CIT Group on the Verge of Bankruptcy, Bailouts in Question

Strategic Insights -

The CIT Group is on the brink of filing for bankruptcy due to its inability to reach a deal with the government for emergency funding. This potential bankruptcy would be the first instance since the collapse of Lehman Brothers where a significant financial company is not bailed out by the administration. CIT provides funding for thousands of small and mid-size businesses, which could face severe consequences if the company fails.

Key Takeaways:

  • CIT Group is on the verge of bankruptcy, with a potential Chapter 11 filing that would be the fourth-largest bankruptcy by assets.
  • The company provides funding for thousands of small and mid-size businesses, with a significant impact in California's apparel-import business.
  • If CIT collapses, it will be the first instance since the collapse of Lehman Brothers where the administration has declined to bail out a struggling financial company of significant size.
  • The company's failure could lead to severe consequences, including the impact on small and mid-size businesses that rely on CIT for funding.
  • MGIC Investment Corporation's second quarter results missed analyst expectations, with core earnings shrinking to -$2.74 per share.
  • The company's total revenue increased 7.1% year over year to $454.5 million.
  • New insurance written declined considerably by 58% year over year to $5.9 billion.

Statistics:

  • CIT Group's assets would make it the fourth-largest bankruptcy if it were to file for Chapter 11 protection.
  • The company provides funding for thousands of small and mid-size businesses, with a significant impact in California's apparel-import business.
  • MGIC Investment Corporation's core earnings shrank to -$2.74 per share, missing analyst expectations of ($0.65) per share.
  • The company's total revenue increased 7.1% year over year to $454.5 million.
  • Net premiums written decreased 11.14% year over year to $330.4 million.
  • Persitency (% of premium remaining in force from the prior year) improved to 85.1%, compared with 79.7% in the prior-year period.
  • The percent of delinquent loans doubled to 12.04% as compared with 6.02% in the prior-year period.

Sources:

  • [Zacks.com](http://www.profit.zacks.com/)
  • [Profit from the Pros newsletter](http://at.zacks.com/?id=4579)
  • [Zacks Equity Research](http://at.zacks.com/?id=2649)
  • [Zacks Investment Research, Inc.](http://at.zacks.com/?id=2677)
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