10-QPeriod: Q1 FY2023

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 10, 2023For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported a solid first quarter of 2023, with net income available to common stockholders increasing by $92 million to $488 million, or $1.00 per diluted share. On an underlying (non-GAAP) basis, net income was $537 million, or $1.10 per diluted share, reflecting strong performance driven by a significant 43% increase in total revenue to $2.1 billion, largely due to a 43% rise in net interest income. This growth was supported by higher market interest rates and strategic acquisitions, including the HSBC transaction and Investors acquisition. The bank demonstrated improved operational efficiency with an efficiency ratio of 60.9% (57.8% on an underlying basis), down from 67.2% in the prior year. Profitability metrics also saw improvement, with Return on Tangible Common Equity (ROTCE) at 14.4% (15.8% underlying), up from 11.4% in Q1 2022. Tangible book value per common share increased by 6% from the prior quarter. Despite an increase in the provision for credit losses to $168 million, reflecting normalization from pandemic-era lows and specific portfolio concerns, the company maintained strong capital ratios, with CET1 capital ratio at 10.0% and Tier 1 capital ratio at 11.1%, well above regulatory requirements.

Financial Highlights

38 data points
Beta

Revenue

$2.13B

Net Income

$511.00M

24.0% Net Margin

EPS (Diluted)

$1.00

Total Assets

$222.26B

Cash & Equivalents

$7.97B

Free Cash Flow

$1.15B

Financial Statements
Beta
Revenue$2.13B
Interest Expense$759.00M
Net Income$511.00M
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)485.44M
Shares Outstanding (Diluted)487.71M

Key Highlights

  • 1Net income available to common stockholders increased 23% to $488 million ($1.00/share) compared to Q1 2022 ($396 million, $0.93/share).
  • 2Underlying net income available to common stockholders increased 19% to $537 million ($1.10/share) compared to Q1 2022 ($452 million, $1.07/share).
  • 3Total revenue surged 29% to $2.1 billion, driven by a 43% increase in net interest income, benefiting from higher market rates and recent acquisitions.
  • 4Efficiency ratio improved to 60.9% (57.8% underlying) from 67.2% (64.3% underlying) in Q1 2022, indicating better operational efficiency.
  • 5Return on Tangible Common Equity (ROTCE) improved to 14.4% (15.8% underlying) from 11.4% (13.0% underlying) in Q1 2022.
  • 6The provision for credit losses increased significantly to $168 million from $3 million in Q1 2022, reflecting normalization and specific portfolio concerns.
  • 7Capital ratios remained strong, with CET1 ratio at 10.0% and Tier 1 capital ratio at 11.1%, well above regulatory minimums.

Frequently Asked Questions

Citizens Financial Group reported a significant improvement in profitability. Net income available to common stockholders increased by $92 million to $488 million ($1.00 per diluted share) compared to $396 million ($0.93 per diluted share) in the prior year. On an underlying (non-GAAP) basis, which excludes certain items, net income available to common stockholders rose to $537 million ($1.10 per diluted share) from $452 million ($1.07 per diluted share) in Q1 2022.

The net interest income increased by 43% to $1.64 billion. This growth was primarily driven by higher market interest rates, which increased interest-earning asset yields, and by the expansion of the interest-earning asset base, significantly influenced by the recent HSBC transaction and Investors acquisition. While funding costs also increased, the overall yield expansion was a key driver.

Citizens Financial Group demonstrated improved operational efficiency with an efficiency ratio of 60.9% for the first quarter of 2023, down from 67.2% in the same period of 2022. On an underlying basis, the efficiency ratio improved to 57.8% from 64.3%. This improvement indicates that the company is generating more revenue relative to its expenses, suggesting successful cost management and integration of strategic initiatives, which positively impacts profitability.

The provision for credit losses increased significantly to $168 million in Q1 2023 from $3 million in Q1 2022. Management attributes this increase to a normalization of credit losses from pandemic-era lows, particularly in the Commercial Real Estate general office portfolio due to return-to-office dynamics and rising interest rates. While this indicates a cautious approach to credit risk, the overall loan portfolio remains well-diversified, and the company's capital position remains strong, providing a buffer against potential future credit deterioration.