Citizens Financial Group Inc
Q4 2023 Earnings
Did CFG Beat Earnings? Q4 2023 Results
Citizens Financial Group closed out 2023 on a mixed note, posting underlying earnings per share of $0.85 for the fourth quarter against revenue of $1.99 billion, though a $345 million pre-tax charge load, anchored by a $225 million industry-wide FDIC special assessment, dragged GAAP net income down to $189 million, or $0.34 per diluted share. The underlying result itself reflected a quarter under pressure, with net interest income slipping 2% sequentially to $1.49 billion as net interest margin compressed 12 basis points to 2.91%, a deliberate consequence of management's liquidity build strategy amid rising funding costs. Credit normalization also continued, with net charge-offs climbing to $171 million, or 46 basis points annualized, compared to $88 million a year ago. On a more constructive note, the CET1 ratio firmed to 10.6% and tangible book value per share grew 11% year-over-year to $30.91. Looking ahead, management guided for full-year 2024 NII down 6-9% with a PPNR trough expected in the second quarter, before returning to sequential positive operating leverage in the second half.
- Capital markets fees increased $20 million QoQ from stronger bond and equity underwriting
- Trust and investment services fees up $5 million QoQ from increased sales activity
- Non-Core portfolio run-off of $2.6 billion in 2H2023 improving NIM
- FHLB advances reduced by $3.3 billion QoQ to $3.8 billion
- Balance sheet optimization actions in commercial reducing loan balances
- LDR improved from 84% to 82% QoQ
- Consumer Banking net interest income up 2% QoQ to $1,086 million and 7% YoY
- Commercial Banking efficiency ratio improved to 43.44% from 40.18% YoY
“We continue to execute well and posted solid performance in Q4. Our balance sheet is very strong, as we bolstered CET1 to 10.6%, lowered our LDR to 82%, enhanced our liquidity profile, which now exceeds Category 1 bank LCR requirements, and reduced FHLB advances to $3.8 billion. We are seeing less pressure on deposit costs and NIM, fees are beginning to rebound, expenses remain well controlled, and credit costs are as expected. Key strategic initiatives like the Private Bank, NYC Metro, TOP 9 and Non-Core are all on track, positioning us well for medium-term growth and enhanced returns. I would like to thank our colleague base for their hard work and dedication in serving our customers well and building a great bank.”
Citizens Financial Group CEO, on the earnings call
Forward Guidance & Outlook
For FY2024, Citizens guided for NII down 6-9% (net swaps impact of ~4-5%), with FY2024 average NIM of 2.80-2.85% and 4Q24 exit NIM of ~2.85%. Noninterest income expected up 6-9% (market dependent). Underlying noninterest expense up ~1-1.5%. Average loans down 2-3% reflecting Non-Core run off, but spot loans up 3-5% driven by Private Bank and 2H24 commercial activity. Average earning assets up slightly. NCO ratio of ~50 bps with ACL likely to see releases over the course of the year. CET1 target of ~10.5%. Tax rate of ~21-22%. The company expects to return to sequential positive operating leverage in 2H24, with PPNR trough in 2Q24. For Q1 2024, NII expected down ~3% (includes ~$12MM day count impact), noninterest income up mid-single digits, noninterest expense up 1-2% (seasonal), NCOs ~50 bps, CET1 ~10.5%, and share repurchases of ~$300 million. Medium-term ROTCE target of ~16-18%, CET1 of ~10.0-10.5%, dividend payout ratio of ~35-40%, and efficiency ratio in the mid-50s%.
CFG YoY Financials
CFG Revenue by Segment
Figures from SEC filings and company reports. Not investment advice.