With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

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The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

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This year’s Fortune 500 marks the 67th running of the list.

Operating throughout New England and the central parts of the U.S., the bank chain owns over 1,000 locations and 3,000 ATMs in 11 states.

This year's Fortune 500 marks the 66th running of the list.

With a banking business serving customers primarily in the Northeast, Citizens operates 1,000 branches and 2,800 ATMs. Citizens held $176.7 biliion in assets as of March 31, 2020.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

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One of the oldest financial institutions in the U.S., Citizens Financial Group was founded in 1828 and now provides a variety of retail and commercial banking products and services, operating through its consumer banking and commercial banking segments. The consumer banking segment offers products including mortgages and credit cards and services like wealth management, while the commercial banking segment provides services such as lending and leasing, foreign exchange, and deposit management to companies in various sectors. Formerly called RBS Citizens Financial Group, the company became Citizens Financial Group in 2014.

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Citizens Financial Group (CFG): Company Profile, Stock Price, News, Rankings

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Citizens Financial Group

citizens financial group

Good morning everyone, and welcome to the Citizens Financial Group first quarter 2026 earnings conference call. My name is Ivy, and I will be your operator today. Currently, all participants are in a listen-only mode. Following the presentation, we will conduct a brief question and answer session. As a reminder, this event is being recorded. Now I will turn the call over to Kristin Silberberg, Head of Investor Relations. Kristin, you may begin.

Thanks, Ivy. Good morning, everyone, and thank you for joining us. First this morning, our Chairman and CEO, Bruce Van Saun, and CFO, Aunoy Banerjee, will provide an overview of our first quarter results. Brendan Coughlin, President, and Ted Swimmer, Head of Commercial Banking, are also here to provide additional color. We will be referencing our first quarter presentation located on our investor relations website. After the presentation, we will be happy to take questions. Our comments today will include forward-looking statements which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review in the presentation. We also reference non-GAAP financial measures, so it's important to review our GAAP results in the presentation and the reconciliations in the appendix. With that, I will hand it over to Bruce.

Okay. Thanks, Kristin, and good morning, everyone. Thanks for joining our call today. We're pleased to start the year off strong, notwithstanding geopolitical tensions and uncertainty in the macro environment. We delivered good financial performance in a seasonally soft quarter with year-over-year EPS growth of 47%, positive operating leverage of 7% and NIM expansion of 24 basis points. Our balance sheet position continues to be robust, with CET1 at 10.5% and our allowance for loan losses at 1.52%. Credit trends continue to be favorable across our portfolios, and we continue our loan mix shift towards deeper relationships with lower credit risk. Execution on our strategic initiatives continues to track well.

The private bank and wealth business showed further growth in customers, balance sheet, and profitability, now accounting for roughly 10% of our pre-tax income while delivering an ROE in excess of 25%. During the quarter, we opened three more PBOs, bringing the total to nine. Reimagine the Bank is off to a solid start, and we reaffirm our $450 million P&L target by the end of 2028. We estimate about $100 million in 2026 exit run rate benefits at this point. Our positioning with private capital continues to be excellent. We anticipate a strong year for private equity sponsor activity, which should provide balance sheet and fee opportunities for us. We've reviewed all of our lending to private credit vehicles at a granular level, and we feel good about our credit exposure. The New York City Metro initiative also continues to show further progress.

We are growing across retail, small business and middle market. We're in the process of analyzing Citizens' existing branch footprint for net new investment and optimization, with New York City likely to see growth in branches in coming years. We should have more details to share with you on this mid-year. We're also focused on an initiative we call One Citizens, which is systematically finding ways to work across the enterprise to deliver valuable solutions to our customers. Now that we have stood up the private bank and continued the build-out of our corporate bank, we have the capacity to provide both personal and corporate services to successful business owners, investors, and entrepreneurs. We will report more on this as the year progresses, but we're already gaining real traction.

As we look ahead to the second quarter and the full year, we remain cautiously optimistic that we'll be able to navigate through external challenges and still deliver the strong results we projected coming into this year. So far, markets have behaved rationally despite the war, with equity markets holding in and credit spreads only slightly wider. We intend to stay on our investment plan for the year unless the macro takes a meaningful turn for the worse. We're pleased with the regulatory changes we see coming from Washington, D.C., and we look forward to the upcoming CCAR stress test results, which we're hopeful will give a more accurate result for Citizens than what we've seen in the past. To sum up, a good start, well-positioned with a great strategy and a great team, and optimistic for a strong 2026. With that, I'll turn it over to Aunoy for the financial details. Aunoy.

Thanks, Bruce. Good morning, everyone. As Bruce mentioned, Citizens has started the year well. Referencing slides three and four, we delivered EPS of $1.13 for the first quarter with ROTCE of 12.2%. Results were paced by strong NII, reflecting both continued net interest margin expansion and solid loan growth. We also delivered our best-ever first quarter fee result, led by strong performance in our commercial bank. The solid revenue performance and expense discipline drove more than 700 basis points of positive operating leverage year-over-year, notwithstanding continued investment in the private bank and our other strategic priorities, along with ramping up our Reimagine the Bank program. The private bank continued to grow its profitability, contributing $0.11 to EPS, up from $0.10 in the prior quarter, as the business delivered another very strong quarter of deposit growth.

Now let me walk through the first quarter results in more detail, starting with net interest income on slide five. Net interest income was up 1.6% linked quarter, driven by the benefit of an expanded net interest margin and higher interest earning assets, including strong loan growth, which more than offset the day count impact of about $22 million. As you see from the NIM walk at the bottom of the slide, our margin improved seven basis points to 3.14%, driven primarily by the benefits of the reduced drag from terminated swaps and non-core runoff with a five basis point of combined impact, the fixed-rate asset repricing benefit of one basis point, and lastly, the net impact of one basis point related to improved funding cost and mix, largely offset by lower asset yields. We continue to do a good job optimizing deposits in a competitive environment.

Our interest-bearing deposit costs were down 16 basis points, and total deposit costs were down 12 basis points. The cumulative interest-bearing deposit beta improved to 50% as we benefited from the repricing after the last rate cut. Even with the Fed now expected to hold steady in 2026, we are still projecting a high 40 beta for the cycle. Moving to slide six. Non-interest income is up 11% year-over-year, but down 2% linked-quarter. As I mentioned, this was our strongest first quarter fee result ever, notwithstanding heightened geopolitical tensions and an increase in market volatility. Capital markets performance demonstrated the strength and diversity of the franchise, with fees up 34% year-over-year and down 4% compared with the strong fourth quarter. M&A delivered a good result in the quarter with our pipeline is strong and continues to build.

Bond underwriting was up nicely from the prior quarter. Our equity underwriting performance was stable linked quarter and up significantly year-over-year. Loan syndications were lower given the market volatility. We continue to maintain strong market share, ranking fourth in the middle market sponsors book runner deals by volume. This is for both the first quarter and over the last 12 months. Our deal pipelines across M&A, debt, and equity capital markets continue to build, notwithstanding the unsettled environment. Our global markets business was up $10 million linked quarter with increased client hedging activity in interest rate products and energy-related commodities. Our wealth business continues to build with progress in the private bank and strength in our retail network. Wealth fees are up 2% linked quarter and 23% year-over-year. These results reflect higher advisory fees with continued positive momentum in fee-based AUM growth year-over-year.

The first quarter results reflect positive net inflows, partially offset by market impacts on AUM. Mortgage was down 19% linked quarter, given a lower MSR valuation, partially offset by slightly higher production and servicing fees. On slide seven, expenses were managed tightly, up 2.6% linked quarter, largely reflecting the usual seasonality in salaries and benefits, as well as about $6 million of implementation costs to ramp up the Reimagine the Bank program. On slide eight, average and period-end loans were up 1% linked quarter. We saw solid loan growth across each of the businesses. Commercial loans, excluding the private bank, were up 1% on a spot basis. This was driven by net new money originations of higher commercial line utilization. This was partially offset by CRE paydowns. We continue to reduce commercial banking CRE balances, which were down about 4% this quarter and 16% year-over-year.

The private bank delivered good loan growth again this quarter, with period-end loans up about $600 million, driven by growth in multi-family and residential mortgage. Growth in retail loans ex non-core on a spot basis was about $300 million, led by real estate secured categories. This was offset by non-core auto portfolio runoff of roughly $500 million for the quarter. Next, on slides nine and 10, we continued to do a good job on deposits, with average deposits up 1% or $1.5 billion quarter-over-quarter, primarily driven by the growth in the private bank, which reached $16.6 billion at the end of the quarter. This was partially offset by seasonal impacts in commercial.

Year-over-year, average balances are up $8.6 billion or 5%, reflecting combined growth in the private bank and commercial of $11.2 billion, partially offset by roughly $2 billion of reduction in higher cost treasury broker deposits. On a spot basis, non-interest-bearing balances are up $1.3 billion or 3% quarter-over-quarter, and up $4.1 billion or 11% year-over-year, improving the overall mix to 23% of the book. Our total non-interest-bearing and low-cost deposit mix was steady at 43%, and our consumer deposits are 64% of our total deposits. This compares to a peer average of about 56%. Moving to slide 11. Credit continues to trend favorably, with net charge-offs coming in at 39 basis points, down from 43 basis points in the prior quarter.

Non-accrual loans are down modestly linked-quarter, reflecting a decrease in commercial, largely driven by C&I, which was partially offset by an increase in mortgage. Turning to slide 12. The allowance was essentially stable this quarter, with ACL coverage ratios of 1.52%. This reflects the continued improvement in our portfolio mix with non-core runoff, the reduction in CRE, and strong originations of lower loss content C&I, residential real estate secured, and private loans. The economic forecast supporting the allowance contemplates a mild recession with a slight deterioration compared with the last quarter, reflecting the potential impact of higher energy prices. As we look broadly across the portfolio, the credit outlook remains positive, though we continue to carefully monitor the macroeconomic environment. Moving to slide 13. We maintained excellent balance sheet strength, ending the quarter with CET1 at 10.5%.

We returned about $500 million to shareholders in the first quarter, with $198 million in common dividends and $300 million of share repurchases. Moving to slide 14. The private bank continues to make excellent progress. The private bank delivered strong deposit growth, again, ending the quarter at $16.6 billion. Importantly, the overall deposit mix and cost continues to be very attractive. We also delivered solid loan growth in the quarter, adding about $600 million of loans at a healthy spread of 4% over deposit cost to end the quarter at $7.7 billion of loans. We ended the quarter with $10.1 billion of total client assets, with modest net inflows partially offset by market impacts. We have more runway here as we plan to continue adding top-quality teams in key geographies.

We opened offices in Menlo Park and Laurel Village in the first quarter, and we expect to open at least two more offices this year in West Palm Beach, Florida and Greenwich, Connecticut. Moving to slide 15. Our Reimagine the Bank program is off to a great start. The objective is to position Citizens for long-term success by embracing a host of new innovative technologies across the bank and simplifying our business model, which will reshape our customer experience and drive a meaningful improvement in productivity and efficiency. The program is well underway, with work commencing on several key work streams. For example, on the technology front, we are leveraging AI to assist in writing code and expect to have material productivity improvements in software development, cutting down cycle times.

We are also using AI to improve our interactions with customers, which we expect will materially cut call volumes and improve the overall customer experience. We expect to exit 2026 with an annualized run rate of about $100 million of pre-tax benefit. Now moving to slide 16. We provide our outlook for the second quarter. We expect net interest income to be up in the range of 3%-4%, driven by continued expansion in net interest margin and earning asset growth. Non-interest income is expected to be up 3%-5%, led by capital markets, with some risk if market volatility moves higher. Other fee categories such as FX and derivatives, wealth, and card should also provide lift for the quarter.

We are projecting expenses to be stable to up 1%, incorporating a step-up in implementation costs associated with Reimagine the Bank and continued investment in other key business initiatives. We expect expenses from Reimagine the Bank to benefit second-half expenses. The charge-off level is expected to be stable to down slightly, and we should end the second quarter with CET1 in the range of 10.5%-10.6%, including share repurchases of about $225 million. In addition, our full-year outlook remains broadly in line with the guide we provided in January, which contemplated a pickup in business activity over the course of the year. Looking out further, we see a clear path to achieving our 16%-18% ROCE target by the end of 2027.

Expanding our net interest margin is an important driver, and we continue to project NIM to be in the range of 3.22%-3.28% in 4Q 2026 and in the range of 3.30%-3.50% in 4Q 2027. Slide 17 provides incremental details on our net interest margin progression to the end of 2027. This, combined with the impact of successful execution of our strategic initiatives and normalizing credit, should drive ROCE to our target range. To wrap up, we are off to a good start to 2026, with results highlighted by strong growth in net interest income and good fee results in a seasonally soft quarter. Our balance sheet is strong, and we continue to drive forward our strategic initiatives with strong momentum in growing the private bank and in our Reimagine the Bank program. With that, I will hand it back over to Bruce.

Okay. Thank you, Aunoy. Operator, let's open it up for Q&A.

We'll now proceed to the question and answer portion of the call. At this time, if you would like to ask a question, please unmute your phone, press star one and record your name clearly when prompted. If you need to withdraw your question at any time, please press star two. Again, that is star one to ask a question. Our first question comes from Scott Siefers from Piper Sandler. Please go ahead.

Morning, guys. Thank you for taking the question. Let's see. I was hoping you could maybe start by speaking to kind of the capital markets dynamics. Obviously see the numbers in the first quarter, but curious how you thought the first quarter actually performed, given that you had sort of the interplay between one, the environment played out a lot differently than we all figured it might. Two, I know you all had some deals that were pushed from the fourth quarter into the first quarter, so maybe just sort of results versus expectations, and then if you could speak to the forward look, things like pipelines, confidence in pull-through, etc.

First and then hand over to Ted to provide more color. I would say all things considered, we're pleased with the performance of the capital markets franchise in an environment that had increased volatility and lots of uncertainty, particularly in March once the war kicked in. We have good diversification across our different services in capital markets. We have M&A, we have bond underwriting, equity underwriting, and syndicated loans. I think that diversity helped us print a good quarter. There was some leakage, I would say from March that's geared up to go in April, which now that we have more optimistic tone to the market, we're actually starting to see that come through. We may be in this situation where our pipelines are very full. We're very optimistic given kind of the strength of the franchise, the likelihood that people want to transact.

If there's this external volatility ebbs and flows, you could see people pull to the sidelines, wait for the opportune time, for example, to go to market. Hopefully that cleans up. We're certainly not taking our numbers down for the year. In fact, we feel quite good about that given the level of activity that we see and the pipeline strength that we have. Ted, over to you.

Building on what Bruce just said, we took a couple transactions in March that we would've launched into the market and pushed them into April, just given the volatility in the overall markets. During that whole period of time, we continued to sign up new transactions. I think what's really exciting about the transactions that we're signing up, based on the investments we made in corporate finance and industry specialization, we now are doing more complex transactions and getting signed up on more complex transactions than we ever had before, and feel very good about what those transactions are and how the pipeline is building. Add to what Bruce just said, the deals that got postponed in March, especially this week, we've seen them back into the market.

We are launching several transactions and part of several transactions that were postponed in March that are getting very good reception now in April. We continue to feel very optimistic about the pipeline, especially on the M&A side. During this whole period of turmoil, we really actually saw a pickup in new mandates, especially on the M&A side of the business.

Yeah. I should just close by saying it was a record first quarter for us in capital markets fees. That shouldn't go unnoted.

Yeah, totally agree. Okay, perfect. Thank you. That's very helpful. I was hoping you all would maybe speak to the private credit portfolio as well. I know there's a lot of good detail in the appendix. Just curious sort of not only for an update on credit quality dynamics, but also given your build out of the team over many years. I know it's been a focus area, just sort of your appetite to continue to grow the portfolio given sort of certain current industry circumstances.

Yeah. I'll start again and flip to Ted. I would say we've been very disciplined in terms of the kind of counterparties that we select. Usually they're often a private equity sponsor that's migrated to a broader kind of business model that picks up private credit, and they're moving to be more of an alternative asset manager. We've helped them grow and get into this business and provide leverage to many of those names. Client selection is always key. Making sure we have the right structures in place so that we're structurally protected from any issues that could arise in the portfolios. We've gone through and looked at kind of our exposure and kind of the broad portfolio, looking at all the underlying factors, who has liquidity gates for retail investors, who's got software exposure.

At the end of the day, I feel very confident that we're structurally well protected from a credit loss standpoint. I think even though this is in the headlines and there's concerns about private credit, the asset class, if you want to call it that, is here to stay. They provide a certain amount of leverage and deal structures that exceeds what banks have historically been willing to play. There's certainly a lot of institutional demand. Folks or private credit managers are continuing to raise new money. I think we'll just grow selectively with the market as we have in the past. We don't see this turning around and being something that starts to shrink. It's just going to grow. I think every player in the market will be more selective, and we'll continue to be selective, but we would expect this to be an area that we stay committed to. Ted.

Just adding on to what Bruce said. In a number of conversations we've had with private credit since the noise has really started, we really haven't seen a decrease in appetite. In fact, in a lot of the conversations and the deals we're getting ready to launch. We're getting inbound calls from the private credit side of the business. Technology and software is certainly something that they're not all that interested in investing in right now, but for the most part, the majority of their portfolio, they're still very hungry and there's a lot of demand out there.

Perfect. All right, thank you all very much.

We'll go to the line of Manan Gosalia from Morgan Stanley. Please go ahead.

Maybe to start on NII. I know you broadly reiterated the guide for the year including the NII guide and the exit NIM. You have noted that Citizens' skew is slightly asset sensitive. In a scenario where rates stay high for longer, we don't get any rate cuts until the end of the year. Where do you think the NII and NIM is trending, and what's the most likely outcome here?

Yeah. We feel really good about our ability to deliver the kind of NII and the NIM that we gave in the beginning of the year guide. As you say, the environment is going to have an impact to some degree, and a bit of a pause by the Fed. A little higher rate scenario that we came into the year, given asset sensitivity, is modestly positive for us. The little slightly steeper yield curve. We had assumed 425-450 is the 10-year, and we're kind of in that zone. To the extent that moves up and there's a little more steepening, that's also potentially positive to the outlook. I wouldn't say it's a game changer. These are kind of marginal benefits that give us even more conviction that we can deliver to the numbers or slightly ahead of the numbers. With that, Aunoy, I'll turn it over to you if you want to add any color.

Yeah, I think, Manan, to Bruce's point, we are very confident on getting to the NIM and the NII outlook that we gave. I think on the NIM side of it, as you saw from our walk in 1Q, a lot of the benefit is coming from the terminated swaps and the non-core runoffs, which is not rate dependent, and that's another 12 basis points for the rest of the year. The front book dynamic, as Bruce said, would be helpful in this environment. We remain confident on getting there. As you saw, we have some good loan growth. We have good traction and pipeline on that. We feel confident of getting there. Yep.

Perfect. Then maybe to pivot over to capital, given the new proposals that we got a few weeks ago. If you could give us your initial thoughts on what the magnitude of the benefit is for risk-weighted assets given your specific business mix, and maybe if you have any thoughts on whether Citizens would adopt the ERBA?

Okay. Sure. It's still early days, and we're going through a comment period, but based on what we see now, this could deliver kind of a 10% reduction in risk-weighted assets, which would translate to in excess of 100 basis points. Call it 110 basis points or so of CET1 improvement. The AOCI phase-in, if it happened right today, it would basically mitigate that. As it phases in over time, some of that drag will dissipate, and so we would expect to be kind of at least 30 basis points to the good net net, even with AOCI, maybe as much as 50. We'll just have to see how the rate curve plays out from here. Anyway, it's a good problem to have. It's probably early days to say kind of what we'll plan to do with that.

There'll be a lot of considerations. What are stakeholders' expectations? The market, the rating agencies, the regulators, etc. Anyway, it's a good issue for us to think about. The other thing is on this ERBA. There's a modest improvement even over the revised standard approach. There's a lot of work that goes into that. You'd have to step back and decide, do you want to do it? One of the things that sticks out as a difference between the two approaches is kind of the lesser risk weights under ERBA for investment grade credit. We'll have to see if that gets imported into the revised standard approach so there's no difference, or whether there is a difference that might pull you towards wanting to move over and do the ERBA approach. Aunoy, anything to add?

Yeah. I think as Bruce said, Manan, we are going through all the advocacy on some of these things that Bruce mentioned. We are also looking at all the work that needs to be done on ERBA versus standardized for what's there. Now with a lot of new technology, things could be really different in some ways. There's a lot to do here still. As Bruce said, it's in the right direction, and we feel good about it.

I appreciate all the color. Thanks, Bruce. Thanks, Aunoy.

Next we'll go to the line of Ryan Nash from Goldman Sachs. Please go ahead.

Good morning, Bruce. Good morning, Aunoy.

Bruce, you've had four straight quarters of sequential loan growth. If I look at the drivers of growth, clearly, private capital call, private credit have all been contributors. Maybe you could just talk about your confidence in loan growth from here and what you see as the key drivers. Then second, I know you referenced higher utilization. What's driving that? Are you expecting to see more of this? Thank you.

Yeah. I'd say that the really impressive thing, Ryan, is that we're getting the growth in each of the three main business areas. Private bank, being kind of that startup phase, is growing their book nicely and consistently. I think that leans a little bit more on the consumer side and multifamily side. That should continue. We had actually low line utilization with their client base, which should bounce back. We see private bank contributing. I think in commercial as well. We have the growth in NBFI, but also starting to see a little deal activity pick up across the corporate book. We have our expansion markets, don't forget. We brought banking teams into Florida and California and beefed up our New York Metro team. That's contributing a bit.

In the consumer bank, we've been kind of a rock star in HELOCs and also consistent growth in mortgage. It's nice to see it's pretty broad-based. Some of the drags of the things that we've had in the past, such as kind of the rundown of non-core, some of the commercial BSO, thin relationship exits, and things like that, the CRE kind of getting back to par where we want to be on commercial CRE after the investors acquisition. All that is starting to abate a little bit, which allows the inherent growth to shine through. I think I'll maybe go to Brendan first for some color on consumer and private bank, and then Ted, I'll ask you for some color on commercial.

Yeah. Thanks, Bruce. Thanks, Ryan. Adding on Bruce, just give you a little more color and data on the retail side of the business. We're up about 4% year-on-year on core loans, heavily driven by HELOC and mortgage. As Bruce mentioned, you just got the league tables in from 2025. We're the number one originator in the United States at home equity lending with an incredibly strong risk profile, low LTVs, strong FICO scores, all depository relationship customers who are very proud about that, and we expect that to continue. Mortgage originations in this rate environment has obviously been challenged, but prepay speeds have slowed too. We're seeing net positive growth in mortgage and the balance sheet rotating into higher relationship-based lending fueled by the private bank and the retail bank.

With our launch of our new credit card products, we're seeing 50%+ growth in new credit card originations. It takes a little bit of time for that to translate into the balance sheet as payment activity gets through, but we should see some modest growth in credit card as we hit the back half of the year too. Broadly in retail, we expect the growth rate that we're seeing to project forward with a lot of confidence and the mixing of the balances to get stronger with higher return and deeper relationships. The private banking side, we've generally been in the range of about $1 billion in net growth each quarter. We were a little bit lighter than that this quarter with some lower utilization rates on the private equity side, but we view that to be temporal.

The underlying originations activity is quite strong, and we're very confident we'll end the year in the range that we gave of $11 billion-$13 billion, which projects back to about $1 billion in net growth per quarter, returning in the private bank. Both retail and private banking, I would just broadly describe as continued steady momentum with what you've seen over the last few quarters. Ted?

Yeah. Thanks, Brendan and Bruce. On the middle market side, we have seen a pickup in utilization over the last three months. I think our customers are getting more comfortable in the economy and overall spending money on CapEx, which has led to a slight increase there. On the mid-corporate and adding on that, what we built out in Florida, New York and California, we're starting to see some real success there with some increased loan demand and some increased customer count, which has resulted in higher growth there. On the mid-corporate side, we've reorganized the division a little bit to be more industry focused, less geographic focus. That has resulted in a nice pickup of new opportunities for us on the mid-corporate side of the business, and that was really heroic in the first quarter for us with significant growth there.

MDFI continues to grow somewhere in the range of 5% a year. There's still good opportunities both on the capital call line, the securitization business, and on the lending to the direct funds, and we expect that to continue to go around 5%. We have really not seen much pickup in the private equity side of the business. The sponsor business has still been, I would say, flattish year-over-year. Most of our growth has been in the traditional mid-corporate and middle market space.

Great. Got it. Maybe just as my follow-up, Bruce. In the slides, you highlighted some of the things that you're doing with Reimagine the Bank, including incorporating LLMs and a handful of things on AI. I guess given the pace of change we're seeing in the market in areas like AI, are there opportunities to accelerate any of these initiatives or adjust the timing given, again, just the rapid pace of change that we're seeing? Thank you.

Yeah. I'll start and flip it to Brendan, who's sponsoring and leading that program. I think that's a really good call out, Ryan, is that the adoption curve, the innovation curve that we're seeing in AI is really, it's almost mind-boggling. It's very significant. I think what we did when we set up the program was we took a very systematic approach to say, like, here's how we do things today. How would we like to do them in the future, embracing the technology as we have it today? Recognizing though that over a 2-3-year timeframe, there's going to be a lot more innovation and a lot of chance to embrace even better tools. Maybe that creates a higher level of benefit, maybe that creates an acceleration, and maybe it just creates new work streams that we haven't even thought were possible.

It's really a living, breathing program. It's dynamic, it'll incorporate. We'll have our telescope out looking at all the new things that are coming down the pike and figuring out how we can incorporate those in. I'd say one thing to leave you with, though, is that we've demonstrated over the years an ability to take innovation and take new approaches to how we're running the bank and put them into a program and deliver real financial benefits. We won't create a lot of science fair projects and kind of use some of this new technology in ways that actually don't deliver real benefits. That's kind of our mindset as we go through this. Brendan.

Yeah. Thanks, Ryan. Your question was principally about AI, but one point on the non-AI front, you saw from us in the quarter, the Reimagine the Bank initiative was principally self-funded by quick wins that were non-AI based. We've already got over $30 million in projected vendor saves for the year in the box with an expectation that that number goes up. We've closed 19 corporate facilities, smaller facilities. That's driving savings. That has offset the investment already. You're seeing real tangible impact in the program already this early in the year. On the AI front, I'd say two things. One is, you're right to point out the risk of speed of execution also is the speed of obsolescence. As we put these in place, the idea that the best answer could be different in a quarter is very much front of our mind.

We're architecting all the things that we're building to be even more nimble than you might expect from a tech standpoint in the past. As new models come up, we can easily plug and play and make sure we're taking advantage of the latest and greatest. That's very much front of our mind. We very much have real AI use cases in market today. In the call center, as an example, we've told you we expect to get 50% of the calls out by the end of the period. It's already in pilot. In fact, we expect inside of this calendar year, by the end of the year, we should have 25% of our calls answered by non-humans with the expectation that will ramp in 2027 to 50%. That really should hit in the summer and into the early fall. This is very real.

This isn't a back-loaded program all coming in 2028. In the tech space, as an example, we've deployed Claude to our engineers. We're already seeing a very material productivity improvement and leverage we're getting on our capital investment and deployment ranging from 30% improvement in productivity that in some tests we've done, it's been a 5-10 times improvement in productivity. Now we're working on scaling it and engineering it for real scale. We are moving very fast. We're keeping up with the pace, and it's live and in production, and our confidence is building.

We'll go to Erika Najarian from UBS. Please go ahead.

Hi. Good morning. Just a few follow-up questions for me, please. Given everything that you've said about a record first quarter in capital markets and very full pipelines, picking up new mandates while some of these deals were pushed into closing in the second quarter or launching in the second quarter, it sounds like we should still subscribe to the 6%-8% fee outlook growth for 2026?

Yeah. We're not coming off any of those ranges in the full year guide at this point, Erika.

Perfect. My follow-up question is, thank you for the expansive answer on NIM and NII relative to the current forward curve. I guess this is a two-part question. First is, I think, Aunoy talked about the non-interest-bearing growth in a seasonally tough quarter for that, maybe where that non-interest-bearing growth is coming from. To that end, if we do have a scenario where we have no rate cuts, can Citizens keep deposit costs stable in light of more robust growth from you guys on both the consumer and corporate?

Yeah, Erika. It's Aunoy here. We were quite pleased with our deposit performance this quarter. As we saw actually good non-interest-bearing deposit growth. Obviously, we have the couple of strategic initiatives. One is being the private bank where you saw the good DDA growth. The DDA percentage in the private bank is 30%. We continue to see that coming. As you saw the balance growth, we are seeing the DDAs grow along with it. That's there. That's one thing that's really driving the DDA growth. As Brendan mentioned, even on the consumer side, there is a lot of growth that we are seeing in the low cost and DDA as we really build the relationships with our clients. We are seeing a lot of good traction there. To your second question about where we go deposits from here.

Obviously, deposit volume is going to depend on the overall economy, how the GDP goes, how the loan formation goes in the economy. With some of the strategic initiatives, we believe that we can maintain in the competitive range about where deposits are going to go from here. As you saw, our deposit betas are 50% this quarter, and we expect it to be in the high 40s, which is in line with the competition. With that, maybe Brendan, I'll pass it on to you to see if you have any comments.

I'll add a little color on each consumer and private. Out of the $118 billion or so of deposits that sit in the consumer bank, 52% of them are what we call low-cost, which is either DDA or checking with interest. In the retail bank, checking with interest is sort of a sub 10 basis point type of cost. For all intents and purposes, it's very similar to DDA. The COVID period of all of those operating balances reducing is firmly behind us, and we're now seeing net growth. We're up 130 basis points year-over-year in our low-cost deposit categories. That's versus a peer average of about 50 basis points. We are very firmly in the top quartile in terms of low-cost growth for the consumer bank.

We project that to continue with confidence in the outlook, which will really help control interest bearing or our total cost of deposits when you include the interest bearing side. Then Aunoy pointed this out, but in the private bank, we ended the quarter with very strong spot numbers. It was actually almost 40% DDA, over 50% when you add in the checking with interest in the private bank itself as well. We're expecting that to be in the same range that we've seen in the past. We're getting this really strong growth in the private bank without breaking the quality metrics in this far end. That's a real positive to see. Broadly, we expect that to continue looking forward.

We'll go to the line of John Pancari from Evercore ISI. Please go ahead.

Just on the private bank side, I just wanted to see if you can give us just a bit more color in terms of what are you seeing in terms of the mix of loan growth. How much momentum are you seeing in the mortgage side versus the commercial capital call type of loan generation? And then if you could maybe give us a breakout of where new money yields are that you're bringing on loans in the private bank, maybe on the mortgage side as well as on the other type of lending capital calls included?

Yeah. On the loan side, the longer-term trend line has been pretty evenly mixed between mortgage, multifamily commercial real estate, and private equity capital call lines. The utilization rates this quarter on the PE lines were down a little bit, so it sort of artificially suppressed. The linked quarter growth was more driven by mortgage and multifamily CRE, which is pretty evenly split between those categories. Both of those asset classes where we use the balance sheet comes with deep, deep relationship-based banking, and so the net returns on the customers are actually quite high. When you look at our overall loan yields versus our deposit costs, we remain in the range of north of 400-425 basis points of net spread between our loan yields and our deposit costs. That has been consistent since we launched.

The growth that we're seeing is actually deep relationship based, but even just asset yields minus deposit costs, it's net accretive to our NIM position. The return profile of the business overall remains in the mid-20s because of that, with high profitability on the balance sheet, and we see nothing that will take us off that trajectory.

Got it. Thanks, Brendan. On the capital front, Bruce, maybe if you could kind of talk about your capital allocation priorities from organic versus buyback, and then maybe on the M&A interest side. I know you've been historically uninterested in whole bank M&A. Just curious if that's changed for any reason at this point. Thanks.

Yeah. Thanks. I would say the capital kind of priorities are really unchanged. They've been stable. We always look to make sure that we have a good dividend on the stock and that we can raise our dividend as earnings grow, which will be an objective for this year. The second place objective is to make sure we have capital supporting our clients and supporting the growth of the bank. Organic growth is kind of next up. Then the residual you can look to do potentially some selective acquisitions. For example, in the first quarter, we bought a very small but high-quality M&A boutique to, as Ted indicated, we go deeper into these industry verticals. Do we have everything we need to really serve those clients well? In some instances, rather than hire people, it's faster just to go out and buy an M&A boutique.

That doesn't use a lot of capital, but we certainly look for things like that or maybe some things in the payment space that can accelerate our growth a little bit. These are generally going to be small. Whatever we have as the residual really goes to buying back our stock. I still think the stock is very attractive here, as you would expect me to say. In any case, we bought a lot of stock in the first quarter, $300 million, and we gave in our guide that we're looking to buy $225 million here in the second quarter. If we keep growing our overall results and our earnings, we'll have lots of flexibility to both grow the bank organically plus buy back stock.

We'll go to the line of David Rochester from Cantor. Please go ahead.

Back on capital, you mentioned the stress tests coming up and the potential to get some relief there. Your buffer's 4.5%. It seems like you could see some pretty significant relief this time around. If you do, does that at all come into play with how you think about the 10.5% level for CET1, especially in the context of seeing some of the larger banks moving their CET1 ratios lower recently? Thanks.

Yeah. What I would say on that is that we've managed the capital where we think it's appropriate given the environment and stakeholder expectations. We've been at the high side of our range of 10%-10.5% or slightly over the 10.5% for the last several quarters. The SCB has not really been a binding constraint. I've said in the past, it's to me more of a scarlet letter. I can't believe that we're getting that high of an SCB, which is completely outsized relative to peers. I do think that the Fed is now kind of taking a hard look at why are there some of these inaccuracies that take place. We'll see.

The models aren't really going into this round, but there's other things that I think the progression coming out of where we were in 2023 to the strong balance sheet and jump-off point we have today, higher revenue levels, and then the scenario was particularly severe in the last cycle that is better this cycle. We would expect to see the notional equivalent SCB, even though it won't go into effect. We would expect to see that hopefully quite a bit lower and more in line with peers even before we see some of the model changes. Like the model changes of not picking up the benefit of swaps was really a big miss. Even without fixing things like that, I think we'll see improvement. I would say we'll wait and see how the environment shapes up.

Right now we're in a war with a lot of uncertainty, and profitability is still increasing. I think carrying a little extra capital through the course of 2026 makes sense. Certainly there'll be opportunities to reassess that if we get a positive outcome to the war and the market conditions improve and we continue to deliver higher level of earnings, it might be possible to start to ratchet that down. Probably that would be a 2027 event and not something that you'd see us do in 2026.

Yeah. Okay. Thank you for that. Then just switching to the private bank. You had some great deposit growth this quarter, and you mentioned some of the spread details on that incremental business which sounded great for the 400-425 spread. Was just curious what the rough cost of those deposits were in terms of the growth coming in this quarter? If you could just give an update on the talent pipeline in that business, that'd be great. Thanks.

Yeah. The deposit cost, looking at Aunoy, it's 220-ish basis points is the total deposit cost when you blend in the interest bearing plus non-interest. Check me on that.

Yeah. It's going to be lower than our commercial deposit funding cost, but higher than pure retail. Is one way to think about that.

Remember, the interest bearing side is mostly still front book. You've got a heavy piece of DDA, and then the interest bearing side is front book. The portfolio is somewhat barbelled over time, and we can smooth that out as the business builds.

Yeah. The other thing that I would say is we opened three PBO offices this quarter, and we have two more geared up, one this quarter and one later in the year. That'll bring us up. I think we're at nine, that brings us to 11 by the end of the year. That's an important part of the deposit gathering strategy to have an ability to go out to successful people and walk in, we call them two-legged customers, in addition to some of the corporate relationships that we have. We get billboard value from having those new locations opened. I would say over the next 3-4 years, we could see that PBO count get up to 25-30. If you recall, I think First Republic had maybe 80.

I don't think we're going to go near there, but I think we can get into the key markets and kind of have 25-30, which will also kind of keep that deposit machine cranking along. In terms of talent, the main needs, we've taken the business from about 150 people at launch up to close to 600 today, including all the dedicated support people. I think the plan for this year is to kind of continue to build out Florida is one of the things on the PB side, but then continue with the wealth lift outs. We have a pretty good pipeline on private wealth lift outs. None of them hit in the first quarter. We hopefully will catch up here where we want to be in the second quarter, that's also a real focal point to make sure that we have the wealth professionals co-located with our private bankers so we can deliver kind of total solutions to the customer.

Citizens Financial Group (CFG) Q1 2026 Earnings Call Transcript

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