CITIZENS FINANCIAL GROUP INC/RI (CFG)·Q2 2025 Earnings Summary

Executive Summary

• CFG delivered a clean beat: Diluted EPS $0.92 vs S&P Global consensus ~$0.88, and total revenue $2.037B vs consensus ~$2.010B; margin expanded 5 bps to 2.95% FTE and fees rose 10% QoQ . EPS/revenue estimates from S&P Global data; values retrieved from S&P Global.*
• Operating leverage was ~5% QoQ as expenses were broadly flat and NII rose 3.3% QoQ; CET1 held at 10.6% while the board lifted buyback capacity to $1.5B .
• Private Bank was a highlight: loans +$1.2B QoQ to $4.9B, contributed $0.06 to EPS, with attractive deposit mix (~36% non‑interest bearing) and AUM up to $6.5B .
• Management reiterated confidence in full‑year 2025 guide and issued Q3 outlook calling for NII up ~3–4%, NIM +~5 bps, non‑interest income up low single digits, expenses +~1–1.5%, CET1 stable with ~$75M buybacks; credit expected to improve modestly .
• Near‑term catalysts: expected >$30M in capital markets fees slipping into July, continued NIM tailwinds (non‑core runoff and terminated swaps), and idiosyncratic Private Bank growth .

What Went Well and What Went Wrong

• What Went Well

  • “We announced strong financial results… Highlights include strong NII growth of 3.3% sequential, paced by NIM expansion of five basis points and the resumption of net loan growth… Good fee growth of 10%… expenses broadly flat” — CEO Bruce Van Saun .
  • Private Bank execution: “contributing $0.06 to EPS… strongest quarter of loan growth… adding $1.2B of loans… deposit mix ~36% non‑interest bearing” — CFO John Woods .
  • Deposit quality and pricing: interest‑bearing deposit costs fell 2 bps QoQ; stable retail deposits are 67% of total (vs peers ~55%), supporting lower funding cost and NIM expansion .

• What Went Wrong

  • Capital markets mix: M&A advisory and bond underwriting were softer due to tariff/macro uncertainty; several significant deals pushed into July (>$30M fees) .
  • Non‑core remains a headwind: runoff continued (down $662M QoQ), still dragging consolidated mix and returns despite planned acceleration .
  • Commercial charge‑offs ticked modestly higher within C&I idiosyncratic credits; office ACL coverage declined slightly as reserves were utilized in workouts (still robust at 11.8%) .

Financial Results

Segment and Business Mix

KPIs and Credit

Notes: Q2 2025 had no notable items; Underlying results equal GAAP .

Guidance Changes

Dividend: Common dividend declared $0.42 per share payable Aug 14, 2025; buyback capacity increased to $1.5B (June) .

Earnings Call Themes & Trends

Management Commentary

• “We announced strong financial results… strong NII growth of 3.3%… NIM expansion of five basis points… fee growth of 10%… expenses broadly flat… capital markets had a pretty good quarter notwithstanding uncertainty.” — Bruce Van Saun .
• “EPS of $0.92… Net interest income increased 3.3%… margin improved five bps to 2.95%… interest‑bearing deposit costs decreased two bps. We ended with CET1 at 10.6% and repurchased $200M.” — John Woods .
• On transformation: “Reimagining the Bank… redesign how we serve customers and run the bank, taking advantage of new technologies like GenAI and Agentic AI… led by Brendan.” — Bruce Van Saun .
• On NIM trajectory/hedging: “We have medium‑term NIM of 3.25–3.50%… even with Fed funds ~2.75% we can hold the low end… opportunistically putting on forward hedges to protect downside.” — John Woods .
• On capital: “We’ve been running a bit above our 10–10.5% CET1 range… fortress balance sheet provides long‑term benefits.” — Bruce Van Saun .

Q&A Highlights

• Loan growth drivers: inflection with net loan growth across Commercial, Consumer, and Private Bank; sponsor/private complex utilization picking up; HELOC and mortgage steady .
• NIM and hedging: forward‑starting hedges added in Q1/Q2; medium‑term NIM range resilient even in a dovish scenario; keep powder for higher‑rate scenarios .
• Deposits strategy: strong low‑cost trends and CD repricing (Q2 maturities ~$6B, down 120–150 bps); stable LDR; idiosyncratic Private Bank deposit growth .
• Capital markets outlook: diversified fee base; IPOs and syndications active; pent‑up M&A demand; >$30M fees slid into July .
• Credit/Office CRE: reserve utilization as workouts progress; office ACL coverage 11.8%; peak charge‑offs in Q1; nonaccruals trending down .
• Capital allocation: emphasis on OpEx/talent in capital markets; prudent underwriting limits; no need to raise capital limits .

Estimates Context

Values retrieved from S&P Global.*

Implication: CFG delivered a clean beat on EPS and revenue, aided by NIM expansion, lower deposit costs, and strong sequential fees (wealth/card/mortgage), setting a constructive setup for Q3 with delayed M&A fees to be recognized in July .

Key Takeaways for Investors

• Margin tailwinds are durable: time‑based benefits from non‑core runoff and terminated swaps, plus deposit pricing discipline underpin 2.95% NIM with a reiterated 3.05–3.10% 4Q25 exit target .
• Private Bank is scaling and accretive: +$1.2B loans QoQ, $0.06 EPS contribution, attractive deposit mix (~36% NIB), and AUM momentum to $6.5B — a key idiosyncratic growth lever through H2 .
• Fee rebound likely in Q3: >$30M of capital markets fees slipped into July; equity underwriting and syndications performed despite macro uncertainty .
• Credit risks contained: office CRE reserve coverage remains robust (11.8%); nonaccruals down; management believes charge‑offs peaked in Q1 .
• Capital return intact: CET1 10.6% with buyback capacity raised to $1.5B and common dividend at $0.42/share; board has flexibility to lean into repurchases opportunistically .
• Q3 setup: guided to NII +3–4%, NIM +5 bps, non‑interest income up low single digits, and modestly lower charge‑offs — supportive of continued operating leverage .
• Medium‑term thesis: “Reimagining the Bank”/TOP program could structurally improve efficiency and growth; NIM targeted to 3.25–3.50% by 2027; ROTCE path 16–18% on execution .