PROVIDENCE – Citizens Financial Group Inc. reported a $530 million profit in the third quarter, more than doubling its profit margin one year prior, the company announced on Wednesday.
The third-quarter earnings represent a 69% increase over profits in the third quarter of 2020, reflecting the continued release of loan loss reserves built up during the pandemic. In the third quarter of 2021, the company let go of $33 million from its credit loss provisions, citing “strong credit improvement and macroeconomic performance.” In contrast, during the height of the pandemic a year ago, Citizens added $428 million to its reserves in anticipation of bad loans.
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Total earnings per diluted share rose from 68 cents per share to $1.18, year over year.
The earnings boost comes despite drops in both interest and noninterest income. Interest income of $1.2 billion represented a 5% decline over a year ago as a result of a continued low interest rate environment. Also a reflection of depressed interest rates, the company’s net interest margin, the difference between interest income generated versus the amount of interest paid out to lenders, dropped 11 basis points to 2.72%.
This was offset by a 46% decline in interest expenses thanks to an improved funding mix, deposit pricing and accelerated loan forgiveness options for Paycheck Protection Program borrowers, the company stated. With the $77 million in interest expenses, the bank still saw a 1% bump to its net interest income to reach $1.1 billion.
The $514 million in noninterest income – a 21% drop over a year ago- included declines in mortgage banking fees and “other” income from the gain on sale of education loans. This was partially offset by boosts to service charges and fees for capital markets, cards, letters of credit and trust and investment services.
Noninterest expenses of $1 billion increased 2% over a year ago, attributed to higher operating costs and equipment and software.
Quarter-end assets increased 4% to $187 billion, including $132.2 billion on loans and leases. Total loans declined 1% over a year ago, with cuts to commercial loans that were partially offset by growth in residential mortgages, car and education loans.
Total deposits stood at $151.9 billion, a 7% increase over a year ago tied to federal stimulus money during the pandemic that grew demand deposits, savings, money market accounts and checking with interest, the company stated.
The latest earning disclosure comes amid growing expansion of the Providence-based bank, which has announced several acquisition deals in recent months. Both the $3.5 billion deal to purchase New Jersey-based Investors Bancorp Inc. and the $149 million acquisition of California capital markets firm JMP Group LLC have not yet closed and therefore are not reflected in the latest financial statements.
The bank closed a deal in the third quarter to acquire an Illinois-based financial valuation and consulting analysis firm but the terms of the deal were not disclosed.
“We delivered strong results in the third quarter, paced by solid revenue growth across both net interest income and fees, which combined with excellent expense discipline resulted in positive sequential operating leverage in excess of 2%,” Chairman and CEO Bruce Van Saun said in a statement. “Integration planning for our recent acquisitions is going well, and we are excited about the franchise and synergy benefits as we look forward to 2022. While economic growth and loan demand in the second half have been affected by the pandemic, we maintain a positive outlook for a gradual, strong recovery through next year.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
