Item 3. Quantitative and Qualitative Disclosures about Market Risk

Founded in 1908, CIT Group Inc. ("we", "CIT" or the "Company"), a Delaware Corporation, is a bank holding company ("BHC") that provides commercial financing and leasing products and other financial services to small and middle market businesses across a wide variety of industries. CIT became a bank holding company in December 2008 and CIT Bank, a Utah state-chartered bank, is the Company's principal bank subsidiary.

CIT operates primarily in North America, with locations in Europe, South America and Asia and has four commercial business segments - Corporate Finance, Trade Finance, Transportation Finance and Vendor Finance. We also own and manage a pool of liquidating consumer loans, predominantly government guaranteed student loans, that are reported in the Consumer segment.

As of March 31, 2012 the Company had 3,526 employees and over $44 billion in assets.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures about Market Risk" contain financial terms that are relevant to our business. You can find a glossary of key terms used in Part I Item 1. Business Section in our Form 10-K for the year ended December 31, 2011 (the "2011 Form 10-K").

Management uses certain non-GAAP financial measures in its analysis of the financial condition and results of operations of the Company. See "Non-GAAP Financial Measurements" for a reconciliation of these to comparable accounting principles generally accepted in the United States of America ("GAAP") measures.

2012 PRIORITIES AND PROGRESS

Our 2012 priorities were developed to further advance our broader strategic initiatives centered on improving our financial strengths, enhancing our business model, and further improving our approach to risk management and control functions. The following highlights some of our accomplishments:

1. Accelerate Growth and Business Development Initiatives

† Increased new business activity. Committed new business volume was $2.5 billion for the quarter ended March 31, 2012, up 46% from the prior-year quarter. Funded new business volume increased 51% to $2.0 billion over the prior-year quarter. These increases were driven by Corporate Finance. In addition to new business volume, CIT Bank purchased a portfolio of approximately $200 million of loans secured by aircraft.

† Increased commercial assets. Commercial financing and leasing assets were up $554 million sequentially and across most segments, with a slight decline in Trade.

† Contributing to the volume and asset growth were activity from newer businesses such as commercial real estate and equipment financing.

2. Improve Profitability While Maintaining Financial Strength

† While we reported a $406 million pre-tax loss for the quarter, pre-tax income excluding $620 million of debt refinancing charges(1) ($597 million of accelerated FSA debt discount on debt extinguishments and $23 million of loss on debt extinguishment) was $214 million, up from $178 million in the prior-year quarter driven by lower funding costs and higher gains on asset sales, and down from $230 million in the fourth quarter of 2011 on lower FSA accretion benefit.

† Pre-tax income excluding debt refinancing charges and all other net FSA accretion/amortization(2) was $155 million up from $54 million in the prior-year quarter and $140 million in the fourth quarter of 2011 driven by lower funding costs and higher gains on asset sales.

(2) Pre-tax income excluding debt refinancing charges and net FSA accretion/amortization is a non-GAAP measure. See "Non-GAAP Measurements" for reconciliation of non-GAAP to GAAP financial information.

36 CIT GROUP INC

† Reduced weighted average coupon rates of outstanding deposits and long-term borrowings to 4.24% at March 31, 2012 from 4.71% at December 31, 2011. Including the $2 billion of unsecured debt issued on May 4, 2012 and $4.1 billion of Series C redemptions either completed or announced during the second quarter ($1.6 billion on April 16 and $0.5 billion on May 2 and $2.0 billion announced on May 7, 2012), the weighted average coupon rates on outstanding deposits and long-term borrowings would have been 3.93% at March 31, 2012.

† Tier 1 and Total Capital ratios at March 31, 2012 were 17.6% and 18.5%, respectively, down from December 31, 2011. Book value per share at March 31, 2012 was $42.09, compared to $44.30 at December 31, 2011 and $44.88 at March 31, 2011. Tangible book value per share at March 31, 2012 was $40.20, compared to $42.33 at December 31, 2011 and $42.69 at March 31, 2011. These comparative declines were primarily driven by net losses recorded due to the acceleration of FSA accretion discount related to the prepayment of high cost debt.

3. Advance Transformation of Funding Profile

† During the first quarter, CIT raised over $5 billion in aggregate proceeds primarily through bond offerings with maturities ranging from 3 to 7 years and weighted average coupon of approximately 5.2%. The bond offerings included $1.5 billion of registered senior unsecured notes issued under the Company's newly filed "shelf" registration. On May 4, 2012, CIT issued at par $1.25 billion of senior unsecured notes that mature in 2017 and bear interest at a rate of 5.00% and $750 million of senior unsecured notes that mature in 2020 and bear interest at a rate of 5.375%.

† Deposits have increased, both in dollars and proportion of total fundings (21% at March 31, 2012 as compared to 19% and 11% at December 31, 2011 and March 31, 2011, respectively).

† Outstanding balance of deposits raised through the online bank exceeded $1.1 billion at March 31, 2012. Expanded CIT Bank's online deposit offerings with the launch of a new savings account on March 26, 2012. See "CIT Bank".

† Redeemed at par the remaining balance of Series A notes, aggregating approximately $6.5 billion. Upon redemption of the Series A notes, all outstanding Series C notes and the revolving credit facility became unsecured. See "Funding, Liquidity and Capital".

† On May 7, 2012 CIT announced its intention to redeem on June 4, 2012, $2.0 billion of 7% Series C Notes maturing in 2017. On April 16, 2012, we redeemed at par the entire approximately $1.6 billion outstanding balance of our 7% Series C Notes due in 2015 and on May 2, 2012 we redeemed $500 million of our 7% Series C Notes maturing in 2017. These redemptions will increase second quarter 2012 interest expense by up to $260 million for the acceleration of FSA discount amortization. In addition, there may be a loss on debt extinguishment related to the redemptions. The final amount of FSA to be accelerated and the amount of loss on debt extinguishment will not be known until after the redemptions have occurred.

† In April 2012, CIT closed a $753 million equipment lease securitization, secured by a pool of equipment leases from CIT's Vendor Finance business segment. The weighted average fixed coupon was 1.45%, which represented a weighted average credit spread of 0.88% over benchmark rates for the six classes of notes and the net advance rate was 92.5%.

During the remainder of 2012 we will continue to advance these business priorities, and enhance those relating to internal control functions and our relationships with our regulators.

2012 FIRST QUARTER OVERVIEW

First quarter operating results reflect increased commercial business activity, further progress advancing our liability restructuring and ongoing portfolio optimization efforts.

Net loss for the quarter ended March 31, 2012 totaled $447 million, $2.22 per diluted share. This net loss compares to net income of $66 million, $0.33 per diluted share, for the first quarter of 2011 and includes debt refinancing charges of $620 million related to the prepayment of $6.5 billion of high cost debt, while the year-ago period included debt refinancing charges of $46 million.

Pre-tax loss totaled $406 million, compared to pre-tax income of $132 million for the first quarter of 2011. While we reported a pre-tax loss for the quarter, pre-tax income excluding debt refinancing charges was $214 million compared with $178 million in the prior-year quarter. Pre-tax income excluding debt refinancing charges and net fresh-start accounting ("FSA") amortization/accretion for the 2012 first quarter was $155 million, driven by lower funding costs and higher gains on asset sales, up from $54 million in the prior-year quarter. The current quarter includes a net FSA detriment of $537 million, primarily due to the acceleration of interest expense related to the prepayment of $6.5 billion of high cost debt, while the year-ago period included a net FSA benefit of $113 million.

Item 2: Management's Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk 37

The following table presents the pre-tax results, and adjusts for debt related transaction costs and FSA accretion. This is a non-GAAP measurement.

--------------------------------------------------------------------------------
                                                                    Quarters Ended March 31,
                                                                ---------------------------------
                                                                     2012               2011
                                                                ---------------    --------------
Pre-tax income/(loss) - reported                                  $  (405.7 )        $  132.0
Accelerated FSA net discount/(premium) on debt
extinguishments and repurchases                                       596.9              11.2
Debt related - loss on debt extinguishments                            22.9                 -
Debt related - prepayment penalties                                       -              35.0
Pre-tax income/(loss) - excluding accelerated net FSA
net discount/(premium) on debt extinguishments and
repurchases and loss on debt extinguishments                          214.1             178.2
Net FSA accretion (excluding debt related
acceleration)                                                         (59.6 )          (124.4 )
Pre-tax income (loss) - excluding FSA net accretion &
debt related costs                                                $   154.5          $   53.8

Net finance revenue(3) ("NFR") was negative in the first quarter due to a significant increase in interest expense related to the accelerated recognition of FSA discounts on the $6.5 billion of high cost debt repaid. Average earning assets were $33.1 billion in the first quarter, down $2.3 billion from the year-ago quarter and $0.7 billion from the fourth quarter due primarily to asset sales. NFR as a percentage of average earning assets ("finance margin") was negative in the first quarter, compared to 2.14% in the prior-year quarter and 1.14% in the fourth quarter. Excluding net FSA accretion and debt prepayment penalties, finance margin was 1.97%, compared to 1.41% in the prior-year quarter and 2.07% last quarter. The increase from the year-ago quarter was driven primarily by lower funding costs and the benefit from the suspension of depreciation on operating lease equipment held for sale. The sequential quarter decline was due to $15 million of corrections that pertain to prior periods in our Vendor Finance business, primarily in Mexico, and lower interest recoveries. Operating lease rental income increased from the prior-year quarter due to higher asset levels and improved utilization.

Provision for credit losses for the quarter ended March 31, 2012 was $43 million, compared to $122 million in the year-ago quarter and $16 million in the fourth quarter. The decrease from the prior-year quarter reflects improved portfolio credit quality, including a reduction in specific reserves, and the continued reduction in non-accrual loans. The sequential quarter increase in the provision is primarily due to the establishment of reserves for commercial asset growth.

Other income (excluding operating lease rentals) of $249 million decreased $21 million from the prior-year quarter as reduced recoveries on loans charged off pre-emergence and increased impairments on assets held-for-sale more than offset higher gains on assets sold. The $40 million sequential increase reflected higher gains on asset sales and lower impairments on assets held for sale that were offset by several other items. Factoring commissions of $32 million were down slightly from the prior-year quarter, primarily reflecting lower commission rates, and flat sequentially.

Operating expenses were $223 million and included a $5 million restructuring charge. Excluding restructuring charges, operating expenses increased 10% from the prior-year quarter as increased compensation costs offset reduced professional fees. Headcount at March 31, 2012 was 3,526, down 5% from the prior-year quarter and unchanged from December 31, 2011.

Provision for income taxes was $40 million, down from $62 million from the prior-year quarter and predominantly reflects provisions related to income generated by our international operations. The provision decreased from the prior-year quarter, driven by lower international earnings and a decrease in reserves for uncertain tax positions and specific valuation allowances.

Total assets at March 31, 2012 were $44.1 billion, down $1.1 billion from December 31, 2011, and $6.9 billion from March 31, 2011. Commercial financing and leasing assets increased from the prior period and we reduced lower yielding assets through the sale of student loans and non-accrual commercial loans. Total loans of $20.5 billion declined from the prior-year quarter but increased sequentially as commercial loan growth exceeded the reduction in consumer loans. Operating lease equipment increased $0.9 billion from the prior-year quarter to $11.9 billion largely reflecting aircraft deliveries, but fell slightly sequentially. Cash and short-term investments decreased $1.0 billion from December 31, 2011 to $7.3 billion as we paid down high-cost debt.

Funded new business volume of $2.0 billion increased 51% over the prior-year quarter. Committed new business volume was $2.5 billion for the quarter ended March 31, 2012, up 46% from the prior-year quarter. Corporate Finance and Vendor Finance each reported double-digit percentage increases in both funded and committed volume from the prior-year quarter. Factoring volume for the 2012 first quarter of $6.0 billion was down 2% from the prior-year period.

(3) Net finance revenue, average earning assets and net operating lease revenue are non-GAAP measures; see reconciliation of non-GAAP to GAAP financial information.

38 CIT GROUP INC

Credit metrics further improved, as net charge-offs, non-accrual loans and inflows to non-accruals all declined from the prior-year quarter and sequentially. Net charge-offs were $22 million, or 0.42% of average finance receivables, down from $140 million (2.32%) in the year-ago quarter and $24 million (0.45%) in the fourth quarter. The improvement from the prior-year quarter was driven primarily by Corporate Finance. Non-accrual loans were $482 million, or 2.35% of finance receivables at March 31, 2012, down from $702 million (3.53%) at December 31, 2011. The sequential improvement in Corporate Finance primarily reflected the completion of a multi-phased loan portfolio sale that began in the fourth quarter of 2011. In the current quarter, we closed on sales of approximately $150 million of loans in conjunction with this transaction, the majority of which were non-accrual. The reductions in Transportation Finance (Aerospace) and Trade Finance from the prior quarter primarily reflected the return to accrual status of accounts following a period of improved performance. Vendor Finance was essentially flat with last quarter.

NET FINANCE REVENUE

The following tables present management's view of consolidated margin and
include the net interest spread we make on loans and on the equipment we lease,
in dollars and as a percent of average earning assets.

--------------------------------------------------------------------------------
Net Finance Revenue (dollars in millions)
--------------------------------------------------------------------------------
                                                                           Quarters Ended
                                                        -----------------------------------------------------
                                                           March 31,        December 31,         March 31,
                                                             2012               2011               2011
                                                        ---------------    ---------------    ---------------
Interest income                                          $    411.6         $    492.4         $    638.8
Rental income on operating leases                             439.3              427.6              408.9
Finance revenue                                               850.9              920.0            1,047.7
Interest expense                                           (1,079.7 )           (686.5 )           (698.6 )
Depreciation on operating lease equipment                    (137.5 )           (137.1 )           (160.2 )
Net finance revenue                                      $   (366.3 )       $     96.4         $    188.9
Average Earning Assets ("AEA")                           $ 33,060.9         $ 33,774.3         $ 35,316.1
As a % of AEA:
Interest income                                                4.98 %             5.83 %             7.24 %
Rental income on operating leases                              5.31 %             5.06 %             4.63 %
Finance revenue                                               10.29 %            10.89 %            11.87 %
Interest expense                                             (13.06 )%           (8.13 )%           (7.91 )%
Depreciation on operating lease equipment                     (1.66 )%           (1.62 )%           (1.82 )%
Net finance revenue                                           (4.43 )%            1.14 %             2.14 %
As a % of AEA by Segment:
Corporate Finance                                             (2.25 )%            3.17 %             4.42 %
Transportation Finance                                        (4.72 )%            2.45 %             2.01 %
Trade Finance                                                 (5.98 )%           (0.03 )%           (2.50 )%
Vendor Finance                                                (1.61 )%            7.87 %             7.20 %
Commercial Segments                                           (3.53 )%            3.54 %             3.60 %
Consumer                                                      (0.99 )%           (4.49 )%            0.88 %

Average earning assets are less than comparable balances displayed later in this document in 'Select Quarterly Financial Data' (Quarterly Average Balances) due to the exclusion of deposits with banks and other investments and the inclusion of credit balances of factoring clients.

Net finance revenue (NFR) declined primarily due to the acceleration of interest expense of $597 million related to the prepayment of $6.5 billion of high cost debt. Net FSA accretion decreased NFR by $546 million during 2012, compared to an increase of approximately $83 million in the prior-year quarter and an $88 million decrease in the prior quarter, due to higher debt discount recognition reflecting accelerated debt payments and lower interest income accretion.

Item 2: Management's Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk 39

Interest income was down from the prior-year quarter and prior quarter reflecting lower FSA accretion and declines in average earning assets. FSA accretion was $91 million in the current quarter, down from $247 million in the prior-year quarter and $128 million in the prior quarter. Average assets were down 6% from March 31, 2011, largely due to asset sales and repayments, and 1% sequentially.

Interest expense for 2012 included the impact of approximately $6.5 billion in debt redemptions and extinguishments as management continued to reduce CIT's cost of capital via the repayment of high cost debt. Interest expense in the first quarter of 2012 included $597 million of accelerated FSA debt accretion while the prior-year quarter had $11 million of accelerated FSA debt accretion and $35 million of prepayment penalties. Interest expense in the second quarter will reflect the redemption of $4.1 billion of Series C Notes, which will increase interest expense by up to $260 million for the acceleration of FSA discount amortization.

New debt issuances, the proceeds of which were used to redeem high cost debt, included the February 7, 2012 private placement of $3.25 billion aggregate principal amount of Series C Notes, consisting of $1.5 billion principal amount due 2015 at a rate of 4.75% and $1.75 billion principal amount due 2019 at a rate of 5.50%. In March 2012, we issued $1.5 billion of five year, 5.25% fixed rate unsecured notes. On May 4, 2012 we issued at par $1.25 billion of senior unsecured notes that mature in 2017 and bear interest at a rate of 5.00% and $750 million of senior unsecured notes that mature in 2020 and bear interest at a rate of 5.375%.

Deposits have increased, both in dollars and proportion of total fundings (21% at March 31, 2012 as compared to 19% and 10% at December 31, 2011 and March 31, 2011, respectively). The weighted average rate of deposits at March 31, 2012 was 2.45%, compared to 2.68% and 3.22% at December 31, 2011 and March 31, 2011, respectively. During the 2012 first quarter, we issued over $750 million of deposits at a weighted average rate of 1.12%.

As a result of our 2012 debt restructurings and the increased proportion of deposits to our total funding, we reduced weighted average coupon rates of outstanding deposits and long-term borrowings to 4.24% at March 31, 2012 from 4.71% and 5.24% at December 31, 2011 and March 31, 2011, respectively. Including the $2 billion of unsecured debt issued on May 4, 2012 and $4.1 billion of Series C redemptions either completed or announced during the second quarter ($1.6 billion on April 16 and $0.5 billion on May 2 and $2.0 billion announced on May 7, 2012), the weighted average coupon rates on outstanding deposits and long-term borrowings would have been 3.93% at March 31, 2012. See Select Financial Data section for more information on debt rates.

As detailed in the following table, NFR as a percentage of AEA includes significant impact from net accretion as a result of FSA and debt prepayment penalties.

Adjusted Net Finance Revenue as a % of AEA (dollars in millions)
--------------------------------------------------------------------------------
                                                                                     Quarters Ended
                                                ----------------------------------------------------------------------------------------
                                                       March 31, 2012               December 31, 2011              March 31, 2011
                                                ----------------------------    -------------------------    ---------------------------
Net finance revenue                              $ (366.3 )        (4.43 )%      $  96.4          1.14 %      $ 188.9           2.14 %
FSA impact on net finance revenue                   546.3           6.40 %          88.2          0.83 %        (83.1 )        (1.08 )%
Secured debt prepayment penalties                       -              -             9.2          0.10 %         35.0           0.35 %
Adjusted net finance revenue                     $  180.0           1.97 %       $ 193.8          2.07 %      $ 140.8           1.41 %

Net finance revenue is a non-GAAP measure, see non-GAAP financial information.

Net Finance Margin ("NFM") excluding FSA and prepayment penalties improved over the prior-year quarter, reflecting lower funding costs and fairly stable asset yields. The sequential quarter decline reflects corrections related to prior periods recorded in the 2012 first quarter on Vendor Finance loans, mostly in Mexico, and lower interest recoveries, which offset the margin benefit from lower funding costs of about 10 basis points in the quarter. That funding cost benefit is lower than in recent quarters due to the timing of our debt actions and the resulting increased negative carry on cash. The average cash and investment balance was up sequentially due to the lag between the $3.25 billion we issued on February 7, 2012 and subsequent paydown of $3.9 billion of Series A Notes on March 9, 2012. However, the funding cost benefit was more than offset by a 20 basis point decline in pre-FSA asset yields which was largely driven by two factors. First, we recorded a $15 million correction to interest income related to prior periods in Vendor Finance mentioned above, which reduced first quarter margin by about 15 basis points. Second, interest recoveries, which remained above historical levels, came off of a particularly high fourth quarter level and accounted for 10 basis points of the sequential decline. The remaining change includes items such as change in asset mix shift to higher yielding commercial assets, lower non-accrual loans and lower student loans.

Generally, 2012 new business yields in Corporate Finance were stable. Utilization rates in air and rail assets in Transportation Finance remained strong; rail lease rates continued to improve and air lease rates reflected some compression. Asset yields vary by vendor program, geography and types of credit in Vendor Finance, but remained relatively stable in 2012.

40 CIT GROUP INC

Margin also continues to be impacted by our changing business mix, in which cash, student loans and liquid investments continue to represent a significant but declining portion of the overall balance sheet. Growth in the relative proportion of commercial loans and leases, the continued refinancing of debt at lower rates, the increased proportion of deposits to total fundings and further declines in non-accrual loan balances, should all benefit margin in future periods.

The following table sets forth the details on net operating lease revenue, before and after the impact of FSA:

. . .