CITIZENS FINANCIAL GROUP INC/RI (CFG) Q3 2025 Earnings Summary

Executive Summary

• EPS of $1.05 rose 14% QoQ and 36% YoY on stronger NII and fees; ROTCE improved to 11.7% and efficiency ratio to 63.0% . Capital markets fees had the second-best quarter ever, up 58% QoQ/77% YoY, while Private Bank contributed $0.08 to EPS, up from $0.06 in Q2 .
• Consensus beat: EPS modestly above Wall Street ($1.05 vs $1.027); revenue slightly above ($2.118B vs $2.101B). Fees mix was strong despite mortgage/MSR headwinds; NIM expanded +5 bps to 3.00% .
• Guidance: Q4 NII up ~2.5–3% with NIM +~5 bps; noninterest income stable; expenses stable to slightly up; charge-offs in low-40s bps; CET1 ~10.7% and ~$125M buybacks; tax rate ~22.5% .
• Strategic catalysts: dividend hiked 9.5% to $0.46 and continued buybacks ($75M); Private Bank surpassed deposit target ($12.5B spot, +$3.8B QoQ) with ongoing AUM and loan growth; “Reimagine the Bank” multi-year transformation targeting >$400M run-rate benefits post-2027 .

What Went Well and What Went Wrong

What Went Well

• Capital markets resurgence: second-highest quarter ever; broad-based strength across M&A, debt/equity underwriting and loan syndication; pipelines strong heading into Q4 (“we have strong pipelines into Q4…sustained period of increased activity”) .
• NIM and NII expansion: NIM +5 bps to 3.00%, driving 3.5% QoQ NII growth; deposit costs stable and total cost of funds -2 bps; cumulative interest-bearing down-beta ~53% .
• Private Bank momentum: $3.8B QoQ deposit growth to $12.5B; loans +$1.0B to $5.9B; ~34% non-interest-bearing mix; AUM +$1.1B to $7.6B; EPS contribution $0.08; tracking ~7% earnings contribution for 2025 .

Management quotes:

• “We announced very strong financial results today...EPS growth...strong NII growth...fee growth...positive operating leverage...CET1 increased 10 bps to 10.7%.”
• “Capital markets delivered a record third quarter...performance was strong across all categories” .

What Went Wrong

• Mortgage fees headwind: mortgage banking fees -$24M QoQ due to lower MSR valuation changes (net of hedge) .
• Slight expense increase: noninterest expense +1% QoQ with hiring and capital markets comp; though offset by vendor efficiency and branch optimization .
• CRE and non-core runoff continue to weigh: CRE balances reduced (down ~3% QoQ) and non-core portfolio run-off persists; allowance ratio down slightly to 1.56% reflecting improved loan mix .

Analyst concerns addressed:

• Margin trajectory risks from tighter commercial spreads and lower long-end rates; mgmt still targets 3.25–3.50% medium-term NIM, with hedges and time-based benefits underpinning the range .

Financial Results

Core results vs prior periods and estimates

Values with asterisk are Wall Street consensus. Values retrieved from S&P Global.*

Fee mix detail

Balance sheet and credit KPIs

Segment contribution (Q3 2025)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Bruce Van Saun: “We are pleased to report very strong results for the third quarter…highest Capital Markets revenues since Q4 2021…well-positioned for the medium-term.”
• Chris Emerson: “NIM continues to steadily expand…deposit costs stable; positive operating leverage…returned $259MM to shareholders” .
• On NIM range sensitivity: “We’ve increasingly solidified our view that we can sustain 3.25%–3.5% at lower Fed funds down to ~2.75%…” .
• On M&A/capital markets: “We have strong pipelines into Q4…and a sustained period of increased activity” .

Q&A Highlights

• Margin path and rates: Mgmt acknowledged lower long-end yields and tighter commercial spreads but maintained NIM targets via hedging and time-based benefits .
• Capital deployment: Emphasis on organic growth (Private Bank, NYC Metro), dividend increases, continued buybacks given “stock is cheap” .
• Private credit exposure: Lending via securitization structures; diversified, high-quality collateral; very low loss history; ability to adjust quickly .
• Loan growth drivers: Consumer (HELOC/mortgage), Private Bank (subscription lines), commercial line utilization; non-core drag waning .
• Program costs/benefits: One-time costs largely severance/consulting/vendor changes; focus on quick wins to fund transformation; net benefits from 2027 .

Estimates Context

• Q3 2025 EPS: Actual $1.05 vs Consensus $1.0267*; beat by ~$2.3% (16 estimates*).
• Q3 2025 Revenue: Actual $2,118MM vs Consensus $2,100.7MM*; beat by ~$0.8% (16 estimates*).
• Target Price Consensus Mean: $61.83* (20 estimates*).

Values retrieved from S&P Global.*

Key Takeaways for Investors

• Near-term upside: Q4 guide calls for continued NII/NIM expansion with stable fees/expenses; capital markets strength and Private Bank growth should support sequential earnings momentum .
• Medium-term thesis: Hedged rate positioning and time-based benefits (non-core runoff/terminated swaps) underpin 3.25–3.50% NIM trajectory and 16–18% ROTCE target into 2026–2027 .
• Fee durability: Diversified fee engine (M&A/DCM/ECM, FX/derivatives, wealth) mitigates mortgage/MSR volatility; capital markets pipelines remain robust .
• Credit quality: Favorable trends (NCOs 46 bps; ACL 1.56%) with CRE office well-reserved (12.4% coverage); Private Bank assets high quality; ongoing CRE reduction .
• Capital returns: Dividend raised to $0.46 and buybacks ongoing; CET1 10.7% provides flexibility amid loan growth and transformation investments .
• Strategic optionality: “Reimagine the Bank” (AI/tech/vendor/branch optimization) targets >$400MM run-rate benefits fully phased, enhancing operating leverage over time .
• Trading angle: Catalysts include capital markets deal closures, sustained NIM expansion, Private Bank KPIs (deposits/AUM/loans), and clarity on transformation economics in January.

Appendix: Additional Q3 Items

• Dividend increase to $0.46 (9.5% QoQ); $184MM dividends and $75MM repurchases; TBV/share up 4% QoQ to $36.73 .
• Other press release: Citizens Bank led syndication upsizing Jefferson Capital’s revolver to $1.0B with reduced margins and extended maturity (Citizen’s role as lead) .