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Citizens Financial (CFG) Q2 Earnings Miss, Revenues Rise on NII
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Citizens Financial Group (CFG - Free Report) has reported second-quarter 2023 earnings per share of 92 cents, missing the Zacks Consensus Estimate of $1. Nonetheless, the bottom line rose from 67 cents in the year-ago quarter.
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 decline in loans were the undermining factors.
Net income was $478 million, up 31% from the prior-year quarter.Our estimate for the same was $538.1 million.
Revenues Rise on NII, Loans Decline
Total revenues in the second quarter were $2.09 billion, marginally surpassing the consensus estimate. Also, the top line was up 5% year over year.
Citizens Financial’s NII increased 6% year over year to $1.58 billion, backed by 1% growth in interest-earning assets and a higher net interest margin.Our estimate for NII was $1.57 billion.
The net interest margin expanded 12 basis points to 3.16%, supported by the impacts of higher yields on earning assets and interest-earning asset growth, partially offset by a rise in funding costs.
The non-interest income increased 2% to $506 million. A decline in capital market fees and mortgage banking fees largely led to the fall.Our estimate for the metric was $523.4 million.
Non-interest expenses rose marginally to $1.30 billion.Our estimate for the metric was $1.24 billion.
The efficiency ratio of 62.3% in the second quarter fell from 65.3% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Jun 30, 2023, period-end total loan and lease balances were $151.32 billion, down 2% sequentially. Total deposits increased 3% to $177.66 billion. Our estimate for the metric was $182.5 billion.
Credit Quality Worsens
As of Jun 30, 2023, the allowance for credit losses increased 21% to $2.29 billion, up 7% year over year. Further, net charge-offs jumped 210% to $152 million. Our estimate for the metric was $134.4 million. Non-accrual loans and leases were up 42% to $1.19 billion. Our estimate for the metric was $932.5 million.
Nonetheless, CFG’s provision for credit losses was $176 million compared with $216 million in the year-ago quarter. Our estimate for the metric was $159.5 billion.
Capital Position Strong
As of Jun 30, 2023, the tier-1 leverage ratio was 9.4%, down from 9.3% in the prior-year quarter.
The common equity tier-1 capital ratio was 10.3% compared with 9.6% at the end of the prior-year quarter. Further, the total capital ratio was 13.3%, up from 12.3% in the prior-year quarter.
Share Repurchase Update
During the quarter, the company repurchased shares worth $256 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
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were tailwinds.
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Citizens Financial (CFG) Q2 Earnings Miss, Revenues Rise on NII
Citizens Financial Group (CFG - Free Report) has reported second-quarter 2023 earnings per share of 92 cents, missing the Zacks Consensus Estimate of $1. Nonetheless, the bottom line rose from 67 cents in the year-ago quarter.
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 decline in loans were the undermining factors.
Net income was $478 million, up 31% from the prior-year quarter.Our estimate for the same was $538.1 million.
Revenues Rise on NII, Loans Decline
Total revenues in the second quarter were $2.09 billion, marginally surpassing the consensus estimate. Also, the top line was up 5% year over year.
Citizens Financial’s NII increased 6% year over year to $1.58 billion, backed by 1% growth in interest-earning assets and a higher net interest margin.Our estimate for NII was $1.57 billion.
The net interest margin expanded 12 basis points to 3.16%, supported by the impacts of higher yields on earning assets and interest-earning asset growth, partially offset by a rise in funding costs.
The non-interest income increased 2% to $506 million. A decline in capital market fees and mortgage banking fees largely led to the fall.Our estimate for the metric was $523.4 million.
Non-interest expenses rose marginally to $1.30 billion.Our estimate for the metric was $1.24 billion.
The efficiency ratio of 62.3% in the second quarter fell from 65.3% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.
As of Jun 30, 2023, period-end total loan and lease balances were $151.32 billion, down 2% sequentially. Total deposits increased 3% to $177.66 billion. Our estimate for the metric was $182.5 billion.
Credit Quality Worsens
As of Jun 30, 2023, the allowance for credit losses increased 21% to $2.29 billion, up 7% year over year. Further, net charge-offs jumped 210% to $152 million. Our estimate for the metric was $134.4 million. Non-accrual loans and leases were up 42% to $1.19 billion. Our estimate for the metric was $932.5 million.
Nonetheless, CFG’s provision for credit losses was $176 million compared with $216 million in the year-ago quarter. Our estimate for the metric was $159.5 billion.
Capital Position Strong
As of Jun 30, 2023, the tier-1 leverage ratio was 9.4%, down from 9.3% in the prior-year quarter.
The common equity tier-1 capital ratio was 10.3% compared with 9.6% at the end of the prior-year quarter. Further, the total capital ratio was 13.3%, up from 12.3% in the prior-year quarter.
Share Repurchase Update
During the quarter, the company repurchased shares worth $256 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 #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were tailwinds.