Citizens Financial at RBC Conference: Strategic Growth Amid Uncertainty

On Tuesday, March 4, 2025, Citizens Financial Group (NYSE: CFG) participated in the RBC Capital Markets Financial Institutions Conference, discussing its strategic growth plans amid economic uncertainties. While the company anticipates challenges due to interest rates and tariffs, it remains optimistic about strong commercial activity and capital market expansion in the latter half of the year.

Key Takeaways

• Citizens aims for a 16% to 18% ROTCE, leveraging both balance sheet drivers and strategic initiatives.
• The company expects a strong M&A market in the second half of 2025, driven by full pipelines.
• Net Interest Margin (NIM) is projected to reach 3.05% to 3.10% by the end of 2025.
• Citizens is expanding geographically in New York Metro, California, and Florida.
• Regulatory developments may see delays, with a neutral RWA impact anticipated.

Financial Results

• ROTCE Target: Citizens is targeting a Return on Tangible Common Equity of 16% to 18%, up from the current 11%.
• Balance Sheet Impact: A 400 to 500 basis point contribution is expected from balance sheet drivers like the runoff of terminated swaps.
• Net Interest Margin (NIM): The target NIM is between 3.25% and 3.5% in the medium term, with expectations to reach 3.05% to 3.10% by the end of 2025.
• Operating Leverage: A strong year is expected in 2025, with an increase of 50 basis points in operating leverage.
• Capital: At the end of 2024, the CET1 ratio stood at 10.8%.

Operational Updates

• Commercial Activity: Citizens anticipates increased economic activity and a robust second half of the year.
• Capital Markets: The business has grown through organic growth and acquisitions, ranking in the top 10 for middle-market M&A.
• Private Bank: The launch is progressing well, contributing to early loan growth.
• Geographic Expansion: Expansion efforts are underway in New York Metro, California, and Florida.
• Loan Growth: Growth in C&I and the private bank is offsetting non-core runoff.

Future Outlook

• M&A Market: An aggressive M&A market is expected in the latter half of the year, contingent on the completion of high-profile deals.
• Regulatory Environment: Potential delays in Basel III implementation are anticipated, with a neutral RWA impact for Citizens.
• Capital Deployment: The primary focus remains on dividends, followed by organic activities and bolt-on M&A.
• Economic Outlook: Citizens forecasts supportive economic activity with GDP around 2% and a favorable yield curve.

Q&A Highlights

• Tariffs: The impact could be absorbed by manufacturers or passed to consumers.
• Refinancing Activity: It’s too early to determine the effect of lower interest rates on residential mortgage refinancing.
• Private Capital Partnerships: A non-exclusive approach is preferred to maintain flexibility.
• Regulatory Landscape: Optimism exists for a pro-business regulatory environment and potential adjustments to the Fed’s PPNR model.

For a detailed account of the conference call, please refer to the full transcript below.

Full transcript - RBC Capital Markets Financial Institutions Conference:

Unidentified speaker, Unidentified role: As many of you know, Citizens has just over $217,000,000,000 in total assets. The company has nine ninety one branches. And in the most recent period, it had a return on tangible common equity of about 11% and an ROA of about 75 basis points. And this was priced as of February 28 and you guys are trading at about 1.4 times tangible. But in today’s action, that’s probably a little lower.

So better buying opportunity for folks. But to my immediate left is John Woods, who’s the Vice Chair and Chief Financial Officer for Citizens Financial. John joined Citizens back in 2017. And prior to that, he was with MUFG out in the West Coast, which as you know owned Union Bank in California, which was subsequently sold to U. S.

Bancorp. To his immediate left is Ted Swimmer, Head of Corporate Finance and Capital Markets. Ted has been with the bank since 2010. He headed up capital markets back then and has taken on more responsibility since that time. And prior to that time, Ted is down at Wachovia.

And so with that, gentlemen, we have some questions that we’d like to ask and we’ll get some questions from the audience possibly a little later on. But maybe first, John, we were just talking briefly about this. Let’s start with the environment. There’s a lot of wildcards going on, a lot of crosscurrents with the new administration, what we heard last night with tariffs, the rate outlook. What are you hearing from your customers, both the consumers and the commercial customers?

Are they on edge? Or what’s the sense you’re getting from them?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. I’ll I’ll start off, and Ted may jump in here a little bit. But, yeah, fascinating times. There’s the competing narratives here where I think there is a, some expectation for management teams that the the Trump administration would be pro business and that regulations would be dialed back. And I think that that we still believe that that that’ll that’ll be the case.

And I think that can that’s competing with the the very near term narrative of uncertainty. And broadly, that uncertainty encompasses the rate path and tariffs and where will growth go. So, you know, a little while ago, we were thinking, hey, maybe we’re gonna have some runaway inflation and the ten year was close to five. Now the ten year is closer to four and we, you know, we have now we have three or four cuts out there. So you’ve got this, these two competing forces broadly and it’s causing a bit of uncertainty.

I think that management teams are digesting, I would say, is a good word to describe what they’re doing, all of that uncertainty. And, you know, but I would say that the conditions for a rebound, you know, and a strong 25 remain. You know, the the you know, we’ve been below trend from a commercial activity perspective for a couple of years, and there’s a significant amount of dry powder on the sidelines as a result. So a lot of capital around to be put to work, and we’re seeing that in our pipelines. So conversations are still are still consistent with what we were saying in January, which is we really see activity building throughout the year, and that would be reflective of a very strong second half.

I’ll also add, you know, from a tariff standpoint, that seems to be the the the topic of the day. You know, we’ll see how it plays out. And if they if they stay in place, you know, there’s a number of potential responses. Right? We could have foreign manufacturers, you know, absorb some of the hit.

We could have domestic manufacturers absorb some of the hit in margins and or we could have it passed along to the consumer. Right? Or probably be some of all three occurring. But I’ll I’ll hasten to add that, you know, our our commercial customers have been through a lot, you know, over the last couple of years. And through the pandemic, you know, they they’ve really, you know, cleaned up their balance sheets, delevered.

They’ve they’ve they’ve launched expense campaigns to preserve margin where possible. So I think that they’ve been hardened to some of these uncertainties and the resilience there, I think, is very good. So, so I would close it out on the commercial side, still consistent with picking up economic activity and, as we had indicated, and, we don’t see, any significant, you know, areas of concern on the commercial side. In consumer, I think it’s, you know, we’re hearing a lot of the soft data. Right?

I mean, the consumer sentiment. Yep. And then how much of that is gonna translate into the hard metrics, like, you know, spending and who and and we’ll see where jobs goes, this Friday. But, I mean, what we’re seeing, in the consumer side is a lot of stability for us. I’d say that there’s there’s probably building pressure on the lower end consumer, but we’re a high prime lender and most of our customers on the consumer side are homeowners as well.

And so those mortgage rates have have created a fair a nice, you know, a protective barrier against a lot of the price rises that that renters may have felt. So we have a predominantly high prime book with the majority of our customers as homeowners and that really is translating to a level of stability on the consumer side. So those are some thoughts there.

Unidentified speaker, Unidentified role: Yes. And just speaking on the consumer side, you guys obviously have residential mortgage production and if this ten year continues to come down to your point a moment ago, none of us were thinking refinancing business was going to come back with the ten year going to five. And now if it breaks down under four, not to say it will go there. Are you guys hearing anything yet from your folks on the front lines about refinancing activity, or is it too early for that?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. I’d I’d say it’s too early to tell. I mean, it takes a little while for that. You know, you need a sustained decline in the mortgage rates, typically, for that to translate, and there’s lead times that should go for this, but for that to translate. And we’re we’re sitting in typically a seasonally down quarter on mortgage in any event.

But if we if we have a sustained lower ten year

Unidentified speaker, Unidentified role: Yes.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: And it spreads cooperate as well, which they need to.

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: Yes.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: I think there’s still capacity in the system. There’s a lot of things that are gonna have to happen. We’re gonna have to, you know, see the see the mortgage rate come down in in sympathy with the ten year on a sustained basis, you know, into the typical spring, you know, buying season. But the other side of it, we’re gonna need supply. Right?

And so that’s been an issue as well. So there’s a number of things that’ll have to contribute before we see that really taking off. But without a doubt, this is this is net positive to see the ten year closer to four, than than otherwise.

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: What we what we are seeing, Gerard, is we are seeing a number of our corporate issuers go out to the market and refinance. A lot of them in the looking for a rate of under 4.25 on the ten year. And now that started to happen, we’ve seen an uptick of conversations with people going into the market, refinance their deals. We’re seeing a lift of securitization deals come into the market because people are trying to take advantage of this lower rate. And that has been a positive in the last couple of weeks with a ten year drop in.

Unidentified speaker, Unidentified role: Got it. Very good. In fact, maybe you can talk to when Citizens has been public back in 2014, if I recall. The capital markets business has been building throughout that period. Obviously, you’ve been part of that growth.

Can you share with us what differentiates Citizens Capital Markets today versus maybe when you first started, but also against your competitors today?

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: Sure. When we started, we always had a very good customer base. We had a very local middle market customer base. We had a decent mid corporate customer base. But what we didn’t have was a lot of products to sell these companies when they did transactions, when they did something transition from an ownership perspective.

We were kind of limited to basically lending with them, maybe putting on an interest rate swap or doing something of that nature. What we’ve done over the last ten years, some of it organically, some of it inorganically is grow into a be able to fully transact with our customers over a number of different bases, whether that being from an M and A perspective, we’ve purchased four M and A specialty boutiques over the last couple of years. Over the last seven years, we bought JMP, which is obviously gets us into the equity business. And then we built out a number of industry verticals where we feel like we can penetrate with our customers and have the right to compete on every transaction they do. That has translated into us being depending on how you measure either one or two in the middle market lead tables for sponsor driven transactions.

It’s resulted in us being a top 10 middle market M and A firm. And we continue to find ways to deploy our balance sheet to hopefully get more fees from the customer. I think we were an early adopter of the private capital into the private capital industry. When we started in 2013, ’20 ’14, we were trying to figure out how to increase the amount of customers we had. The private capital business was really just taken off at that point and we embraced it.

We did a lot on the subscription line business. We did a lot of lending to the direct lenders. And then of course, we built out our M and A capabilities and things of that nature. All that together really helped us embrace this and really run with the same as the private capital universe has grown, so have we and it’s really helped our capital markets and advisory business take off over the last couple of years.

Unidentified speaker, Unidentified role: Speaking of the private capital, the PE business is often referred to. Sponsors obviously have portfolio companies as we all know. And many of us are anticipating that there’s going to be an opportunity for them to monetize those investments that they’ve had in those portfolios. What in but it’s been kind of they’ve gotten off to a slow start, but what’s holding it back, do you think? Well, what do we need to see to really see that activity maybe pick up?

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: So so I think things are somewhat skewed. Last year happened to be a record year from us on the m and a side. So I think the issue we have is with all these with PE growing, we all believe that PE is gonna that there should be more and more M and A. And then I think we’re a little bit we’re a little bit skewed in that last year was a decent year. It’s just so much more could happen given how many more companies are now in private capital’s hands.

I think last year I think for the first time last year, we had financing markets that cooperated with the M and A environment. So in twenty twenty two, twenty twenty three, it was very, very hard for companies to borrow money at rates that they saw as being conducive to M and A. That changed last year, supply and demand definitely went in the favor of the issuer versus the borrower. But we still had a mismatch of where companies have been bought in the twenty twenty, twenty twenty one generation of companies versus where they could sell now. I think we are starting to approach a point where that gap had narrowed.

Now M and A does not do well in periods of high uncertainty. And I think right now we’re experiencing a position a period of slightly high uncertainty. I think we all expect that to even itself out over the foreseeable future and the M and A market really is lined up to be very aggressive, I think, in the second half of this year. Our pipelines are full. I mean, we never had a bigger pipeline of M and A transactions right now.

And they’re really good transactions. So the good companies are now looking for an opportunity to sell their private equity firms who have owned them are reaching their maturity point of how or not the maturity point, but how long they generally want to hold the customer. And so they’re looking for a market and we have those engagements. They really start to pick up after the election. So, So when you have a M and A process, it generally takes from the start to the end somewhere between six and nine months to transact, which is why we really think assuming that the macro environment settles down a little bit at the second half of the year should be a very strong year for M and A.

Unidentified speaker, Unidentified role: Got it. And sticking with private capital for a moment, some of your competitors have done partnerships or joint ventures with private capital. What’s your thoughts about that? And then also, how competitive is that environment where you do get into with the partnerships with the PE firms?

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: So we’ve I will say this with all candor. I think I get three calls a week from some private capital firm wanting to form a partnership. We talk to all the private capital firms on a regular basis and we really struggle to want to get us wholesale exclusive with one partner. We use private capital. I mean, private capital and regulated banks like ourselves are really frenemies when it comes to doing transactions.

We need them, they need us, but we compete against each other. We talk to on a given day, we will talk to a capital provider on six or seven different topics, whether it’s lending to their direct lending fund, whether it’s providing subscription line finance to them, whether it’s selling our primary flow from the bank or the bond side to them, whether it’s doing a swap or FX with one of their portfolio companies, whether it’s our private banking customers talking about doing a partnership loan to them. So we’re always in conversations with them and the relationship is pretty symbiotic. The one place we do compete is on new leveraged originations. I think linking ourselves to one and we may ultimately choose to do it at some point if we see something beneficial, but we have contact and conversations with so many different financials, with so many private capital providers.

It’s hard for us to go with just one of them. So we feel like the strategy has done us well. We continue to move up the lead tables. We continue to grow with have more product to show them that to limit ourselves to one has not been what we thought a great opportunity for us.

Unidentified speaker, Unidentified role: Coming back to the capital markets franchise in its entirety, not just private equity, What are the big opportunities that you see for Citizens over the next three to five years and how you can grow this business out?

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: So I think we’re still in the second or third inning of what we’re doing. We bought JMP in November of twenty twenty one. We bought DH Capital in 2022. DH Capital is a leading data center infrastructure firm, M and A firm, we think, in the country. And then the markets were not incredibly cooperative for us for a period of time.

And yet last year, we still had record years in our DCM and our M and A business. I think just having a good market in front of us for two to three years, we should see some very nice pickup in revenues. And then filling the integration, I mean, we were a number of different firms coming together to think of ourselves as one citizens and being able to cross sell everything we have at once. And that now includes a private bank and have really built out treasury solution set that we’ve built over the last couple of years. All that coming together and then with our expansion in California and Florida and the expansion, the more customers we have at our fingertips now that we can do transactional and relationship business with.

We think we’re just beginning to build all of that out. And then finally, centralizing ourselves around eight industry verticals where we have we can play from the equity side all the way down to the debt side all the way down to Treasury Solutions side, creating products for them in those industries, in those subsectors, I think it has a lot of upside in the near future.

Unidentified speaker, Unidentified role: Got it. Very good. John, coming back to you, Citizens has some real good ROTCE targets that you guys have laid out, 16% to 18%, which is very attractive for investors, of course. Can you share with us the path you’re going to use to get there? And then how confident are you reaching it?

But also, what are the risks that you have to keep an eye on as well?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. I mean, we have a very clear path, and it’s one of the most exciting things I think about our story. As you mentioned upfront, we’re sitting around 11% ROTC in the fourth quarter. Right. And, when you think about getting to 16 to 18, the first, you know, contributor to that is really, what’s going on on the balance sheet.

And that the balance sheet drivers are gonna take us 400 to 500 basis points along this journey to 1,600 to 1,800. And within that, that’s primarily time based. Right. So as we have our terminated swaps running off and our noncore, you know, the negative carry on both of those terminated and non core running off, that’s the the overwhelming majority of the balance sheet turnover that gets us to the low end of that 16 to 18. It’s basically time based mechanical turnover.

And so we’re excited about that. To get into the range itself, it’s the distinctive portfolio of strategic initiatives that we’ve launched across all of our businesses. And there’s 200 to 300 basis points on top of that 400 to 500 that gets you into that range. And within that, we’ve got you know, that’s where you find our our private bank launch, you know, which is going extremely well. We’ve got New York Metro, which is really building, in terms of its momentum.

We’ve got investments, as you heard from Ted, in the commercial business, building out California and and, and Florida, in terms of geographic expansion. Right. And so the the, it’s really right in front of us organically to see that, that that, that transition to the 16 to 18%. I should hasten to add that, you know, the credit costs are expected to normalize from where we are now to the low to mid thirties, and that’s also a contributor. So everything seems to be heading in in that direction.

You know, the you know, we it’s basically organic execution. Yes. There are a range of economic environments that are consistent with the 16 to 18, and so it’s right in front of us. It’s a clear path. And, even a wide range of interest rates would still be consistent with the 16 to 18.

But, I mean, we’re expecting generally supportive economic activity with GDP, you know, being in the around the 2% level from a real real standpoint and having an upward slope per yield curve. Yep. And with the Fed landing somewhere around three fifty, which is what we published, in January, which is frankly where they’re at, where they are right now in that in that range of three fifty to three seventy five. So all of those things, are highly consistent with a with a pretty direct path to 16 to 18.

Unidentified speaker, Unidentified role: Got it. We were saying to investors that it’s been twenty years since we’ve had the front end of the curve around 3.75% with a positive slope. Now we don’t have it literally today, but we did. How powerful it I mean, that you know, for net interest income for a lender, that kind of condition is pretty good.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. It is. It’s important. We’re, you know, we’re maturity transformers as banks. We we we’re an intermediary in that in that regard.

But, I mean, I don’t think that is an absolute necessity

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: Okay.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: For us to get to to the 16 to 18. I think, you know, as I mentioned, most of this transition is driven by the time based runoff of terminated swaps and noncore, which gets us to the low end. And then there’s, you know, execution that drives fees and drives, you know, activity that isn’t highly dependent upon, you know, we must have a higher an upward starting yield curve. I mean, that’s the expectation. That’s what we think would be supportive.

But I think we get to 16 to 18 even if it’s a little flatter.

Unidentified speaker, Unidentified role: Got it. Got it. How you’ve laid out a very strong organic way of getting there. How does M and A play in a role in reaching there? Is it part of it or it doesn’t really matter?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. I mean, well, I mean, maybe I’ll zoom out and talk about capital priorities. Right? I think it fits in there. Okay.

And and the the the top of that stack, as always is is is the dividend. Right? So that’s that’s basically where we are on that and and looking for opportunities to grow that over time. So that’s number one. And then and then right behind that is all of the organic activities, and that’s our focus.

Overwhelmingly, we are, we have our our our work cut out for us, with a very distinct portfolio of strategic initiatives, as I mentioned, across all three legs of our stool, the private bank, which has been going extremely well, The what we believe to be one of the the best positioned commercial bank and a fully transformed consumer bank with low cost deposits. So we’re we’re excited about all of that. I mean, as a sort of subset of organic, I think bolt on m and a Yeah. Would be something that we would look to if it’s capability enhancing, predominantly fee based sort of bolt ons. You heard from Ted regarding some of the things we’ve done in capital markets.

But but what we’re doing in the wealth space, and we would add payments to some of the the categories of bolt ons that we would find interesting. But I sort of think of that as supplementing organic activities and, you know, kind of bank m and a is just not a priority at this point, and it’s not a necessity. We’ve got, you know, an organic path here that’s very exciting and very distinctive.

Unidentified speaker, Unidentified role: Yep. You you touched on the capital in your answer. Can you guys give us your view of what’s going on in Washington from the regulatory standpoint? How it appears things are changing, particularly with the stress test? I mean, your stress capital buffer appears to be it is higher than many of your peers.

What are your thoughts about Basel III endgame possibly being a lot softer or lighter than what was originally proposed in ’twenty three? Yeah. What are

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: your thoughts on this? It feels like from a time standpoint, this stuff is likely to get pushed out. We still need a vice chair of supervision. Correct. Likely gets pushed out to late twenty five at the earliest, early twenty six from a timing standpoint.

Right. And then even when it does come through, I think the expectation is that we’ll have an RWA neutral RWA neutral impact for a category four firm like ours, almost almost certainly no real RWA impact. But, you know, our expectation, we’re operating as if the AOCI deduction from capital is gonna be something that we’ll we’ll have to comply with. But I think that’s already happened. Right?

We’ve been publishing it, and I think the industry has been publishing it. I think that’s true of a lot of the regulations, whether it’s capital or liquidity. A lot of it’s been pushed out Upfront, I mentioned we have a pro business, lighter touch on regulation environment that I think is is still intact. And, we really don’t see, any real headwinds from that standpoint on our business. You mentioned SEB.

You know, it the SEB for us is not virtual. I mean, at at 12:31, we had a 10.8 set one. And, so SEB doesn’t really drive, the outcome. That said, we think it’s unnecessarily and frankly incorrectly high. Yeah.

But but and I think the Fed is is beginning to acknowledge that they’ve got some work to do. Yes. Primarily on their PPNR model. And, it seems like there could be some work on that in ’25. Yep.

We’re next up in, in June of twenty six to participate. And, it’s it’s, there’s a, you know, there’s a possibility that we may see some additional transparency and some fixes that may get put in place over the next year, which I think would be very positive to reducing the volatility and, so, you know, some of the, the head scratching that happens when some of the results come out in your and it’s it’s hard to know what was really driving it, based on the scenario that that they published. So we’re hopeful and optimistic that that will continue to really not be a huge issue for us.

Unidentified speaker, Unidentified role: Sure. You guys have talked about your medium term net interest margin being between 3.253.5%. Can you share with us what gets you there? I assume some of the terminated swaps will be part of that, of course. And then if the Fed just stays pat and doesn’t move from here, how does that influence your thinking on that margin?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Sure. Yeah. I mean, so this margin is connected to the ROTC story where most of our, you know, progression to sixteen and eighteen is actually coming from the margin side of the house. So we’re we were at two eighty seven in the fourth quarter. We have 38 basis points of time based tailwinds, which just come in, mechanically over the next, over the medium term.

Yep. And that’s from noncore and terminated swabs. So that gets you that math gets you to three twenty five, which is at the low end of our range. Sure. The range itself was constructed predominantly based on where the Fed may end up.

And so 3% Fed is consistent with a three twenty five NIM for us. So that’s that that anchors the low end. Four percent Fed is consistent with a three fifty NIM for us, and that’s the biggest driver is where the Fed comes out in the short end. The long end matters. It’s not as as big of a a driver, but, but but really the the short end is where where that that that range was constructed.

And so, you know, out the window, and, you know, if if the Fed’s ultimately gonna get to three fifty or three seventy five, that would be middle of the range.

Unidentified speaker, Unidentified role: Yep.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: So the other drivers, you know, I’d say the other things that will contribute deposit betas, we are expecting a low to mid fifties deposit beta. So if that’s a little higher, you know, we’ll we’ll be more upper end of the range or lower, you know, lower end of the range and balance sheet mix, which is stabilized, and and into slightly improving over time. Your final question about about what happens if the Fed doesn’t move at all, that’s net positive for us. We would be, you know, all else equal, above the upper end of the range at a with a fourth we’re asset sensitive out the window. We’re asset sensitive here, in the fourth quarter and in the first quarter with some growing asset sensitivity over time with opportunities to balance that.

I mean, I think we have a nice balance of, of a roadmap here, where in order to to see this happening along the way, we indicated that, in the fourth quarter of twenty five, we’ll get to three zero five to three ten, and that’s that’s also intact and and that’s our expectation even with the out the window rates that you’re seeing is that we we expect to con to achieve the three zero five to three ten by the end of twenty five

Unidentified speaker, Unidentified role: Yep.

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Which is also important to seeing our net interest income rise. Yep. And wrapping it all together, 2025 is gonna be, for us, a very strong operating leverage year of a 50 basis points, strong revenues coming from fees and and net interest income. But I think what we’re what we’re demonstrating here is is delivery along the way to a pretty exciting medium term outcome.

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: Yep.

Unidentified speaker, Unidentified role: Bringing it to near term

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah.

Unidentified speaker, Unidentified role: With the quarter, I know we’re only two months beyond well, going into the third month in the first quarter. How is it shaping up for you guys relative to your expectations? Any updates you’d like to give us?

John Woods, Vice Chair and Chief Financial Officer, Citizens Financial: Yeah. So maybe I’ll start with the balance sheet. Things playing out as expected. We’re seeing some early loan growth in C and I. Could be could be inventory building.

We’re getting in front of tariffs and things like that, but that that was to be expected, and we’re seeing some growth in the private bank. You know, that’s that is, so core loan growth. That’s being offset by non core runoff that that, again, exactly as expected, in terms of the quarter playing out on the loan side. Deposits, you know, this is typically the seasonally down quarter for deposits that also playing out just as we expected. January, do you typically see the dip in February?

You see the recovery? Right. It’s exactly what we’ve seen. So deposit recoveries in February and, the outlook for deposits is right where we were thinking it would be for the end of the quarter. We flip over to P and L, so, you know, P and L trends playing out broadly as expected.

So, you know, that’s both with respect to the components of PPNR Yep. As well as credit, where we said that credit would likely see a moderate decline and charge offs. And we’re seeing that play out with stability in consumer and seeing commercial coming down in the quarter. So, you know, feeling right on schedule in 2025 for, you know, a nice delivery, as I mentioned earlier. Yep.

Unidentified speaker, Unidentified role: Ted, coming back to M and A, do you think M and A begets M and A? Meaning, if we start to see some high profile deals in the next three months, does that in your experience bring others to the table saying, you know what, we better get moving?

Ted Swimmer, Head of Corporate Finance and Capital Markets, Citizens Financial: And we have started to see some in the first quarter. Some we saw American Axle make an acquisition, we saw Columbus McKinnon just make an acquisition. There have been some activity. It has not been to the pace that we thought it would necessarily be. But yes, to your direct question, there is no doubt in my mind that when we start seeing some of these transactions get complete, it will accelerate.

And I think it will start opening it up for some of the I think we’re seeing the A companies have transactions right now. I think we’ll start seeing some A minus and B plus companies behind a buyer too because people aren’t going to be afraid to miss out on the way. It just hasn’t happened quite yet.

Unidentified speaker, Unidentified role: Got it. And I see we’re in the red zone, which means we’re finished with time. Please join me in a round of applause thanking the gentlemen for coming to the conference.

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