10-QPeriod: Q1 FY2021

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 5, 2021For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported a significant rebound in its first quarter 2021 financial performance compared to the first quarter of 2020. Net income available to common stockholders surged to $588 million, a substantial increase from $12 million in the prior year, primarily driven by a substantial decrease in the provision for credit losses. The company's total revenue remained stable year-over-year at $1.7 billion, supported by a 9% increase in noninterest income, which offset a 4% decline in net interest income. Despite a lower net interest margin due to the prevailing low-rate environment and elevated cash balances, the company saw healthy growth in average deposits and loans. Noninterest expenses were largely stable. Capital ratios remained strong and well above regulatory minimums. The improved financial results reflect a strengthening economic outlook and strong credit performance, marking a significant recovery from the pandemic-induced impacts seen in the first quarter of 2020.

Financial Highlights

38 data points
Beta

Revenue

$1.66B

Net Income

$611.00M

36.8% Net Margin

EPS (Diluted)

$1.37

Total Assets

$187.22B

Cash & Equivalents

$14.66B

Free Cash Flow

-$690.00M

Financial Statements
Beta
Revenue$1.66B
Interest Expense$99.00M
Net Income$611.00M
EPS (Basic)$1.38
EPS (Diluted)$1.37
Shares Outstanding (Basic)425.95M
Shares Outstanding (Diluted)427.88M

Key Highlights

  • 1Net income available to common stockholders was $588 million, a substantial increase from $12 million in Q1 2020.
  • 2Total revenue was stable at $1.7 billion, with noninterest income up 9% and net interest income down 4%.
  • 3Provision for credit losses was negative $140 million, a significant improvement from $600 million in Q1 2020, reflecting better credit performance and economic outlook.
  • 4Average deposits increased by 16% to $146.6 billion, while average loans and leases increased by 1% to $122.8 billion.
  • 5Net interest margin decreased by 34 basis points to 2.76% (FTE basis), impacted by a lower rate environment and elevated cash balances.
  • 6Capital ratios, including CET1 at 10.1%, remained robust and well above regulatory minimums.
  • 7Tangible book value per common share increased by 3% to $32.79 compared to Q1 2020.

Frequently Asked Questions

The substantial increase in net income from $12 million in Q1 2020 to $588 million in Q1 2021 was primarily driven by a significant reduction in the provision for credit losses. In Q1 2020, the company set aside $600 million for credit losses due to the economic uncertainty from the COVID-19 pandemic. In Q1 2021, this provision was negative $140 million, reflecting improved credit performance and a more optimistic macroeconomic outlook.

The net interest margin (NIM) decreased by 34 basis points to 2.76% (FTE basis) in Q1 2021 compared to Q1 2020. This was primarily due to a lower interest rate environment, which reduced yields on earning assets, and elevated cash balances resulting from strong deposit inflows. These factors more than offset the benefit of improved funding mix and deposit pricing.

Citizens Financial Group maintains a strong capital position. As of March 31, 2021, the Common Equity Tier 1 (CET1) capital ratio was 10.1%, Tier 1 capital ratio was 11.4%, and Total capital ratio was 13.4%. All these ratios are well above the required regulatory minimums plus the stress capital buffer (SCB). The company also has an authorized $750 million common stock repurchase program.

The company monitors credit risk through rigorous analysis of loan portfolios, including regulatory classification ratings for commercial loans and FICO scores for retail loans. The allowance for credit losses (ACL) is maintained based on expected lifetime credit losses and incorporates a forward-looking economic forecast. The significant reduction in the provision for credit losses and the reported strong credit performance across portfolios indicate effective risk management. However, the company does acknowledge ongoing uncertainty and applies management judgment to adjust reserves in sectors most impacted by the pandemic.