10-QPeriod: Q2 FY2024

CITIZENS FINANCIAL GROUP INC/RI Quarterly Report for Q2 Ended Jun 30, 2024

Filed August 6, 2024For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported a decrease in net income and earnings per share for the second quarter of 2024 compared to the prior year, primarily driven by a significant decline in net interest income. This was largely due to a lower net interest margin, which was impacted by higher funding costs and a shift in the company's funding mix, despite some offset from higher asset yields. Noninterest income showed strength, particularly in capital markets fees and card fees, but this was not enough to offset the decline in net interest income. Noninterest expenses increased modestly, mainly due to investments in the Private Bank and technology, along with higher FDIC deposit insurance costs. Credit quality indicators remained relatively stable overall, though commercial real estate, particularly in the office sector, showed some deterioration in criticized balances. The company's capital ratios remained strong and improved year-over-year, demonstrating solid capital adequacy.

Financial Highlights

36 data points
Beta

Revenue

$1.96B

Net Income

$392.00M

20.0% Net Margin

EPS (Diluted)

$0.78

Total Assets

$219.94B

Cash & Equivalents

$11.77B

Free Cash Flow

$834.00M

Financial Statements
Beta
Revenue$1.96B
Net Income$392.00M
EPS (Basic)$0.79
EPS (Diluted)$0.78
Shares Outstanding (Basic)454.14M
Shares Outstanding (Diluted)456.56M

Key Highlights

  • 1Net income available to common stockholders decreased by $124 million to $373 million for the three months ended June 30, 2024, compared to $497 million in the prior year period.
  • 2Earnings per diluted common share fell to $0.82 for the second quarter of 2024 from $1.04 in the same period of 2023.
  • 3Total revenue decreased by $131 million to $1.96 billion, driven by an 11% decline in net interest income.
  • 4Net interest margin (FTE) decreased by 30 basis points to 2.87% in the second quarter of 2024 compared to the prior year.
  • 5Noninterest income increased by 9% to $553 million, driven by higher capital markets fees and card fees.
  • 6Efficiency ratio (non-GAAP) deteriorated to 64.6% from 58.9% in the prior year period, indicating higher expenses relative to revenue.
  • 7Tangible book value per common share of $30.61 decreased 1% from December 31, 2023.

Frequently Asked Questions

The primary reason for the decrease in net income is a significant decline in net interest income, driven by a lower net interest margin. This was primarily caused by higher funding costs and changes in the company's funding mix, which outpaced the benefits from higher interest-earning asset yields.

Overall credit quality remained relatively stable, with the Allowance for Credit Losses (ACL) to total loans and leases ratio at 1.63% as of June 30, 2024, compared to 1.59% at December 31, 2023. However, nonaccrual commercial real estate loans increased, and criticized balances in the commercial real estate office sector also rose due to interest rate impacts and return-to-office dynamics.

The report indicates that net interest income decreased due to lower net interest margin driven by higher funding costs and the impact of building liquidity. While asset yields have increased, the company expects to see incremental deposit migration to higher-rate products in rising rate scenarios, suggesting continued pressure on net interest margin.

Citizens Financial Group maintained strong capital ratios. At June 30, 2024, the company's CET1 capital ratio was 10.7% and its Tier 1 capital ratio was 12.0%, both of which are well above the regulatory minimums and reflect an increase from December 31, 2023, supported by net income and a decrease in risk-weighted assets.