PROVIDENCE – Citizens Financial Group Inc. saw its annual profits shrink by 11% in 2022 after acquisition costs and building up its loan loss reserves, the company reported on Tuesday.
The parent company for Citizens Bank ended 2022 with $2.1 billion in earnings, versus the $2.3 billion profit for 2021. Earnings per diluted share also fell $1.06 year-over-year, to $4.10.
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The profit loss comes as the bank, like others nationwide, begins to stockpile reserves in anticipation of loan defaults from an economic downturn. The company added $474 million to its credit loss provisions for the calendar year 2022, compared with $411 million it had released from its reserves in 2021 as the economy began to rebound.
The acquisitions of Investors Bancorp Inc. and East Coast branches of HSBC U.S. Bank NA., both of which closed in 2022, also cut into profits by upping non-interest expenses. Non-interest expenses rose 20% year-over-year to $4.9 billion as a result of the deals, which are anticipated to help Citizens crack the top-10 market share in the New York City metro region.
The assets brought in by these acquisitions, alongside aggressive federal interest rate hikes, led to a 33% boost to net interest income, reaching $6 billion by the end of 2022.
Also benefiting from higher interest rates, net interest margin – the difference between interest income generated and the amount the company pays out – rose 39 basis points year-over-year to $3.10.
Non-interest income of $2 billion marked a 6% decline compared with the end of 2021, with mortgage banking fees down 40% due to lower production volume, the company stated. Capital market fees and net securities gains also decreased due to “challenging market conditions,” according to Citizens.
Total assets as of Dec. 31 stood at $226.7 billion, up 20.3% over a year ago, thanks to acquisitions and loan growth. The $156.7 billion in loans marked a 22% increase, with the biggest gains in commercial real estate and residential mortgage loans.
Year-end deposits were up 17% to $180.7 billion, with gains in checking, savings and term deposits.
In Rhode Island, Citizens continues to have with the highest share of in-market deposits, 39%, according to the Federal Deposit Insurance Corp.
In the fourth quarter of 2022, the company reported a $653 million profit, up 23% over the fourth quarter of 2021. Higher fourth-quarter profits also reflected the increase in interest rates as well as more interest-earning assets following the Investors and HSBC acquisitions.
Quarterly net interest income rose 51% to $1.7 billion, with a boost to quarterly net interest margin of 63 basis points, to 3.29%.
This was partially offset by a 15% drop in quarterly non-interest income, to $505 million, amid a 47% drop in capital market fees, again due to market conditions. Economic headwinds also led the company credit to add $132 million in credit loss provisions in the fourth quarter, versus the $25 million it released from its reserves in the fourth quarter of 2021.
“We continue to focus on managing the balance sheet and interest rate position well given the macro environment, and we ended the year with a strong credit and capital position,“ Chairman and CEO Bruce Van Saun, said in a statement. “We look forward to continuing our momentum in 2023, we are well prepared for the challenging and uncertain economic environment.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
