Citizens Financial (US:CFG)2026-01-21 15:02Financial Data and Key Metrics Changes - The company reported a net interest margin expansion of 7 basis points, with net interest income (NII) up 9% year-on-year and earnings per share (EPS) of $3.86, reflecting a 19% increase compared to 2024 [4][6][12] - For Q4, EPS was $1.13, up 8% sequentially and 36% year-on-year, with a return on tangible common equity (ROTCE) of 12.2% [14][6] - The company achieved positive operating leverage of 1.3% sequentially and 5.2% year-on-year, with expenses up 4.6% against a guide of 4% [4][7] Business Line Data and Key Metrics Changes - The Private Bank contributed $0.10 to EPS in Q4, with deposits reaching $14.5 billion and loans at $7.2 billion, exceeding the original target of 5% contribution to pre-tax income [4][24] - Wealth management fees increased by 22% year-on-year, while capital markets fees were up 9% year-on-year, contributing to an overall fee increase of 11% [12][13] - The company reduced non-core assets from $6.9 billion to $2.5 billion, enhancing balance sheet strength [5][24] Market Data and Key Metrics Changes - Total spot deposits increased approximately 2% to $183 billion, with non-interest-bearing balances up 2% [19][20] - The company maintained a CET1 ratio of 10.6%, with expectations to manage it between 10.5% and 10.6% throughout 2026 [10][22] - Credit quality improved, with net charge-offs decreasing to 43 basis points from 46 basis points in the prior quarter [20][22] Company Strategy and Development Direction - The company is focused on executing strategic initiatives, including the "Reimagine the Bank" program, which aims to enhance customer experience and drive revenue benefits [7][25] - The outlook for 2026 includes expectations for NII growth of 10%-12% and continued expansion of the net interest margin [9][27] - The company plans to maintain a disciplined approach to capital management, with share repurchases projected at $700 million-$850 million [10][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a favorable macro environment for 2026, anticipating solid GDP growth and stable unemployment [8][9] - The company expects to achieve a medium-term ROTCE target of 16%-18% by the second half of 2027, supported by margin expansion and strong loan growth [30][31] - Management highlighted the importance of maintaining a strong balance sheet and credit quality as key components of their strategy [22][29] Other Important Information - The company returned $1.4 billion to shareholders in 2025, representing 80% of earnings, with a tangible book value per share increase of 18% year-over-year [22][23] - The "Reimagine the Bank" initiative is expected to deliver approximately $450 million in pre-tax run rate benefits by the end of 2028 [26] Q&A Session Summary Question: Insights on the "Reimagine the Bank" initiative - Management indicated that the program has about 50 work streams and is expected to improve customer experience and reduce attrition, with revenue benefits anticipated over time [34][36] Question: Changes in deposit betas and NIM outlook - Management noted that the market has become less aggressive in pricing actions, leading to a revised deposit beta in the high 40s, while confidence in NIM remains due to strong non-interest-bearing balance growth [40][42] Question: Loan growth guidance and balance sheet optimization - Management highlighted strong growth in the private bank and commercial banking sectors, with a focus on reducing non-core assets and optimizing the balance sheet [48][50] Question: Fee growth assumptions and capital markets outlook - Management provided a conservative fee growth guidance of 6%-8% for 2026, citing strong capital markets pipelines and record wealth management performance [64][66] Question: CET1 ratio and buyback strategy - Management expressed optimism about potential changes in the stress test outcomes, which could allow for a reduction in the CET1 ratio and increased buybacks in the latter half of the year [70][72]