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					 E sec                                                                                                Company Report
                                                                                                           Specialty Finance
 February 22, 2010 | 24 Pages



 CIT GROUP, INC. (NYSE: CIT)                                                                                RATING: BUY
 INITIATING COVERAGE OF CIT GROUP WITH A BUY RATING                                       Fiscal Year Ends Dec

     $40 PT assumes shares sell at book value                            Rating:                                           Buy
 We are initiating coverage with a BUY rating and a $40 price target.    Price: Close                                   $33.01
 We think post last December’s bankruptcy the company will report a      Price Target:                                  $40.00
 $40+ book value and a balance sheet capable of generating earnings      52-wk Range:                             $24.83-$35.00
 potential (EP) of $4.80 per share. Our price target assumes a P/E of    Market Capitalization (M):                   $13,356.1
 8.3x EP and values the stock at close to expected book value.           Shares Outstanding (M):                         404.7
                                                                         Avg. Daily Vol. (000):                          825.4
      We want to be long credit risk                                     Book Value/Share:                              $40.78
 In theory, we are out of the recession. The recovery in the credit      Price/Book Value:                                81%
 markets begun in 2009 has been sustained into 2010 and defaults on      Equity/Assets:                                  13.2%
 junk bonds and high yield loans are expected to decline. The funding    Assets (B):                                     $61.8
 markets are open and, in the current environment, rates and terms on
 new loans should be relatively attractive.                              Henry J. Coffey, Jr.,
                                                                         CFA
                                                                         (615) 760-1472
      Risk Factors 1 & 2                                                 hcoffey@sterneagee.com
 First, most investors we spoke with were concerned about the
 company’s ability to have its C&D lifted. Without this they will not
 be able to grow with the hoped for bank-centric model. The company
 has a new management team, a meaningful level of capital and a core
 mission close to the heart of most politicians—lending to small and
 middle market businesses. Offsetting this is the U.S. Treasury’s loss
 of $2.3 billion in TARP funds that resulted from the company’s
 bankruptcy. Second, we have no solid starting beginning point and all
 targeted yields, balance sheet values, and book value estimates are
 just that, and are subject to revision (read could be wrong).




                                                  Earnings Summary
FYE Dec                         2010E                         2011E                                   2012E

                                                EPS & P/E Summary
                                2010E    2010 Previous       2011E 2011 Previous                      2012E     2012 Previous
EPS:         Q1                 -$1.18               --           --           --                          --               --
             Q2                 -$1.03               --           --           --                          --               --
             Q3                 -$0.08               --           --           --                          --               --
             Q4                  $0.25               --           --           --                          --               --
             Full Year          -$2.04               --       $3.20            --                      $4.57                --
P/E Ratio:                      -16.2x               --       10.3x            --                       7.2x                --




   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
             800 Shades Creek Parkway        Suite 700         Birmingham, AL 35209                   205-949-3500
                                Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
CIT GROUP, INC. (NYSE: CIT)                                                                    February 22, 2010

Investment Summary
CIT is a commercial finance company with, at the end of September, $60.1 billion in
managed assets and a focus on a number of middle market and small business lending
products. Post bankruptcy, we are looking at a company which, in our view, has the
capital and liquidity to address its loan quality issues and rebuild at least three of its
business units (corporate finance, trade/factoring finance, and vendor finance). We are
initiating coverage with a BUY rating and a $40 price target. Our favorable view of this
stock and its price target are based in part on the following:

    1.   Our own analysis suggests that post bankruptcy, this company will report a year
         end book value above $40 per share, a TCE/assets ratio of 13%, and a business
         profile capable of generating 2012 EPS of $4.57, earnings potential of $4.80 per
         share, and an ROE of close to 12%. Our price target of $40 assumes the shares
         are valued close to expected book and at 8.3x estimated earnings potential. In
         our view, this is a value that can be realized by the company or by a bank-
         acquirer.

    2.   We want to be long credit risk. In theory, despite an arguable worsening housing
         profile and intolerably high unemployment levels, we are out of the recession.
         The recovery in the credit markets begun in 2009 has been sustained into 2010
         and concerns over rising interest rates have created an environment where, year
         to date, leverage corporate loans are outperforming high yield bonds by a factor
         of 1.7:1. Junk bond default rates are expected to fall from the 12-14% range in
         2009 to 4% and recovery levels improve.

    3.   The primary challenge facing CIT, improving its lending spreads, is clearly
         addressable. The fair value marks associated with fresh-start accounting will
         improve current yields and arguably this is an ideal environment for boosting
         lending rates and terms. Lowering its funding cost can be done by reactivating
         securitization programs and secured borrowing facilities and by using the cash
         flow from collecting loans and selling assets to pay down debt. From a
         fundamental point of view, executing on the bank-centric funding model is
         important, but not mission critical.

         RISK FACTORS

    4.   Risk factor #1: to most investors, lifting the Cease and Desist (C&D) order put
         in place on July 16, 2009, which caps the ability of the bank to grow its deposits,
         is critical. The absence of a positive resolution of this matter within a
         reasonable amount of time could weigh heavily on investors’ minds. Without
         the ability to grow deposits, our earnings potential estimates would be $0.50-
         $0.75 lower and the shares could trade below the $30 price level. Politically, we
         think regulators should be doing everything they can to help this company
         expand its lending to small and middle market businesses, the company has a
         new management team, and capital levels should be comfortably above anything
         required. Offsetting these positives, the Treasury lost $2.3 billion in TARP as a
         result of the December bankruptcy, the FDIC was never supportive of the
         company, and it is logical to assume that regulators will move slowly on this
         issue. A positive resolution in less than 6-12 months would be surprising.

    5.   Risk factor #2: we do not have a real starting point for our analysis, just
         estimates in terms of likely loan yields, book value, and capital. We have our
                                                                                                        Page 2
CIT GROUP, INC. (NYSE: CIT)                                                                      February 22, 2010

           own marks as well as data supplied by a third party back in October, but no solid
           starting point and all of our estimates are subject to revision (read could be
           wrong). The offset, at least as it applies to book value estimates, is that any
           yield-related mark or other, non-credit quality adjustment, will ultimately be
           earned back into book value.


Overview

CIT is a traditional commercial finance company founded in 1908. In its modern
incarnation, it used its investment grade rating to build a relatively highly leveraged
balance sheet focused on the upper end of the commercial finance market. It also had a
relatively unprofitable foray into residential mortgage and student lending. The
residential portfolio has been sold and the student loan business is being held on the
balance sheet at a “break-even” basis. The company has built at least three (arguably
four) nationally prominent, viable businesses that can prosper within its new capital
structure. The trade finance/factoring business is the largest of its kind in the country. Its
vendor finance unit provides financing for primarily items that are core to running an
office (phone systems, copiers, computers, etc.). Its corporate finance business is a mix
of SBA loans and what are generally 1st lien/lower senior term loans to leveraged middle
market borrowers.

Exhibit 1: Business Mix
CIT                                       Managed             Owned Operating
09/30/09                                     Assets Mix       Recv.    Leases
Corp. Finance                                 $18.0 30%       $17.3      $0.2
Transportation                                $14.6 24%        $2.4     $12.2
Trade Finance                                  $3.9  6%        $3.9      $0.0
Vendor Finance                                $11.8 20%       $10.6      $0.8
Consumer                                      $11.6 19%       $11.6      $0.0
Total Recv & Leases                           $59.9 100%      $45.7     $13.2
Equity Interest                                $0.2  0%        $0.0      $0.0
Total                                         $60.1 100%       $0.0      $0.0
Source: Com pany Reports and Sterne Agee Research estimates
$ in billions


The defining event in the company’s recent history was its confirmation of (12/08/09)
and emergence from (12/10/09) a pre-approved bankruptcy. The balance sheet below
reflects reported and estimated adjustments to the company’s September balance sheet
related to the bankruptcy. The company will be adopting Fresh-Start (FS) accounting
when it reports year end results. Our exhibit does not reflect the marking to fair value of
the company’s outstanding debt required with FS under GAAP. To differentiate the two,
the balance sheet or earnings data provided in the format below will be referred to as Fair
Value (FV) or Economic Value (EV).




                                                                                                          Page 3
CIT GROUP, INC. (NYSE: CIT)                                                                      February 22, 2010


Exibit 2: Post Bankruptcy PF Adjusments and Balance Sheet
(Fair or Economic Value, not GAAP)                              Adjustments
                                              Reported        Impact of FV &              PF
CIT                                             09/30/09       Rerorg. Other        09/30/09
Cash                                                $5.8          ($0.5) ($0.8)         $4.6
Recv. & Operating Leases                           $57.6           $0.0 ($5.8)         $51.8
Total Assets                                       $69.2          ($0.5) ($6.9)        $61.8
Deposits                                            $5.2           $0.0 $0.0            $5.2
Secured Borrowings                                 $16.6           $0.6 ($3.5)         $13.6
Secured Credit Facility (1st lien)                  $2.9           $0.0 $3.9            $6.8
Unsecured bank credit facilities                    $3.1          ($3.1) $0.0           $0.0
Senior Secured notes                               $30.1         ($29.0) $0.0           $1.1
Subordinated notes and equity units                 $2.1          ($2.1) $0.0           $0.0
New Series A Notes                                  $0.0          $21.0 $0.0           $21.0
New Series B Notes                                  $0.0           $2.1 $0.0            $2.1
Total Debt                                         $54.7         ($10.4) $0.3          $44.7
Preferred                                           $3.2          ($3.2) $0.0           $0.0
Combined                                           $57.9         ($13.6) $0.3          $44.7
Common Equity                                        $1.9         $13.1 ($6.9)          $8.2
Common Equity/Assets                                2.8%                               13.2%
Book Value                                         $4.76                              $40.78
Common shares-#                                    404.7                                200.0
Source: Company Reports and Sterne Agee Research estim ates
$ in billions except per share amounts, share count in millions
Includes Fair Value Marks to Assets, excludes Fresh-Start Account Adj to Liab., etc..


As a result of the December bankruptcy, all existing shares, its preferred stock (including
$2.3 billion in TARP), and a portion of its senior debt were eliminated. The transaction
had three significant impacts: first, $13.6 billion in debt, capital notes, preferreds and all
of its existing shares were eliminated. The company issued two series of new notes (A &
B) to certain classes of bond and debt holders as well as their pro-rata share of the
company’s newly issued 200 million in shares. Secondly, the company’s post-
bankruptcy balance sheet will reflect, in our view, a more meaningful level of underlying
equity and assets marked to their fair value (marked down to both collectable value and a
level that allows for a more meaningful asset yield). Lastly, cost of funds will increase
from 4.55% at 3Q09 to an estimated combined level of ~6.45%.

For GAAP purposes we expect to see other possible FS adjustments to assets not
reflected above, as well as the write down of several classes of notes and company debt.
Any adjustment to asset values taken to enhance yields will eventually be accreted into
book over time. Any adjustment taken to reflect lower recovery values will be reversed if
the asset is collected and result in a lower on-going provision charge. On the liability
side, debt will be written down to fair value. For example, the class A notes were trading
at close to 90% of par.

With FS accounting, the adjustments to assets and liabilities factor in a consideration for
the value of both the new notes and the value of the equity received. The value of equity
is not just a simple matter of FS/FV of assets less FS/FV of liabilities = equity. The
adjustments will be more akin to those used in purchase accounting. Marks to both assets
and liabilities will in part be a function of the estimated value of the consideration
received by note holders who got new bonds (A & B) and the 200 million shares of stock.
The operating units of the business continued to function during the whole reorganization
process and we believe enough of any NOL will be preserved to offset the impact of
taxable gains created by the dismissal of liabilities.



                                                                                                          Page 4
CIT GROUP, INC. (NYSE: CIT)                                                                              February 22, 2010

We want to be long “credit-recovery”
In theory, despite an arguable worsening housing profile and intolerably high
unemployment levels, we are out of the recession. If government spending and low
interest rates are the theoretical cure for a recession, then we have been receiving a
“double prescription strength dose” of the required medicine. The real risk is that the
data is pointing to a false positive and that there is a double dip just over the horizon.
What is clear, for now, is that we are seeing a recovery in the credit markets. This we
view as an important indicator (actually a driver) that the current (or pending) recovery is
sustainable. Historically, business bankruptcies are a lagging indicator and they tend to
increase after the official end of a recession. Commercial losses follow suit and in a
normal environment, commercial loan losses are best described as either a late cycle (or
very late cycle) item.

All arguments about the economy aside, we have seen a continuation of the recovery in
the credit markets for most of 2009. A survey of Street research and other data indicates
that after peaking at LIBOR (L) + 2,045 bps in December of 2008, the value placed on
leveraged corporate loans has steadily risen during 2009 to end in December at modestly
below L+700 bps with improvements registered in November and December of 2009.
Street research estimates the return on leveraged loans was approximately 48% in 2009,
beat only by returns realized in “single-B” and “triple-CCC” rated bonds. Between
October 16th, 2009 and year end, the S&P Leveraged Loan Index, which is a total return
benchmark index that tracks the performance of the 100 Largest institutional leverage
loans, gained 3.9%. Default rates on leveraged loans in 2009 have been estimated at
between 12.5% and 14%, but are expected to fall to the 4.00% area. Recovery rates are
expected to be close to 60%.




In setting marks on the company’s corporate finance loans, we have targeted a 7.50% yield. On
the lease portfolio, we targeted yields 120 bps lower than this, or ~6.30%. At the end of
December, one year LIBOR was at 98 bps, six month LIBOR was at 43 bps, and prime was at
3.25%. Net losses are assumed to be 3.00% (close to projected default rate of 4.00% x 60%
recovery = 2.40%).

The loan quality data below is imperfect. It contains the results of consumer and commercial
lending business lines, discontinued business units, and more than one shift in accounting
standards. However, it does verify the view that post recovery, we should expect another year or
so of higher charge-offs and then a sustainable decline. The magnitude of losses and credit
deterioration is arguably going to be higher this time, but the direction and timing should not be all
that different from past cycles.
                                                                                                                  Page 5
CIT GROUP, INC. (NYSE: CIT)                                                                      February 22, 2010


Exhibit 4: Historical Loan Quality
               NCO   Non-Acc, 90              Dlq's
CIT           Ratio OREO/Assets                 60's
1990              na      1.68%               2.59%
1991              na      5.04%                   na
1992              na      4.78%                   na
1993              na      1.65%               1.69%
1994          0.61%       1.23%               1.19%
1995          0.50%       1.16%               1.66%
1996          0.61%       1.13%               1.71%
1997          0.58%       1.01%               1.65%
1998          0.41%       1.15%               1.67%
1999          0.41%       1.41%               2.46%
2000          0.65%       1.70%               2.76%
Sep-01        1.01%       1.90%               3.26%
2002          1.76%       2.59%               3.47%
2003          1.71%       1.46%               2.10%
2004          0.88%       1.06%               1.66%
2005          0.52%       0.92%               1.65%
2006          0.33%       0.56%               1.82%
2007          0.35%       0.55%                   na
2008          0.90%       1.78%               2.06%
Sep-09        4.11%       3.87%                   na
Source:SNL, Sterne Agee Research, Company Reports
Sept-01 12 months, Sep-09 9 months


Business Profile

The company’s September portfolio reflected a blended mix of middle market term loans
(Corporate Finance), operating leases backed by rail and aircraft (Transportation), a
factoring unit (Trade Finance), and its Vendor finance business which provides financing
through a primary vendor for the purchase of small ticket items used primarily in offices
(copiers, software, phone systems, etc.) and service businesses (e.g., Snap-On Tools,
discontinued). The commercial businesses were/are funded with a combination of
secured debt, securitizations, credit facilities, public notes, and equity capital. In 2009,
the consumer loan business ($5.7 billion of government guaranteed student loans) was
able to move assets into the company’s Utah bank.



Exhibit 5: Line of Business Results
CIT                        Corporate Trans.      Trade Vendor Commercial Consumer              Total
3Q09                          Fin.      Fin.      Fin.  Fin.     Seg.    (Student)             Seg.
Loan Yield                     5.03%     6.57% 4.60%     6.68%     5.63%     2.18%              4.75%
Net Lease Yields               2.95%     5.63% 0.00%     5.97%     5.55%     0.00%              5.54%
Revenue Yield                  4.30%     5.91% 11.56%    7.40%     5.99%     2.27%              5.26%
Managed Earning Assets         $18.0     $14.6     $3.0  $11.8     $47.4     $11.6              $59.0
Mix                              31%       25%       5%    20%       80%       20%               100%
Loss Experience--NCO's to Average Finance Receivables
NCO-Fin Recv. 3Q09            15.63%     0.00% 3.99%     3.11%      9.6%     1.22%              7.45%
FY 2008                        0.82% recovery     0.92%  1.24%     0.89%     0.94%              0.90%
FY 2009                        0.34% recovery     0.44%  0.57%     0.32%     0.49%              0.35%
Source: Company Reports and Sterne Agee Research estimates
$ in Billions; NCO's for FY 2008, 2007 based on loan types, 3Q09 LOB data


                                                                                                          Page 6
CIT GROUP, INC. (NYSE: CIT)                                                                           February 22, 2010

The company’s public statements suggest that its goal is to transfer the corporate finance, trade
finance, and vendor finance businesses into the bank and most likely sell transportation finance.
The consumer lending business, which is primarily a portfolio of private and government
guaranteed education loans, is being funded at what we believe is a loss/servicing-adjusted
breakeven spread and we would view this portfolio as either non-core or for sale. The
Transportation finance business is the largest user of the lease structure. Approximately 60%
(58% in September 2009) of its managed assets are operating leases of aircrafts to non-U.S.
carriers of single-aisle design commercial planes. The company pre-commits to purchase planes
from major manufacturers and almost generally has a lessor waiting for the plane once it is
available. At the end of September 2009, 94% of the consumer loan/student loan portfolio was
government guaranteed. The non-guaranteed portfolio included $196.8 million of loans to
students at a now bankrupt helicopter pilot training school. The company plans to charge off $120
million of these and by the end of September of 2009 had fully reserved against this expected
charge-off.

The one business in the above mix that does not fit a traditional spread lending model is Trade
Finance/Factoring. In this business the company is supplying a manufacturer or distributor with a
guarantee that its customers will pay within a set period. CIT underwrites the credit of the buyer.
Traditionally this includes major retailers such as a Macy’s (M - $18.47 – not rated), but the
company also targets a number of small businesses. It is primarily a volume/factoring commission
business. Reported loans equal the dollar value of receivables guaranteed at a point in time. The
company also makes advances to clients against factored receivables. This is the net receivable
(factored receivables less credit balances due factoring clients). A look back over the years peg
peak factoring volumes at approximately $44 to $45 billion per year and with more normal credit
losses, pretax net could equal closer to 45-50 bps of factoring volume.

Exhibit 6: Factoring
Trade Finance                                 3Q08         2Q09     3Q09        FY08        FY07
Avg Factored Receivables (AFR)               $6,586       $5,209   $4,352     $6,740      $7,153
Avg Loans (AFR less Cr Bal.)                 $3,349       $2,429   $2,880     $3,258      $3,018
NCO a % of AFR                                1.08%        1.09%    3.99%      0.92%       0.44%
Factoring Volume                            $11,102       $8,170   $7,174    $42,204     $44,967
Comm %                                        0.47%        0.57%    0.58%      0.47%       0.50%
Loan Yield (Avg Loans)                        6.19%        5.10%    4.60%      3.12%       4.07%
Total Revenue Yield (AFR)                     7.01%        6.66%    7.65%      6.74%       8.00%
Pre Tax Net/Volume                            0.35%        0.25%    0.30%      0.37%       0.59%
Source: Company Reports and Sterne Agee Research estim ates
$ in millions




                                                                                                               Page 7
CIT GROUP, INC. (NYSE: CIT)                                                                                February 22, 2010

Lending, Yields/Cost of Funds & Credit History
For most of its recent history, CIT has been a senior, frequently secured, lender with asset
yields that worked well given the company’s capacity to borrow at above “A-rated” rates.
In 3Q09 the company reported a substantial increase in commercially related net charge
offs due primarily to a refinement in the charge off process. NCO’s increased from
3.36% in 2Q09 to 9.34% in 3Q09. In dollar terms, most of the increase between the two
periods was attributable to this adjustment.

Exhibit 7: Historical Performance
                                          FY            FY           FY           FY            FY 9M YTD
CIT                                 12/31/04      12/31/05     12/31/06     12/31/07      12/31/08 09/30/09
Finance Receivables                    $29.9         $35.9        $45.2        $53.8         $53.1    $45.3
Operating leases, net                   $8.3          $9.6        $11.0        $12.6         $12.7    $13.2
Total Earning Assets                   $38.2         $45.5        $56.2        $66.4         $65.8    $58.5
Total Managed Assets                   $46.2         $53.2        $63.2        $73.4         $67.8    $70.2
Commercial Loan Mix
Corporate Finance                        44%            49%         56%          51%             51%      50%
Transportation Finance                   10%             6%          6%           6%              7%       7%
Trade Finance                            21%            22%         19%          18%             15%      12%
Vendor Finance                           25%             0%         19%          25%             28%      31%
Total                                   100%            77%        100%         100%            100%     100%
Earning Asset Mix
Commercial Loans                         78%           67%          64%          63%             62%      58%
Consumer Loans (Student)                  1%           12%          16%          18%             19%      20%
Operating Leases                         22%           21%          20%          19%             19%      23%
Total                                   100%          100%         100%         100%            100%     100%
Loan, Lease Yld                         7.58%         7.67%       8.41%         8.38%          6.68%    4.97%
Operating Lease Yields, net             5.52%         6.01%       6.67%         6.94%          6.51%    5.78%
Deposits                                                          5.15%         4.98%          4.44%    3.61%
ST Debt                                                           4.91%         5.83%          7.41%    0.00%
LT Debt                                                           4.79%         5.02%          4.51%    4.31%
Total IBL Cost                                                    4.81%         5.08%          4.54%    4.26%
Spread                                                            3.11%         2.89%          1.75%    0.46%
NCO's - owned Finance Recv.
Corporate Fin.                          1.10%         0.35%       0.22%         0.34%           0.82%   11.73%
Transportation                          0.37%         2.34%       0.08%        -1.39%          -0.05%    0.37%
Trade Finance                           0.37%         0.34%       0.55%         0.44%           0.92%    4.18%
Vendor Finance                          1.19%         0.66%       0.60%         0.57%           1.24%    2.70%
Commercial                              0.88%         0.57%       0.36%         0.32%           0.89%    7.24%
Consumer                                  -           0.22%       0.19%         0.49%           0.94%    1.70%
Total                                   0.88%         0.52%       0.33%         0.35%           0.90%    5.82%
Loans on Non Accrual                    1.08%         0.83%       0.69%         0.89%           2.66%    5.82%
Loan Loss Reserves                      1.85%         1.51%       1.28%         1.07%           2.06%    3.01%
Operating Cost                         $1.012        $1.114      $1.276        $1.390          $1.281   $0.871
% of M Avg Assets                       2.13%         2.05%       2.19%         2.03%           1.81%    1.68%
Source: Company Reports and Sterne Agee Research estimates
$ in billions




                                                                                                                    Page 8
CIT GROUP, INC. (NYSE: CIT)                                                                     February 22, 2010

Book Value – Fair Value or Economic Value

The difference between FV or EV book values and GAAP will be the write down (or up)
of liabilities associated with fresh start (FS) accounting. FS accounting may result in
other adjustments not captured in our analysis, but with the exception of expected credit
losses, ultimately any write down will be recovered in the form of either lower
amortization charges or the accretion into earnings of yield-related discounts. Any write
down in debt will be reversed as well in the form of higher interest cost due to the
amortizing into earnings of the debt-related discount (akin to an OID). Given the number
and magnitude of adjustments and one-time charges likely to have occurred between the
end of September and December, we do not have a credible view on 4Q earnings and are
assuming a break-even quarter on an operating basis. We are also assuming that the $6
billion in available NOLs are sufficient to offset all, or most, of any tax charge related to
debt forgiveness.



Exibit 8: FV Balance Sheet and Book Value
(Fair or Economic Value, not GAAP)                          Adjustments
                                                 Reported Impact of FV &        PF
CIT                                              09/30/09   Reorg. Other 09/30/09 Disc.
Cash                                                 $5.8     ($0.5) ($0.8)   $4.6
Recv. & Operating Leases                            $57.6      $0.0 ($5.8)   $51.8 10.0%
Total Assets                                        $69.2     ($0.5) ($6.9)  $61.8
Total Debt                                          $54.7    ($10.4) $0.3    $44.7
Preferred                                            $3.2     ($3.2) $0.0     $0.0
Combined                                            $57.9    ($13.6) $0.3    $44.7
Common Equity                                        1.927    $13.1 ($6.9)    $8.2
Common Equity/Assets                                 2.8%                    13.2%
Book Value                                          $4.76                   $40.78
Common shares-#                                     404.7                     200.0
Source: Company Reports and Sterne Agee Research estimates
$ in billions except per share amounts, share count in millions
Includes Fair Value Marks to Assets, excludes Fresh-Start Account Adj to Liab., etc..


Our asset marks include both an adjustment for yield and collectability, but are not as
aggressive as those presented in the company’s October 16, 2009 Exchange Offer,
Appendix A. We suspect that most of the difference is tied to differing yield expectations
relative to the current credit markets. It is also likely that collections are better than
projected.

In deriving our own fair value estimates we targeted specific loan yields based on
perceived market indices adjusted by our own estimates of credit risk and liquidity. A
key starting point were yields in loan indices, such as the S&P leveraged loan index, and
available aggregate yields on BB- and B-rated bonds. Another condition was the view
that the company’s loan portfolio has embedded in it more risk than its own debt and that
its loan and lease portfolio should support a higher loss-adjusted spread than its post-bank
cost of debt.

In estimating expected annual losses we factored in projected losses on corporate debt as
well as losses already taken over the last year (2008) and nine months (2009). During
this period, on a cumulative basis, the company has written off approximately 9.6% of its
Corporate Finance portfolio and 6.3% of its full commercial portfolio. Actual marks or
discounts are amplified by the expected duration of each asset class.




                                                                                                         Page 9
CIT GROUP, INC. (NYSE: CIT)                                                                     February 22, 2010


Exhibit 9: Fair Value Inputs
                     Fair Value         3Q09 Targeted    Net CO's
CIT               Marks (disc.)         Yield  Yields Target YTD 09
Finance Receivables
Corp Finance              19.1%         5.03%      7.50%     3.00%   7.93%
Transportation             2.9%         6.57%      7.50%     0.00%   0.13%
Trade Finance              1.3%         4.60%      5.25%     1.00%   2.14%
Vendor Finance            19.2%         6.68%      9.99%     2.50%   2.41%
Total Commercial          16.4%         5.63%      8.02%     2.40%   4.99%
Consumer                   7.6%         2.18%      2.98%      nmf    1.15%
Total                     14.8%         4.75%      6.73%     1.79%   5.82%
Operating Lease Portfolio
Corp Finance              10.9%         2.95%      7.50%
Transportation             5.8%         5.63%      6.32%
Vendor Finance             9.6%         5.97%      9.99%
Total                      6.1%         5.62%      6.56%
Source: Company Reports and Sterne Agee Research estimates


Based on past business cycles, we are assuming that the Corporate Finance portfolio and
the Vendor finance portfolio will see heavier than normal losses deeper into the recovery.
Also, since both of these are longer duration assets with potential lives of 2-3 years, the
cumulative adjustments or mark for these two, as well as for Transportation finance, is
higher than it would be for a shorter duration asset.

The 9.99% rate used on the Vendor Finance portfolio came from quoted rates on vendor-
provided finance from a direct source (excludes any yield sharing or adjustment for
origination cost). Historically, losses taken against the transportation portfolio have been
nil; with this portfolio the primary issue is utilization rates. Our view on the valuation of
these assets is impacted more by the pending sale of two other large portfolios of aircraft
leases which are overhanging the market as well. Trade Finance is generally a short
duration product (with frequent renewals of both guarantees and advances against fresh
receivables). The losses on the student loan portfolio are primarily from the non-
guaranteed portion of the portfolio (which should occur immediately).

Earnings Outlook – The Post-Bankrupt CIT

    •    Economic or Fair Value Earnings

    •    FV Yields/Actual Liability Cost, bank centric (but not bank-only solution)

    •    The estimates below reflect only required marks against assets


One thing is clear from the start: loans need to be re-priced to reflect available yields on
similar assets and the company needs to generate a positive loss-adjusted spread on its
earnings assets. Total revenue yields (all net revenue/earnings assets) in the third quarter
from the commercial businesses were only 5.99% and blended funding cost, post-
reorganization is estimated to higher than this. Fixing the funding problem can be done
in a series of steps which begins with the company writing loans and leases down to a fair
value that will support a higher yield, assumes the company reactivates its most cost-
effective secured loan and securitization facilities, and ends with the company gaining
access to deposit-based funding. This final step is important, but not franchise defining
or mission critical.      The cost difference between a short duration AAA-rated
securitizations facility and a two year CD is somewhere between 60 and 120 bps.
Throughout our analysis we have kept combined capital (equity plus A + B notes) at over
20% of assets.
                                                                                                         Page 10
CIT GROUP, INC. (NYSE: CIT)                                                                February 22, 2010

Steps to Profitability
   1.   Write assets down to allow for acceptable yields
        The fair value marks taken in December should do exactly this. Yields will then
        be boosted by both a lower denominator (loan or lease balance) and yield-related
        discounts accreted back into yields. Any write down to enhance yield is
        ultimately recovered back into book value.
   2.   Re-access the securitization market and use cash flow to pay off the first
        lien notes (13.00%)
        Recent quotes on AAA-rated equipment securitizations put borrowing cost
        against these securitizations at below 3.00%. Assuming a 70% advance ratio,
        the company has an estimated $5.1 billion in secured or securitized borrowing
        capacity in its Vendor finance portfolio. CIT’s recent TALF securitization
        reflects an advance ratio of ~80% and other securitizations reflect an advance
        ratio of ~75%. Market quotes on recently traded AAA-rated CIT asset-backed
        securities (ABS) show yields in the “high 2.00% area.” In this step, we assume
        the company begins the process of reactivating secured lines, rolling over
        deposits at market rates, and paying down high cost debt.
   3.   Sell non-core assets such as transportation and the student loan portfolio
        Selling the student loan portfolio would not free up much in the way of cash in
        our view, but it should open up capacity in the bank and help improve capital
        ratios. We are assuming that the transportation lease portfolio could be sold at
        94% of depreciated value freeing up $8.9 billion in cash for paying down debt.
        Our “mark” is arguably deep due not to the performance of these assets, but due
        to known competition from two other major vendors and the lack of identifiable
        bidders.
   4.   Rebuild commercial earning assets up to pre-sale levels. Fund growth with
        deposits – 1-2 years
        Once the company can originate loans in the bank, loan renewals can move from
        the Finance Corp to the Bank, releasing cash and paying down debt. We are not
        assuming that the company will seek or receive permission to transfer in assets,
        but do see the company funding renewed corporate finance loans, as well as new
        loans, in the bank. Market rates on three year CDs average, according to Bank
        Rate monitor, 2.05%. Rates on one to three year institutionally brokered CDs
        range between 0.80% (one year) and 2.15% (three year). Without deposits
        funding, but assuming the growth reflected in step two, EPS in step 4b (below)
        would cause EPS to be $0.50 to $0.75 per share lower.




                                                                                                    Page 11
CIT GROUP, INC. (NYSE: CIT)                                                                              February 22, 2010


Exhibit 10: Steps to Profitability
                                          FairValue   Reactivate       Sell      Grow w/      Grow w/
CIT                                             Adj      Secur.      Assets      Deposits     Deposits
                                                  1            2          3           4a           4b
Loan Balances
Commercial                                   $28.6        $28.6       $28.6         $33.6       $38.6
Consumer                                     $10.7        $10.7        $0.0          $0.0        $0.0
Total Receivables                            $39.4        $39.4       $28.6         $33.6       $38.6
Operating Leases                             $12.4        $12.4        $0.9          $0.9        $0.9
Total Assets                                 $61.8        $61.1       $38.9         $43.9       $48.9
Deposits                                      $5.2         $5.2        $5.2         $10.2       $15.2
Debt                                         $44.7        $44.0       $21.7         $21.7       $21.7
Equity                                        $8.2         $8.2        $8.2          $8.2        $8.2
Commercial Loan Yields                       7.94%        7.94%       7.94%         7.89%       7.86%
Net Lease Yields                             6.56%        6.56%       6.56%         6.56%       6.56%
Combined Yields                              6.58%        6.58%       7.90%         7.86%       7.83%
Cost of Funds                                6.46%        4.95%       4.71%         3.57%       2.77%
Spread (not margin)                          0.12%        1.64%       3.18%         4.29%       5.06%
Prov Ratio = Unreserved NCOs                 0.45%        0.45%       0.60%         0.60%       0.60%
Factoring Volume                             $44.4        $44.4       $44.4         $51.1       $58.7
OH/Assets                                    1.90%        1.90%       1.80%         1.80%       1.80%
EPS                                         ($2.35)       $0.25       $1.89         $3.36       $4.80
ROE                                            neg        0.61%       4.65%         8.23%      11.78%
Equity/Assets                                13.2%        13.3%       21.0%         18.6%       16.7%
Shares                                          200          200         200           200         200
Book Value                                  $40.78       $40.78      $40.78        $40.78      $40.78
Source: Com pany Reports and Sterne Agee Research estim ates
$ in billions except per share am ounts



Fresh Start Accounting

We have discussed this in detail. What follows are two exhibits derived from Appendix
A of the original Offer to Exchange Outstanding Notes and the solicitation for the
company’s proposed prepackaged plan of reorganization, dated October 16, 2009. The
final plan was similar, but not exactly the same, as this. FS fair value marks reflected in
Appendix A and year end 2009 post-FS reorganization balance sheet and five year
earnings projections reflect market values in October. The estimates were prepared by a
major New York investment banking firm. In their analysis, they indicated an expected
view of the value of the company’s equity of between $5 and $11 billion and the $8
billion is the mid-point. We think asset and liability marks will both be lower when the
company publishes its balance sheet, but that the changes will be offsetting. We are
looking for a fresh start book value of $40.00 per share +/- 10% error factor.

What follows should not be construed as our estimates, but merely the reorganization and
manipulation of the supplied information to better illustrate the implications and impact
of FS accounting.




                                                                                                                  Page 12
CIT GROUP, INC. (NYSE: CIT)                                                                                   February 22, 2010


Exhibit 11: GAAP/Fresh Start
                                                                                                1
                                                                                        Estimate
                                                                                  Adjustments          Post
CIT                                                          12/31/09            Reorg. Fresh Start Restructing Discount
Assets
Cash & Restricted Cash                                          $5,884            ($500)          $0     $5,384
Receivable, net of reserve                                     $41,891              -        ($9,122)   $32,769     22%
Operating Leases                                               $12,952              -        ($3,056)    $9,896     24%
Other Assets                                                    $5,822              -          ($291)    $5,531      5%
Total                                                          $66,549            ($500)    ($12,469)   $53,580     19%
Liabilities
Deposits                                                        $3,672               -           -       $3,672
Secured Borrowings                                             $15,532               -       ($2,034)   $13,498     13%
First Lien Debt                                                 $4,500               -           -       $4,500
Second Lien Debt (A&B notes)                                        $0           $23,267     ($4,457)   $18,810     19%
Senior Unsecured Notes                                         $29,881          ($28,583)        -       $1,298      0%
Bank Credit Facilities                                          $3,100           ($3,100)        -           $0      0%
Credit Balance of Factoring Clients                               $891                $0         -         $891
Jr Sub Notes & Convert. Equity                                  $2,099           ($2,099)        -           $0
Other                                                           $2,911                $0         -       $2,911
Total Liabilities                                              $62,586          ($10,515)    ($6,491)   $45,580     10%
Equity
Preferred Equity                                                $3,171          ($3,171)         -           $0
Common Equity                                                     $753          $13,186          -      $13,939
Non-controlling Interest                                           $39               $0          -          $39
Total Equity                                                    $3,963          $10,015      ($5,978)    $8,000
Total Liab. & Equity                                           $66,549            ($500)    ($12,469)   $53,580
Shares                                                                                                     200.0
Book Value                                                                                               $40.00
Equity to Assets                                                  6.0%                                    14.9%
Source: Company Reports and Sterne Agee Research estimates
1   CIT Exchange offer, October 16, 2009-page A8. Estimates by Morgan Stanley
$ in millions except per share amounts


As the asset (accretion) and liability (amortization) discounts work their way into
earnings, GAAP book value grows closer to the actual book value realized from
collecting the loans and paying down debt. Provision to loans (a good proxy for a NCO
ratio) is low, because the bulk of any projected losses have already been factored into
asset values.




                                                                                                                       Page 13
CIT GROUP, INC. (NYSE: CIT)                                                                                     February 22, 2010


Exhibit 12: Fresh Start Earnings Dynamics
                                                                                              1
                                                                                   Estimate
CIT-Dec FY                                        2009           2010            2011              2012     2013       2014
Yield
Int Income                                                      6.77%            6.66%             6.40%    7.02%     7.41%
Int accretion-fresh start adj.                                  7.31%            4.85%             3.91%    3.22%     2.14%
Combined                                                       14.08%           11.51%            10.31%   10.24%     9.56%
IBL Cost
Interest Exp.                                                   6.95%           6.74%             6.48%    6.01%      6.01%
Int amort-fresh start adj.                                      2.65%           2.75%             2.73%    2.50%      2.16%
Combined                                                        9.60%           9.50%             9.20%    8.51%      8.17%
Provision/Avg Loans                                             0.61%           0.31%             0.30%    0.34%      0.42%
FS Adj. to Depreciation                                           42%             38%               35%      33%        29%
Overhead to Avg AR and Leases                                   2.10%           1.99%             1.85%    1.82%      1.83%
Pre Tax, Pre Prov/Avg Earn. Assets                              3.13%           1.77%             1.77%    2.36%      2.37%
Finance Receivables, net                          $32.8         $29.6           $29.4             $28.6    $27.2      $27.3
Operating Lease Equipment, net                     $9.9         $10.1           $10.3             $10.1     $9.7       $9.1
Combined Earnings Assets                          $42.7         $39.7           $39.7             $38.6    $36.9      $36.4
Interest Bearing Liabilities
Deposits                                          $3.7           $3.7             $4.8              $5.8     $5.4       $6.6
Other Debt                                       $41.8          $37.6            $36.5             $34.8    $31.4      $30.1
Total                                            $41.8          $37.6            $36.5             $34.8    $31.4      $30.1
Equity                                            $8.0           $8.7             $9.2              $9.6    $10.1      $10.6
 Assumed Shares                                   200            200               200               200      200        200
Book Value                                      $40.00         $43.63           $45.76            $47.88   $50.57     $53.14
TCE/Assets                                        15%            17%              18%               20%      22%        23%
Source: Company Reports and Sterne Agee Research estimates
$ in billions except per share amounts
1   CIT Exchange offer, October 16, 2009-page A9. Estimates by Morgan Stanley


2010-2012 Earnings Estimates

Our EPS estimates are meant to mimic GAAP accounting and are likely to get revised a
number of times until we have more clarity as to the timing of key events, the company’s
final strategy, and what the year-end 2009, post fresh start balance sheet looks like.

Exhibit 13: Earnings Summary
CIT                                                                     FY     FY     FY
FY=Dec                    1Q10E 2Q10E 3Q10E 4Q10E                     2010   2011  2012
EPS                        ($1.18) ($1.03) ($0.08) $0.25            ($2.04) $3.20  $4.57
ROE                           neg     neg     neg 2.76%                neg 2.19% 11.34%
Book Value                 $39.60 $38.56 $38.48 $38.73              $38.73 $41.93 $46.50
Source: Company Reports and Sterne Agee Research estimates
$ in millions except per share am ounts


Our estimates are built around the four steps outlined earlier to fix the company’s liability
cost and restart growth. The primary adjustment required from our EV- or FV-based
view is to adjust debt cost (primarily the combined A& B notes) to reflect likely
discounts. We are assuming these notes get a fresh start value of 90% of par and
amortize the fresh start adjustments over the expected average life of the original issue.
For now, we excluded from our estimate any one-time adjustments related to debt pay
downs, severance, or assets sales. In modeling quarterly results, we assumed that the
company started the changes outlined in Step 2, reactivate securitizations, late in 1Q10 or
early in 2Q10, and that by 4Q010 they were successful at selling non-core businesses
                                                                                                                         Page 14
CIT GROUP, INC. (NYSE: CIT)                                                                            February 22, 2010

(Step 3). Growth in loan balances and the deposit-based funding of new loans was not
assumed to occur until 2011 and 2012 (Step 4). To repeat a point made earlier, we think
the growth projected in 2011 and 2012 can be accomplished with or without the
company’s ability to access its depository, but that EPS would ultimately be $0.50 to
$0.75 per share lower.

Management
The company has a new CEO, John Thain. His professional career includes the
successful sale of Merrill Lynch. Prior to this, he was CEO of the New York Stock
Exchange and spent the majority of his career at Goldman Sachs (GS - $156.71 - not
rated), where he rose to the position of CEO. Whether Mr. Thain was brought in to fix
and then sell, or fix and run CIT remains to be seen. Nothing has been officially
articulated regarding the expected strategy, but we believe it is likely to be similar to that
outlined previously. Seven of the new board members were brought in at the time of, or
after, its December reorganization. They are a team picked with the a review of bond
holders and not viewed as having any sentimental attachments to the independence of
CIT. Based on recent 13G/13F filings, the company’s top five institutional share holders
include Icahn Associates and other noted activist share holders.



Exhibit 14: CIT Management
Name                                Age   Employee?     Elected    Detail
John A. Thain (Chrm, CEO)            54   Yes           2010       New CEO
Gerald Rosenfeld                     63   No            2010       Deputy Chairman of Rothschild
Laura Simone Unger                   49   No            2010       former SEC reg
Arthur B. Newman                     66   No            2009       Reorg-Blackstone
Daniel A. Ninivaggi                  45   No            2009       Attorney
Michael J. Embler                    45   No            2009       former CIO Franklyn Management
R. Brad Oates                        56   No            2009       Advisor Distressed Assets (Stone)
John R. Ryan (Lead Director)         64   No            2008
Seymour Sternberg                    66   No            2005
Marianne Miller Parrs                65   No            2003
William M. Freeman                   57   No            2003
Peter Joseph Tobin                   65   No            2002
Source:SNL, SA Research


Valuation

In valuing CIT’s shares we are using the same metric applied to other recovering
financial institutions, earnings potential. Based on the four step process outlined earlier,
we think it is 24 months until this company fully executes on the process of rebuilding
portfolio growth and establishing a bank-centric funding model. We are applying the
same P/E to earnings potential that we use for our credit card companies: ~8.3x. This
assumes a P/E of 12, discounted at 20% a year for two years. We also view expected
book value as a relevant bench mark once the company begins to report a more
meaningful level of profitability.




                                                                                                                Page 15
CIT GROUP, INC. (NYSE: CIT)                                                                              February 22, 2010


Exhibit 15: Calculated Value
CIT                                         Target       Time
Earnings Potential                             P/E       Disc.        P/E        EPS           Value
Fair Value or Economic Earnings               12.0x       20%         8.3x      $4.80         $40.02
EPS 2012                                      12.0x       20%         8.3x      $4.57         $38.12
Book Value                                   P/Bk        Disc      Target       Book           Value     ROE
Fair Value or Economic Earnings              120%         curr      120%       $40.78         $48.93   11.78%
2012                                         120%         20%        83%       $46.50         $38.75   11.34%
No Growth in Deposits                                                 P/E
Fair Value or Economic Earnings          High Estimate                6.5x      $4.30         $27.97
                                         Low Estimate                 6.5x      $4.05         $26.34
Source: Sterne Agee Research estimates


Three points worth noting in reviewing the list of comparable valuation companies: 1)
there are no perfect matches, 2) in aggregate the group sells for a median P/tang book
ratio of 80% (this is not far off of CIT’s estimated price to Tang Bk ratio), and 3) to the
extent that 2011 consensus EPS-based P/E are relevant, the median ratio of 10.0x on the
C-corp peers lends support to our Earnings Potential P/E (10.0x/discounted for 1 year =
8.3x).

Capital Source (CSE - $5.44 – not rated) owns a bank and is a senior lender as well, but
focused almost exclusively in the same area as CIT’s corporate finance group. History
suggests Capital Source lends deeper into the capital structure than CIT. Another closer
peer in this regard is, Gladstone Capital Corporation (GLAD - $9.32 – not rated). The
other RIC/BDCs are also somewhat similar, but they are taking deeper positions than
CIT’s corporate lenders and holding warrants or equity positions. The equipment leasing
group has a number of peers. All would have the intellectual capacity to evaluate,
finance, and service the CIT transportation business, but it is unlikely that anyone of
these peers would acquire the whole portfolio. Marlin (MRLN - $8.35 – not rated) runs a
leasing/financing business that is similar to CITs, but yield and loss ratios suggest this
company is buying deeper into the credit spectrum than CIT. The student lending
business is identical to the public companies involved in this niche. Discover (DFS -
$13.84 - rated BUY) is also developing a student loan product. The government
guaranteed portion of a student loan portfolio, like a guaranteed SBA loan, in most
markets is a relatively sellable asset (CIT is no longer originating student loans).




                                                                                                                  Page 16
CIT GROUP, INC. (NYSE: CIT)                                                                                               February 22, 2010

Exhibit 16: C Corp Commercial Peers
                                       Share                                   Comp.                 M Assets      Price/ ROCE TCE/          PE
Company                     Symbol     Price      Focus                        LOB          M Cap          $ Bil Tang Bk   LTM Assets     2011
CapitalSource               CSE           $5.46   Diversified                  Corp Fin     $1,764        $19.9      79%    loss 17.1%     20.2x
CA First Natl Bncp          CFNB         $12.78   Tech                         Vendor        $130          $0.5      67% 6.01% 42.7%       12.3x
ePlus Inc                   PLUS         $16.15   Tech Equip, Servicing        Vendor        $134          $0.4      80% 5.57% 48.9%         na
Marlin Bus Svcs             MRLN          $8.51   Small Ticket                 Vendor        $109          $0.6      73% 0.70% 26.2%        8.5x
Mitcham Industries          MIND          $7.87   Seismic                      Spec.           $77         $0.1     101% 0.45% 76.9%       19.7x
AerCap Hldgs NV             AER           $8.25   Aircraft, Engine             Equip.        $702          $6.4      60% 8.91% 20.8%         na
Aircastle                   AYR          $10.20   Aircraft                     Equip.        $808          $4.4      65% 8.64% 28.5%        8.9x
CAI Intl Inc                CAP           $8.83   Container                    Equip.        $158          $0.4     131%    loss 32.7%      6.3x
GATX Corp                   GMT          $27.71   Rail, Marine, Other          Equip.       $1,267         $5.2     126% 7.47% 21.2%       15.0x
Mobile Mini Inc             MINI         $15.17   Portable Storage Units       Equip.        $539          $1.8       nmf 3.44% 30.2%      12.2x
Ryder System Inc            R            $35.20   Trucks, Tractors, Trailers   Equip.       $1,880         $6.3     161% 4.37% 22.8%       15.3x
TAL Intl Grp Inc            TAL          $16.14   Container                    Equip.        $495          $1.8     150% 10.44% 22.2%      10.4x
Textainer Grp Hld           TGH          $21.21   Container                    Equip.       $1,013         $1.4     234% 19.09% 42.2%      10.3x
Willis Lease Fin            WLFC         $15.45   Engine, Aircraft             Equip.        $142          $1.1      77% 13.20% 19.9%       5.5x
First Marblehead            FMD           $2.34   Student Lending              Consumer      $232          $0.7      77%    loss 42.6%      nmf
Nelnet Inc.                 NNI          $16.56   Student Lending              Consumer      $825         $27.6     167% 16.67% 2.6%        6.1x
SLM Corp                    SLM          $11.35   Student Lending              Consumer     $5,505       $202.6     202% 5.33% 3.1%         7.6x
Student Loan Corp           STU          $38.17   Student Lending              Consumer      $763         $45.6      46% 7.83% 5.4%          na
Median                                                                                                              80% 7.47% 25%         10.4x
Source: SA research estimates, SNL Data Source, Company Reports
All stock on this list are not rated



Exhibit 17: Private Finance/Private Equity-RIC BDCs
                                                                                 Price M Cap          Vol.              Div   Price/        Eq/
Company Name                                             Ticker                2/22/10 $ B's         000's   IA Div     Yld    Book      Assets
No Dividend
Allied Capital Corporation                               ALD      nr             $4.20     $0.8       2182   $0.00    0.0%     63%         42%
American Capital Strategies, Limited                     ACAS     nr             $3.91     $1.1       5471   $0.00    0.0%     50%         33%
GSC Investment Corp.                                     GNV      nr             $1.66    $0.03        137   $0.00    0.0%     44%         56%
MCG Capital Corporation                                  MCGC     nr             $4.88     $0.4        328   $0.00    0.0%     61%         51%
Median                                                                                               1255                     55%         47%
Dividend
Apollo Investment Corporation                            AINV     nr            $11.57     $2.0       2019   $1.12     9.7%   111%         53%
Ares Capital Corporation                                 ARCC     nr            $12.74     $1.4       1787   $1.40    11.0%   114%         59%
Fifth Street Fin                                         FSC      nr            $11.11     $0.4        416   $1.20    10.8%   103%         91%
Gladstone Capital Corporation                            GLAD     nr             $9.32     $0.2        113   $0.84     9.0%    78%         77%
Gladstone Investment Corporation                         GAIN     nr             $5.03     $0.1         54   $0.48     9.5%    63%         63%
Hercules Technology Growth Capital, Inc.                 HTGC     NEUT           $9.53     $0.3        198   $0.80     8.4%    93%         72%
Kohlberg Capital Corporation                             KCAP     nr             $4.43     $0.1        156   $0.80    18.1%    40%         50%
Main Street Capital Corporation                          MAIN     nr            $14.50     $0.2         65   $1.50    10.3%   108%         67%
Medallion Financial Corp.                                TAXI     nr             $8.18     $0.1         33   $0.76     9.3%    84%         30%
NGP Capital Resources Co.                                NGPC     nr             $8.18     $0.2         71   $0.68     8.3%    71%         84%
PennantPark Investment Corporation                       PNNT     nr            $10.56     $0.3        199   $1.04     9.8%    89%         58%
Prospect Energy Corporation                              PSEC     NEUT          $11.59     $0.7        883   $1.64    14.1%   115%         93%
Technology Investment Capital Corp.                      TICC     nr             $6.11     $0.2        121   $0.60     9.8%    76%         99%
Tortoise Capital Resources Corp.                         TTO      nr             $6.82     $0.1         29   $0.52     7.6%    73%         94%
Triangle Capital Corporation                             TCAP     BUY           $12.89     $0.1         71   $1.64    12.7%   122%         46%
Blackstone Group L.P.                                    BX       nr            $13.84     $4.2       2853   $1.20     8.7%   125%         62%
Compass Diversified Holding                              CODI     NEUT          $13.23     $0.5        115   $1.30     9.8%   105%         62%
Median                                                                                                  22            9.8%    86%         63%
Source: SA research estimates, SNL Data Source, Company Reports




                                                                                                                                       Page 17
CIT GROUP, INC. (NYSE: CIT)                                                                    February 22, 2010

Summary
We are initiating coverage with a BUY rating and a $40 price target. The risk factors
associated with this stock include the company’s success at accessing reasonably priced
funding, its ability to convince regulators to allow it to expand its deposit program, and
any short term confusion related to FS/FV accounting and the company’s pending 10K.

We think we have done a credible job of quantifying the relative issues. The biggest
potential near term error is likely to be in the assessment of the impact of any FS/FV
marks on asset values. There is clearly a +/- 10% error factor to our analysis, but it is
important to note that any write down (excluding expected recovery rates) will ultimately
be reabsorbed into earnings in the form of higher/lower accretion and amortization rates.
Credit is, we would argue, likely to begin to improve within the next 6-12 months and
given current market conditions, we think the company can execute on its current growth
strategy with or without the depository. The value of this franchise is its asset generation
capacity, not its funding base. These values will be unlocked by CIT and its new
managers, by an acquiring institution, or by both, in our view.




                                                                                                        Page 18
CIT GROUP, INC. (NYSE: CIT)                                                                                           February 22, 2010

 CIT Group, Inc. Quarterly Income Statement

                                                                                                  2010       2011            2012
CIT-Dec FY                                 1Q10E        2Q10E           3Q10E       4Q10E           FY         FY              FY
Interest Income
Fresh Start Adj.
Interest Income                                 $649           $649        $649        $569     $2,514     $2,655          $3,037
Operating Lease Income
Depreciation
Fresh Start Adj.
Net Lease Income                                $204            $204        $204         $15       $626        $59             $59
Total Int & Net Lease Income                    $852            $852        $852        $583     $3,140     $2,714          $3,096
Interest Exp.                                  ($805)          ($805)      ($615)      ($317)   ($2,543)   ($1,131)        ($1,006)
Fresh Start Adj.                               ($153)          ($128)      ($128)       ($64)     ($472)     ($147)           ($37)
Interest Expense                               ($958)          ($933)      ($742)      ($382)   ($3,015)   ($1,277)        ($1,042)
Net Interest                                   ($106)           ($80)       $110        $202       $125     $1,437          $2,054
Loss Provision                                  ($32)           ($32)       ($43)       ($43)     ($150)     ($202)          ($232)
Factoring Fees                                   $72             $72         $72         $72       $289       $332            $382
Other Fees                                       $26             $26         $26         $26       $104       $120            $138
Total Non Int. Revenue                           $98             $98         $98         $98       $393       $452            $519
Overhead                                       ($323)          ($319)      ($192)      ($175)   ($1,010)     ($790)          ($880)
Pre Tax                                        ($363)          ($334)       ($27)        $82      ($642)      $897          $1,461
Taxes                                           $127            $117         $10        ($29)      $225      ($314)          ($512)
Tax Rate                                         35%             35%         35%         35%       140%        35%             35%
Net Income                                     ($236)          ($217)       ($18)        $53      ($417)      $671            $961
EPS                                           ($1.18)         ($1.03)     ($0.08)      $0.25     ($2.04)     $3.20           $4.57
Book Value Per Share                          $39.60          $38.56      $38.48      $38.73     $38.73     $41.93          $46.50
Shares                                         200.0           210.0       210.0       210.0      210.0      210.0           210.0
Loan and Oper Lease Yields                     6.58%           6.58%       7.90%       7.86%      7.23%      7.39%           7.60%
IBL Cost                                       6.46%           6.46%       4.71%       3.57%      5.30%      5.01%           4.65%
Spread                                         0.12%           0.12%       3.18%       4.29%      1.93%      2.38%           2.95%
ROE                                               neg            neg         neg       2.76%        neg      2.19%          11.34%
Source: Company Reports and Sterne Agee Research estim ates
$ in millions except per share amounts




                                                                                                                              Page 19
CIT GROUP, INC. (NYSE: CIT)                                                                                            February 22, 2010

                                                       APPENDIX SECTION

Company Description: CIT is a traditional commercial finance company founded in 1908. In its modern incarnation, it used its
investment grade rating to build a relatively highly leveraged balance sheet focused on the upper end of the commercial finance
market. Core lending units include Corporate Finance, Trade Finance, and Vendor Finance. The company also has a transportation
leasing portfolio and a liquidating portfolio of student loans. The defining even in the company's recent history was its confirmation
of (12/08/09) and emergence from (12/10/09) a pre-approved bankruptcy.

IMPORTANT DISCLOSURES:

Price Target Risks & Related Risk Factors:
In addition to concerns about trends in the economy, lending rates and borrowing spreads, this company is facing a number of
challenges that are unique to its recent bankruptcy. We will not know what the balance sheet will look like until we see the 10-K and
use any reference to early results has been rendered moot by Fresh Start Accounting. The company is still operating under a Cease
and Desist (C&D) order put in place on July 16th, 2009. While access to a depository is not mission critical, the C&D is likely to
weigh heavily on investor's minds.

Valuation Methodology:
Our price target is based on expected price to book value ratios as well as targeted P/E ratios and earnings potential We also gave
consideration to current peer valuation multiples.

Regulation Analyst Certification:
I, Henry J. Coffey, Jr., CFA, hereby certify the views expressed in this research report accurately reflect my personal views about the
subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed by me in this report.

Sterne, Agee & Leach, Inc. Disclosure Legend as of February 22, 2010:

            Company                                                                           Disclosure(s) – See Below
            CIT Group, Inc. (CIT - NYSE):                                                     None
            Discover Financial Services (DFS - NYSE):                                         None

    1.    Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
    2.    Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or
          provided other investment banking services for the subject company.
    3.    Sterne, Agee & Leach, Inc. has various security accounts open for the subject company.
    4.    Sterne, Agee & Leach, Inc. provides administration for 401(k) plans for the subject company.
    5.    Sterne Agee Financial Services, Inc. has clearing agreements with the subject company.
    6.    The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.

Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various factors, including Sterne, Agee &
Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Definition of Investment Ratings:

BUY:                        We expect this stock to outperform the industry over the next 12 months.
NEUTRAL:                    We expect this stock to perform in line with the industry over the next 12 months.
SELL:                       We expect this stock to underperform the industry over the next 12 months.
RESTRICTED:                 Restricted list requirements preclude comment.

Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of December 31, 2009, 41.3% had a BUY rating, 54.4% had a NEUTRAL
rating, 4.3% had a SELL rating, and 0% was RESTRICTED. Within those ratings categories, 2.04% of the securities rated BUY,
1.94% rated NEUTRAL, 0% rated SELL, and 0% rated RESTRICTED received investment banking services from Sterne, Agee &
Leach, Inc., within the 12 months preceding December 31, 2009.


                                                                                                            Appendix Section, Page I
CIT GROUP, INC. (NYSE: CIT)                                                                                          February 22, 2010

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.

Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.

Copyright © 2010 Sterne, Agee & Leach, Inc. All Rights Reserved.

Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.

Price Chart(s):




To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. toll-
free at (800) 966-0814 or (205) 949-3689.




                                                                                                         Appendix Section, Page II
                                                     STERNE, AGEE & LEACH, INC.
                  Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for
                  over a century. During the early years, our founders prominently established themselves in the financial securities
                  industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
                  Agee is headquartered in Birmingham, Alabama with offices in 22 states including Alabama, Arkansas, California,
Florida, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Jersey, New York,
North Carolina, Pennsylvania South Carolina, Tennessee, Texas, Virginia, and Wisconsin. Sterne Agee is one of the largest
independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust
Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial
Services, Inc.—www.sterneagee.com

                                              EQUITY CAPITAL MARKETS ADMINISTRATION
Ryan Medo           Managing Dir., Eq. Cap. Mkts.     (205) 949-3623     David Lee                 Director, Equity Products          (205) 949-3689
Robert Lake         Vice President                    (205) 949-3624     Yan Chao                  Associate                          (205) 949-3622
                                                                         Chuck Carlisle            Sr. Portfolio Analyst              (205) 949-3571


                                                           EQUITY RESEARCH
                                      Robert Hoehn      Director of Research                  (212) 338-4731

CONSUMER                                                                       FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                        Life Insurance
  Margaret Whitfield            SVP, Sr. Analyst      (973) 519-1019             John M. Nadel                  Mng. Dir.               (212) 338-4717
  Jennifer Milan                VP, Analyst           (212) 763-8211             Jason Weyeneth, CFA            Analyst                 (212) 763-8293
                                                                                 Dennis Zavolock                Associate               (212) 338-4748
  Educational Services / Interactive Entertainment
  Arvind Bhatia, CFA            Mng. Dir.             (214) 702-4001             Mortgage Finance & Specialty Finance
  Luke Shagets                  Analyst               (214) 702-4030             Henry J. Coffey, Jr., CFA      SVP, Sr. Analyst        (615) 760-1472
                                                                                 John Sites, CFA                Associate               (615) 760-1470
  Footwear & Apparel
  Sam Poser                     SVP, Sr. Analyst      (212) 763-8226           GLOBAL INDUSTRIAL INFRASTRUCTURE (GII)
  Kenneth M. Stumphauzer        Analyst               (212) 763-8287            ACME &Latin America
                                                                                 Lawrence T. De Maria, CFA      SVP, Sr. Analyst        (212) 338-4704
  Leisure & Entertainment                                                        Ben Elias, CFA                 VP, Sr. Analyst         (212) 338-4706
  David Bain                    Mng. Dir.             (949) 721-6651
  Sherry Yin                    Associate             (949) 721-6651             Building, Power & Water Infrastructure
                                                                                 Michael J. Coleman, CFA        VP, Sr. Analyst         (212) 338-4718
  Restaurants
  Lynne Collier                 Mng. Dir.             (214) 702-4045             Engineering and Construction
  Philip May                    Analyst               (214) 702-4004             Chase Jacobson                 VP, Sr. Analyst         (212) 338-4753

ENERGY                                                                           Multi-Industry
  Oilfield Services & Equipment                                                  Nicholas P. Heymann            Mng. Dir.               (212) 338-4703
  David S. Havens               Mng. Dir.             (212) 763-8238             Samuel H. Eisner               Analyst                 (212) 338-4705
  Karl Sowislo                  Analyst               (212) 338-4732             Paul A. Dircks                 Analyst                 (212) 338-4725
                                                                                 Jordan Calabrese               Associate               (212) 338-4729
FINANCIAL SERVICES
                                                                               TRANSPORTATION, SERVICES & EQUIPMENT
  Banks & Thrifts
                                                                                 Jeffrey A. Kauffman            Mng. Dir.               (212) 338-4765
  James M. Schutz               Dir. of Fin. Ser.     (864) 241-3384
                                                                                 Sal Vitale                     Analyst                 (212) 338-4766
  John Schutz                   Associate             (502) 420-4015
                                                                                 Kanchana Pinnapureddy          Associate               (212) 338-4767
  Adam Barkstrom, CFA           Mng. Dir.             (800) 906-0577
  Blair Brantley, CFA           Analyst               (800) 621-8635
  Matthew Kelley                Mng. Dir.             (207) 699-5800           ADMINISTRATION
  Mike I. Shafir                VP, Sr. Analyst       (212) 763-8239             Carlo Francisco                Supervisory Analyst     (914) 434-3451
  Matthew Breese                Analyst               (207) 699-5800             Marianne Pence                 Mgr., Res. Admin.       (205) 949-3618
  Edward D. Timmons             SVP, Sr. Analyst      (800) 203-5332             Nathan Mitchell                Editor                  (205) 949-3635
  Brett Rabatin, CFA            SVP, Sr. Analyst      (877) 457-8625             Elizabeth Koch                 Editor                  (615) 289-4122
  Kenneth James                 Analyst               (615) 760-1474
  Peyton Green                  Mng. Dir.             (877) 492-2663
  Michael Lipman                Analyst               (615) 269-7323




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)
                                                                 SALES & TRADING

                                  Steve Pokorny       Head of Institutional Sales         (214) 702-4020
                                  JT Cacciabaudo      Head of Trading                     (212) 763-8288

ATLANTA                                       DALLAS                                         NEW YORK (cont.)
Adam Aspes               (404) 812-3068       Jennifer Elkins            (214) 702-4050      Brian Haise           (212) 763-8206
Adam Kramer              (404) 814-3902       Mary Foster                (214) 702-4009      Jeff Hood             (212) 490-1453
Joe Maloney              (404) 814-3942       Dan Griffith               (214) 702-4044      Alex Jones            (212) 338-4701
Jamie Pennington         (404) 814-3948       Candace Martin             (214) 702-4033      Carey Kaufman         (212) 763-8274
John T. Riley            (404) 814-3966       Bob Nasi                   (214) 702-4017      Konrad Krill          (212) 763-8218
                                              John Schwalenberg          (214) 702-4010      Robert McGuire        (212) 763-8236
BIRMINGHAM                                                                                   Adam Merlo            (212) 763-8232
Gary Hagstrom            (205) 380-1782       MINNEAPOLIS                                    John Molster          (212) 763-8210
Sam Haskell              (205) 380-1781       Randy Mason                (952) 820-4461      Jake Morton           (212) 763-8261
Scott Hughen             (205) 380-1764       John Regan III             (952) 841-6408      Michael Newman        (212) 763-8258
Claude Preston           (205) 380-1762                                                      Matt O’Kelly          (212) 763-8227
Amber Spitzer            (205) 380-1761       NEW ORLEANS                                    David O’Shea          (212) 763-8260
Wyatt Weems              (205) 949-3589                                                      Jon Palan             (212) 763-8225
                                              Patrick Donnelly           (504) 636-4902
                                                                                             Bruce Rae             (212) 763-8271
                                              Cheryl Grabert             (504) 636-4911
BOSTON                                                                                       Jon Schenk            (212) 763-8221
                                              John Regan, Jr.            (850) 650-5676
                                                                                             Chuck Schroeder       (212) 763-8264
Richard Gill             (617) 478-5006
                                                                                             Jason Scott           (212) 763-8215
Tom Goode                (617) 478-5008       NEW YORK
                                                                                             Miko Tam              (212) 763-8252
Ian Moran                (617) 478-5003       Jason Barber               (212) 763-8219      Scott Tashman         (212) 763-8256
Ted Sheehan              (617) 478-5003       Andrew Benenson            (212) 763-8246
Mike Roncone             (617) 478-5001       Adam Cavise                (212) 763-8292
Nicholas White           (617) 478-5002                                                      SAN FRANCISCO
                                              Mike Cline                 (212) 763-8268
                                                                                             Justin Brennan        (415) 362-6140
                                              Tom Criscoula              (212) 338-4719
CHICAGO                                                                                      Tom Cervantez         (415) 362-7430
                                              Noel Cueto                 (212) 763-8251
                                                                                             Chris Larson          (415) 362-6142
Mark Burrier             (312) 525-8425       Enrico DeMatt              (212) 338-4724
                                                                                             Naghmeh Rabii         (415) 362-6141
Jennifer Crall           (312) 525-8423       Geri DeVito                (212) 763-8242
                                                                                             Rob Salomon           (415) 362-7432
Scott Hallermann         (312) 525-8421       Eric Dusansky              (212) 763-8231
Scott Hootman            (312) 525-8426       Mike Flanagan              (212) 763-8282
Robert Hurley            (312) 525-8440       Rich Gallagher             (212) 763-8260
Vesna Radovic            (312) 525-8429
Dan Roesner              (312) 525-8433
Curt Thompson            (312) 525-8427


                                                     INVESTMENT BANKING
Mark Behrman, Mng. Dir.                         (212) 763-8286         Kimberlee Taylor, Admin. Asst.             (212) 338-4715



FINANCIAL INSTITUTIONS GROUP                                          NON-FINANCIALS
Michael J. O’Boyle, Mng. Dir.                   (205) 949-3592        John Bolebruch, Mng. Dir. – Industrials     (212) 338-4716
Michael Perry, Mng. Dir.                        (212) 338-4736        Richard Cunniffe, SVP – Industrials         (212) 338-4713
Robert P. Hutchinson, Mng. Dir.                 (617) 478-5011        Everett Titus III, Mng. Dir – Energy        (908) 730-7882
Jeffrey W. Prochnow, CFA, SVP                   (402) 778-5054        Will Brooke, Analyst - Industrials          (212) 763-8278
D. Timothy Speegle, SVP                         (205) 380-1720
John McCrory, SVP                               (205) 949-3664        EQUITY SYNDICATE
Robert Toma, VP                                 (617) 478-5005        Craig B. Jampol, Mng. Dir.                  (212) 338-4708
Horacio Barakat, VP                             (212) 338-4768
Andrew Stager, Associate                        (617) 478-5009
Nathan Strall, Associate                        (617) 478-5010
Jung Lee, Associate                             (212) 338-4769
Michael Stern, Analyst                          (212) 338-4756


Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)
                                                             LOCATIONS


      Corporate Headquarters                               13727 Noel Road                             12020 Shamrock Plaza
                                                                 th
     800 Shades Creek Parkway                                  7 Floor                                        Suite 200
             Suite 700                                    Dallas, TX 75240                             Omaha, NE 68154-3537
       Birmingham, AL 35209                                 (972) 239-4806                                 (402) 778-5054
                                                            (800) 404-2226                               (402) 778-5135 fax
 (205) 949-3500     (800) 239-2408
         (205) 802-1414 fax                               (972) 980-7125 fax
                                                                                                       620 Newport Center Dr.
                                                                                                             Suite 1100
       OTHER LOCATIONS                                706 E. Washington Street
                                                       Greenville, SC 29601                          Newport Beach, CA 92660
                                                           (864) 233-6630                                  (949) 721-6651
          3475 Lenox Road                                (864) 233-6630 fax                              (949) 721-6652 fax
              Suite 800
         Atlanta, GA 30326
           (404) 365-9630                              3100 West End Avenue                                  2 Union Street
         (404) 812-3097 fax                                  Suite 930                                         Suite 403
                                                        Nashville, TN 37203                              Portland, ME 04101
                                                          (615) 269-7323                                    (207) 699-5800
  8400 Normandale Lake Boulevard                          (615) 269-9223                                  (207) 699-5888 fax
             Suite 920
     Bloomington, MN 55437
          (952) 841-6410                                                                                5609 Patterson Avenue
                                                           639 Loyola Ave
          (800) 949-4102                                                                                        Suite B
                                                              Suite 200
                                                       New Orleans, LA 70113                            Richmond, VA 23226
                                                           (504) 299-1021                                   (804) 521-3224
         265 Franklin Street                                                                              (804) 521-3199 fax
                                                           (888) 978-3763
              Suite 310
                                                         (504) 299-0956 fax
         Boston, MA 02110
           (617) 478-5000
           (800) 836-4616                                                                                One Maritime Plaza
                                                        2 Grand Central Tower
         (617) 443-0310 fax                                                                                  Suite 1940
                                                         140 East 45th Street
                                                                                                      San Francisco, CA 94111
                                                              18th Floor
                                                                                                           (415) 362-7430
                                                        New York, NY 10017
         123 N. Wacker Drive                                                                             (415) 362-7436 fax
                                                            (212) 763-8224
              Suite 1250
                                                            (800) 966-0814
         Chicago, IL 60606
                                                          (212) 763-8201 fax
            (312) 525-8440
            (800) 966-0815
          (312) 525-8438 fax




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
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