10-QPeriod: Q2 FY2017

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 3, 2017For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported strong financial performance for the second quarter and first half of 2017 compared to the same periods in 2016. Net income saw a significant increase, up 31% to $318 million for the quarter and 37% to $638 million for the first half. This growth was driven by a 9% increase in total revenue for the quarter and 11% for the first half, primarily fueled by a robust 11% rise in net interest income due to loan growth and improved net interest margin. Noninterest income also contributed positively. The company also demonstrated improved operational efficiency, with a lower efficiency ratio and positive operating leverage. Despite a $26 million pre-tax impact from impairments on aircraft lease assets, the underlying performance was strong, reflecting effective expense management and credit quality improvements.

Financial Highlights

36 data points
Beta

Revenue

$1.40B

Net Income

$318.00M

22.8% Net Margin

EPS (Diluted)

$0.63

Total Assets

$151.41B

Cash & Equivalents

$4.17B

Free Cash Flow

-$316.00M

Financial Statements
Beta
Revenue$1.40B
Interest Expense$179.00M
Net Income$318.00M
EPS (Basic)$0.63
EPS (Diluted)$0.63
Shares Outstanding (Basic)506.37M
Shares Outstanding (Diluted)507.41M

Key Highlights

  • 1Net income increased by 31% to $318 million in Q2 2017 and by 37% to $638 million in H1 2017 compared to the prior year periods.
  • 2Total revenue grew by 9% in Q2 2017 and 11% in H1 2017, driven by an 11% increase in net interest income.
  • 3Net interest margin improved by 13 basis points in Q2 2017 and 12 basis points in H1 2017.
  • 4Return on average tangible common equity (ROTCE) improved to 9.6% in Q2 2017 and 9.6% in H1 2017, up from 7.3% and 7.0% respectively.
  • 5The efficiency ratio improved to 61.94% in Q2 2017 and 61.81% in H1 2017, indicating better operational efficiency.
  • 6Provision for credit losses decreased by 22% in Q2 2017 and 8% in H1 2017, reflecting improved portfolio credit quality.
  • 7Capital ratios, including CET1, Tier 1, and Total Capital, remained strong and well above regulatory minimums, with CET1 at 11.2%.

Frequently Asked Questions

The primary driver of the increase in net income was strong revenue growth, particularly in net interest income, which rose 11% due to higher loan volumes and an improved net interest margin. This was complemented by growth in noninterest income and effective expense management.

Citizens Financial Group focused on expense management, which contributed to positive operating leverage and an improved efficiency ratio. While noninterest expense increased by 4% in Q2 2017, this included a $15 million impact from operating lease impairments. Excluding these impairments, underlying noninterest expense growth was a more moderate 3%.

The company maintains a strong capital position. As of June 30, 2017, its Common Equity Tier 1 (CET1) capital ratio was 11.2%, Tier 1 capital ratio was 11.4%, and Total Capital ratio was 14.0%. These ratios are well above the regulatory minimums, including the capital conservation buffer.

Yes, there was a $26 million pre-tax impact related to impairments on aircraft lease assets, primarily from a non-core runoff portfolio. This charge reduced noninterest income by $11 million and increased noninterest expense by $15 million, impacting the results for the quarter and the first half.