Fitch Ratings has upgraded CIT Group Inc.'s (CIT) and CIT Bank, N.A.'s (CIT Bank) Long-Term Issuer Default Ratings (IDRs) and to 'BBB-' from 'BB+'. The Viability Ratings (VRs) for both entities were also upgraded to 'bbb-' from 'bb+'. The Rating Outlook has been revised to Stable from Positive.

The upgrade reflects CIT's stabilized operating performance and strong execution against its objective of refocusing on national commercial lending and transitioning its funding profile to be more bank-like. The upgrade also reflects Fitch's view that the Mutual of Omaha Bank (MOH) acquisition will benefit and diversify CIT's funding profile while lowering the company's funding costs. Prior to today's upgrade, CIT's Rating Outlook was Positive since November 2018.

CIT's ratings reflect its solid franchise position in middle market lending, equipment and real estate finance, rail leasing, and factoring, evidenced by good market positions in its core businesses. Offsetting this strength is the company's funding profile, albeit improved, which Fitch considers weaker relative to higher-rated banks as it relies on relatively higher-cost deposits.

The action and CIT's rating consider its strong execution on multiple strategic actions that have reduced expected earnings volatility going forward. Over the last few years management has sold its reverse mortgage portfolio and servicing business, its reverse mortgage loan portfolio, and its European rail leasing business. Fitch believes the MOH acquisition, which is expected to close in 1Q20, has sound strategic rationale and should result in an improved funding profile while lowering the company's funding costs. CIT expects deposit costs to fall by approximately 20 bps immediately following the close of the transaction, a credit positive. This is largely due to the meaningfully sized, low-cost homeowners' association (HOA) deposit portfolio that CIT expects to gain.

For more information and a full list of ratings see the full release here.