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CITIZENS FINANCIAL GROUP INC/RI 8-K Report, Financial Results (Jan 17, 2024)

Reports
Earnings & Results·Regulation FD·Exhibits & Filings
Filing Date
Filed January 17, 2024
Period End
January 17, 2024
In the record · 2016–202610-K1210-Q328-K196

CFG filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 196 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Dec ’18Dec ’18
  2. Material agreement8-K · Jul ’21Jul ’21
  3. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 8-K filed January 17, 2024. Cited figures are marked; the original filing is the authoritative source.

Citizens Financial Group (CFG) reported weak reported fourth-quarter 2023 results, driven largely by notable items, while underlying performance was more stable.

Reported net income was $189 milliona, or $0.34 per diluted share, versus $653 million a year earlier. Excluding $345 million of pre-tax notable items (chiefly a $225 million FDIC special assessment and $115 million of TOP and other items), underlying net income was $426 million and underlying EPS was $0.85, down 36% year over year but roughly flat with the prior quarter's $0.89. Underlying pre-provision profit was $721 million, and the underlying efficiency ratio was 63.8%.

Full-year 2023 reported EPS was $3.13b and underlying EPS was $3.88, down from $4.84 in 2022. Balance sheet and capital metrics improved. The CET1 ratio rose to 10.6% from 10.4% in the prior quarter, period-end loan-to-deposit ratio fell to 82%, and FHLB advances were cut by $3.3 billion to $3.8 billion.

Tangible book value per share rose 11% to $30.91c, largely from AOCI recovery. Management paused share repurchases in Q4 to offset the FDIC assessment but expects to resume in 1Q24, with about $300 million planned. The quarterly dividend was maintained at $0.42 per share.

The main investor debate is the earnings trajectory. Net interest margin fell to 2.91%d amid higher funding costs and liquidity build, and credit costs are edging up, with nonaccrual loans at 0.93% of loans and net charge-offs at 46 bps. Management guides to NII down 6-9% in 2024, with PPNR troughing in 2Q24 and positive operating leverage returning in 2H24.

It also expects swap and Non-Core runoff to add meaningful NII in 2025-2027, supporting a medium-term ROTCE target of about 16-18%. The Private Bank is expected to reach breakeven in 2H24.

02—Key points

Key Highlights

  1. Reported Q4 2023 EPS of $0.34 and net income of $189 million, depressed by $345 million of notable items including the $225 million FDIC special assessment; underlying EPS was $0.85 and underlying ROTCE was 11.8%.
  2. Underlying PPNR of $721 million was down 3% quarter over quarter, with fees up 2% and NII down 2% on lower NIM (2.91%, down 12 bps).
  3. Capital strengthened with CET1 at 10.6% (up from 10.4%) and TCE ratio at 6.7%; tangible book value per share rose 11% to $30.91, mostly from AOCI recovery.
  4. Funding improved as the period-end loan-to-deposit ratio fell to 82% and FHLB advances dropped $3.3 billion to $3.8 billion; the pro forma Category 1 LCR rose to 117%.
  5. Credit costs are rising gradually: net charge-offs were 46 bps (up 6 bps QoQ), nonaccrual loans rose 5% QoQ to 0.93% of loans, and the ACL ratio increased to 1.59%.
  6. 2024 guidance calls for underlying NII down 6-9%, noninterest expense up about 1-1.5%, and NCOs of about 40 bps, with share repurchases expected to resume in 1Q24 (about $300 million in 1Q24).
  7. The quarterly dividend was held at $0.42 per share, and management pointed to 2025-2027 NII tailwinds from swap and Non-Core runoff as a path to a medium-term ROTCE of about 16-18%.

03—Questions

Frequently Asked Questions

  1. Why was reported Q4 2023 EPS so much lower than underlying EPS?

    Reported EPS of $0.34 included $0.51 per share of notable items. The largest was the industry-wide FDIC special assessment, worth $0.35 per share ($225 million pre-tax). Other notable items were TOP and other restructuring-related costs (about $0.15 per share) and integration costs. Management excludes these items to show underlying performance.

  2. Will Citizens resume share buybacks?

    Yes. Buybacks were paused in Q4 2023 to offset the FDIC special assessment, and management said it expects to resume repurchases in 1Q24, with about $300 million planned for the quarter. The remaining Board authorization was $1.094 billion at year-end. The 2024 CET1 outlook is about 10.5%, and repurchases depend on market conditions and loan growth.

  3. What is the outlook for net interest income and margin in 2024?

    Management expects 2024 underlying NII to fall 6-9% from 2023, with average NIM of 2.80-2.85% and a 4Q24 exit NIM of about 2.85%. The decline reflects higher deposit and funding costs. Management expects NII to recover over 2025-2027 as receive-fixed swaps and Non-Core assets run off, with an estimated NIM tailwind of about 57 bps from 4Q23 to 4Q27.

  4. Is credit quality deteriorating?

    Credit costs are rising gradually rather than sharply. Nonaccrual loans reached 0.93% of total loans (up from 0.60% a year earlier), driven largely by the General Office CRE segment, and net charge-offs were 46 bps. The ACL ratio rose to 1.59%, and General Office reserve coverage is 10.2%. Management said criticized loan trends appear to be stabilizing and guided to 2024 NCOs of about 40 bps, with ACL releases possible later in the year.

04—Continue

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