PROVIDENCE – Citizens Financial Group Inc. on Tuesday reported a 44% drop in quarterly earnings compared with a year ago, following the trend reported by major banks nationwide.
The parent company for Rhode Island-based Citizens Bank ended the second quarter of this year with a $364 million profit, down from $648 million for the same time frame last year. Earnings per diluted share also fell 26 cents to 67 cents per share.
The profit slide was driven by changes to loan loss reserves. Citizens, like banks nationwide, dumped millions from its stockpile in 2021, realizing the safety net for bad loans was no longer needed, and subsequently boosting its 2021 earnings. This year, the company is again building back its reserves, with $216 million added in the second quarter, a majority of which was required under new accounting standards tied to its acquisition of New Jersey-based Investors Bancorp.
The $3.5 billion acquisition, which closed in April, is the second major deal to expand the bank’s footprints, following on the heels of a deal to buy 80 East Coast branches of HSBC U.S. Bank NA. Together the two deals are anticipated to help Citizens crack the top 10 market share in the New York City metro area.
Already, the acquisitions have boosted the company’s balance sheet, according to results reported on Tuesday.
Total assets of $226.7 billion marked a 22% increase over a year ago, including a 27% jump in total loans and leases to $156.2 billion, which the company attributed to its recent acquisitions.
Quarterly deposits stood at $178.9 billion, up 19% over a year ago, driven by the $25.8 billion impact of the HSBC and ISBC transactions, the company stated.
Also reflecting the assets brought in from the new deals as well as higher interest rates, interest income increased 34% to $1.6 billion.
This was partially offset by increased funding costs, which hiked interest expenses by 34% to $121 million.
Net interest margin, the difference between interest income generated and the amount it pays out, rose 29 basis points to 3.04%.
The $494 million in noninterest income marked a 2% rise year over year, with records in card fees, trust and investment service fees and foreign exchange and derivative products revenue. This was partially offset by losses to other income related to the Investors acquisition and declines in mortgage banking fees.
Noninterest expenses also increased 32% to $1.2 billion, $128 million of which stemmed directly from the two recent acquisitions, the company stated. This included a 30% jump in employee compensation and benefits, although seasonal compensation excluding the two acquisitions deals was lower, according to the company.
“We were pleased to deliver strong results in the second quarter, which featured the completion of the Investors Bancorp acquisition,” Chairman and CEO Bruce Van Saun said in a statement. “We have navigated well through a period marked by higher than expected inflation, and the Fed’s aggressiveness in raising short-term rates and tightening liquidity. Our capital, liquidity and funding position remains strong – we are funding attractive loan growth and have raised our dividend. Our fee businesses are proving to be diversified and resilient, and our credit metrics all remain very favorable. We look forward to continuing our momentum in the second half.”
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
