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CIT expects Q4'19 NIM drop; could reverse in early 2020 on deal closing

New York-based CIT Group Inc. expects its net interest margin to decrease in the fourth quarter following the Federal Reserve's September rate cut and a continued rate decline during the remainder of 2019. But this trend could rebound somewhat as the bank manages deposit costs and following an expected deal closure early in 2020, management said during the bank's third-quarter earnings call.

CIT's net interest margin decreased 7 basis points in the third quarter to 3.06%. Management expects NIM to decrease to between 2.90% and 3.00% in the fourth quarter.

Management said deposit costs remained relatively flat in the third quarter compared to the prior period. The bank has reduced rates on one of its deposit products by 35 basis points so far, without "meaningful levels" of customer attrition, executives said.

The bank is expecting 20 basis points of benefit to its deposit costs when it closes its announced acquisition of Mutual of Omaha Bank, management said.

"This transaction will diversify our funding profile with scalable, lower-cost deposits," said board chair and CEO Ellen Alemany on the call.

The bank expects the deal to close in the first quarter of 2020. "We're going to continue to aggressively manage our deposit costs down," said CFO John Fawcett. "The Mutual of Omaha Bank transaction is a game-changer for us."