Summary
Citizens Financial reported strong Q3 earnings despite facing various challenges, highlighting resilience in its performance. The bank showcased improved revenue and loan growth, driven by strategic initiatives and effective cost management, while addressing concerns related to economic headwinds and competitive pressures. Overall, the results reflect the bank’s robust operational capabilities and commitment to delivering value to shareholders.
“Since the second quarter of 2023, we have absorbed $364 million of cumulative losses in the general office portfolio,” Chief Financial Officer John Woods said during the call. While Citizens still has elevated levels of problem office loans, the bank is taking a prudent approach to rectifying its problems, according to a Sept. 26 report by Fitch Ratings. Citizens has higher reserve levels for problem office loans than similar banks.
“Fitch expects credit losses to stabilize [at Citizens] given peer-leading reserve coverage of office CRE exposure,” Fitch said in the report. Citizens also provided a breakout of lending by geography. About 53% of Citizens’ general office loans are in Northeast or mid-Atlantic states. About $749 million of its general office loans are for properties in the New York City market, representing about 14% of its total office loan book. The New York loans are about evenly split between offices located downtown and in the suburbs. The bank’s second-largest market for general office loans is Washington, D.C., where all properties are in the suburbs. Citizens holds $467 million of general office loans in the Washington market. Citizens executives did not discuss its office loan portfolio by specific geographic region during the conference call.