Three years ago, when Citizens Bank opened in Sydney’s inner west, it was hailed as a landmark event for the banking sector.
Its opening, along with the subsequent decline in the number of bank branches in the region, heralded a return to “business as usual” for the sector.
In February 2018, however, the company revealed its results, showing its net profit had declined by $2.5 billion.
Its board of directors were scathing about the results, saying the company’s management was “uncomfortable” with the “risk of the future”.
“We have been on a path of decline,” the chairman of the board, Stephen O’Connor, told a senate inquiry in March 2018.
“I am uncomfortable with the risks of the business as usual that we have had to undertake.”
The chairman of Citizens Bank, Stephen Owen, says he is uncomfortable with a ‘business as normal’ scenario.
Photo: Andrew Meares “We are going to continue to have to manage risk, which is a real challenge in a global economy.”
In February, a year later, the Sydney Morning Herald reported the company was considering closing its branches in South Australia, Queensland and Tasmania, as well as selling some of its business.
In the first half of 2019, it announced it was selling some assets, including its online banking business, its mobile banking business and its digital payments business.
The company also said it would cut $1.2 billion from its workforce.
“There has been no change in the way we operate or the nature of our business,” CEO Stephen Owen said in February 2018.
He said the company would continue to operate in the same way and that he would continue “to seek external funding”.
“There is no doubt we have a lot of growth potential, which we are really proud of,” he said.
The news was met with concern.
“The question of whether or not to sell the bank in the future is the question that is on everyone’s minds,” says Andrew O’Brien, an economist with The Australian Financial Review.
“If they sell it, there is a risk that the cash flow that the bank will be able to make in the short-term could be very low.”
In its quarterly results, released in February, Citizens Bank said its quarterly profit had fallen by $4.7 billion, largely because of lower net income from selling its mobile payment business.
This was largely offset by higher cash flow from the sale of its digital payment business, which was $2 billion higher than the previous quarter.
“In all, the cashflow generated from the cash-flow-generating activities in the quarter was lower than the same period last year and the first quarter of 2019,” the report said.
“Cash flow generated from our digital payments segment, excluding the effect of the acquisition of the Commonwealth Bank, increased by $734 million compared with the same quarter last year.”
The report also noted the company had reduced its cash flow by $1 billion to $1,619 million in the first six months of 2019.
“We expect this cash flow impact to be mitigated by continuing investments in our digital payment and other business lines,” the statement said.
It also said its results in the fourth quarter were “not materially different” to the same time last year, when it had $5.2 million in cash on hand.
“However, the results presented are materially different from the results in previous years,” it said.
This means the company “did not make any capital investments to support its business”.
In the quarter ending March 31, 2019, Citizens reported operating profit of $4 billion, down from $6.5 million in 2019.
However, it also reported a net loss of $5 billion, mainly due to higher debt and non-cash charges, and a $3 billion impairment charge.
“This was a significant loss and impacted upon our overall operating results,” the company said in its quarterly report.
“Despite the significant decline in net income, the total cash and cash equivalents were sufficient to cover the impairment charges.”
Capital expenditures, including capital leases and other lease commitments, amounted to $5,056 million, which reflected capital spending to fund expansion and operations and general and administrative costs.
“The company said it had spent $4 million on new facilities and facilities upgrades.
It had invested $2 million on the company itself.
Mr O’Leary was confident the company could achieve its goals in 2019, but he warned it would be a tough year. “
Consistent with our long-term strategic plan, we will continue to seek additional external financing in order to support our business in the long-run,” the CEO said.
Mr O’Leary was confident the company could achieve its goals in 2019, but he warned it would be a tough year.
“It will be a challenging year for the company,” he told the ABC.
“Our plan is to do this year well.”
The future of the bank is uncertain.