Citizens Beats Estimates on Loan Growth, Fee Income

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Profits rose at Citizens Financial in the second quarter thanks to higher-than-expected fee income and loan growth, including improvements in mortgages and auto finance as well as a continuing surge in student lending.

The $142 billion-asset bank on Thursday reported net income of $243 million, a 28% increase over the second quarter of 2015. Earnings per share were 46 cents, handily beating analysts' consensus estimate of 43 cents. Revenue was $1.28 billion, up 7% over the same period last year.

Not long ago, Providence, R.I.-based Citizens had tapped the brakes on auto finance as it searched for opportunities to improve its margins. This past quarter, with demand ticking up, the bank's auto book grew by 3.7% to $14 billion.

Its sales of mortgage loans rose by $1.8 billion to a second-quarter total of $12.9 billion. Student loans nearly doubled year over year, growing from $2.7 billion to $5.1 billion.

Average consumer loans rose 7% to $54 billion, and commercial loans rose 11% to $45.9 billion. During a call Thursday, bank executives said they expected the loan growth to continue in the third quarter of the year.

The bank's fee income increased 8% to $355 million, thanks to stronger performance in capital markets and an uptick in mortgage banking fees. These gains were partially offset by a 2% increase in noninterest expenses, which totaled $827 million for the quarter.

In its continuing quest for efficiency, Citizens unveiled Thursday the next phase in its profitability program. Dubbed TOP III, it is expected to deliver between $73 million and $90 million of expense savings and $10 million to $15 million in tax benefits in 2017, executives said.

The still-ongoing TOP II is well on its way to providing $90 million to $115 million of benefits this year, according to Citizens.

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