Dear Mr. Berko:

Dear W.P.:

I agree. “Hold” recommendations are often issued by brokerages that don’t want to say “sell” because negative opinions irritate management, which determines which brokerages can participate in its firm’s investment banking fees. I thought everyone knew that!

Commercial Credit and Investment Co., or CIT Group Inc., opened its doors in 1908, when Ted Roosevelt was in the White House. In 1908, federal spending was $670 million, unemployment was at 8 percent, a first-class stamp cost 2 cents and the Chicago Cubs beat the Detroit Tigers (in five games) for their second consecutive title. And in the first inning of game five, Orval Overall became the first and only World Series pitcher to strike out four batters in one inning. It was, indeed, a very good year.

Today CIT Group (CIT-$36.78) is a $3.7 billion revenue bank holding company that provides loans, leasing and debt collecting services; letters of credit; insurance; export and import financing; debt underwriting; and merger, acquisition and advisory services to middle-market businesses.

CIT used to be a prestigious, highly regarded and enormously profitable company. Trouble began brewing in 2006 and continued through 2009, so after taking a $3 billion loan from the Treasury Department (what a deal), CIT very cleverly filed for bankruptcy in late 2009.

John Thain, who was asked to vacate his chairmanship of the New York Stock Exchange (NYSE) in 2008 and then his presidency of Merrill Lynch in 2009, was appointed CEO of CIT Group in 2010. CIT emerged from bankruptcy and gained some traction; its shares got a dead-cat bounce to trade in the mid-$40s and now trade in the mid-$30s.

One of CIT’s problems, though, is John Thain, who has the personality and warmth of a concrete wall. He is not a people person, is not well liked by his executive team and does not communicate well. And under Thain’s aegis, revenues have fallen in the past four quarters, though earnings in 2010 were bolstered by the sale of CIT’s Canadian, Australian and New Zealand divisions.

On the bright side, a consensus of 15 analysts believe CIT will earn $2.58 per share this year — but those same fellows are not as sanguine about next year and suggest that 2012 per-share earnings will come in somewhere between a loss of 70 cents to a profit of $5.06.

Wow! That speaks volumes about Thain’s credibility as CEO. But a low-level big shot I know at CIT suggests 2012 earnings should come in at $2.20 a share, and Credit Suisse suggests $2.58. To my surprise, seven of those 15 analysts have a “buy” recommendation (including Reuters and Schwab) with a 12-month price projection of $46. However, Market Edge and Ned Davis Research have a “sell” recommendation on the stock.

I also agree with the “sell” idea, because CIT will be facing a weak economy in 2012 and 2013. Though loan demand is likely to be down, the banking industry will be more competitive and aggressive in bringing in new business. And I agree because, Thain’s attractive resume aside, some observers doubt the man has the skill set to take CIT through a rough business environment.

Thain’s last years at Goldman Sachs, just before he took the NYSE position, were marred by some internal squabbles. His tenure at the Big Board was predictably short (but he did computerize the NYSE for high-frequency trading), and his pompous behavior at Merrill Lynch got him canned. Thain has been bounced around in the last few years and got his psyche whacked pretty hard each time. I hope he makes it at CIT, but I’m not comfortable holding the stock if he controls the reins. The last few things he has touched have turned to silt.

Your broker has given you good advice.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775, or email him at mjberko@yahoo.com. © 2011 Creators.com