Profits rose at Citizens Financial Group as commercial loan growth accelerated and the Providence, R.I., company continued to reap the benefits of higher interest rates and lower taxes.

The $155 billion-asset Citizens reported second-quarter earnings of $425 million, or 34% more than a year earlier. Earnings per share were 88 cents, or three pennies higher than an estimate of analysts compiled by FactSet Research Systems.

Chairman and Chief Executive Bruce Van Saun said he is optimistic about the remainder of the year.

“We continue to execute well, with strong balance sheet management and smart investments in fee-based product capabilities, as well as technology applications, digital channels and data,” Van Saun said in a news release Friday. “We are well positioned to continue our momentum in the second half.”

Citizens Bank branch.
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Citizens attributed its commercial lending growth to demand from midsize companies. Bloomberg News

During the quarter, Citizens agreed to acquire Franklin American Mortgage Company, a loan servicer based in Franklin, Tenn. The deal, announced in May, is expected to close in the third quarter.

Total period-end loans rose 4% to $113.4 billion, thanks in part to a 6% increase in commercial loans and leases. Net interest income, meanwhile, rose 9% to $1.1 billion. The net interest margin climbed 21 basis points to 3.18%.

Noninterest income increased 5% to $388 million, as higher foreign exchange and trust fees offset ongoing declines in mortgage banking and capital markets revenue.

Net interest expenses edged up 1% to $875 million, on higher compensation as well as costs associated with outside services, which the company attributed to its deal for Franklin.

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