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Citizens Financial (CFG) Q4 Earnings & Revenues Beat, Loans Up – January 19, 2022

Citizens Financial (CFG) Q4 Earnings & Revenues Beat, Loans Up - January 19, 2022
Written by Publishing Team

Citizens Financial Group (CFG Free report) reported underlying earnings per share for the fourth quarter of 2021 of $1.26, topping Zacks’ consensus estimate of $1.16. Also, net profit is up 21% from last quarter’s figure.

Paying interest from provisions and higher results loan balances. Moreover, strong credit quality, buoyed by an improving economy, was a tailwind. However, higher expenses and lower net interest income (NII) were spoiler sports.

Net income was $530 million compared to $456 million in the previous quarter.

In 2021, basic EPS was $5.34 compared to the previous year’s figure of $2.41. The lower bound exceeded the consensus estimate of $5.23. Net income rose to $2.32 billion from last year’s figure of $1.06 billion.

Revenue rises from fee income, costs flare up

Total revenue for the fourth quarter was $1.72 billion, beating expectations of $1.66 billion. Also, the top streak is up 1% year over year.

In 2021, revenue was $6.65 billion, down from $6.91 billion in 2020. However, the upper end exceeded Zacks Consensus’ estimate of $6.59 billion.

Citizens Financial’s National Insurance Index fell marginally year over year to $1.13 billion. The net interest margin (on a fully taxable equivalent basis) shrank 9 basis points to 2.66%. The downside arose from lower asset returns, which was mitigated in part by an improved financing mix, deposit pricing and the benefits of the Higher Paycheck Protection Program (PPP).

Non-interest income increased 3% year over year to $594 million. The increase helped in all components except for service charges and mortgage banking fees. Fees of $29 million from acquisitions completed in the third and fourth quarters of 2021 were another gain.

Non-interest expense increased 5% year over year to $1.06 billion. This reflected higher salaries and employee benefits as well as increased expenses incurred for external services associated with growth initiatives.

The efficiency ratio of 22.4% in the fourth quarter is up from 20.2% in the same quarter last year.

As of December 31, 2021, total loan and lease balances at the end of the period were up 3.9 percent sequentially to $128.16 billion. Total deposits also improved by 1.4% to $154.36 billion.

Strong credit quality

Reflecting strong credit performance and an improvement in the macroeconomic outlook, the provision for credit losses saw a reversal of $25 million versus the $124 million of provision expense experienced in the prior year quarter. Net shipments for the quarter fell 76% to $45 million.

Non-accrual loans and rents also decreased on an accrual basis by 31% to $702 million. As of December 31, 2021, the provision for credit losses was down 28% to $1.93 billion.

deteriorating capital position

Citizens Financial raised good capital in the fourth quarter. As of December 31, 2021, the Tier 1 leverage ratio was 9.7%, up from 9.4% in the prior year quarter.

However, the tier 1 equity ratio for common stock was 9.9% compared to 10% at the end of the previous quarter. Moreover, the total capital ratio was 12.7%, down from 13.4% in the first quarter of last year.

Capital deployment update

The company resumed share buybacks in November, buying back $200 million of common stock in the December-end quarter. It also paid $168 million in common stock dividends to shareholders.

our point of view

Citizens Financial’s results highlight a decent quarter despite lower interest rates. The recovery in credit quality helped the company offset some of the margin pressure. Going forward, inorganic growth movements must drive their momentum. The purchase of HSBC East Coast subsidiaries and online deposits (expected to close in February) are expected to have a 22 basis point impact on the Tier 1 common stock ratio.

However, the escalating expenditures and the decline in the National Insurance Institute is troubling.

Currently, Citizens Financial has a Zacks #3 (Hold) rating. you can see The full list of Zacks #1 stocks (strong buy) today is here.

performance of other banks

Bank of New York Mellon Corporation‘s (BK Free report) Fourth-quarter 2021 adjusted earnings of $1.04 per share beat Zacks Consensus’ estimate of $1.02. The bottom line is an 8.3% increase over the previous quarter.

For 2021, BK’s earnings per share (on a GAAP basis) of $4.14 were up 8% from 2020. Zacks’ consensus estimate of earnings was $4.17 per share. Net income applicable to common shareholders was $3.55 billion, an increase of 4% year over year.

First Republic Bank‘s (FRC Free report) fourth-quarter 2021 earnings per share of $2.02 exceeded Zacks’ consensus estimate of $1.91. In addition, net profit improved by 26.3% compared to the same quarter last year.

The Fed’s quarterly results were supported by an increase in net interest and non-interest income. Furthermore, First Republic’s balance sheet position was strong in the quarter. However, higher expenses and higher net discounted loans were the corresponding factors.

City Group (c Free report) generated a surprising 5.04% profit in the fourth quarter of 2021. Income from continuing operations per share of $1.46 easily exceeded Zacks Consensus’ estimate of $1.39. However, the reported figure was down 24% from the previous quarter.

Citigroup’s investment banking revenue jumped in the quarter under review, driven by equity underwriting as well as growth in advisory services revenue. However, fixed income revenue declined due to lower rates and product proliferation.

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