10-QPeriod: Q1 FY2022

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 4, 2022For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported first-quarter 2022 results marked by significant strategic acquisitions and a mixed financial performance. While total revenue remained relatively stable, net income saw a notable decrease year-over-year, primarily impacted by higher noninterest expenses and acquisition-related costs. The company successfully closed the acquisition of HSBC's East Coast branches and national online deposit business in February 2022, and the acquisition of Investors in April 2022, expanding its geographic reach and customer base. Despite the decline in net income, driven partly by integration costs and a shift in provision for credit losses from a benefit in the prior year to a small expense, the underlying performance indicates resilience. Net interest income increased due to higher earning assets, though net interest margin was stable. Noninterest income was impacted by lower mortgage banking fees, partially offset by stronger capital markets and foreign exchange revenues. The company maintains strong capital and liquidity positions, with regulatory capital ratios well above minimum requirements, providing a solid foundation for future growth and integration efforts.

Financial Highlights

38 data points
Beta

Revenue

$1.65B

Net Income

$420.00M

25.5% Net Margin

EPS (Diluted)

$0.93

Total Assets

$192.10B

Cash & Equivalents

$9.94B

Free Cash Flow

$1.55B

Financial Statements
Beta
Revenue$1.65B
Interest Expense$66.00M
Net Income$420.00M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)422.40M
Shares Outstanding (Diluted)424.67M

Key Highlights

  • 1Completed two significant acquisitions: HSBC East Coast branches (February 2022) and Investors (April 2022), expanding the company's footprint and customer base.
  • 2Net income available to common stockholders decreased by $192 million to $396 million compared to Q1 2021, influenced by notable items and integration costs.
  • 3Total revenue of $1.6 billion was largely stable, down 1% year-over-year, with net interest income up 3% and noninterest income down 8%.
  • 4Noninterest expense increased by 9% due to higher salaries, employee benefits, and operating expenses related to integration and strategic initiatives.
  • 5Provision for credit losses was $3 million, a significant shift from a $140 million benefit in Q1 2021, reflecting strong credit performance.
  • 6Average total assets grew to $192.1 billion, driven by acquisitions and organic loan growth.
  • 7Capital ratios (CET1, Tier 1, Total Capital) remained strong and well above regulatory minimums, demonstrating robust capital adequacy.

Frequently Asked Questions

CFG completed two significant acquisitions during the quarter: the acquisition of HSBC's East Coast branches and national online deposit business on February 18, 2022, and the acquisition of Investors on April 6, 2022. These transactions are aimed at expanding the company's geographic presence and customer base, particularly in attractive markets like the Mid-Atlantic region.

The acquisitions had a notable impact, contributing to an increase in total assets and deposits. However, they also led to higher noninterest expenses due to integration costs. While the full financial impact is still being integrated, the acquisitions are central to CFG's national expansion strategy.

Net income for Q1 2022 decreased year-over-year, partly due to integration costs and a shift in the provision for credit losses. Total revenue remained stable, supported by growth in net interest income, though noninterest income faced headwinds from lower mortgage banking fees. Management is navigating a complex economic environment with rising inflation and interest rates, while pursuing strategic growth through acquisitions. The company's asset sensitivity suggests potential benefits to net interest income from rising rates.

CFG reported strong credit performance with a low provision for credit losses of $3 million, down from a benefit in the prior year. Nonaccrual loans and leases saw a slight increase, primarily due to loans exiting forbearance. The company continues to monitor macroeconomic risks, including inflation, supply chain challenges, and geopolitical events, and adjusts its allowance for credit losses accordingly.