In an era of lofty interest rates and suddenly fierce pressure on deposit costs, Citizens Financial Group supported its bottom line with substantial growth in noninterest income.
Executives said to expect more following a slew of new hires and a broader plan to bolster and further expand its wealth management business. Coming off its
The Providence, Rhode Island, bank
Earlier this month, the bank promoted Mark Lehmann to the role of president of its California market. Lehmann is the chief executive of JMP Group, a San Francisco-based capital markets firm that Citizens
During the company's second-quarter earnings call Wednesday, Vice Chairman and Chief Financial Officer John Woods said the former First Republic bankers provide a unique opportunity to grow across business lines and into new regions.
"These bankers serve the types of customers we are seeking to attract to the bank: high- and ultra-high net worth individuals and families often with strong connections to middle-market companies, with a particular focus on private equity and venture capital firms serving the innovation economy," Woods said.
He said Citizens has now built a "coast-to-coast" wealth management operation and will continue to fortify it. "We plan to open a few private banking centers in key geographies and build appropriate scale in our wealth business," he said.
After the Tennessee bank's canceled sale to TD Bank, it launched a marketing campaign that attracted tens of thousands of new customers. The next step is expanding these relationships, executives said during the company's second-quarter earnings call.
Woods said the former First Republic hires were onboarded late in the second quarter, and he expects them to begin ramping up revenue by the fourth quarter.
"These bankers have hit the ground running and are out working to build their book of business, and we expect the effort to break even around the middle of 2024," Woods said. "By 2025, we expect EPS accretion of roughly 5%, with 2025 year-end projections of about $9 billion in loans, $11 billion of deposits and $10 billion of assets under management. So overall, a very exciting advance for us."
The wealth management business is a key driver of fee revenue. For the second quarter, Citizens said its noninterest income of $506 million was up $21 million, or 4%, from the prior quarter. Trust and investment services fees accounted for $2 million of the increase.
This helped to offset pressure on net interest income — a reflection, in large part, of substantially higher deposit costs that permeated the industry this year and hampered net interest margins. Citizens said its second-quarter net interest income declined 3% from the first quarter and its NIM contracted 13 basis points to 3.17%.
"We have good diversification," Van Saun said. "That served us well this quarter."
Citizens reported second-quarter net income of $478 million, or 92 cents per share, up from $364 million, or 67 cents, a year earlier. However, earnings were down from the first quarter, when the company posted a $511 million profit and EPS of $1.00. The sequential decline reflected higher funding costs.
