Citizens Financial fourth-quarter profit falls on FDIC charge

Jan 17 (Reuters) - Citizens Financial Group reported a fourth-quarter profit on Wednesday that fell 71%, hurt by a $225-million charge to replenish a deposit insurance fund and the bank warned that its net interest income could fall this year. Large-cap banks are required to replenish the Federal Deposit Insurance Corporation's (FDIC) fund, which insures customer deposits in the event of a bank failure. The fund was drained of roughly $16 billion after the collapse of two banks in early 2023. Meanwhile, banks have been grappling with rising deposit costs as customers chase better returns in rate-sensitive fixed-income assets. Higher funding costs have led to net interest margins contracting across the industry as competition for deposits increases. Headwinds from tepid loan growth also added to the pressure on interest income across the industry in the fourth quarter. Citizens Financial's net interest income (NII), or the difference between what a bank earns on loans and pays out on deposits, fell 12% to $1.49 billion in the three months ended Dec. 31. The bank warned its NII this year could be 6% to 9% lower than its 2023 NII of $6.24 billion. Larger rivals Wells Fargo and Bank of America also posted a similar drop in their quarterly interest income last week. Citizens Financial also raised its buffer for customers missing or falling behind on repaying debt on their mortgages or credit cards amid an uncertain economic backdrop and a cost-of-living crisis. The bank set aside $171 million in provisions for credit losses in the fourth quarter, compared with $132 million a year earlier. The lender reported a net income of $189 million, or 34 cents per share, in the fourth quarter, compared with $653 million, or $1.25 per share, a year earlier. (Reporting by Pritam Biswas in Bengaluru; Editing by Shounak Dasgupta)