Citizens Financial Group Inc Q4 2024 Earnings Call Transcript

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

Question: Scott Siefers - Piper Sandler Companies - Analyst : John, maybe I wanted to start on sort of that medium-term margin outlook. Can you just sort of add some additional context on what gave you the confidence to bump up the top end of that medium-term range to basically the extra error between the 340 and the 350 at the top end of the range, please?

Question: Scott Siefers - Piper Sandler Companies - Analyst : Got you. Perfect. And then separately, I was hoping you could help to put in a little bit more context, sort of the higher fourth quarter costs and investments. I mean certainly understand them in light of what you're building with the private bank. But just maybe curious about where you stand such that you're confident that costs can hold more firm after that small additional lift that we would expect in the first quarter.

Question: Erika Najarian - UBS - Analyst : As we -- just wanted to think about some of the dynamics that are more strategic than mechanical on the margin improvement, John, give us a sense in terms of how you're thinking about deposit growth and the mix of that deposit growth and also sort of what the repricing cadence looks like? And given that the neutral rate seems to be settling around 4, does the pacing change is the beta fast first and slow down as loan growth comes back?

Question: Erika Najarian - UBS - Analyst : Great. That's helpful. And just secondly, just a quick follow-up, and I just wanted to ask a bigger question of Bruce. One, John, given all those elements and the fact that you're entering at 2.87% on -- for the year, and you have a 3% net interest margin guide for the full year. Does that mean the exit is somewhere between 3% to 3.10%. And if so, grows that to up for a very strong year, not just mechanically, but strategically, I think the question that I was getting this morning is where are we in terms of the investment horizon and with regard to the private bank and the private wealth initiative. In other words, you're setting up for great NII growth in 2026. And investors are wondering if you're going to continue to front load some of the investment spend in the Walton Private Bank initiative.

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Just on the timing of the ROTCE targets that you laid out medium-term. Is that implied for 2027 or just a liquidity on that?

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Sorry. That's right. The 16% to 18% medium term, any way to frame the timing?

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Okay. And then you laid out the waterfall in terms of how you get there. And just to clarify, the operating leverage of 1.5% this year. Obviously, there's a nice improvement in that in the next couple of years to support that ROTCE level, right?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Bruce, can we take a step back for a moment. Obviously, we have a new administration coming in and we're going to get a number of new heads of the different regulatory agencies, maybe the most important change coming from the Vice Chair of safety and soundness at the Fed with [bar] stepping down about two weeks ago. When you look at it, how you kind of thinking about what can change to the benefit for not just for the banking industry? What are you looking or hoping for that these new leaders can come in and really enable the banking industry to the Treasury Secretary nominee in his testimony, get the banks more involved in the US economy.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Just quickly on what you just said, Bruce, consolidation at the smaller end of the spectrum. How do you define smaller and $10 billion in less asset-sized banks or something smaller.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Great. And then as a follow-up question, can you guys -- you give us very good detail on your commercial real estate portfolio and how you're working through the issues that the industry confronts on commercial real estate office, in particular, can you give us an update on using the baseball vernacular, what inning do you think we're in, in getting through this kind of pig in the python situation in commercial real estate, specifically office?

Question: Manan Gosalia - Morgan Stanley - Analyst : I wanted to ask about the belly of the curve. How much of an impact does that have on both the asset and the liability side of the balance sheet. So I'm thinking from an asset it gives you some more benefit from fixed asset repricing. But on the liability side, maybe it makes it a little bit harder to drop those CD rates further. Is that something you guys are focusing on? Does it -- is there a risk that if the value of the curve keeps moving higher, could that weigh on some of those deposit betas from here?

Question: Manan Gosalia - Morgan Stanley - Analyst : Yes. I'm just thinking with -- you guys were actually ahead of the curve when the Fed was cutting rates and you were able to drop those deposit rates sooner. So I'm just thinking now that there's not as many rate cuts in the forward curve and the belly of the curve is higher, whether that's weighing on deposit costs at all.

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Perfect. And if I can just ask a follow-up on loan growth. you're looking for mid-single-digit spot loan growth, excluding noncore loans. Can you talk about the catalyst there? And also like where do you see loan growth coming from? Is it sponsors? Is it traditional middle market? Is it both?