10-QPeriod: Q2 FY2020

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 6, 2020For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported a challenging second quarter in 2020, significantly impacted by the COVID-19 pandemic. Net income available to common stockholders decreased by 72% year-over-year for the first half of 2020, largely due to a substantial increase in the provision for credit losses, reflecting the economic downturn. Despite these headwinds, total revenue saw a 7% increase in Q2 2020 compared to the prior year, driven by a strong performance in mortgage banking fees, which offset declines in other fee-based income categories. The company also experienced robust deposit growth, indicating a solid liquidity position. Management is actively managing expenses and capital while navigating the uncertain economic environment.

Financial Highlights

38 data points
Beta

Revenue

$1.75B

Net Income

$253.00M

14.5% Net Margin

EPS (Diluted)

$0.53

Total Assets

$179.87B

Cash & Equivalents

$7.45B

Free Cash Flow

-$86.00M

Financial Statements
Beta
Revenue$1.75B
Interest Expense$190.00M
Net Income$253.00M
EPS (Basic)$0.53
EPS (Diluted)$0.53
Shares Outstanding (Basic)426.61M
Shares Outstanding (Diluted)427.57M

Key Highlights

  • 1Net income available to common stockholders for the first half of 2020 decreased by 72% to $237 million compared to $859 million in the prior year period.
  • 2Provision for credit losses increased significantly to $1.1 billion for the first half of 2020, up from $182 million in the prior year, primarily due to the impact of COVID-19.
  • 3Total revenue for Q2 2020 increased by 7% to $1.75 billion, driven by a 28% increase in noninterest income, particularly from strong mortgage banking results.
  • 4Net interest margin (FTE) decreased by 33 basis points to 2.88% in Q2 2020 compared to Q2 2019, reflecting the impact of lower interest rates.
  • 5Total deposits grew by 15% to $143.6 billion as of June 30, 2020, indicating strong customer inflows.
  • 6The CET1 capital ratio stood at 9.6% as of June 30, 2020, remaining well above regulatory minimums.
  • 7Citizens Financial Group, Inc. suspended its stock repurchase program through December 31, 2020, to preserve capital during the pandemic.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Citizens Financial Group's financial performance, primarily through a substantial increase in the provision for credit losses, reflecting the challenging economic environment and potential credit deterioration. This led to a sharp decline in net income available to common stockholders for the first half of 2020 compared to the prior year. Lower interest rates also compressed the net interest margin.

The primary driver of revenue growth was the strong performance in mortgage banking fees, which increased significantly due to higher origination volumes and improved gain-on-sale margins. This growth in noninterest income helped to offset declines in other fee-based income categories that were negatively impacted by the pandemic.

The company has maintained strong capital ratios, with its CET1 capital ratio well above regulatory requirements. To preserve capital and support customers during the economic uncertainty, Citizens Financial Group temporarily suspended its stock repurchase program through the end of 2020. Deposit growth has been robust, contributing positively to liquidity.

The company significantly increased its allowance for credit losses, reflecting the economic impact of COVID-19 and forward-looking economic forecasts. While net charge-offs increased, the company is actively monitoring credit quality and has implemented customer accommodation programs to mitigate potential adverse effects.