Company: CFG-PE
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0000759944-25-000013
Chunk: 1070

Company: CITIZENS FINANCIAL GROUP INC/RI
Filing Date: 2025-02-13
Form: 10-K
Item: Item 1
Chunk 1070
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’s underwriting guidelines for wholesale borrowings or lending policies may limit or restrict our ability to borrow, and therefore could have a significant adverse impact on our liquidity.

Changes in interest rates may have an adverse effect on our liquidity and profitability.

Changes in interest rates can have a material impact on the value of our securities portfolio, the primary objective of which is to provide a readily available source of liquidity. An increase in rates could lower the collateral value of these securities, reducing the amount we could borrow, and lead to losses in the event of their sale.

Since our earning assets are primarily in the form of loans and debt securities, changes in interest rates can have a material impact on our net interest income, net interest margin, fee income, and credit costs. Our asset yields and funding costs may not rise or fall in parallel in response to changes in interest rates, causing our net interest income to increase or decrease and our net interest margin to expand or contract. If our funding costs rise faster than our asset yields, or if our asset yields fall faster than our funding costs, our net interest income could decrease, and our net interest margin could contract.

Citizens Financial Group, Inc. | 22

An increase in interest rates could cause lower demand for loans by customers, reducing our net interest income due to lower loan balances and origination-related fee income due to lower production volume, and could also have an adverse impact on our credit costs, as borrowers may have difficulty in making higher interest payments. Additionally, an increase in rates could cause the recognition of losses on our AFS securities portfolio if the securities needed to be sold. 

Similarly, a decrease in interest rates could reduce our net interest income, net interest margin and fee income. A prolonged period of low interest rates may result in us holding lower yielding loans and securities should rates rise rapidly after the period of low interest rates.

Changes in the spread between short-term and long-term interest rates (i.e., the yield curve) can also have a material impact on our net interest income and net interest margin. If the yield curve, typically upward sloping with short-term rates lower than long-term rates, were to flatten or invert, our net interest income and net interest margin may decrease if the cost of our short-term funding increases relative to the yield we can earn on our long-term assets. 

Interest rates and the yield curve are highly sensitive to many factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory agencies and, in particular, the Federal Open Market Committee.