PROVIDENCE – After adding $463 million in reserve funds for anticipated COVID-19 credit losses, Citizens Financial Group Inc. saw its quarter-one profit drop 92%, the company reported on Friday.
The holding company for Citizens Bank brought in $34 million in the first quarter of 2020, a $405 million decrease over its profits from quarter one of 2019. The loss was primarily driven by a $515 million increase in its provision funding for credit losses, $463 million of which is directly tied to financial impacts from the new coronavirus, the company stated. The increase in credit loss provisions also reflects new federal accounting standards.
Earnings per diluted share were 3 cents, compared to 92 cents in the first quarter of 2019.
National banks have reported similarly dramatic drops in earnings as they shore up funding to prepare for an onslaught of bad loans caused by the COVID-19 pandemic.
First-quarter revenue increased 4% to $1.7 billion, reflecting a 16% bump in noninterest income thanks to “record results” in mortgage banking, which increased by 270% or $116 million. This was partially offset by decreases in fees and charges, including a 33% drop in foreign exchange and interest rate products and a 20% loss to capital markets fees.
Net interest income – the difference between interest earned on assets like loans, mortgages and securities and interest paid out to customer deposits – remained stable at $1.2 billion.
The net interest margin declined 14 basis points to 3.09%, a function of slashed federal interest rates partially mitigated by an improved deposit mix and better-returning assets, the company stated.
Non-interest expense increased 8% to $1.0 billion, including an 8% or $40 million increase in employee salaries and benefits.
Total assets stood at $176.7 billion, a 10% increase over quarter one 2019, reflecting an $11.9 billion bump in loans and leases held for sale – a function of an increase in commercial line of credit utilization resulting from COVID-19. Total deposits reached $133.5 billion, an increase of 8% from a year ago, attributable to growth in money market accounts, demand deposits, checking with interest and savings that was partially offset by a decrease in term deposits.
“We are dealing with unprecedented times but I am pleased to say that Citizens remains financially strong, and focused on serving the needs of our customers, colleagues and communities,” Chairman and CEO Bruce Van Saun said in a statement. “Our first-quarter results were quite strong before the impact of the CECL provision build, which was impacted by COVID-19’s effect on the economy.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavn@PBN.com.
