PROVIDENCE – Citizens Financial Group Inc. on Tuesday reported a 31% rise in quarterly earnings compared with a year ago, beating Wall Street estimates and following the upward trend reported this earnings season by the nation’s biggest banks.
The parent company for Rhode Island-based Citizens Bank ended the second quarter of this year with a $478 million profit, up from $364 million for the same time frame last year. Earnings per diluted share also rose 15 cents to 92 cents per share.
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The results are from the first full-quarter following the collapse of three mid-sized U.S. banks in the spring of 2023.
“We were pleased to navigate well through a dynamic and challenging environment in the second quarter,“ said Chairman and CEO Bruce Van Saun. “We were very focused on further strengthening our capital, liquidity and funding position and delivered impressive results.”
Citizens CET1 ratio – which compares a bank’s capital against its assets – improved to 10.3% from 9.6% year-over-year. Van Saun said that while the bank bought back more than $250 million in stock, Citizens grew deposits by $5.5 billion, and reduced Federal Home Loan borrowings by almost $7 billion to $5 billion.
The higher CET1 ratio will help protect the bank from further erosion in its commercial real estate portfolio. Office real estate values have nosed-dived in the wake of the pandemic and the continued trend of employees working from home.
To help mitigate additional downturns in the office real estate market, the bank has limited commercial real estate originations to existing clients and is “proactively engaging borrowers on mutually beneficial work-out solutions well before maturity.”
To “optimize its balance sheet and emphasize relationship-based lending,” Citizens stopped originating indirect auto loans on July 1.
Van Saun said Citizens Financial has “made solid progress” on strategic initiatives, highlighting the launch of Citizens Private Bank and continued growth within the New York City metropolitan region.
“As a strong bank we will continue to be well-positioned to benefit from opportunities in the current environment,” he said.
Total assets of $223.1 billion marked a 2% decrease over a year ago, including a 3% decline in total loans and leases to $151.3 billion. Total available liquidity increased by 19% to about $79 billion, according to CFG’s earnings statement.
Quarterly deposits stood at $177.7 billion, down 1% from a year ago primarily due to interest rate-related outflows. The continuing increases in interest rates by the Federal Reserve also drove the migration of deposits from demand and checking with interest to term and money market accounts, according to CFG’s earnings statement.
Net interest income ticked up 6% year-over-year rising from $1.51 billion to $1.59 billion, reflecting higher net interest margin and 1% growth in average interest earning assets, according to CFG’s earnings statement.
Net interest margin, the difference between interest income generated and the amount it pays out, rose 13 basis points from 3.04% to 3.17%, reflecting higher interest-earning-asset yields given higher market interest rates and interest-earning asset growth, according to CFG’s earnings statement.
The $506 million in noninterest income marked a 2% rise over last year’s $494 million. Service charges and fees decreased $7 million, reflecting the elimination of non-sufficient funds fees in the consumer banking division. Card fees increased $9 million, given higher transaction volumes, according to CFG’s earnings statement.
Noninterest expense ticked up 4% to $1.2 billion, reflecting both higher advertising costs and a hike in FDIC insurance as a result of the industry-wide 2 basis point surcharge that went into effect Jan. 1. Salaries and employee benefits decreased overall, according to CFG’s earnings statement.
Contact PBN staff writer Sam Wood at Wood@PBN.com.
