Citizens Financial Group Q1 2026 Earnings Call - Reimagine the Bank and Private-Client Engine Poised to Boost NIM and ROE

Brendan Coughlin, President, Citizens Financial Group3: Good morning everyone, and welcome to the Citizens Financial Group first quarter 2026 earnings conference call. My name is Ivy, and I will be your operator today. Currently, all participants are in a listen-only mode. Following the presentation, we will conduct a brief question and answer session. As a reminder, this event is being recorded. Now I will turn the call over to Kristin Silberberg, Head of Investor Relations. Kristin, you may begin.

Brendan Coughlin, President, Citizens Financial Group1: Thanks, Ivy. Good morning, everyone, and thank you for joining us. First this morning, our Chairman and CEO, Bruce Van Saun, and CFO, Aunoy Banerjee, will provide an overview of our first quarter results. Brendan Coughlin, President, and Ted Swimmer, head of commercial banking, are also here to provide additional color. We will be referencing our first quarter presentation located on our investor relations website. After the presentation, we will be happy to take questions. Our comments today will include forward-looking statements which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review in the presentation. We also reference non-GAAP financial measures, so it’s important to review our GAAP results in the presentation and the reconciliations in the appendix. With that, I will hand it over to Bruce.

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

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

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

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

With that, I’ll turn it over to Aunoy for the financial details. Aunoy.

Aunoy Banerjee, Chief Financial Officer, Citizens Financial Group: 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 with ROTCE of 12.2%. Results were paced by strong NII, reflecting both continued net interest margin expansion and solid loan growth. We also delivered our best-ever first quarter fee result, led by strong performance in our commercial bank. The solid revenue performance and expense discipline drove more than 700 basis points of positive operating leverage year-over-year, notwithstanding continued investment in the private bank and our other strategic priorities, along with ramping up our Reimagine the Bank program. The private bank continued to grow its profitability, contributing 11 cents to EPS, up from 10 cents in the prior quarter, as the business delivered another very strong quarter of deposit growth.

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

Our interest-bearing deposit costs were down 16 basis points, and total deposit costs were down 12 basis points. The cumulative interest-bearing deposit beta improved to 50% as we benefited from the repricing after the last rate cut. Even with the Fed now expected to hold steady in 2026, we are still projecting a high 40 beta for the cycle. Moving to slide 6. Noninterest income is up 11% year-over-year, but down 2% linked-quarter. As I mentioned, this was our strongest first quarter fee result ever, notwithstanding heightened geopolitical tensions and an increase in market volatility. Capital markets performance demonstrated the strength and diversity of the franchise, with fees up 34% year-over-year and down 4% compared with the strong fourth quarter. M&A delivered a good result in the quarter with our pipeline is strong and continues to build.

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

The first quarter results reflect positive net inflows, partially offset by market impacts on AUM. Mortgage was down 19% linked quarter, given a lower MSR valuation, partially offset by slightly higher production and servicing fees. On slide 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 of higher commercial line utilization. This was partially offset by CRE paydowns. We continue to reduce commercial banking CRE balances, which were down about 4% this quarter and 16% year-over-year.

The private bank delivered good loan growth again this quarter, with period-end loans up about $600 million, driven by growth in multi-family and residential mortgage. Growth in retail loans ex non-core on a spot basis was about $300 million, led by real estate secured categories. This was offset by non-core auto portfolio runoff of roughly $500 million for the quarter. Next, on slides 9 and 10, we continued to do a good job on deposits, with average deposits up 1% or $1.5 billion quarter-over-quarter, primarily driven by the growth in the private bank, which reached $16.6 billion at the end of the quarter. This was partially offset by seasonal impacts in commercial.

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

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

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

We opened offices in Menlo Park and Laurel Village in the first quarter, and we expect to open at least 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.

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

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

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Okay. Thank you, Anuj. Operator, let’s open it up for Q&A.

Brendan Coughlin, President, Citizens Financial Group3: We’ll now proceed to the question and answer portion of the call. At this time, if you would like to ask a question, please unmute your phone, press star one and record your name clearly when prompted. If you need to withdraw your question at any time, please press star two. Again, that is star one to ask a question. Our first question comes from Scott Siefers from Piper Sandler. Please go ahead.

Brendan Coughlin, President, Citizens Financial Group5: Morning, guys. Thank you for taking the question.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Good morning.

Brendan Coughlin, President, Citizens Financial Group5: Let’s see. I was hoping you could maybe start by speaking to kind of the capital markets dynamics. Obviously see the numbers in the first quarter, but curious how you thought the first quarter actually performed, given that you had sort of the interplay between one, the environment played out a lot differently than we all figured it might. Two, I know you all had some deals that were pushed from the fourth quarter into the first quarter, so maybe just sort of results versus expectations, and then if you could speak to the forward look, things like pipelines, confidence in pull-through, et cetera.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. Scott, it’s Bruce. I’ll take it.

Brendan Coughlin, President, Citizens Financial Group5: Hey, Bruce.

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

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

Brendan Coughlin, President, Citizens Financial Group6: Building on what Bruce just said, we took a couple transactions in March that we would’ve launched into the market and pushed them into April, just given the volatility in the overall markets. During that whole period of time, we continued to sign up new transactions. I think what’s really exciting about the transactions that we’re signing up, based on the investments we made in corporate finance and industry specialization, we now are doing more complex transactions and getting signed up on more complex transactions than we ever had before, and feel very good about what those transactions are and how the pipeline is building. Add to what Bruce just said, the deals that got postponed in March, especially this week, we’ve seen them back into the market.

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. I should just close by saying it was a record first quarter for us in capital markets fees. That shouldn’t go unnoted.

Brendan Coughlin, President, Citizens Financial Group5: Yeah, totally agree. Okay, perfect. Thank you. That’s very helpful. I was hoping you all would maybe speak to the private credit portfolio as well. I know there’s a lot of good detail in the appendix. Just curious sort of not only for an update on credit quality dynamics, but also given your build out of the team over many years. I know it’s been a focus area, just sort of your appetite to continue to grow the portfolio given sort of certain current industry circumstances.

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

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

I think every player in the market will be more selective, and we’ll continue to be selective, but we would expect this to be an area that we stay committed to. Ted.

Brendan Coughlin, President, Citizens Financial Group6: Just adding on to what Bruce said. In a number of conversations we’ve had with private credit since the noise has really started, we really haven’t seen a decrease in appetite. In fact, in a lot of the conversations and the deals we’re getting ready to launch.

We’re getting inbound calls from the private credit side of the business. Technology and software is certainly something that they’re not all that interested in investing in right now, but for the most part, the majority of their portfolio, they’re still very hungry and there’s a lot of demand out there.

Brendan Coughlin, President, Citizens Financial Group5: Perfect. All right, thank you all very much.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Okay.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to the line of Manan Gosalia from Morgan Stanley. Please go ahead.

Brendan Coughlin, President, Citizens Financial Group2: Hi, good morning.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Hi.

Brendan Coughlin, President, Citizens Financial Group2: 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?

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

With that, Anuj, I’ll turn it over to you if you want to add any color.

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

Brendan Coughlin, President, Citizens Financial Group2: Perfect. Then maybe to pivot over to capital, given the new proposals that we got a few weeks ago. If you could give us your initial thoughts on what the magnitude of the benefit is for risk-weighted assets given your specific business mix, and maybe if you have any thoughts on whether Citizens would adopt the ERBA?

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

There’ll be a lot of considerations. What are stakeholders’ expectations? The market, the rating agencies, the regulators, 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?

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yep.

Brendan Coughlin, President, Citizens Financial Group2: I appreciate all the color. Thanks, Bruce. Thanks, Anuj.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Sure.

Brendan Coughlin, President, Citizens Financial Group3: Next we’ll go to the line of Ryan Nash from Goldman Sachs. Please go ahead.

Brendan Coughlin, President, Citizens Financial Group4: Good morning, Bruce. Good morning, Anuj.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Morning.

Brendan Coughlin, President, Citizens Financial Group4: Bruce, you’ve had four straight quarters of sequential loan growth. If I look at the drivers of growth, clearly, private capital call, private credit have all been contributors. Maybe you could just talk about your confidence in loan growth from here and what you see as the key drivers. Then second, I know you referenced higher utilization. What’s driving that? Are you expecting to see more of this? Thank you.

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

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

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

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

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

Brendan Coughlin, President, Citizens Financial Group6: Yeah. Thanks, Brendan and Bruce. On the middle market side, we have seen a pickup in utilization over the last three months. I think our customers are getting more comfortable in the economy and overall spending money on CapEx, which has led to a slight increase there. On the mid-corporate and adding on that, what we built out in Florida, New York and California, we’re starting to see some real success there with some increased loan demand and some increased customer count, which has resulted in higher growth there. On the mid-corporate side, we’ve reorganized the division a little bit to be more industry focused, less geographic focus. That has resulted in a nice pickup of new opportunities for us on the mid-corporate side of the business, and that was really heroic in the first quarter for us with significant growth there.

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

Brendan Coughlin, President, Citizens Financial Group4: Great.

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

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

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

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

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

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

Brendan Coughlin, President, Citizens Financial Group4: Awesome. Thanks for all the color.

Brendan Coughlin, President, Citizens Financial Group: Thanks.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to Erika Najarian from UBS. Please go ahead.

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. We’re not coming off any of those ranges in the full year guide at this point, Erika.

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

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

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

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

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

Erika Najarian, Analyst, UBS: Thank you so much.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to the line of John Pancari from Evercore ISI. Please go ahead.

John Pancari, Analyst, Evercore ISI: Morning.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Hey.

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

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

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

John Pancari, Analyst, Evercore ISI: 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.

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

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

John Pancari, Analyst, Evercore ISI: Got it. All right. Thanks, Bruce.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to the line of Jon Arfstrom from Cantor. Please go ahead.

Jon Arfstrom, Analyst, Cantor: Hey, good morning, guys.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Morning.

Jon Arfstrom, Analyst, Cantor: 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.

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

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

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

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

Brendan Coughlin, President, Citizens Financial Group: Yeah. The deposit cost, looking at Aunoy Banerjee

Jon Arfstrom, Analyst, Cantor: Yeah.

Brendan Coughlin, President, Citizens Financial Group: It’s 220-ish basis points is the total deposit cost when you blend in the interest bearing plus non-interest. Check me on that.

Jon Arfstrom, Analyst, Cantor: Yep.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. It’s going to be lower than our commercial deposit funding cost, but higher than pure retail.

Brendan Coughlin, President, Citizens Financial Group: Right.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Is one way to think about that.

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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, we call them two-legged customers, in addition to some of the corporate relationships that we have. We get billboard value from having those new locations opened. I would say over the next 3-4 years, we could see that PBO count get up to 25-30. If you recall, I think First Republic had maybe 80.

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

that’s also a real focal point to make sure that we have the wealth professionals co-located with our private bankers so we can deliver kind of total solutions to the customer.

Brendan Coughlin, President, Citizens Financial Group: 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’ve 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’ve 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.

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.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: I would have said A plus, but.

Brendan Coughlin, President, Citizens Financial Group: Okay. I’ll give you the rounding to A plus.

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

Brendan Coughlin, President, Citizens Financial Group: Yeah. Good point.

Jon Arfstrom, Analyst, Cantor: Ton of great detail, guys. Appreciate it.

Brendan Coughlin, President, Citizens Financial Group: Okay, sure.

Brendan Coughlin, President, Citizens Financial Group3: We have Ebrahim Poonawala from Bank of America. Please go ahead.

Ebrahim Poonawala, Analyst, Bank of America: 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.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah.

Ebrahim Poonawala, Analyst, Bank of America: 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 what you’re thinking there?

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah, sure. I’ll start and flip it to Brendan. I think I referenced this on a prior call, 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 footprint is pretty saturated and we need to go outside a 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.

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 is. If you look at that over a 10-year period, that’s another $20 billion-$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.

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. We’re pretty excited by that opportunity. We probably will open another one or two PB locations in Manhattan, for example. The focus here really is to optimize what we’re going to do on the retail side. Brendan, anything to add?

Brendan Coughlin, President, Citizens Financial Group: 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 on the rest of the markets. In a world post-COVID, there’s 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%+ 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.

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 in 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.

Ebrahim Poonawala, Analyst, Bank of America: That’s good color. Thank you. Just a quick follow-up, Bruce, for you on the capital plans, like the SCB 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?

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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.

Ebrahim Poonawala, Analyst, Bank of America: Helpful. Thank you.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to Gerard Cassidy from RBC Capital Markets. Please go ahead.

Gerard Cassidy, Analyst, RBC Capital Markets: Hi, Bruce. Hi, Anoy.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Hey, Gerard.

Aunoy Banerjee, Chief Financial Officer, Citizens Financial Group: Hi, Gerard.

Gerard Cassidy, Analyst, RBC Capital Markets: 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. 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? 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?

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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 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.

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. Now we have 400 people in California, over 400 people. That kind of works together to raise our visibility and our presence, 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. Ted?

Brendan Coughlin, President, Citizens Financial Group6: 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. 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. 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? 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?

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.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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 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.

Gerard Cassidy, Analyst, RBC Capital Markets: Very helpful. I appreciate it. Then 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? Is that just too optimistic?

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. I think it’s going to be hard. It’s going to be very dynamic process, and there’s a lot of cross currents 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 and 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.

There’ll be a lot of cross currents in the economy and other things. You might not have the cleanliness of connection that you’re talking about, that you’re aspiring to.

Gerard Cassidy, Analyst, RBC Capital Markets: appreciate that. Thank you, Bruce.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yep.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to line of Ken Usdin from Autonomous Research. Please go ahead.

Brendan Coughlin, President, Citizens Financial Group0: Thanks. Just one here on expenses. The first quarter and then the second quarter 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 second half 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 second half? Should we just be kind of thinking about that 4.5 overall guide that you gave us in January? Thanks.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah. Ken, we’re not coming off the 4.5, 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. The second quarter 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 first half of the year, you’re going to kind of peak I would say, in the upward pressures and your merit happens in the second quarter, early second quarter. You’re kind of peaking in the first half of the year. It wouldn’t be as much net investment spending on adds in the second half of the year.

Some of the benefits coming in from Reimagine the Bank will flow through in the second half of the year. You could actually see expenses start to dip a bit in the second half. 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, but 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.

Aunoy Banerjee, Chief Financial Officer, Citizens Financial Group: Yeah. Ken, I would just add, we are pleased with the expense discipline that we had in the first quarter. Really the growth quarter-over-quarter was all about 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 this.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah.

Brendan Coughlin, President, Citizens Financial Group0: Perfect. Thank you, guys.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Okay.

Brendan Coughlin, President, Citizens Financial Group3: We’ll go to Christopher McGratty from KBW. Please go ahead.

Christopher McGratty, Analyst, KBW: Oh, great, thanks. Bruce, you expressed confidence getting into the 16%-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?

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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 Iran 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.

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 and the war doesn’t get resolved quickly and 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%-15% is really these time-based benefits and some of the trajectory we see on the NIM.

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 points 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.

Christopher McGratty, Analyst, KBW: Perfect. Thank you.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Sure.

Brendan Coughlin, President, Citizens Financial Group3: For the final question, we’ll go to David Chiaverini from Jefferies. Please go ahead.

David Chiaverini, Analyst, Jefferies: 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.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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 grew a little bit on the subscription lines as well. We expect, as you think about the spreads, 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 credit relationships, 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 a deposit relationship or other business activities, fees, et cetera, that we are getting.

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 start with you.

Brendan Coughlin, President, Citizens Financial Group6: Just to build on what Anuj said. Overall, in the markets in the beginning of the first quarter, 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 are their ancillary business. 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.

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

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: Yeah, I would say it’s Bruce, and I’ll let Ted add color. 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 and 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?

Brendan Coughlin, President, Citizens Financial Group6: Yeah. We’re going to continue to support our customers. We look at these relationships not just on the NBFI 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 survivors, but the winners and make acquisitions, may we grow with them? Sure. We’re not going to specifically grow NBFI. We’re going to just continue to go with where our customers go.

David Chiaverini, Analyst, Jefferies: Very helpful. Thank you.

Bruce Van Saun, Chairman and Chief Executive Officer, Citizens Financial Group: 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.

Brendan Coughlin, President, Citizens Financial Group3: That concludes today’s conference. Thank you for your participation, and you may now disconnect.