Citizens teases branch changes as it hunts for more deposits

• Key insight: Citizens Financial plans to revamp its branch network in hopes of attracting more customers and more deposits. It joins a growing list of large and regional banks doing the same.
  
• What's at stake: Citizens said it will double down on branches in its existing footprint. Taking that route avoids the costs and challenges of introducing the bank to new markets.
  
• Forward look: Citizens expects to unveil its branch strategy this summer. The plan will include opening new branches and closing or relocating others.
  

UPDATE: This article has been updated to include new comments from Citizens CEO Bruce Van Saun.

Citizens Financial Group is preparing to update its 14-state branch footprint, a project that will involve opening new offices in places such as New York City and relocating or closing others.

CEO Bruce Van Saun teased the upcoming changes Thursday, saying the $227.9 billion-asset regional bank is currently analyzing its retail branch network and expects to unveil details of its optimization plan by the middle of the year. The intent, Van Saun told American Banker, is not to reduce expenses, but rather to capture more customers, more households and more deposits.

The review comes as other large and regional banks reassess and revamp their own footprints, with an eye toward attracting more retail and wealth management customers. This week, JPMorganChase, Bank of America and PNC Financial Services Group said they're still investing in their branch networks, even though in some cases, their net branch count is still declining.

Citizens operates about 1,000 branches, with the bulk of them located in the Northeast. The New York metro area, where Citizens has been investing ever since it completed back-to-back acquisitions in 2022, is one market where it plans to add more branches, Van Saun said.

"We want to get to something that's … connects better to the local population, so we can start to grow households and deposits," he said. "We're looking at every place where we have a market position and [asking], 'Is this optimized, and if we were to optimize it, what would we do?'"

He said he doesn't anticipate a big change in the bank's total branch count. In the New York metro area, including the five boroughs of New York City, Long Island, New Jersey and Fairfield County, Connecticut, Citizens has 173 retail branches, a Citizens spokesperson said Thursday.

That's down from the 196 branches that Citizens acquired in that region following the closures of the HSBC Bank and Investor Bancorp acquisitions, the spokesperson said.

The bank also has one private bank office in New York City, according to the spokesperson.

One benefit of doubling down on Citizens' existing markets is not having to reintroduce the bank and avoiding the "top of funnel" advertising expenses that come with launching a brand in a new market, Van Saun told analysts Thursday during the bank's first-quarter earnings call.

The upcoming changes may involve relocating certain in-store branches, Van Saun told American Banker. The bank has long had relationships with grocery chains such as Tops Friendly Markets.

Over time, the change in strategy could yield $20 billion to $30 billion of new deposits, Van Saun said. During the first quarter, average deposits totaled $181.3 billion, up 5% year over year.

"Some of our peer banks are … taking the view that, 'Our footprint is pretty saturated and we need to go outside footprint to different regions of the country to get more growth,'" Van Saun said during the interview. "That's not our strategy."

First-quarter earnings beat

Citizens reported a solid first-quarter performance. Its net income climbed 39% during the first quarter as the bank benefited from increases in both net interest income and fee income.

Earnings per share totaled $1.13 for the period ending March 31, up 47% from a year earlier and surpassing analysts' estimate by four cents, according to S&P Capital IQ.

Citizens' still-young private bank continued to be a strong addition to the company, contributing 11 cents to its overall earnings-per-share total.

Revenue was approximately $2.2 billion for the quarter, up 12% year over year. Net interest income also rose 12% from the year-ago period, while fee income increased by 11%.

Expenses totaled $1.4 billion, up 5% year over year, in part because of costs related to the implementation of a three-year technology-overhaul project called "Reimagine the Bank," which aims to lean into artificial intelligence to revamp the call center, optimize vendors and provide digital advisory services.

By late 2028, Citizens expects the strategy to generate pretax, annualized run-rate benefits of $450 million, of which two-thirds will be tied to expense cuts. The rest of the payoff is expected to be related to revenue growth.

Citizens remains focused on its longer-term financial targets. It continues to expect to achieve a return on tangible common equity of 16% to 18% by the end of 2027.

For the first quarter, the bank's return on tangible common equity was 12.2%, the same as during the prior quarter and an improvement from the first quarter of 2025, when it came in at 9.6%. Citizens' efficiency ratio was 63.6% at the end of March, slightly higher than December but down from the year-ago period.

The bank repurchased $300 million of shares between January and March, and executives expect to buy back $225 million during the second quarter, they said on Thursday's call.

The private bank, which launched in 2023, delivered another strong quarter, accounting for about 10% of Citizens' pretax income and achieving a return on equity beyond 25%, Van Saun said on the earnings call. Citizens operates nine private bank offices, including three that opened during the first quarter. Another two, one in Florida and one in Connecticut, will open later this year.

During the quarter, Citizens said it had agreed to buy substantially all the assets of Matrix Capital Markets Group, an M&A boutique firm in Richmond, Virginia, that advises convenience retailers, wholesale fuel distributors, propane and heating oil distributors, and lubricant distributors. The all-cash deal, which closed during the quarter, is a way to strengthen Citizens' sector-focused advisory capabilities.

Citizens remains on the sidelines when it comes to whole-bank mergers and acquisitions, Van Saun said on the call. The bank is inclined to consider doing smaller, tuck-in deals, similar to the Matrix transaction, he said. The payments space in particular could be an area to bulk up, he added.

"It's faster just to go out and buy an M&A boutique that doesn't use a lot of capital, but we'll certainly look for things like [the Matrix deal] or maybe some things in the payment space that can accelerate our growth a little bit," Van Saun said on the call. "But these are generally going to be small."