What drove the year-over-year decline in underlying EPS for 2024?

Full-year underlying EPS fell to $3.24 from $3.88 (down 16%). Underlying net income declined 18%, mainly because net interest income fell 10% to $5.63 billion. Lower average loans (down 6%) and a lower NIM (2.85% versus 3.10%), reflecting the rate environment and the Non-Core portfolio run-off, were the main drags. Fee growth of 9% and a 1.5% increase in underlying expenses partly offset the decline.

Is the Non-Core portfolio run-off expected to help future earnings?

Management expects a meaningful NII tailwind over the medium term. Non-Core lost $45 million in Q4 2024 and $206 million for the full year, but the run-off of $4.2 billion in 2024 and the expected maturity of legacy swaps are projected to add roughly 38 bps of time-based NIM benefit from 4Q24 to 4Q27. Management's 2027 NIM target is 3.25% to 3.50%. These targets depend on the rate path and on execution, so the benefit is not guaranteed.

Are there credit quality concerns investors should watch?

Yes, in CRE. Nonaccrual loans reached $1.66 billion, up 22% year over year, primarily from the General Office portfolio ($2.9 billion, with an ACL coverage of 12.4%). The ACL-to-nonaccrual ratio fell to 136% from 170%. Management expects net charge-offs of about 65 to 70 million per quarter in 2025 ($650 to $700 million in total, or high-40s bps) and anticipates ACL releases over the year, but the General Office exposure remains the key credit risk to watch.

How strong is Citizens' capital and liquidity position?

Reported CET1 is 10.8%, total capital is 14.0%, and the pro forma LCR is 119%, above the 100% Category I requirement. However, the CET1 ratio adjusted for removing the AOCI opt-out is about 9.1%, reflecting unrealized securities and pension losses. Management expects about $0.7 billion of these unrealized losses to 'burn off' by year-end 2026, adding roughly 40 bps to that adjusted ratio. Share repurchases in 2025 are conditioned on market conditions and loan growth, with a CET1 target of 10.5% to 10.75%.

What is the Private Bank's contribution and outlook?

The Private Bank contributed $0.01 to Q4 2024 EPS and was first profitable in that quarter. Its deposits reached $7.0 billion and loans $3.1 billion at year-end, with an average deposit cost of about 2.5%. Management expects the Private Bank to contribute 5% or more of total CFG earnings in 2025 and targets a 20% to 24% return on equity over the medium term. This growth is a central part of management's strategy to offset run-off in other areas.

CFG 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed January 17, 2025. Cited figures are marked; the original filing is the authoritative source.

Citizens Financial Group (CFG) reported fourth-quarter 2024 GAAP net income of $401 million^a, or $0.83 per diluted share, and underlying net income of $412 million, or $0.85 per share, on total revenue of $1.99 billion.

Full-year 2024 GAAP net income was $1.5 billion^b ($3.03 per diluted share), with underlying EPS of $3.24, down 16% from $3.88 in 2023. Underlying pre-provision profit rose 4% sequentially to $684 million, driven by a 10 basis point NIM expansion to 2.87%, a 5.6% increase in underlying fee income, and a 3.5% increase in underlying expenses. Balance sheet trends were mixed: period-end loans fell 1.7% sequentially to $139.2 billion as Non-Core run-off and lower commercial balances offset Private Bank growth, while deposits were broadly stable at $174.8 billion.

Credit quality was stable, with net charge-offs at 53 basis points, an ACL coverage ratio of 1.62%, and nonaccrual loans up 22% year over year to $1.66 billion^c, largely from General Office CRE. Capital and liquidity remained strong, with the CET1 ratio at 10.8% (about 9.1% adjusted for the AOCI opt-out removal) and a pro forma LCR of 119%. Tangible book value per share fell 3.6% to $32.34 because of AOCI losses from higher long-term rates.

Management guided to 2025 underlying NII growth of 3% to 5%, a NIM near 3.00%, noninterest income growth of 8% to 10%, expense growth of about 4%, and a CET1 ratio of 10.5% to 10.75%. The company also declared a $0.42^d quarterly dividend and set a medium-term ROTCE target of roughly 16% to 18%, along with a NIM target of 3.25% to 3.50%. For investors, the central question is whether the Non-Core run-off, swap roll-off, and Private Bank build-out can lift returns toward the medium-term ROTCE target.

Fourth-quarter results show progress on margin and operating leverage, but the figures also show continued loan contraction, rising nonaccrual loans in CRE, and a full-year underlying EPS decline. The forward case depends on NII tailwinds and share repurchases that management has tied to market conditions and loan growth.

02—Key points

Key Highlights

Q4 2024 GAAP diluted EPS of $0.83 and underlying EPS of $0.85, up from $0.34 GAAP in Q4 2023 (which included large FDIC special assessment and integration costs), and flat underlying versus the prior year's $0.85.
Underlying NIM expanded 10 bps sequentially to 2.87%, with interest-bearing deposit costs down 31 bps to 2.55%; management expects FY2025 NIM of about 3.00%.
Period-end loans declined 1.7% sequentially to $139.2 billion (Non-Core run-off of $0.9 billion), while Private Bank loans grew $1.1 billion to $3.1 billion and Private Bank deposits reached $7.0 billion.
Credit metrics were stable quarter over quarter (NCOs of 53 bps; ACL at 1.62% of loans), but nonaccrual loans rose 22% year over year to $1.66 billion, driven by CRE General Office exposure.
Capital position: CET1 of 10.8% (up from 10.6%), though the AOCI-adjusted CET1 is about 9.1%; TBV per share fell 3.6% to $32.34 due to AOCI losses from higher long-term rates.
Capital return: $413 million returned in Q4 ($188 million in dividends and $225 million in buybacks); the quarterly dividend remains $0.42, and FY2024 buybacks totaled $1.05 billion.
2025 outlook includes underlying NII up 3% to 5%, noninterest income up 8% to 10%, expenses up about 4%, and a CET1 target of 10.5% to 10.75%; the company also set a medium-term ROTCE target of roughly 16% to 18%.

03—Questions

Frequently Asked Questions

What drove the year-over-year decline in underlying EPS for 2024?
Full-year underlying EPS fell to $3.24 from $3.88 (down 16%). Underlying net income declined 18%, mainly because net interest income fell 10% to $5.63 billion. Lower average loans (down 6%) and a lower NIM (2.85% versus 3.10%), reflecting the rate environment and the Non-Core portfolio run-off, were the main drags. Fee growth of 9% and a 1.5% increase in underlying expenses partly offset the decline.
Is the Non-Core portfolio run-off expected to help future earnings?
Management expects a meaningful NII tailwind over the medium term. Non-Core lost $45 million in Q4 2024 and $206 million for the full year, but the run-off of $4.2 billion in 2024 and the expected maturity of legacy swaps are projected to add roughly 38 bps of time-based NIM benefit from 4Q24 to 4Q27. Management's 2027 NIM target is 3.25% to 3.50%. These targets depend on the rate path and on execution, so the benefit is not guaranteed.
Are there credit quality concerns investors should watch?
Yes, in CRE. Nonaccrual loans reached $1.66 billion, up 22% year over year, primarily from the General Office portfolio ($2.9 billion, with an ACL coverage of 12.4%). The ACL-to-nonaccrual ratio fell to 136% from 170%. Management expects net charge-offs of about 65 to 70 million per quarter in 2025 ($650 to $700 million in total, or high-40s bps) and anticipates ACL releases over the year, but the General Office exposure remains the key credit risk to watch.
How strong is Citizens' capital and liquidity position?
Reported CET1 is 10.8%, total capital is 14.0%, and the pro forma LCR is 119%, above the 100% Category I requirement. However, the CET1 ratio adjusted for removing the AOCI opt-out is about 9.1%, reflecting unrealized securities and pension losses. Management expects about $0.7 billion of these unrealized losses to 'burn off' by year-end 2026, adding roughly 40 bps to that adjusted ratio. Share repurchases in 2025 are conditioned on market conditions and loan growth, with a CET1 target of 10.5% to 10.75%.
What is the Private Bank's contribution and outlook?
The Private Bank contributed $0.01 to Q4 2024 EPS and was first profitable in that quarter. Its deposits reached $7.0 billion and loans $3.1 billion at year-end, with an average deposit cost of about 2.5%. Management expects the Private Bank to contribute 5% or more of total CFG earnings in 2025 and targets a 20% to 24% return on equity over the medium term. This growth is a central part of management's strategy to offset run-off in other areas.

04—Continue

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