Citizens Financial Group’s Q1 2025 Earnings: Strategic Gains Amid Regulatory Crosscurrents

Citizens Financial Group (CFG) delivered mixed but resilient results for its first quarter of 2025, balancing disciplined execution against a backdrop of macroeconomic uncertainty. While net income of $373 million and earnings per share (EPS) of $0.77 aligned with management’s expectations, the quarter highlighted both progress in core initiatives and challenges stemming from shifting policy landscapes.

Financial Performance: Stability Amid Headwinds

The bank’s net interest income (NII) fell 1.5% sequentially to $1.391 billion, pressured by lower interest-earning assets and day-count effects. However, the net interest margin (NIM) improved to 2.90%, up 3 basis points (bps) from Q4 2024, driven by reduced deposit costs. Noninterest income declined 3.5% to $544 million, with capital markets fees down 17% and card fees falling 14% seasonally. Notably, wealth fees rose 7% on higher annuity sales, signaling momentum in its Private Bank/Private Wealth segment.

The balance sheet remained robust: deposits grew 2% to $177.6 billion, with Private Bank deposits surging 25% year-over-year to $8.7 billion. Total assets rose to $220.1 billion, while the loan-to-deposit ratio (LDR) dipped to 77.5%, reflecting disciplined asset management. Liquidity metrics were strong, with a pro forma Liquidity Coverage Ratio of 122%, well above regulatory requirements.

Strategic Momentum and Capital Allocation

A key highlight was the agreement to sell $1.9 billion in non-core education loans, with $200 million settled in Q1. This accelerated the “Non-Core rundown,” freeing capital and liquidity to focus on core businesses. CEO Bruce Van Saun emphasized that the sale aligns with CFG’s strategy to optimize its balance sheet, a move that also boosted tangible book value (TBV) per share by 5% to $33.97.

The Private Bank/Wealth initiative continues to drive growth, with AUM expansion contributing to a 1% sequential rise in core loans. However, noninterest expenses rose 1.7% to $1.314 billion, pushing the efficiency ratio to 67.9%—up 1.6 points from Q4 2024. While technology investments and seasonal payroll taxes partly explain this increase, the rise underscores the need to manage costs amid slowing revenue growth.

Risks and Regulatory Uncertainty

Van Saun highlighted “heightened uncertainty” in Q2 2025 due to potential policy shifts in Washington, including debates over bank regulation and interest rate trajectories. These factors could pressure loan demand and deposit costs. The bank’s CET1 ratio of 10.64% provides a buffer, but a 16.78% year-to-date stock decline reflects investor caution.

The allowance for credit losses (ACL) remained stable at 1.61% of loans, though net charge-offs (NCO) rose to 0.58%, driven by the non-core loan sale. Excluding this, core NCOs were 51 bps, a prudent level. However, a slowing economy could strain credit quality, particularly in consumer and small-business lending.

Dividend and Valuation

CFG maintained its quarterly dividend of $0.42 per share, yielding 3.8% based on its April 2025 stock price. While the dividend is sustainable given its CET1 ratio, investors will monitor capital returns against strategic reinvestment needs.

Conclusion: A Resilient Foundation, But Challenges Loom

Citizens Financial Group’s Q1 results underscore its ability to navigate headwinds through disciplined capital management and strategic focus. The sale of non-core assets, growth in Private Bank deposits, and stable credit metrics provide a solid foundation. However, the rising efficiency ratio and regulatory uncertainty temper optimism.

With a TBV growth of 5% and a CET1 ratio above 10%, CFG is positioned to weather near-term turbulence. Yet, investors should watch for signs of margin stabilization and cost control in Q2. The stock’s 16.78% YTD decline may offer value for long-term holders, but the path to outperformance hinges on clearer policy clarity and sustained core revenue growth.

In the words of Van Saun: “We remain focused on executing our strategy… while maintaining the discipline to navigate an uncertain environment.” For now, CFG’s results reflect a bank in transition—one balancing strategic progress against an increasingly unpredictable landscape.