PROVIDENCE – Citizens Financial Group saw its profits cut by nearly a third compared with a year ago, ending the first quarter with $420 million in earnings, the company reported on Tuesday.
Decreases to mortgage banking income as well as costs related to its recently closed acquisition of 80 branches of HSBC Bank U.S. NA were the major drivers of lower earnings.
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Earnings per diluted share fell 44 cents to 93 cents.
The company also started boosting its loan loss reserves, adding $3 million in credit loss provisions compared with the $140 million that were released from its stockpile in the first quarter of 2021. Financial institutions nationwide have opted for a similar strategy amid market volatility over the war in Ukraine, which has sent capital markets on a rollercoaster ride.
Meanwhile, the red-hot housing market has finally cooled off amid rising rates and depleted inventory, cutting the company’s mortgage banking income by more than half to $69 million.
While many banks saw capital markets and investment banking business drop due to market reactions to Russia’s invasion of Ukraine, Citizens still increased its capital markets income by 15% year-over-year, and grew its trust and investment service income by 5%.
Total noninterest income declined 8% to $498 million.
While interest rates have finally started to rise after years of near-zero rates, Citizens hasn’t seen the benefit on its interest income yet. Quarterly interest income remained flat compared with a year ago at $1.2 billion. And still-depressed interest expenses have stuck around from that low interest rate environment, creating a 3% boost to net interest income to $1.5 billion.
Net interest margin – the difference between interest income generated and the amount it pays out – stayed flat at 2.75%.
Non-interest expenses also increased 9% to $1.1 billion, driven by a 22% jump in “outside services” which the company said included costs related with its HSBC acquisition deal, which closed in the first quarter. The company also set aside $24 million as a required accounting of pre-tax provisions for its acquisition of HSBC.
Total assets ticked up 3% to $192.1 billion, including a 7% increase in loans and leases. The $131.3 billion in loans and leases reflected year-over-year growth in residential mortgage, car, education and home equity loans. This was partially offset by a $4.7 billion loss in Paycheck Protection Program loans which have since been forgiven.
Quarterly deposits stood at $158.8 billion, a 5% increase driven by the $6.3 billion in deposits added from HSBC, the bank stated.
Citizens also acquired New Jersey-based Investors Bancorp., but the deal didn’t close until after the end of the first quarter.
“We started off 2022 with solid financial performance, as strong net interest income, good expense discipline and excellent credit helped to offset the macro environment’s impact on Capital Markets and Mortgage revenue,” Chairman and CEO Bruce Van Saun said in a statement. “We were pleased to close both the HSBC branch and the Investors Bancorp acquisitions, and look forward to building out a strong franchise in the New York City Metro market. Our strategic initiatives are on track, which should drive relative out-performance in the future. During the quarter, we actively managed our balance sheet strategies, and we feel well-positioned to benefit from the market expectations for significant rate rises.”
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
