Citizens Financial Group Inc Q1 2025 Earnings Call Summary

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

Question: John Pancari - Evercore Group L.L.C. - Analyst : Good morning. Just on the balance sheet growth, just wanted to see if you can give us a little bit more color around loan demand, what you're seeing here in this backdrop. Are you seeing -- what are some of the trends in line utilization? Are you seeing any REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call weakening of the pipeline and also any type of pre-tariff inventory build that might have driven a little bit of the growth in the near term but might be more of a pull-forward versus the outlook? If you can just give us some color there. Thanks.

Question: John Pancari - Evercore Group L.L.C. - Analyst : Great. Thank you for all that color. I appreciate it. And just quickly on my second question is just around capital. I know you're sitting here around 10.6% CET1, and you cited expectation for around $200 million to buybacks, similar to this quarter or to last quarter. But also, I know you mentioned -- I think Bruce, you mentioned this and, John, you mentioned it as well that you know if you did see weaker loan growth and weaker macro, you could see higher buybacks. Can you just maybe help frame that? If we do see weaker loan growth and a weaker economy, would you conversely maybe be more cautious and, therefore, maybe be a husband more capital versus step up buybacks? Can you just talk about how you view that trade off? Thanks.

Question: Ken Usdin - Autonomous US - Analyst : Thanks. Good morning. I wonder if you could talk through that push and pull on the capital markets outlook and the fee guide. So I guess, first of all, the record pipeline, what's your level of confidence in terms of closing those transactions? And secondly, if that that capital markets embedded expectation doesn't pull through how do we understand like the comp ratio offset and the magnitude of flex that you can have to keep PPNR close to in line? Thanks.

Question: Peter Winter - D.A. Davidson & Co. - Analyst : Good morning. I was wondering, just looking at interest rates, which have been extremely volatile, it seems like the forward curve changes daily. But can you talk about what the ideal interest rate environment is for Citizens and yield curve and conversely, what type of rate environment would put the NIM outlook potentially at risk? And are there any plans to reduce some of the asset sensitivity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call

Question: Peter Winter - D.A. Davidson & Co. - Analyst : That's great. Thanks, John. If I could ask just kind of a follow-up to Ken's question, you talked about the puts and takes with this uncertain environment, but could you just give an update on the positive operating leverage for the full year versus January's forecast of 1.50? Just I realized there's all this uncertainty, but just wondering how you're thinking about it.

Question: Erika Najarian - UBS Securities LLC - Analyst : Hi. Good morning. You have -- thank you. You've alluded to this in how you've responded to all the questions, particularly the PPNR one. But as you know, the net interest income outlook is quite important. And as I pull up the slide from last quarter, it's set up 3% to 5%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call So if I think about affirming the exit NIM on slide 21, and then the balance sheet seems to be fairly in line at least average earning assets were in line this quarter, unless we think that the balance sheet will shrink it seems like that up, 3% to 5%, it is still broadly in line, right, in terms of what you're affirming? So I just wanted to confirm that in terms of the full-year look.

Question: Erika Najarian - UBS Securities LLC - Analyst : Thank you. And switching topics on the reserve. So this is a two-part question. Number one, just a broad question here. What unemployment rate is your reserve sort of looking forward to? And second, John, could you talk through the dynamics that's perhaps unique to citizens about the non-core runoff? So as we think about perhaps the baseline case of unemployment potentially getting worse or the company waiting the downside case more, what is sort of the offset of the $1.9 billion student loan sale and the runoff portfolio? And obviously, the commercial real estate portfolio has been -- you've been resolving parts of that for some time now. So walk us through those two dynamics as we think about how to think about the provision from here as we think about perhaps a more uncertain economic backdrop, but also specific optimization of your loan mix?

Question: Erika Najarian - UBS Securities LLC - Analyst : Very thorough. Thank you.

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Good morning. A couple of follow-ups on feedback new categories. The service charges were quite strong year over year. And you mentioned cash management, which I think is pretty straightforward and then also overdraft. Just elaborate on the overdraft. Is it increased frequency? And why do you think that is? Were there some pricing changes? Or what drove that component? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Okay. That's helpful. And then in credit card, they were down, obviously, those 4Q on seasonal trends but also down a little bit year over year. I know we're trying to grow it. Is that just the cost of rewards and upfront sign-ons? Or what's driving that drop on a

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi, Bruce. Hi, John. Guys, can you share with us, as a follow-up to your comments on the non-core loan portfolio and in view of the sale of the non-core student loans, can you give us the pros and cons of selling the entire portfolio that you outlined on slide 16? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Great. Thank you. And then as a follow-up, obviously, your credit, you've got it in the control. And you talked very thoroughly about the office, commercial real estate portfolio and the challenges there. I noticed in the C&I portfolio -- and I know the numbers are not large, and it could be the law of low numbers that loans going non-accrual will push the number up -- but in slide 28, you do give us that breakdown of non-accruals. Can you give us some color on the C&I portfolio? The uptick again wasn't material in nominal levels, but what are you guys seeing in the C&I, especially in view of your outlook of the uncertainty we're all confronting with this economy?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Correct. But it's small. I understand it's small, but I'm just curious.

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : Hey, good morning, Just two very quick follow-up questions. John, maybe for you. I'm not sure if I missed -- when we look at your fee income guidance, you talked about the capital markets pipeline. What are we assuming for capital markets just from a fee revenue standpoint for second quarter and for the full year, if you don't mind sharing that?

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : Got it. And I guess maybe just a follow-up, on the margin outlook, when you have the margin for the end of the year, end of '26, can you remind us what the Fed funds rate underpinning there is? I appreciate the time sensitivity of what the NIM does. But what's the Fed funds rate? And if we get 100 basis points of Fed funds cut, let's say, between now and year-end, does that create some downside risk to that '25, '26 outlooks or not?

Question: Manan Gosalia - Morgan Stanley & Co. LLC - Analyst : Hi, good morning. Just a couple of quick follow-up questions. One was on loan growth. Can you talk about how much of the loan growth over the past year has come from NBFI loans and how you're thinking about the credit risk of that portfolio?

Question: Manan Gosalia - Morgan Stanley & Co. LLC - Analyst : Very helpful. And then as my follow-up, just on the non-core loan sale in the first quarter, how should we think about the benefit to NIM from that sale. I know the year-end NIM guide is relatively unchanged. So I was wondering if there's some offsets there, if there is a higher probability that you can hit the higher end of that guide? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00PM, CFG.N - Q1 2025 Citizens Financial Group Inc Earnings Call

Question: Manan Gosalia - Morgan Stanley & Co. LLC - Analyst : Okay. Thank you.