Citizens Financial Group Inc
Q3 2024 Earnings
Market Reaction
S&P 500 over the same 30 days: +0.59%.
Did CFG Beat Earnings? Q3 2024 Results
Citizens Financial Group posted third-quarter 2024 earnings of $0.79 per share on revenue of $1.90 billion, results that reflected meaningful pressure from higher funding costs and the drag of forward-starting interest rate swaps that commenced in July. Those swaps alone clipped net interest margin by 9 basis points, contributing to a 10 basis point sequential decline to 2.77% and pushing net interest income down 10% year-over-year to $1.37 billion. GAAP net income of $382 million fell 11% from a year ago, though underlying noninterest income offered some offset, rising 9% year-over-year to $534 million on stronger capital markets and card fees. Credit quality deteriorated modestly, with net charge-offs climbing to 54 basis points from 40 basis points a year ago and commercial real estate nonaccruals rising 81% year-over-year to $852 million. Looking ahead, management guided fourth-quarter net interest income up 1.5-2.5% sequentially and sees a path to a net interest margin of 3.25-3.40% over the medium term as legacy swaps mature and the non-core portfolio continues its planned wind-down.
- Forward-starting swaps dragged NIM down 9 bps in the quarter
- Private Bank reached break-even mid-quarter with $5.6B deposits and $4.1B AUM
- Non-Core portfolio run-off of $1.0 billion in Q3 ($3.2 billion YTD)
- Capital markets fees up $27M YoY driven by higher bond underwriting and M&A advisory
- Card fees up $13M YoY from favorable vendor contract renegotiations
- Wealth fees up $13M YoY from increased sales activity and higher AUM
- Underlying expense down 2% YoY reflecting headcount reductions and vendor efficiencies
- Lower effective tax rate of 18.7% vs 21.7% year ago benefiting from tax-advantaged investments
- Net charge-offs rose to 54 bps from 40 bps YoY driven by C&I and auto loans
- CRE General Office nonaccruals surged with reserve coverage increased to 12.1%
“We continue to be pleased with the strong execution of our key initiatives during the third quarter. Our Private Bank reached $5.6 billion in deposits and $4.1 billion in AUM, our NYC Metro region continues to achieve strong growth, and we are close to launching a TOP 10 program with $100 million plus impact. Our balance sheet remains strong across capital, liquidity, funding and loan loss reserves. While Q3 was impacted by the drag from forward-starting swaps that commenced in July, as well as some fees that pushed out to Q4, we project a strong fourth quarter and launch into 2025.”
Citizens Financial Group CEO, on the earnings call
Forward Guidance & Outlook
For Q4 2024 (vs. Q3 2024 underlying results), Citizens expects: NII up 1.5-2.5% with NIM up ~5 bps and spot loans up slightly; noninterest income up mid-to-high single digits; noninterest expense up ~2%; net charge-offs broadly stable with ACL continuing to benefit from Non-Core run-off; CET1 ratio broadly stable with $200-$250 million in share repurchases; tax rate of ~20%. Assumes 25 bps Fed rate cuts in both November and December with YE2024 Fed funds target of 4.50%. Over the medium term (through 4Q27), management targets NIM of 3.25-3.40% driven by ~25 bps benefit from terminated swap maturities and ~15 bps from Non-Core run-off, plus ~30 bps from maturing legacy active swaps. Medium-term ROTCE target of 16-18%.
CFG YoY Financials
CFG Revenue by Segment
Figures from SEC filings and company reports. Not investment advice.