Citizens Financial Group Q1 2025 presentation: EPS beat, NIM expansion on track

Introduction & Market Context

Citizens Financial Group (NYSE:CFG) reported its first-quarter 2025 earnings on April 16, posting results that exceeded analyst expectations on earnings per share while meeting revenue forecasts. The bank’s stock showed a modest pre-market increase of 0.14% following the announcement, as investors responded positively to the company’s strategic initiatives and financial performance despite ongoing macroeconomic uncertainties.

Executive Summary

Citizens Financial Group delivered an earnings per share (EPS) of $0.77 for Q1 2025, surpassing the analyst consensus of $0.75 by 2.67%. Revenue came in at $1.94 billion, in line with market expectations. The company’s net interest margin (NIM) expanded by 3 basis points to 2.9%, while return on tangible common equity (ROTCE) reached 9.6%.

"We delivered Q1 results that were in line with our expectations," stated CEO Bruce Van Sorn during the earnings call, highlighting the company’s strategic focus on balance sheet optimization and operational resilience in an uncertain economic environment.

Quarterly Performance Highlights

Citizens Financial’s first quarter was marked by strategic balance sheet management and continued execution of key initiatives. Net interest income decreased 1.5% linked quarter, primarily due to day count impact of approximately $28 million and slightly lower interest-earning assets, partially offset by higher net interest margin.

The company maintained strong deposit performance, with period-end deposits growing approximately $3 billion or 2%, driven primarily by low-cost growth in the private bank and consumer segments. Interest-bearing deposit costs decreased 18 basis points quarter-over-quarter, translating to a cumulative down beta of 53%.

Credit quality remained stable, with net charge-offs of 58 basis points for the quarter, including a 7 basis point impact from a non-core transaction. Excluding this impact, net charge-offs were 51 basis points, slightly down from 53 basis points in the prior quarter.

During Q1, Citizens executed $200 million in stock buybacks and returned a total of $386 million to shareholders when including dividends. The company maintained a strong capital position with a CET1 ratio of 10.64%, or 9.1% when adjusted for AOCI opt-out removal.

Strategic Initiatives

A key highlight of Citizens’ Q1 performance was the continued success of its private banking business, which contributed $0.04 to EPS during the quarter. The private bank saw excellent growth, reaching $8.7 billion in deposits (up $1.7 billion in Q1 alone) and $5.2 billion in assets under management. The deposit mix remains attractive with over 40% in non-interest bearing accounts.

"The private bank continued to see excellent growth," noted Van Sorn. "We added private wealth teams in Florida and Southern California during the quarter and another one today in New Jersey."

In a significant strategic move, Citizens entered into an agreement to sell $1.9 billion in purchased student loans from its non-core portfolio. The company sold $200 million of the portfolio in Q1, with the balance to be settled ratably over the next three quarters. Management indicated the transaction will be accretive to NIM, EPS, and ROTCE as proceeds are used to pay down high-cost funding, purchase low-risk weight securities, and repurchase shares.

Forward-Looking Statements

Citizens Financial reaffirmed its full-year EPS guidance despite acknowledging increased uncertainty in the macroeconomic environment. The company projects its net interest margin to increase to between 3.05% and 3.10% by year-end 2025, with further expansion to 3.15-3.3% by Q4 2026 and 3.25-3.5% by 2027.

For Q2 2025, management expects net interest income to increase approximately 3%, driven by an improvement in net interest margin of approximately 5 basis points. Non-interest income is projected to grow mid to high single digits, led by capital markets activity, though with some risk if market uncertainty persists.

CFO John Woods emphasized the strength of the company’s NIM trajectory: "The net interest margin trajectory is primarily not rate dependent," noting that time-based benefits from non-core runoff and reduced drag from terminated swaps would continue to drive margin expansion regardless of the interest rate environment.

Challenges & Risks

While maintaining a positive outlook, Citizens Financial acknowledged several potential risks in the current environment. These include:

1. Economic Uncertainty: Continued macroeconomic volatility could impact growth projections and delay capital markets activity.

2. Slower Loan Growth: Potential challenges in maintaining loan growth amid tightening credit conditions and client hesitancy.

3. Higher Credit Provisions: If economic conditions worsen beyond current expectations, credit provisions could increase.

4. Policy Uncertainty: The rollout of tariffs and other policy decisions from Washington has caused market participants to pause investments and deal activity.

Management noted that these risks could be offset by several factors, including better-than-expected performance on funding costs, greater share repurchases, and further cost transformation efforts. The company also highlighted significant pent-up demand for M&A activity, with a record number and dollar value of transactions in the pipeline.

"While it’s still early to make a call as to how the environment plays out, we remain focused on pulling the levers we can to offset any macro headwinds as we did in 2024 in meeting our initial year guide," Van Sorn stated.

Conclusion

Citizens Financial Group’s Q1 2025 results demonstrate the company’s ability to execute on its strategic initiatives while navigating an uncertain economic landscape. The continued expansion of net interest margin, strong growth in the private banking business, and strategic optimization of the balance sheet position the company well for future profitability.

With a clear path to achieving its 16-18% ROTCE target in the medium term and multiple levers to pull in response to potential headwinds, Citizens Financial appears well-positioned to maintain its financial momentum throughout 2025 despite macroeconomic challenges.

Full presentation:

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