8-KOther EventsExhibits & Filings

CITIZENS FINANCIAL GROUP INC/RI 8-K Report, Corporate Update (Apr 27, 2020)

Filed April 27, 2020For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) reported its first quarter 2020 financial results, marked by a significant impact from the adoption of the Current Expected Credit Loss (CECL) accounting standard and the onset of the COVID-19 pandemic. Net income available to common stockholders fell sharply to $34 million ($0.03 per share) from $439 million ($0.92 per share) in the prior-year period. This decline was heavily influenced by a substantial provision for credit losses of $600 million, which included a $463 million reserve build specifically attributed to CECL and projected COVID-19 impacts. Despite the bottom-line pressure, the company highlighted strong capital and liquidity positions, with a CET1 capital ratio of 9.4% and a compliant LCR. Loan growth was robust, up 7% quarter-over-quarter, driven by commercial client line draws, and deposits also increased, keeping pace with loan growth. The company also announced a common stock dividend of $0.39 per share for the second quarter of 2020, while pausing stock repurchases through year-end 2020 to conserve capital.

Key Highlights

  • 1Q1 2020 net income available to common stockholders was $34 million ($0.03 per share), a significant decrease from $439 million ($0.92 per share) in Q1 2019.
  • 2A substantial provision for credit losses of $600 million was recorded, including a $463 million reserve build due to CECL adoption and expected COVID-19 impacts.
  • 3Underlying net income (excluding notable items) was $37 million ($0.09 per share), down from $428 million ($0.93 per share) in Q1 2019.
  • 4Total assets grew to $176.7 billion, a 10% increase year-over-year, driven by loan growth and an increase in the investment portfolio.
  • 5Loan growth was 7% in Q1 2020 compared to Q4 2019, largely due to commercial client line draws totaling $7.2 billion.
  • 6The company maintained strong capital levels with a CET1 capital ratio of 9.4% and a fully compliant LCR.
  • 7A common stock dividend of $0.39 per share was declared for Q2 2020, with share repurchases suspended until December 31, 2020.

Frequently Asked Questions

The primary driver was the substantial increase in the provision for credit losses, which rose to $600 million. This included a $463 million reserve build related to the adoption of the CECL accounting standard and the anticipated economic impacts of the COVID-19 pandemic.

Citizens Financial Group experienced strong loan growth, with period-end loans increasing by $8.4 billion (7%) compared to the prior quarter. This growth was significantly boosted by commercial clients drawing on credit lines due to COVID-19 disruptions. Deposit growth kept pace, increasing by $8.2 billion (7%) quarter-over-quarter.

The company emphasized its strong capital and liquidity. At March 31, 2020, its Common Equity Tier 1 (CET1) capital ratio was 9.4%, well above regulatory requirements. The Liquidity Coverage Ratio (LCR) was also fully compliant, indicating ample liquidity to navigate the challenging economic environment.

The company declared a common stock dividend of $0.39 per share for the second quarter of 2020. However, to preserve capital and ensure sufficient liquidity to meet potential loan demand, Citizens Financial Group has suspended its stock repurchase program through December 31, 2020.