Detailed narrative
Seasonally soft quarter, strong headline results
Citizens delivered EPS of $1.13 with ROTCE of 12.2% in a seasonally soft first quarter, producing 47% YoY EPS growth, 700+ basis points of positive operating leverage and 24bps of YoY NIM expansion. Results were paced by strong NII — up 1.6% linked quarter on an expanded margin and higher earning assets, overcoming a ~$22M day-count drag — and a best-ever first-quarter fee result led by the commercial bank.
Management characterized the quarter as a strong start delivered notwithstanding geopolitical tensions and macro uncertainty🌐.
Net interest margin walk and deposit repricing
NIM improved 7bps QoQ to 3.14%, driven primarily by 5bps of combined benefit from reduced drag on terminated swaps and noncore runoff, 1bp of fixed-rate asset repricing, and 1bp net from improved funding cost and mix (partly offset by lower accretion).
Interest-bearing deposit costs fell 16bps and total deposit costs 12bps; cumulative interest-bearing deposit beta improved to 50%, with a high-40s beta projected for the cycle even as the Fed is expected to hold steady in 2026. Roughly 12bps of additional rate-independent swap/noncore benefit remains for the balance of the year.
Capital markets: record Q1 despite volatility
Capital markets fees were up 34% YoY (down 4% versus a strong Q4) and set a first-quarter record, with diversification across M&A, bond underwriting, equity underwriting and syndicated loans. M&A delivered a good result with a building pipeline; bond underwriting rose from the prior quarter; equity underwriting was stable QoQ and up sharply YoY; loan syndications were lower on volatility.
Some March transactions were pushed into April and are now re-entering the market. Citizens ranks #4 in middle-market sponsor book-runner deals by volume (both Q1 and trailing 12 months). Global Markets rose $10M QoQ on client hedging in rates and energy commodities.
Loan and deposit growth broad-based
Average and period-end loans rose 1% QoQ with growth across all three businesses. Commercial loans ex private bank were up 1% spot on net-new originations and higher line utilization, partly offset by ~4% QoQ (16% YoY) CRE paydowns. The Private Bank added ~$600M of loans (multifamily, residential mortgage) to reach $7.7B; retail ex-noncore grew ~$300M led by real-estate-secured, offset by ~$500M noncore auto runoff.
Average deposits rose 1% ($1.5B) QoQ, up $8.6B (5%) YoY; spot noninterest-bearing balances grew $1.3B (3%) QoQ and $4.1B (11%) YoY, lifting the NIB mix to 23% and keeping the low-cost mix at 43%. Consumer deposits are 64% of the book versus a ~56% peer average.
Credit quality and allowance
Net charge-offs came in at 39bps, down from 43bps in the prior quarter, with nonaccruals down modestly on a decline in commercial (largely C&I). The allowance was essentially stable at 1.52% ACL coverage, reflecting continued portfolio mix improvement — noncore runoff, CRE reduction 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 slight deterioration versus last quarter, reflecting the potential impact of higher energy prices; the broad credit outlook remains positive.
Private Bank scaling toward material contribution
The Private Bank contributed $0.11 to EPS (up from $0.10), roughly 10% of pretax income, at an ROE above 25%. It ended the quarter with $16.6B of deposits, $7.7B of loans (added at a healthy ~4% spread over deposit costs) and $10.1B of client assets with modest net inflows.
DDA is ~40% of private-bank deposits (over 50% including checking-with-interest); blended deposit cost is ~220bps. The business has scaled from ~150 people at launch to ~600, opened 3 more offices (to 9 total, targeting 11 by year-end and 25-30 over 3-4 years), with a robust talent pipeline and wealth lift-outs expected to catch up📎 in Q2.
Reimagine the Bank and AI deployment
The reimagine-the-bank program targets $450M of pretax P&L benefit by end-2028, with a ~$100M annualized run-rate benefit expected exiting 2026 — self-funded so far by non-AI quick wins including $30M+ of projected vendor saves and facility closures, against ~$6M of Q1 implementation costs.
On AI, a code-assistant is live and delivering material engineering productivity gains (30%, up to 5-10x in some tests), and a call-center AI pilot targets 25% of calls handled by non-humans by end-2026, ramping toward 50% in 2027. Management stresses real financial benefits over 'science-fair projects' and architecting for model plug-and-play.
Capital, regulatory reform and New York expansion
CET1 ended at 10.5% with ~$500M returned to shareholders in Q1. Management is optimistic on regulatory change: the Basel III Endgame reproposal could cut RWA ~10% (~110bps CET1 gross, net +30 to +50bps after AOCI phase-in), and is evaluating ERBA versus the revised standardized approach.
It also anticipates a more accurate — and hopefully💬 lower notional-equivalent — SCB from the upcoming CCAR round, though it plans to carry extra capital through 2026 given war-related uncertainty; any ratchet-down is more likely a 2027 event. Separately, Citizens is analyzing its branch footprint for net-new investment, with New York City likely to see branch growth (currently ~2.25-2.5% density versus a 4%+ target), details expected midyear.