CITIZENS FINANCIAL GROUP INCRI
For the period ended Dec 31, 2023. Filed Feb 16, 2024.
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FY2023 · Filed Feb 16, 2024
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Net Interest Income
Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans, leases and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). The level of net interest income is primarily a function of the difference between the effective yield on our average interest-earning assets and the effective cost of our interest-bearing liabilities. These factors are influenced by the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as economic conditions, competition for loans and deposits, the monetary policy of the FRB and market interest rates. For further discussion, refer to “Market Risk — Non-Trading Risk” and “Risk Governance.”
| Table 2: Major Components of Net Interest Income | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | ||||||||||||||
| 2023 · 2022 · Change | ||||||||||||||
| (dollars in millions) · AverageBalances · Income/Expense · Yields/Rates · AverageBalances · Income/Expense · Yields/Rates · AverageBalances · Yields/Rates (bps) | ||||||||||||||
| Assets | ||||||||||||||
| Interest-bearing cash and due from banks and deposits in banks | $8,531 | $451 | 5.22% | $6,195 | $128 | 2.04% | $2,336 | 318 | bps | |||||
| Taxable investment securities | 39,437 | 1,162 | 2.94 | 35,639 | 840 | 2.35 | 3,798 | 59 | ||||||
| Non-taxable investment securities | 2 | — | 2.68 | 3 | — | 2.33 | (1) | 35 | ||||||
| Total investment securities | 39,439 | 1,162 | 2.94 | 35,642 | 840 | 2.35 | 3,797 | 59 | ||||||
| Commercial and industrial | 48,693 | 2,956 | 5.99 | 50,002 | 1,942 | 3.83 | (1,309) | 216 | ||||||
| Commercial real estate | 29,206 | 1,804 | 6.09 | 24,746 | 1,026 | 4.09 | 4,460 | 200 | ||||||
| Leases | 1,305 | 46 | 3.53 | 1,521 | 46 | 3.00 | (216) | 53 | ||||||
| Total commercial | 79,204 | 4,806 | 5.99 | 76,269 | 3,014 | 3.90 | 2,935 | 209 | ||||||
| Residential mortgages | 30,660 | 1,052 | 3.43 | 27,759 | 876 | 3.16 | 2,901 | 27 | ||||||
| Home Equity | 14,475 | 1,092 | 7.54 | 13,057 | 555 | 4.25 | 1,418 | 329 | ||||||
| Automobile | 10,374 | 429 | 4.13 | 13,729 | 507 | 3.69 | (3,355) | 44 | ||||||
| Education | 12,333 | 621 | 5.04 | 13,047 | 560 | 4.29 | (714) | 75 | ||||||
| Other retail | 5,171 | 489 | 9.46 | 5,483 | 456 | 8.31 | (312) | 115 | ||||||
| Total retail | 73,013 | 3,683 | 5.04 | 73,075 | 2,954 | 4.04 | (62) | 100 | ||||||
| Total loans and leases | 152,217 | 8,489 | 5.53 | 149,344 | 5,968 | 3.97 | 2,873 | 156 | ||||||
| Loans held for sale, at fair value | 1,160 | 73 | 6.26 | 1,767 | 67 | 3.77 | (607) | 249 | ||||||
| Other loans held for sale | 339 | 29 | 8.43 | 1,188 | 57 | 4.71 | (849) | 372 | ||||||
| Interest-earning assets | 201,686 | 10,204 | 5.02 | 194,136 | 7,060 | 3.61 | 7,550 | 141 | ||||||
| Noninterest-earning assets | 20,535 | 20,925 | (390) | |||||||||||
| Total assets | $222,221 | $215,061 | $7,160 | |||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Checking with interest | $33,960 | $446 | 1.31% | $36,127 | $142 | 0.39% | ($2,167) | 92 | ||||||
| Money market | 51,178 | 1,494 | 2.92 | 48,410 | 320 | 0.66 | 2,768 | 226 | ||||||
| Savings | 29,266 | 433 | 1.48 | 27,524 | 100 | 0.37 | 1,742 | 111 | ||||||
| Term | 19,320 | 772 | 4.00 | 8,330 | 89 | 1.07 | 10,990 | 293 | ||||||
| Total interest-bearing deposits | 133,724 | 3,145 | 2.35 | 120,391 | 651 | 0.54 | 13,333 | 181 | ||||||
| Short-term borrowed funds | 746 | 43 | 5.70 | 1,584 | 23 | 1.47 | (838) | 423 | ||||||
| Long-term borrowed funds | 15,853 | 775 | 4.86 | 12,078 | 374 | 3.07 | 3,775 | 179 | ||||||
| Total borrowed funds | 16,599 | 818 | 4.89 | 13,662 | 397 | 2.88 | 2,937 | 201 | ||||||
| Total interest-bearing liabilities | 150,323 | 3,963 | 2.63 | 134,053 | 1,048 | 0.78 | 16,270 | 185 | ||||||
| Demand deposits | 41,581 | 51,717 | (10,136) | |||||||||||
| Other noninterest-bearing liabilities | 6,711 | 5,553 | 1,158 | |||||||||||
| Total liabilities | 198,615 | 191,323 | 7,292 | |||||||||||
| Stockholders’ equity | 23,606 | 23,738 | (132) | |||||||||||
| Total liabilities and stockholders’ equity | $222,221 | $215,061 | $7,160 | |||||||||||
| Interest rate spread | 2.39% | 2.83% | (44) | |||||||||||
| Net interest income and net interest margin | $6,241 | 3.09% | $6,012 | 3.10% | (1) | |||||||||
| Net interest income and net interest margin, FTE(1) | $6,258 | 3.10% | $6,023 | 3.10% | — | |||||||||
| Memo: Total deposits (interest-bearing and demand) | $175,305 | $3,145 | 1.79% | $172,108 | $651 | 0.38% | $3,197 | 141 | ||||||
(1) Net interest income and net interest margin is presented on a FTE basis using the federal statutory tax rate of 21%. The FTE impact is predominantly attributable to commercial and industrial loans for the periods presented.
Citizens Financial Group, Inc. | 40
Net interest income increased $229 million, or 4%, compared to 2022, reflecting stable net interest margin and growth of 4% in average interest-earning assets, including the impacts of the HSBC transaction and Investors acquisition.
Net interest margin on a FTE basis was neutral compared to 2022, reflecting higher interest-earning asset growth and associated yields, offset by increased funding costs.
Average interest-earning assets increased $7.6 billion, or 4%, compared to 2022, primarily attributable to growth in loans and leases reflecting the impacts of the HSBC transaction and Investors acquisition, and growth in investments.
Average deposits increased $3.2 billion, or 2%, compared to 2022, primarily attributable to the impacts of the HSBC transaction and Investors acquisition.
Average total borrowed funds increased $2.9 billion compared to 2022, driven by an increase in FHLB advances and secured borrowings collateralized by auto loans.
| Table 3: Changes in Net Interest Income Due to Average Volume and Average Rate | |||
|---|---|---|---|
| Year Ended December 31, | |||
| 2023 Versus 2022 | |||
| (dollars in millions) | Average Volume(1) | Average Rate(1) | Net Change |
| Interest Income | |||
| Interest-bearing cash and due from banks and deposits in banks | $47 | $276 | $323 |
| Taxable investment securities | 91 | 231 | 322 |
| Non-taxable investment securities | — | — | — |
| Total investment securities | 91 | 231 | 322 |
| Commercial and industrial | (49) | 1,063 | 1,014 |
| Commercial real estate | 182 | 596 | 778 |
| Leases | (7) | 7 | — |
| Total commercial | 126 | 1,666 | 1,792 |
| Residential mortgages | 92 | 84 | 176 |
| Home Equity | 60 | 477 | 537 |
| Automobile | (124) | 46 | (78) |
| Education | (31) | 92 | 61 |
| Other retail | (26) | 59 | 33 |
| Total retail | (29) | 758 | 729 |
| Total loans and leases | 97 | 2,424 | 2,521 |
| Loans held for sale, at fair value | (23) | 29 | 6 |
| Other loans held for sale | (41) | 13 | (28) |
| Total interest income | $171 | $2,973 | $3,144 |
| Interest Expense | |||
| Checking with interest | ($9) | $313 | $304 |
| Money market | 19 | 1,155 | 1,174 |
| Savings | 7 | 326 | 333 |
| Term | 117 | 566 | 683 |
| Total interest-bearing deposits | 134 | 2,360 | 2,494 |
| Short-term borrowed funds | (12) | 32 | 20 |
| Long-term borrowed funds | 128 | 273 | 401 |
| Total borrowed funds | 116 | 305 | 421 |
| Total interest expense | 250 | 2,665 | 2,915 |
| Net interest income | ($79) | $308 | $229 |
(1)Volume and rate changes are allocated on a consistent basis using the respective percentage changes in average balances and average rates.
Citizens Financial Group, Inc. | 41
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