Q1 2026 Citizens Financial Group Inc Earnings Call

April 16, 2026

Operator: Good morning, everyone, and welcome to the Citizens Financial Group Q1 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.

Speaker #1: Currently, all—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.

Speaker #1: Head of Investor Relations, Kristin, you may begin.

Speaker #2: Thanks, Ivy. Good morning, everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Saun, and CFO, Anoy Banerjee, will provide an overview of our first-quarter results.

Kristin Silberberg: Thanks, Ivy. Good morning, everyone, and thank you for joining us. First this morning, our chairman and CEO, Bruce Van Saun, and CFO, Anuj Banerjee, will provide an overview of our Q1 results. Brendan Coughlin, president, and Ted Swimmer, head of commercial banking, are also here to provide additional color. We will be referencing our Q1 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: And with that, I will hand it over to Bruce.

Speaker #3: 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.

Bruce Van Saun: 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%.

Speaker #3: 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.

Speaker #3: Our balance sheet position continues to be robust, with Set 1 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.

Speaker #3: 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%.

Speaker #3: During the quarter, we opened three more PBOs, bringing the total to 9. Reimagine the Bank is off to a solid start, and we reaffirm our 450 million P&L target by the end of 2028.

Bruce Van Saun: 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.

Speaker #3: 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.

Speaker #3: 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.

Bruce Van Saun: 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.

Speaker #3: 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.

Speaker #3: 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.

Bruce Van Saun: 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 Q2 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.

Speaker #3: 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 and investors and entrepreneurs.

Speaker #3: 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.

Speaker #3: 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.

Bruce Van Saun: We intend to stay on our investment plan for the year unless the macro takes a meaningful turn for the worst. We're pleased with the regulatory changes we see coming from Washington, DC, 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 Anuj for the financial details. Anuj?

Speaker #3: We're pleased with the regulatory changes we see coming from Washington, DC, and we look forward to the upcoming CCARS stress test results which we're hopeful will give a more accurate result for CITIZENS than what we've seen in the sum up, a good start, well-positioned with a great strategy and a great team, and optimistic for a strong 2026.

Speaker #3: With that, I'll turn it over to Anoy for the financial details. Anoy?

Speaker #2: Thanks, Bruce. Good morning, everyone. As Bruce mentioned, CITIZENS has started the year well. Referencing slides 3 and 4, we delivered EPS of $1.13 for the first quarter.

Aunoy Banerjee: 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 Q1 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 Q1 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 11 cents to EPS, up from 10 cents in the prior quarter, as the business delivered another very strong quarter of deposit growth.

Speaker #2: With ROTC 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.

Speaker #2: 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.

Speaker #2: As the business delivered another very strong quarter of deposit growth, let me walk through the first-quarter results in more detail, starting with net interest income on slide 5.

Aunoy Banerjee: Now let me walk through the Q1 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 7 basis points to 3.14%, driven primarily by the benefits of the reduced drag from terminated swaps and non-core run-off with a 5 basis point combined impact. The fixed-rate asset repricing benefit of 1 basis point, and lastly, the net impact of 1 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.

Speaker #2: Net interest income was up 1.6% late 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 dollars.

Speaker #2: As you see from the NIM walk at the bottom of the slide, our margin improved 7 basis points to 3.14%, driven primarily by the benefits of the reduced drag from terminated swaps and non-core runoff, with a 5 basis point combined impact.

Speaker #2: The fixed-rate asset repricing benefit of 1 basis point, and lastly, the net impact of 1 basis point related to improved funding cost and mix, largely offset by lower asset yields.

Speaker #2: 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.

Aunoy Banerjee: 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 40s 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 Q1 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 Q4. M&A delivered a good result in the quarter, with our pipeline is strong and continues to build.

Speaker #2: 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 ’26, we are still projecting a high-40s beta for the cycle.

Speaker #2: Moving to slide 6. Non-interest income is up 11% year over year, but down 2% late quarter. As I mentioned, this was our strongest first-quarter fee result ever.

Speaker #2: 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.

Speaker #2: M&A delivered a good result in the quarter, with our pipeline strong and continuing to build. Bond underwriting was up nicely from the prior quarter.

Aunoy Banerjee: 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 Q1 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.

Speaker #2: Our equity underwriting performance was stable late quarter and up significantly year over year. Loans indications 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.

Speaker #2: 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.

Speaker #2: Our global markets business was up $10 million late 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.

Speaker #2: Wealth fees are up 2% late quarter and 23% year over year. These results reflect higher advisory fees with continued positive momentum in fee-based AUM growth year over year.

Speaker #2: The first-quarter results reflect positive net inflows, partially offset by market impacts on AUM. Mortgage was down 19% late quarter, given a lower MSR valuation.

Aunoy Banerjee: Q1 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 7, 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 8, 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 and 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.

Speaker #2: Partially offset by slightly higher production and servicing fees. On slide 7, expenses were managed tightly, up 2.6% late quarter, largely reflecting the usual seasonality in salaries and benefits.

Speaker #2: As well as about $6 million of implementation costs to ramp up the Reimagine the Bank program. On slide 8, average and period-end loans were up 1% late quarter.

Speaker #2: 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 and higher commercial line utilization.

Speaker #2: 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.

Speaker #2: The private bank delivered good loan growth again this quarter, with period-end loans up about $600 million, driven by growth in multifamily and residential mortgage.

Aunoy Banerjee: 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 run off of roughly $500 million for the quarter. Next, on slides 9 and 10. We continued to do a good job on deposits, with average deposits up 1% or $1.5 billion quarter on 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.

Speaker #2: 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.

Speaker #2: Next, on slides 9 and 10, we continue to do a good job on deposits. Average deposits were up 1%, or $1.5 billion, quarter on quarter, primarily driven by the growth in the Private Bank, which reached $16.6 billion at the end of the quarter.

Speaker #2: This was partially offset by seasonal impacts in commercial. Year over year, average balances are up 8.6 billion dollars or 5%, reflecting combined growth in the private bank and commercial of 11.2 billion dollars, partially offset by roughly $2 billion of reduction in higher cost treasury broker deposits.

Aunoy Banerjee: 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 on 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.

Speaker #2: On a spot basis, non-interest-bearing balances are up $1.3 billion, or 3%, quarter on quarter, and up $4.1 billion, or 11%, year over year.

Speaker #2: 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.

Speaker #2: This compares to a PR 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.

Speaker #2: Non-accrual loans are down modestly late quarter, reflecting a decrease in commercial, largely driven by C&I, which was partially offset by an increase in mortgage.

Aunoy Banerjee: 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%.

Speaker #2: 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 CNI residential real estate secured and private loans.

Speaker #2: 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.

Speaker #2: 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%.

Aunoy Banerjee: We returned about $500 million to shareholders in Q1, 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Aunoy Banerjee: We opened offices in Menlo Park and Laurel Village in Q1, and we expect to open at least 2 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Aunoy Banerjee: 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 Q2. We expect net interest income to be up in the range of 3% to 4%, driven by continued expansion in net interest margin and earning asset growth. Non-interest income is expected to be up 3% to 5%, led by capital markets, with some risk if market volatility moves higher. Other fee categories such as FX and derivative, wealth, and card should also provide lift for the quarter.

Speaker #2: 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.

Speaker #2: We expect to exist 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.

Speaker #2: We expect net interest income to be up in the range of 3% to 4%, driven by continued expansion in net interest margin and earning asset growth.

Speaker #2: Non-interest income is expected to be up 3% to 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.

Aunoy Banerjee: 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 H2 expenses. The charge-off level is expected to be stable to down slightly, and we should end Q2 with CET1 in the range of 10.5% to 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% to 18% ROCE target by the end of 2027.

Speaker #2: We are projecting expenses to be stable to up 1%. Incorporating a step up in implementation cost associated with Reimagine the Bank and continued investment in other key business initiatives.

Speaker #2: We expect expense saves 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% to 10.6%, including share repurchases of about $225 million.

Speaker #2: 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.

Speaker #2: Looking out further, we see a clear path to achieving our 16% to 18% ROTC target by the end of '27. Expanding our net interest margin is an important driver, and we continue to project NIM to be in the range of 3.22% to 3.28% in Q4 '26.

Aunoy Banerjee: Expanding our net interest margin is an important driver, and we continue to project NIM to be in the range of 322% to 328% in Q4 2026, and in the range of 330% to 350% in Q4 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.

Speaker #2: And in the range of 3.30% to 3.50% in four Q2 '27. Slide 17 provides incremental details on our net interest margin progression to the end of '27.

Speaker #2: This, combined with the impact of successful execution of our strategic initiatives and normalizing credit, should drive ROTC to our target range. To wrap up, we are off to a good start to '26.

Speaker #2: 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.

Bruce Van Saun: Okay, thank you, Aunoy. Operator, let's open it up for Q&A.

Speaker #2: With that, I will hand it back over to Bruce. Okay. Thank you, Enoi. Operator, let's open it up for Q&A.

Operator: We are ready for 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.

Speaker #3: We are ready for the question and answer portion of the call. If you would like to ask 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.

Speaker #3: If you need to withdraw your question at any time, please press *2. Again, that is *1 to ask a question. Our first question comes from Scott Seafers from Piper Sandler.

Scott Siefers: Morning, guys. Thank you for taking the question. Let's see. Aunoy, maybe was hoping you could maybe start by speaking to kind of the capital markets dynamics. Obviously see the numbers in Q1, but curious how you thought Q1 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 Q4 into Q1. Maybe just sort of results versus expectations, and then if you could speak to the forward look, things like pipelines, confidence in pull-through, et cetera.

Speaker #3: Please go ahead.

Speaker #4: Good morning, guys. Thank you for taking the question. Let's see. Enoi, maybe I was hoping you could maybe start by speaking to kind of the capital markets dynamics.

Speaker #4: Obviously, I 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, and, two, I know you all had some deals that were pushed from the fourth quarter into the first quarter.

Speaker #4: So maybe just sort of results versus expectations, then if you could speak to the forward look—things like pipelines, confidence in pull-through, etc.

Bruce Van Saun: Yeah. Scott, it's Bruce. I'll take it.

Speaker #2: Yeah, Scott, it's Bruce. I'll take it first, and then hand it over to Ted to provide more color. But 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.

Scott Siefers: Hey, Bruce.

Bruce Van Saun: ... 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 a 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.

Speaker #2: But we have good diversification across our different services and capital markets. So we have M&A, we have bond underwriting, equity underwriting, and syndicated loans.

Speaker #2: 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 a more optimistic tone to the market, we're actually starting to see that come through.

Speaker #2: So 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. But 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.

Bruce Van Saun: 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.

Speaker #2: And 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 Swimmer: Building on what Bruce just said, we took a couple of transactions in March that we would have 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. More to what Bruce just said, the deals that got postponed in March, especially this week, we've seen them back into the market.

Speaker #2: So Ted, over to you.

Speaker #4: Building on what Bruce just said, we've seen we took a couple of transactions in March that we would have launched into the market and pushed them into April, just given the volatility and the overall markets.

Speaker #4: But during that whole period of time, we continued to sign up new transactions. And 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 have before.

Speaker #4: And feel very good about what that pipe, what those transactions are, and how the pipeline is building. And to more to what Bruce just said, the deals that got postponed in March, especially this week, we've seen them back into the market.

Aunoy Banerjee: 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.

Ted Swimmer: 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.

Speaker #4: We are launching several transactions and part of several transactions that were postponed in March, that are getting very good reception now in April. So we continue to feel very optimistic about the pipeline, especially on the M&A side.

Speaker #4: And during this whole period of turmoil, we've actually seen a pickup in new mandates, especially on the M&A side of the business.

Bruce Van Saun: Yeah. I should just close by saying it was a record Q1 for us in capital markets fees. That shouldn't go unnoted.

Speaker #2: Yeah, and I should just close by saying it was a record first quarter for us in capital markets fees. That shouldn't go unnoted.

Scott Siefers: Yeah, totally agree. Okay, perfect. Thank you. That's very helpful. I was hoping you all would maybe speak to the private credit portfolio.

Speaker #4: Yeah, totally agree. Okay, perfect. Thank you, that's very helpful. And then I was hoping you all could maybe speak to the private credit portfolio as well.

Scott Siefers: 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.

Speaker #4: I know there's a lot of good detail in the appendix. I'm 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 just sort of industry circumstances.

Bruce Van Saun: 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.

Speaker #2: Yeah, I'll start again and flip to Ted. But I would say we've been very disciplined in terms of the kind of counterparties that we select, usually there.

Speaker #2: Often, private equity sponsors have 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. So, we've helped them grow and get into this business, and provided leverage to many of those names.

Speaker #2: So, client selection is always key, and then making sure we have the right structures in place so that we're structurally protected from any issues that could arise in the portfolios.

Bruce Van Saun: 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, feel very, 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.

Speaker #2: And so 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, feel very, very confident that we're structurally well protected from a credit loss standpoint.

Speaker #2: And I think, even though this is in the headlines and there are concerns about private credit, the asset class, if you want to call it that, is here to stay.

Speaker #2: And they provide a certain amount of leverage and deal structures that exceeds what banks have historically been willing to play. And there's certainly a lot of institutional demand. Folks—private credit managers—are continuing to raise new money.

Speaker #2: So, I think we'll just grow selectively with the market as we have in the past. But we don't see this turning around and being something that starts to shrink.

Bruce Van Saun: 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.

Speaker #2: It's just going to grow. And I think every player in the market will be more selective, and will continue to be selective. But we would expect this to be an area that we stay committed to.

Ted Swimmer: 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 really 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, so.

Speaker #2: Okay?

Speaker #4: Just adding on to what Bruce said. In a number of conversations we've had with private credit since this 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.

Speaker #4: So 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.

Speaker #4: And there's a lot of demand out there, so perfect.

Scott Siefers: Perfect. All right. Thank you all very much.

Bruce Van Saun: Okay.

Speaker #3: All right. Thank you all very much.

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

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

Speaker #2: Okay.

Speaker #5: We'll go to the line of Minanga Salia from Morgan Stanley. Please go ahead.

Manan Gosalia: Hi, good morning.

Bruce Van Saun: Hi.

Speaker #6: Hi, good morning. Maybe to start on NII, I know you broadly reiterated the guide for the year, including the NII guide and the exit NIM.

Manan Gosalia: 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?

Speaker #6: But you have noted that Citizens SKUs slightly asset sensitive. In a scenario where rates stay higher for longer, we don't get any rate cuts until the end of the year.

Speaker #6: Where do you think the NII and NIM are trending, and what's the most likely outcome here?

Bruce Van Saun: 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. Then I know the little slightly steeper yield curve. We had assumed 4.25 to 4.50 is the ten-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.

Speaker #2: Yeah, so 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.

Speaker #2: But as you say, the environment is going to have an impact to some degree, and a bit of a pause by the Fed. So, a little higher rate scenario than we came into the year with—given asset sensitivity—is modestly positive for us.

Speaker #2: And then, kind of the little, slightly steeper yield curve. We had assumed 4.25% to 4.50% is the 10-year, and we're kind of in that zone.

Speaker #2: But to the extent there's that moves up and there's a little more steepening, that's also potentially positive to the outlook. But I wouldn't say it's a game changer.

Bruce Van Saun: 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, Anuj, I'll turn it over to you if you want to add any color.

Speaker #2: These are kind of marginal benefits that give us even more conviction that we can deliver. The numbers are slightly ahead of the numbers.

Speaker #2: With that, Anuj, I'll turn it over to you if you want to add any color.

Aunoy Banerjee: 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 Q1, a lot of the benefit is coming from the terminated swaps and the non-core runoffs, which is not rate dependent. 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.

Speaker #3: Yeah, I think I'm going to add to Bruce's point. We are very confident about getting to the NIM and the NII outlook that we gave.

Speaker #3: I think on the NIM side of it, as you saw from our walk in one queue, a lot of the benefits are coming from the terminated swaps and the non-core runoffs, which are not rate dependent.

Speaker #3: And that's another 12 basis points for the rest of the year. The front book dynamic, bank book dynamic, as Bruce said, would be helpful in this environment.

Speaker #3: So we remain confident on getting there. And as you saw, we have some good loan growth. We have good traction and pipeline on that.

Bruce Van Saun: Yep.

Speaker #3: So we feel confident of getting there.

Manan Gosalia: Perfect. 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?

Speaker #2: Yeah.

Speaker #6: Perfect. And 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 and 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.

Bruce Van Saun: Okay. Sure. It's still early days, and we're going through a comment period. 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. You know, 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.

Speaker #2: Okay. Sure. So 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%-ish reduction in risk-weighted assets, which would translate to in excess of 100 basis points call it 110 basis points or so of set one improvement.

Speaker #2: The AOCI phase-in, if it happened right today, would basically mitigate that. But as it phases in over time, some of that drag will dissipate.

Speaker #2: 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.

Speaker #2: So we'll just have to see how the rate curve plays out from here. But anyway, it's a good problem to have. And it's probably early days to say kind of what we'll plan to do with that.

Bruce Van Saun: There'll be a lot of considerations. What are stakeholders' expectations, the market, the rating agencies, the regulators, et cetera? 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. Anuj, anything to add?

Speaker #2: There'll be a lot of considerations: what are stakeholders' expectations, the market, the rating agencies, the regulators, etc. But anyway, it's a good issue for us to think about.

Speaker #2: The other thing is, on this ERBA, there's a modest improvement even over the revised standard approach. But there's a lot of work that goes into that.

Speaker #2: So 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 IRBA.

Speaker #2: For investment-grade credit, and 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 Banerjee: 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. We are, as Bruce said, it's in the right direction, and we feel good about it.

Speaker #2: So annoy anything to add?

Speaker #3: Yeah, I think as Bruce said, we are going through all the advocacy on some of these things that Bruce mentioned. We are also looking at all the work that we need to get done on ERBA versus standardized for what's there.

Speaker #3: And now with a lot of new technology, things could be really different in some ways. So there's a lot to do here still. But we are, as Bruce said, we are it's in the right direction.

Bruce Van Saun: Yep.

Speaker #3: And we feel good about it.

Manan Gosalia: I appreciate all the color. Thanks, Bruce. Thanks, Aunoy.

Speaker #2: Yeah.

Speaker #6: I appreciate all the color. Thanks, Bruce. Thanks, Annoy.

Bruce Van Saun: Sure.

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

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

Speaker #2: Sure.

Speaker #5: Let's go to the line of Ryan Nash from Goldman Sachs. Please go ahead.

Ryan Nash: Good morning, Bruce. Good morning, Anuj.

Bruce Van Saun: Morning.

Speaker #7: Good morning, Bruce. Good morning, Annoy.

Ryan Nash: 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. Second, I know you referenced higher utilization. What's driving that? Are you expecting to see more of this? Thank you.

Speaker #2: Morning.

Speaker #7: So 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.

Speaker #7: So maybe you could just talk about your confidence in loan growth from here and what you see as the key drivers. And then second, I know you referenced higher utilization.

Speaker #7: What's driving that? I know you're expecting to see more of this. Thank you.

Bruce Van Saun: Yeah. I'd say 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 NDFI. 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, California, and beefed up our New York Metro team. That's contributing a bit.

Speaker #2: Yeah. Yeah. I'd say that really impressive thing, Ryan, is that we're getting the growth in each of the three main business areas. So private bank, being kind of that startup phase, is growing their book nicely and consistently.

Speaker #2: And 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.

Speaker #2: And so we see private bank contributing. I think in commercial as well, we have the growth in MBFI. But also starting to see a little deal activity pick up across the corporate book.

Speaker #2: And we have our expansion markets, don't forget. So we've brought banking teams into Florida and California, and beefed up our New York Metro team.

Speaker #2: So that's contributing a bit. And then in the Consumer Bank, we've been kind of a rock star in HELOCs and also had consistent growth in mortgage.

Bruce Van Saun: Then 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. Then 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 of 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 ask 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.

Speaker #2: So it's nice to see. It's pretty broad-based. And then 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, or 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.

Speaker #2: 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.

Brendan Coughlin: Yeah. Thanks, Bruce. Thanks, Ryan. Adding on to Bruce's, 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, we 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. So we're 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. So 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.

Speaker #8: Hi. Yeah. Thanks, Bruce. Thanks, Ryan. Adding on to Bruce, I'll 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.

Speaker #8: You just got the league tables in from 2025. We're the number one originator in the United States in home equity lending with an incredibly strong risk profile.

Speaker #8: 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, as obviously been challenged, but prepay speeds have slowed too.

Speaker #8: So 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.

Brendan Coughlin: With our launch of our new credit card products, we're seeing 50% plus 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. 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.

Speaker #8: With our launch of a new credit card product, we're seeing 50%-plus 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.

Speaker #8: But we should see some modest growth in credit card as we hit the back half of the year too. So broadly in retail, we expect the growth rate that we're seeing to project forward with a lot of confidence.

Speaker #8: And the mixing of the balances to get stronger, with higher return and deeper relationships. On the private banking side, we've generally been in the range of about $1 billion in net growth each quarter.

Bruce Van Saun: 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. We view that to be temporal, and 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 to $13 billion, which projects back to about that $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?

Speaker #8: 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.

Speaker #8: And 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 to $13 billion, which projects back to about that billion in net growth per quarter returning in the private bank.

Speaker #8: So both retail and private banking, I would just broadly describe as continued steady momentum with what you've seen over the last few quarters.

Brendan Coughlin: 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. 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-focused. 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 Q1 for us with significant growth there. NDFI continues to grow somewhere in the range of 5% a year.

Ted Swimmer: 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. 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-focused. 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 Q1 for us with significant growth there. NDFI continues to grow somewhere in the range of 5% a year.

Speaker #2: Ted?

Speaker #4: Yeah. Thanks, Brendan and Bruce. On the middle market side, we have seen a pickup in utilization over the last three months. I think customers are getting or customers are getting more comfortable in the economy and overall spending money on capbacks.

Speaker #4: 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.

Speaker #4: 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-focused.

Speaker #4: 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.

Speaker #4: NDFI continues to grow somewhere in the range of 5% a year. There are still good opportunities both on the capital call line, the securitization business, and on the lending to the direct funds.

Ted Swimmer: 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%. Then finally, we have really not seen much pickup in the private equity side of the business. The sponsor business has still been, I would say, flat-ish year over year. Most of our growth has been in the traditional mid-corporate and middle market space.

Speaker #4: And we expect that to continue to go around 5%. And then, finally, we have really not seen much pickup in the private equity side of the business.

Speaker #4: The sponsor business has still been I would say flattish year over year. So most of our growth has been in the traditional mid-corporate and middle market space.

Bruce Van Saun: Great.

Ryan Nash: 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.

Speaker #2: Great.

Speaker #3: Got it. And maybe just as my follow-up, Bruce, in the slides you highlighted some of the things that you're doing with reimagining the bank, including incorporating LLMs and a handful of things on AI.

Speaker #3: I guess, given the pace of change we're seeing in the markets 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?

Bruce Van Saun: 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 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, "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- to 3-year time frame, 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.

Speaker #3: Thank you.

Speaker #2: Yeah, I'll start and flip it to Brendan, who's sponsoring and leading that program. But 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.

Speaker #2: It's very significant. And so, I think what we did when we set up the program was we took a very systematic approach to say, 'Here's how we do things today. How would we like to do them in the future?'

Speaker #2: Embracing the technology as we have it today, recognizing, though, that over a two- to three-year timeframe, there's going to be a lot more innovation and a lot of change to tools.

Speaker #2: And so 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.

Bruce Van Saun: 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.

Speaker #2: So 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.

Speaker #2: But 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.

Speaker #2: So 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.

Speaker #2: That's kind of our mindset as we go through this. So, 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.

Brendan Coughlin: 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.

Speaker #2: That were non-AI-based. And so 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.

Speaker #2: We've closed 19 corporate facilities, smaller facilities that's driving savings. So that has offset the investment already. So you're seeing real tangible impact in the program already.

Speaker #2: 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.

Speaker #2: Also is the speed of obsolescence. So as we put these in place, the idea that the best answer could be different in a quarter is very much front of our minds.

Brendan Coughlin: 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.

Speaker #2: So, 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.

Speaker #2: So as new models come up, we can easily plug and play and make sure we're taking advantage of the latest and greatest. So that's very much front of our mind.

Speaker #2: We very much have real AI use cases in market today. So in the call center, as an example, we've told you we expect to get 50% of the calls out.

Speaker #2: 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 we'll ramp in '27 to 50%.

Speaker #2: That really should hit in the summer and into the early fall. So this is very real. This isn't a backloaded program all coming in 2028.

Brendan Coughlin: 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. In some tests we've done, it's been a 5 to 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.

Speaker #2: And 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.

Speaker #2: Ranging from 30% improvement in productivity that in some tests we've done, it's been a 5 to 10 times improvement in productivity. So now we're working on scaling it and engineering it for real scale.

Speaker #2: So we are moving very, very fast. We're keeping up with the pace. And it's live and in production. And our confidence is building.

Ryan Nash: Awesome. Thanks for all the color.

Speaker #3: Awesome. Thanks for all the color.

Brendan Coughlin: Thanks.

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

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

Speaker #2: Thanks.

Speaker #4: Thanks for both the work and the journey from UBS. Please go ahead.

Erika Najarian: Hi, good morning. Just a few follow-up questions for me, please. Given everything that you've said about a record Q1 in capital markets and very full pipelines, picking up new mandates while some of these deals were pushed into closing in Q2 or launching in Q2, it sounds like we should still subscribe to the 6% to 8% fee outlook growth for 2026.

Speaker #5: Hi. Good morning. Just a few follow-up questions for me, please. So given everything that you've said about a record first quarter and cap 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 to 8 percent fee outlook growth for '26?

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

Speaker #2: Yeah, we're not coming off any of those ranges in the full-year guide at this point, Erica.

Erika Najarian: 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 Anoy 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?

Speaker #5: Perfect. And then 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.

Speaker #5: First is, I think annoy you talked about the non-interest-bearing growth in a seasonally tough quarter for that. Maybe where that non-interest-bearing growth is coming from.

Speaker #5: And 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?

Aunoy Banerjee: Yeah, Erika, it's Anuj 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. But even on the, 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.

Speaker #2: Yeah, Erica, it's Anna here. We were quite pleased with our deposit performance this quarter, and we actually saw good non-interest-bearing deposit growth.

Speaker #2: 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%.

Speaker #2: So, we continue to see that coming. And, as you saw, the balance growth—we are seeing the DDAs grow along with it. So that's there.

Speaker #2: That's one thing that's really driving the DDA growth. But even 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.

Speaker #2: So we are seeing a lot of good, good traction there. And to your second question about where we go deposits from here, obviously, deposit volume will going to depend on the overall economy, how the GDP goes, how the loan formation goes in the economy.

Aunoy Banerjee: 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 comparative 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 Dave have any comments.

Speaker #2: But with some of the strategic initiatives, we believe that we can maintain in the comparative range about where deposits are going to go from here.

Speaker #2: And as you saw, our deposit betas are 50% this quarter. We had expected them to be in the high 40s, which is in line with the competition.

Speaker #2: With that, maybe Brendan, I'll pass it on to you to see if you have any comments.

Brendan Coughlin: 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, is 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.

Speaker #3: I'll add a little color on each consumer and private. But 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.

Speaker #3: And in the retail bank, checking with interest is sort of a sub-10-basis-point type of cost. So, for all intents and purposes, it's very similar to DDA.

Speaker #3: The COVID period of all those operating balances reducing is firmly behind us. And we're now seeing net growth. So we're up 130 basis points year over year.

Speaker #3: And our low-cost deposit categories—that's versus a peer average of about 50 basis points. So we are very firmly in the top quartile in terms of low-cost growth for the consumer bank.

Brendan Coughlin: We project that to continue with confidence in the outlook, which will really help control interest bearing or total cost of deposits when you include the interest bearing side. Then Anuj 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 that sort of range, 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.

Speaker #3: We project that to continue with confidence in the outlook, which will really help control interest-bearing or total cost of deposits, when you include the interest-bearing side.

Speaker #3: And then Annoy pointed this out. But in the private bank, we ended the quarter with very strong spot numbers. It was actually 40% DDA, over 50% when you add in the checking with interest in the private bank itself as well.

Speaker #3: So we're expecting that to be in that sort of range—in the same range that we've seen in the past. So we're getting this really strong growth in the private bank without breaking the quality metrics in this far end.

Speaker #3: That's a real positive to see, and broadly, we expect that to continue looking forward.

Erika Najarian: Thank you so much.

Speaker #5: Thank you so much.

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

Speaker #4: We'll go to the line of John Pam Perry from Evercore ISI. Please go ahead.

John Pancari: Morning.

Brendan Coughlin: Hey.

John Pancari: 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? 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, and capital calls included.

Speaker #6: Good morning.

Speaker #7: Hi.

Speaker #6: Just on the private bank side, wanted to see if you can give us just a bit more color in terms of what you're seeing in terms of the mix of loan growth?

Speaker #6: How much momentum are you seeing in the mortgage side versus the commercial capital call type of loan generation? And then if you can 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.

Brendan Coughlin: Yeah. On the loan side, it has the longer term trend line. It's 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 was pretty evenly split between those categories. Both of those asset classes where we use the balance sheet come with deep relationship-based banking. 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.

Speaker #3: Yeah. On the loan side, it has, to the longer-term trend line, been pretty evenly mixed between mortgage, multifamily, commercial real estate, and private equity capital call lines.

Speaker #3: The utilization rates this quarter on the PE lines were down a little bit, so it's sort of artificially suppressed. So the linked-quarter growth was more driven by mortgage and multifamily CRE, which is pretty evenly split between those categories.

Speaker #3: Both of those asset classes where we use the balance sheet come with deep, deep relationship-based banking. And so the net returns on the customers are actually quite high.

Speaker #3: 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.

Speaker #3: And that has been consistent since we launched. And so 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.

Brendan Coughlin: The growth that we're seeing is actually deep relationship based. 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.

Speaker #3: So 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.

John Pancari: 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.

Speaker #6: Got it. Thanks, Brendan. And then on the capital front, Bruce, maybe if you could kind of talk about your capital allocation priorities—from organic versus buyback.

Speaker #6: And then maybe on the M&A interest side, want to see I know you've been historically uninterested in whole bank M&A, just curious if that's changed for any reason at this point.

Bruce Van Saun: 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 Q1, 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.

Speaker #6: Thanks.

Speaker #2: Yeah. Thanks. I would say the capital kind of priorities are really unchanged. They've been stable. So 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.

Speaker #2: The second place objective is to make sure we have capital supporting our clients and supporting the growth of the bank. So organic growth is kind of next up.

Speaker #2: And 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, go deeper into these industry verticals.

Speaker #2: Do we have everything we need to really serve those clients well? And in some instances, rather than hire people, it's faster just to go out and buy an M&A boutique.

Bruce Van Saun: 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, but 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 Q1, $300 million, and we gave in our guide that we're looking to buy $225 million here in Q2. 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.

Speaker #2: That doesn’t use a lot of capital, but we’re certainly looking for things like that. Or maybe some things in the payment space that can accelerate our growth a little bit.

Speaker #2: But these are generally going to be small. And then whatever we have as the residual really goes to buying back our stock. And I still think the stock is very attractive here.

Speaker #2: As you would expect me to say, but in any case, we're we bought a lot of stock in in the first quarter, 300 million.

Speaker #2: And we gave in

Speaker #1: In our guide that we're looking to buy 225 million here in the second quarter . So we'll have if we keep growing our overall results and our earnings , we'll have lots of flexibility to both grow the bank organically .

Speaker #1: Plus , buyback stock

John Pancari: Got it. All right. Thanks, Bruce.

Speaker #2: Got it . All right . Thanks , Bruce

Kristin Silberberg: We'll go to Dave Rochester from Cantor. Please go ahead.

Operator: We'll go to Dave Rochester from Cantor. Please go ahead.

Speaker #3: Will Chester from Cancer. Please, go ahead.

Dave Rochester: Hey, good morning, guys.

Bruce Van Saun: Morning.

Speaker #4: Hey . Good morning guys . Good morning . Back on capital . You mentioned the stress tests coming up and the potential to get some relief .

Dave Rochester: 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.

Speaker #4: There Your buffers 4.5% . It seems like you could see some pretty significant relief this time around . And 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 other larger banks moving There , they're ct1 ratio is lower .

Speaker #4: Recently , thanks

Bruce Van Saun: Yeah. What I would say on that is that we've managed the capital kind of where we think it's appropriate given the environment and stakeholder expectations. We've been at the high side of our range of 10 to 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.

Speaker #1: Yeah . So what I would say on that is that we've managed the capital kind of where we think it's appropriate given the environment and stakeholder expectations .

Speaker #1: And so we've been at the high side of our range of 10 to 10 and a half or slightly over the ten and a half for the last several quarters , the SCB has not really been a binding constraint .

Speaker #1: And 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 SCP , which is completely outsized , relative to peers I do think that the fed is now , you know , kind of taking a hard look at , you know , why are there some of these inaccuracies that take place and so 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 23 to the strong balance sheet and jump off point , we have today .

Bruce Van Saun: 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. 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.

Speaker #1: Higher revenue levels . And then the scenario was particularly severe in the in the last cycle . That is better this cycle . So we would expect to see the the notional equivalent SCB , even though it won't go into effect .

Speaker #1: We would expect to see that . Hopefully quite a bit lower and more in line with peers , even before we the model changes , like the model changes of not picking up the benefit of swaps was really a big miss .

Speaker #1: But even even without fixing things like that , I think we'll see improvement . So I would say we'll wait and see . Like how the environment shapes up .

Bruce Van Saun: 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.

Speaker #1: Right now we're in a war with a lot of uncertainty . You know , and profitability is still increasing . So I think carrying a little extra capital through the course of 2026 makes sense .

Speaker #1: But certainly there'll be opportunities to reassess that if we get a positive outcome to the war . And , and the market conditions improve and we continue to deliver higher level of earnings , it might be possible to to start to ratchet that down .

Speaker #1: But probably that would be at 27 event and not something that you'd see us do in 26 .

Dave Rochester: Yeah. Okay. Thank you for that. 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 to 425 spread. I 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.

Speaker #4: Yeah . Okay . Thank you for that . And then just switching to the private bank , you had some great deposit growth this quarter .

Speaker #4: And you mentioned some of the spread details on that incremental business, which, you know, sounded great for the 400 to 425 spread.

Speaker #4: I was just curious what the rough cost of those deposits was in terms of the growth coming in this quarter. And if you could just give an update on the talent pipeline in that business, that'd be great.

Brendan Coughlin: Yeah. The deposit cost, looking at announced cash rates, it's 220-ish basis points. Is the total deposit cost when you blend in the interest-bearing plus the non-interest-bearing? Check me on that.

Speaker #4: Thanks

Speaker #1: Yeah. The deposit cost.

Speaker #5: I'm looking at it . It's two 220 ish basis points . Is the total deposit cost . When you blend in the interest bearing plus noninterest bearing .

Bruce Van Saun: Yep. Yeah. It's going to be lower than our commercial deposit funding cost, but higher than pure retail.

Speaker #5: Check me on that . Yeah , yeah .

Speaker #1: So, it's going to be somewhere. It's going to be lower than our commercial deposit funding costs but higher than pure retail. Right.

Brendan Coughlin: Right. Yeah.

Bruce Van Saun: Is one way to think about that.

Brendan Coughlin: Yeah. 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, we can smooth that out as the business builds.

Speaker #1: Is one way to think about that.

Speaker #5: And remember, the interest-bearing side is mostly still front book. So you've got a heavy piece of DDA, and then the interest-bearing side is front book.

Speaker #5: So the portfolio is somewhat barbell over time , we can smooth , we can smooth that out as the business , as the business builds .

Bruce Van Saun: Yeah. The other thing that I would say is we opened 3 PBO offices this quarter, and we have 2 more geared up, 1 this quarter and 1 later in the year. That'll bring us up. I think we're at 9. 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 to, 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 to 30. If you recall, I think First Republic had maybe 80.

Speaker #1: Yeah . And the other thing that I would say is , you know , we , we opened three PBO offices this quarter and we have two more geared up one this quarter and one later in the year .

Speaker #1: That'll , you know , bring us up . I think we're at nine . That brings us to 11 . By the end of the year .

Speaker #1: So that's an important part of the deposit gathering strategy to have an ability to go out to successful people and walk into , we call them , two legged customers , in addition to some of the corporate relationships that we have .

Speaker #1: And we get billboard value from having those new locations opened . I would say over the next three , four years , we could see that PBO count , get up to 25 to 30 .

Bruce Van Saun: 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 to 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 Q1. We hopefully will catch up here where we want to be in Q2.

Speaker #1: 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 to 30 , which will also kind of keep that deposit machine cranking along in terms of talent .

Speaker #1: The main need is we've taken the business from about 150 people at launch up to close to 600 today, including all the support, dedicated support people.

Speaker #1: I think the plan for this year is to kind of continue to build out Florida as one of the things on the PB side, but then continue with the wealth lift-outs.

Speaker #1: And so we have a pretty good pipeline on the on private wealth lift outs . None of them hit in the first quarter .

Speaker #1: We hopefully will catch up here where we want to be in the second quarter. But 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.

Bruce Van Saun: 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.

Brendan Coughlin: The only thing I would add is our talent pipeline is really robust, and attracting talent to this platform has not been a problem. Over the course of the last two years, we held ourselves back candidly a little bit for two reasons. One is our commitment to the market to deliver the profitability and the results we committed, and then just making sure the platform is ready. We had a lot of investment we had to make to connect all of our products and deliver the service. Our NPS has gone up from 70 to 76, and growth is obviously really strong, and we're feeling good about the foundation of the platform. We're starting to think about how we play some more offense on bringing talent in selectively.

Speaker #5: The only thing I would add is our talent pipeline is really robust, and attracting talent to this platform has not been a problem.

Speaker #5: We , you know , over the course of the last two years , held ourselves back candidly a little bit for two reasons .

Speaker #5: One is our commitment to the market to deliver the profitability and the results we committed . And then just making sure the platform is ready .

Speaker #5: We've had a lot of to make to connect all of our products and deliver the service . Our NPS has gone up from a 70 to a 76 , and growth is obviously really , really strong .

Speaker #5: And we're feeling good about the foundation of the platform. So we're starting to think about how we play similar offense on bringing talent in selectively.

Brendan Coughlin: We want to maintain a really high bar that's really important to us, both on the wealth side and the banking side. We're searching for a talent and a talent only. That's what we're bringing in.

Speaker #5: We want to maintain a really high bar that's really important to us , both on the wealth side and the banking side . Where we're searching for a talent and a talent only .

Bruce Van Saun: I would have said A plus.

Brendan Coughlin: Okay. I'll give you the rounding to A plus.

Bruce Van Saun: Okay. I'll give you the rounding to A plus.

Speaker #5: And so that's what we're—that's what we're bringing in.

Speaker #1: I would have said a plus , but .

Aunoy Banerjee: On the deposit side, I would just add that we are also bringing good quality deposits. The lendability of the deposits are good. So that we can use it in the broader franchise. Just wanted to make sure that.

Speaker #5: Okay, I'll give it. I'll give you that. I'll give you the rounding, plus.

Speaker #6: I'm on the deposit side. I would just add that we are also bringing good quality deposits to the lendability of this.

Speaker #6: Deposits are good . So , so just so that we can use it in the broader franchise . So just just wanted to make sure that .

Bruce Van Saun: Yep. Good point.

Dave Rochester: Okay. Ton of great detail, guys. Appreciate it.

Speaker #6: Yep .

Speaker #1: Good point .

Brendan Coughlin: Okay. Sure.

Bruce Van Saun: Okay. Sure.

Speaker #4: So ton of great detail guys . Appreciate it .

Kristin Silberberg: The next is Ebrahim Poonawala from Bank of America. Please go ahead.

Operator: The next is Ebrahim Poonawala from Bank of America. Please go ahead.

Speaker #1: Okay . Sure

Speaker #3: Ibrahim Poonawala from Bank of America. Please go ahead.

Ebrahim Poonawala: Yeah. Thank you. Just two quick follow-ups. Maybe Bruce, in your prepared remarks, you talked about looking at New York branch strategy. I guess you plan to open more branches in New York. Just talk to us.

Speaker #7: Hey , thank you . Just two quick follow ups . Maybe Bruce , in your prepared remarks , you talked about looking at New York branch strategy .

Bruce Van Saun: Yeah.

Ebrahim Poonawala: Is that more private banks related, or do you see an opportunity to just open more branches in New York and just the size of kind of what you're thinking there?

Speaker #7: I guess you plan to open more branches in New York . Just talk to us . Is that more private bank related , or do you see an opportunity to just open more branches in New York and just the size of kind of what you're there ?

Bruce Van Saun: Yeah, sure. I'll start and flip it to Brendan. I think I referenced this on a prior call, in that we see a real opportunity to kind of double down on our footprint. Some of our peer banks are, okay, taking the view that our footprint is pretty saturated. We need to go outside our footprint to different regions of the country to get more growth. That's not our strategy that we're arriving at. It's where we're already well-known. We can make some investment in the branch system to really optimize locations, optimize the mix between in-store and standalone branches, and try to pick up the growth rate of deposits just in our footprint. Then we avoid all that top of funnel spend advertising in a different region where nobody knows who we are. People already know who we are, so we think that makes sense.

Speaker #1: Yeah , sure . I'll start and flip it to Brendan , but you know , I think I referenced this on a prior call .

Speaker #1: Is that we see a real opportunity to kind of double down on our footprint . Some of our peer banks are okay taking the view that our , our footprint is pretty saturated , and we need to go outside of footprint at different regions of the country to get more growth .

Speaker #1: That's not our strategy that we're arriving at . It's where we're already well known . We can make some investment in the branch system to really optimize locations , optimize the mix between in-store and standalone branches , and try to pick up the growth rate of deposits just in our footprint .

Speaker #1: And then we don't we avoid all that top of funnel spend advertising in a different region where nobody knows who we are . People already know who we are , so we think that makes sense .

Bruce Van Saun: My hope is that when we get to the end and we kind of unveil this program, that we'll be spending some incremental dollars on the branch network, but we'll pick up that growth rate in deposits maybe by 200, 300 basis points over what the normal GDP growth rate was. If you look at that over a 10-year period, that's another $20 to $30 billion of deposits. Deposits, obviously the lifeblood of a strong bank. This is really important to us. Stay tuned for more details, probably at the middle of the year. New York is clearly an area where proof of concept, we got in on the back of combining two franchises that frankly were, from a retail standpoint, in need of some TLC.

Speaker #1: I . My hope is that , you know , when we get to the end and we , we kind of unveil this program that we'll be spending some incremental dollars on , on the branch network .

Speaker #1: But we'll pick up that growth rate in deposits , maybe by 200 or 300 basis points over what the normal GDP growth rate was , and if you look at that over a ten year period , that's another 20 to $30 billion of deposits and deposits .

Speaker #1: Obviously , the lifeblood of a strong bank . So this is really important to us . Stay tuned for more details . Probably at the middle of the year .

Speaker #1: But New York is clearly an area where proof of concept. We got in on the back of combining two franchises that, frankly, were from a retail standpoint in need of some TLC.

Bruce Van Saun: We put our best people down there and brought our version of banking into a highly competitive market, and we're having great success. It is our fastest-growing region in terms of households and deposits. We're still not at the full scale with where we would need to be to really penetrate that opportunity. As part of that broader effort, you would expect us to open more retail branches in Manhattan, in surrounding environments, and we're pretty excited by that opportunity. We probably will open another one or two PB locations in Manhattan, for example, but the focus here really is to optimize what we're going to do on the retail side. Brendan, anything to add?

Speaker #1: We put our best people down there and brought our version of banking into a highly competitive market. And we're having great success.

Speaker #1: It is our fastest-growing region in terms of households and deposits, but we're still not at the full scale with where we would need to be to really penetrate that opportunity.

Speaker #1: So, as part of that broader effort, you would expect us to open more retail branches in Manhattan and surrounding environments. And we're pretty excited by that opportunity.

Speaker #1: We probably will open another 1 or 2 PB locations in Manhattan , for example , but the the focus here really is to optimize what we're going to do on the retail side .

Brendan Coughlin: I guess a sign of an incredibly aligned leadership team, you took almost every word out of my mouth. The only thing I would add is just to give you one piece of color in New York and then on the rest of the markets. In a world post-COVID, there are a lot of questions on the future of retail branches and the importance of them. It's still very much a truth if you want outsized operating leverage in retail banking, you need 4% plus share of branch density. Despite all of our incredible successes in New York, we're still at sort of call it 2.25, 2.5% branch density. We do think we can build on our momentum by densifying a little bit, and we'll do that thoughtfully over time.

Speaker #1: Brendan, anything to add?

Speaker #5: I guess a sign of an incredibly aligned leadership team—you took almost every word out of my mouth. The only thing I would add is, just, I'll give you one piece of color in New York and then the rest of the markets.

Speaker #5: But , you know , in a world post , it's , it's , there's a lot of questions on the future of retail branches and the importance of them , but it's still very much a truth if you want outsized operating leverage in retail banking , you need 4% plus share of branch density and despite all of our incredible successes in New York , we're still at sort of call it two and a quarter , 2.5% branch density .

Speaker #5: So we do think we can build on our momentum by densifying a little bit . And we'll do that thoughtfully over time . As Bruce mentioned , we'll give you more details as we get towards the middle part of the year .

Brendan Coughlin: As Bruce mentioned, we'll give you more details as we get towards the middle part of the year. We also have some self-funding dynamics that still exist in the rest of the franchise. We still have a lot of in-store branches that we'll be able to reposition a bit to traditional branches in the non-New York parts of the footprint that will free up some expense and capital to densify New York. We'll bring everybody through the plan here in short order. Really, as Bruce pointed out, the goal really is to drive sustainable market share gains and outsized deposit growth in retail to fund the rest of the franchise.

Speaker #5: We also have some self-funding dynamics that still exist in the rest of the franchise . We still have a lot of in-store branches that will be able to reposition a bit to traditional branches in the non New York parts of the footprint .

Speaker #5: That will free up some expense and capital to densify in New York . So we'll we'll bring everybody through the plan here in short order .

Speaker #5: But really , as Bruce pointed out , the goal really is to drive sustainable market share gains and outsized deposit growth in retail to fund the rest of the franchise .

Ebrahim Poonawala: That's a good color. Thank you. Just a quick follow-up, Bruce, for you. On the capital plans, like the FCB should benefit Citizens once that gets mark-to-market. When we look at the benefit from the capital proposals, it's something we've begun to think about. Do you think the tangible common equity ratio then becomes something that you're more mindful for in a world where the RWA density is coming down?

Speaker #7: That's good color . Thank you . And just a quick follow up , Bruce , for you on the capital plans like the SCB should benefit citizens .

Speaker #7: Once that gets marked to market . When we look at the benefit from the capital proposals , it's something we've begun to think about .

Speaker #7: Do you think the tangible common equity ratio then becomes something that you're more mindful for in a world where the RWA density is coming down

Bruce Van Saun: Yeah, that's a really thoughtful question. I do think while that's not a regulatory ratio, it is something that bank investors have focused on over time. As I said, we're going to have to triage when this good news comes in. You have to triage as to what are market expectations, what are regulatory expectations, what are rating agencies' expectations. Yeah, I think that could happen. I think that TCE ratio could be something that analysts and investors move up in prominence.

Speaker #1: Yeah , that's a that's a really thoughtful question . So I do think while that's not a regulatory ratio , it is something that bank investors have focused on over time .

Speaker #1: And so as I said , we're going to have to triage when when there's good news comes in , you have to triage as to what our market expectations , what are regulatory expectations , what are rating agencies expectations , but yeah , I think that could happen .

Speaker #1: I think that TCE ratio could be something that analysts and investors move up in prominence .

Ebrahim Poonawala: Helpful. Thank you.

Kristin Silberberg: We'll go to Gerard Cassidy from RBC Capital Markets. Please go ahead.

Operator: We'll go to Gerard Cassidy from RBC Capital Markets. Please go ahead.

Speaker #7: Thank you

Speaker #3: We'll go to Gerard Cassidy, RBC Capital Markets. Please go ahead.

Gerard Cassidy: Hi, Bruce. Hi, Noy.

Bruce Van Saun: Hey, Gerard.

Aunoy Banerjee: Hi, Gerard.

Speaker #8: Hey , Bruce . How You guys have done a good job of expanding the commercial banking business . You talked about it on the call already .

Gerard Cassidy: You guys have done a good job of expanding the commercial banking business. You talked about it on the call already. Can you share with us when you go into a new market like Florida or California? Now, clearly you're building your national brand, but I don't think it's yet at a Bank of America level in terms of recognition. So when you go into these markets that could provide growth on the commercial side, how do you balance the risk with growth? Then second, are you leading with your balance sheet or are you building out treasury products first and then lending to those customers? How do you guys approach that?

Speaker #8: Can you share with us when you go into a new market like Florida or California ? Now , clearly you're building your national brand , but it's I don't think it's yet a Bank of America level in terms of recognition .

Speaker #8: So, how do you balance—when you go into these markets that could provide growth on the commercial side—how do you balance the risk with growth?

Speaker #8: And then second , are you leading with your balance sheet or are you building out treasury products first and then lending to those customers ?

Bruce Van Saun: Let me start, and I'll flip right to Ted. I would say, we have tried to leverage an expanded presence in these new markets where we've brought a private banking operation or private wealth operations, and then kind of magnify that by also bringing in the corporate banking teams. What we aspire to is to bring very experienced, high-quality bankers onto the platform who kind of have a growth ambition and who are good team players. One of the reasons that we're successful overall in the corporate bank is we work very collaboratively with a coverage banker who has product partners that they work together to come up with good ideas. We call it thought leadership. At every touch point with the client, we're showing up. We understand your business. We want to get to know you.

Speaker #8: How do you guys approach that ?

Speaker #1: Let me let me start and I'll flip right to Ted . But you know , I would say we have tried to lever an expanded presence in these new markets where we brought a private banking operation or private wealth operations .

Speaker #1: And then kind of magnify that by also bringing in kind of the corporate banking teams and what we aspire to is to bring very experienced , high quality bankers onto the platform who kind of have a growth ambition and who are good team players .

Speaker #1: And so one of the reasons that we're successful overall in the corporate bank is we work very collaboratively , collaboratively with a coverage banker who has product partners that they work together to come up with good ideas .

Speaker #1: We call it thought leadership , but at every touch point with the client , we're showing up . We we understand your business .

Bruce Van Saun: We have some ideas about how you can be more successful. That really resonates with customers. I think there's always room for market participants who do that well. It's really a combination of the visibility of already being in the market, and now we have 400 people in California, over 400 people, and that kind of works together to raise our visibility and our presence. Then staying committed to really high-quality people and staying committed to that One Citizens collaborative model where we can deliver solutions to the customer. Ted?

Speaker #1: We want to get to know you. We have some ideas about how you can be more successful, and that really resonates with customers.

Speaker #1: So I think there's always room for market participants who do that well . So it's really a combination of the visibility of already being in the market .

Speaker #1: And now we have like 400 people in over 400 people . And that kind of works together to raise our visibility and our presence .

Speaker #1: And then staying committed to really high quality people and staying committed to that one . Citizens collaborative model where we can deliver solutions to the customer .

Brendan Coughlin: Yeah. Bruce hit it. The One Citizens model that we've implemented throughout our bank has really gone to differentiate ourselves as we expand into these new regions.

Ted Swimmer: Yeah. Bruce hit it. The One Citizens model that we've implemented throughout our bank has really gone to differentiate ourselves as we expand into these new regions.

Speaker #1: Ted .

Speaker #5: Yeah . Bruce . Hit it . The one citizens model that we've implemented throughout our bank has really gone to differentiate ourselves as we expand into these new regions .

Ted Swimmer: To your question, Gerard, we don't necessarily lead with treasury, don't necessarily lead with credit. What we try to lead with is ideas to our customers, and where we differentiate ourselves is as we pick what customers we're going to attract, we really look at where do we differentiate ourselves versus our competitors. Is it an industry that we have a specialization in? Is it a sponsor or a private equity group that we know better? And then how do we bring all the parts of the bank together to give the customer an experience that they wouldn't necessarily get from somebody else?

Speaker #5: So to your question , Gerard , we don't necessarily lead with Treasury , don't necessarily lead with credit , but we try to lead with is ideas to our customers and where we differentiate ourselves is as we pick what customers we're going to attract , we really look at where do we differentiate ourselves versus our competitors .

Speaker #5: So is it an industry that we have a specialization ? Is it a sponsor , a private equity group that we know better ?

Speaker #5: We are trying to . And then how do we bring all the parts to the bank together to give the customer an experience that they wouldn't necessarily get from somebody else ?

Ken Usdin: When you have the private bank and all the great people and all the relationships that they have, and an ability to interact with people that we normally, if we were just showing up with a balance sheet, we wouldn't have the ability to address those customers. Bringing the private bank in and combining all those together has really been what we try to achieve as we've been building out in these markets.

Ted Swimmer: When you have the private bank and all the great people and all the relationships that they have, and an ability to interact with people that we normally, if we were just showing up with a balance sheet, we wouldn't have the ability to address those customers. Bringing the private bank in and combining all those together has really been what we try to achieve as we've been building out in these markets.

Speaker #5: And when you have the private bank and all the great people and all the relationships that they have and the ability to interact with people that we normally , if we were just showing up with a balance sheet , we wouldn't have the ability to , to address those customers .

Speaker #5: Bringing the private bank in and combining all those together has really been what we tried to achieve as we've been building out in these markets.

Bruce Van Saun: I would say that the kind of companies in the regions we're targeting or the industries we're targeting are very receptive to have a new player with a really strong approach. That they're not exactly some of the bigger players who aren't covering themselves in glory when it comes to how they cover middle market and mid-corporate companies. It feels like we're pushing on an open door to some extent when we go into these markets.

Speaker #1: Yeah . And I would say that , look , the , the kind of companies in the regions we're targeting are the industries that we're targeting are very receptive to have a new player with a really strong approach that they're not exactly some of the bigger players aren't covering themselves in glory when it comes to how they cover middle market and corporate companies .

Speaker #1: And so it feels like we're pushing on an open door to some extent when we go into these markets.

Gerard Cassidy: Very helpful. I appreciate it. Pivoting over to AI. Brendan touched on it a moment ago. Bruce, and maybe it's for Brendan as well. When do you think we get to the point where you folks, and your peers probably as well, are able to go out and tell investors, we just spent $X million on AI, and this is the bottom line impact. Earnings per share improved 2%, or the ROTCE number went up 50 basis points because of the $X million we just spent on AI. Do you think we can ever get to something like that down the road, or is that just too optimistic?

Speaker #8: Very helpful . I appreciate it . And then pivoting over to AI . Brendan touched on it a moment ago , Bruce . And maybe it's for Brendan as well .

Speaker #8: When do you think we get to the point where you folks and your peers probably as well , are able to go out and tell investors , you know , we just spent X millions of dollars on AI and this is the bottom line .

Speaker #8: Impact earnings per share improved 2% or the ROTC number went up 50 basis points because of the X millions of dollars . We just spent on AI .

Speaker #8: Do you think we can ever get to something like that down the road, or is that just too optimistic?

Bruce Van Saun: Yeah. I think it's going to be hard. It's going to be a very dynamic process, and there's a lot of crosscurrents that go through the P&L. I think we'll try to do that with Reimagine the Bank. We're not kind of detailing any notable items for what the cost is of restructuring, an investment, and consultants and all of that. I think we'll certainly delineate it so that you understand what we're expending. Just within that program, when we get to the 450 run rate, that's going to be a very good return on what it took to stand that up. That might be one way that you can kind of get a sniff of how much are they spending and what benefits are resulting. I do think it's a dynamic process and a lot of things.

Speaker #9: Yeah , I , I , I think it's going to be hard .

Speaker #1: It's going to be very dynamic process . And there's a lot of cross currents that go through the PNL . I think we'll try to do that with reimagined the bank .

Speaker #1: We're not kind of detailing any notable items for what the cost is of restructuring and investment . And consultants and all of that .

Speaker #1: But I think we'll certainly delineate it so that you , you , you understand what we're spending . And so just within that program , when we get to the 450 run rate , that's going to be a very good return .

Speaker #1: On what it took to stand that up. So, that might be one way that you can kind of get a sniff of how much are they spending, and what benefits are resulting.

Bruce Van Saun: There'll be a lot of crosscurrents in the economy and other things. You might not have the cleanliness of connection that you're talking about, that you're aspiring to.

Speaker #1: But I do think it's a dynamic process and a lot of things . There'll be a lot of cross currents in the economy and other things .

Speaker #1: And so you might not have the cleanliness of connection that you're talking about, that you're aspiring to.

Gerard Cassidy: Appreciate that. Thank you, Bruce.

Bruce Van Saun: Yep.

Speaker #8: Appreciate that . Thank you . Bruce .

Kristin Silberberg: We'll go to the line of Ken Usdin from Autonomous Research. Please go ahead.

Operator: We'll go to the line of Ken Usdin from Autonomous Research. Please go ahead.

Speaker #1: Yep .

Speaker #3: I'll go to the line of Ken from Autonomous Research. Please go ahead.

Ken Usdin: Thanks. Just one here on expenses. The Q1 and then the Q2 guide kind of get us to that 4.5-ish, 5% year-over-year cost growth. I know a lot of the Reimagine the Bank benefit comes in the H2, as well as some of the spending. Can you just help us just understand the cadence of expense growth as we kind of see that benefit and as you balance performance-related and investments against that as we move to the H2? Should we just be kind of thinking about that 4.5 overall guide that you gave us in January? Thanks.

Speaker #10: Thanks . Just one here on expenses . So , you know , the first quarter and then the second quarter guide kind of get that , get us to that four and a half ish , 5% year over year cost growth .

Speaker #10: I know a lot of the reimagined the bank benefit comes in the second half . As long as well as some of the spending .

Speaker #10: So can you just help us just understand the cadence of expense growth as we kind of see that benefit ? And as you balance , you know , performance related and investments against that , as we move to the second half and should we just be kind of thinking about that four and a half overall guide that you gave us in January ?

Bruce Van Saun: Yeah. Ken, we're not coming off the 4.5, and there is a seasonal pattern of expense recognition that the Q1 has the FICA and associated payroll items that go with the bonus, paying the bonus. Then the Q2 tends to be where we would bring in people and after they get bonus. Any net adds that we want to have, it's a big period for the net adds. You overlay some Reimagine the Bank one-time costs in the H1 of the year. You're going to kind of peak, I would say, in the upward pressures, and your merit happens in the Q2, early Q2. You're kind of peaking in the H1 of the year. Then wouldn't be as much net investment spending on adds in the H2 of the year.

Speaker #10: Thanks .

Speaker #1: Yeah . Ken . So we're not coming off the four and a half . And there is a seasonal pattern of expense recognition that the first quarter has the FICA and associated payroll items that go with the bonus , paying the bonus .

Speaker #1: And then the second quarter tends to be where we would bring in people . And after they get bonus . And so any net adds that we want to have .

Speaker #1: It's a big period for the net adds. So you overlay some reimagined the bank one-time costs in the first half of the year.

Speaker #1: You're going to kind of peek . I would say in the upward pressures and your merit happens in the second quarter , early second quarter .

Speaker #1: So you're kind of peaking in the first half of the year . And then wouldn't be as much net investment spending on ads in the second half of the year .

Bruce Van Saun: Some of the benefits coming in from Reimagine the Bank will flow through in the H2 of the year. You could actually see expenses start to dip a bit in the H2. We'll obviously give you that guidance as we get to Q2. We'll tell you what we think in Q3. Just to preview it, we're still holding to the 4.5 for the year, and it's kind of the build is more front-loaded and then kind of levels off or even declines a little.

Speaker #1: And then some of the benefits coming in from reimagining the bank will flow through in the second half of the year. So you could actually see expenses start to dip a bit in the second half.

Speaker #1: So we'll we'll obviously give you that guidance as we get to the second quarter . We'll tell you what we think in the third quarter .

Speaker #1: But just to preview it , we're still holding to the four and a half for the year . And it's kind of the build is more front loaded .

Aunoy Banerjee: Yeah. Ken, I would just add, we are pleased with the expense discipline that we had in Q1. Really, the growth quarter-on-quarter was all of the seasonality that Bruce mentioned. As Brendan mentioned, we have good line of sight to some of the savings that are coming. He mentioned the vendor saves as well as some of the property closures. We feel very good about some of the downtick that we will see and the benefit that's come there. We have very disciplined returns objective on the private bank, et cetera. I would just add, like if you remember the 500 basis points of positive operating leverage for the year, and we delivered 700 basis points this quarter. That still remains very much true for us.

Speaker #1: And then kind of levels off, or even declines a little. Okay.

Speaker #6: And Ken , I would just add , we are pleased with the expense discipline that we had in the first quarter . Really the growth quarter on quarter was all about the seasonality that Bruce mentioned .

Speaker #6: And as Brendan mentioned , we have good line of sight to some of the savings that are coming . So he mentioned the vendor saves as well as some of the property closures .

Speaker #6: And so we feel very good about some of the some of the downtick that we will see . And the benefits . That's come there .

Speaker #6: And we have very disciplined returns objective on the private bank , etc. . And I would just add , like , if you should remember the 500 basis point of positive operating leverage for the year , and we delivered 700 basis points this quarter .

Bruce Van Saun: Yep.

Speaker #6: So that's , that's , that still remains very much true for this

Ken Usdin: Perfect. Thank you, guys.

Speaker #1: Yep .

Bruce Van Saun: Okay.

Kristin Silberberg: We'll go to Chris McGratty from KBW. Please go ahead.

Operator: We'll go to Chris McGratty from KBW. Please go ahead.

Speaker #10: Perfect . Thank you guys

Speaker #1: Okay .

Christopher McGratty: Oh, great. Thanks. Bruce, you expressed confidence getting into the 16% to 18% range for the ROTCE by the end of next year. I guess, number one, what could make it perhaps a little sooner get into the range, and maybe the factors that might push it out a little bit?

Chris McGratty: Oh, great. Thanks. Bruce, you expressed confidence getting into the 16% to 18% range for the ROTCE by the end of next year. I guess, number one, what could make it perhaps a little sooner get into the range, and maybe the factors that might push it out a little bit?

Speaker #3: Back Chris Mcgratty from KBW . Please go ahead

Speaker #11: Oh great . Thanks Bruce , you expressed getting into the the the 16 to 18% range for by the end of next year .

Speaker #11: I guess number one , what could make it perhaps a little sooner get into the range and maybe the factors that might push it out a little bit .

Bruce Van Saun: Yeah. I think it's hard to pull it forward a whole lot. We have some of the time-based benefits of those legacy swaps running off, which is a driver of kind of moving higher in NII and overall kind of revenue. If we got into a kind of peace dividend from the resolution of the Ukraine war, and then there's a lot of activity in the capital markets, I think we're as well-positioned as anyone, certainly amongst our peers, maybe better positioned to really capture that upside if that happens. I think that's one driver that can maybe hope to get us there a little faster. I'd say in the private bank, they're on a steady as she goes by design kind of trajectory. If we did start to see more revenues, maybe we could force-feed a little more investment there.

Speaker #1: Yeah , I , I think it's hard to pull it forward a whole lot . We have some of the time based benefits of those legacy swaps running off , which is a driver of kind of moving higher in NII and overall kind of revenue .

Speaker #1: But , you know , if we got into kind of peace , peace , dividend from the resolution of the Iran war and then there's a lot of activity and , you know , the capital markets , I think we're as as , as well positioned as anyone , certainly amongst our peers , maybe better positioned to really capture that upside if that happens .

Speaker #1: So I think that's one driver that can maybe help to get us there a little faster . And I'd say in in the private bank , they're on a steady as she goes by design kind of trajectory .

Speaker #1: If we did start to see more revenues , maybe we could force feed a little more investment there . And we talked a little bit about the potential for pull forward of RTB benefits .

Bruce Van Saun: We talked a little bit about the potential for pull forward of RTB benefits if some of the new technologies kick in. There is a case to make that potentially, in a perfect scenario, you could pull it in a little bit, but I'm not promising that, and I'm really just focused on making sure we hit that by kind of the end of 2027. I guess the converse is true too. If the kind of environment stays volatile, the war doesn't get resolved quickly, energy prices go up, and the economy slows down a bit, there's possibilities that that could extend a little bit. A lot of this is actually baked in. To get kind of from 12 to 15 is really these time-based benefits and some of the trajectory we see on the NIM.

Speaker #1: If some of the new technologies kick in . So there is a case to make that potentially in a perfect scenario , you could pull it in a little bit , but I'm not promising that .

Speaker #1: And I'm really just focused on making sure we hit that by kind of the end of 27 . And then , you know , I guess the converse is true too .

Speaker #1: If the kind of environment stays volatile and the war doesn't get resolved quickly and energy prices go up and the economy slows down a bit , there's there's possibilities that that could extend a little bit , but a lot of this is actually baked in .

Speaker #1: So to get kind of from 12 to 15 is really these time-based benefits. And some of the trajectory we see on the NIM.

Bruce Van Saun: Kind of getting all the way there is execution of kind of some of the rest of the initiatives, the normalization of credit costs back to the mid-30s. We had a 39 basis point this quarter. I think we're firmly on that trajectory again, absent something happening in the economy. We'll just continue to buy back our stock fairly aggressively as well.

Speaker #1: And then kind of getting all the way there is execution of kind of some of the rest of the initiatives , the normalization of credit costs back to the mid 30s .

Speaker #1: We had a 39 basis point this quarter . I think we're firmly on that trajectory . Again , absent something happening in the economy .

Speaker #1: And then we'll just continue to buy back our stock fairly aggressively as well

Christopher McGratty: Perfect. Thank you.

Chris McGratty: Perfect. Thank you.

Bruce Van Saun: Sure.

Kristin Silberberg: For the final question, we'll go to David Chiaverini from Jefferies. Please go ahead.

Operator: For the final question, we'll go to David Chiaverini from Jefferies. Please go ahead.

Speaker #11: Perfect . Thank you

Speaker #1: Sure .

Speaker #3: Final question . We'll go to David from Jefferies . Please go ahead .

David Chiaverini: Hi. Thanks for taking my question. I wanted to ask about loan pricing. Commercial loan growth has been increasing nicely across the industry. I was curious about how loan spreads are holding up in a competitive environment.

Speaker #12: Hi . Thanks for taking the question . So I wanted to ask about loan pricing , commercial loan growth has been increasing nicely across the industry .

Speaker #12: So I was curious about how loan spreads are holding up in a competitive environment.

Aunoy Banerjee: Yeah. Let me start, David, and then I'll pass it on to Ted. As you saw, that we had a diversified loan growth and even in the commercial bank we had in the mid-corporate space, we go a little bit on the subscription lines as well. We expect as you think about the spreads, like it definitely came down as the rates came down. We are well within the pack. The one thing I would talk about loan growth is, and Ted mentioned this is not only just a credit relationship, it's a more holistic relationship. We look at the returns of this loan on a holistic basis to think about what else are we getting, whether it's the deposit relationship or other business activities, fees, et cetera, that we are getting.

Speaker #1: Yeah .

Speaker #6: Let me start , David , and then I'll pass it on to Ted . As you saw that we had a diversified loan growth .

Speaker #6: And even in the commercial bank , we had in the mid corporate space , we go a little bit on the subscription lines as well .

Speaker #6: So and we expect as you think about the spreads , like it's definitely came down as the rates came down . But , but we are well within the pack .

Speaker #6: And the one thing I would talk about with loan growth is, and Ted mentioned this, this is not only just a credit relationship, it's a more holistic relationship.

Speaker #6: So we look at the returns of this loan on a holistic basis to think about what else are we getting , whether it's a deposit relationship , what are the business other business activities , fees , etc.

Aunoy Banerjee: There's a very disciplined process in Ted's business that we go through to ensure that we are just not looking at the spreads. Maybe Ted, I'll send it to you.

Speaker #6: that we are getting ? So there's a very disciplined process in Ted's business that we go through to ensure that we are just not looking at the spreads .

Ted Swimmer: Just to build on what Anuj said. Overall in the markets in the beginning of Q1, we saw more on the institutional side and in the bond side, we saw some tightening in spreads that obviously widened back out with what's going on in March. As we get specific to Citizens, we look at the relationship holistically. We try to figure out when we make a loan, what other ancillary business, and this was all part of our BSO that we really completed through the end of last year. We now feel like we have a very good discipline in place that we do not stretch on loans where we do not get an overall suitable return for our customer. As such, we really haven't seen much of a decline in spreads the last quarter.

Speaker #6: Maybe

Speaker #5: Just to build on what Noise said overall, in the markets, in the beginning of the first quarter, we saw more on the institutional side and then the bond side.

Speaker #5: We saw some tightening in spreads and obviously widened back out with what's going on in March . As we get specific to citizens , we are now , we look at the relationship holistically , so we try to figure out when we make a loan , what are the ancillary business ?

Speaker #5: And this was all part of our BSO that we really completed through the end of last year . We now feel like we have a very good discipline in place that we do not stretch on loans where we do not get an overall suitable return for our customer .

Speaker #5: As such, we really haven't seen much of a decline in spreads the last couple of the last quarter.

Bruce Van Saun: Good.

David Chiaverini: Thanks for that. Yeah, thanks for that. Shifting over to private credit and NDFI. To what extent are you contemplating leaning in as other banks pull back, or are you comfortable with your existing exposure?

Speaker #12: Thanks for that . Yeah , thanks for that . And then shifting over to private credit and NFI to what extent are you contemplating leaning in as other banks pull back , or are you comfortable with your existing exposure ?

Bruce Van Saun: Yeah, I would say it's Bruce, and I'll let Ted add color, but we've grown that, as I mentioned earlier, that book in a very disciplined manner. Call it 5% a year, being very selective about who we want to bank, the type of vehicles that we bank, and making sure we have the right structure. I don't really see us veering off of that. That served us well to where we're positioned today, and I think that's the strategy that we'll have going forward, even if some people step back and there's opportunities to do more. We'll see. Our baseline assumption is that we kind of keep to that mid-single digits growth rate. Ted?

Speaker #1: Yeah , I would say it's Bruce and I'll let Ted add color , but we've grown that . As I mentioned earlier , that book by very in a very disciplined manner , call it , you know , 5% a year being very selective about who we want to bank and the type vehicles that we bank and making sure we have the right structure .

Speaker #1: So I don't really see us veering off of that . That served us well to where we're positioned today . And I think that's the strategy that we'll have going forward , even if some people step back and there's opportunities to do more , we'll see .

Speaker #1: But our baseline assumption is that we kind of keep to that mid-single-digits growth rate. Ted.

Ted Swimmer: Yeah. We're going to continue to support our customers. We look at these relationships not just on the NDFI side, but on the private equity side, on the subscription side, and then what their portfolio companies are doing. If some of our customers are the winners and the survivors, we think that they're, not the survivors, but the winners and make acquisitions. May we grow with them? Sure. We're not going to specifically grow NDFI. We're going to just continue to go with where our customers go.

Speaker #5: Yeah . We're going to continue to support our customers . We we look at these relationships , not just on the NFI side , but on the private equity side , on the subscription side .

Speaker #5: And then what their portfolio companies are doing. So if some of our customers are the winners and the survivors, we think that they're not just survivors, but the winners, and make acquisitions.

Speaker #5: May we grow with them . Sure . But but we're not going to specifically grow NFI . We're going to just continue to go with where our customers go .

David Chiaverini: Very helpful. Thank you.

Bruce Van Saun: Okay. All right. I think that gets to the end of the question queue. Really appreciate your interest in Citizens. Thanks for dialing in today. Have a great day.

Speaker #12: Very helpful . Thank you .

Speaker #1: Okay . All right . I think that gets to the end of the question . Q so really appreciate your interest in citizens .

Speaker #1: Thanks for dialing in today . Have a great day

Operator: That concludes today's conference. Thank you for your participation, and you may now disconnect.

Speaker #13: That concludes today's conference .

Q1 2026 Citizens Financial Group Inc Earnings Call

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