Citizens Financial income plummets 39 per cent
In one of its first updates since it was spun-off from the Royal Bank of Scotland (RBS), Citizens Financial has posted results showing its income dipped 39 per cent in the second quarter.
The figures
It wasn't a great quarter for the US bank: earnings fell to $190m in the three months to the end of June, 39 per cent down from last year's $313m. That's 35 cents per share, down from 56 cents per share during the same period last time, although taking out restructuring charges, that was a more healthy 40 cents per share, up from 37 cents last year.
Meanwhile, revenues fell 18 per cent to $1.2bn – dead on expectations.
Of course, that decline in earnings was partly attributable to the $40m hit it took on restructuring after it was spun-off from RBS. Shareholders seemed unperturbed: shares edged down 0.05 per cent to $27.96 in pre-market trading.
Why it matters
Citizens was spun-off from RBS in a $3bn IPO in September last year as part of the UK bank's plans to focus more on its home market. IPO fans will remember that the bank was forced to scale back the price of its listing at the last minute, after investors became wary of RBS' financial forecasts for the group.
However, that hasn't prevented RBS from pressing ahead with its plans to extricate itself from Citizens by the end of next year. In April it sold off more shares, leaving it with a 40.8 per cent stake in the US bank. At the time, Ross McEwan, RBS' chief executive, said selling off Citizens would help RBS "create a stronger, safer, UK focused bank that can better serve the needs of its customers".
RBS has suggested that another selldown will take place "in the autumn", although Investec analyst Ian Gordon suggested something could happen earlier. "With Citizens Financial trading within 0.2 per cent of its all-time closing high, we wonder if RBS might be tempted to act very quickly indeed."
What Citizens Financial said
Chief executive and chairman Bruce Van Saun said:
During the quarter we demonstrated strong loan and deposit growth and good expense discipline, which combined for solid operating leverage, on an adjusted basis. We have launched a series of further initiatives which should continue to help the trajectory of our financial performance. We are on the right track. I feel good about the continued progress we are making.
In short
If RBS had been tempted before, today's results suggest getting out sooner, rather than later, might be the right move.