CIT Group Inc , which emerged from bankruptcy in December 2009, reported a drop in quarterly profit compared with the third quarter, as the commercial lender was hurt by a fall in interest income and higher expenses.

Chief Executive John Thain, who took the reins of the company in February last year, has been trying to cut expenses and boost CIT's business through debt reduction and sale of non-core assets.

Thain was previously the CEO of Merrill Lynch & Co and NYSE Euronext .

In 2010, the company reduced more than $7 billion of high-cost debt, sold more than $5 billion of assets and funded more than $4.5 billion in new business.

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, with a market value of about $9.5 billion, 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.

The filing caused the U.S. government to lose the $2.3 billion of bailout money it had injected in December 2008.

Shares of the New-York based company were nearly flat at $48.0 in premarket trade. The stock has gained more than three-fourth since the company emerged from bankruptcy.

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