Company Overview and History
Citizens Financial Group, Inc. (CFG) is one of the nation's oldest and largest financial institutions, tracing its roots back to 1828. Headquartered in Providence, Rhode Island, the company offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations, and institutions across its 14-state footprint and select national markets.
Over the past decade, Citizens has undergone a remarkable transformation, transitioning from a regional bank to a superregional powerhouse poised to capitalize on shifting industry dynamics. The company's journey began in 1828 as the High Street Bank in Providence, Rhode Island. Through numerous mergers and acquisitions over the years, Citizens expanded to become one of the largest regional banks in the Northeast. A significant milestone in the company's history came in 2014 when Citizens conducted an initial public offering and became an independent publicly traded company.
Strategic Transformation
Following the IPO, Citizens embarked on a major transformation and strategic repositioning. The company divested non-core businesses and assets, streamlined operations, and invested heavily in technology, digital capabilities, and talent. This period was marked by challenges, as Citizens worked to overcome the lingering effects of the financial crisis and establish itself as a leading super-regional bank. Despite these headwinds, the company made substantial progress in strengthening its balance sheet, improving asset quality, and enhancing its product and service offerings.
Private Banking and Wealth Management
One of the key pillars of Citizens' strategic vision has been the development of a premier bank-owned private banking and wealth management franchise. In 2023, the company launched its Citizens Private Bank, which has rapidly gained traction, reaching $7 billion in deposits, $3.1 billion in loans, and $4.7 billion in assets under management as of the end of 2024. The private bank's profitability reached a milestone in the fourth quarter of 2024, contributing $0.01 to the company's earnings per share. Citizens has set a goal for the private bank to be 5% accretive to the company's bottom line by 2025.
Commercial Banking
Alongside the private bank's growth, Citizens has also made significant strides in strengthening its commercial banking capabilities, particularly in the middle-market segment. The company has invested in expanding its presence in key expansion markets, such as Southern California and Florida, and has built out specialized industry verticals to better serve clients' evolving needs. These initiatives have helped drive consistent growth in the commercial banking franchise, which generated $2.86 billion in revenue in 2024, despite a challenging macroeconomic environment.
The Commercial Banking segment primarily serves companies and institutions, aiming to be a trusted advisor and preferred provider for their banking needs. This segment offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as syndicated loans, corporate finance, mergers and acquisitions, and debt and equity capital markets capabilities. The Commercial Banking segment focuses on middle-market companies, large corporations, and institutions, with dedicated teams possessing industry and product expertise in areas such as Aerospace, Defense and Government Services, Communications, Transportation and Logistics, Food and Restaurants, Human Capital Management, and Gaming.
For the year ended December 31, 2024, the Commercial Banking segment reported net interest income of $1.95 billion, noninterest income of $908 million, and pretax profit of $1.26 billion.
Consumer Banking
On the consumer banking side, Citizens has transformed its retail network, enhancing the customer experience through digital innovation and a more personalized approach. The company's deposit franchise has continued to perform well, with the bank maintaining a strong position in low-cost deposits, including a sizable and growing contribution from the private bank. In 2024, Citizens' retail banking segment generated $5.70 billion in revenue, up from $5.25 billion the prior year.
The Consumer Banking segment serves consumer customers and small businesses, offering a range of traditional banking products and services. This includes deposits, mortgage and home equity lending, credit cards, small business loans, education loans, point-of-sale finance loans, as well as wealth management and investment services. The segment's distribution channels include a branch network, ATMs, and a workforce of experienced specialists covering lending, savings, investment needs, and a broad range of small business products and services. The Consumer Banking segment's value proposition is centered around providing simple, easy-to-understand product offerings and a convenient banking experience with a more personalized approach.
For the year ended December 31, 2024, the Consumer Banking segment reported net interest income of $4.57 billion, noninterest income of $1.13 billion, and pretax profit of $1.69 billion.
Financials
Citizens' financial performance in 2024 was broadly in line with the company's guidance, with the exception of lower-than-expected loan volumes. Net income available to common stockholders declined to $1.37 billion, or $3.03 per diluted share, compared to $1.49 billion, or $3.13 per diluted share, in 2023. The company's return on average tangible common equity (ROTCE) was 9.8% for the full year, or 10.5% on an underlying basis, which excludes the impact of certain notable items.
Despite the headwinds in loan growth, Citizens demonstrated its financial resilience, with a strong net interest margin (NIM) of 2.85% for the full year. The company's NIM expanded by 10 basis points in the fourth quarter, benefiting from the runoff of the non-core portfolio, fixed-rate asset repricing, and improved deposit and loan betas. Citizens expects its NIM to continue expanding in 2025, targeting a range of 3.00% to 3.10% by the end of the year.
For the full year 2024, Citizens reported total revenue of $7.79 billion, net income of $1.51 billion, operating cash flow of $2.00 billion, and free cash flow of $1.88 billion. In the fourth quarter of 2024, the company achieved revenue of $3.02 billion, up 10% year-over-year, driven by higher capital markets fees, card fees, and wealth fees, partially offset by lower mortgage banking fees. Net income for the quarter was $401 million.
The Non-Core segment, which includes the company's indirect auto and certain purchased consumer loan portfolios, reported net interest income of $117 million and pretax profit of $276 million for 2024.
Liquidity and Capital Position
The company's balance sheet and capital position remain strengths, with a CET1 ratio of 10.8% at the end of 2024. Citizens deployed $1.05 billion in share repurchases during the year, reflecting its commitment to efficiently managing capital and returning excess funds to shareholders. Looking ahead, the company expects to maintain a CET1 ratio above the high end of its 10% to 10.5% target range, given ongoing macroeconomic uncertainty.
Citizens maintains a strong liquidity position with $10.6 billion in cash and cash equivalents as of the end of 2024. The company has a debt-to-equity ratio of 0.51, a current ratio of 1.62, and a quick ratio of 1.62. Additionally, Citizens has access to a $7 billion unsecured revolving credit facility and $21.1 billion in FHLB borrowing capacity, further bolstering its liquidity position.
Commercial Real Estate Portfolio Management
One area of focus for Citizens in recent years has been the management of its commercial real estate (CRE) portfolio, particularly the office segment, which has faced challenges amid the shift to remote and hybrid work models. The company has made steady progress in working through this portfolio, with criticized assets declining by 17% in the fourth quarter of 2024, led by a 30% reduction in the general office sector. Citizens expects the CRE workout process to continue throughout 2025, but believes it is past the midpoint of this cycle.
Future Outlook and Strategic Priorities
As Citizens navigates the evolving banking landscape, the company remains committed to its strategic priorities, which include further enhancing its consumer and commercial banking franchises, driving growth in the private bank and wealth management business, and leveraging technology and data to deliver a superior customer experience. The company's strong balance sheet, diversified business model, and experienced management team position it well to capitalize on the industry's transformation and deliver sustainable value for shareholders.
Looking ahead to 2025, Citizens has provided guidance on several key financial metrics. The company expects net interest income to grow by 3-5%, driven primarily by an increase in net interest margin to around 3% for the year. Spot loan growth is anticipated to be in the low single digits overall, and mid-single digits excluding non-core loans. Non-interest income is expected to increase by 8-10%, led by capital markets and wealth management activities. Expenses are projected to rise by about 4%, or 2.6% excluding the private bank and private wealth segments.
Citizens aims to achieve positive operating leverage of approximately 150 basis points in 2025. Net charge-offs are expected to trend down to around $650-700 million, or high-40s basis points. The company plans to continue releasing reserves over the course of 2025, given favorable credit trends and balance sheet remix. The CET1 ratio is expected to end 2025 in the 10.5-10.75% range, above the 10-10.5% medium-term operating range.
In terms of medium-term outlook, Citizens is confident in achieving its 16-18% ROTCE target by 2027. A key driver of this goal is expanding the NIM to the 3.25-3.5% range by 2027. Additional tailwinds are expected from non-rate dependent swaps amortization, non-core runoff, and other balance sheet dynamics. The company anticipates generating solid returns from its core business, coupled with the execution of private bank and other key initiatives.
Citizens primarily operates in the New England, Mid-Atlantic, and Midwest regions of the United States, without a significant global presence. The regional banking industry has experienced moderate loan growth and increased competition for deposits amid rising interest rates. The compound annual growth rate (CAGR) for the industry's revenue and net income is estimated to be around 5-6% over the next 3-5 years.
As Citizens continues to execute its strategic plan and navigate the evolving financial services landscape, the company is well-positioned to capitalize on growth opportunities, enhance operational efficiency, and deliver value to its stakeholders in the years ahead.