Citizens Financial Group Inc at Goldman Sachs U.S. Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Nash - Goldman Sachs - Analyst : So maybe to kick it off. So it's been a busy year for the bank with lots of initiatives going on, all the things I referenced the Private Bank, Metro New York, Private Capital and a handful of others. So maybe just talk about the strategy behind all these initiatives? And how do you think the bank is positioned to succeed in '25? And kindly mute your phones?

Question: Ryan Nash - Goldman Sachs - Analyst : So lots of things in there that we will get into Bruce. Maybe just as you look into the future, you've been targeting a 16% to 18% return. And while there's been some noise in the results from BSO to build out the Private Bank, the core bank is still putting up an 11% return in what has been a challenging backdrop. Maybe just talk about the path from getting from where you are operating today to 16% to 18%. What are the key drivers? And over what time frame do you think this can happen? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 3:00PM, CFG.N - Citizens Financial Group Inc at Goldman Sachs U.S. Financial Services Conference

Question: Ryan Nash - Goldman Sachs - Analyst : Maybe let's spend a minute on the economy. So post the election, there seems to be a lot of excitement that we'll have an administration that's pro business. I know you're out in the market a lot of talking to commercial clients. Maybe just talk a little bit about how are they feeling about their business post the election?

Question: Ryan Nash - Goldman Sachs - Analyst : Got you. Makes a lot of sense. So one of the things that transpired over the years, obviously, loan growth has been somewhat just disappointing, given all the uncertainty that you talked about waiting on the election, what the Fed is going to do with rates. I'm just curious, based on your conversations that what you're seeing and hearing, what are your expectations for loan demand, both on the commercial side and consumer? And how long do you think it's going to take for us to start to see more meaningful core loan growth to pick up? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 3:00PM, CFG.N - Citizens Financial Group Inc at Goldman Sachs U.S. Financial Services Conference

Question: Ryan Nash - Goldman Sachs - Analyst : Maybe to dig into some of the initiatives you just referenced, growth in the Private Bank. You've been building it out. You reached a milestone in the third quarter with breakeven, despite I think you just referenced for loan growth has been a little softer. Talk about how the build-out has been progressing? What have been some of the lessons learned? And how do you feel about some of the key financial targets that you had laid out regarding this?

Question: Ryan Nash - Goldman Sachs - Analyst : Maybe the shift gears, a little talk about the Private Capital, an area where you've had tremendous success, one in sponsored middle market book runner and been building a host of other capabilities. Parts of the business have been held back by higher rates. So maybe just talk about where you're investing within that ecosystem? What are the best opportunities in that business? How are you working with private credit? And do you view this as an opportunity or a threat?

Question: Ryan Nash - Goldman Sachs - Analyst : Let's shift gears and talk about some financial things. So you put out a medium-term target for a 3.25% to 3.40% NIM. You've laid out some of the factors for swaps, noncore runoff, improving balance sheet mix and obviously, the strength of the deposit base, which has been an ongoing project. And I think this included reaching 3% in '25. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 3:00PM, CFG.N - Citizens Financial Group Inc at Goldman Sachs U.S. Financial Services Conference However, I think some people walked away from last quarter's EPS call thinking that it was more back-end loaded. And since earnings, we've obviously seen the rate curve move around a bit. So can you maybe square what the margin message you're trying to get across? And what will it take to reach that targeted level?

Question: Ryan Nash - Goldman Sachs - Analyst : So Bruce, earlier on, you referenced the transformation of the deposit base. So last cycle, you're on the upper end of peers when it came to deposit cost increases. This time, you were one of the best. And there have been a handful of things driving this, right, growing low-cost branch-based deposits. I think it was a 7% CAGR from '18 to '23. Obviously, Metro New York customer acquisition. Talk about what drove this improvement this cycle? And how does that position you for the next leg of the rate cycle?

Question: Ryan Nash - Goldman Sachs - Analyst : So maybe more near term, Bruce, so we're two months into the quarter. You've given a handful of items for 4Q. I think it was NII up 1.5% to 2.5%, the margin up 5%, fees up mid- to high single, cost up 2% and stable charge-offs. Maybe just give us an update on how the quarter is progressing and any trends that you're seeing in the market?

Question: Ryan Nash - Goldman Sachs - Analyst : Great. Maybe to build on one point, you noted that you talked about a 40% near-term beta, you're having success and maybe something similar on the way down as you have on the way up, so maybe low 50s. Obviously, the environment has shifted a little bit. We've heard from some other banks good near-term success, but maybe a little bit slower than they had thought just given the less rate cut. How are you thinking about overall your ability, given that, as you just said, you're in optimization mode on the deposit side. How does that, along with the shifting rate curve impact your ability to bring down rate over time?

Question: Ryan Nash - Goldman Sachs - Analyst : So you referenced it earlier, but obviously, post the election markets have become optimistic regarding capital markets, which I've enjoyed to see. Can you maybe just talk about what you're hearing from clients in terms of willingness to transact? What do you think capital market activity looks like, not only in '25 and over the next few years? And what are the other best opportunities to grow fees looking ahead?

Question: Ryan Nash - Goldman Sachs - Analyst : And when you think about investing into next year, you've obviously committed to positive operating leverage in '25 and for the next few years. When you think about investing in the franchise, are we back to more normal obviously, 2024 was a very successful year on the cost front. Are we back to more normal years where we have some headline expense growth that's a little bit more elevated, and we use top to get back to more normal run rate?

Question: Ryan Nash - Goldman Sachs - Analyst : Sure. So shifting to capital. So banks have a very strong capital position. I think 10.6, which is above the target, one of the strongest adjusted capital ratios without needing to raise capital or do anything strategic. And you've been buying back stock consistently with the $200 million to $300 million a quarter clip. When you -- thinking ahead, like -- maybe give us some updated thoughts on capital allocation, are you planning on getting more aggressive in returning capital? Are you holding dry powder for the return of loan growth? How are you thinking about capital allocation?

Question: Ryan Nash - Goldman Sachs - Analyst : I noticed you didn't make any reference to inorganic activity there, Bruce. The bank has not been interested in M&A for a variety of factors, the balance sheet marks and the other items. Do you think the shifting political and regulatory environment changes the way you think about acquisitions, whether traditional bank or even nonbank acquisitions?

Question: Ryan Nash - Goldman Sachs - Analyst : Maybe just one last question to end on, Bruce. You touched on credit a couple of times, we're running around 50 basis points. You noted that maybe that's elevated where you expect to be. At earnings, you had some positive comments near the Beacon NPA and criticized. Maybe just give a quick rundown how you're feeling in credit over the medium term and maybe separating it out office versus everything else?