CIT Group Inc reported a sequential drop in quarterly profit as the commercial lender was hurt by a fall in interest income and higher expenses.

Fourth-quarter net income was $74.8 million, or 37 cents as share, compared with $115.8 million, or 58 cents a share, in the third quarter.

Analysts on average had expected CIT to earn 40 cents a share, before items, according to Thomson Reuters I/B/E/S.

The lower quarterly earnings also reflect a decline in net finance revenue and higher credit costs, the company said in a statement.

Total interest income fell to $754.0 million from $838.1 million in the third quarter.

Operating expenses saw a sequential increase of 9 percent to $250 million in the quarter.

The company expects to increase new business volume and reduce costs in 2011.

Earlier this month CIT Group restated and raised its profit for the first three quarters of 2010 after finding accounting errors.

The errors were mainly related to the use of Fresh State Accounting (FSA), a form of accounting used by companies that have exited bankruptcy.

CIT expects 2011 results to reflect significantly reduced FSA benefits as expectations for asset repayments slow and voluntary Series A debt redemptions result in both prepayment fees and FSA-related costs.

The small- and mid-market lender filed one of the five largest bankruptcies in U.S. history on November 1, 2009, and emerged on December 10 the same year.

Shares of the New-York based company closed at $48.15 on Monday on the New York Stock Exchange. The stock has gained more than three-fourth since the company emerged from bankruptcy.

(Reporting by Sweta Singh in Bangalore; Editing by Unnikrishnan Nair)