Citizens Financial Group in Providence, R.I., benefited from fee and interest income in the second quarter as interest rate increases boosted yields on commercial and consumer loans.
Second-quarter net income for the $151.4 billion-asset company was $318 million, up 31% from the same time last year. Its earnings per share of 63 cents beat analysts’ average estimate of 59 cents, according to FactSet Research Systems.
Nonetheless, Citizens announced the next phase of its efficiency effort, Tapping Our Potential IV, which is intended to achieve expense cuts and revenue enhancements of $90 million to $105 million by the end of 2018.
As part of the new efficiency campaign, Citizens plans to build out its fee income capabilities, expand commercial and industrial lending in the Southeast and renegotiate some of its vendor contracts.
“We believe we are turning the corner and emerging from our turnaround phase, having made strong strides in growing our balance sheet and customer base and building out our capabilities in both consumer and commercial,” Chairman and CEO Bruce Van Saun said in an earnings release Friday.
Net interest income increased 11% to a little over $1 billion, largely due to loan growth coupled with higher yields on commercial and consumer loans. The net interest margin expanded 13 basis points to 2.97%.
Compared with the year-earlier period, total loans and leases grew 5% to $109 billion. Commercial loans and leases rose 5% over that time frame, and retail loans grew 6%. Citizens said that commercial loan growth was driven mainly by commercial real estate, middle-market and franchise finance, while retail loan growth was driven by education, mortgage lending and other unsecured retail loans.
Noninterest income increased 4% year over year to $370 million. Capital markets fees, mortgage banking fees and letter of credit and loan fees boosted noninterest income and helped to partially offset the $11 million impact of finance lease impairments, Citizens said.