Q3 2024 Citizens Financial Group Inc Earnings Call

In This Article:

Participants

Kristin Silberberg; Head of Investor Relations; Citizens Financial Group Inc

Bruce Van Saun; Director; Citizens Financial Group Inc

John Woods; Vice Chairman of the Management Board, Chief Financial Officer, Interim Chief Accounting Officer; Citizens Financial Group Inc

Brendan Coughlin; Vice Chairman and Head of Consumer Banking; Citizens Financial Group Inc

Donald McCree; Finance; Citizens Financial Group Inc

Robert Siefers; Analyst; Piper Sandler & Co.

Matthew O'Connor; Analyst; Deutsche Bank AG

John Pancari; Analyst; Evercore ISI Institutional Equities

L. Erika Penala; Analyst; UBS Investment Bank

Manan Gosalia; Analyst; Morgan Stanley

Presentation

Operator

Good morning, everyone, and welcome to the Citizens Financial Group Third Quarter Earnings Conference Call. My name is Alan, and I'll be your operator today. (Operator Instructions)
As a reminder, this event is being recorded. Now I'll turn the call over to Kristin Silberberg, Executive Vice President, Investor Relations. Kristin, you may begin.

Kristin Silberberg

Thank you, Alan. Good morning, everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Van Saun; and CFO, John Woods, will provide an overview of our third quarter results. Brendan Coughlin, Head of Consumer Banking; and Don McCree, Head of Commercial Banking, are also here to provide additional color.
We will be referencing our third quarter earnings presentation located on our Investor Relations website. After the presentation, we'll be happy to take questions. Our comments today will include forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review on page 2 of the presentation. We also reference non-GAAP financial measures, so it's important to review our GAAP results on page 3 of the presentation and the reconciliations in the appendix.
And with that, I will hand over to Bruce.

Bruce Van Saun

Thanks, Kristin, and good morning, everyone. Thanks for joining our call today.
We continue to execute well through an uncertain environment. We've made good progress on our strategic initiatives, our balance sheet remains strong across capital, liquidity, funding and loan reserves and our profitability has stabilized and is poised to move higher. Let me start with an update on our initiatives. First, the Private Bank delivered another terrific quarter. We reached $5.6 billion in deposits, up from $4 billion in Q2, and our assets under management reached $4.1 billion.
During the quarter, we opened 2 new private bank offices in the San Francisco Bay Area, and we added a new private banking team to cover Southern California. We reached breakeven in August and September and expect to be profitable in Q4 with good momentum entering 2025.
Next, our commercial bank continues to demonstrate its capacity to serve private capital well. For the quarter, we were number two in the league tables for sponsor leveraged loan arrangements, and we remain numbr one over the past 12 months. We continue to add quality talent to our coverage and our capital markets teams. Our New York City Metro initiative continues to show nice growth. We had 5% year-on-year growth in households and 7% growth in deposits. We look forward to being a key sponsor of the upcoming New York City Marathon as we continue to raise our brand profile in the market.
We've executed well on TOP 9, achieving a Q4 run rate benefit of $135 million, and we're finalizing the details of TOP 10, which should have a $100 million plus run rate benefit by end of 2025. Our BSO actions continue to proceed as planned. Noncore reduced by $1 billion in the quarter, and we continue to use the liquidity generated to pay down higher cost funding like brokered CDs. We continue to execute actions in commercial to exit lending-only relationships, and we're focused on our medium-term plan to reduce CRE exposure.
With respect to our balance sheet, our CET1 ratio is at 10.6%. Adjusting for OCI puts us at 9.2%. We repurchased $325 million in stock during the quarter. Our spot LDR was 80.8%, and our Federal Home Loan Bank advances remained low at well under $1 billion. We are not seeing much loan demand, but we remain hopeful this should start to pick up in coming quarters.
Our P&L was impacted by the drag from forward starting swaps, which commenced in July as well as some fees that pushed out to Q4. Nonetheless, we did a good job managing expenses and credit is performing broadly as expected.
Our Q4 guide shows a nice rebound in both NII and fees, leading to positive operating leverage in the quarter. We expect credit to remain broadly stable, and we will continue to repurchase shares. For the full year, we will hit most of our beginning of year guide with the exception of balance sheet volume impacting NII and a modestly higher ACL build. We continue to have strong confidence in our medium-term outlook, and we've added to the materials in the appendix to show more detail on our NIM progression.
Lots of uncertainty in the environment remains, but we feel good about our capacity to manage through that and continue to execute on our broad strategy. Our strategy rests on a transformed consumer bank, the best positioned super regional commercial bank and the aspiration to have the premier bank-owned private bank. We will continue to execute with the financial and operating discipline that you've come to expect from us.
With that, let me turn it over to John.