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Citizens Financial (CFG) Q1 Earnings Miss on Provisions, NII Rise
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Citizens Financial Group (CFG - Free Report) has reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.Our estimate for earnings was $1.13 per share.
Results reflect net interest income (NII) growth on a rise in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.
Net income was $511 million, up 22% from the prior-year quarter.Our estimate for the same was $573.8 million.
Revenues Rise on NII, Costs Increase
Total revenues in the first quarter were $2.13 billion, missing the consensus estimate of $2.14 billion. However, the top line moved up 29% year over year.
Citizens Financial’s NII jumped 43% year over year to $1.64 billion, backed by 20% growth in interest-earning assets and a higher net interest margin.Our estimate for the metric was $1.66 billion.
The net interest margin expanded 54 basis points to 3.29%, supported by the impacts of higher yields on earning assets and interest-earning asset growth, partially offset by higher funding costs.
The non-interest income decreased 3% to $485 million. A decline in capital market fees and mortgage banking fees largely led to the fall.Our estimate for the metric was $492.3 million.
Non-interest expenses rose 17% to $1.29 billion.Our estimate for the metric was $1.29 billion.
The efficiency ratio of 60.9% in the first quarter fell from 67.2% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Mar 31, 2023, period-end total loan and lease balances were $154.7 billion, down 1% sequentially. Total deposits declined 5% to $172.2 billion.
Credit Quality Worsens
CFG’s provision for credit losses was $168 million compared with $3 million in the year-ago quarter. As of Mar 31, 2023, the allowance for credit losses increased 21% to $2.27 billion.
Net charge-offs jumped 125% to $133 million. Non-accrual loans and leases were up 26% to $996 million.
Capital Position Strong
As of Mar 31, 2023, the tier-1 leverage ratio was 9.4%, down from 9.6% in the prior-year quarter.
The common equity tier-1 capital ratio was 10% compared with 9.7% at the end of the prior-year quarter. Further, the total capital ratio was 12.9%, up from 12.5% in the prior-year quarter.
Share Repurchase Update
In the quarter, the company repurchased shares worth $400 million.
Our View
Citizens Financial’s results highlight a decent quarter, supported by higher interest rates. Going forward, inorganic growth moves should drive the company’s momentum. However, escalating expenses and a decline in mortgage banking income are worrisome.
Citizens Financial Group, Inc. Price and Consensus
Wells Fargo’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 35% year over year.
WFC’s results benefited from higher net interest income, rising rates and solid average loan growth. A fall in non-interest expenses acted as another tailwind. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share.
Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.
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Citizens Financial (CFG) Q1 Earnings Miss on Provisions, NII Rise
Citizens Financial Group (CFG - Free Report) has reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.Our estimate for earnings was $1.13 per share.
Results reflect net interest income (NII) growth on a rise in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.
Net income was $511 million, up 22% from the prior-year quarter.Our estimate for the same was $573.8 million.
Revenues Rise on NII, Costs Increase
Total revenues in the first quarter were $2.13 billion, missing the consensus estimate of $2.14 billion. However, the top line moved up 29% year over year.
Citizens Financial’s NII jumped 43% year over year to $1.64 billion, backed by 20% growth in interest-earning assets and a higher net interest margin.Our estimate for the metric was $1.66 billion.
The net interest margin expanded 54 basis points to 3.29%, supported by the impacts of higher yields on earning assets and interest-earning asset growth, partially offset by higher funding costs.
The non-interest income decreased 3% to $485 million. A decline in capital market fees and mortgage banking fees largely led to the fall.Our estimate for the metric was $492.3 million.
Non-interest expenses rose 17% to $1.29 billion.Our estimate for the metric was $1.29 billion.
The efficiency ratio of 60.9% in the first quarter fell from 67.2% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Mar 31, 2023, period-end total loan and lease balances were $154.7 billion, down 1% sequentially. Total deposits declined 5% to $172.2 billion.
Credit Quality Worsens
CFG’s provision for credit losses was $168 million compared with $3 million in the year-ago quarter. As of Mar 31, 2023, the allowance for credit losses increased 21% to $2.27 billion.
Net charge-offs jumped 125% to $133 million. Non-accrual loans and leases were up 26% to $996 million.
Capital Position Strong
As of Mar 31, 2023, the tier-1 leverage ratio was 9.4%, down from 9.6% in the prior-year quarter.
The common equity tier-1 capital ratio was 10% compared with 9.7% at the end of the prior-year quarter. Further, the total capital ratio was 12.9%, up from 12.5% in the prior-year quarter.
Share Repurchase Update
In the quarter, the company repurchased shares worth $400 million.
Our View
Citizens Financial’s results highlight a decent quarter, supported by higher interest rates. Going forward, inorganic growth moves should drive the company’s momentum. However, escalating expenses and a decline in mortgage banking income are worrisome.
Citizens Financial Group, Inc. Price and Consensus
Citizens Financial Group, Inc. price-consensus-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
Wells Fargo’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 35% year over year.
WFC’s results benefited from higher net interest income, rising rates and solid average loan growth. A fall in non-interest expenses acted as another tailwind. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share.
Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.