By Julie Steinberg And Angela Chen
Citizens Financial Group Inc. reported a 30% increase in
fourth-quarter profit as strength in retail and commercial loans
pushed up net interest income for the regional lender.
The Providence, R.I., firm, which sold shares to the public in
an initial offering last year, earned $197 million in the December
quarter, up from $152 million a year earlier.
On a per-share basis, the bank's earnings increased to 36 cents,
from 27 cents a year earlier.
The results beat expectations, and the bank's stock rose 38
cents, or 1.6%, to $24.09 on the New York Stock Exchange.
Excluding special items, per-share earnings rose to 39 cents,
from 30 cents a year earlier. Revenue edged up to $1.18 billion
from $1.16 billion.
Analysts polled by Thomson Reuters had expected earnings of 34
cents on revenue of $1.17 billion.
For the most recently ended quarter, net interest income edged
up 2.4%, to $840 million from a year earlier.
This was driven by average loans and leases that increased $2.4
billion, or 3%, on strength in both retail and commercial
loans.
Chairman and Chief Executive Bruce Van Saun said in an interview
Monday that the loan growth stems from the firm's "scaling up the
business" and hiring people "in areas where we see
opportunities."
The bank has been able to increase its customer base on the
commercial side, Mr. Van Saun said, while on the consumer side, the
bank has benefited from both buying assets and expanding its
business in auto loans and student loans.
Some of that comes from expanding into slightly less
credit-worthy borrowers, but Mr. Van Saun said the bank is growing
into the prime space in auto loans after having "largely been
playing in super prime."
Like other regional banks, Citizens has faced stubbornly low
interest rates that have dented interest income.
Citizens said its net interest margin, a key margin of lending
profitability, increased to 2.8% from 2.77% the quarter before,
though it was down from 2.83% a year earlier.
Noninterest income fell 11% to $339 million, a result of a
reduction in securities gains and a decline in service charges and
fees and card fees, the bank said.
Capital markets were a bright spot.
Fees for that business grew to $25 million from $18 million a
year earlier.
The firm's strategy has been to beef up businesses not as
sensitive to interest rates, such as mortgage banking and wealth
management, over the next couple years.
Mr. Van Saun said in an interview that hiring plans for those
areas remain on track, but he cautioned that a competitive
environment could make it harder to hire in the short-term.
"It's tough," he said. "Everyone wants to grow in wealth. We're
not backing off the trajectory we have, we're just saying it's not
easy."
The bank has said it plans to, by the end of 2016, double the
number of mortgage-loan officers, to 700, from 350 at the beginning
of 2014.
In addition, the bank plans to add between 60 and 75 financial
consultants in its wealth-management business to its pool of
300.
Separately, Citizens said today it was making progress with
targeting expenses and last year had achieved 28% of its goal of
saving $200 million in costs by 2016.
The bank expects to complete between 85% and 90% of the goal
through this year, Mr. Van Saun said in the interview.
Citizens sold shares to the public on Sept. 24. Its stock rose
7.4% on its first day of trading after it was priced below
expectations the day before.
The lender's majority owner, Royal Bank of Scotland Group PLC,
reduced its stake in the firm and has said it plans to exit from
its holdings completely by the end of 2016.
Like other banks, Citizens submitted its so-called stress-test
plan to regulators earlier this month.
Last year, the Federal Reserve identified problems with its
capital planning processes and the unit's calculation of
losses.
Mr. Van Saun said the bank had worked with regulators over the
last year to address their concerns.
"We've made a lot of progress," he said. "I think we did a good
job."
Write to Julie Steinberg at julie.steinberg@wsj.com and Angela
Chen at angela.chen@dowjones.com
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