Citizens Financial Group, Inc. Q2 FY2025 earnings call

• Strong net interest income growth of 3.3% sequentially, paced by NIM expansion and loan growth across segments. • Fee growth of 10%, with wealth, card, and mortgage driving the increase. • Expense discipline with expenses broadly flat, resulting in 500 basis points of operating leverage. • Loan growth across consumer, private bank, and commercial, with the Private Bank adding $1.2 billion in loans. • Progress in New York City Metro, Private Capital payments, and BSO initiatives. • Commenced the 'reimagining the bank' initiative leveraging GenAI and Agentic AI to redesign customer service and bank operations. • The Private Bank is on track to deliver over 5% accretion to Citizens' bottom line and a 20% plus ROE in 2025.

Net interest income increased by 3.3% sequentially, driven by a 5 basis point NIM expansion and loan growth across consumer, private bank, and commercial segments. Fees saw a 10% increase, with wealth, card, and mortgage leading the growth. The Private Bank experienced strong loan and AUM growth, adding $1.2 billion in loans and ending the quarter with $4.9 billion in loans. Commercial loans showed growth in C&I and line utilization, while consumer banking saw growth in HELOC, mortgage, and the launch of new credit cards. The Private Bank contributed $0.06 to EPS in the quarter, up from $0.04 in the prior quarter.

• Third quarter expected net interest income to increase by approximately 3% to 4%, driven by NIM improvement and interest-earning asset growth. • Noninterest income anticipated to increase in the low single digits, led by a rebound in capital markets. • Expenses projected to increase by approximately 1% to 1.5%, reflecting private bank build-out and strong fee revenues. • CET1 ratio expected to remain stable, including share repurchases of roughly $75 million. • Full-year outlook remains in line with the guide provided in January. • Medium-term ROTCE target of 16% to 18%, with NIM projected to reach 3.50% by 2027.

• Macro environment uncertainty, including ongoing tariff machinations. • Commercial real estate office risks and potential impacts on credit reserves. • Intensifying competitive dynamics in deposits and lending. • Uncertainty around regulatory and rating agency perspectives on capital levels and their impact on regional banks.

Q: Ryan Nash inquires about loan growth in the private bank and other segments and borrower sentiment.

A: Bruce Van Saun and others discuss loan growth across segments, the private bank's progress, and positive borrower sentiment with easing noncore rundown.

Q: Erika Najarian asks about deposit strategy and capital allocation.

A: John Woods and others talk about deposit mix optimization, low-cost deposit outperformance, and capital rotation into front book activities.

Q: Matt O'Connor asks about the 'reimagining the bank' initiative.

A: Bruce Van Saun and Brendan Coughlin discuss the initiative's broad scope, technology utilization, and long-term benefits.

Q: Kenneth Usdin asks about the capital markets pipeline and other fees.

A: Bruce Van Saun and Donald McCree talk about capital markets pipeline strength, pent-up deal activity, and other fees being lumpy in nature.

Q: Steven Alexopoulos asks about the Private Bank deposit target and the 'reimagining the bank' initiative.

A: Brendan Coughlin discusses confidence in the Private Bank deposit target and the 'reimagining the bank' initiative's broad focus on multiple areas.

Q: John Pancari asks about competitive dynamics and the M&A backdrop.

A: Bruce Van Saun and others talk about competitive focus on relationships, deposit and loan pricing strategies, and M&A focus on organic growth.

Q: Manan Gosalia asks about credit trends and office reserve management.

A: John Woods and others discuss credit trends, stable charge-offs, and office reserve management strategies.

Q: Chris McGratty asks about capital allocation to capital markets.

A: Bruce Van Saun and Donald McCree talk about OpEx focus, industry specialization, and prudent capital allocation.

Q: Ebrahim Poonawala asks about deposit costs and lending outlook.

A: John Woods and Donald McCree discuss deposit cost trends, CD rotation benefits, and lending utilization in capital call lines.