Summary of Citizens Financial Group Conference Call Company Overview - **Company**: Citizens Financial Group (NYSE: CFG) - **Date**: February 10, 2026 - **Key Speakers**: Don McCree (Chair of Commercial Banking), Ted Swimmer (Head of Commercial Banking) Key Points Company Evolution and Strategy - Citizens Financial Group has evolved significantly since its IPO, focusing on building a comprehensive commercial banking platform that includes leveraged finance, industry verticals, and boutique M&A acquisitions [5][6][12] - The bank has expanded its geographical reach beyond the Mid-Atlantic and New England to include Florida, California, and New York City, enhancing its middle-market banking capabilities [9][10] - The strategy includes a focus on private equity and capital markets, with investments in Treasury Solutions and Merchant Services, positioning the bank as a dominant player in these sectors [11][12][15] Market Outlook - The bank anticipates a positive trajectory for 2026, with signs of increased M&A activity and a more favorable banking environment compared to the previous sluggish years [14][15] - There is a narrowing bid-ask spread in the market, indicating that transactions are expected to increase in 2026, particularly for top-tier companies [22][25] - Citizens Financial Group is optimistic about its pipelines, indicating a strong potential for growth in capital markets and advisory revenues [36][38] Private Equity and Capital Markets - The bank has shifted its approach to view relationships with private equity firms holistically, providing comprehensive services that include financing, equity, and advisory [27][30] - The acquisition of JMP in 2021 has enhanced the bank's capabilities in equity research and private capital, allowing it to better serve clients in the growing private equity market [77][78] Expansion Markets - Citizens is strategically expanding into Florida, California, and New York, leveraging its brand and comprehensive service offerings to attract middle-market companies seeking more robust banking solutions [81][89] - The bank's approach in California focuses on new economy sectors, filling the void left by other banks, and emphasizing its private banking capabilities [89][90] Financial Performance and Projections - The bank expects loan growth of 3%-5% for the year, driven by increased utilization of revolvers and participation in M&A transactions [96][97] - Citizens Financial Group is focused on optimizing its balance sheet by reallocating resources to higher-return opportunities and leveraging AI for operational efficiency [16][17] Risk Management - The bank is monitoring sectors such as retail and biotech for potential risks but currently does not see significant concerns in its portfolio [99][100] - Regulatory changes and market volatility are ongoing considerations, but the bank feels well-positioned to navigate these challenges [105][106] Conclusion - Citizens Financial Group is poised for growth in 2026, with a strong focus on executing its strategies in private equity, capital markets, and expansion into new markets. The bank aims to leverage its comprehensive service offerings and industry expertise to capture a larger share of the market [110][112]

Financial Data and Key Metrics Changes - Core EPS for Q4 2025 was $0.79, representing an 88% increase year-over-year, driven by record total revenues of $124 million [3][14] - NIM increased by 10 basis points to 311 basis points, with average earning assets up over $650 million on a linked-quarter basis [4][14] - Core deposits rose by $1.2 billion year-over-year, with total deposits up approximately $800 million compared to the prior quarter [4][15] Business Line Data and Key Metrics Changes - Business loans grew over $175 million on a linked-quarter basis and over $500 million year-over-year, with significant contributions from new industry verticals [5][27] - Non-interest income for Q4 was $11.5 million, exceeding guidance [16] - The loan loss provision declined to $10.9 million, with the allowance to loans increasing to 91 basis points [16] Market Data and Key Metrics Changes - The company has a strong liquidity position, with a total capital ratio exceeding 16% and a common equity tier 1 ratio of 11.66% [6][17] - The company is focused on reducing its CRE concentration ratio to the mid-350% area [21] Company Strategy and Development Direction - The company is committed to organic growth, focusing on building out its commercial banking platform and industry verticals [6][10] - Plans for 2026 include modest NIM expansion in the first half and more substantial growth in the second half due to loan repricing opportunities [17][20] - The company aims to operate at a sub-50% efficiency ratio and continue attracting talented bankers to support growth [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted a strong environment for organic growth, with a target-rich marketplace [6] - The company expects to see significant growth in both revenues and loan portfolios in 2026, driven by loan repricing and core deposit growth [8][19] - Management expressed confidence in the company's ability to navigate market disruptions and capitalize on lending opportunities [6][9] Other Important Information - The company has added new capabilities in various sectors, including Fund Finance and Lender Finance, to enhance its commercial banking offerings [11][12] - The company is focused on geographic expansion, particularly in Manhattan and New Jersey [12] Q&A Session Summary Question: What industries accounted for the growth in business loan balances this quarter? - Approximately $400 million of the $500 million year-over-year growth in business loans came from new specialized industries, with healthcare being a significant contributor [27] Question: How much business do you have in New Jersey? - About 8% to 10% of the loan portfolio is in Northern New Jersey, with a deposit-to-loan ratio of 15%-20% [28] Question: How do you view the deposit growth pipeline and pricing? - The company is offering high twos to low threes on money market accounts to attract new customers, with an overall cost of deposits at $168 [33][34] Question: What is the current status of the rent-regulated loan book? - The 100% rent-regulated book is around $350 million, with maturities and repricings expected to be about $250 million for 2026 [36][38] Question: What is the strategy for deploying cash and securities? - The company is not rushing to buy securities and prefers to maintain flexibility on the balance sheet, with cash expected to be used for loans starting in the second half of the year [48][49]

Core Insights - KeyCorp reported a revenue of $1.8 billion for Q2 2025, reflecting a 21% increase year-over-year, driven by a 10% growth in noninterest income and a 4% increase in net interest income [1][2][6] - The net income attributable to Key common shareholders for Q2 2025 was $387 million, or $0.35 per diluted common share, compared to $370 million, or $0.33 per diluted common share in Q1 2025, and $237 million, or $0.25 per diluted common share in Q2 2024 [1][5][49] - The company experienced a decline in net loan charge-offs by 8% quarter-over-quarter, indicating stable to improved credit metrics [1][20] Revenue and Income - Total revenue for Q2 2025 was $1.84 billion, up 20.6% from $1.526 billion in Q2 2024, with net interest income at $1.15 billion, a 27.9% increase year-over-year [6][49] - Noninterest income reached $690 million, a 10% increase from $627 million in Q2 2024, driven by higher investment banking and debt placement fees [10][11][49] Expenses - Noninterest expenses increased to $1.154 billion, a 7% rise from $1.079 billion in Q2 2024, primarily due to higher personnel expenses related to incentive compensation [13][14][49] - The company managed to keep deposit costs below 2%, with average deposits totaling $147.4 billion, reflecting a 2.3% increase year-over-year [18][19] Asset Quality - Net loan charge-offs for Q2 2025 were $102 million, or 0.39% of average total loans, compared to $91 million, or 0.34%, in Q2 2024 [20][22] - Nonperforming loans at the end of Q2 2025 totaled $696 million, representing 0.65% of period-end portfolio loans, stable compared to previous quarters [23][22] Capital Position - KeyCorp's Common Equity Tier 1 ratio was 11.7% as of June 30, 2025, maintaining a strong capital position above regulatory benchmarks [25][27] - The company declared a dividend of $0.205 per common share in May 2025, consistent with previous quarters [28][49] Business Segments Performance - The Consumer Bank segment generated $912 million in revenue, a 20.3% increase from Q2 2024, with net income of $122 million [32][35] - The Commercial Bank segment reported $974 million in revenue, up 26.8% year-over-year, with net income of $349 million [31][38]

Financial Data and Key Metrics Changes - The commercial loan portfolio reached $10.7 billion, reflecting a 6.5% increase quarter over quarter and a 23% increase year over year [5] - Net interest income totaled $65.3 million, with an interest margin of 2.36%, remaining resilient and in line with guidance [6][8] - Net income for the quarter was CAD 51.7 million, consistent with the previous quarter, and return on equity stood at 15.4% [8][25] Business Line Data and Key Metrics Changes - Total loan portfolio reached a record $8.7 billion, up 18% year over year and 4% quarter over quarter, indicating sustained loan demand [9] - The contingency portfolio, including letters of credit and guarantees, grew to nearly $2 billion, up 20% quarter over quarter and 49% year over year [10] - Fee income totaled $10.6 million, up 12% year over year, with letters of credit generating $6.7 million in fees, also up 12% year over year [20][21] Market Data and Key Metrics Changes - Deposits rose to $5.9 billion, reflecting an 8% increase quarter over quarter and 24% year over year, now representing almost 60% of total funding [5][14] - The bank maintained a strong liquidity position with $1.9 billion in liquid assets, representing 15% of total assets [11] - Nonperforming loans remained at $17 million, representing just 0.1% of total exposure, indicating strong asset quality [12][13] Company Strategy and Development Direction - The company is focused on building a business model that consistently generates fee income to reduce sensitivity to interest rate fluctuations [44] - There is a strong emphasis on letters of credit as a low capital allocation business with attractive returns, supported by investments in technology [45] - The company aims to maintain a healthy deal pipeline, including longer tenure structured transactions to complement core short-term lending [10] Management's Comments on Operating Environment and Future Outlook - The global economic environment has shifted, leading to increased uncertainty and potential impacts on growth forecasts [27] - Latin America has remained relatively insulated from recent tariff announcements, with opportunities to benefit from shifts in global supply chains [29] - The company reaffirms its full-year guidance, indicating confidence in achieving objectives despite current global uncertainties [31] Other Important Information - The total capital increased to $1.37 billion, up 3% from the prior quarter, with a Tier one ratio of 15.1% [17][18] - Operating expenses totaled $21 million, reflecting a 50% increase year over year due to strategic investments and higher headcounts [22] Q&A Session Summary Question: What is driving the increase in operating costs, and what could be expected going forward? - The increase in costs is mainly due to headcount growth, IT investments, and consulting fees tied to the execution of the strategic plan [35] Question: Can you comment on the growth in the commercial book and its sustainability? - The off-balance sheet growth was higher than expected, particularly driven by the oil and gas sector in Argentina, and the company anticipates continued growth in this area [41][46] Question: Can you elaborate on the impact of high volatility on spreads and potential upside risks to NIM guidance? - The company has maintained lending margins above December 2024 levels, and expects margin expansion in upcoming quarters due to a robust medium-term pipeline [58][63] Question: Why did the letters of credit business show a decrease in fee income despite growth in the balance? - The increase in balance occurred towards the end of the quarter, and the benefits of the income will reflect more in the second quarter [60]

Financial Data and Key Metrics Changes - The commercial loan portfolio reached $10.7 billion, reflecting a 6.5% increase quarter over quarter and a 23% increase year over year [5] - Net interest income totaled $65.3 million, with a net interest margin of 2.36%, remaining resilient and in line with guidance [6][19] - Deposits rose to $5.9 billion, up 8% quarter over quarter and 24% year over year, representing almost 60% of total funding [5][15] - Net income for the quarter was $51.7 million, with a return on equity of 15.4% [7][25] Business Line Data and Key Metrics Changes - The total loan portfolio reached a record $8.7 billion, up 18% year over year and 4% quarter over quarter [10] - The contingency portfolio, including letters of credit and guarantees, grew to nearly $2 billion, up 20% quarter over quarter and 49% year over year [11] - Fee income totaled $10.6 million, up 12% year over year, with letters of credit generating $6.7 million in fees [6][20] Market Data and Key Metrics Changes - Strong performance was noted in Argentina, Mexico, and Guatemala, contributing to the growth of the loan portfolio [5][11] - The bank maintained a strong liquidity position with $1.9 billion in liquid assets, representing 15% of total assets [12] Company Strategy and Development Direction - The company is focused on building a robust and diversified pipeline with long-standing clients, particularly in sectors less exposed to tariff discussions [4] - A proactive commercial execution strategy is in place, supported by close client relationships and deep local market insights [4] - The company aims to maintain its full-year guidance despite global uncertainties, emphasizing prudent execution and long-term value creation [31] Management's Comments on Operating Environment and Future Outlook - The global economic environment has shifted, leading to increased uncertainty and potential impacts on growth forecasts [27] - Latin America remains relatively insulated from direct tariff effects, with opportunities to benefit from shifts in global supply chains [29] - The company is well-positioned to manage exposures and capitalize on arising opportunities, with only 15% of its trade finance portfolio linked to the US [30] Other Important Information - The capital ratio remains strong at above 15%, with a quarterly dividend of $0.0625 per share approved, reflecting confidence in earnings outlook [8][18] - The efficiency ratio improved to 26.9%, down from 29.2% in the prior quarter, indicating effective cost management [22] Q&A Session Summary Question: What is driving the increase in operating costs, and what can be expected going forward? - The increase in costs is mainly due to headcount growth, IT investments, and consulting fees tied to the execution of the strategic plan. The pace of hiring is expected to decelerate moving forward [34][36] Question: Can you comment on the growth in the commercial book and its sustainability? - The off-balance sheet growth was higher than expected, driven by the oil and gas sector in Argentina. The company anticipates continued growth in letters of credit, supported by a robust pipeline [40][45] Question: Can you elaborate on the impact of high volatility on spreads and potential upside risks to NIM guidance? - The company has maintained lending margins above December 2024 levels despite competitive pricing. Active balance sheet management and a strong pipeline are expected to benefit margins moving forward [56][62] Question: Why did the letters of credit business show a decrease in fee income despite growth in the balance? - The increase in balance occurred towards the end of the quarter, with income benefits expected to reflect more in the second quarter. The dynamics of commitments and letters of credit are expected to normalize [58][60]