Citizens Financial Group

Moat components and weights: deposit franchise and switching costs (40% weight): 60/100. Citizens has a long‑standing footprint across 14 states with sticky primary relationships, plus an emerging Private Bank that is adding high‑quality, often non‑interest‑bearing deposits.

Still, deposit betas rose across the industry, and switching is easier with digital options.

Evidence: non‑interest‑bearing demand deposits were ~37.4B out of ~174B (≈21%) in Q2 2025; Private Bank NIB mix ~34% and deposits reached ~$12.5B by Q3. Intangible assets and brand (20%): 55/100. A 190‑year heritage, but brand is not a decisive moat versus money‑center banks and fintechs.

Regulatory licenses help but are standard. 2024 10‑K notes the scale and multi‑channel capabilities. Cost scale (20%): 60/100. Efficiency ratio trending mid‑60s with room to improve as TOP 10 and ‘Reimagine the Bank’ mature; scale helps in technology, compliance, and funding costs, but Citizens is mid‑sized vs national leaders.

Network effects (10%): 40/100. Limited for traditional banking aside from capital markets distribution and private wealth networks. Efficient scale (10%): 65/100. In certain New England and Mid‑Atlantic markets, branch density and customer density discourage new entrants, but national banks remain formidable. Weighted result approximates 58.

Banks do not price like monopolistic toll‑roads. Pricing power shows up via net interest margin resilience, low‑cost deposit share, and fee mix. NIM expanded sequentially in 2025 (Q1 ~2.90% to Q2 ~2.95% to Q3 ~3.00%), aided by mix and lower swap drag. Fee growth in capital markets and wealth also improved.

However, deposit competition caps pricing latitude and makes power cyclical. The Private Bank should enhance latent pricing power through better funding and higher‑value advisory, but this is still scaling.

Citizens’ earnings path is improving but remains tied to the rate cycle and credit costs. TTM EPS is ~3.57 (Q4 2024 0.83, Q1 2025 0.77, Q2 2025 0.92, Q3 2025 1.05), with positive operating leverage and fee momentum. The bank is shrinking non‑core portfolios and reducing office CRE exposure, which supports steadier forward earnings.

That said, regional banks are not true subscription models, and results depend on funding costs, yield curve, and credit normalization.

Capital and liquidity are solid: CET1 ~10.7% in Q3 2025 (10.6% in Q2), tangible common equity ratio ~7.4% in Q3, LDR ~78 to 80, and TBVPS increased to ~$36.7. Even adjusting for AOCI opt‑out removal, management cited CET1 in the ~9.1 to 9.4% range, which still provides headroom to minimums plus SCB.

The 2024 SCB was communicated at 4.5% effective Oct 1, 2024, implying a total CET1 requirement near 9% absent a GSIB surcharge. Liquidity coverage is strong. Credit metrics show NCOs in the ~0.46 to 0.58% range recently, an ACL of ~1.56 to 1.59%, and elevated but well‑reserved general office CRE with ~12% coverage.

Management is exiting lower‑return, higher‑volatility assets and recycling capital into better uses. In 2025, Citizens accelerated the sale of ~$1.9B purchased student loans from non‑core and used proceeds to pay down high‑cost funding, add low‑risk securities, and repurchase shares.

Buybacks were $1.05B in 2024 and continued in 2025 ($200M in Q1; $75M in Q3), alongside a dividend increase to $0.46 in Q3 2025. Capex needs are modest compared with industrials, and technology investments are funded by TOP programs. The Private Bank build‑out is an internally compounding use of capital with attractive ROE potential.

Share‑count dilution from SBC appears manageable given net reduction in diluted shares.

CEO Bruce Van Saun and CFO John Woods have steered the franchise through the post‑pandemic and 2023 regional bank challenges with a steady focus on capital, funding, and simplification. Execution is visible in NIM stabilization, Private Bank growth, and de‑risking actions.

Communication around AOCI impacts and office CRE reserves has been transparent, and targets for medium‑term ROTCE are reasonably ambitious. On the other hand, retail customer‑experience issues (notably a bill‑pay platform change and some service frictions) highlight operational complexities still being worked through.

Overall, competent owner‑like behavior, but not a founder‑led compounding culture.