PROVIDENCE – Citizens Financial Group Inc. reported a 41% cut to year-over-year earnings, ending 2020 with $1.1 billion in profit, the company announced on Wednesday.
Much of the $734 million loss stems from a dramatic increase in the company’s reserves set aside in anticipation for bad loans. The $1.6 billion in provision for credit losses through 2020 marks a 311% increase over similar provisions set aside in 2019.
At the same time, the holding company for Citizens Bank reported a record $2.3 billion noninterest income – an increase of 24% year over year – which it attributed to fees generated through its mortgage, capital wealth and market business. Mortgage banking fees skyrocketed 203% year over year to $915 million, driven by $41 billion in originations plus strong gain-on-sale margins. Capital markets fees increased 16% to $250 million, reflecting merger and acquisition advisory and loan syndication fees.
Total revenue nonetheless fell slightly, declining 4.8% to $7.7 billion. This stemmed from the 13% fall in interest income, which ended the year at $5.4 billion, reflecting the effects of a continued low interest rate-environment. Also a sign of the low interest rates, net interest margin – the difference between interest income generated and the amount paid out to lenders – fell 26 basis points year-over-year to 2.88%
Noninterest expenses increased 4% to $4.0 billion, including a 5% increase in salaries and employee benefits to help service the strong mortgage production activity.
Year-end assets stood at $183.3 billion, an 11% year-over-year increase that included a $4 billion bump in loans and leases. More than half of $123.1 billion in 2020 loans and leases came from retail-sector loans ($62.3 billion) including residential mortgages, while commercial and industrial loans totaled $44.2 billion.
Total deposits as of Dec. 31 were $147.2 billion, a 17% year-over-year increase that included a 50% or $14.6 billion rise in demand deposits.
In the fourth quarter of 2020, the company recorded a $456 million profit, a 1% increase over the fourth quarter of 2019. This included a $124 million set aside for credit losses, $14 million more than what was included a year earlier.
Despite continued stockpiling of its loan loss provisions, the company has not yet reported what some financial experts predict to be an outpouring of defaulted loans in the wake of the COVID-19 crisis. Fourth-quarter net charge-offs were $190 million, down from $219 million the prior quarter but above the $122 million in quarter four of 2019.
Strong mortgage and capital markets continued to drive noninterest income, which increased 24% over quarter four of 2019 to $578 million. Total quarterly revenue of $1.8 billion represented an 8.4% decrease over the same time frame a year ago, reflecting the low interest rate environment. The quarterly earnings included $4.1 billion in Paycheck Protection Program loans.
“Citizens was able to meet the unique challenges present in 2020 and demonstrate the diversification and resilience of our business model,” Chairman and CEO Bruce Van Saun said in a statement. “Our capital and credit allowance position remains strong, giving us confidence that we can meet loan demand while also increasing return of capital to our shareholders… We feel we are well positioned to benefit from economic recovery in 2021.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
