Citizens lays out tech overhaul, says profit goals are close

• Key insight: Citizens is planning to revamp its tech stack over the next three years, but the bank said the strategy isn't necessary for it to hit profitability targets.
• Supporting data: The bank expects the latest initiative to deliver run-rate benefits of $450 million, but those aren't baked into its guidance for future returns.
• Forward look: Citizens expects to reach its return on tangible common equity and net interest margin goals by the end of 2027.

Citizens Financial Group's stock price surged more than 7% Wednesday after the bank announced that its profitability goals are within reach.

The Providence, Rhode Island-based company beat market expectations for its fourth-quarter earnings, and predicted strong growth for 2026.

Citizens Chief Executive Officer Bruce Van Saun said the bank has garnered investor confidence by proving its investment theses — efforts like building out its private bank, honing in on certain middle-market business and treading further into the mass affluent consumer market — with steadily improving returns.

"We've laid out a very credible plan about how we're going to drive our earnings higher and our return on equity higher," Van Saun said in a Wednesday interview with American Banker. "And as we continue to put up proof points … the market is revaluing us and saying, 'Hey, if it really does happen, then this stock was too cheap and its returns are going up and it should trade higher.'"

Citizens' stock is up more than 32% from a year ago, while the Nasdaq Regional Banking Index has risen less than 6% over the same period. The company's stock was trading at $64.17, as of Wednesday afternoon.

The bank is also overhauling its technology to serve customers through a strategy it calls "Reimagine the Bank," a three-year program that will include initiatives like revamping the call center, optimizing vendors and providing digital advisory services.

Of the roughly 50 initiatives outlined in the plan, about 60% involve leveraging some form of advanced technology, like artificial intelligence, Van Saun said in the interview.

The effort isn't designed to cut costs, Van Saun said, though it will. By the end of 2028, Citizens expects the strategy to generate pretax, annualized run-rate benefits of $450 million — about two-thirds of which will be related to expense efficiencies, while one-third will be related to revenue.

"It's not really about expense efficiencies," he said. "What it's about is changing the way we're running the bank in terms of how we serve our customers and how we operate. … Job one is to re-architect how we're doing things to really significantly improve the customer experience, particularly at the consumer end."

Most of the largest banks in the country have detailed plans in recent years to revamp their technology stacks, especially through the adoption of AI, for both streamlining back-end functions and enhancing customer-facing products.

Citizens plans to spend $50 million on implementation costs for the "Reimagine the Bank" plan in 2026, and $100 million in both 2027 and 2028.

Van Saun added that while the plan is "quite detailed," as new technologies arise, the bank will look to reap further upside from additional innovations. The initiative is expected to contribute to overall profitability, but it's unclear how much total impact it will have, he said.

"We have a lot of wood to chop to actually execute this program, but we'll be reporting on it all along," he said on a call with analysts. "We'll have more visibility into the flow-through as time goes by. … I would expect that the flow-through should be high, but we're not going to make that call at this point."

But Van Saun said that Citizens expects to hit its financial goals regardless of the outcome of its tech overhaul plan.

Citizens took a risk in 2023 when it began building out its private bank in the wake of a series of bank failures. Now, the company has close to 600 private bank employees and seven offices across the country, with plans to hire more than 100 bankers this year and open four new locations across Florida, California and the northeast.

In 2025, the private bank was 7% accretive to pretax income, beating the bank's target that the business would be 5% accretive.

The company brought in $489 million of net income in the fourth quarter, up 32% from the same period a year prior. Citizens logged diluted earnings per share of $1.13 in the last three months of 2025, beating analyst consensus estimates of $1.10.

In 2026, the bank projects net interest margin expansion of 4 to 5 basis points per quarter, loan growth of 2.5% to 3.5%, net interest income increase of 10% to 12% and fee income growth of 6% to 8%.

Citizens' medium-term target for return on tangible common equity is between 16% and 18%, which it expects to hit in the second half of 2027, up from its current ROTCE of 12.2%. The bank's net interest margin goal for that time is between 3.3% and 3.5%, up from its current NIM of 3.07%.