On Thursday, Citizens Financial Group (NYSE:CFG) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Citizens Financial Group reported a strong start to 2026 with a 47% increase in EPS, positive operating leverage of 7%, and a net interest margin (NIM) expansion of 24 basis points.
The private bank and wealth business, accounting for 10% of pre-tax income, continued to grow, contributing $0.11 to EPS, with a robust ROE exceeding 25%.
Strategic initiatives like ‘Reimagine the Bank’ and expansion in New York and private banking are progressing well, with a reaffirmed P&L target of $450 million by 2028.
The company anticipates favorable outcomes from regulatory changes and stress tests, and remains cautiously optimistic about navigating external challenges.
Management highlighted strong loan growth across commercial, consumer, and private banking segments, with an emphasis on maintaining robust credit quality.
Full Transcript
Ivy (Operator)
Good morning everyone and welcome to the Citizens Financial Group’s first quarter 2026 earnings conference call. My name is Ivy and I will be your operator today. Currently all participants are in a listen only mode. Following the presentation we will conduct a brief question and answer session. As a reminder, this event is being recorded now. I will turn the call over to Kristen Silverberg, Head of Investor Relations. Kristen, you may begin.
Kristen Silverberg (Head of Investor Relations)
Thanks Ivy. Good morning everyone and thank you for joining us. First this morning our Chairman and CEO Bruce Van Sorn and CFO Anoy Banerjee will provide an overview of our first quarter results. Brendan Coughlin, President and Ted Swimmer, Head of Commercial Banking are also here to provide additional color. We will be referencing our first quarter presentation located on our Investor Relations website. After the presentation we’ll be happy to take questions. Our comments today will include forward looking statements which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review in the presentation. We also reference non GAAP financial measures so it’s important to review the GAAP results in the presentation and the reconciliations in the appendix and with that I will hand it over to Bruce.
Bruce Van Saun
Okay, thanks Kristen and good morning everyone. Thanks for joining our call today. We’re pleased to start the year off strong. Notwithstanding geopolitical tensions and uncertainty in the macroeconomic environment environment, we delivered good financial performance in a seasonally soft quarter with year over year eps growth of 47%, positive operating leverage of 7% and NIM expansion of 24 basis points. Our balance sheet position continues to be robust with CET1 at 10.5% and our allowance for loan losses at 1.52%. Credit trends continue to be favorable across our portfolios and we continue our loan mix shift towards deeper relationships with lower credit Risk execution on our strategic initiatives continues to track wealth. The private bank and wealth business showed further growth in customers balance sheet and profitability now accounting for roughly 10% of our pre tax income while delivering an ROE in excess of 25%. During the quarter we opened three more PBOs bringing the total to nine Reimagine the Bank is off to a solid start and we reaffirm our 450 million P&L target by the end of 2028. We estimate about 100 million in 2026 exit run rate benefits. At this point, our positioning with private capital continues to be excellent. We anticipate a strong year for private equity sponsor activity which should provide balance sheet and fee opportunities for us. We’ve reviewed all of our lending to private credit vehicles at a granular level and we feel good about our credit exposure. The New York City Metro Initiative also continues to show further progress. We are growing across retail, small business and middle market. We are in the process of analyzing Citizens existing branch footprint for Net new investment and optimization. With New York City likely to see growth in branches in coming years, we should have more details to share to share with you on this mid year. We’re also focused on an initiative we call One Citizens which is systematically finding ways to work across the enterprise to deliver valuable solutions to our customers. Now that we have established the private bank and continued the build out of our corporate bank, we have the capacity to provide both personal and corporate services to successful business owners, investors and entrepreneurs. We will report more on this as the year progresses, but we’re already gaining real traction as we look ahead to the second quarter and the full year. We remain cautiously optimistic that we’ll be able to navigate through external challenges and still deliver the strong results we projected coming into this year. So far, markets have behaved rationally despite the war with equity markets holding in and credit spreads only slightly wider. We intend to stay on our investment plan for the year unless the macro takes a meaningful turn for the worse. We’re pleased with the regulatory changes we see coming from Washington D.C. and we look forward to the upcoming CCAR stress test results which we’re hopeful will give a more accurate result for Citizens than than what we’ve seen in the past. So to sum up, a good start, well positioned with a great strategy and a great team and optimistic for a strong 2026. With that, I’ll turn it over to Anoy for the financial details. Thank you, Bruce. Anoy.
Anoy Banerjee
Good morning everyone. As Bruce mentioned, Citizens have started the year well. Referencing slides 3 and 4. We delivered EPS of $1.13 for the first quarter with ROTC of 12.2%. Results were paced by strong net interest income (NII) reflecting both continued net interest margin expansion and and solid loan growth. We also delivered our best ever first quarter fee result led by strong performance in our commercial bank. The solid revenue performance and expense discipline drove more than 700 basis points of positive operating leverage year over year, notwithstanding continued investment in the private bank and our other strategic priorities. Along with ramping up our Reimagine the Bank program, the private bank continued to grow its profitability, contributing $0.11 to EPS, up from $0.10 in the prior quarter as the business delivered another very strong quarter of deposit growth. Now let me walk through the first quarter resultss in more detail starting with net interest income on slide 5. Net interest income was up 1.6% linked quarter driven by the benefit of an expanded net interest margin and higher interest earning assets including strong loan growth which more than offset the day count impact of about $22 million. As you see from the net interest margin (NIM) walk at the bottom of the slide, our margin improved 7 basis points to 3.14% driven primarily by the benefits of the reduced drag from terminated swaps and non core runoff with a five basis point of combined impact, the fixed rate asset repricing benefit of 1 basis point and lastly the net impact of 1 basis point related to improved funding cost and mix largely offset by lower asset yields. We continue to do a good job optimizing deposits in a competitive environment. Our interest bearing deposit cost were down 16 basis points and total deposit costs were down 12 basis points. The cumulative interest bearing deposit beta improved to 50% as we benefited from the repricing after the last rate cut. Even with the Fed now expected to hold steady in 26, we are still projecting a high 40s beta for the cycle. Moving to slide 6 non interest income is up 11% year over year but down 2% linked quarter as I mentioned this was our strongest first quarter fee result ever notwithstanding heightened geopolitical tensions and an increase in market volatility. Capital markets performance demonstrated the strength and diversity of the franchise with fees up 34% year over year and down 4% compared with the strong fourth quarter. MA delivered a good result in the quarter with our pipeline strong and continues to build. Bond underwriting was up nicely from the prior quarter. Our equity underwriting performance was stable linked quarter and up significantly year over year. Loans indications were lower given the market volatility. We continue to maintain strong market share ranking fourth in the middle market. Sponsors Bookrunner Deals by volume this is for both the first quarter and over the last 12 months. Our deal pipelines across MA debt and equity capital markets continue to build notwithstanding the unsettled environment. Our global markets business was up $10 million linked quarter with increased client hedging activity in interest rate products and energy related commodities. Our wealth business continues to build with progress in the private bank and strength in our retail network. Wealth fees are up 2% linked quarter and 23% year over year. These results reflect higher advisory fees with continued positive momentum in fee based AUM growth year over year. The fourth quarter results reflect positive net inflows partially offset by market impacts on AUM. Mortgage was down 19% linked quarter given a lower MSR valuation partially offset by slightly higher production and servicing fees on slide 7. Expenses were managed tightly up 2.6% linked quarter, largely reflecting the usual seasonality in salaries and benefits as well as about $6 million of implementation costs to ramp up the reimagine. The bank program on slide 8 average and period end loans were up 1% linked quarter we saw solid loan growth across each of the businesses. Commercial loans excluding the private bank were up 1% on a spot basis. This was driven by net new money originations and higher commercial line utilization. This was partially offset by CRE paydowns. We continue to reduce commercial banking CRE balances which were down about 4% this quarter and 16% year over year. The private bank delivered good loan growth again this quarter with period end loans up about $600 million driven by growth in multifamily and residential mortgage. Growth in retail loans ex non core on a spot basis was about $300 million led by real estate secured categories. This was offset by non core auto portfolio run up of roughly $500 million for the quarter. Next on slides 9 and 10 we continued to do a good job on deposits with average deposits up 1% or $1.5 billion quarter on quarter, primarily driven by the growth in the private bank which reached $16.6 billion at the end of the quarter. This was partially offset by seasonal impacts in commercial year over year average balances are up $8.6 billion or 5% reflecting combined growth in the private bank and commercial of $11.2 billion, partially offset by roughly $2 billion of reduction in higher cost treasury broker deposits on a spot basis. Non interest bearing balances are up $1.3 billion or 3% quarter on quarter and up $4.1 billion or 11% year over year, improving the overall mix to 23% of the book. Our total non interest bearing and low cost deposit mix was steady at 43% and our consumer deposits are 64% of our total deposits. This compares to a peer average of about 56%. Moving to Slide 11 credit continues to trend favorably with net charge offs coming in at 39 basis points down from 43 basis points in the prior quarter. Non accrual loans are down modestly linked quarter reflecting a decrease in commercial largely driven by CNI which was partially offset by an increase in mortgage. Turning to slide 12, the allowance was essentially stable this quarter with ACL coverage ratios of 1.52%. This reflects the continued improvement in our portfolio mix with non core runoff, the reduction in CRE and strong originations of lower loss content cni, Residential Real Estate Secured and Private Loans the economic forecast supporting the allowance contemplates a mild recession with a slight deterioration compared with the last quarter, reflecting the potential impact of higher energy prices. As we look broadly across the portfolio, the credit outlook remains positive, though we continue to carefully monitor the macroeconomic environment. Moving to slide 13 we maintained excellent balance sheet strength, ending the quarter with CET1 at 10.5%. We returned about $500 million to shareholders in the first quarter with $198 million in common dividends and $300 million of share repurchases. Moving to Slide 14, the private bank continues to make excellent progress. The private bank delivered strong deposit growth again ending the quarter at $16.6 billion. Importantly, the overall deposit mix and cost continues to be very attractive. We also delivered solid loan growth in the quarter, adding about $600 million of loan at a healthy spread of 4% over deposit cost to end the quarter at $7.7 billion of loans. We ended the quarter with $10.1 billion of total client assets with modest net inflows partially offset by market impacts. We have more Runway here as we plan to continue adding top quality teams in key geographies. We opened offices in Melno park and Laurel village in the first quarter and we expect to open at least two more offices this year in West Palm Beach, Florida and Greenwich, Connecticut. Moving to Slide 15 our Reimagine the Bank program is off to a great start. The objective is to position citizens for long term success by embracing a host of new innovative technologies across the bank and simplifying our business model which will reshape our customer experience and drive a meaningful improvement in productivity and efficiency. The program is well underway with work commencing on several key work streams. For example, on the technology front, we are leveraging AI to assist in writing code and expect to have material productivity improvements in software development, cutting down cycle times. We’re also using AI to improve our interactions with customers which we expect will materially cut call volumes and improve the overall customer experience. We expect to exist 2026 with an annualized run rate of about $100 million of pre tax benefit. Now moving to Slide 16, we provide our outlook for the second quarter. We expect net interest income to be up in the range of 3 to 4% driven by continued expansion in net interest margin and earning asset growth. Non interest income is expected to be up 3 to 5%, led by capital markets with some risk if market volatility moves higher. Other fee categories such as FX and derivatives, wealth and card should also provide lift for the quarter. We are projecting expenses to be stable to up 1%, incorporating a step up in implementation cost associated with Reimagine the Bank and continued investment in other key business initiatives. We expect expense saves from Reimagine the Bank to benefit second half expenses. The charge off level is expected to be stable to down slightly and we should end the second quarter with CET1 in the range of 10.5 to 10.6%, including share repurchases of about $225 million. In addition, our full year outlook remains broadly in line with the guide we provided in January, which contemplated a pickup in business activity over the course of the year. Looking out further, we see a clear path to achieving our 16 to 18% ROTC target by the end of 2017. Expanding our net interest margin is an important driver and we continue to project net interest margin (NIM) to be in the range of 322 to 328% in 4Q26 and in the range of 330 to 350% in 4Q27. Slide 17 provides incremental details on our net interest margin progression to the end of 2017. This, combined with the impact of successful execution of our strategic initiatives and normalizing credit, should drive ROTC to our target range. To wrap up, we are off to a Good start to 26 with results highlighted by strong growth in net interest income and good fee results in a seasonally soft quarter. Our balance sheet is strong and we continue to drive forward our strategic initiatives with strong momentum in growing the private bank and in our Reimagine the Bank program. With that, I will hand it back over to Bruce.
Bruce Van Saun
Okay, thank you, Anoy Operator, let’s open it up for Q and a.
OPERATOR
Question and answer portion of the call. If you would like to participate at this time. If you would like to ask a question, please unmute your phone, press Star one and record your name clearly when prompted. If you need to withdraw your question at any time, please press Star two. Again, that is Star one to ask a question. Our first question comes from Scott Siefers from Piper Sandler. Please go ahead.
Scott Siefers (Equity Analyst)
Morning guys. Thank you for taking the question. Let’s see, I was hoping you could maybe start by speaking to kind of the Capital markets Dynamics. Obviously see the numbers in the first quarter but curious how you thought the first quarter actually performed given that you had sort of the interplay between one the environment played out a lot differently than we all figured it might.
Bruce Van Saun
But two, I know you all had some deals that were pushed from the fourth quarter into the first quarter, so maybe just sort of results versus expectations, then if you could speak to the forward look, you know, things like pipelines, confidence in pull through, et cetera. Yeah, Scott, let me. It’s Bruce. I’ll take it first and then hand it over over to Ted to provide more color. But you know, I would say all things considered, we’re pleased with the performance of the capital markets franchise in an environment that had increased volatility and lots of uncertainty, particularly in March once the war kicked in. But we have good diversification across our different services and capital markets. So we have M and A, we have bond underwriting, equity underwriting and syndicated loans. I think that diversity helped us print a good quarter. There was some leakage, I would say, from March that’s geared up to go in April, which now that we have more optimistic tone to the market, we’re actually starting to see that come through. So we may be in this situation where our pipelines are very full. We’re very optimistic given kind of the strength of the franchise, the likelihood that people want to transact. But if there’s this external volatility, ebbs
Ted Swimmer (Head of Commercial Banking)
and flows, you could see people pull to the sidelines, wait for the opportune time, for example, to go to market, and hopefully that cleans up. We’re certainly not taking our numbers down for the year. In fact, we feel quite good about that given the level of activity that we see and the pipeline strength that we have. So, Ted, over to you. Building on what Bruce just said. We’ve seen we took a couple of transactions in March that we would have launched into the market and pushed them into April, just given the volatility in the overall markets. But during that whole period of time, we continued to sign up new transactions. And I think what’s really exciting about the transactions that we’re signing up based on the investments we made in corporate finance and industry specialization, we now are doing more complex transactions and getting signed up on more complex transactions than we ever had before and feel very good about what that pipe, what those transactions are and how the pipeline is building. And to more to what Bruce just said, the deals that got postponed in March, especially this week, we’ve seen them back into the market. We are launching several transactions and part of several transactions that were postponed in March that are getting very good reception now in April. So we continue to feel very optimistic about the pipeline, especially on the M and A side. And during this whole period of turmoil, we really actually saw a pickup in new mandates, especially on the MA side of the business.
Bruce Van Saun
Yeah, I should just close by saying it was a record first quarter for us in capital markets, fees that shouldn’t go unnoted.
Scott Siefers (Equity Analyst)
Yeah, totally agree. Okay, perfect. Thank you. That’s very helpful. And then I was hoping you all would maybe speak to the private credit portfolio as well. I know there’s a lot of good detail in the appendix. Just curious, sort of not only for an update on credit quality dynamics, but also given your build out of the team over many years, I know it’s been a focus area, just sort of your appetite to continue to grow the portfolio given sort of certain current, just sort of industry circumstances.
Bruce Van Saun
Yeah, I’ll start again and flip to ted, but you know, I would say we’ve been very disciplined in terms of the kind of counterparties that we select. Usually there often a private equity sponsor that’s migrated to a broader kind of business model that picks up private credit, and they’re moving to be more of an alternative asset manager. And so we’ve helped them grow and get into this business and provide leverage to many of those names. So client selection is always key. And then making sure we have the right structures in place so that we’re structurally protected from any issues that could arise in the portfolios. And so we’ve gone through and looked at kind of our exposure and kind of the broad portfolio, looking at all the underlying factors, who has liquidity gates for retail investors, who’s got software exposure at the end of the day, feel very, very confident that we’re structurally well protected from a credit loss standpoint. And I think even though this is in the headlines and there’s concerns about private credit, the asset class, if you want to call it that, is here to stay. And they provide a certain amount of leverage and deal structures that exceeds what banks have historically been willing to play. And there’s certainly a lot of institutional demand folks or private credit managers are continuing to raise new money. So I think we’ll just grow selectively with the market as we have in the past. But we don’t see this turning around and being something that starts to shrink. It’s just going to grow. And I think every player in the market will be more selective, and we’ll continue to be selective, but …
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