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Citizens Financial (CFG) Q1 Earnings Miss Estimates, Costs Rise
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Citizens Financial Group (CFG - Free Report) has reported first-quarter 2024 earnings per share (EPS) of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 in the year-ago quarter.
Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.
Results were adversely affected by lower net interest income (NII) and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
Net income was $334 million, down 34.6% from the prior-year quarter.
Revenues Fall and Expenses Rise
Total revenues in the first quarter were $1.96 billion, which missed the consensus estimate of $1.97 billion. Also, the top line declined 7.9% year over year.
Citizens Financial’s NII decreased 12.2% year over year to $1.44 billion due to a lower net interest margin and a decline in average interest-earning assets. Our estimate for NII was the same as the reported number.
The net interest margin (NIM) shrunk 39 basis points to 2.91% on the back of increased funding costs and the impact of building liquidity, partially offset by higher yields on interest-earning assets and the benefit of non-core run off. Our estimate for NIM was 2.85%.
The non-interest income increased 6.6% to $517 million. The improvement resulted from increased capital market fees, card fees and trust and investment services fees.
Non-interest expenses rose 4.8% to $1.36 billion. Our estimate for the metric was $1.41 billion.
The efficiency ratio of 69.3% in the first quarter increased from 60.9% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Mar 31, 2024, period-end total loans and leases balances were $143.19 billion, down 1.9% sequentially. Total deposits decreased marginally to $176.43 billion.
Credit Quality Worsens
As of Mar 31, 2024, CFG’s provision for credit losses was $171 million, up 1.8% from the year-ago quarter. The allowance for credit losses decreased marginally to $2.3 billion.
Further, net charge-offs jumped 36.1% to $181 million. Our estimate for the metric was $185.5 million. Non-accrual loans and leases were up 47.5% to $1.47 billion.
Capital Position: Mixed Bag
As of Mar 31, 2024, the tier-1 leverage ratio was 9.3% compared with 9.4% from the prior-year quarter.
The common equity tier-1 capital ratio was 10.6% compared with 10% at the end of the prior-year quarter. Further, the total capital ratio was 13.8%, up from 12.9% in the prior-year quarter.
Share Repurchase Update
In the first quarter of 2024, CFG returned $497 million of capital to shareholders. This included $197 million in common stock dividends and $300 million in common share repurchases.
Our View
Citizens Financial’s results highlight a weak quarter amid the current macroeconomic backdrop. Elevated expenses and a decline in NII and fee income are near-term concerns. Nonetheless, inorganic growth initiatives should drive its momentum back. Also, the company’s balance sheet optimization efforts support its financials.
Citizens Financial Group, Inc. Price, Consensus and EPS Surprise
Citigroup Inc.’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.
WFC’s results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income and loan balances and an increase in expenses were the undermining factors.
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Citizens Financial (CFG) Q1 Earnings Miss Estimates, Costs Rise
Citizens Financial Group (CFG - Free Report) has reported first-quarter 2024 earnings per share (EPS) of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 in the year-ago quarter.
Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.
Results were adversely affected by lower net interest income (NII) and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
Net income was $334 million, down 34.6% from the prior-year quarter.
Revenues Fall and Expenses Rise
Total revenues in the first quarter were $1.96 billion, which missed the consensus estimate of $1.97 billion. Also, the top line declined 7.9% year over year.
Citizens Financial’s NII decreased 12.2% year over year to $1.44 billion due to a lower net interest margin and a decline in average interest-earning assets. Our estimate for NII was the same as the reported number.
The net interest margin (NIM) shrunk 39 basis points to 2.91% on the back of increased funding costs and the impact of building liquidity, partially offset by higher yields on interest-earning assets and the benefit of non-core run off. Our estimate for NIM was 2.85%.
The non-interest income increased 6.6% to $517 million. The improvement resulted from increased capital market fees, card fees and trust and investment services fees.
Non-interest expenses rose 4.8% to $1.36 billion. Our estimate for the metric was $1.41 billion.
The efficiency ratio of 69.3% in the first quarter increased from 60.9% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Mar 31, 2024, period-end total loans and leases balances were $143.19 billion, down 1.9% sequentially. Total deposits decreased marginally to $176.43 billion.
Credit Quality Worsens
As of Mar 31, 2024, CFG’s provision for credit losses was $171 million, up 1.8% from the year-ago quarter. The allowance for credit losses decreased marginally to $2.3 billion.
Further, net charge-offs jumped 36.1% to $181 million. Our estimate for the metric was $185.5 million. Non-accrual loans and leases were up 47.5% to $1.47 billion.
Capital Position: Mixed Bag
As of Mar 31, 2024, the tier-1 leverage ratio was 9.3% compared with 9.4% from the prior-year quarter.
The common equity tier-1 capital ratio was 10.6% compared with 10% at the end of the prior-year quarter. Further, the total capital ratio was 13.8%, up from 12.9% in the prior-year quarter.
Share Repurchase Update
In the first quarter of 2024, CFG returned $497 million of capital to shareholders. This included $197 million in common stock dividends and $300 million in common share repurchases.
Our View
Citizens Financial’s results highlight a weak quarter amid the current macroeconomic backdrop. Elevated expenses and a decline in NII and fee income are near-term concerns. Nonetheless, inorganic growth initiatives should drive its momentum back. Also, the company’s balance sheet optimization efforts support its financials.
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 see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Citigroup Inc.’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.
WFC’s results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income and loan balances and an increase in expenses were the undermining factors.