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CITIZENS FINANCIAL GROUP INC/RI (CFG)·Q1 2025 Earnings Summary

Executive Summary

  • CFG delivered Q1 2025 results in line with internal expectations: diluted EPS $0.77, total revenue $1.935B, NIM (FTE) 2.90%, and ROTCE 9.6%; expenses rose seasonally, while fee income declined on capital markets softness .
  • Beat vs Wall Street EPS, inline on revenue: EPS $0.77 vs S&P Global consensus $0.75*, revenue $1.935B vs $1.934B*; beat driven by deposit cost improvement and NIM expansion despite fee headwinds; revenue essentially matched consensus *.
  • Strategic actions were a key catalyst: agreement to sell ~$1.9B non-core education loans (accretive to NIM/EPS/ROTCE), $200M of buybacks, and strong Private Bank growth (+$1.7B deposits to $8.7B) .
  • Guidance: 2Q25 outlook calls for ~3% QoQ NII increase, ~5 bps NIM uplift, mid-to-high single-digit fee growth, broadly stable expenses; FY25 guide broadly reaffirmed with CET1 targeted at 10.5–10.75% .
  • Near-term stock narrative likely driven by NIM trajectory and balance sheet optimization (non-core runoff/swaps), plus capital markets pipeline execution and continued buybacks .

What Went Well and What Went Wrong

  • What Went Well

    • “We were pleased with our execution in Q1…NIM expansion of 3 basis points…core loan growth of 1%…credit trends remaining favorable” — CEO Bruce Van Saun .
    • Deposit beta improvement and mix shift lowered funding costs; NIM up to 2.90% (+3 bps QoQ) as interest-bearing deposit costs fell 18 bps QoQ and total deposit costs fell 15 bps .
    • Private Bank momentum: deposits +$1.7B to $8.7B, loans $3.7B, AUM $5.2B; contributed $0.04 EPS in Q1; tracking toward ~5% EPS accretion in 2025 .

  • What Went Wrong

    • Fees declined 3.5% QoQ: capital markets fees -$21M on seasonality and market uncertainty pushing M&A/loan syndication; card fees -$3M on seasonal volumes .
    • Expenses up 1.7% QoQ on seasonal payroll taxes and occupancy/utilities, pressuring efficiency ratio to 67.9% .
    • Capital markets execution risk from policy-driven uncertainty; management highlighted broader macro volatility and potential near-term fee softness, though pipeline strength remains .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$1,959 $1,986 $1,935
Diluted EPS ($)$0.65 $0.83 $0.77
NIM, FTE (%)2.91 2.87 2.90
ROTCE (%)8.9 10.4 9.6
Efficiency Ratio (%)69.3 66.3 67.9
Net Charge-Off Ratio (%)0.50 0.53 0.58

Segment Breakdown (Q1 2025):

Segment ($USD Millions)Legacy CorePrivate BankCore TotalNon-CoreTotal CFG
Net Interest Income$1,336 $70.5 $1,406 ($15) $1,391
Noninterest Income$530 $13.6 $544 $0 $544
Total Revenue$1,866 $84.1 $1,950 ($15) $1,935
Noninterest Expense$1,238 $59.9 $1,298 $16 $1,314
PPNR$628 $24.2 $652 ($31) $621
Net Income to Common$373 $18.1 $391 ($51) $340

Key KPIs:

KPIQ1 2024Q4 2024Q1 2025
Period-End Loans ($B)$143.2 $139.2 $137.6
Period-End Deposits ($B)$176.4 $174.8 $177.6
Loan-to-Deposit Ratio (period-end, %)81.2 79.6 77.5
CET1 (%)10.6 10.8 10.6
ACL to Loans (%)1.61 1.62 1.61
TBV/Share ($)$30.19 $32.34 $33.97

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income2Q25 QoQ—Up ~3% QoQ; NIM up ~5 bps; earning assets stable New detail
Noninterest Income2Q25 QoQ—Up mid-to-high single digits; capital markets uncertainty risk New detail
Noninterest Expense2Q25 QoQ—Broadly stable New detail
Net Charge-Offs2Q25—Down slightly vs 1Q25 ex non-core transaction New detail
CET1 Ratio2Q25—10.5–10.75% New detail
Tax Rate2Q25—20–21% New detail
NIIFY2025Up 3–5% Broadly reaffirmed Maintained
NIMFY2025~3.00% FY avg; 4Q25 exit NIM 3.05–3.10% Exit NIM 3.05–3.10% reaffirmed Maintained
Noninterest IncomeFY2025Up ~8–10% Broadly reaffirmed Maintained
Noninterest ExpenseFY2025Up ~4% (≈2.6% ex PB/PW) Broadly reaffirmed; offsets available if macro weak Maintained
Net Charge-Off RatioFY2025High-40s bps; ACL likely releases Slight improvement ex transaction; reserve conservative Maintained
CET1FY202510.5–10.75% 10.5–10.75%; buybacks ~$200M in 2Q, flexible with loan growth Maintained
DividendFY2025$0.42/qtr common (ongoing) $0.42 common declared in Q1 2025; preferred dividends scheduled Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (prev)Q4 2024 (prev)Q1 2025 (current)Trend
Private Bank buildBreak-even mid-Q3; deposits $5.6B, AUM $4.1B First profitable quarter; deposits $7.0B, loans $3.1B, AUM $4.7B Deposits $8.7B (+$1.7B QoQ), loans $3.7B, AUM $5.2B; ~$0.04 EPS contribution Accelerating
Capital markets pipelineSeasonality; fees pushed to Q4 Fees improved; +$27M QoQ Record M&A engagements; diversified fees offset if M&A slips Strong but timing risk
Non-Core runoff & swapsNon-Core run-off $1.0B; swaps drag in Q3 NIM +10 bps QoQ; deposit costs down; strong tailwinds medium term Agreement to sell ~$1.9B education loans; accretive; time-based NIM tailwinds Positive tailwinds
Macro/tariffs/policyRate cuts commenced; deposit migration Liquidity strong; LCR >100% Heightened uncertainty from Washington policy rollout; risks/offsets outlined Uncertain near-term
NIM trajectoryTarget 3.25–3.40% mid-term Mid-term 3.25–3.50% with +38 bps time-based benefit by 4Q27 4Q25 exit NIM 3.05–3.10%; 2026–27 path intact Reaffirmed
CRE General OfficeACL coverage 12.1% (Q3) ACL coverage 12.4% (Q4) ACL coverage 12.3%, cumulative NCOs ~$464M since 3/31/23 Stable reserves
Capital actionsRepurchased $325M (Q3) Repurchased $225M (Q4) Repurchased $200M (Q1); flexible buybacks vs RWA Ongoing

Management Commentary

  • Bruce Van Saun: “We announced financial results today that were in line with our expectations…NIM expansion of 3 basis points…balance sheet remains very strong with CET1 ratio of 10.6%…entered into an agreement to sell $1.9B in purchased student loans…accretive to NIM, EPS and ROTCE” .
  • John Woods: “Net interest income came in at the better end of our expectations…benefit from the time-based decline of noncore and terminated swaps along with strong deposit cost performance…Private Bank contributed $0.04 to EPS and finished the quarter with $8.7B deposits” .
  • On outlook: “We expect NII to be up ~3% [in 2Q25], margin up ~5 bps…fees up mid-to-high single digits…expenses broadly stable…CET1 10.5–10.75%…share repurchases of ~$200M” .
  • On capital markets: “Our M&A pipeline is at all-time highs…we have not lost one mandate…transactions are just taking a little longer to execute” .

Q&A Highlights

  • Loan demand and utilization: Commercial line utilization up a couple of points QoQ; some pre-tariff inventory builds and sponsor capital call usage; HELOC and mortgage growth strong; Private Bank mortgage originations doubled YoY .
  • Capital and buybacks: Committed to CET1 10.5–10.75%; willing to step up buybacks if RWA lower; strong TBV earn-back supports repurchases .
  • Fee outlook and expense levers: If capital markets revenues push, offsets include diversified fee streams (FX/derivatives, financing), incentive comp flex and cost transformation (TOP 10, AI/process automation) .
  • Rates/NIM sensitivity: Slightly asset sensitive (~±1% NII for ±100 bps); NIM trajectory primarily time-based, hedged through mid-2027; exit NIM 3.05–3.10% in 4Q25 .
  • Reserves and non-core: Baseline unemployment 5.1% in reserve models, severe scenario on CRE office; non-core rundown offsets credit mix; Private Bank credit quality very strong .
  • NBFI exposures: Selective, investment-grade-like profiles; structures strong, relationships broad; modest growth via utilization .

Estimates Context

  • Q1 2025 S&P Global consensus vs actual:
    • Primary EPS Consensus Mean: $0.75* vs actual $0.77 → bold beat*.
    • Revenue Consensus Mean: $1.934B* vs actual $1.935B → inline*.
    • Primary EPS – # of Estimates: 13*; Revenue – # of Estimates: 14*.
  • Next quarter (Q2 2025) consensus (directional reference): Primary EPS $1.11*, Revenue $2.161B*; 16 estimates each*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Deposit cost/mix improvements and time-based NIM tailwinds (non-core runoff, swaps amortization) underpin a visible path to 4Q25 exit NIM 3.05–3.10% and mid-term 3.25–3.50%, supporting ROTCE expansion .
  • Private Bank execution is accelerating, adding low-cost deposits and high-quality lending/AUM with ~5% EPS accretion targeted in 2025; strategic footprint expansion continues .
  • Capital markets pipeline is robust despite macro timing risks; diversified fee engines and expense levers provide resilience to deliver FY25 positive operating leverage .
  • Balance sheet optimization continues: sale of ~$1.9B education loans (accretive), reduced auto collateralized borrowings, strong liquidity (LCR ~122%), and CET1 10.6% with flexibility for ~$200M+ quarterly buybacks .
  • Credit remains manageable: net charge-offs elevated by $25M non-core transaction; excluding, NCOs improved to 51 bps; CRE office reserve stable at 12.3% with conservative scenarios .
  • Near-term trading implications: stock likely sensitive to capital markets prints and buyback cadence; medium-term thesis anchored by NIM expansion and Private Bank accretion.
  • Monitor 2Q25 catalysts: NII/NIM uplift delivery, fee trajectory vs guidance, continued deposit cost down-beta, and execution on non-core settlements each quarter of 2025 .
Notes:
- Additional corporate actions in Q2: announced redemption of 4.35% subordinated notes due Aug 2025 (redeeming July 3, 2025) and declared preferred dividends payable July 7, 2025 **[759944_3cdfc944de9d4c1c8d057db0b2e47b9f_0]** **[759944_28b868fe75ff4099b65d55f59262f0b4_0]**.