Citizens Financial Group, Inc. Q3 FY2025 earnings call

Bruce Van Saun highlighted strong financial results including EPS growth of $0.13 sequentially (14%), strong net interest income growth driven by NIM expansion and net loan growth. Fee growth was 5% with capital markets performing strongly. There was sequential positive operating leverage of 3% with expense growth held to 1%. Strategic initiatives progress: the private bank had strong deposit growth and continued team build-out; the Reimagine the Bank initiative was ongoing. The Board declared a quarterly dividend of $0.46, a 9.5% increase, and $75 million in stock buybacks during the quarter.

Private bank deposits saw a spot growth of $3.8 billion to $12.5 billion in the third quarter. Net interest margin expanded by five basis points to 3%, net interest income grew by 3.5% with average interest-earning assets up 1%. Fees increased by 5%, with capital markets delivering a record third quarter and wealth business also setting a record. The CET1 ratio rose to 10.7%, and the loan-to-deposit ratio was 78.3% with virtually no wholesale borrowing.

For the fourth quarter, net interest income is expected to be up approximately 2.5% to 3% driven by NIM improvement and interest-earning assets growth, non-interest income is stable, expenses are stable or slightly up, and credit trends are favorable with CET1 ratio stable at 10.7%. Medium term, the bank is confident in achieving a 16%-18% ROTCE target. The Reimagine the Bank initiative is expected to bring positive net benefits in 2027 and accelerate in 2028 with fully phased-in run rate benefits greater than $400 million.

Macro environment uncertainty regarding fiscal and monetary policies; private credit risks exist but are mitigated by strong structures and controls.

Q: Scott Siefers with Piper Sandler asked about the expected margin trajectory.

A: Chris Emerson and Bruce Van Saun discussed that the margin outlook involves time-based benefits, front book back book factors, and impacts of curve movement and commercial loan pricing.

Q: Dave Rochester with Cantor Fitzgerald inquired about the Private Bank outlook.

A: Bruce Van Saun and Brendan Coughlin talked about the private bank's momentum, including deposit growth, AUM progress, and medium-term outlook.

Q: Ebrahim Poonawala with Morgan Stanley asked about Fed funds sensitivity and Reimagine the Bank costs.

A: Bruce Van Saun and Brendan Coughlin responded on Fed funds sensitivity and the cost-saving opportunities and investment aspects of the Reimagine the Bank initiative.