Citizens Financial Group (CFG Quick QuoteCFG – Free Report) has reported third-quarter 2023 earnings per share of 85 cents, missing the Zacks Consensus Estimate of 92 cents. The bottom line also declined from $1.23 in the year-ago quarter.
Shares of the company fell nearly 3% in the pre-market trading. A full-day trading session will depict a clearer picture.
Results were adversely impacted by lower net interest income (NII), rise in provisions and operating expenses. Non-interest income also witnessed a decline in the quarter. However, a rise in deposit balance acted as a tailwind.
Net income was $430 million, down 32.4% from the prior-year quarter. Our estimate for the same was $467.8 million.
Revenues Fall, Loans Decline
Total revenues in the third quarter were $2.01 billion, which missed the consensus estimate of $2.04 billion. Also, the top line moved down 7.5% year over year.
Citizens Financial’s NII decreased 8.6% year over year to $1.52 billion due to a 2% decline in average interest-earning assets and a lower net interest margin. Our estimate for NII was the same as the reported number.
The net interest margin shrunk 21 basis points to 3.03% on the back of increased funding costs, partially offset by higher yields on interest-earning assets. Our estimate for NIM was 3.13%.
The non-interest income decreased 3.9% to $492 million. A decline in service charges and fees, capital market fees and other income largely led to the fall.
Non-interest expenses rose 4.2% to $1.29 billion. Our estimate for the metric was $1.27 billion.
The efficiency ratio of 64.2% in the third quarter increased from 57% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Sep 30, 2023, period-end total loans and leases balances were $149.75 billion, down 1% sequentially. Total deposits increased marginally to $178.20 billion. Our estimate for total loans and leases and total deposits was $151.93 billion and $177.69 billion, respectively.
Credit Quality Worsens
As of Sep 30, 2023, CFG’s provision for credit losses was $172 million compared with $123 million in the year-ago quarter. Our estimate for the metric was $173.6 billion. The allowance for credit losses increased 5.6% to $2.32 billion.
Further, net charge-offs jumped 106.8% to $153 million. Our estimate for the metric was $159.4 million. Non-accrual loans and leases were up 52.1% to $1.3 billion.
Capital Position Improves
As of Sep 30, 2023, the tier-1 leverage ratio was 9.4%, up from 9.2% in the prior-year quarter.
The common equity tier-1 capital ratio was 10.4% compared with 9.8% at the end of the prior-year quarter. Further, the total capital ratio was 13.4%, up from 12.6% in the prior-year quarter.
Share Repurchase Update
During the quarter, the company repurchased shares worth $250 million.
Our View
Citizens Financial’s results highlight a weak quarter amid the current macroeconomic backdrop. Any further rise in expenses and decline in NII and fee income is likely to affect its financials. However, inorganic growth initiatives should drive its momentum back.
Citizens Financial Group, Inc. Price, Consensus and EPS Surprise
Currently, Citizens Financial carries a Zacks Rank #3 (Hold).
Performance of Other Banks
The PNC Financial Services Group, Inc.’s (PNC Quick QuotePNC – Free Report) third-quarter 2023 earnings per share of $3.60 surpassed the Zacks Consensus Estimate of $3.18. However, the bottom line reflects a 4.8% decline year over year.
The results of PNC were aided by a fall in non-interest expenses and lower provisions. However, a decrease in NII and non-interest income were headwinds.
Citigroup Inc.’s (C Quick QuoteC – Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, C witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.