================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------
                                    Form 10-Q
                                   ----------

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the quarterly period ended March 31, 2003

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                        Commission File Number: 001-31369

                                   ----------

                                 CIT Group Inc.
             (Exact name of Registrant as specified in its charter)

            Delaware                                      65-1051192
(State or other jurisdiction of                         (IRS Employer
incorporation or organization)                      Identification Number)

                   1 CIT Drive, Livingston, New Jersey, 07039
              (Address of Registrant's principal executive offices)

                                 (973) 740-5000
                             (Registrant's telephone
                                     number)

              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No _____

     Indicate by check mark whether the  registrant is an  accelerated  filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [X]  No _____

     As of April 30, 2003,  there were  211,573,200  shares of the  Registrant's
common stock outstanding.

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                         CIT GROUP INC. AND SUBSIDIARIES
                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----

                         Part I--Financial Information:

Item 1     Consolidated Financial Statements (Unaudited) ...............     1
           Consolidated Balance Sheets .................................     1
           Consolidated Statements of Income ...........................     2
           Consolidated Statements of Stockholders' Equity .............     3
           Consolidated Statements of Cash Flows .......................     4
           Notes to Consolidated Financial Statements ..................   5-17
Item 2     Management's Discussion and Analysis of Financial
             Condition and Results of Operations and Quantitative
             and Qualitative Disclosure about Market Risk ..............   18-46
Item 4     Controls and Procedures .....................................    46

                           Part II--Other Information:

Item 1     Legal Proceedings ...........................................    48
Item 6     Exhibits and Reports on Form 8-K ............................   48-49
           Signatures ..................................................    50
           Certifications ..............................................   51-52


                                       i


PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                         CIT GROUP INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Unaudited)
                                 ($ in millions)

                                                        March 31,   December 31,
                                                          2003          2002
                                                        --------- --------------
                                     ASSETS

Financing and leasing assets:
   Finance receivables .............................    $28,654.6     $27,621.3
   Reserve for credit losses .......................       (757.0)       (760.8)
                                                        ---------     ---------
   Net finance receivables .........................     27,897.6      26,860.5
   Operating lease equipment, net ..................      6,831.4       6,704.6
   Finance receivables held for sale ...............      1,273.0       1,213.4
Cash and cash equivalents ..........................      2,025.4       2,036.6
Goodwill, net ......................................        384.4         384.4
Other assets .......................................      4,837.4       4,732.9
                                                        ---------     ---------
   Total Assets ....................................    $43,249.2     $41,932.4
                                                        =========     =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
   Commercial paper ................................    $ 4,490.5     $ 4,974.6
   Variable-rate bank credit facilities ............      1,300.0       2,118.0
   Variable-rate senior notes ......................      6,609.2       4,906.9
   Fixed-rate senior notes .........................     20,152.1      19,681.8
                                                        ---------     ---------
Total debt .........................................     32,551.8      31,681.3
Credit balances of factoring clients ...............      2,437.9       2,270.0
Accrued liabilities and payables ...................      3,006.1       2,853.2
                                                        ---------     ---------
   Total liabilities ...............................     37,995.8      36,804.5
                                                        ---------     ---------
Commitments and Contingencies (Note 12)
Company-obligated mandatorily redeemable
  preferred securities of subsidiary
  trust holding solely debentures of the
  Company ..........................................        256.8         257.2
Stockholders' Equity:
   Preferred stock, $0.01 par value, 100,000,000
     authorized; none issued .......................           --            --
   Common stock, $0.01 par value, 600,000,000
     authorized; 211,573,200 issued and
     outstanding ...................................          2.1           2.1
   Paid-in capital, net of deferred compensation
     of $4.6 and $5.5 ..............................     10,677.0      10,676.2
   Accumulated deficit .............................     (5,505.3)     (5,606.9)
   Accumulated other comprehensive loss ............       (177.2)       (200.7)
                                                        ---------     ---------
   Total Stockholders' Equity ......................      4,996.6       4,870.7
                                                        ---------     ---------
   Total Liabilities and Stockholders' Equity ......    $43,249.2     $41,932.4
                                                        =========     =========

               See Notes to Consolidated Statements (Unaudited).


                                       1


                        CIT GROUP INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                     ($ in millions, except per share data)

                                                            For the Quarters
                                                             Ended March 31,
                                                         ---------------------
                                                          2003         2002
                                                         -----         -----
Finance income ........................................  $939.2      $ 1,106.7
Interest expense ......................................   346.7          348.3
                                                         ------      ---------
Net finance income ....................................   592.5          758.4
Depreciation on operating lease equipment .............   278.8          310.2
                                                         ------      ---------
Net finance margin ....................................   313.7          448.2
Provision for credit losses ...........................   103.0          195.0
                                                         ------      ---------
Net finance margin after provision for
  credit losses .......................................   210.7          253.2
Other revenue .........................................   235.5          232.1
                                                         ------      ---------
Operating margin ......................................   446.2          485.3
                                                         ------      ---------
Salaries and general operating expenses ...............   233.6          234.2
Interest expense - TCH ................................      --          305.0
Goodwill impairment ...................................      --        4,512.7
                                                         ------      ---------
Operating expenses ....................................   233.6        5,051.9
                                                         ------      ---------
Income (loss) before provision for income taxes .......   212.6       (4,566.6)
Provision for income taxes ............................   (82.9)         (50.4)
Minority interest in subsidiary trust holding
  solely debentures of the Company, after tax .........    (2.7)          (2.7)
                                                         ------      ---------
Net income (loss) .....................................  $127.0      $(4,619.7)
                                                         ======      =========

Net income (loss) per basic share .....................  $ 0.60      $  (21.84)
                                                         ======      =========
Net income (loss) per diluted share ...................  $ 0.60      $  (21.84)
                                                         ------      ---------
Dividends per common share ............................  $ 0.12      $      --
                                                         ======      =========

Note:  Per share  calculations  for the quarter ended March 31, 2002 assume that
common shares as a result of the July 2002 IPO (211.6 million) were outstanding.

               See Notes to Consolidated Statements (Unaudited).


                                       2


                        CIT GROUP INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                                 ($ in millions)



                                                                                     Accumulated
                                                                                        Other           Total
                                                 Common     Paid-in    Accumulated  Comprehensive   Stockholders'
                                                  Stock     Capital      Deficit        (Loss)         Equity
                                                  -----     -------      -------        ------         ------
                                                                                       
December 31, 2002 .............................    $2.1     $10,676.2   $(5,606.9)      $(200.7)      $4,870.7
Net income ....................................      --            --       127.0            --          127.0
Foreign currency translation adjustments. .....      --            --          --           9.0            9.0
Unrealized loss on equity and
  securitization investments ..................      --            --          --         (11.2)         (11.2)
Change in fair values of derivatives
  qualifying as cash flow hedges ..............      --            --          --          25.7           25.7
                                                                                                      --------
Total comprehensive income ....................                                                          150.5
                                                                                                      --------
Cash dividends ................................      --            --       (25.4)           --          (25.4)
Restricted common stock grants ................      --           0.8          --            --            0.8
                                                   ----     ---------   ---------       -------       --------
March 31, 2003 ................................    $2.1     $10,677.0   $(5,505.3)      $(177.2)      $4,996.6
                                                   ====     =========   =========       =======       ========

               See Notes to Consolidated Statements (Unaudited).


                                       3


                        CIT GROUP INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 ($ in millions)



                                                                  For the Quarters
                                                                   Ended March 31,
                                                              ----------------------
                                                                 2003        2002
                                                              ----------  ----------
                                                                    
Cash Flows From Operations
Net income (loss) .........................................   $    127.0  $ (4,619.7)
Adjustments to reconcile net income (loss) to net cash
  flows from operations:
   Goodwill impairment ....................................           --     4,512.7
   Provision for credit losses ............................        103.0       195.0
   Depreciation and amortization ..........................        288.8       321.2
   Provision for deferred federal income taxes ............         74.7        50.4
   Gains on equipment, receivable and investment sales ....        (60.7)      (58.7)
   (Increase) in other assets .............................       (116.7)      (54.5)
   Increase (decrease) in accrued liabilities and payables          61.1      (100.1)
   Other ..................................................         (8.5)       (1.3)
                                                              ----------  ----------
Net cash flows provided by operations .....................        468.7       245.0
                                                              ----------  ----------
Cash Flows From Investing Activities
Loans extended ............................................    (12,341.1)  (11,639.4)
Collections on loans ......................................     10,233.4     9,703.8
Proceeds from asset and receivable sales ..................      1,699.2     3,739.6
Purchases of assets to be leased ..........................       (333.4)     (472.8)
Net decrease in short-term factoring receivables ..........       (182.7)     (410.9)
Purchase of finance receivable portfolios .................       (360.8)      (18.8)
Purchase of investment securities .........................           --       (97.6)
Other .....................................................        (41.4)      (19.1)
                                                              ----------  ----------
Net cash flows (used for) provided by investing activities      (1,326.8)      784.8
                                                              ----------  ----------
Cash Flows From Financing Activities
Repayments of variable and fixed-rate notes ...............     (2,997.8)   (1,479.4)
Proceeds from the issuance of variable and fixed-rate notes      4,352.4     8,518.4
Net decrease in commercial paper ..........................       (484.1)   (7,306.2)
Net capitalization from Tyco and Tyco affiliates ..........           --       268.4
Net repayments of non-recourse leveraged lease debt .......        (28.2)      (72.6)
Cash dividends paid .......................................        (25.4)         --
                                                              ----------  ----------
Net cash flows provided by (used for) financing activities         816.9       (71.4)
                                                              ----------  ----------
Net (decrease) increase in cash and cash equivalents ......        (41.2)      958.4
Exchange rate impact on cash ..............................         30.0        (2.1)
Cash and cash equivalents, beginning of period ............      2,036.6     1,301.5
                                                              ----------  ----------
Cash and cash equivalents, end of period ..................   $  2,025.4  $  2,257.8
                                                              ==========  ==========
Supplementary Cash Flow Disclosure
Interest paid .............................................   $    331.2  $    380.0
Federal, foreign, state and local income taxes paid, net ..   $     18.9  $     24.1


               See Notes to Consolidated Statements (Unaudited).


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 -- Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a leading global source of financing and leasing capital for companies in a wide
variety of industries, including many of today's leading industries and emerging
businesses,  offering vendor, equipment,  commercial,  factoring,  consumer, and
structured financing capabilities. CIT operates primarily in North America, with
locations in Europe, Latin America, Australia and the Asia-Pacific region.

      These  financial  statements,  which have been prepared in accordance with
the  instructions  to Form 10-Q, do not include all of the  information and note
disclosures  required by accounting  principles generally accepted in the United
States  ("GAAP") and should be read in  conjunction  with the  Company's  Annual
Report on Form 10-K for the  three-month  transition  period ended  December 31,
2002.  These  financial   statements  have  not  been  examined  by  independent
accountants in accordance with generally accepted auditing standards, but in the
opinion  of  management  include  all  adjustments,  consisting  only of  normal
recurring  adjustments,  necessary  for a  fair  statement  of  CIT's  financial
position  and  results  of   operations.   Certain   period  amounts  have  been
reclassified to conform to the current presentation.

      On June 1, 2001,  The CIT  Group,  Inc.  was  acquired  by a  wholly-owned
subsidiary  of  Tyco  International  Ltd.  ("Tyco"),   in  a  purchase  business
combination recorded under the "push-down" method of accounting,  resulting in a
new basis of accounting for the  "successor"  period  beginning June 2, 2001. On
July 8, 2002, Tyco completed a sale of 100% of CIT's outstanding common stock in
an initial public offering ("IPO").  Immediately prior to the offering,  CIT was
merged with its parent Tyco Capital  Holding,  Inc.  ("TCH"),  a company used to
acquire CIT. As a result,  the historical  financial results of TCH are included
in the historical consolidated CIT financial statements.

      CIT  consolidates  entities in which it owns or  controls  more than fifty
percent of the voting shares, unless control is likely to be temporary. Entities
that are twenty to fifty  percent  owned by CIT are included in other assets and
presented at the corresponding share of equity plus loans and advances. Entities
in which CIT owns less than twenty percent of the voting shares,  and over which
the Company has no significant influence,  are included in other assets at cost,
less declines in value that are other than  temporary.  In accordance  with SFAS
140,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishment of Liabilities",  Qualifying Special Purpose Entities utilized in
securitizations are not consolidated.  Interests in securitizations are included
in  other  assets.   All  significant   inter-company   transactions  have  been
eliminated.

      Variable interest entities  (selected  entities with related  contractual,
ownership,  voting  or  other  monetary  interests,  including  special  purpose
entities)  created after January 1, 2003 are consolidated in the cases where CIT
is the primary  beneficiary  of the entity as defined by  Interpretation  No. 46
"Consolidation of Variable Interest Entities."

      For  guarantees  issued or  modified  subsequent  to  December  31,  2002,
liabilities  are  recognized  at the  estimated  fair  value  of the  obligation
undertaken at the inception of the guarantee.


Note 2 -- Acquisition by Tyco

      The following table summarizes purchase accounting  liabilities  (pre-tax)
related to severance of employees and closing  facilities  that were recorded in
connection  with the  acquisition  by Tyco,  as well as  utilization  during the
current quarter ($ in millions):

                                     Severance         Facilities
                               ------------------  ------------------
                                Number of           Number of           Total
                                Employees Reserve  Facilities Reserve  Reserves
                                --------- -------  ---------- -------  --------
Balance at December 31, 2002 ...   240     $17.2       22      $12.4    $ 29.6
First quarter fiscal 2003
  utilization ..................   (47)     (9.3)      --       (2.0)    (11.3)
                                   ---     -----       --      -----    ------
Balance at March 31, 2003 ......   193     $ 7.9       22      $10.4    $ 18.3
                                   ===     =====       ==      =====    ======


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The  reserves   remaining  at  March  31,  2003  relate   largely  to  the
restructuring of the European operations. The facility reserves relate primarily
to shortfalls in sublease  transactions  and will be utilized over the remaining
lease terms,  generally between 3 and 7 years.  Severance  reserves also include
amounts  payable  within  the next  year to  individuals  who  chose to  receive
payments on a periodic basis.

Note 3 -- Consolidating Financial Statements -- Tyco Capital Holdings (TCH)

      The March 31, 2002 financial statements include the activity of TCH, which
was a wholly owned  subsidiary of a Tyco  affiliate and was the holding  company
for the acquisition of CIT by Tyco. In its capacity as the  acquisition  holding
company,  TCH's activity  included an outstanding loan from and related interest
expense payable to an affiliate of Tyco.  Immediately prior to the IPO of CIT on
July 8, 2002, the prior activity of TCH (accumulated net deficit) was eliminated
by means of a capital  contribution  from Tyco.  As a result,  the  consolidated
financial  statements  of CIT were not  impacted by TCH  subsequent  to June 30,
2002.




                                                               For the Quarter Ended
($ in millions)                                                   March 31, 2002
                                                       -----------------------------------
                                                          CIT         TCH     Consolidated
                                                                      
Finance Income .....................................   $ 1,106.7    $    --    $ 1,106.7
Interest expense ...................................       348.3         --        348.3
                                                       ---------    -------    ---------
Net finance income .................................       758.4         --        758.4
                                                       ---------    -------    ---------
Depreciation on operating lease equipment ..........       310.2         --        310.2
                                                       ---------    -------    ---------
Net finance margin .................................       448.2         --        448.2
Provision for credit losses ........................       195.0         --        195.0
                                                       ---------    -------    ---------
Net finance margin after provision for credit losses       253.2         --        253.2
Other revenue ......................................       232.1         --        232.1
                                                       ---------    -------    ---------
Operating margin ...................................       485.3         --        485.3
                                                       ---------    -------    ---------
Salaries and general operating expenses ............       226.9        7.3        234.2
Interest expense -- TCH ............................          --      305.0        305.0
Goodwill impairment ................................     4,512.7         --      4,512.7
                                                       ---------    -------    ---------
Operating expenses .................................     4,739.6      312.3      5,051.9
                                                       ---------    -------    ---------
(Loss) before provision for income taxes ...........    (4,254.3)    (312.3)    (4,566.6)
(Provision) benefit for income taxes ...............       (98.4)      48.0        (50.4)
Minority interest in subsidiary trust holding solely
   debentures of the Company, after tax ............        (2.7)        --         (2.7)
                                                       ---------    -------    ---------
Net (loss) .........................................   $(4,355.4)   $(264.3)   $(4,619.7)
                                                       =========    =======    =========


Note 4 -- Earnings Per Share

      Basic EPS is  computed  by  dividing  net  income by the  weighted-average
number of common shares  outstanding for the period. The diluted EPS computation
includes the potential  impact of dilutive  securities,  including stock options
and restricted  stock grants.  The dilutive  effect of stock options is computed
using the treasury  stock method,  which assumes the repurchase of common shares
by CIT at the average  market  price for the period.  Options that do not have a
dilutive  effect  (because the exercise price is above the market price) are not
included in the denominator and averaged  approximately  17.3 million shares for
the three months ended March 31, 2003.

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented for the quarters  ended March 31, 2003 and March 31,
2002.  The  denominator  for the  quarter  ended March 31, 2002 is the number of
shares upon  completion  of the July 2002 IPO ($ in  millions,  except per share
amounts, which are in whole dollars; share balances in thousands):


                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                       Income        Shares     Per Share
                                                     (Numerator) (Denominator)    Amount
                                                     ----------- -------------    ------
                                                                        
Quarter ended March 31, 2003
Basic:
   Income available to common stockholders ........   $  127.0      211,573      $  0.60
Effect of Dilutive Securities:
   Restricted shares ..............................         --          326           --
   Stock options ..................................         --           --           --
                                                     ---------      -------      -------
Diluted ...........................................   $  127.0      211,899      $  0.60
                                                     =========      =======      =======
Quarter ended March 31, 2002
Basic:
   Income available to common stockholders ........  $(4,619.7)     211,573      $(21.84)
Effect of Dilutive Securities:
   Restricted shares ..............................         --           --           --
   Stock options ..................................         --           --           --
                                                     ---------      -------      -------
Diluted ...........................................  $(4,619.7)     211,573      $(21.84)
                                                     =========      =======      =======


Note 5 -- Derivative Financial Instruments

      The components of the adjustment to Accumulated Other  Comprehensive  Loss
for  derivatives  qualifying as hedges of future cash flows at December 31, 2002
and at March 31, 2003 are presented in the following table ($ in millions):



                                        Adjustment of
                                        Fair Value of   Income Tax   Net Unrealized
                                         Derivatives      Effects      Loss (Gain)
                                        -------------   ----------    -------------
                                                                 
Balance at December 31, 2002 .........      $190.8        $(72.5)        $118.3
Changes in values of derivatives
  qualifying as cash flow hedges .....       (39.0)         13.3          (25.7)
                                            ------        ------         ------
Balance at March 31, 2003 ............      $151.8        $(59.2)        $ 92.6
                                            ======        ======         ======


      The  unrealized  loss as of March 31,  2003,  presented  in the  preceding
table,   primarily   reflects  our  use  of  interest   rate  swaps  to  convert
variable-rate  debt to fixed-rate debt, and lower market interest rates. For the
three  months ended March 31, 2003,  the  ineffective  portion of changes in the
fair value of cash flow hedges amounted to $0.4 million and has been recorded as
an increase to interest  expense.  Assuming no change in interest  rates,  $57.9
million,  net of tax, of Accumulated Other  Comprehensive Loss is expected to be
reclassified  to  earnings  over the next  twelve  months  as  contractual  cash
payments are made.  The  Accumulated  Other  Comprehensive  Loss (along with the
corresponding  swap  liability) will be adjusted as market interest rates change
over the remaining life of the swaps.

      As part of managing the exposure to changes in market interest rates, CIT,
as an end-user,  enters into various  interest  rate swap  transactions,  all of
which  are  transacted  in   over-the-counter   markets  with  other   financial
institutions acting as principal counter-parties. We use derivatives for hedging
purposes  only,  and do not enter  into  derivative  financial  instruments  for
trading or speculative  purposes.  To ensure both appropriate use as a hedge and
hedge accounting treatment, derivatives entered into are designated according to
a hedge objective against a specific liability, including commercial paper, or a
specifically  underwritten debt issue. The notional amounts,  rates, indices and
maturities of our derivatives are required to closely match the related terms of
our hedged  liabilities.  CIT exchanges  variable-rate  interest on certain debt
instruments for fixed-rate amounts.  These interest rate swaps are designated as
cash flow hedges.  We also exchange  fixed-rate  interest on certain of our debt
for  variable-rate  amounts.  These  interest rate swaps are  designated as fair
value hedges.


                                       7



                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedged liability position at March 31,
2003 ($ in millions):




Interest Rate Swaps                 Notional Amount                    Comments
-------------------                 ---------------                    --------
                                                
Floating to fixed-rate swaps --                       Effectively converts the  interest rate on an
  cash flow hedges .................   $3,668.5       equivalent amount of commercial paper and
                                                      variable-rate notes to a fixed rate.

Fixed to floating-rate swaps --                       Effectively converts the interest rate on an
  fair value hedges ................    5,332.8       equivalent amount of fixed-rate notes to a
                                       --------       variable rate.
Total interest rate swaps ..........   $9,001.3
                                       ========


      CIT utilizes  trusts as part of its ongoing  securitization  programs.  As
part of these related  activities,  the Company  enters into hedge  transactions
with the trusts in order to protect the trust against  interest  rate risk.  CIT
insulates its associated risk by entering into offsetting swap transactions with
third  parties.  The net effect is to protect the trust from interest rate risk,
while also  protecting CIT from interest rate risk. The notional amount of these
swaps was $3.9 billion at March 31, 2003.

      CIT also utilizes  foreign currency  exchange  forward  contracts to hedge
currency risk  underlying its net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign  debt.  At March 31,  2003,  CIT was party to  foreign
currency  exchange forward contracts with notional amounts totaling $2.7 billion
and  maturities  ranging from 2003 to 2006. CIT was also party to cross currency
interest rate swaps with notional  amounts  totaling $1.4 billion and maturities
ranging from 2003 to 2027.

Note 6 -- Business Segment Information

      Selected  financial  information by business  segment,  based upon a fixed
leverage  ratio  across  business  units and the  allocation  of most  corporate
expenses is presented below. The business  segments'  operating  margins and net
income for the quarter  ended  March 31,  2003  included  the  allocation  (from
Corporate  and  Other) of  additional  borrowing  costs  stemming  from the 2002
disruption to the Company's funding base and enhanced  liquidity  levels.  These
additional costs were significantly higher in 2003. The additional borrowing and
liquidity  costs were  included in Corporate  and Other in 2002.  Corporate  and
Other also included the 2002 non-cash goodwill impairment charge.

      During  the  quarter  ended  March  31,  2003,  in order to  better  align
competencies,  we transferred certain small business loans and leases, including
the small  business  lending  unit,  totaling  $1,078.6  million from  Equipment
Financing and Leasing to Specialty Finance. Prior periods have not been restated
to conform to this current presentation ($ in millions).



                                Equipment                                                 Corporate
                                Financing  Specialty  Commercial  Structured    Total        and
                               and Leasing  Finance     Finance     Finance   Segments      Other   Consolidated
                               -----------  -------     -------     -------   --------      -----   ------------
                                                                                
At and for the quarter
   ended March 31, 2003
Operating margin ...........   $    69.1   $   190.5   $  129.9    $   28.3   $   417.8   $   28.4   $   446.2
Income taxes ...............        11.7        33.4       34.6         7.8        87.5       (4.6)       82.9
Net income (loss) ..........        18.4        52.2       54.1        12.2       136.9       (9.9)      127.0
Total financing and
   leasing assets ..........    13,124.9    11,925.8    8,682.7     3,359.9    37,093.3         --    37,093.3
Total managed assets .......    17,102.1    18,336.3    8,682.7     3,359.9    47,481.0         --    47,481.0

At and for the quarter
   ended March 31, 2002
Operating margin ...........   $   149.5   $   256.1   $  115.0    $   33.3   $   553.9  $   (68.6)  $   485.3
Income taxes ...............        31.9        61.2       30.8         9.2       133.1      (82.7)       50.4
Net income (loss) ..........        62.6       100.0       46.2        16.4       225.2   (4,844.9)   (4,619.7)
Total financing and
   leasing assets ..........    15,489.2    10,937.4    4,436.7     3,035.7    33,899.0         --    33,899.0
Total managed assets .......    19,241.7    17,941.3    7,869.1     3,035.7    48,087.8         --    48,087.8



                                       8


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 7 -- Concentrations

      The following  table presents the geographic and industry  compositions of
financing and leasing  portfolio  assets,  based on the location and industry of
the customer, at March 31, 2003 and December 31, 2002 ($ in millions):

                                     At March 31, 2003     At December 31, 2002
                                   ---------------------  ----------------------
                                     Amount      Percent    Amount      Percent
                                     ------      -------    ------      -------
North America:
   Northeast .................     $ 7,871.8      21.2%   $ 7,833.8      21.8%
   West ......................       6,531.7      17.6      6,223.8      17.4
   Midwest ...................       6,128.7      16.5      5,748.3      16.0
   Southeast .................       5,193.5      14.0      4,946.8      13.8
   Southwest .................       3,826.4      10.3      3,691.9      10.3
   Canada ....................       1,846.5       5.0      1,804.9       5.0
                                   ---------     -----    ---------     -----
Total North America ..........      31,398.6      84.6     30,249.5      84.3
Other foreign ................       5,694.7      15.4      5,625.2      15.7
                                   ---------     -----    ---------     -----
   Total .....................     $37,093.3     100.0%   $35,874.7     100.0%
                                   =========     =====    =========     =====

                                      At March 31, 2003    At December 31, 2002
                                     -------------------  ----------------------
                                     Amount      Percent    Amount      Percent
                                     ------      -------    ------      -------
Manufacturing(1) (no industry
  greater than 2.9%) .........     $ 7,231.0      19.5%   $ 7,114.3      19.8%
Commercial Airlines (including
  regional airlines)..........       4,555.1      12.3      4,570.3      12.7
Retail(2) ....................       4,353.6      11.7      4,053.6      11.3
Transportation(4) ............       2,675.6       7.2      2,703.9       7.5
Consumer based lending --
  non-real estate(3) .........       2,541.5       6.9      2,435.0       6.8
Consumer based lending --
  home mortgage ..............       1,601.3       4.3      1,292.7       3.6
Service industries ...........       1,921.6       5.2      1,571.1       4.4
Communications(5) ............       1,660.3       4.5      1,662.6       4.6
Construction equipment .......       1,613.2       4.3      1,712.7       4.8
Wholesaling ..................       1,320.5       3.6      1,305.2       3.6
Automotive services ..........       1,170.5       3.2      1,138.8       3.2
Other (no industry greater
  than 3.0%)(6) ..............       6,449.1      17.3      6,314.5      17.7
                                   ---------     -----    ---------     -----
   Total .....................     $37,093.3     100.0%   $35,874.7     100.0%
                                   =========     =====    =========     =====
--------------------------------------------------------------------------------
(1)   Includes  manufacturers of textiles and apparel,  industrial machinery and
      equipment, electrical and electronic equipment and other industries.

(2)   Includes retailers of apparel (4.9%) and general merchandise (3.1%).

(3)   Includes  receivables  from  consumers for products in various  industries
      such  as  manufactured  housing,  recreational  vehicles  and  marine  and
      computers and related equipment.

(4)   Includes rail, over-the-road trucking industries and business aircraft.

(5)   Includes  $655.3 million and $685.8 million of  telecommunication  related
      assets at March 31, 2003 and December 31, 2002, respectively.

(6)   Included in "Other" above are financing and leasing  assets in the energy,
      power and utilities  sectors,  which totaled  $822.1  million,  or 2.2% of
      total financing and leasing assets at March 31, 2003. This amount includes
      approximately  $575 million in project  financing and $204 million in rail
      cars on lease.

Note 8 -- Accounting Change -- Goodwill

      The Company  periodically  reviews and  evaluates  its  goodwill and other
intangible  assets for  potential  impairment.  Effective  October 1, 2001,  the
Company  adopted SFAS No. 142, under which  goodwill is no longer


                                       9


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

amortized but instead is assessed for impairment at least  annually.  As part of
the  adoption,  the  Company  allocated  its  existing  goodwill  to each of its
reporting units as of October 1, 2001.  Under the transition  provisions of SFAS
No. 142, there was no goodwill impairment as of October 1, 2001.

      During  the  quarter  ended  March 31,  2002,  our  former  parent,  Tyco,
experienced disruptions to its business surrounding its announced break-up plan,
downgrades  in its  credit  ratings,  and a  significant  decline  in its market
capitalization. As a result of these events at Tyco, CIT also experienced credit
downgrades  and a disruption  to our funding base and ability to access  capital
markets.   Further,   market-based  information  used  in  connection  with  our
preliminary  consideration  of an  initial  public  offering  for  100%  of  CIT
indicated  that CIT's book value  exceeded its estimated  fair value as of March
31,  2002.  As a  result,  management  performed  a Step 1 SFAS  142  impairment
analysis  as of March 31,  2002 and  concluded  that an  impairment  charge  was
warranted at that date.

      Management's  objective in performing  the Step 1 SFAS 142 analysis was to
obtain  relevant  market-based  data to  calculate  the  fair  value of each CIT
reporting  unit as of March 31, 2002 based on each  reporting  unit's  projected
earnings  and  market  factors  that  would be used by  market  participants  in
ascribing value to each of these  reporting  units in the planned  separation of
CIT from Tyco.  Management  obtained  relevant  market  data from our  financial
advisors regarding the range of price to earnings multiples and market discounts
applicable to each  reporting  unit as of March 31, 2002 and applied this market
data to the individual  reporting  unit's  projected annual earnings as of March
31, 2002 to calculate a fair value of each reporting  unit. The fair values were
compared to the corresponding carrying value of each reporting unit at March 31,
2002, resulting in a $4.513 billion impairment charge as of March 31, 2002.

      SFAS 142 requires a second step analysis  whenever the reporting unit book
value exceeds its fair value.  This  analysis  required us to determine the fair
value of each reporting unit's individual assets and liabilities to complete the
analysis of goodwill  impairment as of March 31, 2002.  During the quarter ended
June 30, 2002, we completed this analysis for each reporting unit and determined
that an  additional  Step 2 goodwill  impairment  charge of $132.0  million  was
required based on reporting unit level valuation data.

      There were no changes to the carrying value of goodwill during the quarter
ended March 31, 2003.


Note 9 -- Accumulated Other Comprehensive Loss

      The  following  table  details  the March 31, 2003 and  December  31, 2002
components of accumulated other comprehensive loss, net of tax ($ in millions):

                                                      March 31,     December 31,
                                                        2003            2002
                                                      ---------     ------------
Changes in fair values of derivatives
  qualifying as cash flow hedges ..................   $ (92.6)       $(118.3)
Foreign currency translation adjustments ..........     (66.6)         (75.6)
Minimum pension liability adjustments .............     (20.5)         (20.5)
Unrealized gain on equity and securitization
  investments .....................................       2.5           13.7
                                                      -------        -------
   Total accumulated other comprehensive loss .....   $(177.2)       $(200.7)
                                                      =======        =======


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 10 -- Summarized Financial Information of Subsidiaries

      The following presents condensed  consolidating  financial information for
CIT Holdings LLC and its wholly-owned  subsidiary,  Capita Corporation (formerly
AT&T Capital Corporation).  CIT has guaranteed on a full and unconditional basis
the existing  registered debt securities and certain other indebtedness of these
subsidiaries.  CIT has not  presented  related  financial  statements  or  other
information for these subsidiaries on a stand-alone basis ($ in millions).




                                             CIT                    CIT
             CONSOLIDATING                  Group      Capita     Holdings     Other
            BALANCE SHEETS                   Inc.   Corporation     LLC     Subsidiaries Eliminations    Total
            --------------                   ----   -----------     ---     ------------ ------------    -----
                                                                                     
March 31, 2003

ASSETS
Net finance receivables ...............  $   625.1    $3,656.0    $  919.7    $22,696.8   $       --   $27,897.6
Operating lease equipment, net ........         --       686.9       160.0      5,984.5           --     6,831.4
Assets held for sale ..................         --        60.4       138.9      1,073.7           --     1,273.0
Cash and cash equivalents .............    1,416.6       288.5        72.1        248.2           --     2,025.4
Other assets ..........................    6,533.9       211.7       449.5      3,023.3     (4,996.6)    5,221.8
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Assets .......................  $ 8,575.6    $4,903.5    $1,740.2    $33,026.5    $(4,996.6)  $43,249.2
                                         =========    ========    ========    =========    =========   =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ..................................  $28,849.8    $1,799.3    $1,867.8    $    34.9    $      --   $32,551.8
Credit balances of factoring clients            --          --          --      2,437.9           --     2,437.9
Other liabilities .....................  (25,270.8)    2,527.3      (923.3)    26,672.9           --     3,006.1
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Liabilities ..................    3,579.0     4,326.6       944.5     29,145.7           --    37,995.8
Preferred securities ..................         --          --          --        256.8           --       256.8
Equity ................................    4,996.6       576.9       795.7      3,624.0     (4,996.6)    4,996.6
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Liabilities and
   Stockholders' Equity ...............  $ 8,575.6    $4,903.5    $1,740.2    $33,026.5    $(4,996.6)  $43,249.2
                                         =========    ========    ========    =========    =========   =========
December 31, 2002

ASSETS
Net finance receivables ...............    $ 633.5    $3,541.4     $ 935.7    $21,749.9    $      --   $26,860.5
Operating lease equipment, net ........         --       734.6       157.1      5,812.9           --     6,704.6
Assets held for sale ..................         --       159.1        62.8        991.5           --     1,213.4
Cash and cash equivalents .............    1,310.9       231.1       293.7        200.9           --     2,036.6
Other assets ..........................    6,532.9       283.3       391.6      2,780.2     (4,870.7)    5,117.3
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Assets .......................  $ 8,477.3    $4,949.5    $1,840.9    $31,535.4    $(4,870.7)  $41,932.4
                                         =========    ========    ========    =========    =========   =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ..................................  $27,760.7    $1,815.7    $2,116.8      $ (11.9)   $      --   $31,681.3
Credit balances of factoring clients            --          --          --      2,270.0           --     2,270.0
Other liabilities .....................  (24,154.1)    2,551.5    (1,396.1)    25,851.9           --     2,853.2
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Liabilities ..................    3,606.6     4,367.2       720.7     28,110.0           --    36,804.5
Preferred securities                            --          --          --        257.2           --       257.2
Equity ................................    4,870.7       582.3     1,120.2      3,168.2     (4,870.7)    4,870.7
                                         ---------    --------    --------    ---------    ---------   ---------
   Total Liabilities and
   Stockholders' Equity ...............  $ 8,477.3    $4,949.5    $1,840.9    $31,535.4    $(4,870.7)  $41,932.4
                                         =========    ========    ========    =========    =========   =========



                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)




                                             CIT                    CIT
                 CONSOLIDATING             Group       Capita     Holdings    Other
              STATEMENTS OF INCOME          Inc.     Corporation     LLC   Subsidiaries  Eliminations   Total
              --------------------          ----     -----------     ---   ------------  ------------   -----
                                                                                     
Quarter Ended
   March 31, 2003

Finance income ........................  $    29.7      $202.6       $48.5     $658.4      $    --   $   939.2
Interest expense ......................       13.7        88.9        (2.7)     246.8           --       346.7
                                         ---------      ------       -----     ------      -------   ---------
Net finance income ....................       16.0       113.7        51.2      411.6           --       592.5
Depreciation on operating
   lease equipment ....................         --        98.2        20.1      160.5           --       278.8
                                         ---------      ------       -----     ------      -------   ---------
Net finance margin ....................       16.0        15.5        31.1      251.1           --       313.7
Provision for credit losses ...........       12.7        13.3         2.7       74.3           --       103.0
                                         ---------      ------       -----     ------      -------   ---------
Net finance margin, after provision
   for credit losses ..................        3.3         2.2        28.4      176.8           --       210.7
Equity in net income of subsidiaries ..      125.8          --          --         --       (125.8)         --
Other revenue .........................        0.6        34.0        21.1      179.8           --       235.5
                                         ---------      ------       -----     ------      -------   ---------
Operating margin ......................      129.7        36.2        49.5      356.6       (125.8)      446.2
Operating expenses ....................       (1.9)       40.1        40.0      155.4           --       233.6
                                         ---------      ------       -----     ------      -------   ---------
Income (loss) before provision
   for income taxes ...................      131.6        (3.9)        9.5      201.2       (125.8)      212.6
Provision for income taxes ............        4.6        11.6         7.5       59.2           --        82.9
Minority interest, after tax ..........         --          --          --       (2.7)          --        (2.7)
                                         ---------      ------       -----     ------      -------   ---------
Net income (loss) .....................  $   127.0      $(15.5)      $ 2.0     $139.3      $(125.8)  $   127.0
                                         =========      ======       =====     ======      =======   =========
Quarter Ended
   March 31, 2002

Finance income ........................  $    58.8      $259.3       $61.6     $727.0      $    --   $ 1,106.7
Interest expense ......................      (57.9)      128.4        (4.0)     281.8           --       348.3
                                         ---------      ------       -----     ------      -------   ---------
Net finance income ....................      116.7       130.9        65.6      445.2           --       758.4
Depreciation on operating
   lease equipment ....................         --       122.3        26.0      161.9           --       310.2
                                         ---------      ------       -----     ------      -------   ---------
Net finance margin ....................      116.7         8.6        39.6      283.3           --       448.2
Provision for credit losses ...........       13.3       111.9         2.3       67.5           --       195.0
                                         ---------      ------       -----     ------      -------   ---------
Net finance margin, after provision
   for credit losses ..................      103.4      (103.3)       37.3      215.8           --       253.2
Equity in net income of subsidiaries ..     (159.2)         --          --         --        159.2          --
Other revenue .........................        2.2        26.9        20.0      183.0           --       232.1
                                         ---------      ------       -----     ------      -------   ---------
Operating margin ......................      (53.6)      (76.4)       57.3      398.8        159.2       485.3
Operating expenses ....................    4,528.7        40.6        19.4      463.2           --     5,051.9
                                         ---------      ------       -----     ------      -------   ---------
(Loss) income before provision for
   income taxes .......................   (4,582.3)     (117.0)       37.9      (64.4)       159.2    (4,566.6)
(Benefit) provision for income taxes ..       37.4       (41.5)       23.0       31.5           --        50.4
Minority interest, after tax ..........         --          --          --       (2.7)          --        (2.7)
                                         ---------      ------       -----     ------      -------   ---------
Net (loss) income .....................  $(4,619.7)     $(75.5)      $14.9     $(98.6)     $ 159.2   $(4,619.7)
                                         =========      ======       =====     ======      =======   =========



                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                             CIT                    CIT
                   CONSOLIDATING            Group      Capita     Holdings       Other
              STATEMENT OF CASH FLOWS       Inc.     Corporation    LLC      Subsidiaries Eliminations   Total
              -----------------------       -----    -----------    ---      ------------ ------------   -----
                                                                                        
Quarter Ended
   March 31, 2003

Cash Flows From
   Operating Activities:
Net cash flows provided by (used for)
   operations ..........................   $ 518.2      $517.0     $ (44.4)     $ (522.1)     $    --     $ 468.7
                                          --------      ------     -------       -------      -------    --------
Cash Flows From
   Investing Activities:
Net decrease in financing and
   leasing assets ......................      (3.9)      (76.4)      (78.9)     (1,126.2)          --    (1,285.4)
Decrease in inter-company loans
   and investments .....................  (1,497.7)         --          --            --      1,497.7          --
Other ..................................        --          --          --         (41.4)          --       (41.4)
                                          --------      ------     -------       -------      -------    --------
Net cash flows (used for)
   investing activities ................  (1,501.6)      (76.4)      (78.9)     (1,167.6)     1,497.7    (1,326.8)
                                          --------      ------     -------       -------      -------    --------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt ........   1,089.1       (16.4)     (249.0)         18.6           --       842.3
Inter-company financing ................        --      (366.8)      150.7       1,713.8     (1,497.7)         --
Cash dividends paid ....................        --          --          --         (25.4)          --       (25.4)
                                          --------      ------     -------       -------      -------    --------
Net cash flows provided by
   (used for) financing activities .....   1,089.1      (383.2)      (98.3)      1,707.0     (1,497.7)      816.9
                                          --------      ------     -------       -------      -------    --------
Net increase (decrease) in cash and
   cash equivalents ....................     105.7        57.4      (221.6)         17.3           --       (41.2)
Exchange rate impact on cash . .........        --          --          --          30.0           --        30.0
Cash and cash equivalents,
   beginning of period .................   1,310.9       231.1       293.7         200.9           --     2,036.6
                                          --------      ------     -------       -------      -------    --------
Cash and cash equivalents,
   end of period .......................  $1,416.6      $288.5      $ 72.1       $ 248.2      $    --    $2,025.4
                                          ========      ======      ======       =======      =======    ========



                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                            CIT                      CIT
                  CONSOLIDATING           Group        Capita     Holdings     Other
             STATEMENT OF CASH FLOWS       Inc.      Corporation    LLC     Subsidiaries  Eliminations   Total
             -----------------------       ----      -----------    ---     ------------  ------------   -----
                                                                                      
Quarter Ended
   March 31, 2002

Cash Flows From
   Operating Activities:
Net cash flows provided by (used for)
   operations ..........................  $  176.4      $ 60.1      $(34.0)      $ 42.5        $  --    $  245.0
                                          --------      ------      ------       ------        -----    --------
Cash Flows From
   Investing Activities:
Net increase in financing and
   leasing assets ......................     147.9       183.1        56.9        416.0           --       803.9
Decrease in inter-company loans
   and investments .....................     394.1          --          --           --       (394.1)         --
Other ..................................        --          --          --        (19.1)          --       (19.1)
                                          --------      ------      ------       ------        -----    --------
Net cash flows provided by
   (used for) investing activities .....     542.0       183.1        56.9        396.9       (394.1)      784.8
                                          --------      ------      ------       ------        -----    --------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt ........     320.7      (585.3)      192.8          0.4           --       (71.4)
Inter-company financing ................        --       326.8       (98.1)      (622.8)       394.1          --
Cash dividends paid ....................        --          --          --           --           --          --
                                          --------      ------      ------       ------        -----    --------
Net cash flows provided by
   (used for) financing activities .....     320.7      (258.5)       94.7       (622.4)       394.1       (71.4)
                                          --------      ------      ------       ------        -----    --------
Net increase (decrease) in cash and
   cash equivalents ....................   1,039.1       (15.3)      117.6       (183.0)          --       958.4
Exchange rate impact on cash . .........        --          --          --         (2.1)          --        (2.1)
Cash and cash equivalents,
   beginning of period .................     833.4       145.1       110.6        212.4           --     1,301.5
                                          --------      ------      ------       ------        -----    --------
Cash and cash equivalents,
   end of period .......................  $1,872.5      $129.8      $228.2       $ 27.3        $  --    $2,257.8
                                          ========      ======      ======       ======        =====    ========


Note 11 -- Related Party Transactions

      On September 30, 2001,  CIT sold at net book value  certain  international
subsidiaries to a non-U.S.  subsidiary of Tyco. As a result of this sale,  there
were receivables from affiliates  totaling  $1,440.9  million,  representing the
debt  investment in these  subsidiaries.  CIT charged arms length,  market-based
interest  rates on these  receivables,  and recorded  $19.0  million of interest
income, as an offset to interest expense, related to those notes for the quarter
ended  December  31,  2001.  A note  receivable  issued  at  the  time  of  this
transaction  of  approximately  $295  million was  collected.  Following  Tyco's
announcement  on  January  22,  2002  that it  planned  to  separate  into  four
independent,  publicly traded  companies,  CIT repurchased at net book value the
international  subsidiaries  on February  11,  2002.  In  conjunction  with this
repurchase,  the receivables from affiliates of $1,588.1 million at December 31,
2001 was satisfied.

      As of March  31,  2002,  certain  subsidiaries  of Tyco  sold  receivables
totaling  $360 million to CIT in a factoring  transaction.  CIT has continued to
purchase  receivables from Tyco in similar factoring  transactions through March
31, 2003 on an arms-length basis.

      While CIT was an indirect  subsidiary of Tyco,  certain of CIT's expenses,
such as third party  consulting and legal fees,  were paid by Tyco and billed to
CIT. The payables were satisfied in conjunction with the July 2002 IPO.


                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      CIT is a partner with Dell Computer Corporation ("Dell") in Dell Financial
Services  L.P.  ("DFS"),  a joint venture that offers Dell  customers  financing
services.   The  joint  venture   provides  Dell  with   financing  and  leasing
capabilities  that are  complementary to its product  offerings and provides CIT
with a steady  source of new  financings.  CIT  acquired  this  relationship  in
November  1999,  and the current  agreement  extends  until  October  2005.  CIT
regularly purchases finance receivables from DFS at a premium, portions of which
are typically  securitized within 90 days of purchase from DFS. CIT has recourse
back to DFS on  defaulted  contracts.  In  accordance  with  the  joint  venture
agreement,  net income generated by DFS is allocated 70% to Dell and 30% to CIT,
after CIT has recovered any cumulative losses. The DFS board of directors voting
representation  is evenly split among CIT, Dell and an independent  third party.
Any losses  generated by DFS are  allocated to CIT. DFS is not  consolidated  in
CIT's  financial  statements  and is accounted for under the equity  method.  At
March 31, 2003,  financing and leasing assets originated by DFS and purchased by
CIT  (included  in the CIT  Consolidated  Balance  Sheet) were $2.0  billion and
securitized  assets were $1.5 billion.  In addition to the owned and securitized
assets  acquired  from DFS,  CIT's  maximum  exposure  to loss with  respect  to
activities of the joint venture is  approximately  $290 million  pretax at March
31,  2003,  which is  comprised  of the  investment  in and  loans to the  joint
venture.

      CIT  also  has a  joint  venture  arrangement  with  Snap-on  Incorporated
("Snap-on") that has a similar business purpose and model to the DFS arrangement
described  above,  including  credit  recourse  on  defaulted  receivables.  CIT
acquired this  relationship in November 1999. The agreement with Snap-on extends
until January 2007. CIT and Snap-on have 50% ownership  interests,  50% board of
directors' representation and share income and losses equally. The Snap-on joint
venture is  accounted  for under the equity  method and is not  consolidated  in
CIT's  financial  statements.  As of March 31, 2003,  the related  financing and
leasing  assets and  securitized  assets  were $1.0  billion  and $0.1  billion,
respectively. In addition to the owned and securitized assets purchased from the
Snap-on joint venture, CIT's maximum exposure to loss with respect to activities
of the joint  venture is  approximately  $15 million  pretax at March 31,  2003,
which is comprised of the investment in and loans to the joint venture.

      Since December  2000,  CIT has been a joint venture  partner with Canadian
Imperial Bank of Commerce in an entity that is engaged in asset-based lending in
Canada. Both CIT and the Bank have a 50% ownership interest in the joint venture
and share income and losses  equally.  This entity is not  consolidated in CIT's
financial  statements and is accounted for under the equity method.  As of March
31, 2003, CIT's maximum exposure to loss with respect to activities of the joint
venture is $92 million pretax, which is comprised of the investment in and loans
to the joint venture.

      CIT  invests  in  various  trusts,  partnerships,  and  limited  liability
corporations  established in conjunction with structured financing  transactions
of equipment,  power and infrastructure  projects. CIT's interests in certain of
these entities were acquired by CIT in November  1999,  with others entered into
in the normal course of business  subsequently.  At March 31, 2003, other assets
included $46.5 million of investments in  non-consolidated  entities relating to
such transactions that are accounted for under the equity or cost methods.  This
investment is CIT's maximum  exposure to loss with respect to these interests as
of March 31, 2003.

Note 12 -- Commitments and Contingencies

      In the normal course of meeting the financing needs of its customers,  CIT
enters into various  credit-related  commitments,  including  standby letters of
credit, which obligate CIT to pay the beneficiary of the letter of credit in the
event that a CIT  client to which the letter of credit was issued  does not meet
its related obligation to the beneficiary.  These financial instruments generate
fees and involve,  to varying degrees,  elements of credit risk in excess of the
amounts  recognized in the Consolidated  Balance Sheets.  To minimize  potential
credit risk, CIT generally requires  collateral and other  credit-related  terms
and conditions  from the customer.  At the time  credit-related  commitments are
granted,  the fair value of the underlying  collateral and guarantees  typically
approximates or exceeds the contractual amount of the commitment. In the event a
customer defaults on the underlying transaction, the maximum potential loss will
generally be limited to the contractual amount outstanding less the value of all
underlying collateral and guarantees.


                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      Guarantees  are issued  primarily  in  conjunction  with  CIT's  factoring
product,  whereby CIT provides the client with credit  protection  for its trade
receivables  without actually  purchasing the  receivables.  The trade terms are
generally  sixty days or less.  The  receivables  are not  purchased  unless the
customer in unable to pay.

      As of March 31, 2003,  there were no outstanding  liabilities for the fair
values relating to these  credit-related  commitments or guarantees,  as amounts
are generally billed and collected on a monthly basis.

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related  commitments.   The  reduction  in  guarantees  outstanding  from
December  31,  2002  reflects  the  transition  to  on-balance  sheet  factoring
products,  which are included in credit balances of factoring clients in the CIT
consolidated balance sheet. ($ in millions).



                                                                                            At
                                                           At March 31,                December 31,
                                                               2003                        2002
                                                ------------------------------------   ------------
                                                    Due to Expire
                                                ---------------------
                                                 Within        After        Total          Total
                                                One Year     One Year    Outstanding    Outstanding
                                                ---------    --------    -----------    -----------
                                                                             
Unused commitments to extend credit:
  Financing and leasing assets ...............  $3,160.2      $412.2      $3,572.4       $3,618.9
Letters of credit and acceptances:
  Standby letters of credit ..................     520.0         4.7         524.7          519.8
  Other letters of credit ....................     557.7          --         557.7          583.3
  Acceptances ................................       5.7          --           5.7            5.6
Guarantees ...................................      81.7          --          81.7          745.8
Venture capital fund commitments .............        --       158.1         158.1          164.9


      As of March 31, 2003,  commitments  to purchase  commercial  aircraft from
both Airbus Industrie and The Boeing Company totaled 75 units through 2007 at an
approximate value of $3.6 billion as detailed below ($ in billions):

Calendar Year:                                             Amount       Number
-------------                                              -------      -------

2003 ....................................................   $0.7           17
2004 ....................................................    0.8           17
2005 ....................................................    1.3           27
2006 ....................................................    0.7           13
2007 ....................................................    0.1            1
                                                            ----           --
Total ...................................................   $3.6           75
                                                            ====           ==

      The order  amounts  are  based on  current  appraised  values in 2002 base
dollars and exclude CIT's options to purchase additional aircraft. Eleven of the
2003 units and two of the 2004 units have lessees in place.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed  above,  totaled $280.6 million at March 31, 2003. In addition,  CIT is
party to a railcar sale-leaseback transaction under which it is obligated to pay
a remaining  total of $495 million,  approximately  $28 million per year through
2010 and declining  thereafter  through 2024, which is more than offset by CIT's
re-lease of the assets,  contingent  on its ability to maintain  railcar  usage.

      CIT has guaranteed  the public and private debt  securities of a number of
its wholly-owned,  consolidated subsidiaries,  including those disclosed in Note
10 -- Summarized Financial Information of Subsidiaries.  In the normal course of
business,  various  consolidated CIT subsidiaries have entered into other credit
agreements and certain  derivative  transactions  with  financial  institutions,
which  are  guaranteed  by  CIT  and  included  in  the  consolidated  financial
statements.  These transactions are generally used by CIT's subsidiaries outside
of the U.S. to allow the local  subsidiary to borrow funds in local  currencies.
In  addition,  CIT  has  guaranteed,   on  behalf  of  certain  non-consolidated
subsidiaries,  $8 million of third party  debt,  which is not  reflected  in the
consolidated balance sheet at March 31, 2003.


                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 13 -- Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the Southern  District of New York against CIT, its Chief Executive  Officer and
its  Chief  Financial  Officer.   The  lawsuit  contains  allegations  that  the
registration  statement and prospectus prepared and filed in connection with the
IPO were  materially  false and  misleading,  principally  with  respect  to the
adequacy of CIT's telecommunications-related loan loss reserves at the time. The
lawsuit  purports to be brought on behalf of all those who  purchased CIT common
stock in or  traceable to the IPO, and seeks,  among other  relief,  unspecified
damages or  rescission  for those alleged class members who still hold CIT stock
and  unspecified  damages for other alleged class  members.  Additional  similar
lawsuits have also been filed,  including,  in one case, as defendants,  some of
the  underwriters and former directors of CIT. CIT believes that the allegations
in each of these actions are without merit and that its disclosures were proper,
complete and  accurate.  CIT intends to vigorously  defend itself  against these
actions.

      In addition,  in the ordinary course of business,  there are various legal
proceedings   pending  against  CIT.  Management  believes  that  the  aggregate
liabilities,  if any, arising from such actions, including the class action suit
above,  will not have a material  adverse effect on the  consolidated  financial
position, results of operations or liquidity of CIT.


Note 14 -- Accounting for Stock-based Compensation Plans

      CIT has elected to apply  Accounting  Principles Board Opinion 25 (APB 25)
rather than the optional  provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation"  (SFAS 123) in accounting for its stock-based  compensation plans.
Under APB 25, CIT does not recognize compensation expense on the issuance of its
stock options  because the option terms are fixed and the exercise  price equals
the market price of the underlying  stock on the grant date. The following table
presents the pro forma information  required by SFAS 123 as if CIT had accounted
for  stock  options  granted  under  the  fair  value  method  of SFAS 123 ($ in
millions, except per share data):

                                                        Quarters Ended March 31,
                                                        ------------------------
                                                           2003         2002
                                                         -------     ---------
Net income as reported ................................   $127.0     $(4,619.7)
Stock-based compensation expense -- fair
  value method ........................................     (6.7)           --
                                                          ------      --------
Pro forma net income ..................................   $120.3     $(4,619.7)
                                                          ======     =========
Basic earnings per share as reported ..................   $ 0.60     $  (21.84)
                                                          ======     =========
Basic earnings per share pro forma ....................   $ 0.57     $  (21.84)
                                                          ======     =========
Diluted earnings per share as reported ................   $ 0.60     $  (21.84)
                                                          ======     =========
Diluted earnings per share pro forma ..................   $ 0.57     $  (21.84)
                                                          ======     =========


                                       17


Item 2. Management's Discussion  and Analysis of Financial Condition and Results
        of Operations and  Quantitative  and Qualitative Disclosure about Market
        Risk

Overview

      The   accompanying   Consolidated   Financial   Statements   include   our
consolidated  accounts.  On July 8, 2002, our former parent,  Tyco,  completed a
sale of 100% of CIT's outstanding common stock in the IPO.  Immediately prior to
the offering, our predecessor,  CIT Group Inc., a Nevada corporation, was merged
with and into its parent,  TCH, a Nevada  corporation,  and that combined entity
was further merged with and into CIT Group Inc.  (Del), a Delaware  corporation.
In  connection  with the  reorganization,  CIT Group Inc.  (Del) was renamed CIT
Group Inc. As a result of the reorganization,  CIT is the successor to CIT Group
Inc. (Nevada)'s business, operations and obligations. Accordingly, the financial
results of TCH are included in the consolidated CIT financial statements.

      Prior to the IPO of CIT on July 8, 2002,  the  activity  of TCH  consisted
primarily of interest  expense to an affiliate of Tyco, and the TCH  accumulated
net deficit was relieved via a capital  contribution  from Tyco. The activity of
TCH consisted  primarily of interest  expense to an affiliate of Tyco during the
period from June 1, 2001 to June 30, 2002.  TCH had no operations  subsequent to
June 30, 2002.  Although the financial  statements and notes thereto include the
activity of TCH in conformity with accounting  principles  generally accepted in
the  U.S.,  management  believes  that  it is most  meaningful  to  discuss  our
financial  results  excluding  TCH,  due  to  its  temporary  status  as a  Tyco
acquisition company with respect to CIT. Therefore,  throughout this section, in
order to provide  comparability  with current quarter and  prospective  results,
prior  period  comparisons  exclude  the  results of TCH.  Consolidating  income
statements  for CIT, TCH and CIT  consolidated  for the quarter  ended March 31,
2002  are  displayed  in  Item  1.   Consolidating   Financial   Statements  and
Supplementary Data, Note 3.

      Following  the  acquisition  by Tyco,  we changed our fiscal year end from
December 31 to September  30, to conform to Tyco's  fiscal year end. On November
5, 2002,  the CIT Board of Directors  approved the return to a calendar year end
effective  December  31,  2002.  As a result,  the quarter  ended March 31, 2003
constitutes the first quarter of our calendar 2003 results.

Key Business Initiatives and Trends

      In late 2000,  we initiated  our plan to sell or  liquidate  approximately
$4.5 billion of lower return non-strategic assets. This followed the integration
of a 1999 acquisition,  which  significantly  increased our size,  broadened our
asset and product base and  established  our  substantial  international  reach.
Further, management set forth its plan to strengthen its capital ratios.

      In mid-2001,  this  initiative was broadened and  accelerated  because the
June 2001  acquisition by Tyco provided  additional  capital and support in this
regard.  Management  also  initiated  further  business line  consolidation  and
operating  expense cost  reductions both in the corporate staff areas and in the
business  units.  In early to mid-2001,  the e-commerce  and  telecommunications
industry downturns in the economy became evident. In light of this downturn,  we
recognized  impairment  charges against earnings prior to the Tyco  acquisition,
including equity interests related to e-commerce and telecommunications.

      The targeted non-strategic business lines and products were sold or placed
in liquidation  status,  and we ceased  originating new business in these areas.
Severance and other costs  associated with these  initiatives were identified in
plans that were approved by senior management.  These costs plus any adjustments
to reduce the carrying values of the targeted assets to fair value were provided
for primarily through purchase  accounting (Tyco's  acquisition of CIT, with the
purchase accounting adjustments "pushed-down" to CIT financials).  In support of
these  initiatives,  Tyco provided nearly $900 million of additional  capital to
CIT from June  through  December of 2001.  We also  decided to cease  making new
venture  capital  investments  and  to  run-off  our  existing  venture  capital
portfolio.


                                       18


      The  balance  of each of these  non-strategic/liquidating  portfolios  are
presented in the following table ($ in millions):




                                          Balance Outstanding at   Balance Outstanding at
              Portfolio                      March 31, 2003(1)      December 31, 2002(1)
              --------                     ---------------------    --------------------
                                                                    
Manufactured housing ...................          $  613                  $  624
Franchise finance ......................             316                     322
Owner-operator trucking ................             184                     218
Recreational marine ....................             114                     123
Recreational vehicle ...................              51                      34
Wholesale inventory finance ............               4                      18
                                                  ------                  ------
  Sub total -- liquidating portfolios ..           1,282                   1,339
Venture capital ........................             334                     335
                                                  ------                  ------
  Total ................................          $1,616                  $1,674
                                                  ======                  ======

--------------------------------------------------------------------------------
(1) On-balance sheet financing and leasing assets.

      In early 2002,  Tyco  announced  its break-up  plan and intent to sell its
interest in CIT. Subsequent  developments at Tyco prior to the separation of CIT
resulted  in credit  rating  downgrades  of Tyco and  similar  but more  limited
actions for CIT.  These rating  actions  caused  significant  disruption  to our
historical  funding base. As a result,  the Company's  access to the  commercial
paper market was  hindered,  and the Company  drew down on its  existing  backup
lines of credit to meet its  financing  requirements.  Consequently,  management
focused   primarily  on   liquidity   and  capital  as  opposed  to  growth  and
profitability.  As a result of this focus,  senior  management  met regularly to
discuss  such  topics  as  daily  cash  flow,   forecasts  and  funding   needs,
prioritization of liquidity to existing customers and tempering  acquisition and
portfolio  purchases.  Significant  initiatives  were  undertaken to fortify the
Company's liquidity position,  to address bondholder  protections,  to re-access
the commercial  paper and term debt markets and to strengthen our balance sheet.
The steps taken are outlined below.

      In February  2002, we amended our bond  indentures to prohibit or restrict
transactions with Tyco for as long as CIT was owned by Tyco. We also completed a
$1.2 billion conduit  financing backed by trade accounts  receivable in order to
broaden funding access and repay term debt at the scheduled maturities. In March
2002, we completed a $1.0 billion securitization  facility backed by home equity
loans to further  broaden  funding  access.  In April 2002,  we completed a $2.5
billion  unsecured  debt  offering  comprised of $1.25  billion of 7.375% senior
notes due in April 2007,  and $1.25  billion of 7.75%  senior notes due in April
2012. In May 2002, we executed a $1.1 billion  public asset backed  transaction,
secured by  equipment  collateral.  In June 2002,  we renewed  our  existing  $3
billion  equipment  conduit  facility and  increased  the facility  size to $3.5
billion.  Also in June  2002,  we  executed  a $1 billion  public  asset  backed
transaction, secured by home equity assets.

      In July 2002, Tyco sold its entire  investment in CIT in our IPO, with the
proceeds paid to our former parent.  CIT received  approximately $250 million of
additional  capital shortly  following the IPO, which enhanced our capital base,
as the  underwriters  elected to exercise a portion of their  over-allotment  or
"green shoe" option.

      Immediately  following  the IPO and complete  separation  from Tyco,  debt
credit ratings were upgraded by Standard & Poor's and Fitch. Shortly thereafter,
the Company commenced repayment of its drawn bank facilities,  which facilitated
our re-entrance into the commercial paper markets. We re-launched our commercial
paper program, and achieved  significant  outstandings at market pricing levels.
We  continued  to pay down  existing  credit  facilities,  maintaining  backstop
liquidity to fully cover all outstanding commercial paper.

      We demonstrated  successful access to the term debt markets as well. Since
the  IPO,  we  have  issued  an  aggregate  $8.4  billion  in  term  debt in the
institutional  debt markets,  comprised of $4.7 billion in  fixed-rate  debt and
$3.7 billion in  floating-rate  debt.  These totals  include $1.5 billion issued
through a retail note program, which was initiated in October 2002. The weighted
average rate on the fixed rate issuance has been lower than the weighted average
rate of our  outstanding  debt  portfolio  due to  lower  index  rates,  but the
borrowing  spreads are higher than  comparable  borrowing  spreads  prior to the
onset of events surrounding our separation from Tyco.


                                       19


      The events  described  resulted in an  increased  cost of funds due to our
borrowing spreads being higher than traditionally experienced. Additionally, the
Company has been  maintaining  cash liquidity levels in excess of our historical
norms. Although our quality spreads have been trending towards historical levels
in recent months,  management  expects that margin and earnings will continue to
be negatively  impacted for the foreseeable  future, as results will continue to
reflect more expensive borrowing spreads and excess liquidity.

      As management  was executing its plan to dispose of targeted  assets while
improving   liquidity  and  capital,   the  U.S.  and  world  economies   slowed
drastically.  The slowing economy dampened demand for new borrowings,  which was
reflected in lower loan origination  levels. In conjunction with our emphasis on
liquidating or selling targeted assets, and securitizing higher levels of assets
to meet liquidity needs, our on-balance  sheet assets  decreased,  which in turn
led to lower levels of net interest margin.

      As the economy continued its slowdown,  market interest rates continued to
decline in line with the  various  rate-easing  moves  effected  by the  Federal
Reserve  Bank.  However,  given the weak  economy and the  difficult  atmosphere
created   by   numerous   corporate   bankruptcies   and   financial   reporting
irregularities,  corporate  bond quality  spreads  increased,  or "widened out",
leading to increased  borrowing costs relative to U.S.  Treasury  securities and
various floating rate indices for most corporate borrowers, including CIT.

      The following table summarizes the trend in our quality spreads  (interest
rate cost over U.S.  Treasury rates) in relation to 5-year  treasuries.  Amounts
are in basis points and represent the average spread during the period ended:



                            March 31,  December 31,   September 30,  September 30,   December 31,
                              2003         2002           2002           2001            2000
                            ---------  ------------   ------------   ------------    ------------
                                                                           
Average spread over
  U.S. Treasuries ........     215          302            313            147             154


      The  average  spread  over U.S.  Treasuries  for the  month of April  2003
improved to 196 basis  points.  On May 8, 2003, we issued $500 million of 5-year
senior notes at 138 basis points over U.S. Treasuries, a significant improvement
from prior period spread levels.

      The poor economy also  resulted in worsening  borrower  performance  and a
decline in equipment  values,  leading to higher loss  frequency  and  severity,
which lowered  earnings.  In response to increasing past due and  non-performing
loan levels,  management  increased our balance sheet reserve for credit losses,
even  as  portfolio  asset  levels  continued  to  decline.   Our  exposures  to
telecommunications and Argentina were evaluated, with specific reserving actions
taken in the year ended  September  30, 2002.  These  reserves were added to the
balance  sheet  reserve  for credit  losses and are  separately  identified  and
tracked in  relationship  to the  performance of the  corresponding  portfolios.
These reserving actions were consistent with our focus to strengthen our balance
sheet.  While charge-offs  remained high during the three months ended March 31,
2003, the levels of delinquencies and non-performing  assets,  which we consider
to be leading indicators of possible future charge-off  activity,  have improved
in the last two consecutive quarters.

      Management's  principal  focus  continues  to be on  improving  the credit
quality of our portfolio, lowering our borrowing spreads to decrease our cost of
funds,  increasing  new  business  origination  volumes  and  prudently  seeking
opportunities  to  grow  our  earning  assets,  while  maintaining  our  expense
discipline.

Income Statement and Balance Sheet Analysis in Relation to Prior Year

      The  following  table  summarizes  the  impact  of  various  items for the
respective  reporting  periods that affect the  comparability  of our  financial
results under accounting  principles generally accepted in the U.S. ("GAAP"). We
are presenting these items as a supplement to the GAAP results to facilitate the
comparability of results between periods. The adoption of Statement of Financial
Accounting  Standards No. ("SFAS") 142,  "Goodwill and Other Intangible  Assets"
eliminated goodwill amortization and introduced goodwill impairment charges. The
impairment  charge in the March 31, 2002  quarter was a non-cash  charge and did
not impact our tangible  capital.


                                       20


The TCH results relate to a Tyco  acquisition  company that had temporary status
with respect to Tyco's  acquisition of CIT. For these  reasons,  we believe that
this  table,  in  addition  to the GAAP  results,  aids in the  analysis  of the
significant trends in our business over the periods presented ($ in millions):

                                                           Quarters Ended
                                                              March 31,
                                                       ---------------------
                                                        2003           2002
                                                       -----           -----
Net income (loss)-- GAAP basis ....................    $127.0        $(4,619.7)
Charges included in net income (loss):
   Goodwill impairment ............................        --          4,512.7
   TCH losses .....................................        --            264.3
                                                       ------        ---------
Net income -- before charges ......................    $127.0        $   157.3
                                                       ======        =========

      The reduction in net income for the three months ended March 31, 2003 from
the prior year quarter  resulted from the  combination of lower interest  margin
due  to  a  lower  asset  base,  higher  borrowing  costs,  as  well  as  higher
charge-offs.

      Managed  assets  totaled  $47.5  billion at March 31,  2003,  versus $46.4
billion at December 31, 2002 and $48.1 billion at March 31, 2002.  Financing and
leasing  portfolio assets totaled $37.1 billion at March 31, 2003,  versus $35.9
billion at December 31, 2002, and $33.9 billion at March 31, 2002. The portfolio
growth for the current  quarter was primarily in the Commercial  Finance segment
as customers  increased their borrowing levels under existing credit facilities.
Home equity receivables also grew in the Specialty Finance segment. The decrease
in managed  assets in relation to the prior year  quarter  reflects  the factors
discussed in the "Key Business  Initiatives  and Trends"  section,  namely lower
origination  volume  brought  upon  by  the  slow  economic  conditions,  growth
constraints  caused  by the  disruption  to our  funding  base  in  2002,  which
increased our funding costs (see "Net Finance Margin" and  "Liquidity"  sections
for further  discussion),  and the sales and  continued  liquidation  of several
product line portfolios.  Portfolio assets at March 31, 2002 excluded short-term
trade  (factoring)  receivables  securitized  during the quarter ended March 31,
2002 for liquidity purposes,  but subsequently  repurchased in the quarter ended
June 30, 2002.


Net Finance Margin

      A comparison of finance  income and net finance  margin is set forth below
($ in millions):

                                                           Quarters Ended
                                                              March 31,
                                                     --------------------------
                                                       2003             2002
                                                     ---------        ---------
Finance income ....................................  $   939.2        $ 1,106.7
Interest expense ..................................      346.7            348.3
                                                     ---------        ---------
  Net finance income ..............................      592.5            758.4
Depreciation on operating lease equipment .........      278.8            310.2
                                                     ---------        ---------
  Net finance margin ..............................  $   313.7        $   448.2
                                                     =========        =========
Average earning assets ("AEA") ....................  $34,600.6        $36,006.6
                                                     =========        =========
As a % of AEA:
Finance income ....................................      10.86%           12.29%
Interest expense ..................................       4.01             3.86
                                                     ---------        ---------
  Net finance income ..............................       6.85             8.43
Depreciation on operating lease equipment .........       3.22             3.45
                                                     ---------        ---------
Net finance margin as a % of AEA ..................       3.63%            4.98%
                                                     =========        =========

      The growth constraint and debt quality spread factors discussed previously
in the "Key Business Initiatives and Trends" section adversely impacted interest
margin in relation to the quarter ended March 31, 2002. Finance income reflected
the decline in market interest rates from March 2002. However, our funding costs
increased as a result of the draw down of bank  facilities to pay off commercial
paper,  the issuance of term debt at wider  credit  spreads in 2002 and 2003 and
higher levels of excess cash maintained for liquidity purposes.


                                       21


      Finance income  (interest on loans and lease rentals) for the three months
ended March 31, 2003 decreased by $167.5 million to $939.2 million from the same
period  in 2002,  reflecting  a decline  of 3.9% in AEA and the  impact of lower
market  interest  rates.  This trend also reflected a 14% reduction in operating
lease rentals primarily  resulting from lower rentals on the aerospace portfolio
due to the commercial airline industry down turn.

      Although down modestly in dollar  amount,  interest  expense for the three
months ended March 31, 2003  increased as a percentage  of AEA in  comparison to
the three  months ended March 31, 2002,  in spite of declining  market  interest
rates.  Cost of funds as a percentage of AEA averaged 4.01% for the three months
ended March 31,  2003  compared  to 3.86% for the three  months  ended March 31,
2002,  reflecting the replacement of floating interest rate funding sources with
term  funding and higher  borrowing  spreads.  At March 31,  2003,  CIT had $4.5
billion  in  outstanding  commercial  paper  and  $1.3  billion  in  drawn  bank
facilities.  As of March  31,  2002 and  December  31,  2001,  commercial  paper
outstanding  was  $710  million  and $8.0  billion,  respectively,  while  drawn
commercial bank lines were $8.5 billion and zero,  respectively.  We continue to
pay down drawn bank loans,  while maintaining  backstop liquidity to fully cover
all outstanding commercial paper.

      The  operating  lease  equipment  portfolio  was $6.8 billion at March 31,
2003,  compared to $6.7  billion at December  31, 2002 and $6.6 billion at March
31, 2002. The table below  summarizes  operating lease margin as a percentage of
average operating lease equipment for the respective periods.

                                                              Quarters Ended
                                                                 March 31,
                                                          ---------------------
                                                          2003             2002
                                                          ----             ----
As a % of Average Operating Lease Equipment:
Rental income .........................................   22.7%            27.0%
Depreciation expense ..................................   16.6             19.0
                                                          ----             ----
   Operating lease margin .............................    6.1%             8.0%
                                                          ====             ====

      In addition to the previously  mentioned  reduction in aerospace  rentals,
the declines in both rental income and depreciation expense for the three months
ended  March 31,  2003 from the prior  year  reflects  a greater  proportion  of
longer-term  aircraft  and rail  assets in the  current  period  (as  opposed to
smaller-ticket vendor finance assets).

Net Finance Margin after Provision for Credit Losses

      The net finance  margin after  provision for credit losses (risk  adjusted
interest  margin) for the three  months  ended March 31, 2003  declined by $42.5
million (16.8%) to $210.7 million from $253.2 million for the comparable  period
of 2002.  These amounts  equated to risk adjusted margin of 2.44% and 2.81% as a
percentage of AEA for the three months ended March 31, 2003 and 2002. These risk
adjusted net margin comparisons,  although unfavorable, were better than the net
finance  margin trends  discussed  previously as the provision for credit losses
for the  quarter  ended  March  31,  2002  included  $95.0  million  (1.06% as a
percentage of AEA) related to the  devaluation  of the Argentine  peso resulting
from economic reforms instituted by the Argentine government.

      We used  discounted  cash flow  projection  analysis to estimate  the fair
value of our various liquidating  portfolios by modeling the portfolio revenues,
credit  costs,  servicing  costs and other  related  expenses over the remaining
lives of the portfolios, at the date of the Tyco acquisition. The resulting cash
flows were  discounted to determine the estimated fair value of each  portfolio,
which typically  resulted in discounted  values to the previously  recorded book
values.  These  discounts  are being  accreted  into  income  as the  portfolios
liquidate.  As  loans in  these  liquidating  portfolios  are  charged-off,  the
corresponding  reduction to the reserve for credit losses is replenished via the
provision for credit losses,  which is charged against current earnings.  Actual
performance of the portfolios,  including revenue,  credit losses, and expenses,
is  compared  on  a  quarterly  basis  to  the  original  discounted  cash  flow
projections  to monitor  portfolio  performance to determine  whether  scheduled
accretion should be modified. The positive impact on risk-adjusted margin due to
purchase accounting fair value adjustments related to the liquidating portfolios
for the quarter  ended March 31, 2003 and the quarter  ended March 31, 2002 were
five and six basis points, respectively.

      The positive impact on risk adjusted margin due to fair value  adjustments
to mark  receivables and debt to market  remaining from the Tyco acquisition was
19 and 43 basis points for the quarter ended March 31, 2003 and 2002.


                                       22


Other Revenue

      For the three months ended March 31, 2003, other revenue increased 1.5% to
$235.5 million from $232.1 million in the comparable  period in 2002.  Losses on
venture capital investments were recorded as reductions to other revenue.  Other
revenue for the quarters  ended March 31, 2003 and 2002 was 2.72% and 2.58% as a
percentage  of AEA.  The  components  of  other  revenue  are set  forth  in the
following table ($ in millions):

                                                        Quarters Ended March 31,
                                                       -------------------------
                                                         2003             2002
                                                        ------           ------
Fees and other income ...............................   $144.7           $160.9
Factoring commissions ...............................     46.9             37.5
Gains on securitizations ............................     30.7             34.7
Gains on sales of leasing equipment .................     17.6              4.3
(Losses) on venture capital investments .............     (4.4)            (5.3)
                                                        ------           ------
  Total Other Revunue ...............................   $235.5           $232.1
                                                        ======           ======

      For the three months ended March 31, 2003,  fees and other  income,  which
includes  servicing fees,  miscellaneous  fees,  syndication fees and gains from
asset sales,  declined 10.1% from the  comparable  period of 2002. The reduction
was driven  primarily  by lower  gains  from  asset  sales and fee income in the
Specialty Finance segment.  Factoring  commissions  increased  approximately 25%
from  the  quarter  ended  March  31,  2002 to  $46.9  million,  continuing  the
year-over-year  trend of last quarter in higher  factoring  volume  coupled with
stronger  commission  rates.  Gains from the sales of leasing  equipment were up
primarily in the Specialty Finance segment, reflecting the sale of communication
equipment at the end of lease.

      The following table presents  information  regarding  securitization gains
included in the table above ($ in millions):

                                                           Quarters Ended
                                                              March 31,
                                                       ---------------------
                                                         2003           2002
                                                         ----           ----
Volume securitized(1) ..............................   $1,237.4        $2,725.9
Gains ..............................................       30.7            34.7
Gains as a percentage of volume securitized ........       2.48%           1.27%
--------------------------------------------------------------------------------
(1) Excludes short-term trade receivables securitized for liquidity purposes.

      During the three months ended March 31, 2003, we securitized  $0.4 billion
of home equity loans,  versus $1.7 billion  during the prior year  quarter.  The
2002  securitization  volume  was  securitized  at  lower  gain  percentages  in
comparison to 2003, and was done primarily to meet funding and liquidity needs.


Salaries and General Operating Expenses

      The  efficiency  ratio and the ratio of  salaries  and  general  operating
expenses to average  managed assets ("AMA") are two metrics that management uses
to monitor productivity and are set forth in the following table. The efficiency
ratio measures the level of expenses in relation to revenue earned,  whereas the
AMA relationship  measures  expenses in relation to our managed asset base ($ in
millions).

                                                             Quarters Ended
                                                                March 31,
                                                          --------------------
                                                          2003            2002
                                                          ----            ----
Efficiency ratio(1) ..................................     42.5%           33.4%
Salaries and general operating expenses as
  a percentage of AMA(2) .............................     2.08%           1.93%
Salaries and general operating expenses ..............   $233.6          $226.9
--------------------------------------------------------------------------------
(1)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to operating margin, excluding the provision for credit losses.

(2)   "AMA" means average managed  assets,  which is average earning assets plus
      the  average  of  finance  receivables  previously  securitized  and still
      managed by us.

      Salaries and general  operating  expenses for the quarter  ended March 31,
2003 increased 3.0% from the prior year quarter to $233.6 million.  The increase
was primarily due to expenses  relating to our return to public and  independent
company status,  which include investor relations,  advertising,  public company
regulatory compliance,


                                       23


corporate  governance,  increased insurance premiums,  and costs associated with
rebuilding  our income tax  function.  These  expenses are expected to continue.
Personnel decreased to approximately 5,845 at March 31, 2003 from 6,230 at March
31, 2002, largely reflecting lower headcount in our Specialty Finance segment.

      In addition to higher expenses,  the deterioration in the efficiency ratio
for the  quarter  ended  March 31,  2003 to 42.5% from 33.4% for the  comparable
period  of 2002 is also  the  result  of  lower  net  finance  margin  in  2003.
Similarly,  the  deterioration  in the ratio of salaries  and general  operating
expenses to AMA reflects  reduced levels of average managed assets.  We continue
to target an efficiency  ratio in the mid 30% area and an AMA ratio under 2.00%,
as we have the existing capacity to grow assets without  significant  additional
expense.

      Expenses are monitored  closely by business unit and corporate  management
and are reviewed monthly with our senior  management as to trends and forecasts.
To ensure overall project cost control,  an approval and review  procedure is in
place for major capital  expenditures,  such as computer equipment and software,
including post-implementation evaluations.

Goodwill and Other Intangible Assets Impairment and Amortization

      The Company  periodically  reviews and  evaluates  its  goodwill and other
intangible  assets for  potential  impairment.  Effective  October 1, 2001,  the
Company  adopted SFAS No. 142, under which  goodwill is no longer  amortized but
instead is assessed for impairment at least  annually.  As part of the adoption,
the Company allocated its existing goodwill to each of our reporting units as of
October 1, 2001.  Under the transition  provisions of SFAS No. 142, there was no
goodwill impairment as of October 1, 2001.

      During  the  quarter  ended  March 31,  2002,  our  former  parent,  Tyco,
experienced disruptions to its business surrounding its announced break-up plan,
downgrades  in its  credit  ratings,  and a  significant  decline  in its market
capitalization. As a result of these events at Tyco, CIT also experienced credit
downgrades  and a disruption  to our funding base and ability to access  capital
markets.   Further,   market-based  information  used  in  connection  with  our
preliminary  consideration  of an  initial  public  offering  for  100%  of  CIT
indicated  that CIT's book value  exceeded its estimated  fair value as of March
31,  2002.  As a  result,  management  performed  a Step 1 SFAS  142  impairment
analysis  as of March 31,  2002 and  concluded  that an  impairment  charge  was
warranted at that date.

      Management's  objective in performing  the Step 1 SFAS 142 analysis was to
obtain  relevant  market-based  data to  calculate  the  fair  value of each CIT
reporting  unit as of March 31, 2002 based on each  reporting  unit's  projected
earnings  and  market  factors  that  would be used by  market  participants  in
ascribing value to each of these  reporting  units in the planned  separation of
CIT from Tyco.  Management  obtained  relevant  market  data from our  financial
advisors regarding the range of price to earnings multiples and market discounts
applicable to each  reporting  unit as of March 31, 2002 and applied this market
data to the individual  reporting  unit's  projected annual earnings as of March
31, 2002 to calculate a fair value of each reporting  unit. The fair values were
compared to the corresponding carrying value of each reporting unit at March 31,
2002, resulting in a $4.513 billion impairment charge as of March 31, 2002.

      SFAS 142 requires a second step analysis  whenever the reporting unit book
value exceeds its fair value.  This  analysis  required us to determine the fair
value of each reporting unit's individual assets and liabilities to complete the
analysis of goodwill  impairment as of March 31, 2002.  During the quarter ended
June 30, 2002, we completed this analysis for each reporting unit and determined
that an  additional  Step 2 goodwill  impairment  charge of $132.0  million  was
required based on reporting unit level valuation data.

      There were no changes to the carrying value of goodwill during the quarter
ended March 31, 2003.

Provision for Credit Losses

      The provision  for credit  losses was $103.0  million for the three months
ended March 31, 2003 versus  $195.0  million for the same period last year.  The
2002 provision  included a $95.0 million charge relating to the economic reforms
instituted by the Argentine government that resulted in the mandatory conversion
of dollar-denominated receivables into the peso.


                                       24


      Our  provision  for  credit  losses  and  reserve  for  credit  losses are
presented in the following table ($ in millions):

                                                            Quarters Ended
                                                               March 31,
                                                        -----------------------
                                                         2003             2002
                                                        ------           ------
Balance beginning of period .........................   $760.8           $496.4
                                                        ------           ------
Provision for credit losses .........................    103.0            100.0
Provision for credit losses -- specific
   reserving actions Argentine exposure .............       --             95.0
Reserves relating to securitization of
   factoring receivables(1) .........................       --            (25.8)
Reserves relating to dispositions,
   acquisitions, other ..............................      7.5              1.7
                                                        ------           ------
   Additions to reserve for credit losses ...........    110.5            170.9
                                                        ------           ------
Net credit losses:
Equipment Financing and Leasing .....................     39.9             61.1
Specialty Finance -- commercial .....................     31.0             19.6
Commercial Finance ..................................     16.6             20.2
Structured Finance ..................................     13.8              0.1
Specialty Finance -- consumer .......................     13.0             11.4
                                                        ------           ------
   Total net credit losses ..........................    114.3            112.4
                                                        ------           ------
Balance end of period ...............................   $757.0           $554.9
                                                        ======           ======
Reserve for credit losses as a percentage
   of finance Receivables(2) ........................     2.64%            2.11%
                                                        ------           ------
Reserve for credit losses as a percentage
   of past due receivables (sixty days or more)(2) ..     77.9%            47.9%
                                                        ------           ------
--------------------------------------------------------------------------------
(1)   During  the  March  2002  quarter,   certain  factoring  receivables  were
      securitized to enhance our liquidity  position.  The $25.8 million reserve
      was related to those receivables.

(2)   The reserve for credit losses  excluding  the impact of  telecommunication
      and Argentine reserves as a percentage of finance receivables was 1.74% at
      March 31, 2003 and 1.64% at March 31, 2002.  The reserve for credit losses
      excluding  the impact of  telecommunication  and  Argentine  reserves  and
      delinquencies as a percentage of past due receivables (sixty days or more)
      was 49.6% at March 31, 2003.

      The following table sets forth our net charge-off experience in amount and
as a percent of average finance  receivables on an annualized  basis by business
segment ($ in millions):

                                                  Quarters Ended March 31,
                                            -----------------------------------
                                                  2003                2002
                                            ---------------      --------------
Equipment Financing and Leasing ........    $ 39.9    2.07%      $ 61.1   2.26%
Specialty Finance -- commercial ........      31.0    1.73%        19.6   1.21%
Commercial Finance .....................      16.6    0.80%        20.2   1.36%
Structured Finance .....................      13.8    1.90%         0.1   0.01%
                                            ------               ------
   Total Commercial Segments ...........     101.3    1.55%       101.0   1.59%
Specialty Finance-consumer .............      13.0    2.36%        11.4   1.51%
                                            ------               ------
   Total ...............................    $114.3    1.61%      $112.4   1.58%
                                            ======               ======

      Two factors are responsible for the decline in the Equipment Financing and
Leasing segment charge-offs. First, certain small business loans and leases were
transferred  from  Equipment  Financing  and  Leasing  to  Specialty  Finance --
commercial  during the  current  quarter  (prior  period  amounts  have not been
restated).  Charge-offs  during the March  2003  quarter  for these  transferred
portfolios  totaled $11.1 million,  versus $3.7 million during the quarter ended
March  31,  2002.  The  remaining  decline  is due  to  lower  charge-off  rates
associated with receivables in liquidation status, which include  owner-operator
trucking  and  franchise  offset  by  continued  weakness  in other  portfolios.
Excluding the transferred  portfolios,  charge-offs were flat for the quarter in
the Specialty Finance -- commercial unit. The increase in the Structured Finance
segment relates entirely to charge-offs in the telecommunications sector.

      Total  charge-offs  during the  quarter  ended  March 31, 2003 were $114.3
million (1.61%),  including $13.8 million of telecommunication loan charge-offs,
compared to $112.4  million  (1.58%) for the quarter  ended March 31, 2002.  The
tables that follow detail charge-offs for the quarters ended March 2003 and 2002
by segment,


                                       25


both in amount and as a percentage of average finance  receivables.  In addition
to total amounts, charge-offs relating to the liquidating and telecommunications
portfolios are presented to provide enhanced analysis ($ in millions):




                                                            Quarter Ended March 31, 2003
                                             ------------------------------------------------------------
                                                                       Before
                                                                   Liquidating and      Liquidating and
                                                   Total          Telecommunications  Telecommunications
                                             -----------------   ------------------   ------------------
                                                                               
Equipment Financing and Leasing ..........   $ 39.9    2.07%       $ 31.5   1.76%       $  8.4   6.48%
Specialty Finance--commercial ............     31.0    1.73%         30.6   1.71%          0.4   8.65%
Commercial Finance .......................     16.6    0.80%         16.6   0.80%           --     --
Structured Finance .......................     13.8    1.90%           --     --          13.8   8.23%
                                             ------                ------               ------
   Total Commercial Segments .............    101.3    1.55%         78.7   1.27%         22.6   7.48%
Specialty Finance--consumer ..............     13.0    2.36%          6.6   1.92%          6.4   3.09%
                                             ------                ------               ------
   Total .................................   $114.3    1.61%       $ 85.3   1.30%       $ 29.0   5.70%
                                             ======                ======               ======





                                                            Quarter Ended March 31, 2002
                                             ------------------------------------------------------------
                                                                       Before
                                                                   Liquidating and      Liquidating and
                                                   Total          Telecommunications  Telecommunications
                                             -----------------   ------------------   ------------------
                                                                               
Equipment Financing and Leasing ..........   $ 61.1    2.26%       $ 32.4   1.34%       $ 28.7   9.57%
Specialty Finance--commercial ............     19.6    1.21%         16.8   1.08%          2.8   5.36%
Commercial Finance .......................     20.2    1.36%         20.2   1.36%           --     --
Structured Finance .......................      0.1    0.01%          0.1   0.01%           --     --
                                             ------                ------               ------
   Total Commercial Segments .............    101.0    1.59%         69.5   1.15%         31.5   8.94%
Specialty Finance--consumer ..............     11.4    1.51%          5.7   0.95%          5.7   3.65%
                                             ------                ------               ------
   Total .................................   $112.4    1.58%       $ 75.2   1.13%       $ 37.2   7.32%
                                             ======                ======               ======


Reserve for Credit Losses

      The  reserve  for credit  losses  was  $757.0  million or 2.64% of finance
receivables at March 31, 2003 compared to $760.8 million (2.75%) at December 31,
2002 and $554.9  million  (2.11%) at March 31, 2002.  The decrease from December
2002  relates  to $13.8  million  of  telecommunication  charge-offs  which were
applied  to  the  specific   telecommunications  reserve  established  in  2002,
partially offset by reserves associated with loan growth during the quarter. The
increase  in the  reserve  over  last  year,  both on a  dollar  basis  and as a
percentage of finance  receivables,  is primarily due to two specific  reserving
actions.   First,   in   light   of   the   continued   deterioration   in   the
telecommunications  sector,  particularly  with respect to our competitive local
exchange carrier ("CLEC") portfolio,  we added $200.0 million to the reserve for
credit  losses as at June 30, 2002.  Additionally,  as a result of the Argentine
government's action to convert  dollar-denominated loans to pesos, and continued
weakness in the peso, we recorded a $135.0 million provision ($95 million during
the quarter  ended March 31, 2002 and $40 million  during the quarter ended June
30, 2002). The current balances for the specific reserves are detailed below.

      The following  table  presents the specific  components of the reserve for
credit  losses,  both in amount and as a  percentage  of  corresponding  finance
receivables ($ in millions):



                                 At March 31, 2003      At December 31, 2002      At March 31, 2002(3)
                                 -----------------      -------------------       -------------------
                                                                              
Finance receivables ..........   $482.2    1.74%          $472.2    1.77%            $485.7     1.64%
Telecommunications ...........    139.8   21.33%(1)        153.6   22.40%(1)             --       --
Argentina ....................    135.0   72.50%(2)        135.0   73.11%(2)           95.0    52.78%(2)
                                 ------                   ------                     ------
Total ........................   $757.0    2.64%          $760.8    2.75%            $580.7     1.95%
                                 ======                   ======                     ======

--------------------------------------------------------------------------------
(1)   Percentages of telecommunications portfolio finance receivables.

(2)   Percentages of finance receivables in Argentina.

(3)   On a pro forma  basis to include  trade  receivables  securitized  and the
      applicable reserve balance ($25.8 million).


                                       26


      The reserve includes  specific amounts relating to SFAS 114 impaired loans
(excluding telecommunications and Argentina) of $52.8 million at March 31, 2003,
compared to $52.9 million at December 31, 2002,  and $131.4 million at March 31,
2002.  Management  continues to believe that the credit risk  characteristics of
the  portfolio  are  well  diversified  by  geography,  industry,  borrower  and
equipment type. Refer to "Concentrations" for more information.

      The total telecommunications portfolio and the portion comprising the CLEC
exposure  amounted  to $678.7  million  and $238.0  million  at March 31,  2003,
compared to $710.1  million and $262.3  million at December 31, 2002.  As stated
previously, during the current quarter, specific telecommunications  charge-offs
were $13.8 million, versus $15.5 million during the prior quarter.

      The  consolidated  reserve  for credit  losses is  intended to provide for
losses  inherent in the portfolio,  which requires the  application of estimates
and significant  judgment as to the ultimate  outcome of collection  efforts and
realization of collateral,  among other things.  Therefore,  changes in economic
conditions  or other  events  affecting  specific  obligors  or  industries  may
necessitate  additions  or  deductions  to the  consolidated  reserve for credit
losses.

Past Due and Non-performing Assets

      The following table sets forth certain information concerning our past due
(sixty  days  or  more)  and  non-performing   assets  (finance  receivables  on
non-accrual status and assets received in satisfaction of loans) and the related
percentages  of finance  receivables  at March 31,  2003,  December 31, 2002 and
March 31, 2002 ($ in millions):



                                                     At March 31,        At December 31,       At March 31,
                                                         2003                 2002                 2002
                                                   ----------------      --------------      ------------------
                                                                                      
Finance receivables, past due 60 days or more:
   Equipment Financing and Leasing .............  $  366.5    4.91%     $  444.8   5.12%     $  463.0   4.39%
   Specialty Finance --  commercial ............     264.7    3.68%        182.9   3.07%        287.3   4.55%
   Commercial Finance ..........................     152.8    1.76%        172.3   2.14%        224.7   2.86%(1)
   Structured Finance ..........................      55.2    1.89%         67.6   2.31%         39.0   1.49%
                                                  --------              --------             --------
   Total Commercial Segments ...................     839.2    3.19%        867.6   3.39%      1,014.0   3.71%(1)
   Specialty Finance -- consumer ...............     132.0    5.53%        133.7   6.66%        144.1   5.96%
                                                  --------              --------             --------
   Total .......................................  $  971.2    3.39%     $1,001.3   3.63%     $1,158.1   3.90%(1)
                                                  ========              ========             ========
Non-performing assets:
   Equipment Financing and Leasing .............  $  425.4    5.70%     $  558.4   6.42%     $  472.3   4.48%
   Specialty Finance -- commercial .............     160.4    2.23%         98.2   1.65%        140.1   2.22%
   Commercial Finance ..........................     128.0    1.47%        136.2   1.69%        138.5   1.76%(1)
   Structured Finance ..........................     143.4    4.91%        151.6   5.19%         81.8   3.12%
                                                  --------              --------             --------
   Total Commercial Segments ...................     857.2    3.26%        944.4   3.69%        832.7   3.05%(1)
   Specialty Finance -- consumer ...............     149.2    6.25%        141.4   7.04%        155.7   6.44%
                                                  --------              --------             --------
   Total .......................................  $1,006.4    3.51%     $1,085.8   3.93%     $  988.4   3.32%(1)
                                                  ========              ========             ========
Non accrual loans ..............................  $  851.3              $  946.4             $  840.1
Repossessed assets .............................     155.1                 139.4                148.3
                                                  --------              --------              -------
   Total non-performing assets .................  $1,006.4              $1,085.8             $  988.4
                                                  ========              ========             ========

--------------------------------------------------------------------------------
(1)   For comparison, the securitized trade receivables,  which were repurchased
      in June 2002, are included in the calculation.

      Past due loans  continued  a  declining  trend,  down $30.1  million  from
December 31, 2002,  ending the quarter at 3.39% of finance  receivables,  versus
3.63% last quarter.  The fluctuations in the Equipment Financing and Leasing and
Specialty  Finance --  commercial  segments,  primarily  reflect the  previously
mentioned  transfer of small business loans and leases from Equipment  Financing
and Leasing to Specialty  Finance --  commercial.  Past due accounts  related to
these transferred  portfolios  approximated $77 million and $79 million at March
2003 and December 2002,  respectively.  Excluding the transferred accounts, past
dues in Equipment Financing and Leasing and Specialty Finance -- commercial were
essentially  unchanged quarter over quarter.  Commercial Finance declined due to
improvements  in  the  Commercial  Services  (factoring)  unit,  while  regional
aerospace and CLEC accounts within the Structured  Finance segment accounted for
most of the decline from December 2002.


                                       27


      Similar to past due loans,  non-performing  assets declined for the second
consecutive  quarter at March 31, 2003.  Excluding  the impact of the  portfolio
transfers,  the  reduction  for the  quarter  was  primarily  in the  commercial
aerospace  portfolio,  as  aircraft  securing  United  Airlines  receivables  on
non-accrual at December 31, 2002 were placed on short-term  operating leases and
payments  were  received  during  the  quarter  to bring the  account to current
status.  This reduction was in part offset by the placement of Air Canada assets
on non-accrual status following its bankruptcy announcement.

      Managed past due loans, which also include securitized loans, decreased to
3.38% of managed  financial  assets  (managed  assets less operating  leases and
venture capital  investments) at March 31, 2003 from 3.55% and 4.09% at December
31,  2002 and March 31,  2002,  respectively,  as shown in the table below ($ in
millions):




                                               March 31, 2003      December 31, 2002     March 31, 2002
                                             -----------------     -----------------    ----------------
                                                                                 
Managed Financial Assets, past
   due 60 days or more:
   Equipment Financing and Leasing .......   $  540.7    4.66%     $  631.2   4.95%     $  778.5   5.40%
   Specialty Finance -- commercial .......      343.0    3.04%        265.1   2.62%        401.0   3.66%
   Commercial Finance ....................      152.8    1.76%        172.3   2.14%        224.7   2.86%
   Structured Finance ....................       55.2    1.89%         67.6   2.31%         39.0   1.49%
                                             --------              --------             --------
   Total Commercial ......................    1,091.7    3.16%      1,136.2   3.36%      1,443.2   4.02%
   Specialty Finance-consumer ............      269.6    4.64%        259.4   4.71%        237.0   4.51%
                                             --------              --------             --------
   Total .................................   $1,361.3    3.38%     $1,395.6   3.55%     $1,680.2   4.09%
                                             ========              ========             ========


      In light of the continued general economic weakness, and the circumstances
surrounding  particular  sectors  as  discussed  in  "Concentrations",  past due
finance  receivables and non-performing  assets may increase from March 31, 2003
amounts.

Income Taxes

      The effective tax rates for the three months ended March 31, 2003 and 2002
were 39.0% and (1.1)%,  respectively.  The  provision  for income taxes  totaled
$82.9 million and $50.4 million for the  respective  periods.  The effective tax
rate for the prior year  quarter,  excluding  the impact of TCH and the non-cash
goodwill impairment charge, was 38.1%.

      As of March 31, 2003, we had  approximately  $1,559.0  million of tax loss
carry-forwards, primarily related to U.S. federal and state jurisdictions, which
expire at  various  dates  beginning  in 2010.  These  loss  carry-forwards  are
available to offset current federal income tax  liabilities,  subject to certain
limitations.

      In  connection  with the June 2001  acquisition  by Tyco,  our  income tax
compliance,  reporting and planning function was transferred to Tyco.  Following
our 2002 IPO and separation from Tyco we have made strides in rebuilding our tax
functions, including hiring personnel, and rebuilding systems and processes.


                                       28


Results by Business Segment

      The table  that  follows  summarizes  selected  financial  information  by
business  segment,  based upon a fixed leverage ratio across  business units and
the allocation of most corporate expenses ($ in millions):

                                                     Quarters Ended
                                          -------------------------------------
                                          March 31,   December 31,     March 31,
                                            2003         2002            2002
                                          ---------   ------------    ---------
Net Income
Equipment Financing and Leasing ........   $ 18.4        $ 36.2         $ 62.6
Specialty Finance ......................     52.2          73.7          100.0
Commercial Finance .....................     54.1          63.4           46.2
Structured Finance .....................     12.2          13.9           16.4
                                           ------        ------      ---------
   Total Segments ......................    136.9         187.2          225.2
Corporate, including certain charges ...     (9.9)        (45.9)      (4,844.9)
                                           ------        ------      ---------
   Total ...............................   $127.0        $141.3      $(4,619.7)
                                           ======        ======      =========
Return on AEA
Equipment Financing and Leasing ........     0.55%         1.02%          1.58%
Specialty Finance ......................     1.75%         2.86%          3.20%
Commercial Finance .....................     3.58%         5.18%          3.72%
Structured Finance .....................     1.63%         1.96%          2.51%
   Total Segments ......................     1.60%         2.32%          2.70%
Corporate, including certain charges ...    (0.13)%       (0.59)%       (53.83)%
   Total ...............................     1.47%         1.73%        (51.32)%

      Corporate  and Other  included the  following  items in the quarter  ended
March 31, 2002: (1) goodwill impairment of $4,512.7 million, (2) TCH expenses of
$312.3  million  ($264.3  million after tax), (3) specific loan loss reserves of
$95.0 million ($58.9 million after tax) relating to economic reforms  instituted
by the  Argentine  government  which  resulted in the  mandatory  conversion  of
dollar-denominated  receivables into pesos, (4) venture capital operating losses
of $13.7 million ($8.6 million after tax).  Corporate and Other  included  $14.5
million  ($8.9  million after tax) of venture  capital  operating  losses in the
quarter  ended March 31,  2003.  Excluding  these items,  after tax  unallocated
corporate  expenses and funding costs were $0.5 million and $0.4 million  during
the quarters ended March 31, 2003 and March 31, 2002, respectively.

      Return on AEA was down  across all  segments  for 2003 in  relation to the
2002 periods reflecting margin compression and charge-offs  (before  liquidating
and  telecommunication  portfolios)  above  the year  ago  quarter  levels.  The
business  segments'  risk adjusted  margins for the quarter ended March 31, 2003
were further dampened by the allocation (from Corporate) of additional borrowing
costs  stemming  from the 2002  disruption  to the  Company's  funding  base and
enhanced liquidity levels.  These additional costs were significantly  higher in
2003. The additional borrowing and liquidity costs were included in Corporate in
2002.

      The unfavorable variance in Equipment Financing and Leasing included lower
aerospace  profitability  as well as  reduced  returns in the  construction  and
industrial  businesses within the Equipment Financing unit. In addition to lower
risk adjusted  margins,  the Specialty  Finance  comparisons with the prior year
reflected  higher  levels of  securitization  activity  during the quarter ended
March 31, 2002 done  primarily for  liquidity  purposes.  The Specialty  Finance
returns were also  dampened by the  transferred  portfolios,  which had a modest
loss for the current quarter.

      During  the  quarter  ended  March  31,  2003,  in order to  better  align
competencies,  we transferred certain small business loans and leases, including
the small  business  lending unit,  totaling  $1,078.6  million,  from Equipment
Financing  and Leasing to Specialty  Finance --  commercial.  At March 31, 2003,
finance receivables past due 60 days or more and non-performing  assets relating
to these  portfolios were $77 million and $70 million versus $79 million and $73
million at December 31, 2002. Prior periods have not been restated to conform to
this current presentation.

Financing and Leasing Assets

      Managed  assets,  comprised  of financing  and leasing  assets and finance
receivables  previously  securitized  that we continue to manage,  totaled $47.5
billion at March 31, 2003,  up from $46.4  billion at December  31, 2002.  Owned
financing and leasing  portfolio assets totaled $37.1 billion at March 31, 2003,
up from $35.9 billion at


                                       29


December 31, 2002. Our portfolio assets grew during the quarter in most business
units. During the quarter,  certain asset portfolios  totaling  approximately $1
billion were  transferred  from Equipment  Financing to Specialty  Finance.  The
remaining  growth in the  Specialty  Finance --  commercial  segment  was due to
seasonality of certain  portfolios and complementary  portfolio  purchases.  The
Specialty  Finance-consumer  home equity growth was attributed to  opportunistic
bulk purchases  made during the quarter.  Commercial  Finance  growth  reflected
increased  borrowings  by customers  under  existing  credit  facilities.  Total
origination  volume  was down 12% from the prior  quarter  and 5% from the prior
year quarter. Specialty Finance had the most notable improvement, as its volumes
were up over both periods.

      As of March 31, 2003, the net investment in leveraged  leases totaled $1.2
billion, or 4.2% of finance receivables. The major components of this amount are
as follows:  commercial  aerospace of $470  million,  including  $216 million of
tax-optimization  leveraged  leases,  which  generally  have  increased risk for
lessors in relation to conventional lease structures due to additional  leverage
in the transactions; $304 million of project finance transactions,  primarily in
the power and utility sector; and $281 million in rail transactions.

      The  managed  assets  of  our  business  segments  and  the  corresponding
strategic business units are presented in the following table ($ in millions):



                                                   At             At                 Change
                                                March 31,    December 31,   ------------------------
                                                  2003           2002            $             %
                                               ----------     -----------   ----------    ----------
                                                                               
Equipment Financing and Leasing:
Equipment Financing
   Finance receivables(1) ...................   $ 6,400.8      $ 7,476.9     $(1,076.1)    (14.4)%
   Operating lease equipment, net ...........       527.4          668.3        (140.9)    (21.1)
                                                ---------      ---------      --------
     Total ..................................     6,928.2        8,145.2      (1,217.0)    (14.9)
                                                ---------      ---------      --------
Capital Finance

   Finance receivables ......................     1,223.7        1,335.8        (112.1)     (8.4)
   Operating lease equipment, net ...........     4,973.0        4,719.9         253.1       5.4
                                                ---------      ---------      --------
     Total ..................................     6,196.7        6,055.7         141.0       2.3
                                                ---------      ---------      --------
   Total Equipment Financing and
     Leasing Segment ........................    13,124.9       14,200.9      (1,076.0)     (7.6)
                                                ---------      ---------      --------
Specialty Finance:
Commercial
   Finance receivables(1) ...................     8,101.1        6,722.4       1,378.7      20.5
   Operating lease equipment, net ...........     1,227.6        1,257.3         (29.7)     (2.4)
                                                ---------      ---------      --------
     Total commercial .......................     9,328.7        7,979.7       1,349.0      16.9
                                                ---------      ---------      --------
Consumer
   Home equity ..............................     1,601.3        1,292.7         308.6      23.9
   Other ....................................       995.8        1,044.4         (48.6)     (4.7)
                                                ---------      ---------      --------
     Total consumer .........................     2,597.1        2,337.1         260.0      11.1
                                                ---------      ---------      --------
     Total Specialty Finance Segment ........    11,925.8       10,316.8       1,609.0      15.6
                                                ---------      ---------      --------
Commercial Services .........................     4,726.1        4,392.5         333.6       7.6
Business Credit .............................     3,956.6        3,649.1         307.5       8.4
                                                ---------      ---------      --------
     Total Commercial Finance Segment .......     8,682.7        8,041.6         641.1       8.0
                                                ---------      ---------      --------
Structured Finance:
   Finance receivables ......................     2,922.2        2,920.9           1.3        --
   Operating lease equipment, net ...........       103.4           59.1          44.3      75.0
Equity investments ..........................       334.3          335.4          (1.1)     (0.3)
                                                ---------      ---------      --------
     Total Structured Finance Segment .......     3,359.9        3,315.4          44.5       1.3
                                                ---------      ---------      --------
     TOTAL FINANCING AND LEASING
       PORTFOLIO ASSETS .....................    37,093.3       35,874.7       1,218.6       3.4
                                                ---------      ---------      --------
Finance receivables securitized:
Equipment Financing .........................     3,977.2        3,936.2          41.0       1.0
Specialty Finance--commercial ...............     3,191.7        3,377.4        (185.7)     (5.5)
Specialty Finance--consumer .................     3,218.8        3,168.8          50.0       1.6
                                                ---------      ---------      --------
     Total ..................................    10,387.7       10,482.4         (94.7)     (0.9)
                                                ---------      ---------      --------
     TOTAL MANAGED ASSETS(2) ................   $47,481.0      $46,357.1      $1,123.9       2.4%
                                                =========      =========      ========

--------------------------------------------------------------------------------

(1)   During the quarter,  certain owned finance  receivables  totaling $1,078.6
      million were transferred from Equipment  Financing to Specialty Finance --
      commercial,  principally  representing small business loans. Prior periods
      have not been restated to conform to the current presentation.

(2)   Managed assets are compromised of financing and leasing assets and finance
      receivables previously securitized that we continue to manage.


                                       30


Concentrations

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  5.0% of our total  financing  and leasing  assets at both March 31,
2003 (with the largest  account  representing  less than 1.0%) and  December 31,
2002. All ten accounts at each period of time were commercial  accounts and were
secured by equipment, accounts receivable or inventory.

      Our strategic relationships with industry-leading  equipment vendors are a
significant origination channel for our financing and leasing activities.  These
vendor alliances include traditional vendor finance programs, joint ventures and
profit sharing  structures.  Our vendor programs with Dell Computer  Corporation
("Dell"),  Snap-on  Incorporated  ("Snap-on") and Avaya Inc. ("Avaya") are among
our largest alliances. The joint venture agreements with Dell and Snap-on extend
until October 2005 and January 2007,  respectively.  The Avaya agreement,  which
runs  until  September  2003,  extends  automatically  for  three  years  if not
terminated by either party.  No notice of  termination  has been given by either
party, and we are currently negotiating the terms of an extension with Avaya.

      At March 31,  2003,  our  financing  and leasing  assets  included  $2,930
million,  $1,008  million and $1,079  million  related to the Dell,  Snap-on and
Avaya  programs,  respectively.  These amounts  include  receivables  originated
directly by CIT as well as receivables  purchased  from joint venture  entities.
Securitized  assets included  $1,553 million,  $88 million and $857 million from
the Dell,  Snap-on and Avaya  origination  sources,  respectively,  at March 31,
2003.  Any  significant  reduction  in  origination  volumes  from  any of these
alliances  could  have a material  impact on our asset  levels.  For  additional
information  regarding certain of our joint venture  activities,  see Note 11 --
Related Party Transactions.

Geographic Composition

      The following table summarizes state concentrations  greater than 5.0% and
foreign  concentrations  in excess of 1.0% of our owned  financing  and  leasing
portfolio  assets at March 31, 2003 and December 31, 2002.  In each period,  our
managed asset geographic composition did not differ significantly from our owned
asset geographic composition.

                                                       March 31,    December 31,
                                                         2003           2002
                                                       ---------    ------------
State
California .........................................      9.7%           9.8%
New York ...........................................      7.5%           7.9%
Texas ..............................................      6.9%           7.0%
Total U.S. .........................................     79.6%          79.3%

Country
Canada .............................................      5.0%           5.0%
England ............................................      3.3%           3.2%
Australia ..........................................      1.3%           1.3%
China ..............................................      1.2%           1.2%
Germany ............................................      1.0%           1.1%
Brazil .............................................      1.0%           1.1%
France .............................................      1.0%           1.0%
Total Outside U.S. .................................     20.4%          20.7%
--------------------------------------------------------------------------------
(1) The applicable balances are less than 1.0%.

Industry Composition

      At March 31,  2003,  our  commercial  aerospace  portfolio  in the Capital
Finance  business  unit  consisted of financing  and leasing  assets of $4,179.7
million covering 195 aircraft, with an average age of approximately 7 years. The
portfolio  was spread  over 74  accounts,  with the  majority  placed with major
airlines around the world.  The commercial  aerospace  portfolio at December 31,
2002 was $4,072.8  million of financing  and leasing  assets,  which covered 194
aircraft spread over 78 accounts,  with an average age of approximately 7 years.
The commercial aircraft all comply with stage III noise regulations.


                                       31


      The following table summarizes the composition of the commercial aerospace
portfolio as of March 31, 2003 and December 31, 2002 ($ in millions):

                              At March 31, 2003          At December 31, 2002
                          ------------------------     -------------------------
                              Net        Number of         Net         Number of
                          Investment     Aircraft      Investment      Aircraft
                          ----------    ----------     ----------     ----------

By Geography:
   Europe ..............   $1,537.4           51        $1,506.5           51
   North America(1) ....    1,110.1           78         1,042.2           75
   Asia Pacific ........      886.5           36           853.6           35
   Latin America .......      572.5           26           595.9           29
   Africa/Middle East ..       73.2            4            74.6            4
                           --------          ---        --------          ---
Total ..................   $4,179.7          195        $4,072.8          194
                           ========          ===        ========          ===
By Manufacturer:
   Boeing ..............   $2,514.2          138        $2,388.1          135
   Airbus ..............    1,640.8           42         1,647.9           42
   Other ...............       24.7           15            36.8           17
                           --------          ---        --------          ---
Total ..................   $4,179.7          195        $4,072.8          194
                           ========          ===        ========          ===
By Body Type(2):
   Narrow ..............   $2,909.8          144        $2,799.4          142
   Intermediate ........      871.6           18           859.2           17
   Wide ................      373.6           18           377.4           18
   Other ...............       24.7           15            36.8           17
                           --------          ---        --------          ---
Total ..................   $4,179.7          195        $4,072.8          194
                           ========          ===        ========          ===
--------------------------------------------------------------------------------
(1)   Comprised of net  investments in the U.S. and Canada of $902.0 million (72
      aircraft) and $208.1 (6 aircraft) at March 31, 2003 and $832.7 million (69
      aircraft) and $209.5 million (6 aircraft) at December 31, 2002.

(2)   Narrow body are single  aisle  design and consist  primarily of Boeing 737
      and 757 series and Airbus  A320  series  aircraft.  Intermediate  body are
      smaller twin aisle  design and consist  primarily of Boeing 767 series and
      Airbus A330  series  aircraft.  Wide body are large twin aisle  design and
      consist  primarily of Boeing 747 and 777 series and McDonnell Douglas DC10
      series aircraft.

      As of March 31, 2003,  operating leases  represented  approximately 81% of
the  portfolio,  with the  remainder  consisting  of capital  leases  (including
leveraged leases) and loans.  Tax-optimization leveraged leases, which generally
have  increased  risk for lessors in comparison to our other lease and leveraged
lease  structures,  were  approximately  $216 million at March 31,  2003.  Total
leveraged  leases,  including the tax optimization  structures  described above,
were $469 million or 11% of the  aerospace  portfolio at March 31, 2003.  Of the
195  aircraft,  7 are  off-lease,  4 of which have been  remarketed  with leases
pending as of March 31, 2003.

      The regional aircraft  portfolio at March 31, 2003 consisted of 115 planes
and a net  investment of $309.1  million,  primarily in the  Structured  Finance
segment. The planes are primarily located in North America and Europe. Operating
leases accounted for about 32% of the portfolio at March 31, 2003, with the rest
being capital  leases or loans.  There are 5 aircraft in this portfolio that are
off-lease.  At December 31, 2002, the regional aircraft  portfolio  consisted of
117 planes and a net investment of $344.0 million.

      The following is a list of CIT's exposure to various  carriers and current
status of related aircraft.

      o     U.S.  Airways -- On August 11,  2002,  U.S.  Airways  announced  its
            Chapter  11  bankruptcy  filing.  On March 31,  2003,  U.S.  Airways
            emerged  from  its  bankruptcy  filing  and  currently  leases  five
            narrow-body 737's owned by CIT (classified as operating leases) with
            a net book value of $57.0 million.

      o     National Airways -- On November 6, 2002, National Airways, which was
            operating in bankruptcy,  announced  that it would cease  operations
            effective  November 6, 2002. We have repossessed our two narrow-body
            Boeing 757 aircraft  previously leased to National,  with a carrying
            value of $39.3 million, and are remarketing the aircraft.

      o     UAL Corp.  -- On December 9, 2002,  UAL Corp.,  the parent of United
            Airlines, announced its Chapter 11 bankruptcy filing. Under existing
            agreements,  United Airlines  leases four CIT-owned  aircraft narrow
            body (2 Boeing 757  aircraft and 2 Boeing 737  aircraft)  with a net
            book value of $92.3 million. These


                                       32


            leases  were  converted  from  single  investor  capital  leases  to
            short-term operating leases during the quarter ended March 31, 2003.
            In  conjunction  with this  conversion,  we recorded a $1.8  million
            impairment charge to reflect current fair values.

      o     Avianca Airlines -- Avianca  Airlines filed voluntary  petitions for
            re-organization  under  Chapter  11 of the U.S.  Bankruptcy  Code on
            Friday, March 21, 2003. Under existing agreements, CIT has operating
            leases  with  Avianca  whereby it is the lessee of one MD 80 and one
            Boeing 757  aircraft,  the latter of which is  scheduled to come off
            lease in May.  The net  book  value of the two  aircraft  was  $40.8
            million at March 31, 2003.

      o     Air Canada -- Air Canada  filed for  protection  from  creditors  on
            April 1, 2003 under the Companies'  Creditors  Arrangement  Act, the
            Canadian  reorganization  law.  CIT's  exposure  in  aircraft to Air
            Canada is approximately  USD$80 million,  primarily  relating to two
            Boeing 767 aircraft.  One aircraft is scheduled to come off-lease on
            June 1,  2003  for  which  CIT has a signed  commitment  in place to
            re-lease the aircraft to another carrier. On the second 767, CIT has
            an investment in a leveraged lease (not a tax-optimized  structure),
            with a remaining term of six years.

      Additionally, CIT holds $36.7 million and $5.3 million in Senior A tranche
Enhanced Equipment Trust Certificates (EETCs) issued by United Airlines and U.S.
Airways,  respectively,  which are debt instruments  collateralized  by aircraft
operated by the  airlines.  In  connection  with United  Airlines'  filing under
Chapter 11, CIT is a co-arranger  in a $1.2 billion  secured  revolving and term
loan  facility  with a commitment  of $102  million.  This  debtor-in-possession
facility,  with an  outstanding  balance of $32.0  million at March 31, 2003, is
secured by, among other collateral,  previously  unencumbered  aircraft.  Future
revenues and aircraft  values could be impacted by the actions of the  carriers,
management's actions with respect to re-marketing the aircraft, airline industry
performance and aircraft utilization.

      The top five  commercial  aerospace  exposures  totaled  $977.7 million at
March 31, 2003, the largest of which was $242.6 million.  The top three of these
exposures are to European  carriers and all are to carriers  outside of the U.S.
The largest exposure to a U.S. carrier at March 31, 2003 was $144.9 million.

      Our aerospace  assets  include both operating  leases and capital  leases.
Management  monitors economic conditions  affecting equipment values,  trends in
equipment values, and periodically  obtains third party appraisals of commercial
aerospace  equipment,  which  include  projected  rental  rates.  We adjust  the
depreciation  schedules of commercial aerospace equipment on operating leases or
residual values underlying capital leases,  when required.  Aerospace assets are
reviewed for  impairment  annually,  or more often when events or  circumstances
warrant.   An  aerospace   asset  is  considered   impaired  when  the  expected
undiscounted  cash flow over its expected  remaining  life is less than its book
value. Both historical information and current economic trends are factored into
the  assumptions and analyses used when  determining  the expected  undiscounted
cash flow. Included among these assumptions are the following:

      o     Lease terms

      o     Remaining life of the asset

      o     Lease rates supplied by independent appraisers

      o     Remarketing

      o     Maintenance

      An  impairment  loss is  recognized  if the asset book value  exceeds  the
estimated fair value determined under the aforementioned cash flow analysis.  As
discussed  previously,  during the quarter  ended March 31, 2003, we recorded an
impairment  charge of $1.8  million  related  to the United  Airlines  exposure.
Impairment  charges  related  to  commercial  aerospace  assets  have  not  been
significant.

      Our  telecommunications  portfolio is included in  "Communications" in the
industry  composition  table  included in Note 7 to the  Consolidated  Financial
Statements.  This  portfolio  totals  approximately  $678.7 million at March 31,
2003, or approximately 1.8% of total financing and leasing assets. The portfolio
consists of 53 accounts with an average balance of approximately  $12.8 million.
The 10 largest  accounts in the  portfolio  aggregate  $265.6  million  with the
largest single account totaling $33.4 million.  Non-performing  accounts totaled
$85.5 million (9 accounts) or 12.6% of this  portfolio.  The  telecommunications
portfolio  includes CLECs,  wireless,  and towers,  with the largest group being
CLEC accounts,  which totaled $238.0 million, or 35.1% of the telecommunications
portfolio at March 31, 2003. At December 31, 2002, the portfolio  totaled $710.1
million (approximately 2.0% of total financing and


                                       33


leasing  assets)  and  consisted  of 52  accounts  with an  average  balance  of
approximately $13.7 million. The 10 largest accounts in the portfolio aggregated
$264.5  million  with  the  largest  single  account   totaling  $32.9  million.
Non-performing  accounts  totaled  $120.2 million (10 accounts) or 16.9% of this
portfolio.  Total CLEC exposure  amounted to $262.3 million.  Many of these CLEC
accounts are still in the process of building out their  networks and developing
their customer bases. Our telecommunications  transactions are collateralized by
the assets of the customer  (equipment,  receivables,  cash, etc.) and typically
are also secured by a pledge of the stock of non-public companies. Weak economic
conditions and industry  overcapacity have driven down values in this sector. As
discussed  in  "Provision  and Reserve  for Credit  Losses,"  $139.8  million of
previously  recorded  reserves  remain  for  telecommunication   exposures.   As
management  continues  monitoring and workout of the individual accounts in this
portfolio,   charge-offs  will  likely  be  recorded  against  this  reserve  in
subsequent periods. Weakness in this sector could result in additional losses or
require additional reserves.

      The  portfolio  of  direct  and  private  fund  venture   capital   equity
investments  totaled  $334.3  million at March 31,  2003 and  $335.4  million at
December 31, 2002.  At March 31, 2003,  this  portfolio  was comprised of direct
investments of  approximately  $179.6 million in 57 companies and $154.7 million
in 52 private equity funds.  Our direct  investments  totaled $188.8 million (57
companies) and our investment in private equity funds amounted to $146.6 million
(52 funds) as of  December  31,  2002.  These  investments  are  principally  in
emerging growth enterprises in selected industries, including industrial buyout,
information  technology,  life science and consumer products. In 2001, we ceased
making new  venture  capital  investments  beyond  existing  commitments,  which
totaled  approximately  $153.7  million at March 31, 2003 and $164.9  million at
December 31, 2002. These commitments,  which are mainly to private equity funds,
may, or may not, be drawn.  Performance of both our direct  investments  and our
fund investments  will depend upon the performance of the underlying  companies,
and public and private market valuations of these companies.

      At  March  31,  2003,  we  had   approximately   $186.2  million  of  U.S.
dollar-denominated  loans and assets  outstanding to customers  located or doing
business in Argentina. During 2002, the Argentine government instituted economic
reforms,  including  the  conversion  of certain  dollar-denominated  loans into
pesos.  Due to these  actions and the  weakness of the peso,  we  established  a
reserve of $135.0 million during the year. The underlying portfolio continues to
perform as to collection, but payments are now in pesos. Therefore, our exposure
is  primarily  currency  related.  Management  is currently  taking  measures to
mitigate  currency risk by  converting  peso  collections  to dollars as legally
permitted.

      Management  strives to maximize the  profitability  of the operating lease
equipment portfolio by balancing equipment utilization levels with market rental
rates and lease terms.  Substantially  all such  equipment  was subject to lease
agreements  throughout the first quarter of 2003 and 2002.  Total  equipment not
subject to lease  agreements  was $360.6 million and $385.9 million at March 31,
2003 and December 31, 2002, respectively. The current weakness in the commercial
airline  industry and the slower economy could adversely  impact both rental and
utilization rates prospectively.

      See Note 7 -- Concentrations of Item 1. Consolidated  Financial Statements
for further discussion on concentrations.

Other Assets

      Other  assets  totaled  $4.8 billion at March 31, 2003 and $4.7 billion at
December 31, 2002, as both the total balance and the underlying  components were
essentially  unchanged.  Other assets  primarily  consisted of the  following at
March 31, 2003:  securitization assets, including interest-only strips, retained
subordinated  securities,  cash reserve  accounts and  servicing  assets of $1.4
billion,  investments in and  receivables  from and related to  non-consolidated
subsidiaries of $0.8 billion,  accrued  interest and receivables from derivative
counterparties  of  $0.7  billion,   deposits  on  commercial  aerospace  flight
equipment of $0.3 billion,  direct and private fund equity  investments  of $0.3
billion,  repossessed  assets of $0.2 billion,  prepaid expenses of $0.1 billion
and investment in aerospace  securities of $0.1 billion.  The remaining  balance
includes furniture and fixtures, miscellaneous receivables and other assets.

Results and Trends in Relation to the Prior Quarter

      The following analysis is provided in addition to the year-over-prior year
period  analysis  in order to  discuss  trends in our  business  in the  periods
subsequent to our July 2002 IPO.


                                       34


      Net income for the quarter  ended March 31,  2003 was $127.0  million,  or
$0.60 per diluted share,  compared to $141.3 million, or $0.67 per diluted share
for the quarter ended December 31, 2002. The table that follows presents results
for the quarters ended March 31, 2003 and December 31, 2002,  both in amount and
as a percentage of average earning assets ("AEA") ($ in millions):



                                                                    Quarter ended             Quarter ended
                                                                    March 31, 2003          December 31, 2002
                                                                   ------------------      -------------------
                                                                     Amount     % AEA        Amount      % AEA
                                                                   ---------    -----      ---------     -----
                                                                                             
Finance income .................................................   $   939.2    10.86%     $   971.7     11.89%
Interest expense ...............................................       346.7     4.01          340.0      4.16
                                                                   ---------    -----      ---------     -----
Net finance income .............................................       592.5     6.85          631.7      7.73
Depreciation on operating lease equipment ......................       278.8     3.22          277.3      3.39
                                                                   ---------    -----      ---------     -----
Net finance margin .............................................       313.7     3.63          354.4      4.34
Provision for credit losses ....................................       103.0     1.19          133.4      1.64
                                                                   ---------    -----      ---------     -----
Net finance margin after provision for credit losses ...........       210.7     2.44          221.0      2.70
Other revenue ..................................................       235.5     2.72          257.1      3.15
                                                                   ---------    -----      ---------     -----
Operating margin ...............................................       446.2     5.16          478.1      5.85
Salaries and general operating expenses ........................       233.6     2.70          242.1      2.96
                                                                   ---------    -----      ---------     -----
Income before provision for income taxes .......................       212.6     2.46          236.0      2.89
Provision for income taxes .....................................       (82.9)   (0.96)         (92.0)    (1.13)
Minority interest in subsidiary trust holding solely
   debentures of the Company, after tax ........................        (2.7)   (0.03)          (2.7)    (0.03)
                                                                   ---------    -----      ---------     -----
Net income .....................................................   $   127.0     1.47%     $   141.3      1.73%
                                                                   =========    =====      =========     =====
Net income per share--basic and diluted ........................   $    0.60               $    0.67
                                                                   =========               =========
Average Earning Assets (AEA) ...................................   $34,600.6               $32,693.2
                                                                   =========               =========


      The  reduction  in net  income  from the  prior  quarter  reflected  lower
interest margin and other revenue, the effects of which were partially mitigated
by lower charge-offs and reduced operating expenses.

      Net finance  margin,  at 3.63% of average  earning  assets for the current
quarter,  declined from 4.34% during the prior  quarter.  The decline  primarily
reflects  the  following  factors:  the  continuation  of higher  funding  costs
associated  with our term funding  initiatives and liquidity  position,  coupled
with  lower  cost  debt  maturities  and  including  the  impact  of fair  value
adjustments in conjunction  with the Tyco  acquisition (26 basis points);  lower
fees due to reduced  volume (15 basis points);  lower yields on the  liquidating
portfolios (14 basis points) and reduced rental rates on the aerospace portfolio
(7 basis points).  Risk adjusted  margin (net finance margin after provision for
credit losses) declined to $210.7 million or 2.44%, from $221.0 million or 2.70%
last quarter, as the decline in net finance margin was in part offset by reduced
charge-offs.

      The positive impact on risk adjusted margin due to fair value  adjustments
to mark  finance  receivables  and  debt  to  market  remaining  from  the  Tyco
acquisition was 19 and 38 basis points for the quarters ended March 31, 2003 and
December 31, 2002, respectively.

      Operating lease equipment  increased  modestly  ($126.8 million) over last
quarter, primarily due to large-ticket equipment in the Capital Finance unit. As
a result,  depreciation  expense was flat in relation to the prior quarter.  Our
depreciable  assets  range  from   smaller-ticket,   shorter-term  leases  (e.g.
computers) to larger-ticket,  longer-term leases (e.g.  commercial  aircraft and
rail assets).  Operating lease margin (rental income less depreciation  expense)
as a percentage of average operating lease equipment was 6.1% during the quarter
ended March 31, 2003 versus 6.8% during the prior quarter,  reflecting  pressure
on aerospace rental rates.

      Total  charge-offs  during the March quarter were $114.3 million  (1.61%),
including  $13.8  million of  telecommunication  loan  charge-offs,  compared to
$154.5 million  (2.32%) during the prior quarter.  The tables that follow detail
charge-offs for the current and prior quarters by segment, both in amount and as
a  percentage  of average  finance  receivables.  In addition to total  amounts,
charge-offs  relating to the liquidating and  telecommunications  portfolios are
also presented to provide enhanced analysis ($ in millions):


                                       35





Net Charge-offs:                                                      Quarter Ended March 31, 2003
                                                  ------------------------------------------------------------
                                                                            Before            Liquidating and
                                                        Total         Liquidating/Telecom   Telecommunications
                                                  -----------------   ------------------    ------------------
                                                                                      
Equipment Financing and Leasing ...............   $ 39.9    2.07%      $31.5      1.76%      $ 8.4      6.48%
Specialty Finance -- commercial ...............     31.0    1.73%       30.6      1.71%        0.4      8.65%
Commercial Finance ............................     16.6    0.80%       16.6      0.80%        ---        --
Structured Finance ............................     13.8    1.90%         --        --        13.8      8.23%
                                                  ------               -----                 -----
  Total Commercial Segments ...................    101.3    1.55%       78.7      1.27%       22.6      7.48%
Specialty Finance -- consumer .................     13.0    2.36%        6.6      1.92%        6.4      3.09%
                                                  ------               -----                 -----
  Total .......................................   $114.3    1.61%      $85.3      1.30%      $29.0      5.70%
                                                  ======               =====                 =====





Net Charge-offs:                                                 Quarter Ended December 31, 2002
                                                  ------------------------------------------------------------
                                                                            Before            Liquidating and
                                                        Total         Liquidating/Telecom   Telecommunications
                                                  -----------------   ------------------    ------------------
                                                                                      
Equipment Financing and Leasing ...............   $ 71.1    3.23%     $ 57.8      2.81%      $13.3      9.25%
Specialty Finance -- commercial ...............     23.2    1.55%       21.2      1.42%        2.0     36.36%
Commercial Finance ............................     33.5    1.92%       33.5      1.92%         --        --
Structured Finance ............................     15.5    2.24%         --        --        15.5      8.75%
                                                  ------              ------                 -----
   Total Commercial Segments ..................    143.3    2.33%      112.5      1.93%       30.8      9.44%
Specialty Finance -- consumer .................     11.2    2.24%        6.1      2.11%        5.1      2.42%
                                                  ------              ------                 -----
   Total ......................................   $154.5    2.32%     $118.6      1.94%      $35.9      6.68%
                                                  ======              ======                 =====


      Total telecommunication and liquidating charge-offs were down $6.9 million
from last  quarter,  largely in the trucking and  franchise  portfolios.  Before
liquidating portfolio  charge-offs and telecommunication  charge-offs covered by
specific  2002  reserving  actions,  charge-offs  were $85.3  million  (1.30% of
average finance  receivables) for the current quarter,  down from $118.6 million
(1.94%) last  quarter.  The  improvement  from last quarter  primarily  reflects
declines in both the Equipment  Financing and Business  Credit units,  partially
offset by higher Specialty Finance -- commercial charge-offs this quarter, which
included higher losses in the small business loan and leasing units. These small
business loan and leasing units were  transferred  from  Equipment  Financing to
Specialty  Finance during the quarter.  The Equipment  Financing trend reflected
lower charge-offs in the construction and industrial equipment businesses, while
the Business Credit improvement followed a number of large write-offs during the
prior quarter in connection with concluding several loan workouts.

      For the  quarter  ended  March 31,  2003,  other  revenue  totaled  $235.5
million,  down from $257.1  million for the quarter  ended  December  31,  2002,
reflecting lower fee income and factoring  revenues on lower volumes,  partially
offset by a modest  increase in  equipment  gains,  primarily  in the  Specialty
Finance -- commercial  unit.  Securitization  gains  during the current  quarter
totaled $30.7  million,  14.4% of pretax  income,  on volume of $1,237  million,
compared to $30.5 million,  12.9% of pretax income,  on volume of $1,189 million
during the prior  quarter.  The components of other revenue are set forth in the
following table ($ in millions):

                                                           Quarter Ended
                                                    ---------------------------
                                                    March 31,      December 31,
                                                      2003             2002
                                                    ---------      ------------
Fees and other income ...........................     $144.7          $169.2
Factoring commissions ...........................       46.9            55.1
Gains on securitizations ........................       30.7            30.5
Gains on sales of leasing equipment .............       17.6             8.7
Loss on venture capital investments .............       (4.4)           (6.4)
                                                      ------          ------
  Total .........................................     $235.5          $257.1
                                                      ======          ======

      Salaries  and  general  operating  expenses  were  $233.6  million for the
current  quarter,  compared to $242.1 million reported for the December 31, 2002
quarter.  The decrease from last quarter included lower legal,  repossession and
collection  expenses.  Salaries  and general  operating  expenses  were 2.08% of
average  managed assets during the quarter,  versus 2.18% for the prior quarter.
The efficiency ratio for the quarter  (salaries and general  operating  expenses
divided by operating margin, excluding provision for credit losses) was 42.5% as
compared to 39.6% in the prior  quarter,  as the decline in our margin and other
revenue  negatively  impacted the ratio.  Headcount  was 5,845 at March 31, 2003
compared to 5,835 at December 31, 2002.


                                       36


Risk Management

      We performed  additional risk management  procedures in 2002 and into 2003
in light of the factors  discussed  previously in the "Key Business  Initiatives
and Trends"  section.  Our ongoing  risk  management  activities,  beyond  these
special liquidity and capital measures, are described more fully in the sections
that follow.  Our  business  activities  involve  various  elements of risk.  We
consider  the  principal  types of risk to be  credit  risk  (including  credit,
collateral and equipment risk) and market risk (including interest rate, foreign
currency and liquidity risk.)

      We consider the  management of risk essential to conducting our commercial
and consumer businesses and to maintaining profitability.  Accordingly, our risk
management systems and procedures are designed to identify and analyze risks, to
set appropriate  policies and limits and to continually  monitor these risks and
limits by means of reliable  administrative  and  information  systems and other
policies and programs.

      We review and monitor  credit  exposures,  both owned and  managed,  on an
ongoing basis to identify,  as early as possible,  those  customers  that may be
experiencing   declining   creditworthiness   or   financial   difficulty,   and
periodically evaluate our finance receivables across the entire organization. We
monitor  concentrations by borrower,  industry,  geographic region and equipment
type,  and we adjust  limits  as  conditions  warrant  to  minimize  the risk of
substantial credit loss. We have maintained a standard practice of reviewing our
aerospace  portfolio  regularly and, in accordance with SFAS 13 and SFAS 144, we
test for asset  impairment  based upon projected cash flows and relevant  market
data,  with any  impairment  in value charged to operating  earnings.  Given the
developments  in the aerospace  sector  during 2002 and into 2003,  performance,
profitability  and residual  values  relating to aerospace  assets were reviewed
more frequently with the Executive Credit Committee.

      Our Asset  Quality  Review  Committee  is  comprised  of members of senior
management,  including the Chief Risk Officer,  the Chief Financial Officer, the
Controller and the Director of Credit Audit.  Periodically,  the Committee meets
with senior executives of our strategic business units and corporate credit risk
management  group to  review  portfolio  performance,  including  the  status of
individual  financing and leasing  assets,  owned and managed,  to obligors with
higher risk profiles.  In addition,  this committee  periodically meets with the
Chief  Executive  Officer  of CIT  to  review  overall  credit  risk,  including
geographic,  industry  and customer  concentrations,  and the reserve for credit
losses.

Credit Risk Management

      We have developed systems  specifically  designed to manage credit risk in
each of our business  segments.  We evaluate  financing  and leasing  assets for
credit and collateral risk during the credit granting  process and  periodically
after the  advancement of funds.  The Corporate  Credit Risk  Management  group,
which  reports to the Chief Risk  Officer,  oversees  and  manages  credit  risk
throughout CIT. This group includes senior credit  executives  aligned with each
of the business units, as well as a senior executive with  corporate-wide  asset
recovery  and  workout  responsibilities.  In  addition,  our  Executive  Credit
Committee,  which includes the Chief Executive Officer,  the Chief Risk Officer,
members of the Corporate  Credit Risk Management group and group Chief Executive
Officers,  approves large  transactions  and  transactions  which are outside of
established  target market  definitions  and risk  acceptance  criteria or which
exceed the strategic business units' credit authority. The Corporate Credit Risk
Management group also includes an independent credit audit function.

      Each of our  strategic  business  units has  developed  and  implemented a
formal credit  management  process in accordance with formal uniform  guidelines
established by the credit risk management group. These guidelines set forth risk
acceptance criteria for:

      o     acceptable maximum credit lines;

      o     selected target markets and products;

      o     creditworthiness of borrowers,  including credit history,  financial
            condition,  adequacy of cash flow, financial performance and quality
            of management; and

      o     the  type  and  value  of  underlying   collateral   and  guarantees
            (including recourse from dealers and manufacturers).


                                       37


      Compliance  with  established  corporate  policies and  procedures and the
credit management  processes at each strategic business unit are reviewed by the
credit audit group.  The credit audit group examines  adherence with established
credit  policies and procedures and tests for  inappropriate  credit  practices,
including  whether potential problem accounts are being detected and reported on
a timely basis.

Commercial

      The commercial credit management  process (other than small ticket leasing
transactions)  starts with the initial  evaluation of credit risk and underlying
collateral at the time of origination and continues over the life of the finance
receivable  or  operating  lease,  including  collecting  past due  balances and
liquidating underlying collateral.

      Credit personnel  review each potential  borrower's  financial  condition,
results  of  operations,   management,   industry,  customer  base,  operations,
collateral  and other data,  such as third party credit  reports,  to thoroughly
evaluate the customer's  borrowing and repayment  ability.  Borrowers are graded
according to credit quality based upon our uniform credit grading system,  which
considers both the borrower's financial condition and the underlying collateral.
Credit facilities are subject to approval within our overall credit approval and
underwriting  guidelines and are issued  commensurate with the credit evaluation
performed on each borrower.

Consumer and Small Ticket Leasing

      For consumer transactions and small ticket leasing transactions, we employ
proprietary  automated  credit  scoring  models by loan type that  include  both
customer demographics and credit bureau characteristics. The profiles emphasize,
among other things, occupancy status, length of residence, length of employment,
debt to income ratio (ratio of total  installment  debt and housing  expenses to
gross monthly income),  bank account  references,  credit bureau information and
combined  loan to  value  ratio.  The  models  are used to  assess  a  potential
borrower's  credit  standing  and  repayment  ability  considering  the value or
adequacy of property offered as collateral. Our credit criteria include reliance
on credit  scores,  including  those  based upon both our  proprietary  internal
credit scoring model and external credit bureau scoring, combined with judgment.
The credit scoring  models are regularly  reviewed for  effectiveness  utilizing
statistical tools.

      We regularly  evaluate the consumer  loan  portfolio  and the small ticket
leasing  portfolio using past due, vintage curve and other  statistical tools to
analyze  trends  and credit  performance  by loan type,  including  analysis  of
specific credit  characteristics  and other selected  subsets of the portfolios.
Adjustments  to credit  scorecards  and  lending  programs  are made when deemed
appropriate.  Individual  underwriters  are assigned credit authority based upon
their experience, performance and understanding of the underwriting policies and
procedures  of our  consumer  and  small-ticket  leasing  operations.  A  credit
approval   hierarchy  also  exists  to  ensure  that  an  underwriter  with  the
appropriate  level of authority  reviews all  applications.  See  "Provision for
Credit Losses."

Equipment/Residual Risk Management

      We have developed systems, processes and expertise to manage the equipment
and  residual  risk in our  commercial  segments.  Our  process  consists of the
following:  1) setting residual value at deal inception;  2) systematic residual
reviews; and 3) monitoring of residual realizations.  Reviews for impairment are
performed  at  least  annually.  Residual  realizations,  by  business  unit and
product, are reviewed as part of our ongoing financial and asset quality review,
both within the business units and by senior management.

Market Risk Management

      Market  risk  is the  risk of loss  arising  from  changes  in  values  of
financial  instruments,  including  interest rate risk,  foreign  exchange risk,
derivative  credit risk and  liquidity  risk. We engage in  transactions  in the
normal course of business that expose us to market risks.  However,  we maintain
what we believe are appropriate  management  practices and policies  designed to
effectively  mitigate such risks.  The objectives of our market risk  management
efforts are to preserve  company value by hedging changes in future expected net
cash flows and to decrease the cost of capital.  Strategies for managing  market
risks  associated with changes in interest rates and foreign  exchange rates are
an integral  part of the process,  because  those  strategies  affect our future
expected cash flows as well as our cost of capital.


                                       38


      Our Capital Committee sets policies, oversees and guides the interest rate
and currency risk management process,  including establishment and monitoring of
risk metrics,  and ensures the  implementation  of those  policies.  Other risks
monitored by the Capital Committee include  derivative credit risk and liquidity
risk. The Capital Committee meets  periodically and includes the Chief Executive
Officer,  the Chief Financial Officer, the Treasurer,  and the Controller,  with
business unit executives serving on a rotating basis.

Interest Rate and Foreign Exchange Risk Management

      We offer a variety of financing products to our customers, including fixed
and floating-rate loans of various maturities and currency denominations,  and a
variety of leases, including operating leases. Changes in market interest rates,
relationships  between  short-term  and  long-term  market  interest  rates,  or
relationships  between  different  interest rate indices (i.e.,  basis risk) can
affect the interest rates charged on  interest-earning  assets  differently than
the interest rates paid on  interest-bearing  liabilities,  and can result in an
increase  in  interest  expense  relative  to finance  income.  We  measure  our
asset/liability  position  in  economic  terms  through  duration  measures  and
sensitivity  analysis,  and we periodically measure the effect on earnings using
maturity gap analysis.

      A  matched  asset/liability  position  is  generally  achieved  through  a
combination of financial  instruments,  including commercial paper,  medium-term
notes,  long-term  debt,  interest  rate and currency  swaps,  foreign  exchange
contracts, and through asset syndication and securitization. We do not speculate
on interest  rates or foreign  exchange  rates,  but rather seek to mitigate the
possible  impact of such rate  fluctuations  encountered in the normal course of
business.  This process is ongoing due to prepayments,  refinancings  and actual
payments varying from contractual terms, as well as other portfolio dynamics.

      We  periodically  enter into  structured  financings  (involving  both the
issuance of debt and an interest rate swap with corresponding notional principal
amount and  maturity) to manage  liquidity  and reduce  interest  rate risk at a
lower overall funding cost than could be achieved by solely issuing debt.

      CIT uses  derivatives  for hedging  purposes only, and does not enter into
derivative financial instruments for trading or speculative purposes. As part of
managing the exposure to changes in market interest rates,  CIT, as an end-user,
enters into various  interest  rate swap  transactions  in the  over-the-counter
markets, with other financial  institutions acting as principal  counterparties.
To ensure both  appropriate use as a hedge and hedge accounting  treatment,  all
derivatives entered into are designated according to a hedge objective against a
specified  liability,  including  long term debt,  bank credit  facilities,  and
commercial  paper.  CIT's primary  hedge  objectives  include the  conversion of
variable-rate  liabilities  to fixed rates,  and the  conversion  of  fixed-rate
liabilities  to  variable  rates.  The  notional  amounts,  rates,  indices  and
maturities of CIT's  derivatives are required to closely match the related terms
of CIT's hedged liabilities.

      We target to match the basis of assets with that of our liabilities  (i.e.
fixed rate assets  funded with fixed rate  liabilities  and floating rate assets
funded with floating  rate  liabilities),  while also  targeting to preserve the
economic  returns of our assets through duration  matching.  Interest rate swaps
are an effective  means of achieving our target  matched  funding  objectives by
converting debt to the desired basis and duration.

      Interest  rate swaps with  notional  principal  amounts of $9.0 billion at
March 31, 2003 and $7.8 billion at December 31, 2002 were  designated  as hedges
against outstanding debt. The increase in notional principal amounts of interest
rate swaps during the current  quarter  consisted of a $843 million  increase in
fixed to floating-rate  swaps (fair value hedges) and a $388 million increase in
floating to fixed-rate  swaps (cash flow hedges).  This trend  reflects a higher
level and proportion of variable-rate  assets, as well as management's  strategy
to better match the duration of assets and  liabilities,  as funding  actions of
last year resulted in a lengthening of liability  duration.

      The  following  table   summarizes  the  composition  of  our  assets  and
liabilities before and after swaps at March 31, 2003:

                              Before Swaps                    After Swaps
                      --------------------------      --------------------------
                      Fixed Rate   Floating Rate      Fixed Rate   Floating Rate
                      ----------   -------------      ----------   -------------

Assets ............       51%          49%                51%          49%
Liabilies .........       62%          38%                55%          45%


                                       39


      A comparative  analysis of the weighted average principal  outstanding and
interest rates on our debt before and after the effect of interest rate swaps is
shown in the following table ($ in millions):


                                             Quarter Ended March 31, 2003
                                       -----------------------------------------
                                          Before Swaps           After Swaps
                                       -----------------     -------------------
Commercial paper and variable rate
  senior notes and bank credit
  facilities ........................  $12,704.5   1.94%     $14,751.9    2.80%
Fixed rate senior and subordinated
  notes .............................   19,695.7   6.32%      17,648.3    6.10%
                                       ---------             ---------
Composite ...........................  $32,400.2   4.61%     $32,400.2    4.60%
                                       =========             =========

                                           Quarter Ended December 31, 2002
                                       -----------------------------------------
                                          Before Swaps           After Swaps
                                       -----------------     -------------------
Commercial paper and variable rate
  senior notes and bank credit
  facilities ........................  $12,344.2   2.09%     $13,103.1    2.82%
Fixed rate senior and subordinated
  notes .............................   18,055.3   6.20%      17,296.4    5.87%
                                       ---------             ---------
Composite ...........................  $30,399.5   4.54%     $30,399.5    4.56%
                                       =========             =========

                                             Quarter Ended March 31, 2002
                                       -----------------------------------------
                                          Before Swaps           After Swaps
                                       -----------------     -------------------
Commercial paper and variable rate
  senior notes and bank credit
  facilities ........................  $19,300.1   2.15%     $16,034.9    2.26%
Fixed rate senior and subordinated
  notes .............................   15,832.2   5.58%      19,097.4    5.66%
                                       ---------             ---------
Composite ...........................  $35,132.3   3.69%     $35,132.3    4.11%
                                       =========             =========

      The  weighted  average  interest  rates  before  swaps do not  necessarily
reflect the interest  expense that would have been incurred over the life of the
borrowings  had we chosen to manage  interest  rate risk without the use of such
swaps.  Derivatives  are  discussed  further in Note 5 --  Derivative  Financial
Instruments to the Consolidated Financial Statements.

      We regularly  monitor and simulate through computer modeling our degree of
interest  rate  sensitivity  by  measuring  the  re-pricing  characteristics  of
interest-sensitive assets, liabilities,  and derivatives.  The Capital Committee
reviews the results of this modeling periodically. The interest rate sensitivity
modeling  techniques  employed by us include the creation of prospective  twelve
month "baseline" and "rate shocked" net interest income simulations.

      At the date that  interest rate  sensitivity  is modeled,  "baseline"  net
interest income is derived  considering the current level of  interest-sensitive
assets and related run-off (including both contractual  repayment and historical
prepayment experience), the current level of interest-sensitive  liabilities and
related  maturities  and  the  current  level  of  derivatives.  The  "baseline"
simulation assumes that, over the next successive twelve months, market interest
rates (as of the date of simulation)  are held constant and that no new loans or
leases are extended.  Once the  "baseline"  net interest  income is  calculated,
market interest rates, which were previously held constant, are raised 100 basis
points  instantaneously  and parallel across the entire yield curve, and a "rate
shocked"  simulation is run.  Interest rate  sensitivity is then measured as the
difference between calculated "baseline" and "rate shocked" net interest income.

      An immediate  hypothetical  100 basis point increase in the yield curve on
April 1, 2003 would have  reduced net income by an estimated  $15 million  after
tax over the next twelve months,  while a decrease in the yield curve would have
increased net income by a like amount.  A 100 basis point  parallel  increase in
the yield curve on January 1, 2003 would have reduced net income by an estimated
$16 million  after-tax over the following twelve months,  with a decrease in the
yield curve having  caused an increase in net income of a like amount.  Although
management  believes  that this measure  provides a  meaningful  estimate of our
interest  rate  sensitivity,  it does not account for  potential  changes in the
credit quality, size, composition and prepayment  characteristics of the balance
sheet and other business developments that could affect net income. Accordingly,
no assurance can be given that actual results would not differ  materially  from
the potential outcome simulated by our computer modeling.  Further,  it does not
necessarily  represent  management's current view of future market interest rate
movements.


                                       40


      We also  utilize  foreign  currency  exchange  forward  contracts to hedge
currency risk  underlying our net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign  debt.  At March 31,  2003,  CIT was party to  foreign
currency  exchange forward contracts with notional amounts totaling $2.7 billion
and maturities  ranging from 2003 to 2006. CIT was also party to  cross currency
interest rate swaps with notional  amounts  totaling $1.4 billion and maturities
ranging  from 2003 to 2027.  At  December  31,  2002,  CIT was party to  foreign
currency exchange forward contracts with notional amounts totaling $3.0 billion.
CIT was also party to cross currency  interest rate swaps with notional  amounts
totaling  $1.5  billion.  At March 31,  2002,  CIT was party to $3.4  billion in
notional  principal  amount of foreign currency  exchange forward  contracts and
$2.4  billion in notional  principal  amount of  cross currency  swaps that were
designated as currency-related debt hedges.  Translation gains and losses of the
underlying  foreign net investment,  as well as offsetting  derivative gains and
losses on designated hedges, are reflected in other comprehensive  income in the
Consolidated Balance Sheet.

      Derivative  Risk  Management  -- We enter into  interest rate and currency
swaps and foreign exchange forward  contracts as part of our overall market risk
management  practices.  We assess and manage the  external  and  internal  risks
associated  with these  derivative  instruments  in accordance  with the overall
operating goals established by our Capital  Committee.  External risk is defined
as those risks  outside of our direct  control,  including  counterparty  credit
risk,  liquidity risk,  systemic risk, legal risk and market risk. Internal risk
relates to those operational risks within the management oversight structure and
includes actions taken in contravention of CIT policy.

      The primary external risk of derivative instruments is counterparty credit
exposure,  which is defined  as the  ability of a  counterparty  to perform  its
financial obligations under a derivative contract. We control the credit risk of
our derivative agreements through counterparty credit approvals, pre-established
exposure limits and monitoring procedures.

      The Capital Committee approves each counterparty and establishes  exposure
limits based on credit analysis and market value. All derivative  agreements are
entered into with major money center  financial  institutions  rated  investment
grade  by  nationally  recognized  rating  agencies,  with the  majority  of our
counterparties rated "AA" or better.  Credit exposures are measured based on the
market value of outstanding derivative instruments. Exposures are calculated for
each derivative contract to monitor counterparty credit exposure.

      Liquidity  Risk  Management  --  Liquidity  risk refers to the risk of CIT
being unable to meet  potential  cash  outflows  promptly and cost  effectively.
Factors  that  could  cause  such a risk to  arise  might be a  disruption  of a
securities  market or other  source of funds.  We actively  manage and  mitigate
liquidity  risk by  maintaining  diversified  sources of funding  and  committed
alternate  sources of funding.  The primary funding sources are commercial paper
(U.S.),  long-term debt (U.S. and  International)  and  asset-backed  securities
(U.S. and Canada). Included as part of our securitization programs are committed
asset-backed  commercial paper programs in the U.S. and Canada. We also maintain
committed bank lines of credit to provide  backstop  support of commercial paper
borrowings  and  local  bank  lines to  support  our  international  operations.
Additional  sources of liquidity  are loan and lease  payments  from  customers,
whole loan asset sales and loan syndications.

      We also  target and  monitor  certain  liquidity  metrics to ensure both a
balanced liability profile and adequate alternate liquidity availability.  Among
the target ratios are maximum  percentage  of  outstanding  commercial  paper to
total debt,  minimum  percentage of committed  bank line coverage to outstanding
commercial  paper and  minimum  percentage  of  alternate  liquidity  sources to
current cash obligations.

Liquidity

      The commercial paper program closed the quarter at $4.5 billion, down from
$5.0 billion at December 31, 2002. The drop in outstanding balance from December
corresponded with the emphasis on term funding during the quarter.  Our targeted
program  size  remains at $5 billion  and our goal is to  maintain at least 100%
back-up liquidity.

      During the  quarter,  existing  bank  facilities  were paid down  further,
maintaining backstop liquidity to fully cover all outstanding  commercial paper.
At March 31, 2003,  we had total bank credit  facilities of $7,035  million,  of
which $1,300 million was drawn (down from drawn  facilities of $2,118 million at
December  31,  2002).  Accordingly,   undrawn  backstop  liquidity  coverage  of
outstanding  commercial  paper was  approximately  128% at March 31,  2003.  The
quarterly  activity  included  repayment and retirement of a C$500 million ($340
million)


                                       41


364-day bank facility.  In April 2003, a $765 million undrawn  facility  expired
and was not renewed,  but our coverage  remains in excess of 100% of outstanding
commercial  paper. Our remaining  facilities  include a $3,720 million facility,
undrawn  and  available,  which  expires  March 2005,  and two other  facilities
expiring periodically during 2003.

      In addition to the commercial  paper  markets,  CIT accesses the unsecured
term debt markets. From time to time, CIT files registration statements for debt
securities,  which it may sell in the  future.  At March 31,  2003,  we had $3.8
billion of registered,  but unissued,  debt  securities  available under a shelf
registration statement.  Term-debt issued during the quarter consisted of a $1.0
billion  three-year,  fixed-rate  global issue and $2.6 billion in variable-rate
medium-term  notes.  In November  2002, we introduced a retail note program,  in
which we offer senior,  unsecured notes utilizing  numerous  broker-dealers  for
placement to retail accounts.  During the quarter,  we issued $752 million under
this  program.  As of March 31, 2003,  we had issued $1.5 billion of notes under
this program having maturities of between 2 and 10 years.

      To further strengthen our funding flexibility, we maintain committed asset
backed facilities, which cover a range of assets from equipment to consumer home
equity receivables,  and trade accounts  receivable.  While these facilities are
predominately  in the U.S., we also maintain  facilities for Canadian  domiciled
assets. As of March 31, 2003, we had approximately  $2.3 billion of availability
in our committed  asset-backed  facilities and $3.4 billion of  registered,  but
unissued,  securities  available  under  public  shelf  registration  statements
relating to our asset-backed  securitization program.  Securitization volume was
$1.2 billion, unchanged from the prior quarter.

      Our credit  ratings are shown for March 31, 2003,  December 31, 2002,  and
March 31, 2002 in the following table:



                             At March 31, 2003        At December 31, 2002        At March 31, 2002
                          -----------------------    -----------------------   -----------------------
                          Short Term    Long Term   Short Term     Long Term   Short Term    Long Term
                          ----------   ----------   ----------    ----------   ----------   ----------
                                                                              
Moody's .................     P-1          A2           P-1           A2           P-1          A2
Standard & Poor's .......     A-1           A           A-1            A           A-2          A-
Fitch ...................     F1            A           F1             A           F2           A-

--------------------------------------------------------------------------------
The credit  ratings stated above are not a  recommendation  to buy, sell or hold
securities and may be subject to revision or withdrawal by the assigning  rating
organization. Each rating should be evaluated independently of any other rating.

      We have some material covenants within our legal documents that govern our
funding sources.  The most  significant  covenant in CIT's indentures and credit
agreements is a negative pledge  provision,  which limits granting or permitting
liens on our assets,  but provides for  exceptions for certain  ordinary  course
liens needed to operate our  business.  During the quarter ended March 31, 2003,
we  successfully  completed a consent  solicitation to amend the negative pledge
provision  in our 1994  debt  indenture.  This  action  conforms  the 1994  debt
indenture to our other  agreements and provides  flexibility in structuring  our
securitizations  as  accounting  sales or  secured  financings.  Various  credit
agreements also contain a minimum net worth test of $3.75 billion.

      The following tables summarize various contractual  obligations,  selected
contractual  cash  receipts and  contractual  commitments  as of March 31, 2003.
Projected proceeds from the sale of operating lease equipment,  interest revenue
from finance receivables,  debt interest expense and other items are excluded ($
in millions):



                                                                Payments and Collections by Period
                                                ---------------------------------------------------------------
                                                           Remaining                                     After
Contractual Obligations                           Total      2003        2004       2005      2006       2006
                                                --------   --------   ---------  ---------   -------   --------
                                                                                     
Commercial paper ............................   $4,490.5   $4,490.5   $      --  $      --   $    --   $     --
Bank credit facilities ......................    1,300.0    1,300.0          --         --        --         --
Variable-rate term debt .....................    6,609.2    3,006.8     2,527.4      829.1      31.0      214.9
Fixed-rate term debt ........................   20,152.1    3,188.4     3,520.9    3,378.0   2,311.1    7,753.7
Lease rental expense ........................      209.4       48.5        47.5       38.5      27.4       47.5
                                                --------   --------   ---------  ---------   -------   --------
Total contractual obligations ...............   32,761.2   12,034.2     6,095.8    4,245.6   2,369.5    8,016.1
                                                --------   --------   ---------  ---------   -------   --------
Finance receivables(1) ......................   28,654.6   11,780.6     3,900.3    2,770.3   1,757.9    8,445.5
Operating lease rental income ...............    3,279.1    1,052.0       755.2      471.1     303.3      697.5
Finance receivables held for sale(2) ........    1,273.0    1,273.0          --         --        --         --
Cash - current balance ......................    2,025.4    2,025.4          --         --        --         --
                                                --------   --------   ---------  ---------   -------   --------
Total projected cash availability ...........   35,232.1   16,131.0     4,655.5    3,241.4   2,061.2    9,143.0
                                                --------   --------   ---------  ---------   -------   --------
Net projected cash inflow
   (outflow) ................................   $2,470.9   $4,096.8   $(1,440.3) $(1,004.2)  $(308.3)  $1,126.9
                                                ========   ========   =========  =========   =======   ========

--------------------------------------------------------------------------------
(1)   Based upon contractual cash flows; amount could differ due to prepayments,
      charge-offs and other factors.
(2)   Based upon management's intent to sell rather than contractual  maturities
      of underlying assets.


                                       42





                                                    Commitment Expiration by Period
                                    ---------------------------------------------------------------
                                               Remaining                                     After
Contractual Commitments               Total      2003        2004       2005      2006       2006
------------------------            ---------  ---------   --------   --------  --------   --------
                                                                           
Aircraft purchases ...............  $3,590.0   $  700.0      $839.0   $1,248.0    $711.0     $ 92.0
Credit extensions ................   3,572.4    3,160.2        78.4       28.7      53.0      252.1
Letters of credit ................   1,082.4    1,077.7         4.7         --        --         --
Sale-leaseback payments ..........     494.6        8.3        28.5       28.5      28.5      400.8
Manufacturer purchase
  commitments ...................      280.6      280.6          --         --        --         --
Venture capital funds ............     158.1         --         2.5        0.4        --      155.2
Guarantees .......................      81.7       81.7          --         --        --         --
Acceptances ......................       5.7        5.7          --         --        --         --
                                    --------   --------      ------   --------    ------     ------
Total Commitments ................  $9,265.5   $5,314.2      $953.1   $1,305.6    $792.5     $900.1
                                    ========   ========      ======   ========    ======     ======


      See the "-- Overview" and "-- Net Finance Margin" sections for information
regarding  the impact of our  liquidity  and  capitalization  plan on results of
operations.

Capitalization

      The following table presents  information  regarding our capital structure
($ in millions):




                                                                              March 31,        December 31,
                                                                                2003              2002
                                                                              ---------       ------------
                                                                                         
Commercial paper ..........................................................   $ 4,490.5        $ 4,974.6
Bank credit facilities ....................................................     1,300.0          2,118.0
Term debt .................................................................    26,761.3         24,588.7
Company-obligated mandatorily redeemable preferred securities
  of subsidiary trust holding solely debentures of the Company
  ("Preferred Capital Securities") ........................................       256.8            257.2
Stockholders' equity(1) ...................................................     5,076.7          4,968.5
                                                                              ---------        ---------
Total capitalization ......................................................    37,885.3         36,907.0
Goodwill ..................................................................      (384.4)          (384.4)
                                                                              ---------        ---------
Total tangible capitalization .............................................   $37,500.9        $36,522.6
                                                                              =========        =========
Total tangible stockholders' equity .......................................   $ 4,692.3        $ 4,584.1
                                                                              =========        =========
Tangible stockholders' equity(1) and Preferred Capital Securities
  to managed assets .......................................................       10.42%           10.44%
Total debt (excluding overnight deposits) to tangible stockholders'
  equity(1) and Preferred Capital Securities ..............................        6.29x            6.22x

--------------------------------------------------------------------------------
(1)   Stockholders'   equity  excludes   accumulated  other  comprehensive  loss
      relating to  derivative  financial  instruments  and  unrealized  gains on
      equity and  securitization  investments of $80.1 million and $97.8 million
      at March 31, 2003 and December 31, 2002, respectively, as these losses are
      not necessarily indicative of amounts which will be realized.

      The  Company-obligated  mandatorily  redeemable  preferred  securities are
7.70%  Preferred  Capital  Securities  issued in 1997 by CIT Capital  Trust I, a
wholly-owned subsidiary. CIT Capital Trust I invested the proceeds of that issue
in Junior  Subordinated  Debentures  of CIT having  identical  rates and payment
dates.

      See "Liquidity  Risk  Management"  for  discussion of risks  impacting our
liquidity and capitalization.

Securitization and Joint Venture Activities

      We utilize  special  purpose  entities  (SPE's) and joint  ventures in the
normal  course of business to execute  securitization  transactions  and conduct
business in key vendor relationships.

      Securitization  Transactions  -- SPE's are used to achieve "true sale" and
bankruptcy  remote  requirements for these  transactions in accordance with SFAS
No. 140,  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishment  of  Liabilities."  Pools of assets  are  originated  and sold to
special  purpose  entities,  which in turn issue debt  securities  to  investors
solely backed by asset pools. Accordingly, CIT has no legal obligations to repay
the  investment  certificates  in the event of a default by the SPE. CIT retains
the servicing  rights and  participates in certain cash flows of the pools.  The
present  value of expected  net cash flows that  exceeds the  estimated  cost of
servicing  is  recorded  in  other  assets  as  a  "retained  interest."  Assets
securitized are shown in our managed assets


                                       43


and our capitalization ratios on managed assets. Under the recently issued rules
relating to consolidation and SPE's, non-qualifying securitization entities will
have to be consolidated.  Based on our preliminary analysis, we believe that all
of our public asset-backed structures and the majority of our conduit facilities
will continue to qualify as  off-balance  sheet  transactions.  As part of these
related  activities,  the Company enters into hedge transactions with the trusts
(SPE) in order to protect the trust against  interest  rate risk.  CIT insulates
its associated  risk by entering into offsetting  swap  transactions  with third
parties.  The net effect is to protect the trust from interest rate risk,  while
also  protecting CIT from interest rate risk. The notional amount of these swaps
was $3.9 billion at March 31, 2003.  During the quarter ended March 31, 2003, we
successfully  completed  a consent  solicitation  to amend the  negative  pledge
provision  in our 1994  debt  indenture.  This  action  conforms  the 1994  debt
indenture to our other  agreements and provides  flexibility in structuring  our
securitizations as accounting sales or secured financings.

      Joint  Ventures  --  We  utilize  joint  ventures  to  conduct   financing
activities with certain strategic vendor partners. Receivables are originated by
the joint venture and  purchased by CIT. The vendor  partner and CIT jointly own
these distinct legal entities, and there is no third-party debt involved.  These
arrangements are accounted for using the equity method,  with profits and losses
distributed  according to the joint  venture  agreement.  See related  Financial
Accounting   Standards   Board   ("FASB")   Interpretation   No.  46  (FIN  46),
"Consolidation  of Variable  Interest  Entities"  discussion in "Accounting  and
Technical Pronouncements" and disclosure in Note 11 -- Certain Relationships and
Related Transactions.

Critical Accounting Policies

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management to use judgment in making
estimates and assumptions that affect reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported  amounts of income and expenses during the reporting
period.   The  following   accounting   policies   include  inherent  risks  and
uncertainties   related  to  judgments  and  assumptions   made  by  management.
Management's  estimates are based on the relevant  information  available at the
end of each period.

      Investments  --  Investments,  for  which  the  Company  does not have the
ability to exercise  significant  influence and for which there is not a readily
determinable  market  value,  the majority of which are venture  capital  equity
investments,  are accounted for under the cost method.  Management uses judgment
in determining when an unrealized loss is deemed to be other than temporary,  in
which case such loss is charged to earnings.  As of March 31, 2003,  the balance
of venture capital equity  investments was $334.3 million.  A 10% fluctuation in
value of these investments equates to $0.10 in earnings per share.

      Charge-off  of Finance  Receivables  -- Finance  receivables  are reviewed
periodically to determine the  probability of loss.  Charge-offs are taken after
considering such factors as the borrower's  financial condition and the value of
underlying   collateral  and  guarantees  (including  recourse  to  dealers  and
manufacturers).

      Impaired Loans -- Loan impairment is defined as any shortfall  between the
estimated  value and the recorded  investment  in the loan,  with the  estimated
value determined using the fair value of the collateral and other cash flows, if
the loan is collateral  dependent,  or the present value of expected future cash
flows discounted at the loan's effective interest rate.

      Reserve for Credit Losses -- Our consolidated reserve for credit losses is
periodically  reviewed for adequacy  based on  portfolio  collateral  values and
credit quality indicators,  including charge-off experience,  levels of past due
loans     and     non-performing     assets,     evaluation     of     portfolio
diversification/concentration   and  economic  conditions.   We  review  finance
receivables  periodically  to  determine  the  probability  of loss,  and record
charge-offs  after  considering  such factors as  delinquencies,  the  financial
condition  of obligors,  the value of  underlying  collateral,  as well as third
party credit  enhancements  such as guarantees and recourse from  manufacturers.
This  information  is  reviewed  formally  on  a  quarterly  basis  with  senior
management,  including the CEO,  CFO,  Chief Risk Officer and  Controller  among
others, in conjunction with setting the reserve for credit losses.

      The reserve for credit losses is set and recorded based on the development
of three key components (1) specific  reserves for  collateral  dependent  loans
which are impaired under SFAS 114, (2) reserves for estimated losses inherent in
the portfolio based upon historical  credit trends and, (3) general reserves for
estimation  risk. As of March 31, 2003, the reserve for credit losses was $757.0
million or 2.64% of finance  receivables  and 77.9% of past due  receivables.  A
$10.0 million  change in the reserve for credit losses  equates to the following
variances:  3


                                       44


basis points (0.03%) in the percentage of reserves to finance  receivables;  103
basis points (1.03%) in the percentage of reserves to past due  receivables  and
$0.03 in earnings per share.

      Retained   Interests   in   Securitizations   --   Significant   financial
assumptions,  including loan pool credit losses,  prepayment speeds and discount
rates, are utilized to determine the fair values of retained interests,  both at
the date of the  securitization  and in the subsequent  quarterly  valuations of
retained  interests.  Any resulting losses,  representing the excess of carrying
value over estimated fair value, are recorded against current earnings. However,
unrealized  gains  are  reflected  in  stockholders'  equity  as part  of  other
comprehensive income.

      Lease Residual Values -- Operating lease equipment is carried at cost less
accumulated  depreciation  and is depreciated to estimated  residual value using
the straight-line  method over the lease term or projected  economic life of the
asset.  Direct  financing  leases are recorded at the aggregated  future minimum
lease  payments plus estimated  residual  values less unearned  finance  income.
Management  performs  periodic reviews of the estimated  residual  values,  with
impairment, other than temporary,  recognized in the current period. As of March
31, 2003, our direct financing lease residual balance was $2,520 million and our
operating lease equipment  balance was $6,831 million.  A 10 basis points (0.1%)
fluctuation  in the total of these  amounts  equates  to $0.03 in  earnings  per
share.

      Goodwill  -- CIT  adopted  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets"  effective  October 1, 2001,  the  beginning of CIT's  fiscal 2002.  The
Company  determined that there was no impact of adopting this new standard under
the transition provisions of SFAS No. 142. Since adoption, goodwill is no longer
amortized, but instead will be assessed for impairment at least annually. During
this assessment,  management relies on a number of factors  including  operating
results,  business plans, economic  projections,  anticipated future cash flows,
and  transactions  and market place data. See "--Goodwill  and Other  Intangible
Assets Amortization" for a discussion of our impairment  analysis.  Goodwill was
$384.4  million at March 31,  2003. A 10%  fluctuation  in the value of goodwill
equates to $0.18 in earnings per share.

Accounting and Technical Pronouncements

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
Stock-Based  Compensation  -- Transition  and  Disclosure."  This  pronouncement
amends SFAS No. 123 to provide  alternative  methods of transition for an entity
that  voluntarily  changes  to the fair  value-based  method of  accounting  for
stock-based compensation.  SFAS No. 148 also expands the disclosure requirements
with respect to stock-based  compensation.  CIT does not intend to change to the
fair value method of accounting. The required expanded disclosure is included in
the March 31, 2003 financial statements and notes thereto.

      In  November  2002,  the  FASB  issued  Interpretation  No.  45 (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of  Indebtedness of Others." FIN 45 requires a guarantor to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing certain guarantees. The expanded disclosure
requirements  are required for financial  statements  ending after  December 15,
2002, while the liability recognition provisions are applicable to all guarantee
obligations  modified or issued after December 31, 2002. The expanded disclosure
requirements  are included in our March 31, 2003 financial  statements and notes
thereto.

      In  January  2003,  the  FASB  issued  Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities." FIN 46 addresses consolidation by
business  enterprises  of variable  interest  entities  (selected  entities with
related contractual,  ownership,  voting or other monetary interests,  including
certain  special  purpose  entities),  and requires  additional  disclosure with
respect to these  entities.  FIN 46 applied  immediately  to  variable  interest
entities  created  after  January 31, 2003,  and applies for  reporting  periods
beginning  after June 15, 2003 for entities  that  existed  prior to February 1,
2003. This new  interpretation  is not expected to have a significant  impact on
our  financial  position  or  results of  operations.  The  expanded  disclosure
requirements  are included in our March 31, 2003 financial  statements and notes
thereto.

      On April 30, 2003,  the FASB issued SFAS No. 149  "Amendment  of Statement
133 on Derivative Instruments and Hedging Activities." This pronouncement amends
and  clarifies  financial   accounting  and  reporting  for  certain  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts.  This  pronouncement  is effective for all contracts  entered into or
modified after June 30, 2003. We are currently assessing the impact of SFAS 149.


                                       45


Statistical Data

      The following table presents components of net income as a percent of AEA,
along with other selected financial data ($ in millions):

                                                           Quarters Ended
                                                              March 31,
                                                       -----------------------
                                                         2003          2002
                                                       ---------     ---------
Finance income .....................................       10.86%        12.29%
Interest expense ...................................        4.01          3.86
                                                       ---------     ---------
  Net finance income ...............................        6.85          8.43
Depreciation on operating lease equipment ..........        3.22          3.45
                                                       ---------     ---------
  Net finance margin ...............................        3.63          4.98
Provision for credit losses ........................        1.19          2.17
                                                       ---------     ---------
Net finance margin, after provision for
  credit losses ....................................        2.44          2.81
Other revenue ......................................        2.72          2.58
                                                       ---------     ---------
Operating margin ...................................        5.16          5.39
                                                       ---------     ---------
Salaries and general operating expenses ............        2.70          2.60
Goodwill impairment ................................          --         50.13
Interest expense -- TCH ............................          --          3.39
                                                       ---------     ---------
Operating expenses .................................        2.70         56.12
                                                       ---------     ---------
Income (loss) before income taxes ..................        2.46        (50.73)
Provision for income taxes .........................       (0.96)        (0.56)
Minority interest in subsidiary trust holding
  solely debentures of the Company .................       (0.03)        (0.03)
                                                       ---------     ---------
  Net income (loss) ................................        1.47%       (51.32)%
                                                       =========     =========
Average earning assets .............................   $34,600.6     $36,006.6
                                                       =========     =========

Item 4. Controls and Procedures.

      Within 90 days  before  filing this  report,  the  Company  evaluated  the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures.  The Company's  disclosure  controls and  procedures are designed to
ensure that the information  that the Company must disclose in its reports filed
under the  Securities  Exchange Act of 1934 is  communicated  and processed in a
timely manner.  Albert R. Gamper,  Jr., Chairman,  President and Chief Executive
Officer,  and Joseph M. Leone,  Executive  Vice  President  and Chief  Financial
Officer, participated in this evaluation.

      Based on this evaluation,  Messrs.  Gamper and Leone concluded that, as of
the date of their evaluation,  the Company's  disclosure controls and procedures
were  effective,  except as noted in the next  paragraph.  Since the date of the
evaluation  described above, there have not been any significant  changes in the
Company's internal controls or in other factors that could significantly  affect
those controls.

      During  our  fiscal  2002  financial  reporting  process,  management,  in
consultation with the Company's independent accountants, identified a deficiency
in our tax financial  reporting  process relating to the calculation of deferred
tax assets and  liabilities  which  constitutes a "Reportable  Condition"  under
standards established by the American Institute of Certified Public Accountants.
Management  believes  that this  matter has not had any  material  impact on our
financial  statements.  Management  has  established  a  project  plan  and  has
completed the design of processes and controls to address this  deficiency.  The
development phase is ongoing, will include process and control refinements,  and
the project is progressing according to the project plan. The completion of this
project is anticipated in 2003.


                                       46


Forward-Looking Statements

      Certain  statements   contained  in  this  document  are  "forward-looking
statements" within the meaning of the U.S. Private Securities  Litigation Reform
Act of 1995. All statements  contained herein that are not clearly historical in
nature are  forward-looking  and the words  "anticipate,"  "believe,"  "expect,"
"estimate"  and  similar   expressions   are  generally   intended  to  identify
forward-looking  statements. Any forward-looking statements contained herein, in
press releases,  written statements or other documents filed with the Securities
and Exchange  Commission or in communications and discussions with investors and
analysts in the normal  course of business  through  meetings,  webcasts,  phone
calls and conference calls, concerning our operations,  economic performance and
financial  condition are subject to known and unknown risks,  uncertainties  and
contingencies.  Forward-looking  statements  are included,  for example,  in the
discussions about:

      o     our liquidity risk management,

      o     our credit risk management,

      o     our asset/liability risk management,

      o     our capital, leverage and credit ratings,

      o     our operational and legal risks,

      o     our commitments to extend credit or purchase equipment, and

      o     how we may be affected by legal proceedings.

      All  forward-looking  statements involve risks and uncertainties,  many of
which are beyond our control,  which may cause actual  results,  performance  or
achievements  to differ  materially  from  anticipated  results,  performance or
achievements.  Also,  forward-looking  statements  are based  upon  management's
estimates  of  fair  values  and of  future  costs,  using  currently  available
information.   Therefore,  actual  results  may  differ  materially  from  those
expressed  or  implied  in those  statements.  Factors  that  could  cause  such
differences include, but are not limited to:

      o     risks of economic slowdown, downturn or recession,

      o     industry cycles and trends,

      o     risks  inherent  in changes  in market  interest  rates and  quality
            spreads,

      o     funding opportunities and borrowing costs,

      o     changes in funding markets,  including  commercial  paper, term debt
            and the asset-backed securitization markets,

      o     uncertainties  associated with risk  management,  including  credit,
            prepayment, asset/liability, interest rate and currency risks,

      o     adequacy of reserves for credit losses,

      o     risks  associated  with  the  value  and  recoverability  of  leased
            equipment and lease residual values,

      o     changes  in  laws  or   regulations   governing   our  business  and
            operations,

      o     changes in competitive factors, and

      o     future   acquisitions   and  dispositions  of  businesses  or  asset
            portfolios.


                                       47


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the Southern  District of New York against CIT, its Chief Executive  Officer and
its  Chief  Financial  Officer.   The  lawsuit  contains  allegations  that  the
registration  statement and prospectus prepared and filed in connection with the
IPO were  materially  false and  misleading,  principally  with  respect  to the
adequacy of CIT's telecommunications-related loan loss reserves at the time. The
lawsuit  purports to be brought on behalf of all those who  purchased CIT common
stock in or  traceable to the IPO, and seeks,  among other  relief,  unspecified
damages or  rescission  for those alleged class members who still hold CIT stock
and  unspecified  damages for other alleged class  members.  Additional  similar
lawsuits have also been filed,  including,  in one case, as defendants,  some of
the  underwriters and former directors of CIT. CIT believes that the allegations
in each of these actions are without merit and that its disclosures were proper,
complete and  accurate.  CIT intends to vigorously  defend itself  against these
actions.

      In addition,  in the ordinary course of business,  there are various legal
proceedings   pending  against  CIT.  Management  believes  that  the  aggregate
liabilities,  if any, arising from such actions, including the class action suit
above,  will not have a material  adverse effect on the  consolidated  financial
position, results of operations or liquidity of CIT.


Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

            3.1   Restated   Certificate   of   Incorporation   of  the  Company
                  (incorporated by reference to Exhibit 3.1 to Form 8-K filed by
                  CIT on July 10, 2002).

            3.2   Certificate   of   Amendment   of  Restated   Certificate   of
                  Incorporation  of the Company  (incorporated  by  reference to
                  Exhibit 3.2 to Form 8-K filed by CIT on July 10, 2002).

            3.3   Certificate  of  Ownership  and Merger  merging  Tyco  Capital
                  Holding,  Inc.  and CIT  Group  Inc.  (Del)  (incorporated  by
                  reference  to Exhibit 3.3 to Form 8-K filed by CIT on July 10,
                  2002).

            3.4   By-laws of the Company  (incorporated  by reference to Exhibit
                  3.4 to Form 8-K filed by CIT on July 10, 2002.)

            4.1   Indenture  dated as of August 26,  2002 by and among CIT Group
                  Inc.,  Bank One Trust  Company,  N.A., as Trustee and Bank One
                  NA,  London   Branch,   as  London  Paying  Agent  and  London
                  Calculation   Agent,   for  the  issuance  of  unsecured   and
                  unsubordinated  debt securities  (incorporated by reference to
                  Exhibit 4.18 to Form 10-K filed by CIT on February 26, 2003).

            12.1  CIT Group Inc.  and  Subsidiaries  Computation  of Earnings to
                  Fixed Charges.

            99.1  Certification  of Albert R. Gamper,  Jr. pursuant to 18 U.S.C.
                  Section  1350,  as  adopted  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002.

            99.2  Certification of Joseph M. Leone pursuant to 18 U.S.C. Section
                  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.

      (b) Reports on Form 8-K

                  Current Report on Form 8-K, dated January 21, 2003,  reporting
                  that the Board of Directors (i) declared a quarterly  dividend
                  of $0.12 per share and (ii) expanded the Board of Directors to
                  eight members and appointed two new members.

                  Current report on Form 8-K, dated January 23, 2003,  reporting
                  CIT's  financial  results  as of and  for  the  quarter  ended
                  December 31, 2002.


                                       48


                  Current   Report  on  Form  8-K,   dated  February  18,  2003,
                  announcing the commencement of a consent solicitation to amend
                  the  indenture  under which CIT's  $250,000,000  in  principal
                  amount of 6.625% Senior Debt Securities due 2005 were issued.

                  Current   Report  on  Form  8-K,   dated  February  18,  2003,
                  announcing that CIT had received the consent from more that 66
                  2/3% in  aggregate  principal  amount  of the  holders  of its
                  $250,000,000  in  principal   amount  of  6.625%  Senior  Debt
                  Securities  due 2005 to amend the  indenture  under which such
                  debt securities were issued.

                  Current report on Form 8-K, dated March 5, 2003, filing slides
                  from a  presentation  by  management  to  investors  at  CIT's
                  Investor Day conference on March 5, 2003.

                  Current  report on Form 8-K,  dated March 25, 2003,  reporting
                  the financing relationship of CIT with Avianca Airlines.


                                       49


                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                  CIT GROUP INC.

                                  By:         /s/ JOSEPH M. LEONE
                                      ..........................................
                                                   Joseph M. Leone
                                      Executive Vice President, Chief Financial
                                       Officer and Principal Accounting Officer
May 13, 2003


                                       50


                                 CERTIFICATIONS

I, Albert R. Gamper, Jr., certify that:

      1. I have reviewed this quarterly report on Form 10-Q of CIT Group Inc.;

      2. Based on my  knowledge,  this  quarterly  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The  registrant's  other  certifying  officer and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

           a) designed such  disclosure  controls and  procedures to ensure that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;

           b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
      controls  and  procedures  as of a date within 90 days prior to the filing
      date of this quarterly report (the "Evaluation Date"); and

           c)  presented  in this  quarterly  report our  conclusions  about the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

      5. The registrant's other certifying  officer and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

           a)  all  significant  deficiencies  in the  design  or  operation  of
      internal controls which could adversely affect the registrant's ability to
      record,  process,  summarize and report financial data and have identified
      for  the  registrant's   auditors  any  material  weaknesses  in  internal
      controls; and

           b) any fraud,  whether or not material,  that involves  management or
      other employees who have a significant role in the  registrant's  internal
      controls; and

      6. The registrant's  other certifying officer and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

                                            /s/ Albert R. Gamper, Jr.
                                 ...............................................
                                              Albert R. Gamper, Jr.
                                 Chairman, President and Chief Executive Officer


                                       51


I, Joseph M. Leone, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of CIT Group Inc.;

      2. Based on my  knowledge,  this  quarterly  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The  registrant's  other  certifying  officer and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a) designed such  disclosure  controls and procedures to ensure that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;

            b)  evaluated  the  effectiveness  of  the  registrant's  disclosure
      controls  and  procedures  as of a date within 90 days prior to the filing
      date of this quarterly report (the "Evaluation Date"); and

            c)  presented in this  quarterly  report our  conclusions  about the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

      5. The registrant's other certifying  officer and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

            a) all  significant  deficiencies  in the  design  or  operation  of
      internal controls which could adversely affect the registrant's ability to
      record,  process,  summarize and report financial data and have identified
      for  the  registrant's   auditors  any  material  weaknesses  in  internal
      controls; and

            b) any fraud,  whether or not material,  that involves management or
      other employees who have a significant role in the  registrant's  internal
      controls; and

      6. The registrant's  other certifying officer and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

                                             /s/ JOSEPH M. LEONE
                            ....................................................
                                               Joseph M. Leone
                            Executive Vice President and Chief Financial Officer


                                       52