Citizens posts 28% profit gain, 6.8% revenue increase in 2Q

CITIZENS FINANCIAL GROUP posted a 6.8 percent year-over-year gain in total interest and noninterest income in the second quarter to go along with a 27.9 percent increase in net income (discounting the effects of 2015 restructuring and special charges).
CITIZENS FINANCIAL GROUP posted a 6.8 percent year-over-year gain in total interest and noninterest income in the second quarter to go along with a 27.9 percent increase in net income (discounting the effects of 2015 restructuring and special charges).

PROVIDENCE – Citizens Financial Group Inc. on Thursday reported second-quarter profit grew 27.9 percent to $243 million, or 46 cents per diluted share, compared with $190 million, or 35 cents per diluted share, in the same 2015 period.

The comparison to the second quarter of 2015 are complicated by an after-tax restructuring charge impact of 5 cents per diluted share, largely related to costs associated with the company’s spinoff from its former parent Royal Bank of Scotland PLC. Adjusted for those changes, net income for the 2016 second quarter grew 13 percent year over year from $215 million during the same period last year.

Total interest and noninterest revenue for the second quarter of 2016 grew 6.8 percent to $1.4 billion compared with $1.3 billion in 2015.

Bruce Van Saun, chairman and CEO, attributed the growth to strong loan and deposit growth, fee income growth and strong momentum in the capital market. The parent company of Providence-based Citizens Bank improved its return on average common equity to 4.94 percent compared with 3.94 percent in 2015. Removing the effects of the 2015 restructuring charges and special items, return on average common equity increased from 4.45 percent to 4.94 percent. The bank’s net interest margin grew to 2.84 percent compared with 2.72 percent during the same period last year.

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“Our second-quarter results reflect consistent progress in executing well on our plan and improving our financial performance,” Van Saun said in a statement.

Total interest income grew 9.9 percent to $1 billion, thanks largely to growth in commercial, student, mortgage and auto loan growth, which was partially offset by lower investment portfolio income from reduction in Federal Reserve Bank stock dividends and an increase in debt borrowing costs, according to the company’s earnings report.

Total noninterest income fell 1.4 percent to $355 million, which the bank says is a result of a negative impact of the reclassification of $7 million of card reward costs.

Total loans and leases grew 7.3 percent to $103.6 billion, as the bank realized double-digit, year-over-year increases in commercial real estate, residential mortgages, student and other retail loans. Average interest-earning assets grew $6.3 billion, while the nonperforming loans and leases to total loans and leases ratio improved 8 basis points from 1.09 percent, according to the report.

Total assets grew 5.8 percent to $145.2 billion at the same time that total deposits grew 5.6 percent to $106.3 billion. The company also noted that headcount fell 75 year over year.

Looking forward, Citizens recently completed a $310 million sale of consumer real estate-secured loans classified as “troubled debt restructurings,” which it expects will result in a third-quarter, pre-tax gain of about $70 million. The company plans to reinvest 30 percent to 40 percent of the gains to fund costs, “associated with its efficiency and balance sheet optimization initiatives,” in the third quarter of 2016.

During a conference call with investors, Citizens executives signaled an expected 1.5 percent loan increase in the third quarter, with a slight decline in the company’s net interest margin.

The Citizens board of directors declared a common stock dividend of 12 cents per share payable Aug. 17 to shareholders of record on Aug. 3.

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