Citizens Financial Group, Inc. (CFG) Earnings Call Transcript & Summary

All right. Good afternoon, and thank you, Gerard, for all that you do to put on this great industry conference. Given the mayoral election in New York City this week and the return of power to the great people of that city, I thought some trivia was in order. Did you know that today, there are still 215 banks in the United States that have the word Citizen in their name.

Only one that matters.

Exactly. And here with us today is the largest of that group, Citizens Financial, which has a $22 billion market cap, is $223 billion in assets and is headquartered right here in New England. Citizens is a bank on the move since Royal Bank of Scotland fully sold out of the bank 10 years ago, Citizens has gone significant operational improvement, added a lot of talent and launched a number of growth initiatives, and one of the latest being the build-out of a private bank. Citizens has strong management. That is both an opinion and a fact. Personally, I think the leadership of this bank and the improved quality of the franchise remains underappreciated. If I just simply look at market beta, the stock, which remains the highest of the super regional banks at 1.34. Joining us here today is President, Brendan Coughlin, who oversees Consumer Banking, Private Banking and Wealth Management as well as several key enterprise functions. And just one note, we will -- as the other presentations have time for audience questions in a bit. Thanks.

Great. Thanks. Thanks for having me.

So I'll start off with the first question on consumer strategy. Citizens talks about its three-pronged strategy, best positioned commercial bank, a transformed consumer bank and building a private bank and private wealth franchise. You've been involved 5 or 6 years in these businesses. Can you walk us through where you stand now in the transformation of the consumer bank in terms of the customer base, the quality of the deposit franchise?

Yes, absolutely. I won't go too far back in the way back machine but -- and when we brought the bank public, Citizens, particularly in the retail side, very much looked like a very large thrift. A lot of acquisitions that weren't totally put together, unhealthy deposit base, interest-bearing costs that were too high, not enough operating costs -- operating deposits rather, branches that we had too many of them. So we've gone on a 10-year journey to bring it from a very large thrift to a relationship-based, much more profitable institution. So just -- I'll talk for a second about the foundation we've built and then the jump-off point on where we're going. Pre-COVID the business from a segment return standpoint was in the mid- to high teens. Now the business is in the mid- to high 20s on its way into the 30s, if you look at it on a segment basis. So the profitability has improved markedly. When you look at our branches, we've done a couple of acquisitions in Metro New York, Investors, and HSBC's U.S. franchise. If you add that to the branches that we had starting our IPO period, we would have had 1,400 branches. We actually have 1,000 now. So we've done a lot of cost pruning where we've had an abundance of redundancy in the network and reinvested that back into technology. We've been innovative in consumer lending, student loan refinancing with partnership with Apple on Buy Now, Pay later. And now as we think about the path forward, really, our principles are to create durable relationship-based revenue that is sticky and will drive a higher valuation for the franchise, and it all starts with deposits. And so the last time we had a mini up cycle in 2015, Citizens performed worse than the industry in the top 25 banks in terms of deposit beta and deposit quality. Here we are at the end of the cycle starting to go into rate reductions, and we've performed top quartile in the industry. Really -- and with the consumer being 70% of the deposits. At Citizens, it's really a consumer story. We're top third in the U.S. in terms -- in the top 25 banks in the U.S. in terms of net deposit costs, whether you're looking at that total deposit costs or whether you're looking at that on interest-bearing deposit costs. So going from worst to top third in a 10-year period is pretty remarkable. And that's a relationship-based strategy. I tell people a lot that customers don't wake up every morning looking to just put a bunch of noninterest-bearing money in the bank. They do that because you've surrounded them with the right customer experience. So that's been the foundation of our strategy. Now we look to repivot our balance sheet on the lending side to higher yielding, higher returning relationship-based business. We've put a bunch of loans into runoff, noncore loans that we've purchased, the auto lending business, which was nonrelationship-based and we're rotating into things like HELOC, where we have a #1 in the U.S. market-leading position, starting to grow credit card. So you're starting to see a franchise emerge that is valuing cross connection of products, higher returns, durable relationship-based banking, all with the foundation of a much, much, much healthier deposit franchise.

Keeping with the Consumer Private Banking, you launched the Private Bank a few years ago with the hiring of 150 former First Republic bankers. Can you walk us through the strategy for building the franchise and where you're headed?

Yes. We were self reflecting on the bank and the progress as we kind of got through the mid part of COVID. And the one area that we were really -- we had made some progress, but not enough was wealth management. And so we had a strategy that we started to formulate on making a bigger play there. And then, of course, the bank failures in 2023 happened, and it was opportunistic for us that it lined up with where we otherwise wanted to go. And so no secret that we were part of the bidding process for First Republic. Didn't quite go our way in the end. But what was very clear was that the talent that was there really wanted a more intimate bank that could value that single point of contact. And the bigger G-SIBs just have a hard time with larger silos in the bureaucracy and it just couldn't bring together the customer model. So we struck while the iron was hot. We brought 150 of the best folks of First Republic over to start the Private Bank. We're now up to over 500 bankers. And it's going tremendously well. I think many of you might first react to the growth that we're seeing, but I would actually start with the quality of earnings. So we disclosed on our earnings call last quarter that this will now be 7% EPS accretive to the bank. This year, our target was 5%. So we're going to exceed that. So it's going incredibly well. We sort of view this as our version of M&A. We didn't have to do a TBV dilutive deal. We hired a bunch of folks. We took a little bit of an EPS hit in 2023. And now the seeds that we planted are really paying strong dividends. The returns of the business between 20% and 25% are not only growth accretive, but they're ROE accretive. So you've got EPS and returns accretion and we launched this business saying, look, there's a couple of principles that we want to go at. We want to grow at the speed of quality, not earnings growth. It's going to be fortified by high-quality deposit franchise, which we're running the business around a 60% LDR with 42% of the deposits in DDA or CV, which also is accretive from a mix standpoint. So we're growing deposits that are in accretion to Citizens overall quality position and then growing high-quality loans with very low loss content. This has then positioned us really well in the wealth business. So while we hired bankers upfront, it's really put us on the map and so we're getting inbounds now from wealth advisers that, candidly wouldn't have returned our call in the past and now they're calling us. So we're getting some of the very top wealth advisers, the top 1% in the United States in the private wealth to come into the ecosystem to really work with us. And our view is that the -- our right to win in this space is that the intersection of banking and wealth management that bringing it together with that single point of contact, it sounds like motherhood and apple pie. It's really, really hard to pull off to both have all the sophisticated capabilities but be nimble enough to value the customer at the intersection of their lending needs, their business needs, their personal banking needs and their wealth management needs. And we still feel like there's tremendous white space here that we seem to be the only one really leaning in. So -- we're excited about it. We are confident in our ability to hit our metrics. We've already exceeded our deposit metric, a very ambitious deposit metric. We've exceeded our earnings accretion metric. And we think the growth will persist in the future.

Are there any key differences in your go-to-market with these folks? Obviously, First Republic was big with the jumbo mortgages, variable rate mortgages. Is there any different key go-to?

Yes. I don't often like to speak ill of the departed. But look, we're going to price our loans at market rates, and we're going to win on relationships. We're going to make sure we grow at the speed of LCR, high-quality lendable deposits and not get out over our skis. We're going to have an expense policy that is in line with Citizens appetite versus the perception of where First Republic was. So the biggest difference from our standpoint is I want to grow a franchise that has profitability accretion, that has strong control, that the risk appetite of it is very durable. And if over time, that means we're going to grow slower than so be it. Right now, we've been able to have our cake and eat it too and grow really strongly, but the principle guardrail for us is the quality of earnings, the risk management of the balance sheet and how we're putting the business together. So yes, that's -- and I would say that in the recruiting of the teams, personally, I was very direct with them to the point of if I scared anybody off, then so be it, but this is the business that we're going to win with. And you're seeing that in the numbers. So instead of the perception of we're leading with undercut low-priced mortgages, we're leading with high-quality operating deposits. And then the mortgages and business loans come later, which is driving an LDR of 60, which is great. So yes, there's a lot of differences here. I mean just think about the ROE profile of FRB. I think it peaked at 11%. And we're only 2 years into this, and the business last quarter was in the mid-20s for us, just 2 years in. So the earnbacks, we've already earned through the full EPS hole we've dug. It's been profitable for, I think, 13 or 14 months in a row. And that's a better financial profile than any M&A deal we could have thought about doing.

The Private Bank has been adding clients and AUM by bringing on wealth advisers onto the platform like you mentioned. How much more runway do you have for them to bring their existing clients onto the platform?

Yes, a lot. And maybe I'll answer 2 ways. One, on the banking side and then dive into wealth for a second. So the books of business that the bankers that we originally hired, while I don't have precise numbers, they had in excess of $50 billion in deposits before their old place disappeared. And so we're excited about the $12.5 billion we have. In other ways to think about it, we're just getting started. We've earned back some of their old relationships. But we're also starting to see clients come in that weren't on their old legacy client list. So the brand is resonating, the platform we built is resonating. But we have a tremendous amount of running room on the banking side. And we're opening up private banking offices, and we're adding new teams week-over-week. On the wealth management side, we have a lot of running room to go. We've been on a tremendous growth journey, particularly in the last 5 years, but we remain undersized versus our peers. And so it's a story of growth, yet still massive opportunity in front of us. The overall wealth business in 2020, when I took it over, was printing about $50 million a quarter in fees. We printed $93.5 million last quarter. So it almost doubled in a couple of years' time. We've grown about twice the rate of market appreciation in terms of our fee growth. And that's been on both sides of our wealth business. We have about 400 advisers that sit in retail branches that do mass affluent and low-end affluent wealth management that has also been growing quite rapidly. And on the private wealth side, we bought Clarfeld Advisors in New York, which provided a great RIA platform. And now we have 9 teams that we've hired private wealth teams, in fact, in 2024. We did the biggest lift out that I'm aware of, of a team across all wealth management, including the national wires in U.S. Wealth Management, brought a team over that was almost $5 billion in AUM onto the Citizens platform and we've done 8 more of them after that. So we're getting an attraction of clients. We're getting an 85% to 90% plus of client migration, followership to those advisers that come on board, there's still more to go. And our pipeline of talent that we have lined up to talk to us about joining the platform is really robust because they see what happened at the old First Republic model where these bankers that we've hired are such great business development officers that the wealth referrals become incredibly strong and incredibly important. They can double the size of their own personal book of AUM. So the attraction to the business is quite strong. So...

Can you just touch on the wealth referrals to bankers or vice versa?

It actually -- it goes both ways, and we've been clear to the bankers and the wealth managers that we're bringing on. We have no interest in this business being 2 ships passing at a night that every once in a while, they refer to one another. Our -- back to our durable right to win. It's at the intersection of banking and wealth management. So the wealth managers that we bring on, we make it really clear to them that the reason they're here is to partner with banking team and refer business back to the bankers. We don't really -- we don't get very excited about a single service wealth customer who want them to have their private banking with us, too. And vice versa, if we're going to give you credit, we want you to bring your wealth management to us. And so the referrals have been very strong I'd say, in the retail network, the branch network, our referral volume is up about 100% this year. So our core of our branch network business is really starting to fire on all cylinders. Our right to win in retail banking, we think our strength is going to be in the mass affluent customer segment. So the wealth business becomes a critical piece of that pie, and that's really starting to pay off, and you're seeing that through our fee income. And then on the private banking side, we're up 50% to 70% depending on the quarter on net wealth referrals this year from the private bankers from just last year. So now the business model, if you can imagine, we have some private equity bankers. We have some traditional personal private bankers. We have some folks that focus on real estate, particularly in the private equity banking side, the model is, first, you bank the fund. Then you go in with partner loans and you bank the GPs and LPs. Then you earn the private banking. And then you get the wealth management. So there's a very thoughtful cycle here. So we've got the funds banked. We're starting to get the PLP partner loans in. We're starting to get personal private banking from the GPs and LPs and now you're starting to see the wealth flow through. To have it all work together, we need the wealth talent, which is what we've been rapidly working on, on these 9 teams we brought on to the platform.

New York Metro, you entered a few years back with the acquisition of HSBC's East Coast locations and then you acquired Investors Bank. Can you update on how that's going? And what it's like to compete in the New York market?

Yes, the -- going into the belly of the beast as I like to say, in New York, the most competitive financial market in the world was not for the faint of heart. But we really thought our New England franchise had a big hole in the footprint. It's hard to be -- position yourself as you want to be, a preeminent super regional bank in the U.S. with a strong Northeast focus and not have presence in New York. So the perfect opportunity presented itself with HSBC. Rates were really low. Deposits were not something that most banks were focused on. And so we were able to acquire a very strong deposit franchise for not a lot of money. And then the one-two punch of investors to put those 2 franchise together really, really worked for us. We ended up with about 200 branches in the Metro New York and Northern New Jersey area. Candidly, both of those firms were fixer-uppers. And so we were able to get them for relatively inexpensive prices. So the deal math worked without putting in any revenue synergies. But we're seeing revenue synergies. We've been growing deposits in the retail franchise in the high single digits for a couple of years. We've been growing our customers in the mid-single digits. The branches that we got for HSBC, just to give you some relative metrics. We're about 50% the size of a legacy Citizens branch. The branches for investors were about 10% the size of the typical Citizens branch. Both of those numbers have dramatically improved. So HSBC branches are almost at the size of a Citizens legacy branch now and investors branches have got to about 50% of Citizen size. So we're winning. We're winning market share. Look, the big banks are all over Manhattan in particular, but so are a lot of smaller banks. So you see us taking market share. It's not a -- the easy perception is how you're going to win against JPMorgan Chase. I think we are actually, but we're winning against a whole bunch of other banks, too. And so it's been our fastest-growing market for now 2 years going across all of our different segments, retail, commercial as well as business banking.

Health of the consumer, from your vantage point, what are you seeing with respect to the health of consumer? And how are you -- what's your view on the economy?

Yes, I'm probably not going to break any news here, but hopefully, give you some confidence on what we're seeing. It's a K-shaped economy without question. You're seeing significant stability and growth in the high end and some moderate signs of stress in the low end. Keep in mind that Citizens business model, particularly on retail, is to participate in the mass affluent and above segment as a strategy. So we don't have a lot of exposure to near prime, sub-prime. If you were to look where any stress might be emerging, it's there. I have a view on it, but we don't really have empirical data on the Citizens portfolio that would confirm it or not. But the things I look at, a couple of things, macro, you've got consumer sentiment that is not in the greatest spot. You've got unemployment that's still relatively contained. But it's growing a little bit 4.3%, up from 4.1% a couple of quarters ago. So generally stable but a little bit of signs of things to watch. When you look at the business inside a Citizens, look at credit and then deposit liquidity. On the credit side, there's almost nothing I'm worried about right now on the consumer side. We were in the mid-50s for NCOs a couple of years ago. We're now in the high 40s on our way to the high 30s over the next 18 months. Some of that is our noncore rotation out of auto. But some of that is just good old credit metrics normalizing post COVID. So the only blip that we saw was an unsecured credit, the '21 and '22 vintages, which everybody in the industry saw with the FICO inflation had modest blips. That's pretty much run its course. I see delinquency stable to coming down, NCO is stable to coming down. No individual portfolio, do I see anything that would suggest there is any cause for concern. When I look at the deposit side of the business, and I'd like to compare back to pre-COVID a lot, just to give us relative metrics. The top 25% of our portfolio still has 25% plus more deposits than they did pre-COVID. So a lot of wealth creation, a lot of trapped liquidity through COVID. The bottom 25% is back to pre-COVID levels in terms of net deposits. In some cases, maybe even a little bit lighter. And if you adjust that for inflation, you could argue that maybe they're actually in a little bit of a worse spot than pre-COVID. Having said that, there's not anything that I'm systemically worried about. I don't think that's going to translate to anything from a macroeconomic standpoint. It's just a watch item. We're seeing very modest elevation of things like overdraft instances, which is driving a little bit of fee improvement for the firm. But that's something to watch. But there's nothing that looks like there's a breakout happening in any way. And certainly if there was, we don't have the credit exposure for that segment on the books.

You recently announced the multiyear "Reimagine the Bank initiative," which you're leading. Can you talk a little bit about expected costs and benefits and then tie in AI, a bit to that and the broader consumer strategy?.

I'm really excited about this program. Citizens has had a long-standing program we call Project TOP, tapping our potential. Twice in our history, we've done upsized versions of this. Our first top program was when we brought the bank public. And then our TOP 6 program was in 2019, which was in response to the digital transformation but then also morphed into a COVID response program as well. Those were 3 to 4x the size of a normal TOP program for us. And so we took a step back and said, it feels like the right time now to do that again, to have a bolder aspiration on what we want to do with the bank and take a longer-term window for benefit realization. So me and a few folks over the summer kind of locked ourselves in a room and said, what would this look like? And there's -- I'd say there's 2 reasons for why now. One is it's been 5 or 6 years since we've taken a fresh look at it, and there's a lot of things when you take a 3- to 5-year window that you might do differently than a 1- to 2-year window. So outside of the realm of AI and technology, we're looking at things like massive vendor simplifications, strategic renegotiation with our big suppliers, a cleanup of corporate facilities, being responsive to the post-COVID, return to office dynamics. We've got vacancy in buildings that we can collapse and take some cost out, reinvest that back much more strategically. So there's a set of things like that, that are highly strategic, but they're not technology led. Then there's a set of things that are very much technology-led and heavily AI-led. So we're looking at how to deploy Generative AI, agentic AI in a number of different spots and really 0 base our operations to have a win-win, huge Net Promoter Score accretion, huge colleague engagement accretion, risk management improvement and cost base improvement. So we'll give a lot more details as we do earnings in January and guidance for next year. We expect the program to be $400 million in size or better in terms of run rate over a 3-year window. We also expect the 2026 impact to be negligible to our trajectory, you should be thinking about us. We've been very clear in our guidance that we're going to get to a medium-term ROTCE between 16% and 18% and a NIM between 3.25% and 3.50%. This should not, in any way, take us off that in the short or the long term. In fact, the medium to long term, they should be accretive and icing on the cake to that guidance. And because this is an investment-led program, so that we'll take technology capital to deploy AI and so on and so forth. The expense recognition will be capitalized and will be linked to the benefits we see. So because of that, that's why you should be confident that kicking off this program is not going to have this big cost bubble in the short term that we have to get through a J-curve to see the benefit realization. We've spent a lot of time financially engineering this, and we have a lot of conviction around the long-term benefits as well as the short-term neutral impact to the franchise.

Back to deposits. Can you walk us through pricing and optimizing deposits across the different channels, digital bank, retail, Citizens Access and the Private Bank?

Yes. We have more levers than we've ever had. And I think more levers than most banks have back to when we were mostly a big thrift, we had 1 lever, and that was put a poster board on the retail branch and you get a bunch of CDs that come in and you end up with a heavy priced franchise. Citizens Access, many of you remember, we launched a number of years ago. That was a great tool to drive deposits, gain new customers. But what it also did was it allowed me to protect the retail franchise to be relationship-oriented. If I wanted to raise deposits, I can do it in a contained way with Citizens Access. And really restructure the retail franchise to be based -- really focused on durable relationship-based, DDA banking that then when you have interest-bearing relationships, it's tied to a full relationship. So you're willing to do that versus a rotating hamster wheel of hot money that you're constantly repricing. So that gave us a real strong lever for deposit cost management. The Private Bank gives us yet another one. I mean we're at $12.5 billion in deposits with 42% DDA and CV you can see our underlying DDA numbers getting better on an absolute basis and getting better on a relative basis versus other peers. That's a multiphase strategy with consumer getting healthier, the private bank growing and growing in a really healthy way. All of these things lead us to a lot of optionality to manage our costs, which is what's putting us in the Top 3rd in the U.S. in terms of the Top 25 banks in terms of deposit cost management success. What also probably hasn't got as much notability is when you look at wholesale funding, we've drained down most all of our wholesale funding at the bank at the moment because we've had so much success driving high-quality relationship-based banking. So when we're lending, it's tied to real healthy deposits that we've driven. We've got a lot of dry powder from a liquidity standpoint if we ever needed it. But that's been another benefit of having all these levers of deposit growth is to really restructure the treasury balance sheet, to have a much healthier position.

Credit cards, you recently launched a new credit card suite. Can you talk about the strategy there? And what the ambitions are in terms of size?

Yes. Our credit card business was and is undersized. We think we have running room to grow there. It's a little less than $2 billion in size today. It's modestly undersized when you look at peers in our kind of asset zone. It's obviously a very high-returning business. It's mid-20s the higher ROE business. Also drives fee income. It also importantly drives very sticky relationship-based business. When you pull your brand out of your wallet or purse, every day, that's really accretive for the franchise. So we view it as a big opportunity. We had a very simplistic product set. We had a Cashback card and a Revolve card. We just launched a brand-new product suite, 4 new cards ranging from a card we call Amp, which is for new and emerging credit for students, all the way up to a private banking metal black card and a product we're calling Summit Reserve, which is another metal black card that compete with from a reward standpoint and a product value proposition standpoint with Chase Sapphire and AMEX Platinum. We're really excited about it. We've got about 100% growth rate so far over our past run rate on new card sales and the activation and activity on the card is really, really strong. So we're off to a great start. Sometimes it's better to be lucky than good. We launched the high-end product suite in the same week that JPMorgan, Sapphire and AMEX increased their annual fees into almost $1,000 range. We launched this product at $295. It will be waived if you have a strong relationship with Citizens. An equivalent sort of value proposition. So our aspirations are to be bigger, but stay within a relationship-based framework. So could I see this business getting to $3 billion or bigger over the medium term? Yes. Do I have aspirations to go compete nationally with AMEX and JPMorgan on cards? Absolutely not. So this will be a good, strong, healthy growth vertical for us that will drive higher yields, will help us remix our balance sheet to high returning assets, and we'll stay contained into our bank customer base as we distribute it.

Home equity, you guys are big in home equity. Can you talk about the strategy and the growth opportunities there?

74% of the United States has a mortgage below 5%. Home equity has been an area Citizens has always been good at. We made a very strategic investment 3 years ago with data and analytics on a program we called FastLine, where basically, you need 4 things with home equity. You need the property valuation, you need a clear title, you need your credit score and you need income. We can get all 4 of those things with data and not ask the customer for it, which we've done. And so now we've taken out a ton of operating cost in terms of underwriting, but most importantly is we've created a value proposition where this is underwritten and you get money as fast as a personal loan, but it's a home secured loan. With the liquidity line at rates that are attractive. We're pricing middle of the pack versus peers, and we're #1 in the United States in originations and balance sheet growth for 7 or 8 quarters running with publicly available data, including outrunning all the money center banks. By the way, we only originate in 14 states. They originally in all 50 states. So we are quite certainly the nation's leader in HELOC lending. Our credit [strats] are very strong. We skew first lien, 35% or so of the business is first lien. That's different from other banks. Our average FICOs are in the high 700s. Our CLTVs are below 60, and there's de minimis tail risk in the book in terms of higher LTV lending. So we've been able to have an incredibly clean super prime first lien-oriented position and sort of dominate on the originations front for quite some time. And I think, look, the forward rate curve would not suggest mortgage rates coming below 5%. So if you take the medium-term outlook, we've got an incredible competitive advantage. The market is likely not to get back to a refi boom. This is going to be the way U.S. consumers tap into home equity and I think it should position us for strong high-returning loan growth. Also, we don't do a home equity line without a checking account. So it's also driving low-cost deposits with a mass affluent oriented customer base. So it's really served as a strong acquisition vehicle for us for the consumer bank overall.

All right. I've got another question, but we can open it up now. We've got 9 minutes left. I don't know if we can grab the mic. He's coming...

Manan Gosalia, Morgan Stanley. You spoke about Reimagine the Bank not being a significant impact to 2026 expenses. I mean I think one of the concerns from investors has been not that you wouldn't get your ROTCE targets that you would in 2027, but there would be more of a J-curve to getting there. So a, can you confirm that that's not the case? And b, what are the offsets to the expenses that would come through for Reimagine the Bank?

Yes. I can confirm that. Look, we're looking at our expense growth rate, Bruce shared this at our earnings call, our expense growth rate for next year being kind of generally in line with our expense growth rate from 2025. That includes the assumption of the investment and Reimagine the Bank. But net-net, while we're investing in capital and we're investing some in OpEx for some of these initiatives, it's being self-funded by some very early quick wins on vendor contract restructures, exiting some facilities that we don't need anymore. So there's a sort of 40-something initiatives that we're going at, and we've put the Mosaic together in such a way that some of these quick wins are offsetting areas where we need to invest to get the financial profile of this to be de minis, which, by the way, includes any onetime hits that we would take, whether it's investments or write-offs, we're going to net it all -- we'll be transparent about that. But as we talk about the impact to Citizens, it's implied that all those things are included. You're not going to have some separate bucket of onetimes in addition to this. So when you look at it all together, our guidance around expenses will be in line with this year's number. It would include Reimagine the Bank. But the Reimagine the Bank piece netting those quick wins with the investments that we're making will be actually somewhat de minimis too.

All right. Next I guess, Steve raised his hands first before.

Brendan, Steve Alexopoulos. So I have 2 questions on the Private Bank. So a lot of banks studied First Republic service model. But could never get close to their client satisfaction metrics. Where are you guys today? Are you even close to where they were? That's the first question, so I'll start with that.

76 NPS. So they peaked in the '80s, 76 by all accounts is world-class. I would say we still have work to do. The platform is very strong. Obviously, the talent that we brought on board is driving a lot of that. We're making operating platform enhancements where -- we had all the product capabilities, more so than First Republic. The work to be done was integration across, connecting the plumbing. These customers that have commercial real estate needs, they've got deposit needs, they got wealth needs. All those businesses operated somewhat independently at Citizens. So bringing it together to put these bankers in a position to deliver it all together was the work to be done. That has -- a lot of investment has happened. There's more to do. What we hear from clients just maybe simply summarize it, is this feels very familiar to us from First Republic. There's a few things that you guys need to do better. But when I look at where you're at compared to all the other options, nobody is even remotely close. And so we feel great about the path we're on. We're not satisfied that we're at where we need to be, but 76 is not bad.

Okay. That's helpful. The other question, so when I look at the returns, 20%, 25%, I never thought First Republic could ever get close to that. The teaser rates are a portion of it, but just adjusting those rates does not get you to 20% to 25%. Can you talk about what else you've done to unlock the returns of that business?

The biggest piece of that is the deposit quality and the deposit-led nature of the business. So if you look at what drives ROE, the fact that we're at a 60% LDR, obviously, the capital intensity is lighter than a business that might be running at an 80% or 85% LDR. So the high quality of deposits with leading with deposits and wealth and not needing to put out as much capital is really one piece of it. The margin on the business we're doing, while I don't have First Republic's balance sheet memorized. We're around a 4.5% margin, maybe 4.4%, 4.3%, something like that, we're around a 4.5% margin, something like that between the yields that we're putting on for loans and the deposit costs that we're paying. So that's NIM accretive at the top of the house to Citizens. So when you look at less capital intensity, fee income coming from wealth, really strong balance sheet margin that should give you confidence we're not giving away credit. Even when we're deploying credit, we're not giving away credit to get the deposits, it's coming from a relationship-based strategy. That's the formula for a high-returning business. Over a long period of time, look, I don't expect to run at a 60% LDR forever. That will tighten a little bit. But we still think that the fundamental quality metrics of the business should keep us in that range of 20% plus business.

Scott?

Brendan, Scott Siefers. Couple of questions also related to the Private Bank. So you've gone from 150 to about 500 people. As we get farther away from the First Republic like event, does it get easier to add teams because you have a reputation? Or is it harder because there's just less movement? And then as you look at this initiative getting to potentially like double digits or more of the bank's earnings stream, is that going to be more a function of continuing to add advisers? Or is it just sort of more capabilities and seasoning within the existing adviser pool?

Yes, I'll take the last one first. It's both. So we think that the existing teams we have a lot of running room to build their own scale that should drive us. And we think we can double over the medium term that contribute. So we're at 7% EPS accretion today. Can that get into the mid-teens, 15% over the medium term? Yes, and obviously, keep in context that, that is also, given a growing Citizens overall. So percentage share bigger inside of a growing bank, we think there's a lot of running room. Also, we plan to add teams, both on the wealth side and the banking side, you might have seen over the last 2 weeks, just yesterday, we announced the Southern California Wealth team, [$800 million team]. The week before we announced the hiring of a banking team in Southern California in Beverly Hills. So we're finding these selective opportunities to bolt-on talent. And what was holding us back even though we went from 150 to 500 if we were held back, was a couple of things. One is I wanted to deliver to all of you and our investor base that we could build a profitable business. So the further you're continuing to invest in the J-curve, the further you push out showing that this can be profitable. So that's one lens we wanted to really decisively say this is going to be a 20% ROE business plus. We've delivered that. Secondly is the customer experience platform, we did need to invest in it before we would add a ton of scale to it, which we've principally done. So we feel good now about growth, and we will continue to selectively add teams in the markets we're in and maybe start to branch out into new markets. The point around distance from FRB failure, we've all been exhausted, the team that we want from the old FRB platform. Some of them is scattered, some stay at JPMorgan. If we find onesie-twosies that still we didn't we missed, maybe we'll look at them. But the talent growth strategy from here is more likely than not going to be non-X-FRB employees. And so the talent is out there. It's available. What we are building a mindset of is how to now immerse them in the culture of service and that sort of white glove, no holds bar service model, which a lot of banks say not all banks do. And so getting the right people that know how to do that, are willing to be trained to do that is going to be the job to be done to make sure -- I've no doubt we can hire teams in scale. It's hiring teams and scale inside of the context of the culture that we're trying to build around the service model that will require a little bit of a different muscle than just recruiting all folks in that were already in that business for a long period of time. But we're convicted that we can do it, and we're getting looks from non-FRB bankers that want to be part of this, and that's the first set of interview questions is let's talk about the customer experience standards that we're going to set here.

All right. We are out of time, but I really want to thank you again for you and your team for coming to the conference again. And they'll be at the back if anyone has any follow-up questions.

Thanks. I appreciate it.

Thanks.

Thanks, everybody.