10-QPeriod: Q2 FY2018

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 6, 2018For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group (CFG) reported a strong second quarter and first half of 2018, with net income increasing significantly year-over-year, driven by revenue growth and improved net interest margin. The bank benefited from higher interest rates, which boosted asset yields, and a strategic mix of loans towards higher-return categories. Despite increased deposit and funding costs, the company demonstrated effective management of its balance sheet, leading to an improved efficiency ratio and robust return on tangible common equity. Key operational highlights include a 9% increase in net interest income for both the quarter and the first half, supported by loan growth and a wider net interest margin. Noninterest income also saw growth, albeit at a slower pace. The company maintained sound asset quality with stable net charge-offs and a healthy allowance for credit losses. Capital ratios remained strong and well above regulatory minimums. The company also announced an increase in its quarterly dividend and a new share repurchase program, reflecting confidence in its financial performance and commitment to returning capital to shareholders.

Financial Highlights

37 data points
Beta

Revenue

$1.51B

Net Income

$425.00M

28.2% Net Margin

EPS (Diluted)

$0.88

Total Assets

$155.43B

Cash & Equivalents

$3.87B

Free Cash Flow

$711.00M

Financial Statements
Beta
Revenue$1.51B
Interest Expense$290.00M
Net Income$425.00M
EPS (Basic)$0.88
EPS (Diluted)$0.88
Shares Outstanding (Basic)484.74M
Shares Outstanding (Diluted)486.14M

Key Highlights

  • 1Net income available to common stockholders increased by 34% to $425 million in Q2 2018 and by 28% to $806 million in the first half of 2018 compared to the prior year periods.
  • 2Total revenue grew by 8% to $1.5 billion in Q2 2018 and by 7% to $3.0 billion in the first half of 2018, driven by strong net interest income growth.
  • 3Net interest margin improved by 21 basis points to 3.18% in Q2 2018 and by 20 basis points to 3.17% in the first half of 2018, benefiting from higher asset yields.
  • 4Return on average tangible common equity (ROTCE) improved significantly to 12.9% in Q2 2018 from 9.6% in Q2 2017, and to 12.3% in the first half of 2018 from 9.6% in the prior year.
  • 5Average loans and leases increased by 3% in Q2 2018 and the first half of 2018, reflecting growth in both retail and commercial segments.
  • 6Capital ratios remained strong, with the CET1 capital ratio at 11.2% as of June 30, 2018, well above regulatory minimums.
  • 7The company received FRB approval for its 2018 Capital Plan, allowing for a dividend increase to $0.27 per share and a new share repurchase program of up to $1.02 billion.

Frequently Asked Questions

Citizens Financial Group reported a substantial increase in profitability. Net income available to common stockholders rose by 34% to $425 million in the second quarter of 2018 and by 28% to $806 million in the first half of 2018, compared to the same periods in 2017. This growth was primarily driven by a combination of increased revenue and improved efficiency.

The increase in net interest income was primarily driven by a higher net interest margin, which expanded by 21 basis points to 3.18% in the second quarter and by 20 basis points to 3.17% in the first half of 2018. This improvement was due to higher yields on interest-earning assets, influenced by rising short-term interest rates and a favorable shift in the loan mix towards higher-yielding categories, which more than offset increased deposit and funding costs.

Citizens Financial Group maintained strong capital levels, with its Common Equity Tier 1 (CET1) capital ratio at 11.2% as of June 30, 2018, comfortably exceeding regulatory requirements. The company received approval for its 2018 Capital Plan, which includes an increase in the quarterly common dividend to $0.27 per share and authorization for up to $1.02 billion in common share repurchases through the second quarter of 2019. These actions signal the company's financial strength and commitment to returning value to shareholders.

The company experienced solid loan growth, with average loans and leases increasing by 3% in both the second quarter and the first half of 2018, supported by growth in both commercial and retail loan portfolios. Asset quality remained sound, with net charge-offs remaining relatively stable year-over-year. The allowance for loan and lease losses as a percentage of total loans and leases was 1.10% at June 30, 2018, indicating prudent risk management.