- Key insight: Citizens' net income rose by double digits during the first quarter, a result of an uptick in net interest income and a favorable income tax rate.
- Supporting data: The bank reaffirmed its expectation to achieve a return on tangible common equity of 16% to 18% by the end of 2027.
- Forward look: Citizens' three-year "Reimagine the Bank" project, which aims to cut costs and generate revenue by leveraging AI, is well underway, executives said Thursday.
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Citizens Financial Group's net income climbed 39% during the first quarter as the Providence, Rhode Island-based 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.
"We're pleased to start the year off strong, notwithstanding geopolitical tensions and uncertainty in the macro environment," CEO Bruce Van Saun said Thursday during the bank's first-quarter earnings call. "We delivered good financial performance in a seasonally soft quarter."
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' effective quarterly income tax rate was 20.5%, down from 22% in the prior quarter, but virtually unchanged from the same period a year earlier. The quarter-over-quarter reduction was mostly due to "discrete tax benefits" in the first quarter, the bank said.
The $227.9 billion-asset bank 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.
Citizens' private bank, which launched in 2023, delivered another solid quarter, accounting for about 10% of Citizens' pretax income and achieving a return on equity beyond 25%, Van Saun said. 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 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," he said. "But these are generally going to be small."
