Citizens Financial Group (CFG)

Regional banking company Citizens Financial Group (NYSE:CFG) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 11.4% year on year to $2.12 billion. Its GAAP profit of $1.05 per share was 2.3% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1828 as a community-focused institution, Citizens Financial Group (NYSE:CFG) is a regional bank that provides retail and commercial banking services to individuals, small businesses, and large corporations across 14 states.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Citizens Financial Group competes with other regional banks like KeyBank (NYSE:KEY), Fifth Third Bank (NASDAQ:FITB), and PNC Financial Services (NYSE:PNC), as well as national institutions including Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Wells Fargo (NYSE:WFC).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Regrettably, Citizens Financial Group’s revenue grew at a mediocre 3.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Citizens Financial Group’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.2% annually. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Citizens Financial Group reported year-on-year revenue growth of 11.4%, and its $2.12 billion of revenue exceeded Wall Street’s estimates by 0.9%.

Net interest income made up 72.1% of the company’s total revenue during the last five years, meaning lending operations are Citizens Financial Group’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Markets emphasize efficiency ratio trends over static measurements, recognizing that revenue compositions drive different expense bases. Lower efficiency ratios signal superior performance by indicating that banks are controlling costs effectively relative to their income.

Over the last five years, Citizens Financial Group’s efficiency ratio has increased by 9.4 percentage points, going from 60.2% to 65.2%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Citizens Financial Group’s efficiency ratio came in at 63% this quarter, beating analysts’ expectations by 45.9 basis points (100 basis points = 1 percentage point). This result was 2.6 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Citizens Financial Group to rein in some of its expenses as it anticipates an efficiency ratio of 61.8%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Citizens Financial Group’s EPS grew at a spectacular 10% compounded annual growth rate over the last five years, higher than its 3.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Citizens Financial Group, its two-year annual EPS declines of 5.8% mark a reversal from its (seemingly) healthy five-year trend. We hope Citizens Financial Group can return to earnings growth in the future.

In Q3, Citizens Financial Group reported EPS of $1.05, up from $0.77 in the same quarter last year. This print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects Citizens Financial Group’s full-year EPS of $3.57 to grow 32%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Citizens Financial Group’s TBVPS grew at a tepid 3.1% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 17% annually over the last two years from $26.83 to $36.73 per share.

Over the next 12 months, Consensus estimates call for Citizens Financial Group’s TBVPS to grow by 5.9% to $38.89, mediocre growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Citizens Financial Group has averaged a Tier 1 capital ratio of 10.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Citizens Financial Group has averaged an ROE of 8%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

It was encouraging to see Citizens Financial Group beat analysts’ tangible book value per share expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, net interest income and net interest margin were only in line. Investors were likely hoping for more, and shares traded down 1.2% to $51.16 immediately after reporting.

Updated: December 4, 2025 at 11:32 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Citizens Financial Group.

Citizens Financial Group falls short of our quality standards. First off, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its net interest income growth was weak over the last five years.

Citizens Financial Group’s P/B ratio based on the next 12 months is 1x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $61.83 on the company (compared to the current share price of $56.12).