Citizens Financial Group: Private Bank Growth on Track

Citizens Financial Group, Inc. (NYSE: CFG) has made significant strides in its private banking unit, with the division hitting profitability in the fourth quarter of 2024, just over a year after its launch. The Providence, Rhode Island-based company has been investing in building its teams and capabilities, and executives are confident in the division's performance. Going into 2025, Citizens Financial Group plans to continue investing in growing the private banking business, with the unit expected to be at least 5% accretive to this year's bottom line.

Citizens Financial Group announced that it will add another wealth team in South Florida and several more teams in California, expanding its private banking presence in these regions. Although the private bank is one of the main drivers of Citizens' expense growth, the unit is expected to generate significant revenue, contributing to the company's overall profitability.

Citizens Financial Group launched its private bank in 2023, aiming to take advantage of market disruption from bank failures. CEO Bruce Van Saun described the investment as a "startup investment" that is now generating revenue and providing a return on the investment. Van Saun emphasized that the private bank and wealth business is not an expense story for Citizens, as it is now earning enough revenue to offset the initial investments.

The private banking teams are initially "all expenses," but as they transition in customers, they begin to use wealth products as well. Since mid-2023, Citizens Financial Group has brought on more than 250 private banking employees, largely from the failed First Republic Bank. The bank acted on the progress by upping some of its expectations for the division's performance in 2025, projecting to grow deposits by $5 billion instead of $4 billion, after ending 2024 with $7 billion. Assets under management at the private bank are expected to more than double in 2025, from $4.7 billion to $11 billion, up from a previous estimate of $10 billion.

However, the bank also lowered its prediction for loan growth in its private bank by $2 billion. Across the industry, lukewarm loan growth is putting pressure on net interest income. Citizens' guidance calls for 2025 private bank loans of $7 billion, after the unit ended 2024 with $3.1 billion of loans.

Citizens Financial Group's private banking and wealth strategy has "reverse" priorities from First Republic, focusing on deposits and operating accounts before extending credit. The $218 billion-asset company has the bandwidth to invest more in the wealth and private banking operations, in part because of its assuredness about its ability to generate revenue. In the fourth quarter, the company's net interest margin ticked up by 10 basis points due to fixed-rate asset repricing and easing deposit costs.

Citizens Financial Group reeled in net income of $401 million in the fourth quarter, and had earnings per share of $0.83, beating the $0.82 consensus estimate of analysts, per S&P. The bank's stock was trading up 1.54% on Friday afternoon, at $47.52.

Analysts have praised Citizens Financial Group's prospects. Keith Horowitz, an analyst at Citigroup, said in a Friday note to clients that Citizens has "the highest upside" of all the regional banks he covers, due partly to its discounted valuation compared with peers. He also pointed to what he called Citizens' strong outlook at the end of this year and heading into 2026, thanks to robust net interest margin expectations. Piper Sandler analyst Scott Siefers wrote Friday that the bank's "multi-year profitability improvement journey remains intact."

In conclusion, Citizens Financial Group's private banking unit has made significant progress since its launch in 2023, and the company is confident in its ability to continue growing the business while maintaining profitability. With a strong balance sheet and a focus on generating revenue, Citizens Financial Group is well-positioned to capitalize on the opportunities in the private banking sector.