Citizens Financial Group, Inc.(CFG -0.47%) reported 2Q2025 results on July 17th, delivering earnings per share (EPS) of $0.92, up $0.15, or 19%, from the prior quarter, driven by 3.3% net interest income (NII) growth, fee income grew 10% quarter-over-quarter, and five basis points of net interest margin (NIM) expansion to 2.95%.

The company executed $200 million in share repurchases, achieved record private bank loan growth of $1.2 billion, and maintained strong credit metrics, while reaffirming full-year and medium-term targets, including a 16%-18% return on tangible common equity (ROTCE, non-GAAP) for 2025 and beyond. Key strategic initiatives, including a multiyear “reimagining the bank” program leveraging AI and differentiated success in HELOC and private banking, featured prominently in management’s commentary during the earnings call.

Record Private Banking Performance and Accretion Milestone

The private bank segment posted a quarterly high, adding $1.2 billion in loans to reach $4.9 billion in period-end balances and growing average deposits by $966 million, while contributing $0.06 to EPS versus $0.04 in the previous quarter. Assets under management (AUM) in the private bank rose to $6.5 billion, up $1.3 billion.

"With a $0.06 contribution to EPS from the private bank in the second quarter, we are tracking well against our targeted 5% plus accretion to Citizens bottom line in 2025, and to deliver a 20 to 24% return on equity for the year and over the medium term."
— John Woods, CFO

This proven ability to scale the private bank with both deposit and loan growth supports management’s confidence in surpassing 5% bottom-line accretion from this initiative in 2025.

Pivotal Strategic Transformation: 'Reimagining the Bank' Initiative

Management launched a transformational, multiyear enterprise-wide program that seeks to overhaul operating models, customer engagement, technology, and talent through the adoption of generative and agentic artificial intelligence (AI), vendor consolidation, and organizational redesign.

This represents the first major strategic re-engineering since the TOP 6 program, Citizens' multiyear transformational program, and is positioned to go beyond incremental cost takeout by targeting both structural efficiency and digital-first customer experience enhancements as part of its multiyear 'reimagining the bank' initiative, which began in 2025.

"The objective is to redesign how we serve customers and run the bank, taking advantage of new technologies like GenAI and AgenTik AI. This requires changes to our organizational model, our underlying technology and data architecture, and imparting new skills to our colleague base. It will be multi-year in nature, and ultimately serve as our next top program."
— Bruce Van Saun, Chairman & CEO

Successful execution could materially alter long-term expense trajectories, unlock self-funded investment capacity for growth businesses like private banking, and position Citizens as a technology-forward regional bank at a critical industry inflection point for digital transformation.

Net Interest Margin Expansion and Resilient Balance Sheet Management

NIM expanded five basis points sequentially to 2.95%, supported by lower funding costs, front-book/back-book optimization in deposit pricing, and continued run-off in non-core portfolios (including a $700 million reduction). Average deposit cost declined two basis points, and the cumulative deposit beta—tracking sensitivity of cost to rate changes—stood at 54% through the quarter.

Management opportunistically hedged against rate downside risk and saw 22% of deposits in non-interest-bearing accounts as of period end, with stable retail deposits representing 67% of the deposit base as of period end.

"Our margin improved five basis points to 2.95% given the time-based benefits of noncore runoff and reduced drag from terminated swaps, as well as favorable fixed asset repricing. our interest-bearing deposit cost decreased two basis points. We continue to focus on optimizing our deposit funding, with a further reduction of higher-cost treasury broker deposits this quarter and a decline in retail CDs."
— John Woods, CFO

Maintaining margin expansion while driving high-quality deposit mix improvement and actively managing both rate risk and liability composition places Citizens Financial in a structurally advantageous competitive position relative to costlier, less relationship-centric funding models typical of regional peers.

Looking Ahead

Management guided for net interest income to increase approximately 3% to 4% in the third quarter, NIM increasing by roughly five basis points, noninterest income up low single digits, and expenses rising 1%-1.5% (reflecting ongoing private bank buildout); positive operating leverage is expected for a second consecutive quarter.

Guidance for the full year 2025 remains unchanged, with ROTCE projected at 16%-18% and NIM targeted at 3.05%-3.10% for Q4 2025, 3.15%-3.3% in Q4 2026, and 3.25%-3.5% in 2027.

No new quantified cost, earnings, or capital deployment milestones were introduced for the 'reimagining the bank' program in this call; further details are expected in future updates.