Citizens Financial Group (NYSE:CFG) executives used the company’s fourth-quarter earnings call to highlight year-end momentum, progress on strategic initiatives, and an upbeat outlook for 2026 driven by continued net interest margin expansion, fee growth in capital markets and wealth, and improving credit trends.
Fourth-quarter performance: margin expansion and fee strength
Chairman and CEO Bruce Van Saun said Citizens “finished the year with another strong quarter,” pointing to a seven-basis-point sequential expansion in net interest margin (NIM), strong wealth and capital markets fees, and “positive operating leverage of 1.3% sequential and 5.2% year-on-year.” He also cited “favorable credit trends” and what he called a “robust balance sheet across capital, liquidity, and funding.”
Non-interest income declined 2% sequentially but rose 10% year-over-year on an underlying basis. Wealth posted another record quarter, increasing 5% sequentially and 31% year-over-year, supported by advisory fees and fee-based AUM growth. Capital markets produced its “third-best quarter ever,” up 16% year-over-year but down 16% from an unusually strong third quarter. Management said several M&A and equity deals were pushed into 2026 due to government shutdown impacts, and it expects roughly $20 million of related fees to be recognized in the first quarter.
Expenses rose 0.6% sequentially, which management attributed to continued investment in the private bank and private wealth, plus higher incentive compensation. Citizens’ efficiency ratio improved about 79 basis points to 62%.
Balance sheet trends: loan growth broadening as non-core runoff fades
Management emphasized that loan growth improved as headwinds from non-core runoff and balance sheet optimization moderated. Banerjee said average and period-end loans grew 1% in the quarter, or 2% excluding about $500 million of non-core runoff. The private bank contributed meaningfully, with period-end loans rising about $1.2 billion in the quarter, driven by sponsor line utilization and growth in multifamily and residential mortgage lending.
Commercial loans were up slightly on a spot basis, with management citing net new money originations in corporate banking and higher commercial line utilization, partially offset by commercial real estate (CRE) paydowns. CRE balances declined about 4% in the quarter and 10% for the year. Retail loan growth was led by home equity and mortgage, and President Brendan Coughlin said the company was seeing $700 million to $800 million of quarter-over-quarter growth in HELOC balances.
Deposits also increased, with total spot deposits rising about 2% to $183 billion and non-interest-bearing balances up 2%, keeping the mix at 22%. Banerjee said the bank continued to optimize deposit costs: interest-bearing deposit costs fell 15 basis points sequentially, and total deposit costs declined 12 basis points. Management highlighted that non-interest-bearing and low-cost deposits rose to 43% of the total, and stable retail deposits were 65% of the mix, which the bank compared to a peer average of about 55%.
Credit and capital: improving trends and shareholder returns
Credit results continued to improve, with net charge-offs of 43 basis points, down from 46 basis points in the prior quarter. Non-accrual loans decreased slightly, driven by improvement in commercial real estate, and criticized balances also declined. The allowance for credit losses dipped to 1.53%, reflecting what management described as improved portfolio mix due to non-core runoff, CRE reductions, and lower-loss-content new originations in C&I and retail real estate-secured lending.
On CRE office, Banerjee said the general office portfolio was working out as expected and that the bank maintained a “robust allowance” with 10.8% coverage, adding that cumulative charge-offs plus the current reserve implied a total expected lifetime loss rate of about 20% against the March 2023 loan balance, consistent with the bank’s view over the past year.
Citizens ended the quarter with a CET1 ratio of 10.6% and returned $326 million to shareholders in the fourth quarter through common dividends and share repurchases. For 2025, the company returned $1.4 billion—about 80% of earnings—to shareholders and repurchased $600 million of common stock at an average price of $44.55. Tangible book value per share rose to $38.07, up 4% sequentially and 18% year-over-year.
Private bank and “Reimagine the Bank” initiative
Management highlighted progress in its private bank buildout, which ended the year with $14.5 billion in deposits, $10 billion in client assets, and $7.2 billion in loans. Van Saun said the private bank was “7% accretive to pre-tax income in 2025” and delivered about a 25% ROE for the year. Banerjee said the private bank contributed $0.28 to full-year EPS (just over 7%) and added $0.10 to EPS in the fourth quarter.
Looking ahead, Banerjee provided growth targets for the private bank, including deposits of $18 to $20 billion, loans of $11 to $13 billion, and client assets of $16 to $20 billion, with a longer-term goal of mid-teens earnings contribution while maintaining a 20% to 25% ROE profile. Coughlin said private bank loan growth was “pretty balanced,” led by C&I private equity-related lending, residential and real estate (including granular multifamily), with smaller contributions from other consumer lending.
Citizens also introduced its firm-wide “Reimagine the Bank” initiative, which management said spans nearly every part of the bank and is intended to improve customer experience and productivity through technology and simplification. For 2026, the company expects about $50 million of front-loaded one-time costs, effectively offset by $45 million of benefits realized later in the year. Management is targeting fully phased-in pre-tax run-rate benefits of about $450 million by the time it exits 2028, with roughly two-thirds tied to expense efficiencies.
Executives also discussed artificial intelligence use cases under the initiative, pointing to call-center modernization and voice AI, software development productivity, and analytics for fraud and credit risk. Coughlin said Citizens believes it could ultimately handle a significant portion of call-center activity without a human agent as systems and AI capabilities mature.
2026 outlook: NII growth, fee growth, and higher operating leverage
For 2026, Citizens guided to net interest income growth of 10% to 12%, driven by continued NIM expansion and loan growth. Banerjee said the outlook assumes two 25-basis-point Fed cuts (June and September) and a 10-year Treasury rate around 4.25%. Citizens expects NIM to expand about 4 to 5 basis points per quarter, with management discussing an outlook that moves toward approximately 3.25% across the 2024–2026 period described on the call.
Other key components of the company’s 2026 outlook included:
- Loan and earning asset growth: spot loans up 3% to 5%, average loans up 2.5% to 3.5%, and earning assets up 4% to 5%.
- Fees: non-interest income up 6% to 8%, led by wealth and capital markets.
- Expenses: up about 4.5%, reflecting continued investment in growth initiatives and the private bank; management projected operating leverage “in excess of 500 basis points.”
- Credit: net charge-offs expected in the mid-to-high 30s basis points.
- Capital: CET1 expected at 10.5% to 10.6%, with anticipated share repurchases of $700 million to $850 million.
Van Saun also reiterated that Citizens’ current focus is on organic growth rather than acquisitions, citing the scale of ongoing initiatives including the private bank expansion and Reimagine the Bank.
Looking out further, management reiterated its confidence in achieving a 16% to 18% ROTC target in the second half of 2027, supported by margin expansion, strategic execution, improving credit performance, and capital return to shareholders, with Reimagine the Bank benefits described as additive to those return targets.
About Citizens Financial Group (NYSE:CFG)
Citizens Financial Group, Inc (NYSE: CFG) is a bank holding company that provides a broad range of banking and financial services to individuals, small and middle-market businesses, corporations and institutional clients. Headquartered in Providence, Rhode Island, Citizens conducts its banking operations principally through its primary banking subsidiary, Citizens Bank, and serves customers through a combination of branch locations, ATMs and digital channels. The company is publicly traded and operates under the regulatory framework applicable to U.S.
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