(Reuters) – CIT Group Inc (CIT.N), a small-business lender operating under Federal Reserve supervision since emerging from bankruptcy, reported a lower-than-expected quarterly profit on Tuesday due to rising expenses.

CIT, led by former Goldman Sachs and Merrill Lynch executive John Thain, said noninterest expenses were $378.6 million, down 1.6 percent from a year earlier but up 4.5 percent from the fourth quarter of 2012.

“Expenses are above our long-term targets,” Thain said on a conference call with investors. “It is clear to us we need to focus on expenses and bring them down.”

Chief Financial Officer Scott Parker said CIT expects to reduce annual costs by $20 million by

closing small businesses in Latin America and Asia and is considering cutting some “platforms” in Europe.

First-quarter net income was $162.6 million, or 81 cents per share, compared with a loss of $427 million, or $2.13 per share, a year earlier, when the company spent more on servicing its long-term debt.

Analysts on average expected earnings of 88 cents per share, according to Thomson Reuters I/B/E/S.

Thain, who has been negotiating with the Federal Reserve to end an agreement that restricts CIT’s autonomy and its ability to pay dividends and buy back stock, said he had “nothing new” to report on the agreement, which has been in place since August 2009. CIT emerged from bankruptcy in December 2009.

Most of CIT’s lending businesses are growing in tandem with “modest growth” that the company sees in the U.S. economy, Thain said. CIT lends to small and medium-sized businesses that do not qualify for traditional bank credit.

Interest income in the first quarter fell 7 percent to $355.8 million but is within CIT’s targets, Thain said. Assets in its core commercial finance areas grew for the sixth consecutive quarter.

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Courtesy Reuters.com