Citizens Financial Group (CFG) Q2 2024 earnings summary

Executive summary

• Q2 2024 underlying net income was $408 million and EPS $0.82, with ROTCE at 11.1% and PPNR up 2% sequentially; reported net income was $392 million and EPS $0.78.

• Fee performance was strong, up 7% sequentially, led by Capital Markets, Wealth, and Card fees; Private Bank deposits grew by $1.6B to $4.0B, with AUM at $3.6B.

• Expenses declined 1% sequentially despite continued Private Bank investment; efficiency ratio improved to 64.6% underlying and 66.3% reported.

• Capital and liquidity positions remain robust, with CET1 ratio at 10.7% and pro forma LCR at 119%.

• Strategic initiatives (TOP 9, TOP 10, BSO) and digital engagement/AI remain key focus areas.

Financial highlights

• Net interest income was $1.41B, down 2% sequentially and 11% year-over-year, with NIM at 2.87%, down 4 bps sequentially and 30 bps year-over-year.

• Underlying noninterest income rose 7% sequentially and 8% year-over-year, led by Capital Markets, Card, and Wealth fees.

• Noninterest expense (Underlying) decreased 1% sequentially but rose 3% year-over-year; efficiency ratio improved to 64.6% underlying.

• Net charge-offs were $184M (0.52% of average loans), up 2 bps sequentially; provision for credit losses was $182M.

• CET1 ratio at 10.7%, tangible book value per share at $30.61, up 1.4% sequentially.

Outlook and guidance

• Q3 NII expected down 1.1%-2% due to swap costs; noninterest income to rise slightly; expenses stable; net charge-offs expected to decline modestly.

• Full-year NII to be at upper end of down 6%-9% range; fees to exceed 6%-9% guidance; NII and NIM expected to rebound in Q4.

• Medium-term ROTCE target remains 16%-18%; NIM target range of 3.25-3.40% driven by Non-Core runoff and swaps.

• Asset sensitivity broadly neutral; ACL forecast assumes mild recession with peak unemployment at 5.0% and 0.4% GDP decline.

• Minimal impact from notable items expected in 2H24; assumes two 25 bp Fed rate cuts by year-end.