Improved credit environment leads to 2Q profit gain for Citizens

PROVIDENCE – Citizens Financial Group posted a 5.6 percent increase in operating profit to $206 million in the second quarter, according to parent Royal Bank of Scotland Group, as net interest and non-interest income stayed flat at $1.16 billion.
The group, parent of Providence-based Citizens Bank, noted that the 2010 second quarter included a $113 million credit related to changes to the defined benefit pension plan. Subtracting the effects of that change, operating profit for the 2011 period showed improvement of 151 percent over the same 2010 quarter.
Reasons for the improvement included an increase in net interest margin to 3.11 percent from 2.79 percent, as well as a drop of 50 percent in impairment charges. Total impairments recorded in the quarter declined to $107 million, led by a 69 percent drop in corporate and commercial impairments to $35 million, “reflecting an improved credit environment,” said the bank. Set-asides for low-quality home-equity loans also declined, showing a 66.1 percent drop to $19 million.
In its analysis of the quarter, Citizens noted that consumer customer satisfaction improved significantly, approaching the highest level in 24 months.
The bank also said that performance in the period ended June 30 showed significant improvement over the 2011 first quarter, 59.7 percent in operating profit and 4.8 percent in net interest and non-interest income.