Yahoo Finance First Citizens BancShares Inc (FCNCA) (Q1 2024) Earnings Call Transcript Highlights: Key ...
Earnings Per Share (EPS): $52.92, adjusted for notable items.
Net Interest Margin (NIM): Reported at 3.67%, a contraction of 19 basis points.
Adjusted Efficiency Ratio: 50%, reflecting operational efficiency.
Net Charge-Offs: Decreased by $74 million from the previous quarter to $103 million.
Loan Growth: Increased by over $2 billion, an annualized growth rate of 6.2%.
Deposit Growth: Grew at an annualized rate of 10.4%, increasing by $3.8 billion.
Return on Equity (ROE) and Return on Assets (ROA): 15.01% and 1.46% respectively, adjusted for notable items.
Capital Position: CET1 ratio increased by 8 basis points to 13.44%.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Craig, with the market suggesting higher for longer, can you discuss your strategy regarding cash levels and security purchases? A: Craig Lockwood Nix, CFO of First Citizens BancShares, Inc., noted that the bank is intentionally holding a higher cash level, around 15%, aiming to normalize it to 10-15% over time. They plan to continue deploying cash into the investment portfolio, potentially up to $3-4 billion by the end of the year.
Q: Given the improvement in credit, how should we think about the reserve level moving forward? A: Craig Lockwood Nix explained that they feel good about the current reserve levels, which cover quarter-to-date net charge-offs 4x, and 2023 charge-offs nearly 2.9x. The bank has analyzed over 70% of nonaccrual loans for impairment individually, maintaining a reserve ratio of around 30% on those.
Q: Can you clarify the changes in the net interest income (NII) outlook this quarter compared to last? A: Craig Lockwood Nix clarified that the adjustment in the NII outlook is primarily due to the shift in the expected number of rate cuts from 3 to 6 down to 0 to 3.
Q: Regarding capital management, what is the target CET1 ratio, and how does it compare to previous targets? A: Craig Lockwood Nix mentioned that while they aim to manage the CET1 ratio down to the 10.5% range over the next two years, they are not disclosing the new target range yet as they await feedback from regulators on their capital plan. However, he indicated that it would not significantly change from the previous target of 9-10%.
Q: How did you manage to maintain stable deposit balances at SVB despite weak VC investment in Q1? A: Craig Lockwood Nix and Marc Cadieux, a team member, noted that new money increased in Q1, helping to keep the cash position neutral for the first time since the acquisition. This stability was attributed to successful client retention and acquisition.
Q: Given the potential for stock buybacks, how price-sensitive is the bank's strategy regarding buybacks, and how does it align with tangible book value growth? A: Craig Lockwood Nix stated that the bank does not blindly buy back stock but assesses it similarly to open market transactions. They currently see the stock price as attractive for buybacks but did not specify the price levels that would deter buybacks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
