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CITIZENS FINANCIAL GROUP INC/RI 8-K Report, Corporate Update (Oct 21, 2019)

Filed October 21, 2019For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported its third quarter 2019 financial results, showing a slight increase in net income to $449 million from $443 million in the prior year, translating to earnings per share (EPS) of $0.97, up 7% year-over-year. Underlying net income, which excludes notable items, saw a slight decrease of 2% year-over-year. The company highlighted strong growth in noninterest income, up 19% driven by mortgage banking fees and card fees. They also announced a 33% year-over-year increase in their quarterly cash dividend to $0.36 per common share, demonstrating a commitment to returning capital to shareholders. Key operational metrics showed a mixed performance. While total revenue grew 5% year-over-year, net interest margin compressed by 10 basis points due to a challenging yield-curve environment and increased funding costs. Expense management remained a focus, with an efficiency ratio of 59.4% (58.2% underlying). The company also reported continued balance sheet strength, with loan growth of 3% and deposit growth of 6% year-over-year. Tangible book value per common share showed a significant increase of 14% year-over-year, indicating solid growth in shareholder equity.

Key Highlights

  • 1Third quarter net income rose 1% to $449 million, with EPS up 7% to $0.97 compared to the prior year.
  • 2Underlying net income decreased 2% year-over-year, while Underlying EPS increased 5% to $0.98.
  • 3Noninterest income surged 19% year-over-year, driven by strong performance in mortgage banking fees (+139%) and card fees (+11%).
  • 4The quarterly cash dividend increased by 33% year-over-year to $0.36 per common share.
  • 5Net interest margin decreased by 10 basis points year-over-year to 3.12% due to interest rate environment and funding costs.
  • 6Tangible book value per common share increased by a robust 14% year-over-year to $31.48.
  • 7Capital ratios remain strong, with Common Equity Tier 1 (CET1) at 10.3%.

Frequently Asked Questions

The increase in third quarter net income was primarily driven by a significant 19% surge in noninterest income, notably from strong performance in mortgage banking fees and card fees. This growth helped offset a challenging yield-curve environment that impacted net interest income.

Citizens Financial Group reported an efficiency ratio of 59.4%, which was 58.2% on an underlying basis. The company is executing on its 'TOP 5' efficiency program, which is expected to deliver significant run-rate benefits, and is initiating a new 'TOP 6' program targeting further cost savings by 2021.

The company declared a fourth quarter dividend of $0.36 per common share, representing a 33% increase year-over-year. In the third quarter, Citizens returned $662 million to shareholders through dividends and share repurchases, indicating a commitment to capital distribution.

The company cited several risks including negative economic conditions affecting the general economy and housing market, interest rate fluctuations impacting net interest income and margins, regulatory changes, and cybersecurity threats. They also noted ongoing integration costs from acquisitions.