Citizens (CFG) Q2 2025 Earnings Call Transcript
Key Takeaways
Image source: The Motley Fool. Nevertheless, DATEThursday, July 17, 2025 at 10 a. ETCALL PARTICIPANTSChairman and Chief Executive Officer — Bruce Van SaunVice Chairman and Chief Financial Officer — John...
Article Overview
Quick insights and key information
14 min read
Estimated completion
real estate
Article classification
July 17, 2025
11:48 AM
The Motley Fool
Original publisher
Image source: The Motley Fool
Nevertheless, DATEThursday, July 17, 2025 at 10 a
ETCALL PARTICIPANTSChairman and Chief Executive Officer — Bruce Van SaunVice Chairman and Chief Financial Officer — John F
WoodsVice Chairman and Head of Commercial Banking — Donald H
McCreeVice Chairman and Head of Consumer Banking — Brendan Coughlin Investor Relations — Kristin SilberbergOperator — Denise [last name not vided]Need a quote from one of our analysts. [ tected]RISKSAllowance for credit losses on the general office portfolio declined for the first time since concerns began, as management reduced reserve coverage while working through the backlog
Management acknowledged, "a delay in the completion of several significant M&A deals" with over $30 million in anticipated fees deferred to July 2025, citing market uncertainty as the reason for this shift
Tariff-related issues and "machinations around tariffs" continue to present uncertainty in the second half, presenting a potential risk to deal activity and loan demand
Nevertheless, 15 or 19% from Q1 2025, in light of current trends
Net Interest Income (NII): Net interest income increased 3, in light of current trends. 3% from Q1 2025, driven by five basis points of net interest margin (NIM) expansion to 2
Furthermore, 95% and modest growth in interest-earning assets
Fees (Noninterest Income): Rose 10% sequentially, led by record quarters in wealth and card, with capital growth despite some M&A fee delays, in today's financial world
Efficiency Ratio: Imved to below 65% as expenses remained broadly flat sequentially, dering 5% positive operating leverage
Holder Returns: Repurchased $200 million in common s at an average price of $39, with total capital returned of $385 million (including dividends); repurchase authorization increased to $1. 5 billion as of June 2025 (remarkable data)
CET1 Ratio: Reported at 10, given the current landscape. 6% CET1; adjusting for the AOCI opt-out, CET1 was 9 (which is quite significant)
Loan Growth: Period-end total loans were up 1% sequentially
Furthermore, Excluding non-core runoff of $700 million, spot loans increased apximately 2%
On the other hand, Private Bank Performance: Private bank loans rose $1. 2 billion to $4. 9 billion; average private bank deposits up $966 million; $0, given the current landscape
On the other hand, 06 EPS contribution from private bank segment
Additionally, Deposit Mix: Noninterest-bearing deposits rose to comprise 22% of total book
On the other hand, Stable retail deposits are 67% of total deposits versus a peer average of 55%
Deposit Costs: Interest-bearing deposit costs declined by two basis points (fascinating analysis)
On the other hand, Achieving a 54% cumulative down beta, in this volatile climate
Additionally, Credit Trends: Net charge-offs decreased to 48 basis points from 51 in Q1 2025 after adjusting for the non-core education loan sale; nonaccrual loans declined 4% sequentially, in light of current trends
Allowance for Credit Losses: Reduced slightly to 1. 59% of loans, with general office portfolio reserve at $3. 222 billion (11 (noteworthy indeed). 8% coverage), reflecting active utilization of reserve as charge-offs occur, in today's market environment
Guidance: Management jects Q3 NII up 3%-4% sequentially, NIM imving five basis points, noninterest income expected to be up low single digits, expenses jected to be up apximately 1% to 1. 5%, and stable CET1 including planned $75 million repurchases, in today's market environment
Full-year outlook unchanged from January guidance
Net Interest Margin Outlook: Management reaffirmed targets for NIM to reach 3. 10% by Q4 2025, 3
Additionally, Moreover, 30% in Q4 2026, and 3. 50% in 2027, with hedging strategies tecting downside in a lower rate scenario
Strategic Initiative: Announced the launch of a multi-year "reimagining the bank" transformation gram leveraging GenAI and AgenTik AI nologies, with work commencing in Q2 2025, led by Brendan Coughlin and a dedicated ject team
Private Bank Growth Target: gressing toward a $12 billion deposit target for year-end 2025, with mid-July deposit levels exceeding $9
SUMMARYCitizens Financial Group, Inc. 92%) management identified an inflection point, with all three lines—commercial, consumer, and private banking—reporting net loan growth for the first time in recent quarters (fascinating analysis)
Executives pointed to sequentially lower non-core runoff and higher line utilization in subscription and private credit lines as key drivers of results (this bears monitoring)
Fee income saw a material boost from record wealth and card performance, as well as capital activity, although several M&A deals slipped into July, impacting the fee timeline
Additionally, This included new wealth teams added in strategic and white-space opportunity cited as an earnings lever
Moreover, Leaders detailed the next-generation "reimagining the bank" strategy, focused on comprehensive digital transformation and efficiency using emerging AI capabilities
Moreover, However, Loans are secured by strong credit quality, with management citing high FICO scores (high 700s), prudent underwriting, and imved credit indicators as discussed in recent quarters, and commercial real estate headwinds diminishing as reserves were actively deployed and backlogs worked through (which is quite significant)
Woods explained that "private bank continues to steadily grow its fitability contributing $0. 06 to EPS this quarter, up from $0
Furthermore, 04 in the prior quarter" and exceeding prior quarter loan growth
Moreover, Brendan Coughlin noted, "We had a 95% growth rate linked quarter on originations on mortgage" within the private bank
Bruce Van Saun highlighted that our diversity helped as strength in equity underwriting and loan syndications offset weaker debt capital and a delay in the completion of several significant M&A deals
Furthermore, Deposit franchise demonstrated outperformance, with low-cost deposits in the retail franchise exceeding peer averages by over 300 basis points year-to-date, benefiting funding cost management
Loan pipeline and capital deal flow are expected to remain robust in the second half of 2025, with over $30 million in anticipated fees from delayed M&A transactions expected to be recognized in July 2025 and healthy syndication market participation (an important development), amid market uncertainty
While competition for loans and deposits remains nounced, management indicated focus on multiduct, relationship-led growth to maintain pricing discipline and margin preservation
The evidence shows general office portfolio saw its first decline in ACL coverage since concerns began; This's the first quarter where we're really charging off against the reserve and don't feel the need to revide for those charge-offs, according to John Woods, in today's financial world
Moreover, INDUSTRY GLOSSARYBSO: "Balance Sheet Optimization" — Citizens' gram to reduce lower-return assets (e. , select CRE, noncore loans) and reallocate capital to strategic lending and relationship growth areas
However, GenAI: Generative Artificial Intelligence — AI systems that duce content or solutions autonomously, cited as a key tool for Citizens' digital transformation (something worth watching)
However, AgenTik AI: prietary or next-gen artificial intelligence referenced in context of operational and client-facing enhancements at Citizens; precise competitive position or vendor unnamed in call, in light of current trends
ACL: Allowance for Credit Losses — Bank reserve for estimated losses on loans and lease financings, actively managed based on credit trends, loan mix, and macroeconomic factors
Noncore Runoff: The scheduled paydown or sale of loans and portfolios no longer aligned with Citizens' strategy, notably including certain CRE and student loan exposures
CET1: Common Equity Tier 1 Capital — Core capital measure under regulatory frameworks, directly highlighted in capital management and buyback disclosures (this bears monitoring)
Furthermore, Full Conference Call TranscriptBruce Van Saun: Thanks, Kristin, and good morning, everyone, for joining our call today
Additionally, We announced strong financial results today that exceeded expectations, in today's market environment
Notwithstanding tremendous uncertainty in the macro environment during the quarter
Highlights include strong NII growth of 3. 3% sequential quarter, faced by NIM expansion of five basis points and the resumption of net loan growth across consumer, private bank, and commercial
Additionally, Good fee growth of 10%, which was paced by wealth, card, and mortgage
Furthermore, Good expense discipline with expenses broadly flat resulting in 500 basis points of operating leverage and credit trends remaining favorable and continued meaningful repurchases
It's worth noting that capital still managed to have a pretty good quarter notwithstanding the uncertainty in the environment, in today's financial world
Nevertheless, At the same time, Our diversity helped as strength in equity underwriting and loan syndications offset weaker debt capital and a delay in the completion of several significant M&A deals
Additionally, On the other hand, We expect that we will record over $30 million in fees on these deals in July and our pipelines remain strong setting us up well for the second half
Our balance sheet remains rock solid across capital liquidity, funding, our credit reserve position
However, Continue to execute well on our strategic initiatives
The data indicates that private bank had strong growth in loans and AUM, with average deposits up nicely but spot deposits impacted somewhat by the timing of inflows and outflows
We remain on track to hit all full-year targets
This tells us that is on track to der in excess of 5% accretion to Citizens bottom line and a 20% plus ROE in 2025
In addition, efforts across New York City Metro private capital, payments, and BSO are all tracking well (something worth watching)
Nevertheless, We've commenced work on a ject we are calling reimagining the bank which will be led by Brendan and other top leaders, in today's market environment
Nevertheless, The objective is to redesign how we serve customers and run the bank, considering recent developments
Moreover, Taking advantage of new nologies GenAI and AgenTik AI
This requires changes to our organizational model, our underlying nology and data architecture, and imparting new skills to our colleague base
What the re reveals is will be multi-year in nature, and ultimately serve as our next top gram
Stay tuned for more details later in the year
With respect to the second half, we believe that economic conditions and are favorable, though further machinations around tariffs continue to present a degree of uncertainty
Additionally, Unfortunately, the fundamentals to drive higher deal activity and a pickup in loan demand remain intact
Additionally, On the other hand, And we feel well-positioned to capture the opportunity and to der good results, in today's market environment
We remain comfortable with the full-year guide for 2025 we gave back in January, we're well-positioned to sustain that momentum into the medium term
In short, we feel good our positioning overall from a strategic and financial standpoint
Additionally, We will stay focused on execution and the things we can control as we continue our efforts towards building a distinctive great bank (remarkable data)
With that, let me turn it over to John
John Woods: Thanks, Bruce, and good morning, everyone
As Bruce mentioned, we dered strong second quarter results with really good revenue performance and disciplined expense management resulting in positive sequential operating leverage of 5%
Saw lending begin to pick up during the quarter with net growth across commercial, consumer, and private bank, more than offsetting our noncore Runda
Referencing slides five and six, we dered EPS of $0. 92 for the second quarter, a $0. 15 or 19% imvement over Q1, in this volatile climate
Net interest income for the quarter was up 3. 3% driven by margin expansion and interest-earning asset growth, considering recent developments
Moreover, Fees were up significantly linked quarter (this bears monitoring)
Wealth and card fees were a record for the quarter, and capital showed modest growth despite market uncertainty which resulted in several meaningful M&A deals pushing into July
Furthermore, Mortgage also increased largely due to an imvement in MS valuation
However, Expenses were well managed and net charge-offs came in as expected
Meanwhile, With respect to our balance sheet, we continue to maintain robust capital, strong liquidity levels, and a healthy credit reserve (something worth watching)
We the quarter with CET1 at 10. 6%, while also executing $200 million in stock buybacks during the quarter
And importantly, we are executing well against our key strategic initiatives (this bears monitoring)
Paced by continued momentum in our private bank and private wealth build-out
This analysis suggests that private bank continues to steadily grow its fitability contributing $0, in today's financial world. 06 to EPS this quarter, up from $0
In contrast, 04 in the prior quarter, and we dered the strongest quarter of loan growth so far, adding $1
Nevertheless, 2 billion in loans
Also, we continue to make good gress in New York Metro, and our top 10 gram is on target and gressing well
With work commencing on a multiyear transformational top gram to reimagine how the bank operates
Conversely, Next, I'll talk through the second quarter results in more detail, starting with net interest income on slide seven
Net interest income increased 3
At the same time, 3% linked quarter driven by continued expansion of our net interest margin and modestly higher interest-earning assets
As you can see from the NIM walk at the bottom of the slide, our margin imved five basis points to 2. 95% given the time-based benefits of noncore runoff and reduced drag from terminated swaps, as well as favorable fixed asset repricing
On the other hand, In addition, we continue to optimize our funding and well in our down rate deposit playbook as our interest-bearing deposit cost decreased two basis points, in today's financial world
Moving to slide eight, Fees are up 10% linked quarter
Capital imved modestly, driven by higher equity underwriting and loan syndication fees
Bond underwriting fees were lower due to a tariff-driven pause in activity for part of the quarter
Similarly, M&A advisory fees were lower with some sizable deals pushing into July given the market uncertainty during the quarter
Moreover, We expect that we will record over $30 million in fees on these deals in July
We continue to perform well in middle market sponsored book runner deals, ranking third by deal volume in the second quarter
And our deal pipelines across M&A and DCM remain strong in terms of the number and value of transactions given pent-up demand
Our wealth dered a record quarter with increased transaction activity and higher advisory fees from continued positive momentum in fee-based AUM growth, in private bank
However, Our card also dered a record quarter driven by a seasonal imvement in purchase volumes (this bears monitoring)
Importantly, in consumer, we recently launched a new suite of Mastercard credit cards designed to address the distinct financial needs and preferences of our customers which should help us accelerate growth in this
Mortgage revenue growth reflects an imvement in MSR valuation as well as seasonal growth in duction
Conversely, Lastly, other income was a bit higher than usual this quarter as we had a few things break our way (noteworthy indeed), in today's market environment
Furthermore, This line can move around a little from quarter to quarter
However, On Slide nine, expenses are broadly stable linked quarter helping to drive positive operating leverage of 5% and imve our efficiency ratio to below 65%, in today's market environment
Our top gram is gressing well and is on target to der a $100 million pretax run rate benefit by the end of the year
Moreover, We've undertaken an effort to develop a much broader gram to use new nologies to better serve customers and run the bank (which is quite significant), in today's financial world
However, We'll give you more on that later in the year
On slide 10, period-end loans were up 1%, considering recent developments
This includes non-core portfolio runoff of roughly $700 million in the quarter
Excluding non-core, loans were up apximately 2% on a spot-based basis, in today's financial world
The private bank dered its strongest loan growth quarter so far, which period-end loans up $1, given current economic conditions
However, 2 billion to $4
However, Commercial loans were up slightly given some new money lending grow.
Related Articles
More insights from FinancialBooklet