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CITIZENS FINANCIAL GROUP INC/RI (CFG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a clean sequential rebound: GAAP net income $401m and EPS $0.83; underlying net income $412m and EPS $0.85, driven by 10 bps NIM expansion to 2.87%, +3.1% QoQ NII, and +5.6% QoQ fees, while returning to positive operating leverage; CET1 rose to 10.8% and LDR fell to 79.6% .
  • Management raised the medium-term NIM target upper bound to 3.50% (from 3.40%) on a higher terminal rate view; reiterated 16–18% ROTCE by 2027; FY25 outlook: NII +3–5%, NIM ~3%, noninterest income +8–10%, expenses ~+4%, and positive operating leverage ~150 bps .
  • The Private Bank continued to outperform targets: deposits $7.0B, loans $3.1B, AUM $4.7B at year-end; 2025 PB targets were lifted (deposits to $12B from $11B; AUM to $11B from $10B; loans adjusted to $7B) and the business turned profitable in Q4 (~$0.01 EPS) .
  • Credit trends improved: criticized loans fell 17% QoQ, general office reserve coverage increased to 12.4%, ACL ratio ticked up to 1.62%, and NCOs were stable at 53 bps; management expects credit costs to decline in 2025 and anticipates reserve releases .
  • Capital return remained active (Q4 repurchases $225m; FY $1.05B) and the quarterly dividend of $0.42 was maintained; catalysts in 2025 include further NIM expansion toward ~3%, accelerating PB growth, and CRE office workout progress supporting lower credit costs .

What Went Well and What Went Wrong

  • What Went Well

    • NIM inflected up 10 bps to 2.87% with NII +3.1% QoQ; fees +5.6% QoQ led by capital markets and mortgage; the company delivered positive sequential operating leverage despite investment hiring .
    • Deposit-cost management outperformed: interest-bearing deposit costs fell 31 bps QoQ, down-beta ~50% better than initial expectations; noninterest-bearing deposits grew ~$940m QoQ; low-cost + NIB rose to 42% of total deposits .
    • PB momentum beat expectations: “We reached $7 billion in deposits, $3.1 billion in loans and $4.7 billion in AUM… and we were profitable in the quarter,” and management sees 5% EPS accretion from PB in 2025 .

  • What Went Wrong

    • Loan demand remained soft; period-end loans declined 1.7% QoQ with declines in C&I and CRE offsetting PB growth; average loans are guided down ~2–3% for 2025 .
    • CRE office still a headwind: general office NCOs elevated within CRE; management remains in “workout mode” through 2025 despite improving criticized trends .
    • Expenses rose 3.5% QoQ due to continued PB/private wealth and middle-market banker hiring; management is leaning in selectively but expects full-year positive operating leverage in 2025 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Income ($USD Millions)$392 $382 $401
GAAP EPS ($)$0.78 $0.77 $0.83
Underlying Net Income ($USD Millions)$408 $392 $412
Underlying EPS ($)$0.82 $0.79 $0.85
CET1 Ratio (%)10.7% 10.6% 10.8%
LDR (%)80.4% 80.8% 79.6%
KPIQ3 2024Q4 2024
Net Interest Margin (%)2.77% 2.87%
Net Interest Income QoQ-2.9% +3.1%
Fees QoQ-2.7% +5.6%
Noninterest Expense QoQ-1.3% +3.5%
Net Charge-offs (bps)54 bps 53 bps
ACL / Loans (%)1.61% 1.62%
General Office Reserve Coverage (%)12.1% 12.4%
LCR (Category 1, pro forma)122% 119%
Interest-bearing Deposit Cost (QoQ change)+4 bps -31 bps
Low-cost + NIB deposits (% total)—42%
NIB deposits QoQ ($)—+$0.94B
Period-end loans QoQbroadly stable -1.7%

Notes:

  • Q4 2024 dividend declared: $0.42/share, payable Feb 14, 2025 (record date Jan 31, 2025) .
  • Share repurchases: $225m in Q4; $1.05B in 2024; 28.1m shares (~6% of BOY) at $37.35 avg price .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM (medium-term)2027 target3.25%–3.40% 3.25%–3.50% Raised upper end
ROTCE (medium-term)2027 target16%–18% (reiterated) 16%–18% (reiterated) Maintained
NIM (FY)2025—~3% New
NII2025—+3% to +5% YoY New
Noninterest Income2025—+8% to +10% YoY New
Expenses2025—~+4% YoY; ~+2.6% ex PB/PW New
Operating Leverage2025—~+150 bps New
Net Charge-offs2025—~$650–$700m; high-40s bps New
CET12025 year-end—10.5%–10.75% New
Share Repurchases2025—Continue “opportunistically” New/maintained stance
Q1 SeasonalityQ1 2025—Lower day count NII; cap mkts fees seasonally softer; OpEx seasonal; CET1 10.5–10.75% New
Private Bank 2025 Targets2025Deposits $11B; AUM $10B; Loans prior plan Deposits $12B; AUM $11B; Loans $7B Deposits/AUM raised; Loans lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
NIM trajectory—Margin trough at 2.77%; medium-term NIM 3.25–3.40% by 2027 NIM 2.87% (+10 bps QoQ); medium-term upper bound raised to 3.50% Improving
Deposit costs/betas—Ended upgrade cycle with better-than-peer terminal IB deposit beta IB deposit cost -31 bps QoQ; down beta ~50% better than initial plan; aiming low–mid-50s over cycle Improving
Private BankPB deposits $4.0B; AUM $3.6B PB deposits $5.6B; AUM $4.1B; breakeven mid-Q3 PB deposits $7.0B; loans $3.1B; AUM $4.7B; profitable in Q4; 2025 targets raised Strong ramp
Capital marketsStrong in Q2 (press release) +40% YoY capital markets fees; pipelines robust into Q4 Fees +5.6% QoQ; loan syndication and M&A improved; debt underwriting softer vs strong Q3 Better sequentially
CRE office—General office reserve 12.1%; NPAs near peak; criticized broadly stable Coverage 12.4%; criticized down 17% QoQ; still working through 2025 Slowly improving
Credit outlook—ACL 1.61%; NCOs 54 bps; stable outlook ACL 1.62%; NCOs 53 bps; expect 2025 credit cost decline and releases Improving
Capital/returns—CET1 10.6%; Q3 buybacks $325m CET1 10.8%; Q4 buybacks $225m; FY buybacks $1.05B; continue in 2025 Strong
Loan demand—Utilization subdued; slight spot growth guided for Q4 Loans -1.7% QoQ; 2025 average loans down 2–3%; PB drives spot growth ex noncore Still soft

Management Commentary

  • “We were pleased to finish the year with a strong quarter as our financial results reflect good sequential revenue growth led by NIM expansion and capital markets fees… and a robust balance sheet across capital, liquidity and LDR.”
  • “We remain confident in our ability to achieve our medium-term 16% to 18% ROTCE target.”
  • “Our margin was up 10 basis points to 2.87%, reflecting the benefit of noncore runoff, fixed rate asset repricing and better deposit and loan betas...”
  • “We bumped [PB] deposits from $11 billion to $12 billion and AUM from $10 billion to $11 billion… adjusted loans to $7 billion…”
  • “We expect NII to be up 3% to 5%, driven primarily by an increase in NIM to about 3% for the year… noninterest income up 8%–10%... expenses up about 4%… positive operating leverage ~150 bps.”

Q&A Highlights

  • NIM medium-term raised: Upper end lifted to 3.50% given terminal rate near 4% and stronger Q4 NIM execution; deposit hedging and asset sensitivity support confidence .
  • Deposit betas: Down beta ran ~50% better than initial expectations in Q4; management targets low–mid-50s over the easing cycle; IB deposit costs fell 31 bps QoQ .
  • NIM exit and PB investments: FY25 NIM exit implied ~3.05%–3.10%; PB/wealth investments continue but within guardrails, with PB already profitable and targeted 5% EPS accretion in 2025 .
  • CRE office/workout: Management sees “middle innings” with criticized down 17% QoQ and general office reserve at 12.4%; workouts expected to persist through 2025 .
  • Loan growth: Mid-single-digit spot growth ex-noncore largely PB-driven (~$1B/quarter), with commercial utilization and M&A expected to improve in 2H 2025; otherwise volume not a dependency for NII given NIM expansion .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to data access limits at the time of analysis, so we cannot quantify beats/misses. We will update vs. S&P Global consensus upon availability.
  • Company-reported GAAP EPS was $0.83 and underlying EPS $0.85; NIM expanded to 2.87% with NII +3.1% QoQ and fees +5.6% QoQ, suggesting a cleaner sequential setup even without comparison to Street .

Key Takeaways for Investors

  • NIM inflection is durable: management guided FY25 NIM to ~3% and raised the 2027 upper bound to 3.50%, with structural tailwinds from swap amortization, noncore runoff, and fixed-rate asset repricing; volume growth is no longer the key swing factor .
  • PB is a differentiator: deposits/loans/AUM continue to exceed plan, profitability arrived in Q4, and 2025 targets were raised—supporting fee growth and stable low-cost funding mix improvement .
  • Credit normalization should aid 2025 EPS: criticized down 17% QoQ, general office coverage 12.4%, NCOs stable at 53 bps, and management expects reserve releases over the year .
  • Capital return remains active with CET1 10.8% and ongoing buybacks; dividend maintained at $0.42; leverage to repurchase more if loan growth underwhelms .
  • Near-term trading setup: Q1 seasonality likely weighs on revenues and expenses, but FY25 full-year positive operating leverage (~150 bps) and NIM trajectory toward ~3% anchor the medium-term long case .
  • Watch list: deposit betas vs. curve, CRE office workout pace, capital markets activity cadence, and PB team additions versus profitability guardrails .

Additional Relevant Press Releases (Q4 period)

  • Q4/FY results press release with dividend details ($0.42) .
  • Citizens Bank, N.A. redemption of $350m 5.284% senior notes due 2026 (redeemed Jan 27, 2025) .
  • Earnings call logistics announcements (Jan 6 pre-release) .

Notes on sources:

  • Primary sources include the Q4 2024 earnings call transcript and press releases cited above.
  • S&P Global consensus estimates were not available due to access limits during this session; comparisons to consensus will be added when available.