Providence, RI (August 4, 2005) - Citizens Financial Group, Inc. ("Citizens") today announced record pre-tax contribution of $1.40 billion for the first half of 2005, up 79 percent from $784 million for the first half of 2004, reflecting strong organic growth and the contribution of Charter One, which was acquired on August 31, 2004. Excluding Charter One, pre-tax contribution increased by 13 percent to $887 million. Charter One contributed $516 million in the six-month period, up more than 20 percent to comparable prior year earnings.
"The first six months of 2005 were highly successful for Citizens," said Lawrence K. Fish, Chairman, President and CEO of Citizens Financial Group, Inc. "First, we finished converting the Charter One franchise at the end of July, five months ahead of schedule. We seamlessly moved more than three million customer accounts to Citizens' systems over the past nine months. Second, we're reporting double digit organic loan growth as we continue building upon our success in New England and the Mid-Atlantic. And third, our credit quality remained among the very best of our country's largest banks."
Citizens' earnings are based on International Financial Reporting Standards and are as reported by its parent company, The Royal Bank of Scotland Group plc ("RBS"), and reflect pre-tax contribution defined as earnings before taxation, amortization of intangibles, and acquisition costs.
Citizens is now the eighth-largest commercial banking company in the United States ranked by deposits, as well as the number two: supermarket banker, SBA lender and commercial bank auto lender.
Net interest income increased $692 million, or 57 percent to $1.92 billion, reflecting the Charter One acquisition and strong organic growth in both personal loans and deposits. Excluding Charter One, net interest income was up 7 percent or $82 million to $1.31 billion. Average loans were up 17 percent or $8 billion and average deposits were up 9 percent or $6 billion. The benefit of this growth was reduced by a narrowing interest margin due to the flattening of the yield curve.
Non-interest income rose by $522 million, or 113 percent. Excluding Charter One, non-interest income increased by 26 percent or $121 million, reflecting the acquisitions of Lynk Systems, Inc., the People's Bank credit card business, and our joint venture with Kroger supermarkets, as well as good growth in underlying business volumes.
Operating expense increased by $579 million, or 72 percent, to $1.38 billion. Excluding Charter One, expenses were up 14 percent or $116 million, reflecting the acquisitions of Lynk Systems, Inc. and the People's Bank credit card business and the joint venture with Kroger. Operating expense excludes acquisition costs and the amortization of intangibles.
Citizens' credit quality remains strong, as total non-performing loans were 0.3 percent of total loans at both June 30, 2005 and at the end of 2004. This is among the best of the top 20 banks in the United States. Provisions were up $16 million to $115 million. Excluding Charter One, provisions declined by $16 million.
On March 5, 2004, Citizens purchased the credit card business of People's Bank headquartered in Bridgeport, Conn. The purchase added $2 billion of loans to Citizens' balance sheet. In the third quarter of 2004, Citizens engaged in a joint venture to distribute credit cards to the customers of Kroger, the second largest U.S. supermarkets group.
On August 31, 2004, Citizens acquired Charter One Financial, Inc., a $41 billion holding company for Charter One Bank, NA, ("Charter One") a commercial bank based in Cleveland, Ohio. The acquisition extended Citizens' retail and commercial banking into Ohio, Illinois, Indiana, Michigan, New York and Vermont. It also expanded and strengthened Citizens' businesses in western Massachusetts, Connecticut and Pennsylvania. The conversion of Charter One systems to those of Citizens' has been completed.
On September 8, 2004, Citizens expanded its credit card products division with the purchase of Lynk Systems, Inc., an electronic payment processing firm headquartered in Atlanta, Ga.
Citizens Financial Group, Inc. is a $150 billion commercial bank holding company. It is headquartered in Providence, R.I., and has more than 1,600 branches, approximately 3,100 ATMs and more than 27,000 employees. It operates its 13-state branch network in Connecticut, Delaware, Illinois, Indiana, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Vermont, and has non-branch offices in more than 30 states. Citizens is the eighth-largest commercial banking company in the United States ranked by deposits. Citizens is owned by RBS.