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Citizens Financial (CFG) Q4 Earnings Top on NII, Provisions Hurt
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Citizens Financial Group (CFG - Free Report) reported fourth-quarter 2022 underlying earnings per share of $1.32, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose from $1.26 in the year-ago quarter.
Results reflect net interest income (NII) growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.
Net income was $653 million, up 23% from the prior-year quarter.
In 2022, underlying earnings of $4.84 per share beat the consensus estimate of $4.31 but declined 9% year over year. Net income was $2.07 billion, down 11% from the prior year.
Revenues Rise on NII, Costs Up
Total revenues in the fourth quarter were $2.2 billion, missing the consensus estimate of $2.22 billion. However, the top line was up 28% year over year.
In 2022, total revenues came in at $8.02 billion, which missed the Zacks Consensus Estimate of $8.06 billion. The top line jumped 21% year over year.
Citizens Financial’s NII surged 51% year over year to $1.7 billion, backed by 22% growth in interest-earning assets and a higher net interest margin.
The net interest margin expanded 63 basis points to 3.29%, supported by the impact of higher yields on earning assets and loan growth.
The non-interest income decreased 15% to $505 million. A decline in capital market fees and mortgage banking fees largely led to the fall.
Non-interest expenses rose 17% to $1.24 billion.
The efficiency ratio of 56.4% in the fourth quarter fell from 61.7% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Dec 31, 2022, period-end total loan and lease balances were $156.7 billion, relatively stable sequentially. Total deposits improved 1% to $180.7 billion.
Credit Quality Worsens
CFG’s provision for credit losses was $132 million against $25 million of provision benefit witnessed in the year-ago quarter. As of Dec 31, 2022, the allowance for credit losses increased 16% to $2.24 billion.
Further, net charge-offs jumped 96% to $88 million. Non-accrual loans and leases were up 34% to $944 million.
Capital Position Solid
As of Dec 31, 2022, the tier-1 leverage ratio was 9.3%, down from 9.7% in the prior-year quarter.
The common equity tier-1 capital ratio was 10% compared with 9.9% at the end of the prior-year quarter. Further, the total capital ratio was 12.8%, up from 12.7% in the prior-year quarter.
Share Repurchase Update
Citizens Financial resumed common stock repurchases during fourth-quarter 2022. During the quarter, the company repurchased shares worth $150 million.
Our View
Citizens Financial’s results highlight a decent quarter, supported by higher interest rates. Going forward, inorganic growth moves should drive its momentum. However, escalating expenses and a decline in mortgage banking income are worrisome.
Citizens Financial Group, Inc. Price, Consensus and EPS Surprise
First Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. However, the bottom line declined 6.9% from the year-ago quarter.
Results have been supported by a rise in net interest income (NII) and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Wells Fargo’s (WFC - Free Report) fourth-quarter 2022 earnings per share of 67 cents outpaced the Zacks Consensus Estimate of 63 cents. Results included several non-recurring items like the $3.3 billion or 70 cents per share of operating losses related to “litigation, regulatory, and customer remediation matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.
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Citizens Financial (CFG) Q4 Earnings Top on NII, Provisions Hurt
Citizens Financial Group (CFG - Free Report) reported fourth-quarter 2022 underlying earnings per share of $1.32, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose from $1.26 in the year-ago quarter.
Results reflect net interest income (NII) growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.
Net income was $653 million, up 23% from the prior-year quarter.
In 2022, underlying earnings of $4.84 per share beat the consensus estimate of $4.31 but declined 9% year over year. Net income was $2.07 billion, down 11% from the prior year.
Revenues Rise on NII, Costs Up
Total revenues in the fourth quarter were $2.2 billion, missing the consensus estimate of $2.22 billion. However, the top line was up 28% year over year.
In 2022, total revenues came in at $8.02 billion, which missed the Zacks Consensus Estimate of $8.06 billion. The top line jumped 21% year over year.
Citizens Financial’s NII surged 51% year over year to $1.7 billion, backed by 22% growth in interest-earning assets and a higher net interest margin.
The net interest margin expanded 63 basis points to 3.29%, supported by the impact of higher yields on earning assets and loan growth.
The non-interest income decreased 15% to $505 million. A decline in capital market fees and mortgage banking fees largely led to the fall.
Non-interest expenses rose 17% to $1.24 billion.
The efficiency ratio of 56.4% in the fourth quarter fell from 61.7% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Dec 31, 2022, period-end total loan and lease balances were $156.7 billion, relatively stable sequentially. Total deposits improved 1% to $180.7 billion.
Credit Quality Worsens
CFG’s provision for credit losses was $132 million against $25 million of provision benefit witnessed in the year-ago quarter. As of Dec 31, 2022, the allowance for credit losses increased 16% to $2.24 billion.
Further, net charge-offs jumped 96% to $88 million. Non-accrual loans and leases were up 34% to $944 million.
Capital Position Solid
As of Dec 31, 2022, the tier-1 leverage ratio was 9.3%, down from 9.7% in the prior-year quarter.
The common equity tier-1 capital ratio was 10% compared with 9.9% at the end of the prior-year quarter. Further, the total capital ratio was 12.8%, up from 12.7% in the prior-year quarter.
Share Repurchase Update
Citizens Financial resumed common stock repurchases during fourth-quarter 2022. During the quarter, the company repurchased shares worth $150 million.
Our View
Citizens Financial’s results highlight a decent quarter, supported by higher interest rates. Going forward, inorganic growth moves should drive its momentum. However, escalating expenses and a decline in mortgage banking income are worrisome.
Citizens Financial Group, Inc. Price, Consensus and EPS Surprise
Citizens Financial Group, Inc. price-consensus-eps-surprise-chart | Citizens Financial Group, Inc. Quote
Currently, Citizens Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
First Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. However, the bottom line declined 6.9% from the year-ago quarter.
Results have been supported by a rise in net interest income (NII) and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Wells Fargo’s (WFC - Free Report) fourth-quarter 2022 earnings per share of 67 cents outpaced the Zacks Consensus Estimate of 63 cents. Results included several non-recurring items like the $3.3 billion or 70 cents per share of operating losses related to “litigation, regulatory, and customer remediation matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.