've reduced it. At this quarter end, we had approximately $7 billion of commercial loan commitments that were available to be drawn based upon covenants and asset availability. The sale we announced, the agreement we announced today, cuts that number approximately in half, so we're making progress on that overhang contingent liability. Finally with regard to capital, we ended the quarter just shy of our target of 8.5% tangible to managed assets. As we've stressed we are committed to maintaining a strong capital base. The Board's action with regard to dividend reflects that. And couple that with the asset disposition and funding initiatives I just spoke about, we will strive to operate the company in excess of our target. A few items in the quarter, I would like to spend a couple of minutes on. Let me start with the loss on hedge accounting. That was the largest noteworthy item, it was about a $148 million pre-tax charge and the reason for the charge is when we lost our commercial paper program due to the bank line draw. We lost the hedge accounting on swaps associated with that portfolio. Effectively, we're swapping floating rate commercial paper to a fixed rate interest rate to fund fixed rate assets. Given our expectations for the CP running off, these swaps no longer qualify for hedge accounting, resulting in this mark-to-market going to P&L. Previously, it had been in equity. The mark was negative because interest rates have declined since the swaps were initiated. Since hedge accounting was no longer possible, and we would then be subject to future mark-to-market volatility through the margin, we decided to unwind those swaps. In order to maintain our interest rate balance and interest management positions and the discipline we have had over the years, we also decided to terminate a like amount of swap going the other way, swaps to float for example. These were in a favorable mark-to-market position. There is no real economic impact but the action for the accounting treatment is different. The losses on the terminated swaps are recognized from P&L, the gains on the swaps to float will be recognized in margin over the terms of the swap. Combined, these actions have little impact on the balance sheet, no impact to shareholder's equity, a slight positive impact to cash and we have not changed our asset liability management position. A noteworthy item was our -- the byproduct eliminating the overhang on the commercial asset-based loans. We recorded a $180 million evaluation charge on that agreement, on both the loans and the commitment. We did transfer those loans to assets held for sale as of March 31 and marked them to our expected price. Finally, the restructuring charge, Jeff spoke about; $69 million came in a little higher than we expected. The headcount reduction was about 500 positions. In terms of payback, we expect the annual cost to save about $80 million with $7 million in Q1 rising to about $18 million in Q2. A good start, we have more rightsizing to do and we had promised a $100 million in savings. We have more to do on that and we have to right size the expenses to the revenue stream. Going the other way, we did benefit on the tax line. A as we look forward, we assume a more normalized earnings pattern. We had high losses in the US this quarter, more earnings internationally. A more normalized earnings pattern should give us a tax rate in the low 20s. Moving on to consumer lending, we built our reserves significantly. On home lending, we reported a net loss of $150 million due to $150 million reserve build. We did take $68 million of charge-offs, $23 million of lower cost of market adjustments and some securitization impairment. Outside of these credit marks, the operation basically broke even. Broadly speaking the portfolio performance, performed in line with what we thought the delinquency trends would do. However, the charge-offs in provisioning are greater than we thought when we came in to the quarter as we adjusted our assumptions for severity higher on both first and second mortgages. Current reserving assumptions assume 50% or so in first and almost a 100% on second. On the manufactured housing front, we continue to see interest in that portfolio, however buyers have not been able to get financing, so we took an additional charge of $23 million pre-tax and we moved that full back in to asset sell-through investments, that's carried at about 30% discount. Including the manufactured housing loans, the contractual balance, unpaid principle balance of a mortgage portfolio is about $9.4 billion. Against that, we are holding $400 million of loss reserves, $400 million plus of discounts and $280 million of past due valuation reserves, that's 10, 11% reserves against it. Over time, since July of 2007, we have taken about 16% write-downs against this pool. As we look forward, we expect additional loss provision as the portfolio liquidates, Jeff mentioned that a little earlier. Moving on to student lending we had a loss largely due to the credit provisioning Jeff described. Now we are continuing to work on collecting that portfolio. Finally, we announced that we will take some restructuring charges in the second quarter. In the magnitude of that $20 million, we expect front end savings or annualized savings of about $25 million. Just a few words on some line items. Margins first. Margins declined 32 basis points. Oftentimes, I give you some of the impact. We had the impact of the financing we did in November that was three to five basis points. Higher conduit costs and repricing of option rate securities was four to five basis points. We had negative carry on the cash we had and that was four or five basis points. Some mix shift, higher non accruals and some slight benefits from the rate cuts. As for the outlook, we continue to see some compression, should be at a slower pace than we saw in Q1. That said, we will continue to have negative carry on the cash investments, as we have heavy cash investments probably through the rest of the year. On portfolio quality, the commercial businesses are performing well. Jeff described the uptick in current corporate finance. Without that, the charge offs were about 42 basis points. We did see some increase in delinquencies in non-performing. Having said that, we don't see anything systemic. I should also note that no planes, or at least any of those airlines has filed for bankruptcy, who are in our fleet. We do expect higher commercial losses in credit markets to continue to inch higher. Although non-accruals are up, they are net of expected losses, our FAS-114 reserves, and remaining balances are largely covered by collateral of core value. I would sum up as Jeff opened. I have been meeting with many of our businesspeople, certain of our customers, and there is a clear need for what CIT does in this market. There is a clear need for capital in the middle market for the company, for the country to grow. Our factoring clients, our small business entrepreneurs, our vender finance partners are all looking for capital to grow in the US and overseas. So, we are anxious to get back to our normalized funding profile. That's why we work so hard on what we announced today and we will continue to work hard on new initiatives in terms of having more secured financing initiatives for us to announce to you, so that we can get back to a more balanced funding formula. With that, I turn it over to the operator for questions-and-answers.

(Operator Instructions). Your first question comes from the line Eric Wasserstrom of UBS. Please proceed, sir.

Thanks. Actually just two points of clarification please, Joe. The first is, when you say that you've agreed to these asset based sales, does that mean that there is a confirmed commitment to occur in a transaction that hasn't been executed? UBS: Thanks. Actually just two points of clarification please, Joe. The first is, when you say that you've agreed to these asset based sales, does that mean that there is a confirmed commitment to occur in a transaction that hasn't been executed?

No, we have not executed on the transaction. We have agreement on terms and the agreement on terms is price and size of the outstanding loans and loan commitments that we are agreeing to sell.

Okay. And then the other quick clarification is then, the negative $118 million mark, to which assets does that relate? UBS: Okay. And then the other quick clarification is then, the negative $118 million mark, to which assets does that relate?

That relates to the transaction we just described.

Okay. UBS: Okay.

We did sell at a slight discount, but the discount applies to both the outstanding and the commitment.

Great. Thanks very much. UBS: Great. Thanks very much.

Your next question comes from the line Sameer Gokhale of KBW. Please proceed sir.

Hi, just a couple of questions. One, I just want to clarify the $300 million that you closed on in the aircraft business, that gain was also at 10%. I know you referenced the $770 million was for gain of 10%, but the $300 million also we should assume, was it a 10% gain? KBW: Hi, just a couple of questions. One, I just want to clarify the $300 million that you closed on in the aircraft business, that gain was also at 10%. I know you referenced the $770 million was for gain of 10%, but the $300 million also we should assume, was it a 10% gain?

It was about 9%.

Okay, thank you. And then the other question I had was, Joe you spent a fair amount of time talking about liquidity asset sales but it seems like based on the disclosures you guys had in your 10-K that the company seems to have enough liquidity even without the asset sales, and now, you've been talking about some time about pursuing these asset sales, and that's clearly going to add to the liquidity cushion. But then, on top of that today there is a discussion about potentially exploring the issuance of equity securities, it's -- these levels would be dilutive to shareholder so is that issuance of equity securities like a remote possibility at this point? Or can you just provide some color on that? That would be helpful. KBW: Okay, thank you. And then the other question I had was, Joe you spent a fair amount of time talking about liquidity asset sales but it seems like based on the disclosures you guys had in your 10-K that the company seems to have enough liquidity even without the asset sales, and now, you've been talking about some time about pursuing these asset sales, and that's clearly going to add to the liquidity cushion. But then, on top of that today there is a discussion about potentially exploring the issuance of equity securities, it's -- these levels would be dilutive to shareholder so is that issuance of equity securities like a remote possibility at this point? Or can you just provide some color on that? That would be helpful.

Well, just first on those liquidity side, when we prepared our disclosures for the yearend in the 10-K, we were continuing to have access to the commercial paper market at $3.5 billion to $4 billion, so that's one change. Secondly, we always had a secured financing plan, and thirdly, we did continue to expect in that plan to have some access to the unsecured market. Even where we state in April, we've taken out of our plan any access to the unsecured markets and any access to the commercial paper market. In terms of capital, we continue to explore all options that would enable us to return to a more normal funding profile. And that entails having a lot of liquidity, having the confidence that we have enough liquidity through '08 and into '09. So that's how we're thinking about it.

Okay. Thank you. KBW: Okay. Thank you.

Your next question comes from the line of Bruce Harding of Lehman Brothers. Please proceed, sir. Bruce Harding -- Lehman Brothers: Yeah. Hi, Joe. Just on the home lending, can you do a remedial for me, I'm confused on the sort of the charge-offs coming through managed versus some of the discounts and how you're actually marking that down. If I look at finance receivables past due 60 days or more, you've got $1.2 billion of home lending, 60 days or more past due. So I am just wondering can you talk about the role rates in terms of going from 60 to 90 to foreclosure and what your expectations are there? And then, just remind us exactly what the total allowance is on the home equity portfolio? And why -- am I sort of misunderstanding to focus on the $76 million of managed charge-offs versus the much larger provision you took in the quarter, sort of trying to model out the next five, six quarters in terms of actual charge-offs, if you will.

Yes, that is quite a task. Let me tell what I can tell you, Bruce, and clearly you will have follow-up sessions with IR. First of all, our role rate generally from January, February into March as we role to 30s to 60s to 90s etcetera, had improved. That was generally true. In the last week in March, we saw that stop. We saw the payments slowdown in the last week in March. But that was one factor we factored into our loss reserve. Secondly, I mentioned earlier that we increased the severity rates on both first and second. Third, the remedial I think you just, you asked for earlier. To the extent we had set up a discount in September on the loans and the loan went bad those charge-offs went against that discount and did not go through the charge-offs numbers that you were describing. Let me try that again. The extent of loan as we've had to put the discount loan by loan, loan by loan, to extend a loan went bad that we had it discounted again, that charge-offs went against that discount to the extent it was adequate. The extent we thought a loan was good in September when we did this and it turned out to be bad. It went through the charge-offs and the reserving process. In terms of the reserving process, we look at the roll rate, we adjust them to the severity as we just said, and we look out to what is the losses inherent in the portfolio, and generally, we're looking out over a 12-month horizon as the -- how the delinquent loans will perform. I don't know if I got all of the aspects of your question. But that was a little remedial at least in my head, Bruce. Hopefully, that's helpful and we can expand on it later. Bruce Harding -- Lehman Brothers: Okay. And then, with regard to -- should we expect to see the overall balance sheet shrink in subsequent quarters, rather than the linked quarter increase?

Yeah, I think that's true, Bruce. We've got the $1 billion that we're selling, that we announced, depending on whether we finance or sell these other $2 billion of assets we've identified. Clearly, we've spoken about a business that we would be looking to sell. Clearly, we've shrunk the commitment outstanding that we have to fund against and that was one of the reasons for the growth. Some of the wildcards are customer pay down. We had lower customer pay downs in the first quarter than we seasonally and historically expect. And I don't think that's only true for us, I think it’s also true in the economy regarding borrowers who have liquidity and need more liquidity in a slower environment. So my expectation is, yes, the asset levels would come down because we've announced some sales that we are working on. Some will already happen in the second quarter, some may move into the third quarter. But we're also looking to lighten up the balance sheet in other ways. Bruce Harding -- Lehman Brothers: Okay. Thanks.

Your next question domes from the line of Matt Burnell of Wachovia. Please proceed, sir. Matt Burnell - Wachovia: Good morning, Joe. I have a question I guess specifically related to the corporate finance portfolio and the managed past due levels. You mentioned the increase in the non-performers in the corporate finance business. But there seem to be an acceleration of the 60 day past due and corporate finance, could you provide a little more color on what's driving that?

Sure. We have several accounts I would say, one or two in the gaming, and the media industry, where the outstandings are $10 million to $15 million. And we also saw a couple of asset-based loan in the area of about $20 million each. I think if you are looking at an increase of about $75 million, they were isolated or mostly concentrated in about [poor] loans in communications and media for one and then in our traditional asset-based lending business for two. Matt Burnell - Wachovia: Thanks.

Your next question comes from the line of Moshe Orenbuch of Credit Suisse. Please proceed, sir. Moshe Orenbuch - Credit Suisse: Thanks. You mentioned both on the call with two down the lines from today about, it’s kind of establishing relationship with other financial institutions. Could you expand a little bit on what their goals might be in that and kind of how that would reflect with respect to CIT as well?

Sure, Moshe. I think we've certainly over the last three to six months had quite a number of discussions with other financial institutions, predominantly depositories who are deposit rich and asset poor, particularly, dollar-denominated asset poor. And we continue to have those types of discussions with our primary, and I think we've been pretty consistent on this. Our primary objective being access to more finely priced deposit funding, and from time to time, people have said was -- if I'm going to provide that, I'd love to have a little piece of the equity also, and so we've had those discussions, and those discussion continue, continue on to this day, with three or four [companies]. I think, the deterioration in the liquidity environment has consistently raised the odds of some of those discussions but there continues to be quite a bit of interest in our franchises in the middle markets, the ones that have records of profitability and as Joe said are really central to serving the middle market customer. So those continue on and we look forward to adding to our liquidity through doing one or two of those. Moshe Orenbuch - Credit Suisse: Okay, thank you.

Your next question comes from the line of Chris Brendler of Stifel Nicolaus, please proceed. Chris Brendler - Stifel Nicolaus: Hi thanks. Good Morning. Can we just rewind on Moshe’s question, I just had the impression after you pulled the back lines that you felt your baseline forecast got you through yearend and I was wondering with the progress you made this quarter or the announcements you were making today, are you into the first quarter of '09 without, as a baseline forecast. I would think it would extend the past yearend given the progress you made in this quarter or this month.

Yeah, I think, that's fair, Chris, we said, I guess in the March 20th call, that we thought our cash forecast was good through the yearend with the asset sale, let us say, is billing in one for example. That was not in our forecast when we spoke to you three weeks ago. So that would be incremental. Having said that, there is a lot of moving pieces and we run not only a baseline case, but an upside and a downside case and we spent more time making sure we have had the downside covered. So for example, we put in a baseline forecast; expect the draws on line that we have outstanding. And then in our downside case we [strapped] that and so we wanted to build enough liquidity that we could cover, somebody described them potholes or bumps in the road as you hit them. But, I think if you dial back to March and connect the dots to today we have improved the baseline forecast based upon the actions we have covered. So that would, in effect, to be more direct, get us in to ’09. What we would we like to get is through ’09. Chris Brendler - Stifel Nicolaus: Okay, and can you just kind of carve for us in terms of the rail business. I think that is an appropriate carve out. It is obviously not the greatest time in the world, probably the worst time in the world to be selling assets like this but, how attractive is that portfolio, are there other transactions that have happened recently in that sector? I would imagine you wouldn’t have put it up for sale if you didn’t think you could actually do it. So, just maybe give a little color around that. And then, just this discussion of capital raising; could you just talk about your appetite for some sort of convert. I mean, it seems like the option on your stock, the positive impact on you stock, is the large dead issuance which some equity kicker would have. I wouldn’t think that will be your best option, but I haven’t heard much discussion of that. I guess, on this call, I am just wondering is that the most likely path or is there other financing, capital market financing alternatives that you are considering more strongly.

Chris, let me try a couple of those and then I can pass it off to Joe. I think, first, on your first question, we think that in this environment, you have to have multiple initiatives, because you have to really build in optionality. And, so to the extent your reaction was, we were overdoing it on potential liquidity, we just feel like we have to have quite a few initiatives because you can’t count on all of them coming through and the ones that come through all take longer. So, that’s one thing. I think on Rail, what we are finding since the March 20 call that we had is quite a bit of incoming inquiry on various asset classes and as you might expect in this kind of environment, there’s quite a bit of interest in hard assets as opposed to financial assets. And we think the Rail operation, as I said, is quite high quality, very good in the area and we have had a lot of incoming calls on that, and as we said in our prepared remarks, we continue to look for ways to optimize the value coming out of that portfolio, and it is one of our primary liquidity opportunities. I think on the capital raising side, we look at a number of various alternatives in conjunction with the sale of assets, but I think like a lot of financial institutions in this environment, more capital maybe more prudent and we may find that we need higher equity levels going into the future at every rating level. So that’s the way we are looking at that and let's say we are exploring a number of options with the Board and with our advisors. Chris Brendler - Stifel Nicolaus: Okay. And then just last one. If it would be your goal and do you think it’s achievable to -- every time you report a quarter that you have liquidity for the next 12 months, is that the way you are thinking about in terms of your liquidity goals?

I think in this current environment, 12 month plus. Chris Brendler - Stifel Nicolaus: Okay. Great, thanks.

Hey Chris, I think there was another aspect of your question if I had it right, with capacity, the issue, equity length or hybrids or whatever they call these days. The rating agencies have some guidelines on that. We do have some capacity, but we do not have unlimited capacity to use that capital instrument. Chris Brendler - Stifel Nicolaus: Thanks Joe.

Your next question comes from the line Howard Shapiro of Fox-Pitt. Please proceed, sir. Howard Shapiro - Fox-Pitt: Hi, thanks. Just another question on credit, if I could, Joe. You guys said you are not really seeing anything systemic, but I am wondering as you look out, you have a good sense of what's going on in the number of markets. Prospectively, are there any geographies or products that you are particularly concerned about right now, and in terms of Trade Finance, do you have exposure to some of the companies that have recently announced bankruptcies or restructurings like Talbots or winning some things?

Okay. I will try some of that. Nothing geographically and as we've spoken to you over the last year, we seem to have our story credit of the year, whether it’s a coal mine or other kind of energy account or a water bottler. But if I look across the portfolio, as we deal with Nancy Foster, our Chief Credit Risk Officer, consumer related names or where the softness is popping up, even in gaming, because the consumer is keeping the money in the wallet a little closer. So I would say that would be a trend. Matt Burnell asked me about the increase in Corporate Finance earlier. One area that's in Corporate Finance that had some delinquency increase that I didn't mention, was in our small business lending area. So those entrepreneurs act like consumers, so to speak. So, I think that's what I would say about where we see delinquency trends in the commercial book; businesses that are pretty closely tied to a consumer. For example, we had a loan to some sort of home sale search engine site, we've got exactly the technicalities of that, but that was in our communications and media area, and that's the one that's on our watch list. And there was another aspect you questioned Howard, and I lost it -- Howard Shapiro - Fox-Pitt: In terms of trade finance and your exposure to some of the merchants who are having difficulties right now like Talbots or winning some things than the others?

I'd say Howard, that, we are such a big player they are, and I don't think, we are going to get into the specific account exposures here, But for John Daly and his people who run that business, this is their best part of the cycle. I mean, I had it occur, the names that are stressed over the last six to 12 months, they've moved, in certain case, cut our exposure in half or in a couple of other cases, actually get standby letters of credit from third parties, where we have no (inaudible) exposure. So I think, as a rule, some of the LBO retailers probably are going to be stressing this environment, but we've been quite encouraged by the actions, the trade finance, may be, six months or nine months ago, in terms of trying to get other collateral and reduce the exposure. So that said, this is really their best part of the cycle, which is -- have their clients keep shipping but behind the scenes, really dramatically reduce our exposures. Howard Shapiro - Fox-Pitt: Okay. Thank you.

Your next question comes from the line of Michael Cohen of Sinova Capital. Please proceed, sir. Michael Cohen - Sinova Capital: Hi. Just a couple of very quick questions. What type of planes did you sell? Which kind of generation, which model and generation, and then second, on the railcar re-leasing that you did this quarter, can you talk about, sort of, what comp was? I mean, were you re-leasing at higher rates or lower rates relative to four years ago when probably some of those cars were leased originally on the renewals? And then I have one small follow-up.

I think on the airplane -- in general, Michael, I think it was about 30 planes. I think they were not our best planes. They were predominantly US based. They tend to have average -- they were on average, older than the average age of the fleet. And we sold them to, I would say, seven or eight different parties. We were able to maximize proceeds by not selling them all to one buyer. But these would not be -- in general, these were not our best airplanes. I think we did season end, maybe three or four of the Dublin based planes to get -- that has been one asset class where values have held. I mean, these were not our best planes yet were -- I think when we're done with the sale of all 30, we'll have about a 10% gain on that asset value from the fleet. So we think whether our best planes have primarily significantly more value in the fleets, in particularly our order book. I think the next plane we lease will take us into 2011. So we'll be close to three years pre-leased in the order book. On Rail, I would say that they re-leasing rates, I think, on average are probably about at the lease rate coming off or they are about that -- we have eight or nine different types of cars, so it really varies. Some of your cold cars, some of your ethanol cars, probably are holding value pretty well. I think anything in the residential construction area, like your [center being] is -- you are pushing out the cars to stay with them. So I think in some of the weaker classes, you're probably releasing at maybe 90% of the expiring lease rate, if that's helpful. Michael Cohen - Sinova Capital: Okay. Great.

Michael, I have a schedule on the planes we sold in the quarter has everything except the model numbers. So I can give you the contract number, who bought it, and a gain. So if you want to follow-up at IR, we can give you some color on the planes. Michael Cohen - Sinova Capital: Superb. Thank you. And then one clarification follow-up. And that is, Joe, I think you said, on the home equity provision, on a go forward basis, you said a leveling off. Does that imply the kind of -- or can you be more specific about what that implies?

Yeah. I guess our thinking on the provisioning and you know this is -- hasn't been the most accurately predicted number in corporate America. We thought last quarter that when we provided 250 that we would be significantly less. And the number we were modeling was 150 or so. And it turned out to be a 200 plus with most of that variance being due to the change in the severity rates. Let's hope severity rates don't get any worse. We're -- and I think Jeff may have said this a little earlier. Based upon our roll rates, our roll rates are performing based upon the way we expect accept they are less weak in March. We would expect leveling off and maybe then peaking in the second half of the year, I think that's what we said.

I think, Michael, just add to that. I mean, we're feeling more confident in our ability to predict roll rates than we are in housing values. And so, I think those are big change just as to make sure everybody gets this and I think like lot of people its just the number of mortgages going to foreclosure, it's pretty much within our model, its just the loss we're taking when they go to foreclosure because of the decline in housing prices around the country. And that's what's -- I think that's largely the reason that the provisions have been larger than we would have suggested couple of quarters ago.

Maybe I didn't say this earlier in my script, but our number of houses and dollar value of houses in foreclosure has not increased, it actually decreased quarter-to-quarter. Whether that means anything or not, whether we went out got that houses fast enough as you know, it's hard to explain by looking at it. But we think we're getting the houses in and moving them out and that could have attributed to the increase in severity. But we think we'd rather take the first loss and get the stuff moving. So, the fact that the foreclosure and the amount of inventory we had did not increase, we took that as a positive going forward.

I think we have time for one more question.

Your final question comes from the line David Hochstim of Bear Stearns. Please proceed. David Hochstim - Bear Stearns: Yeah. Hi. Most of my questions are answered, but a couple of more on the Rail. Could you provide us what the utilization rate has moved you this quarter? And then, can you give us a sense of what the capital allocated to that business is and some, I guess, indication of what the earnings might be currently? So, if you sell it, what we lose, and make you think about what it might be worth?

Well, I'll give you a couple or three. David Hochstim - Bear Stearns: Okay.

We're at 95% or so utilization, which we still think is terrific, and Jeff gave you a little color on that. David Hochstim - Bear Stearns: That was about 98%?

The peak was about 98%, 99% actually. David Hochstim - Bear Stearns: A year ago or so?

Yeah. And capital allocation varies a little bit, but it's between 10% and 12% and I think, we gave you the ROEs, this team - so that starts them going. David Hochstim - Bear Stearns: Yeah, okay, right there.

Right Dave.

Thank you. Let me just close here and reiterate a couple of the major points. First, we certainly feel a sense of urgency around the plans that we've laid out for end March 20th, and the four or five aspects of liquidity plans [outlined] that we presented today and that, we hope, reflect that. Certainly the senior management and our Board, which we just spent Monday and Tuesday with on our annual offside, all of whom are focused and engaged on the tasks at hand. We are progressing across dual paths and that may be confusing to you from a certain point, but we feel we have to work down these two paths simultaneously. One would obviously be, near term liquidity actions to build liquidity well into 2009, and, second, would be what are the longer term strategic solutions based on where you think the future is going. We fully recognize that you want to see demonstrated progress in the form of action, so do we. We're working on that. And one of the reasons we drew down the bank line in their entirety was to give ourselves the flexibility to act in a timely manner and really focus on maximizing value. So, as I said, we feel like we need to move quickly but we also need to look down the road to make sure what we don’t rob the future of all its value. Our core commercial finance franchise businesses; we think they are doing well; we think they remain very valuable. Their results are acceptable, given our own funding costs in just the marketing environment. As we covered home lending delinquency, we think appeared to have stabilized and our current model projects the charge-offs staying around this level and peaking over the next quarter or two. And, student lending, of course, is a liquidating portfolio. We have closed down the origination platform and it is almost all 97% government guaranteed soft loans. We know these are unsettling, bothering times, are not easy for anybody, but we do have the confidence that we will come through this stronger, more nimble CIT which we poise for a profitable future. I want to thank all your investors for your support and certainly our 6000 employees around the world that keep us going everyday.

Thank you for participating in today's call. You may now disconnect now. Have a great day.