By Lisa Beilfuss
Citizens Financial Group Inc. said profit in its latest quarter
declined due to a big one-time gain from the sale of branches in
the comparable quarter in 2014.
Still, adjusted per-share earnings came in above Wall Street
expectations while revenue matched estimates.
The Providence, R.I.-based regional bank reported earnings of
$190 million, down sharply from $313 million a year earlier. On a
per-share basis, profit fell to 35 cents from 56 cents. Excluding
restructuring charges, among other items, earnings per share rose
to 40 cents from 37 cents. Revenue dropped 18% to $1.2 billion.
Analysts polled by Thomson Reuters anticipated 36 cents in
earnings per share and $1.2 billion in revenue.
Citizens, which went public last year, said during the quarter
it took a $40 million hit related to restructuring efforts and its
separation from Royal Bank of Scotland Group PLC. RBS is Citizens'
largest holder and Citizens has been steadily buying back stock
from RBS, which plans to divest its entire stake by the end of next
year. In the June quarter, Citizens bought back 10.5 million shares
and took the RBS position down to 40.8%.
A larger provision for credit losses, up 57% from a year
earlier, also dented profit. The lender said the increase reflects
higher net-chargeoffs compared with recoveries in the prior year.
It joins fellow regional banks Comerica Inc. and Regions Financial
Corp. in boosting loss provisions over the quarter.
As part of Citizens' unyoking from RBS and its continuing
transformation, the lender has been building out its capital- and
global-markets offerings. Capital-markets fees increased 15% to $30
million in the latest quarter, while foreign-exchange and
trade-finance fees were flat at $22 million. Overall noninterest
income declined 44% to $360 million, but excluding a gain from a
divestiture that boosted the comparable period, noninterest income
rose 2.3%.
Net-interest margin, an important gauge of lending
profitability, fell to 2.72% from 2.87% a year earlier and 2.77% in
the first quarter. Executives had in April warned that the metric
would be down sequentially as the lender, like others, feels the
pinch from low interest rates.
Average loans and leases increased 1.8% to $92.6 billion as
commercial loans rose 10% and retail loans grew 8%.
Citizens, which is targeting cost savings of $200 million by the
end of 2016, said noninterest expense fell 11% in the second
quarter as restructuring charges eased. The company's efficiency
ratio, where lower is better, rose to 70% from 64% a year
earlier.
Shares in the company, up about 24% since the IPO, were inactive
premarket.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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