Citizens Financial (US:CFG)2024-10-16 16:03Financial Data and Key Metrics Changes - The company generated underlying net income of $392 million for Q3 2024, with EPS of $0.79 and ROTCE of 9.7%, impacted by a negative $0.11 from the non-core portfolio [9][10] - The CET1 ratio stood at 10.6% as of September 30, 2024, with an adjusted ratio of 9.2% after AOCI opt-out removal [10][20] - Net interest income (NII) decreased by 2.9% linked quarter, primarily due to lower net interest margin (NIM) and slightly lower interest-earning assets [11] Business Line Data and Key Metrics Changes - The private bank achieved $5.6 billion in deposits, up from $4 billion in Q2, and reached breakeven in August and September, expecting profitability in Q4 [3][23] - The commercial bank ranked second in sponsor leveraged loan arrangements for the quarter and maintained the number one position over the past 12 months [4] - Average loans decreased by 1% linked quarter, with core loans up about $800 million, driven by growth in the private bank and retail mortgage [14][15] Market Data and Key Metrics Changes - Average deposits remained stable, with period-end deposits down 1%, influenced by the paydown of higher-cost treasury deposits [16] - The company reported a 5% year-on-year growth in households and a 7% growth in deposits in the New York City Metro area [4] Company Strategy and Development Direction - The company aims to transform its consumer bank, position itself as a leading super-regional commercial bank, and develop a premier bank-owned private bank [7][21] - The strategy includes executing on TOP 9 and TOP 10 initiatives, targeting significant run rate benefits by the end of 2025 [5][14] - The company is optimistic about the commercial client base as the Fed begins to ease, anticipating a strong finish to the year and momentum into 2025 [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain environment, with expectations for NII and fees to rebound in Q4, leading to positive operating leverage [6][8] - The company anticipates modest improvements across key categories, with a projected 25 basis point rate cut in both November and December [24][25] - Management noted that credit performance is expected to remain stable, with net charge-offs anticipated to be broadly stable [25] Other Important Information - The company repurchased $325 million in stock during the quarter, returning a total of $516 million to shareholders [20] - The allowance for credit losses (ACL) coverage ratio stands at 1.61%, reflecting an improved macroeconomic outlook [18] Q&A Session Summary Question: Margin progression and medium-term outlook - Management discussed drivers of margin expansion, including non-core contributions and active balance sheet management, with expectations for a 5 basis point improvement in Q4 [27][30] Question: Net interest income performance - Management acknowledged weaker NII due to lower loan growth and deposit trends but expressed optimism for future improvements as rates decrease [35][36] Question: Operating leverage expectations - Management indicated significant opportunities for operating leverage, particularly with NIM improvements expected to drive revenue growth [37][38] Question: Loan growth dynamics - Management noted a gradual increase in loan demand, particularly in the private bank and commercial sectors, as rates decline [41][42] Question: Credit quality and charge-offs - Management expressed confidence in the stability of NPAs and charge-offs, citing consistent performance in the credit book [49][51]