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Operating throughout New England and the central parts of the U.S., the bank chain owns over 1,000 locations and 3,000 ATMs in 11 states.

This year's Fortune 500 marks the 66th running of the list.

With a banking business serving customers primarily in the Northeast, Citizens operates 1,000 branches and 2,800 ATMs. Citizens held $176.7 biliion in assets as of March 31, 2020.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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One of the oldest financial institutions in the U.S., Citizens Financial Group was founded in 1828 and now provides a variety of retail and commercial banking products and services, operating through its consumer banking and commercial banking segments. The consumer banking segment offers products including mortgages and credit cards and services like wealth management, while the commercial banking segment provides services such as lending and leasing, foreign exchange, and deposit management to companies in various sectors. Formerly called RBS Citizens Financial Group, the company became Citizens Financial Group in 2014.

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Citizens Financial Group (CFG): Company Profile, Stock Price, News, Rankings

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Citizens Financial Group

citizens financial group

Welcome, and thank you for standing by. All participants will be on a listen-only mode until the question-and-answer session of today's call. At that time, to ask a question, please press star one. Today's conference is being recorded. I would now like to turn the conference over to Kristin Silberberg. Thank you. You may begin.

Thanks, Julie. Good morning, everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Van Saun, and CFO, Aunoy Banerjee, will provide an overview of our fourth quarter and full year results. Brendan Coughlin, our President, and Don McCree, our Chair of Commercial Banking, are also here to provide additional color. We will be referencing our fourth quarter and full year presentation located on our Investor Relations website. After the presentation, we will 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 it over to Bruce.

Okay. Thanks, Kristin, and good morning, everyone. Thanks for joining our call today. We were pleased to finish the year with another strong quarter. Our financial results were paced by net interest margin expansion of 7 basis points, strong wealth and capital markets fees, positive operating leverage of 1.3% sequential and 5.2% year-on-year, favorable credit trends, and a robust balance sheet across capital, liquidity, and funding. We are executing well on our strategic initiatives. Our Private Bank finished the year with $14.5 billion in deposits, $10 billion in client assets, and $7.2 billion in loans. The business was 7% accretive to pre-tax income in 2025, ahead of our 5% target. Importantly, we managed this business to a 25% ROE for the year. We continue to grow nicely in New York City Metro, and our corporate banking expansion into new geographies, verticals, and sponsors is delivering good results.

We made significant progress in running down non-core assets from $6.9 billion at the beginning of the year to $2.5 billion at the end, which included a sale of a student loan portfolio. Our TOP 10 program hit the mark with $100 million-plus run rate benefits in Q4. For the quarter, our EPS was up 8% sequentially and 36% year-over-year. NII is up 9% year-on-year as net interest margin is up 20 basis points, and spot loans grew 3%. Fees are up 8% year-on-year, paced by capital markets and wealth. Provision is down $25 million year-on-year as losses reduce on CRE office, and credit in general looks good. We retired 3% of our shares in 2025 and delivered an 80% return of capital to shareholders. For the full year, our EPS of $3.86 was up 19% relative to 2024.

We hit most of our line items in the beginning of year guide, which is included on Slide 31. Our expenses were up 4.6% versus the guide of 4%, given the fee performance beat and associated incentive compensation, and our desire to keep building out private bank and wealth. We delivered positive operating leverage of around 1.25% for the year. As we think about 2026, our focus will continue to be strong execution of our strategic initiatives. The biggest new addition will be Reimagine the Bank, which has been launched and is creating real excitement at Citizens. We've included a couple of slides in our presentation on this program. What I'd like to call out is that the deployment of new technologies and approaches under Reimagine the Bank will deliver meaningful enhancements to customer experience.

This will drive some real revenue benefits in addition to the targeted expense efficiency improvements from the program. This program has around 50 initiatives at the outset, but we will add to this over time, providing further upside. Looking ahead, the macro environment for 2026 should be favorable. We see solid GDP growth, stable unemployment, and inflation falling by the end of the year. We project two more Fed rate cuts, with the yield curve steepening as the 10-year stays anchored around 4.25%. We anticipate the regulatory environment to stay positive. We will look to take some basic steps on stablecoins, but we do not see a big lift-off and impact in 2026. Notwithstanding several of our peers engaging in acquisitions, our focus for the foreseeable future remains on our attractive organic growth agenda.

With respect to the 2026 outlook, we expect very strong revenue performance, controlled expenses, significant positive operating leverage, and lower credit costs. NII growth of 10%-12% will be paced by strong continuing NIM expansion and solid loan growth led by private bank and C&I. Fees will continue to grow off a strong year in 2025. The capital markets backdrop is highly favorable, and Citizens is well positioned. Our wealth business is in a great position to grow, both with private bank customers as well as branch-based customers. Expense growth is projected to be comparable to this year as we seek to maintain the growth rate of the private bank. We have been disciplined in ensuring that the private bank achieves sustainable growth with attractive returns.

The Reimagine the Bank impact in 2026 will deliver one-time costs of around $50 million versus benefits of $45 million, which are incorporated in this guidance. We do not intend to break out the one-time costs as notables as we've done in the past. Credit costs should continue to improve as the CRE office portfolio continues to be worked out. We continue to see mixed improvements delivering benefits to the charge-off and provision rates over time. We will manage our CET1 ratio to 10.5%-10.6% throughout 2026. We envision share repurchases of approximately $700 million-$850 million. We also are hopeful that the Fed modeling improvements will meaningfully lower our SCB. We've included some slides on our medium-term outlook and how the drag from our legacy swap portfolio will dissipate with time. We remain confident in our ability to achieve our medium-term 16%-18% ROTCE target.

To sum up, we are feeling very good about our positioning for the future. Our strategy rests on a transformed Consumer Bank, the best-positioned superregional commercial bank, and the aspiration to have the premier bank-owned private bank. We continue to make steady progress and will continue to execute with the financial and operating discipline that you've come to expect from us. I'd like to end my remarks by thanking our colleagues for rising to the occasion and delivering a great effort in 2025. We know we can count on you again this year. And with that, let me turn it over to Aunoy for his debut performance. Aunoy?

Thanks, Bruce. Good morning, everyone. I am excited to be part of Team Citizens and to help execute our well-planned strategy. Now, turning to our performance, as Bruce indicated, we delivered strong results in 2025 that were in line with our expectations at the beginning of the year. The fourth quarter delivered continued good performance, and we are well positioned for 2026. Referencing Slides three to seven, I will provide some highlights for the full year and the fourth quarter. First, spending a moment on the full year results. We delivered EPS of $3.86 for 2025, up 19% on an underlying basis, and that includes a $0.28 or just over 7% contribution from the private bank. Importantly, we also achieved full-year positive operating leverage of approximately 125 basis points on an underlying basis. Net interest income was up 4% as we delivered 13 basis points of margin expansion.

Fees were up a strong 11% on an underlying basis, led by record results in both wealth, up 22%, and capital markets, which had a nice pickup in the second half, up 9% year-over-year. Expenses were managed well, up 4.6% on an underlying basis, reflecting the continued investment in the build-out of the private bank and wealth. We also managed credit well, maintaining strong reserve coverage levels, with credit losses coming in line with our expectations at the start of the year. We ended the year in a very strong balance sheet position, maintaining robust capital, strong liquidity levels, and a healthy credit reserve. For the fourth quarter, we generated EPS of $1.13, up 8% linked quarter and 36% year-on-year, and delivered a 12.2% ROTCE. The private bank continues to steadily grow its earnings contribution, adding $0.10 to EPS in Q4, up $0.02 linked quarter.

Now, I will talk to the fourth quarter results in more detail, starting with net interest income on Slide 8. Net interest income increased 3% linked quarters, driven by a strong expansion of our net interest margin and a 1% increase in average interest-earning assets. Our net interest margin continues to steadily expand, up 7 basis points this quarter to 3.07%. Three basis points of the margin expansion was driven by the benefits of non-core run-up and reduced impact from the terminated swaps, what we refer to as time-based benefits. The rest was a combination of fixed-rate asset repricing and lower funding costs, which was partially offset by lower asset yields. We continue to do a good job optimizing deposits in a competitive environment. Interest-bearing deposit costs were down 15 basis points, while total deposit costs were down 12 basis points.

Our cumulative interest-bearing deposit beta is about 48% through the end of the year. Moving to Slide nine, fees are down 2% linked quarter, but up 10% year-over-year on an underlying basis. Our wealth business delivered another record quarter, driven by continued progress in the private bank and strength in the retail network, up 5% linked quarter and 31% year-over-year. These results reflected higher advisory fees with continued positive momentum in fee-based AUM growth, including strong inflows from the conversion of Private Wealth liftouts as well as market appreciation. Capital markets delivered its third-best quarter ever, up 16% year-over-year, though down 16% compared with the exceptionally strong third quarter. Several M&A and equity deals were pushed into 2026, given the impacts associated with the government shutdown. As a result, we expect roughly $20 million of related fees to be recognized in the first quarter.

Despite deals pushing into 2026, our equity underwriting performance was still up nicely linked quarter and up significantly year-over-year. Loan syndication fees were very strong this quarter, driven by refinance activity, and bond underwriting fees were solid, although lower than the very strong third quarter. We continued to perform well in the league tables, ranking second in the fourth quarter and fourth for the full year on both volume and number of deals for middle market sponsored loan syndications, and our deal pipeline across M&A, debt, and equity capital markets remains strong. On Slide 10, expenses are up 0.6% on a sequential basis, largely reflecting continued investment in the build-out of the private bank and Private Wealth and higher incentive compensation. Disciplined expense management and strong revenues resulted in approximately 79 basis points of improvement in our efficiency ratio to 62%.

Our TOP 10 program achieved $100 million of pre-tax run rate benefit exiting the year, and we have launched our Reimagine the Bank initiative, which I will discuss in more detail shortly. On Slide 11, average and period-end loans were up 1%, or up 2% excluding the non-core portfolio run-up of roughly $500 million in the quarter. We saw solid loan growth across each of the businesses as non-core run-up and balance sheet optimization impacts lessened. The Private Bank delivered solid loan growth again this quarter, with period-end loans up about $1.2 billion, driven by a pickup in sponsor line utilization, along with growth in multifamily and Residential Mortgage. Commercial loans were up slightly on a spot basis, driven by net new money originations in corporate banking and higher commercial line utilization, partially offset by CRE paydowns.

We continued to reduce CRE balances, which were down about 4% this quarter and 10% for the year, and retail loans saw some nice growth driven by home equity and mortgage. Next, on Slides 12 and 13, we continued to do a good job on deposits, with non-interest-bearing balances up 2%, maintaining a steady mix at 22% of the book, even as our total spot deposits increased approximately 2% to $183 billion. Average deposits were also up 2%, or $3.9 billion, driven by growth in the private bank, commercial, and retail. Private bank deposits reached $14.5 billion at the end of the year, including some larger flows towards the end of the quarter. We continue to focus on optimizing our deposit funding costs, reducing the average rate paid across all businesses, driving interest-bearing deposit costs down 15 basis points linked quarter.

This, combined with the growth in non-interest-bearing deposits, helped to drive our total deposit costs down 12 basis points. And importantly, our non-interest-bearing and low-cost deposit mix increased to 43%, and our stable retail deposits are 65% of our total deposits, which compares to a peer average of about 55%. Moving to credit on Slide 14, credit continues to trend favorably, with net charge-offs coming in at 43 basis points, down from 46 basis points in the prior quarter. Non-accrual loans are down slightly linked quarter, driven by a decrease in commercial real estate. Criticized balances also continued to decline. Turning to the allowance for credit losses on Slide 15, the allowance was down slightly to 1.53% this quarter, as the portfolio mix continues to improve due to non-core run-up, the reduction in the CRE portfolio, and lower loss content front book originations across C&I and retail real estate secured.

The economic forecast supporting the allowance is relatively stable with the prior quarter, and as we look broadly across the portfolio, the credit outlook looks good. The general office portfolio continues to work out as expected, and we maintain a robust allowance of 10.8% coverage. Importantly, the cumulative charge-off plus the current reserve translates to a total expected lifetime loss rate of about 20% against the March 2023 loan balance, and that level has been consistent with our view for the past year. Moving to Slide 16, we maintain excellent balance sheet strength. Our CET1 ratio is 10.6%, and adjusting for the AOCI opt-out removal, our CET1 ratio increased to 9.5%. We returned a total of $326 million to shareholders in the fourth quarter, with $201 million in common dividends and $125 million of share repurchases. For 2025, we returned $1.4 billion, or 80% of our 2025 earnings to shareholders.

We repurchased $600 million of common stock at an average price of $44.55, representing about 3% of outstanding shares at the beginning of the year. Our tangible book value per share increased to $38.07, up $1.34, or 4% sequentially, with full-year growth of $5.73 per share, or 18% year-over-year. Moving to Slides 17 through 20, we are well positioned to drive strong performance over the medium term with our overall focused strategy, a transformed consumer bank, the best-positioned super regional commercial bank, and our aspiration to build the premier bank-owned private bank and Private Wealth franchise. The private bank continues to make excellent progress, as you see on Slides 19 and 20. We exceeded our balance sheet targets and delivered full-year earnings of $0.28, contributing a little over 7% to EPS in 2025, well ahead of our original projection of 5%.

The Private Bank delivered strong deposit growth again this quarter, ending the year at $14.5 billion. Importantly, the overall deposit mix continues to be very attractive, with about 36% in non-interest-bearing at the end of the year. We also delivered strong loan growth in the quarter, adding roughly $1 billion of loans to end the year at $7.2 billion. Since the launch of the Private Bank in 2023, we have added 10 wealth teams to our platform, with more in the pipeline. We ended the year with $10 billion of total client assets, reflecting the continued strong conversion rates of the wealth hires. We have more runway here, and we plan to continue adding top-quality teams in key geographies.

Given the investments we have made and our plans to further expand the private bank in 2026, we think deposits can grow to $18 billion-$20 billion, loans in the range of $11 billion-$13 billion, and client assets $16 billion-$20 billion. We expect this growth will help drive an increase in private bank's earnings contribution to mid-teens in the medium term, while maintaining a 20%-25% ROE profile. Moving to Slides 21 and 22, we have launched our firm-wide Reimagine the Bank initiative. The objective is to position Citizens for long-term success by embracing a host of new innovative technologies across the bank and simplifying our business model, which will reshape our customer experience and drive a meaningful improvement in productivity and efficiency. Slide 21 will give you a sense for the scope of the effort, which spans nearly every part of the bank.

Slide 22 lays out our financial targets for the program. For 2026, we expect to minimize the EPS impact of one-time costs and capital investments by prioritizing initiatives with faster paybacks. There will be about $50 million of front-loaded one-time costs that will be effectively offset by $45 million of benefits to be realized later in the year. The program will drive positive net benefits in 2027 that we expect will accelerate in 2028, and we are targeting fully phased-in pre-tax run rate benefits of approximately $450 million as we exit 2028. Roughly 2/3 of these benefits are tied to expense efficiencies, which equate to about 5% of our full-year 2025 expense base. Importantly, we are confident that the financial benefits of Reimagine the Bank will be additive to the 16%-18% ROTCE targets we expect to achieve in the second half of 2027.

Moving to Slide 23, I will take you through our full-year 2026 outlook, which contemplates a forward curve with two 25 basis point Fed cuts, one in June and the other in September, ending the year with Fed funds approaching 3%-3.25% and a 10-year Treasury rate anchored around 4.25%. We expect NII to be up 10%-12%, with NIM expanding about 4-5 basis points a quarter toward 3.25% in 4Q 2026. Loan growth is expected to pick up this year, with spot loans up 3%-5%, average loans up 2.5%-3.5%, and overall earning assets up 4%-5%. Non-interest income is expected to be up 6%-8%, driven primarily by wealth and capital markets. We are projecting expenses to be up 4.5% as we are confident in our revenue outlook, and we plan to maintain our investments in growth initiatives.

This translates to a 2026 full-year operating leverage in excess of 500 basis points. We have provided a walk showing the key components of our 2026 expense growth on Slide 24. Credit is projected to continue to improve through the year, with our outlook for net charge-offs in the mid to high 30s basis points. Along with this credit trend, the improving credit trend, the portfolio mix will also continue to improve. And finally, we expect to end the year with a strong CET1 ratio of 10.5%-10.6%. We expect to generate a substantial amount of capital, which will put us in an excellent position to push forward with our strategic priorities, while returning a substantial amount of capital to shareholders. Notwithstanding anticipated strong loan growth, we expect to repurchase $700 million-$850 million in shares this year.

Full-year 2026 earnings incorporates a nice lift from the continued growth of the Private Bank. On Slide 25, we provide the guide for the first quarter. Note that the first quarter has seasonal impacts on revenue, with lower day count impacting net interest income, taxes on the FICA reset, and compensation payouts impacting expenses. Fees are normally softer in the first quarter, but we are expecting a strong performance from capital markets after incorporating the deals that were pushed from the fourth quarter. Moving to Slides 26-28, looking out over the medium term, we see a clear path to achieving our 16%-18% ROTCE target in the second half of 2027, with further momentum in 2028. Reimagine the Bank benefits will be additive to returns.

Expanding our net interest margin is a key driver, which we project to be in the range of 3.30%-3.50% in 2027, along with the impact of successful execution of our strategic initiatives, improving credit performance, and delivering a strong capital return to shareholders. To wrap up, we delivered a good performance in 2025, in line with our expectations. We have a strong outlook for 2026, with significant margin expansion, good momentum in wealth as we continue to grow the private bank, and we see our ship coming in on capital markets, given the capabilities that we have built over the years. All of this puts us in a very good position to hit our medium-term 16%-18% ROTCE target in the second half of 2027. With that, I will hand it back over to Bruce.

And I think, Operator, we're ready to open it up for Q&A.

Thank you. If you would like to ask a question, please press star one. To withdraw your question, press star two. Once again, to ask a question, please press star one. Our first question comes from Ryan Nash with Goldman Sachs. Your line is open.

Good morning, everyone. Good morning. Bruce, you know, appreciate all the details on the Reimagining the bank. I think you noted in the slides that this should add, you know, 2% on ROTCE. First, maybe just talk about how much of this hits the bottom line versus gets reinvested, and if it is reinvested, what are the areas that you will invest in? And then, and then second, you know, the Slide 28 says that you're not incorporating any of these benefits.

Does this increase your confidence in getting to the high end, or do you think this serves more as a hedge in case other parts of the business don't perform? Thank you, and I have a follow-up.

Yep. Okay, give her the space for that follow-up. Nice move, so you know, I would say that at this point, the program has taken shape, and we have about 50 work streams, and it's all siloed out into a transformation office and people that are running with the ball on those streams. And Brendan's kind of leading the overall effort. He can comment as well, so I think at this point we have kind of quarter-by-quarter visibility into each of those work streams and how the kind of implementation costs flow and then how the benefits start to flow.

One thing you'll notice there is that over time, the kind of revenue benefits start to pick up, as we'll see, improved customer experience resulting in less customer attrition, better usage of our products by the customer base. And we think that's really solid in terms of our ability to forecast that. So anyway, the program has taken shape. We're executing it well. As to the question of you know what do we expect to flow through, I think the first thing is you got to look at the gross number, excluding the implementation costs, because implementation costs really are just kind of one-time capital costs in our view. So the run rate will benefit by the full amount. And then I think it's still a bit of an open question as to how much of that flows through.

It kind of depends on kind of where we are at that point in time and what our investment needs and priorities could be. So, do we keep investing at the same pace in the private bank? Is it worth investing to keep on that trajectory and to generate more medium-term revenue growth? I think that's a TBD. So at this point, we're kind of just flagging. Here's the numbers. Here's what we think is possible. We have a lot of wood to chop to actually execute this program, but we'll be reporting on it all along. We'll have, I think, more visibility into the flow through as time goes by. If you look historically at all of our top programs, Ryan, we've had a significant flow through. So we tend to be very disciplined on the remaining expense space.

We have this mindset of continuous improvement. If we want to invest new dollars, try to figure out where to pinch the expense base, to self-fund that. So I would expect that the flow through should be high, but we're not going to make that call at this point. We're just going to give you the contours of what the program could deliver.

Got it. And then if I look on Slide 27, you know, your prior NIM walk had deposit betas in the low to mid-50s. I think now you're saying high 40s. Maybe just talk about what is driving the change. Is it competition or a change in your strategy? And what are some of the offsets that are allowing the NIM to still reach slightly higher levels versus the prior expectation? Thank you.

So what I would say is that, when the rates first started to fall, the market was very aggressive in trying to recoup some of the what's happened on the way up. And what's happened since then, I think, is that the market is kind of less aggressive in its pricing actions at this point. And so, you know, you could call that maybe a little more competition, or you could just say kind of a decision to share kind of some of those benefits with the customer and not be as aggressive. And so that high 40s to us is really the market. So we're not, if we move down from mid low to mid-50s to high 40s, I think that's consistent with what we're seeing in the market.

And the reason that, you know, I still think we're in a very good position to deliver on that NIM walk are several factors contributing to that. But one is our confidence in our net interest, our non-interest-bearing balance growth, which has stayed robust in the private bank and in the consumer bank in particular, and stable in the commercial bank. And so, I think, we score well on that dimension. You know, that we're also, you know, slightly asset sensitive, and my view is that rates will come down, but maybe not as much as feared initially. So I think that is a helpful fact for us as well. And then, over time, we've continued to, I think, be very disciplined in our hedging actions. And so we've been adding in hedges at attractive rates.

So I think it's the combination of those three things, the kind of non-interest or balances, the higher a little bit of asset sensitivity and a higher rate outlook. And then in addition, these attractive hedging actions that we've taken would offset that beta dropping from where it was to the high 40s.

Thank you. Our next question comes from Erika Najarian with UBS. Your line is open.

Hi, good morning. Just wanted to ask about the puts and takes on the loan growth guide. You know, it feels like a bit of a you know, sort of best in class relative to peers. Maybe remind us, Bruce, in terms of where you are in your balance sheet optimization journey.

And as we come to a point where rates may come down, talk to us about, you know, the push-pull in terms of optimizing CRE versus taking advantage of potential refinancing opportunities.

Yeah. So, you know, I'd say our confidence in that loan outlook stems from actually what we're seeing and what we delivered in the second half of the year. So we had, we have an idiosyncratic growth driver in the private bank as they scale up their business. That's something our peer banks don't have. And so that continues at a good clip. And then I think the focus of the commercial bank, in terms of the middle market and our expansion markets, plus some of the kind of private capital and sponsor lines, also has been an area of opportunity for us.

And then kind of in the consumer bank, we have the market-leading HELOC product, and also mortgage. And so we've seen growth across all three of those areas in Q3 and in Q4. And we think that will continue. In prior years, that growth was offset by the accelerated rundown of non-core. But now we have non-core kind of almost at a stub at this point from $14 billion down to like $2.5 billion. And then we've done a lot of work already on the commercial BSO and on the commercial real estate, kind of rundown after the Investors' acquisition.

So there's a slide in the back, Erika, which you may have seen or may not have seen, but kind of lays down some of the reductions in the drag from those efforts, which also contributes to positive sentiment on loan growth. So those are the kind of big things. I'll just maybe flip it over first to Don to talk a little bit about commercial, and then Brendan to talk about the private bank and consumer.

Yeah. I'll start, Erica, by just talking about the environment. I mean, across the board, we're seeing positive sentiment from the client base. So Bruce mentioned the expansion markets. They're growing. So I think New York, California, Florida, they're growing extremely quickly. Those are core middle market relationships with full wallet, realization.

So not only is loan growth materializing, but we're also seeing it from an ROE standpoint being a very attractive business. We're seeing, remember, for most of the last two or three years, the market has been really a refinancing market. I think Aunoy mentioned that. We're seeing new money demand both in our core client base, which is translating into utilization growth. And we're seeing it powerfully in the sponsor business where the sponsors finally seem to be coming alive. And that, that'll impact not only our capital markets businesses, but also our NBFI lending as we engage with the private capital community, both on the PE capital call lines and private, private capital leveraging lines. So across the board, a pretty strong environment to be operating in. And that should drive higher levels of loan growth as we look into 2026 and beyond.

We were probably running close to $1 billion of C&I BSO over the last few years. That really is down to BAU. We're pretty much done with that. If it was going to be half a billion, I'd be surprised, but it'll be just a continuous, kind of rhythm of cleaning out under-returning relationships and replacing them with new relationships. And then the change in real estate, we're going to continue to trim the real estate exposures, but we're beginning to turn on the origination engine. And that's both private bank and commercial bank. And we will be replacing some of the BSO that's happening with some attractive opportunities, you know, as we see them in the marketplace.

So what was a pure drag in the past will be a little bit less of a drag in the future, although we'll continue to kind of trend that down. But BSO will become less of a drag in the overall loan growth.

Yeah. On my side, maybe three points here. One, similar to Don, the headwind on non-core is reducing. So just give you some numbers around it. You know, six, seven quarters ago, we were dealing with $1 billion, $1.1 billion in quarter-on-quarter, rundown of non-core that exited Q4 at $500 million. And that's going to continue to minimize as we look forward into 2026. So that's a real positive to see that wrap up through the cycle. And we've seen really strong growth in private banking, kind of point number two.

And it's been really balanced across private equity, residential lending, and multifamily, granular, high-quality commercial real estate where we have access to full relationships with wealth management. One of the dynamics we were facing early in 2025 is with rates high. There was a lot of cash out in the system with this client base, and they were hesitant to go in and finance things with debt with rates as high as they were. That is starting to change. And as the rates ease a bit, we expect loan growth demand to pick up in the private bank and our run rate to improve further. So we've got, you know, confidence there that the pace of growth in the private bank will continue to accelerate as we look into 2026. And then in consumers, Bruce mentioned, we're getting $700 million-$800 million in quarter-on-quarter growth in HELOC.

We're number one in net balance sheet growth in the United States, number one in originations in the United States in HELOC, and a very high credit quality book with 95%+ of the customers coming with DDA and deep relationship-based banking. We expect that to continue. And candidly, with rates pulling back, but not so far to crater through a 5% mortgage rate, at least in the forward outlook, it's really a perfect time period for HELOC where there's not going to be a ton of mortgage refinancing activity, but huge amounts of equity built up with consumers. So we're very, very well positioned to continue to monetize the HELOC capability we've put in place.

And of course, in the second half of last year, we launched a credit card portfolio, which we expect will start to pay some dividends as we get into the, you know, 2026 first half and second half, with higher yielding, higher quality balances. So for all those reasons, I feel really good about continued pickup and net loan growth. The other thing I would just mention wrapping up here is, it's important to look at the net loan growth number, but under the covers, there's a quality story that you need to pay attention to of the balance sheet remixing to deep relationship-based customer lending, higher yielding, higher profitability, both on the balance sheet, but also the net customers we're bringing in, moving away from single service to a really, really deep relationship-based bank.

So, you know, I think we're, we've got confidence on winning on both dimensions, quantity plus quality.

Thank you. I'll step aside and let my peers ask questions.

Our next question comes from Manan Gosalia with Morgan Stanley. Your line is open.

Hey, good morning all, and welcome, Aunoy. I wanted to start on the fee side. Can you expand a little bit on the underlying assumptions in the fees? I mean, it feels like the private bank is doing well. Capital markets are doing well. Pipelines are strong. You had a survey out recently talking about M&A expanding on the middle market side. There's also been some push out from the fourth quarter into 2026. Just given all of that, it feels like the fee guide is a little conservative. So can you help us with some of the underlying assumptions there?

Yeah, so I'll start and others can chime in. But you know, we had a very strong fee year in 2025. So we'll start with that. We were up 11%. And then you know, to guide up next year 6%-8% is still kind of good growth on top of very strong growth that we had in 2025. I'd say the outlook for 2026 is led by the capital markets where not only do we have strong pipelines, we have several things going for us. One is the carryover. So we have about $20 million of fees that carries over, that'll close in the first quarter. And then in the first half of 2025 we had kind of soft comparisons, I would say, because of the uncertainty and Liberation Day tariffs.

There was a lot of pent-up demand to do deals that started to flow again in the second half of the year. So again, I think capital markets should have a strong relative year. And again, who knows about the uncertainty in the tariffs? And it seems like it's Groundhog Day. We might be in that same movie replaying. But I think that's one of the reasons why overall it's good to have a little bit of caution in that guide of 6%-8%. You just don't know. But at this point, capital markets look like it'll have an extremely strong year. Wealth has been having record quarter after record quarter. And that's a twofold benefit.

It's not only kind of getting the teams in place of recruiting, these lift-outs and then connecting them to the private bank relationships and the corporate bank relationships, which creates its own growth dynamic. But then also in the branch-based system, we've got great leadership there, great product set. We're really hitting our stride. So I think wealth would be the other shining star. Across the rest of the bank, we don't see significant growth in many of the other areas like service charges on deposit accounts, mortgage, you know, our other income was flat. We had, like, the moon and the stars aligned for a couple quarters that might not repeat in 2026. So I think just having a level of conservatism there seems like the way to play it.

And then maybe pivoting over to the capital side, it looks like your buyback guide is a little more front-end loaded. And then you spoke about the fact that you're hopeful that the SCB will come down this year. I guess the question is, how important is the stress test in terms of your comfort level in bringing the CET1 ratio closer to your medium-term targets of like 10%-10.5%? How quickly can you do that? And where would getting into that range put you in terms of buybacks as you get into the back half of the year?

Sure. Again, I'll take this one. I've been living it on this SCB frustration for years. But you know, we are reasonably optimistic that there's some changes afoot down in Washington with the Fed.

And so, based on what we know, we think we'll get a better outcome. It remains to be seen the timing of that implementation. But, to me, it's less of an impact directly on where we set our capital targets. It's just been; it's almost a scarlet letter that we have this outsized SCB when our business model is the same as most of our peers, and it just has been mismodeled. And I won't get into all of it, but we've made those points clear to the new folks that are going to be in charge of the stress test. So, in any case, just falling back into the pack is good for us reputationally, even if it doesn't affect exactly how we're going to manage the capital.

I would say the reason that we're still on the high end of that 10%-10.5% range is just still the amount of uncertainty that's in the environment. We have an upsurge in our profitability projected, but making sure that we get there and that we get the CRE worked out, when we feel the environment is in a better place, and we've accomplished some of those aspects, then I think we could be in a position to start to migrate down within that range. But anyway, that's how we think about it.

Our next question comes from John Pancari with Evercore ISI. Your line is open.

Hi, this is George Nguyen for John. Just wanted to revisit the private bank build-up specifically.

In that $11 billion-$13 billion, private bank-related loans in 2026, can you break down what loan categories in the private bank you're seeing growth, any potential stakes there? And then longer term, how should we think about the loan-to-deposit ratio trending in the private bank? Thank you.

Yeah, it's Brendan. I can take that. It's pretty balanced growth. So about a third of it, I'd say, is coming from C&I private equity-based lending. We have, yeah, about half of the balance sheet is, I'd say, residential and real estate. So mortgage and granular multifamily commercial real estate, as I mentioned before, tied into deep wealth management-based clients. And then there's a smaller portion in sort of other consumers.

So, you know, our HELOC capabilities are making their way over to these clients, some small credit cards, some specialty unsecured lending, loans in the private banking portfolio, the PLP, partner loans that we're leveraging to convert our private equity community into personal private banking relationships. So it's pretty broad-based, but the largest categories are C&I, granular multifamily, CRE, and residential lending mortgage. We expect that to continue as rates to pull back. You know, the traditional personal private banking should pick up. That would. That's again going to the portfolio will benefit from HELOC and continued residential lending. And as our card portfolio picks up, we've optimism that that can be a more meaningful player in the private bank over time.

Yeah, I would just add to that, you know, we've been in business now for a couple of years.

We haven't had one. I'm going to touch wood here when I say this. We haven't had one dollar of credit losses. And that historically was the track record of these bankers, when they operated on the First Republic platform. So very strong credit discipline, very deep relationships, lending to people that we know well, and getting good credit results. The, you meant, you asked about the LDR too. Sorry, I didn't answer that. You know, our 25% ROE is certainly benefiting from a you know little bit wider loan-to-deposit ratio than we probably would expect in a steady state. And so, but you can also see in our guide, we don't expect dramatic meaningful changes in the short term. We're going to expect pretty balanced growth across deposits and lending.

So we expect a self-funding mechanism here where the, not only is the LDR led with deposits, but the lendable deposits also fully self-fund the loan growth that we're getting. Having said that, over the medium-term outlook, I would expect the LDR to tighten, you know, maybe from in the 60s where we are today into the 80% range, potentially. But, you know, that's if rates pull back. Right, right now we're, we still think it's, it will be in this range of, you know, 60%-70% for the next, you know, year to six quarters.

Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.

Good morning. A bit of a follow-up to some comments you just made. I wanted to ask about the deposit growth assumption. I found it interesting.

I think it's what's driving the higher net NII outlook, but your earning asset growth is actually a bit above the loan growth, on Slide 23. So just trying to get a sense of deposit growth assumptions, and obviously you give us a private bank, which is the one piece, but just the overall assumptions there and the confidence in, in that level.

Yeah. Well, we don't have a, a deposit guide here, but I think the expectation, Matt, is that the, LDR will stay relatively stable, over the course of the year. So we brought it down. You may recall, we were operating back in 2023, kind of in the high 80s. We brought it down in 2024 into the low 80s.

We now have it down into the high 70s, which is a place that I think we can sustain that and feel good about kind of the liquidity position there. And, you know, so that's kind of the overall forecast. I don't know, Aunoy, if you want to add anything to that.

Yeah. I think the only other thing to add would be probably our non-interest-bearing deposit growth has been very steady as well, both coming from the private bank and as well as the consumer bank. We expect that 22% to be in the zone as we go through. The two points I'd add on the non-interest-bearing would be, you know, we've gone through a period post-COVID, three years of consistent headwinds on spending out the excess surplus.

2025 was a year of that kind of running its course and flattening out. We started to see some very modest DDA growth in most benchmarks in the Consumer Bank. We were number one in our peer set on relative DDA performance versus peer banks. We expect that relative position to continue and move from a flattening to starting to see some very modest DDA growth. Then the Private Bank, you can see our DDA percentage in the high 30s, but it is important to also look at checking with interest. The entirety of the personal banking deposits in the Private Bank are in checking with interest, which is de minimis interest. When you add that in, our actual low-cost mix is in the mid-40s, and we expect that range to continue, the combination of DDA plus checking with interest.

So healthy growth in the private bank and non-interest-bearing or low-interest-bearing and continued number one performance or top quartile performance in the consumer bank on relative DDA.

And then just on the interest-earning asset growth, it's kind of 1%-2% of both loan growth and maybe deposit growth. Anything else driving that? You know, I think we've seen more banks point to kind of less earning asset growth on loan growth, and yours is the opposite. So I was just wondering if there's something else kind of driving that. I think you've expanded your swap business for customers. So I don't know if there's something with trading assets or a rethinking of how you hedge the balance.

I would say that, you know, the loan growth was 3%-5% and earning assets kind of 4%-5%.

So there may be a little build in liquidity. We may be adding to the securities books. Part of that is looking at the lendable deposits and the kind of what we see as growth in the private bank deposits, which have a little lower lendability than the consumer deposits do. And so it's really probably just a little mix in where we're building a bit of our liquidity to go match what we're doing in terms of the deposit composition growth.

Our next question comes from Ebrahim Poonawala with Bank of America. Your line is open.

Hey, good morning. I guess just a couple of quick follow-ups. As we think about the 16%-18% return, ROTCE exiting 2027, it implies the margin probably being somewhere between around that 340-350. Am I thinking about that correctly?

Yes, I would, I would say think of that, I mean, that's in that zone. Yep.

And then as beyond that, as we think about the new growth that's coming on the balance sheet, on, on, on Slide 19 for Private Bank, you call out the 4.1% spread on that growth. I'm just wondering if you had to have a similar number for the entire balance sheet in terms of growth, where would you say that new growth is coming? Is it close to 4%, close to 3%? I would love any color there.

Yeah, that's, that's an interesting question. I guess I would say the spread in the Private Bank and the Consumer Bank are relatively higher. The spread in commercial is relatively lower. Commercial, you're extending credit, to build relationships and do the cross-sell, to your fee-based complex. So that's a little bit of the dynamics there.

Got it. And just one more on the Private Bank, seven offices, four more to go. Why is that number not larger? Like, is it, is there only so much that you can do from a management bandwidth standpoint, or do you think once you have these 10 to 15 Private Bank offices, you've saturated the opportunity?

Well, I'll start and flip it to Brendan, but, you know, I'd say from a bandwidth standpoint, you want to make sure that these offices are really premium locations and premium fit out, and premium high-quality people, staffing them. And so we've done a lot and, we have another big agenda for this year, but we're certainly not done, when you get to exhaust the list that we have in front of us for 2027. We have a couple more in the pipeline, that are straddling between 2026 and 2027.

Then we have densification of some of our East Coast locations in Florida still in front of us when we look out into 2027. I think ultimately you could see this number get up to something like 25 or 30, and when we've kind of reached maturity with the private banking locations that we have before we would think about potentially other geographic expansion. Brendan, I'll flip it to you.

Citizens Financial Group (CFG) Q4 2025 Earnings Call Transcript

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