Citizens Financial Group Reports Q3 2026 Results in Earnings Call Transcript

Citizens Financial Group (NYSE: CFG ) reported third-quarter financial results on Friday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Citizens Financial Group reported strong Q3 2026 results, with EPS growth of 8.5% sequentially and 34% year-over-year. ROTCE improved to 15.1%. Total revenues hit a record, driven by a 2.7% sequential increase in net interest income and 13% year-over-year growth, despite a slight decrease in fee income due to market volatility. The company saw stable loan and deposit levels, with expected favorable changes in Q4.

Credit metrics remain positive, and a 13% dividend increase to $0.52 per share was announced. Strategic initiatives are progressing well, including expansion in the private bank and wealth management sectors, and a focus on leveraging AI and cybersecurity enhancements. Citizens Financial Group maintains a positive outlook for Q4 and 2027, projecting further net interest margin expansion and strong operating leverage. The company plans $200 million in share repurchases in Q4.

Management expressed confidence in maintaining strong capital and liquidity positions despite interest rate volatility, with plans to continue share buybacks as stock is perceived as undervalued. Full Transcript Denise, Operator Good morning everyone and welcome to the Citizens Financial Group third quarter 2026 earnings conference call. My name is Denise and I'll be your operator today. Currently all participants are in a listen-only mode.

Following the presentation, we will conduct a brief question and answer session. As a reminder, this event is being recorded. Now, I'll turn the call over to Chris Emerson, Head of Investor Relations. Chris, you may begin.

Chris Emerson, Head of Investor Relations Thank you, Denise. Good morning everyone and thank you for joining us. First this morning, our Chairman and CEO Bruce Van Saun and our CFO Anoy Banerjee will provide an overview of our third quarter results. Brendan Coughlin, our President, and Ted Swimmer, our Head of Commercial Banking, are also here to provide additional color.

We will be referencing our third quarter presentation, which is located on our Investor Relations website. After the presentation we'll be happy to take questions. Our comments today will include forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review in the presentation.

We also reference non-GAAP financial measures, so it's important to review our GAAP results in the presentation and the reconciliations in the appendix. And with that, I will hand over to Bruce. Bruce Van Saun, Chairman and CEO Thanks, Chris, and good morning everyone. Thanks for joining our call.

Today we delivered another good quarter in Q3 as our strong momentum continues. EPS growth was 8.5% sequential quarter, 34% year on year, and ROTCE improved to 15.1%. We continue to deliver strong positive operating leverage, 1.8% sequential quarter and 5.3% year on year. Total revenues hit a record in Q3, paced by NII growth of 2.7% sequential quarter and up 13% year on year.

Notwithstanding some interest rate movement and volatility during the quarter, we saw our NIM meet expectations with a 2 basis point increase to 3.19%, which positions us for strong NIM expansion in Q4. Loans and deposits were broadly flat, as expected, given some loan pull-forward into Q2 and seasonality on deposits, which will turn favorable in Q4. Fees were down slightly given volatile capital markets conditions, which resulted in some deals pushing into Q4. We still believe that market conditions remain healthy as we enter Q4, and our pipelines are very strong, particularly in M&A, which is at record levels.

We do not see the current level of rates introducing any real stress on our various loan portfolios. Credit metrics remain broadly positive. Our capital, liquidity, and funding positions remain strong given our consistent growth in earnings. The Board authorized an increase in our dividend of 13% to 52 cents per share.

In addition, the Board also increased the capacity of the company's common share repurchase program to $1.95 billion, an increase of $1.3 billion. Notwithstanding lower AOCI-adjusted CET1 ratio in the quarter, we are comfortable operating with our gross CET1 a little above our 10 to 10.5% target range, which will still allow for at least $200 million in Q4 share repurchases. We continue to progress our strategic initiatives, with good consistent progress across the private bank and wealth buildout, Reimagine the Bank, our Consumer Next branch project, attracting talent to the commercial bank, and growing our New York metro presence.

We have significant resources dedicated to leveraging AI and to driving a strong cybersecurity framework and capabilities. Overall, there's lots to do, but we feel we are prioritizing and executing well. We feel good about our outlook for Q4, and we feel we are positioned well for 2027 and the medium term. Our view of the macro fundamentals remains positive, though we expect uncertainty and volatility to remain high.

With that, I'll turn it over to Anoy for the financial details. UNKNOWN, Chief Financial Officer Thanks, Bruce. Good morning, everyone. As Bruce mentioned, we delivered strong third quarter results.

Record revenue performance and expense discipline drove more than 500 basis points of positive operating leverage year over year. Referencing slides 3 and 4, we delivered EPS of $1.41 for the third quarter, an $0.11 or 8.5% improvement over the second quarter. And we saw solid improvement in ROTCE to 15.1%, up from 13.9% in the second quarter. PPNR was up 4.5% linked quarter and up about 19% year over year.

Third quarter results reflect higher NII given continued net interest margin expansion, slightly lower fees, and good expense discipline. With respect to our balance sheet, we continue to maintain robust capital, strong liquidity levels, and a healthy credit reserve. Turning to slide 5, I will cover our third quarter results in more detail, starting with net interest income, which was up 2.7% linked quarter, given a 1% increase in interest-earning assets and a higher net interest margin. Our net interest margin continued to expand, increasing 2 basis points for a 19 basis point lift compared with the same quarter last year.

In the third quarter, the time-based benefit from terminated swaps contributed 2 basis points, while the benefits of fixed-rate asset repricing and improved asset yields were essentially offset by funding cost as rates moved higher during the quarter. Importantly, average demand deposits were up 2%, which helped mitigate the increase in overall deposit costs, which were up 3 basis points. Moving to slide 6, fee income is down 1% linked quarter and up 3% year over year.

Capital Markets had a very strong third quarter, with fees down slightly compared with the strong second quarter and lower than the exceptional third quarter last year, which benefited from deals being completed following market volatility earlier in the year. M&A fees were up significantly linked quarter, and our pipeline heading into the end of the year is very strong. Loan syndications, bond and equity underwriting fees are slightly lower given market volatility. We continue to maintain strong market share ranking as the number two middle market sponsor bookrunner for the last 12 months.

Wealth delivered another record quarter, with fees up 7% linked quarter and 17% year over year, reflecting higher advisory fees driven by AUM growth in the private bank and in our retail network. Mortgage fees were lower, primarily due to the negative net MSR valuation result of $13 million given high volatility in mortgage rates, though servicing revenue provided a partial offset. On slide 7, expenses were well managed and stable linked quarter, and our efficiency ratio improved to 60%. We delivered positive operating leverage in the quarter of 5.3%, with year to date at 6.3%.

Moving to loans on slide 8, average and period-end loans were both up slightly linked quarter, paced by growth in private bank and retail. Private bank period-end loans were up $2 billion linked quarter, reflecting higher commercial line utilization and strong originations in high-quality residential mortgage and multifamily lending. Commercial period-end loans, excluding the private bank, were down $1.5 billion, or 2% linked quarter, given some loan pull-forward into the second quarter. Third quarter results were driven by continued planned reductions in CRE, primarily given multifamily and general office paydowns, as well as lower C&I line usage.

Growth in period-end retail loans ex-noncore was $565 million, led by real estate—secured categories. This was partially offset by noncore portfolio runoff of roughly $300 million for the quarter. Next, on slides 9 and 10, we continued to do a good job on deposits despite some seasonality, which should reverse in the fourth quarter. Average deposits were stable in quarter, primarily driven by growth in commercial, largely offset by lower consumer.

Spot deposits were also stable linked quarter, reflecting growth in the private bank, which reached $18.5 billion at the end of the quarter, and growth in commercial, partially offset by a decrease in consumer. Our consumer deposits represent 63% of our total deposits, which compares favorably to a peer average of about 57%. Additionally, our mix of total interest-bearing and low-cost deposits was stable at 42% of total deposits. Moving to credit on slides 11 and 12, credit continues to be broadly favorable, with net charge-offs stable at 37 basis points compared with the prior quarter.

On slide 12, you will see that we had a modest reduction in the allowance along with the slight reduction in ACL coverage ratio to 1.47%. We continued to improve our portfolio mix with the reduction in general office and multifamily balances and strong originations of lower-loss-content C&I, residential real estate—secured, and high-quality private bank loans. The economic scenario we used was a little more conservative this quarter, reflecting the higher rate environment. As we look broadly across the portfolio, the credit outlook remains positive, though we continue to carefully monitor the macroeconomic environment.

Moving to slide 13, we maintain excellent balance sheet strength, ending the quarter with CET1 at a healthy 10.5%, at the top end of our medium-term target operating range. We returned about $322 million to shareholders in the third quarter, with $197 million in common dividends and $125 million of share repurchases. Cumulatively, we have now returned $1.24 billion to shareholders in dividends and share repurchases through the first nine months of the year. Our AOCI-adjusted CET1 ratio and TCE ratio ended the quarter at 8.7% and 6.7%, respectively.

Notwithstanding these AOCI impacts, we remain confident in our capital strength and capital generation capacity. Moving to slide 14, the private bank continues to make excellent progress. The private bank again delivered strong deposit growth, ending the quarter at $18.5 billion. Importantly, the overall deposit mix and cost continues to be very attractive.

The private bank also delivered solid loan growth in the quarter, adding $2 billion of loans to end the quarter at $11.7 billion. The loan portfolio maintains a healthy spread of approximately 4% over deposit costs. Client assets increased by $1.2 billion to end the quarter at $12.4 billion. We added another strong team in Tampa and additional bankers in Philadelphia this quarter, and we plan to continue adding top-quality teams in key geographies.

Moving to slide 15, we are making very good progress executing our Reimagine the Bank program as we continue to leverage a host of new, innovative technologies across the bank to simplify our business model, reshape our customer experience, and drive a meaningful improvement in productivity and efficiency. Our key work streams are well underway, and we expect to hit our financial targets for the program with minimal net cost this year.

We expect to exit 2026 with about $100 million of annualized pre-tax benefit, then more than double that to $225 million by the end of 2027, a little ahead of our original plan, and then target at least $450 million of benefit as we exit 2028. Moving to Slide 16, we provide our outlook for the fourth quarter, which contemplates the Fed raising its target rate by 25 basis points in December. We expect net interest income to be up about 2.5% to 3%, driven by continued margin expansion to a range of 3.23% to 3.26%. Noninterest income is expected to be up approximately 4% to 5%, led by capital markets and wealth.

We are projecting expenses to be up about 1%. This puts us on track to deliver over 600 basis points of positive operating leverage for the full year. The charge-off level is expected to be stable to down slightly, and we should end the year with CET1 at approximately 10.6% to 10.7%, including expected share repurchases of $200 million in the quarter. Looking out further, we continue to see a clear path to achieving our 16% to 18% ROTCE target by the end of 2027.

Slide 17 provides incremental details on our net interest margin progression to the end of 2027. We continue to improve our net interest margin, and we project to deliver a 4Q26 NIM in the range of 3.23% to 3.26% and in the range of 3.30% to 3.50% in 4Q27. This projected margin expansion, combined with the increasing contributions from the private bank, our diversified capital markets businesses, and normalizing credit, should drive our ROTCE into our target 16% to 18% range. To wrap up, we delivered strong third quarter results, highlighted by record revenue and a robust level of positive operating leverage.

Notwithstanding the continuation of volatility and uncertainty in the macro environment, we have a positive outlook for the fourth quarter, with good momentum across our businesses continuing to drive strong earnings growth and solid operating leverage. We will continue to focus on progressing our strategic initiatives and delivering for our stakeholders. With that, I will hand it back to Bruce. Bruce Van Saun, Chairman and CEO Okay, thank you.

Operator, let's open it up for Q&A. Denise, Operator Thank you. We are now ready for the Q&A portion of the call. If you would like to ask a question, please press star one.

If you would like to remove your question, press star two. And our first question comes from Scott Cyphers with TD Cowen. Your line is open. Scott Cyphers, Analyst at TD Cowen Morning, guys.

Thanks for taking the question. Hey, let's see. So it was great to see you guys reiterate the 330 to 350 margin by year-end '27. I guess since the last time you all addressed it, there has been a remarkable amount of change in the rate backdrop.

So I maybe was hoping you could spend just a moment or two sort of discussing what you see as getting sort of tougher and easier in meeting that goal. Whether it's, you know, the deposit pricing pressures potentially or, you know, things that move one way or another with all the moving parts. Bruce Van Saun, Chairman and CEO So I would say the outlook continues to be positive that we have a number of drivers that are going to work for us regardless of what happens in the rate environment. The so—called time—based benefits as we describe them with legacy swaps accounting drag kind of rolling off every quarter.

We have a big slug of that in the fourth quarter and that continues a bit into 2027. We also have a front book, back book dynamic that is pretty, you know, we're pretty confident it's going to be there that the yield curve should continue to stay relatively steep and that provides further lift beyond that. Then a lot of the remaining kind of variability is what happens with how we're managing the balance sheet. I think we have a lot of confidence.

You can see the level of non—interest—bearing deposits has held steady through kind of the last period with a lot of volatility. We really focused on growing low cost and deep relationships across consumer and private bank in particular. So that's positive for the cost of funds. And you know, I'd say more broadly we kind of have three basic segments that we can optimize in terms of where we're taking our interest—bearing deposit funds.

And so I think we're doing a good job there as well. If you look at the quarter relative to others, the total deposit costs are only up 3%, which is kind of certainly on the good side of others. So feel good about that. And then on the loan side, we continue to focus on deeper relationships and using our balance sheet in places where we can really be relevant to the customer, whether it's in commercial, consumer or the private bank.

And we see, I think, good opportunities there to grow our market share. We're focused on commercial and lead—left relationships and focusing in the right sectors where we think we can get decent spread and decent cross—sell. The private bank also continues to grow loans at a good clip and the mix is pretty attractive from an overall yield standpoint. It's accretive to overall NIM.

So those are the things I would say, Scott, that we feel good about our ability to drive upwards into that range and you know we are, lastly I would say we are asset sensitive and so assuming that the Fed goes another hike or two that will be accretive to the NII outlook. So anyway, overall feeling quite confident. I don't know if any of my other colleagues, Anoy, if you want to add anything to that. UNKNOWN, Chief Financial Officer No, Bruce, I think you covered it.