Summary of Citizens Financial Group (CFG) 2025 Conference Call Company Overview - **Company**: Citizens Financial Group (CFG) - **Date of Conference**: June 10, 2025 - **Speaker**: Don McCree, Senior Vice Chair and Head of Commercial Banking Key Points Company Positioning and Strategy - Citizens Financial Group is positioned as one of the best commercial banks among super regional peers, focusing on national expansion from its initial regional base in New England and the Mid-Atlantic [2][3] - The bank has developed a comprehensive set of capabilities beyond traditional lending, including leveraged finance, syndicated finance, and global markets [4][5] - Citizens has built a significant private equity and private capital business, banking 4,000 middle market companies, with 10% of them looking to transition at any time, primarily into private equity [6][7] Competitive Advantages - Citizens competes effectively with larger money center banks by focusing on the middle market, where larger banks often lack attention [8][10] - The bank has a strong team with extensive experience, allowing it to evaluate risk and price opportunities effectively [9][10] - Citizens ranks number two in middle market leverage league tables, demonstrating its competitive success [10] Macro Environment and Client Sentiment - Clients are adjusting to macroeconomic uncertainties, with a general sense of optimism emerging regarding business activity [13][15] - Companies have improved their financial management practices post-COVID, leading to reduced financial distress [14][15] - There is a growing confidence among companies to pursue acquisitions if they can secure favorable valuations [56][57] Financial Performance and Guidance - Citizens expects solid performance in the second quarter, maintaining guidance with strong net interest income (NII) and credit performance [17][18] - The bank anticipates an 8-10% growth in fee income for 2025, driven by diversified revenue streams including M&A, syndicated finance, and global markets [21][22] Capital Markets and M&A Activity - The capital markets have seen a resurgence, with increased activity expected in the second half of the year, despite previous volatility [30][31] - There is a significant amount of liquidity in the market, with private equity firms actively fundraising [28][29] - Citizens is well-positioned to capitalize on generational changes in ownership within companies, facilitating M&A transactions [26][27] Loan Growth and Commercial Lending - Commercial lending activity is driven by inventory building and real investments, with healthy pipelines expected to continue [48][49] - The bank is seeing increased line utilization, indicating a positive trend in loan growth [49] Risk Management and Credit Quality - Citizens is closely monitoring office real estate exposure, which has been well reserved, and is actively reducing its overall commercial real estate portfolio [86][88] - The bank has seen a decline in loans moving into workout groups, indicating stable credit quality [86] Private Capital and Private Equity - Citizens has positioned itself to serve both private equity and private credit markets, focusing on comprehensive service offerings [72][73] - The bank has opted not to enter partnerships with private credit firms, preferring to maintain flexibility and optionality in its client relationships [76][78] Future Outlook - The bank is optimistic about the potential for new money transactions to increase, driven by improved market conditions and client sentiment [30][31] - Citizens aims to leverage its private banking capabilities to enhance cross-selling opportunities and strengthen its market presence [64][71] Additional Insights - Citizens is focusing on enhancing its treasury solutions business, which has shown a 10% revenue CAGR since 2015, by expanding into new sectors and technologies [39][40] - The bank is also exploring opportunities in embedded finance and partnerships with fintechs to enhance its service offerings [44][45]

Financial Data and Key Metrics Changes - The return on tangible common equity has improved from below 5% to over 10%, with a path to the mid to upper teens over time [2] - The company anticipates net interest income growth of 3% to 5% for the year, with a net interest margin forecasted between 3.25% and 3.50% [34][36] Business Line Data and Key Metrics Changes - The consumer banking segment has been transformed to target mass affluent and affluent customers, resulting in mid-single-digit household growth and high-single-digit deposit growth [14][15] - The commercial banking segment has expanded its coverage to mid-corporate clients, with significant investments in industry expertise and product capabilities [16][18] - The private banking segment is expected to become a significant contributor to profitability, with a projected EPS accretion of over 5% [31] Market Data and Key Metrics Changes - The company has entered the New York market, which is its fastest-growing region, demonstrating confidence in competing against larger banks [14][15] - Loan demand is expected to grow, particularly in the private banking sector, with anticipated growth of nearly $1 billion per quarter [38] Company Strategy and Development Direction - The company has undergone a significant transformation over the past decade, shedding legacy businesses and focusing on building new ones [10][11] - The strategy includes a focus on a "one citizens" approach, integrating private and commercial banking teams to enhance service delivery in key markets [29][30] - The company aims to improve its efficiency ratio from the mid to upper 60s down to the mid-50s over the long term [55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic outlook, citing a pro-business administration and anticipated improvements in trade and regulatory policies [3][4] - The company is well-positioned to weather economic uncertainties, with a strong credit outlook and minimal adverse migration in consumer loans [7][70] Other Important Information - The company has made significant investments in technology and risk management to support its growth strategy [11][64] - There is a focus on enhancing customer experience through improved digital capabilities and high-touch service models [28][64] Q&A Session Summary Question: What is the outlook for loan growth? - Management anticipates solid growth in the private banking sector, with modest growth in consumer loans focused on real estate-backed lending [38][39] Question: How does the company plan to improve its efficiency ratio? - The company aims to achieve a lower efficiency ratio through disciplined investment and operational improvements, targeting a mid-50s ratio in the long term [55][58] Question: What is the company's stance on regulatory changes? - Management is optimistic about the regulatory environment, believing that recent changes will facilitate a more favorable operating landscape for the bank [79][80]

Financial Performance - Net income for the three months ended March 31, 2025, was $373 million, an increase of $39 million compared to the same period in 2024, with earnings per diluted common share rising by $0.12 to $0.77[18] - Total revenue for the same period was $1.9 billion, a decrease of $24 million year-over-year, primarily due to a 4% decline in net interest income[18] - The efficiency ratio improved to 67.91% for the three months ended March 31, 2025, compared to 69.33% for the same period in 2024[18] - Return on Average Tangible Common Equity (ROTCE) increased to 9.64% for the three months ended March 31, 2025, up from 8.86% in the prior year[18] - Tangible book value per common share rose by 5% to $33.97 from December 31, 2024[18] Income and Expenses - Net interest income decreased by $51 million, or 4%, for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a 3% decrease in average interest-earning assets[27] - Noninterest income increased by $27 million, or 5%, for the three months ended March 31, 2025, compared to the same period in 2024, with notable increases in service charges and fees (up 14%) and mortgage banking fees (up 20%)[32] - Noninterest expense decreased by $44 million, or 3%, for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to lower other operating expenses[33] - Provision for credit losses decreased to $153 million for the three months ended March 31, 2025, down from $171 million for the same period in 2024, reflecting Non-Core portfolio runoff and improving loan mix[37] Loans and Deposits - Total loans and leases decreased by $1.568 billion to $137.635 billion as of March 31, 2025, primarily due to a $2.3 billion decrease in retail loans[45] - Average deposits decreased by $3.4 billion, driven by lower commercial deposits and a reduction in higher-cost Treasury deposits[30] - Total deposits increased to $177,576 million as of March 31, 2025, up from $174,776 million on December 31, 2024, reflecting growth in Private Bank and consumer deposits[58] Capital and Liquidity - The company maintains cash and cash equivalents totaling $3.0 billion as of March 31, 2025, compared to $2.7 billion as of December 31, 2024[109] - Total available liquidity for CBNA was approximately $87.7 billion, including $71.0 billion in contingent liquidity[112] - Citizens Financial Group's CET1 capital ratio was 10.6%, while CBNA's was 12.3%[129] - The regulatory capital ratio, including AOCI impact (non-GAAP), was 10.8% as of March 31, 2025, compared to 9.1% in the previous period[141] Stock and Dividends - During the three months ended March 31, 2025, the Parent Company declared dividends on common stock of $186 million and on preferred stock of $33 million[110] - The Board of Directors increased the common share repurchase program capacity to $1.25 billion, an increase of $656 million from the previous authorization[136] - The company repurchased $200 million of outstanding common stock and declared quarterly common stock dividends of $0.42 per share, totaling $186 million[139] Regulatory and Compliance - The SEC's climate disclosure rule is under litigation, with the agency withdrawing from defense, which may impact future regulatory compliance[22] - The FDIC, FRB, and OCC announced intentions to rescind the Community Reinvestment Act final rule issued in October 2023, reinstating the previous framework[23] Market and Economic Outlook - The company’s economic forecast includes a mild recession with peak unemployment projected at approximately 5.1%[145] - The average effective duration of the securities portfolio was 3.6 years as of March 31, 2025, compared to 3.7 years as of December 31, 2024[43]

Core Viewpoint - Citizens Financial Group (CFG) reported strong adjusted earnings per share of 77 cents for Q1 2025, exceeding estimates and reflecting an 18.4% year-over-year increase, driven by higher non-interest income and reduced expenses, despite challenges from lower net interest income and declining loan balances [1][2][10] Financial Performance - Net income on a GAAP basis was $373 million, a 12% increase from the prior year [2] - Total revenues for the quarter were $1.94 billion, slightly missing estimates by 0.3% and showing a 1.2% decline year-over-year [2] - Net interest income (NII) decreased by 4% year-over-year to $1.39 billion, attributed to a lower net interest margin and a decline in average interest-earning assets [3] - The net interest margin (NIM) shrank by 1 basis point to 2.90% [3] - Non-interest income rose by 5% year-over-year to $544 million, driven by increased service charges, wealth fees, and mortgage banking income [4] - Non-interest expenses decreased by 3% to $1.31 billion, reflecting lower costs in outside services and occupancy [5] Loan and Deposit Trends - Total loans and leases as of March 31, 2025, were $137.6 billion, down 1.1% from the prior year [6] - Total deposits increased by 1.6% to $177.6 billion [6] Credit Quality - Provision for credit losses was $153 million, down 10.5% year-over-year [7] - The allowance for credit losses decreased by 4% to $2.21 billion [7] - Net charge-offs increased by 10% to $200 million [7] - Non-accrual loans and leases rose by 8% to $1.58 billion [7] Capital Position - The tier 1 leverage ratio improved to 9.4%, up from 9.3% in the prior year [8] - The common equity tier 1 capital ratio remained stable at 10.6% [8] - The total capital ratio increased to 13.9%, compared to 13.8% in the prior year [8] Shareholder Returns - In Q1 2025, CFG repurchased $200 million of common shares and paid out $186 million in common dividends [9] Strategic Outlook - CFG's focus on strategic initiatives and efficiency improvements supports its financial performance, while a solid liquidity position allows for sustainable capital distributions [10]

Core Insights - Citizens Financial Group (CFG) reported revenue of $1.94 billion for the quarter ended March 2025, reflecting a decrease of 1.2% year-over-year, with an EPS of $0.77 compared to $0.65 in the same quarter last year [1] - The revenue was slightly below the Zacks Consensus Estimate by 0.29%, while the EPS exceeded the consensus estimate by 2.67% [1] Financial Performance Metrics - Efficiency Ratio was reported at 67.9%, slightly better than the estimated 68.1% [4] - Net Interest Margin stood at 2.9%, matching the average estimate [4] - Book value per common share was $51.99, exceeding the estimated $50.90 [4] - Return on average common equity was 6.2%, surpassing the 6% average estimate [4] - Net charge-offs amounted to $200 million, higher than the estimated $176.35 million [4] - Return on average total assets was 0.7%, consistent with the average estimate [4] - Average balances of total interest-earning assets were $195.06 billion, slightly below the estimated $195.79 billion [4] - Net charge-offs as a percentage of average loans and leases were 0.6%, above the estimated 0.5% [4] - Tangible book value per common share was $33.97, exceeding the estimated $32.68 [4] - Tier 1 Leverage Ratio was reported at 9.4%, matching the estimate [4] - Tier 1 Capital Ratio was 11.9%, slightly below the estimated 12% [4] - Total Capital Ratio was reported at 13.9%, consistent with the average estimate [4] Stock Performance - Citizens Financial Group's shares have returned -11.9% over the past month, compared to a -4.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1 - Citizens Financial Group (CFG) reported quarterly earnings of $0.77 per share, exceeding the Zacks Consensus Estimate of $0.75 per share, and up from $0.65 per share a year ago, representing an earnings surprise of 2.67% [1] - The company posted revenues of $1.94 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 0.29%, and a slight decrease from $1.96 billion year-over-year [2] - Citizens Financial Group shares have declined approximately 17.5% since the beginning of the year, compared to a decline of 8.3% for the S&P 500 [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $0.90 on revenues of $2 billion, and for the current fiscal year, it is $3.77 on revenues of $8.16 billion [7] - The Zacks Industry Rank for Banks - Northeast is in the top 26% of over 250 Zacks industries, indicating that the industry is performing relatively well [8] - Byline Bancorp, another company in the same industry, is expected to report quarterly earnings of $0.62 per share, reflecting a year-over-year decline of 11.4% [9]

1Q25 Financial Results April 16, 2025 Forward-looking statements and use of non-GAAP financial measures This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward- looking statement. These statements often include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "goals," "targets," "initiatives," "potentially," "probably," "projects, ...

Financial Data and Key Metrics Changes - The company reported a net interest margin (NIM) expansion of three basis points to 2.90% [6][21] - Earnings per share (EPS) for Q1 was 77 cents, with a return on tangible common equity (ROTC) of 9.6% [15] - The balance sheet remains strong with a CET1 ratio of 10.6% and a loan-to-deposit ratio (LDR) of 77.5% [6][19] Business Line Data and Key Metrics Changes - The private bank saw significant growth, reaching $8.7 billion in deposits and $5.2 billion in assets under management (AUM) [8][40] - Core retail loans grew slightly, driven by home equity and mortgage products, with HELOC up 9% year-over-year [62][64] - Non-interest income decreased by 3.5% linked quarter, impacted by seasonal effects in capital markets [23] Market Data and Key Metrics Changes - The company experienced a favorable credit trend with net charge-offs at 58 basis points, down from 53 basis points in the prior quarter [32][34] - Non-accrual loans decreased by 5% linked quarter, indicating improved credit quality [33] - Period-end deposits increased by approximately $3 billion, or 2%, primarily in low-cost categories [29] Company Strategy and Development Direction - The company aims to build a premier bank-owned private bank and private wealth franchise, with a focus on strategic initiatives in the private banking sector [39] - The strategy includes a transformed consumer bank and a well-positioned commercial bank among regional peers [39] - The company is optimistic about a pickup in loan demand and deal activity in the second half of the year, contingent on macroeconomic stability [10][12] Management's Comments on Operating Environment and Future Outlook - Management noted increased uncertainty in the macro environment due to policy decisions, but corporate and consumer borrowers are generally in good shape [9][10] - The company reaffirmed its EPS estimate for the full year, despite potential risks from economic uncertainty [10][44] - There is a significant amount of pent-up demand for M&A activity, with a record number of transactions in the pipeline [12][80] Other Important Information - The company executed $200 million in stock buybacks during the quarter, taking advantage of its strong capital position [36] - An agreement was made to sell approximately $1.9 billion in non-core education loans, which is expected to be accretive to NIM, EPS, and ROTC [17][38] - The company maintains a robust liquidity position with a pro forma liquidity coverage ratio (LCR) of 122% [31] Q&A Session Summary Question: Can you provide more color around loan demand and trends in line utilization? - Management indicated an increase in line utilization, driven by factors including tariffs and M&A activity, with expectations for continued growth in the second half of the year [54][56] Question: How does the company view capital management in light of potential weaker loan growth? - The company remains committed to its capital range and is open to increasing buybacks if risk-weighted assets decrease, while also monitoring economic conditions [70][73] Question: Can you discuss the capital markets outlook and fee guidance? - Management expressed confidence in their capital markets capabilities and noted a record pipeline of transactions, although timing may be affected by market conditions [80][86] Question: What is the ideal interest rate environment for the company? - The company is slightly asset sensitive and can perform well in a range of interest rate scenarios, with a focus on non-rate-related tailwinds driving NIM [93][99] Question: What unemployment rate is the reserve based on? - The baseline scenario assumes an unemployment rate of 5.1%, with higher rates applied to specific portfolios like commercial real estate [116][118]

Financial Performance - Total revenue for Q1 2025 was $1,935 million, a decrease of 3% from Q4 2024 and a slight increase of 1% from Q1 2024[4] - Net income for Q1 2025 was $373 million, down 7% from Q4 2024 but up 12% compared to Q1 2024[4] - Basic earnings per share for Q1 2025 were $0.78, a decrease of 6% from Q4 2024 and an increase of 18% from Q1 2024[4] - Total interest income for Q1 2025 was $2,352 million, a decrease of 4% from Q4 2024 and 10% from Q1 2024[7] - Net interest income for Q1 2025 was $1,391 million, down 1% from Q4 2024 and 4% from Q1 2024[7] - Total noninterest income decreased to $544 million in Q1 2025, a decline of 5% from Q4 2024, but an increase of 5% from Q1 2024[7] - Total revenue for consumer banking was $1.490 billion, a slight decrease of 1% from $1.507 billion in Q4 2024, but a 10% increase from $1.351 billion in Q1 2024[12] - Net income for consumer banking was $336 million, down 6% from $358 million in Q4 2024, but up 24% from $272 million in Q1 2024[12] - Total revenue in commercial banking was $656 million, a 6% decrease from $696 million in Q4 2024, and an 11% decrease from $741 million in Q1 2024[14] Asset and Liability Management - Total assets as of March 31, 2025, were $220,148 million, reflecting a 1% increase from December 31, 2024[8] - Total deposits rose to $177,576 million, a 2% increase from December 31, 2024[8] - Total loans and leases decreased by $1,568 million (1%) from December 31, 2024, to $137,635 million as of March 31, 2025[9] - Total deposits increased by $2,800 million (2%) from December 31, 2024, to $177,576 million as of March 31, 2025[9] - Average interest-earning assets decreased by $1,555 million (0.79%) from the previous quarter to $195,058 million in Q1 2025[10] - Total interest-bearing liabilities decreased by $994 million (0.66%) from the previous quarter to $149,494 million in Q1 2025[10] - Total assets in the non-core segment decreased by 12% to $6.536 billion from $7.428 billion in Q4 2024, and decreased by 38% from $10.554 billion in Q1 2024[16] Capital and Equity - The CET1 capital ratio at the end of Q1 2025 was 10.6%, down from 10.8% in Q4 2024[5] - Total stockholders' equity increased to $24,866 million, a 3% rise from December 31, 2024[8] - Total tangible common equity reached $14,867 million, marking a 4% increase from December 31, 2024[8] - Common stockholders' equity increased to $22.753 billion in Q1 2025, reflecting a 3% increase from $22.141 billion in Q4 2024[24] - Total capital decreased to $23.156 billion in Q1 2025, a decline of 0.3% from $23.232 billion in Q4 2024[24] - Total allowance for credit losses decreased to $2.212 billion at the end of Q1 2025, down 2% from $2.259 billion in Q4 2024[23] Efficiency and Ratios - The efficiency ratio for Q1 2025 was 67.91%, an increase from 66.27% in Q4 2024[5] - Return on average common equity for Q1 2025 was 6.21%, a decrease of 43 basis points from Q4 2024[28] - Noninterest income as a percentage of total revenue (non-GAAP) for Q1 2025 was 28.14%, a decrease of 76 basis points from Q4 2024[28] - Dividend payout ratio increased to 54% in Q1 25 from 51% in Q4 2024, reflecting a 325 basis points increase[30] Credit Quality - The provision for credit losses in Q1 2025 was $153 million, a decrease of 6% from Q4 2024[4] - Total nonaccrual loans and leases decreased to $1,582 million, down 5% from Q4 2024[18] - Allowance for loan and lease losses to loans and leases was 1.46% as of March 31, 2025, a decrease of 2 basis points from December 31, 2024[19] - Gross charge-offs for commercial and industrial loans increased to $34 million in Q1 2025, a 143% increase compared to Q4 2024[21] - Total loans and leases 90 days or more past due and accruing decreased to $155 million, a 21% decline from Q4 2024[19] Noninterest Expenses - Noninterest expense (GAAP) for Q1 2025 was $1,314 million, a slight decrease of $2 million (0%) from Q4 2024[27] - Salaries and employee benefits (GAAP) increased by 3% to $696 million in Q1 25 compared to $674 million in Q4 2024[30]

Core Viewpoint - Analysts forecast that Citizens Financial Group (CFG) will report quarterly earnings of $0.75 per share, reflecting a year-over-year increase of 15.4%, while revenues are expected to decline by 0.9% to $1.94 billion [1]. Earnings Projections - The consensus EPS estimate has been revised downward by 2.4% in the past 30 days, indicating a reassessment by covering analysts [2]. - Changes in earnings projections are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate trends and short-term stock price movements [3]. Key Metrics Estimates - The consensus estimate for the Efficiency Ratio is 68.1%, down from 69.3% a year ago [5]. - Analysts estimate the Book Value per Common Share at $50.90, compared to $47.43 last year [5]. - Average Balances of Total Interest-Earning Assets are projected to be $195.79 billion, down from $200.07 billion year-over-year [5]. Financial Ratios - The Return on Average Common Equity is expected to reach 6.0%, up from 5.6% in the same quarter last year [6]. - Net Charge-Offs are forecasted at $176.35 million, slightly down from $181 million a year ago [6]. - Tangible Book Value per Common Share is estimated at $32.68, compared to $30.19 last year [6]. Capital Ratios - The Tier 1 Leverage Ratio is projected to be 9.4%, up from 9.3% in the same quarter last year [7]. - Nonaccrual Loans and Leases are expected to reach $1.62 billion, compared to $1.47 billion a year ago [7]. - The Tier 1 Capital Ratio is anticipated to be 12.0%, slightly up from 11.8% last year [8]. - The Total Capital Ratio is expected to be 13.9%, compared to 13.8% a year ago [8]. - The Common Equity Tier 1 Capital Ratio (CET1 Capital Ratio) is projected at 10.7%, up from 10.6% last year [8]. Recent Performance - Citizens Financial Group shares have decreased by 12.4% in the past month, while the S&P 500 composite has declined by 6.1% [9][10]. - CFG holds a Zacks Rank of 3 (Hold), indicating it is expected to closely follow overall market performance in the near term [10].