SEC Filings

Citizens Moves $833 Million Of Bonds To Held-To-Maturity As Tangible Book Value Falls To $35.78

Citizens Financial shifted $833 million of securities out of available-for-sale, even as it raised its dividend 13% to $0.52 and expanded buybacks.

Citizens Financial Group, the Providence, Rhode Island bank holding company, moved $833 million of securities from available-for-sale to held-to-maturity in the third quarter, leaving a $199 million pretax loss in accumulated other comprehensive income (AOCI), according to its 10-Q filed Wednesday. Tangible book value per share fell to $35.78 as rising long-term rates widened unrealized securities losses, yet the board raised the dividend and the buyback ceiling.

Bond losses widen, book value slips

The $199 million loss will sit in AOCI and be written off gradually as an adjustment to yield across the transferred bonds' remaining terms, the filing says. Held-to-maturity bonds are carried at cost rather than marked to market.

Tangible book value per share was $35.78 at September 30, against $38.29 at June 30 and $38.07 at December 31. The company's earnings release put the quarterly drop at 6.6%. Total AOCI loss reached $3.682 billion, up from $1.970 billion at year-end.

Unrealized losses on available-for-sale debt securities stood at $2.920 billion, versus $1.428 billion in December. The portfolio's average effective duration, including hedges, lengthened to 4.6 years from 3.8 years at year-end.

Why the reported capital ratio held

Citizens excludes AOCI from regulatory capital, so its reported CET1 ratio is 10.5%, against 10.6% at year-end. Including AOCI losses on securities and pension, it would be 8.7%.

A regulatory proposal would require most AOCI elements to be recognized in capital, after a five-year transition. Citizens says it now weighs ratios that include the AOCI hit alongside the regulatory ones.

Higher dividend, larger buyback

The board declared a quarterly dividend of $0.52 per share, up $0.06, or 13%, payable November 13 to holders of record on October 30. It also lifted repurchase capacity to $1.95 billion, $1.3 billion above the $650 million remaining under the prior authorization.

Third-quarter repurchases were $125 million, down from $225 million in the second quarter.

The bank earned $636 million in the quarter, or $1.41 per diluted share, with a return on tangible common equity of 15.1%. Citizens offers consumer and commercial banking through roughly 1,000 branches in 14 states and the District of Columbia.

Stress-test rule changes ahead

The Federal Reserve finalized changes in September that will average a firm's stress capital buffer over the two most recent tests, beginning with requirements calculated in 2028. Citizens' buffer is 4.5%. The change to the buffer's effective date takes effect December 1.

The dividend lands on November 13; the bank's own AOCI-inclusive ratio of 8.7% is the figure to hold against the 10.5% it reports.