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February 28, 2008

Citizens operating profit drops 9%; revenue up 2%

Turmoil in the real estate and credit markets is straining Citizens Financial Group, the bank's parent company, Royal Bank of Scotland, said today.

In all, operating profit at Citizens dropped 9 percent last year, to $2.65 billion. The continuing devaluation of the U.S. dollar made that drop even more painful for RBS; net income was down 16 percent after the conversion to British pounds.

In announcing its 2007 earnings, RBS said the sputtering U.S. economy slowed the growth of Providence-based Citizens last year. "Against a weaker economic backdrop in the U.S., Citizens, whilst performing well relative to its peers, experienced testing conditions," RBS said in its earnings report.

"Market conditions remain difficult," RBS said, "and we continue to respond to challenging income prospects with tight cost control."

U.S. operations were not all bad news for Scotland-based RBS. Citizens, the ninth-largest bank in the United States, grew its consumer banking customer base by 2 percent, RBS said. Boosted by higher fees, Citizens saw its revenue grow by 2 percent to $6.24 billion.

Average loans increased by 4 percent in 2007, despite "close attention being paid to our risk appetite," RBS said. Average customer deposits rose by 1 percent. And Citizens increased its credit card customer base by 20 percent.

But the crisis in the credit market undermined those gains. Impairment losses increased from 0.31 percent of loans to 0.60 percent. After the conversion to pounds, total revenue dropped by 6 percent.

Over all, RBS reported an 18-percent rise in net income in 2007.

For more local breaking business news, visit the Biz Blog at projo.com/business.

Posted by Benjamin N. Gedan  at 12:38 PM | Permalink

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