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Citizens Financial Group (CFG - Free Report) has reported third-quarter 2022 underlying earnings per share of $1.30, surpassing the Zacks Consensus Estimate of $1.20. Also, the bottom line rose from $1.22 in the year-ago quarter.
Results reflect net interest income (NII) growth on the rise in loan balances. However, an escalation in expenses was a spoilsport.
Net income was $636 million compared with $530 million in the prior-year quarter.
Revenues Rise on NII, Costs Flare Up
Total revenues for the third quarter were $2.18 billion, missing the consensus estimate of $2.13 billion. However, the top line was up 31% year over year.
Citizens Financial’s NII rose 45% year over year to $1.66 billion, backed by 19% growth in interest-earning assets and a higher net interest margin. The net interest margin increased 52 basis points to 3.24% supported by the impact of higher yields on earning assets and cash deployment for loan growth.
The non-interest income dipped marginally year over year to $512 million. A rise in card fees and capital market fees was offset by declines in mortgage banking fees, and service charges and fees.
Non-interest expenses shot up 23% year over year to $1.24 billion. This reflected higher salaries and employee benefits, as well as increased expenses incurred for outside services.
The efficiency ratio of 57% in the third quarter increased from 60.9% in the year-ago quarter.A higher efficiency ratio indicates lower profitability.
As of Sep 30, 2022, period-end total loan and lease balances rose 19% sequentially to $156.2 billion. Also, total deposits improved 13% to $178.9 billion.
Credit Quality Mixed
CFG’s provision for credit losses was $123 million against $33 million of provision benefit witnessed in the year-ago quarter. As of Sep 30, 2022, the allowance for credit losses increased by $192 million to $2.2 billion.
Nonetheless, net charge-offs for the quarter increased 68% to $74 million. Non-accrual loans and leases were up 14% to $852 million.
Capital Position Deteriorates
As of Sep 30, 2022, the tier-1 leverage ratio was 9.2%, down from 9.7% in the prior-year quarter.
The common equity tier-1 capital ratio was 9.8% compared with 10.3% at the end of the prior-year quarter. Further, the total capital ratio was 12.6%, down from 13.4% in the prior-year quarter.
Capital Deployment Update
On Oct 19, Citizens Financial announced a quarterly cash dividend of 42 cents per share. The dividend will be paid out on Nov 16 to shareholders of record as of Nov 2, 2022.
Our Viewpoint
Citizens Financial’s results highlight a decent quarter, supported by the rise in 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
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory 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) Q3 Earnings Beat, Revenues Rise Y/Y
Citizens Financial Group (CFG - Free Report) has reported third-quarter 2022 underlying earnings per share of $1.30, surpassing the Zacks Consensus Estimate of $1.20. Also, the bottom line rose from $1.22 in the year-ago quarter.
Results reflect net interest income (NII) growth on the rise in loan balances. However, an escalation in expenses was a spoilsport.
Net income was $636 million compared with $530 million in the prior-year quarter.
Revenues Rise on NII, Costs Flare Up
Total revenues for the third quarter were $2.18 billion, missing the consensus estimate of $2.13 billion. However, the top line was up 31% year over year.
Citizens Financial’s NII rose 45% year over year to $1.66 billion, backed by 19% growth in interest-earning assets and a higher net interest margin. The net interest margin increased 52 basis points to 3.24% supported by the impact of higher yields on earning assets and cash deployment for loan growth.
The non-interest income dipped marginally year over year to $512 million. A rise in card fees and capital market fees was offset by declines in mortgage banking fees, and service charges and fees.
Non-interest expenses shot up 23% year over year to $1.24 billion. This reflected higher salaries and employee benefits, as well as increased expenses incurred for outside services.
The efficiency ratio of 57% in the third quarter increased from 60.9% in the year-ago quarter.A higher efficiency ratio indicates lower profitability.
As of Sep 30, 2022, period-end total loan and lease balances rose 19% sequentially to $156.2 billion. Also, total deposits improved 13% to $178.9 billion.
Credit Quality Mixed
CFG’s provision for credit losses was $123 million against $33 million of provision benefit witnessed in the year-ago quarter. As of Sep 30, 2022, the allowance for credit losses increased by $192 million to $2.2 billion.
Nonetheless, net charge-offs for the quarter increased 68% to $74 million. Non-accrual loans and leases were up 14% to $852 million.
Capital Position Deteriorates
As of Sep 30, 2022, the tier-1 leverage ratio was 9.2%, down from 9.7% in the prior-year quarter.
The common equity tier-1 capital ratio was 9.8% compared with 10.3% at the end of the prior-year quarter. Further, the total capital ratio was 12.6%, down from 13.4% in the prior-year quarter.
Capital Deployment Update
On Oct 19, Citizens Financial announced a quarterly cash dividend of 42 cents per share. The dividend will be paid out on Nov 16 to shareholders of record as of Nov 2, 2022.
Our Viewpoint
Citizens Financial’s results highlight a decent quarter, supported by the rise in 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
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory 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.