Why this large bank is outperforming its peers

So far, more than half of the 20 largest U.S. banks have reported second quarter earnings and it’s been a fairly mixed bag.

While most have reported solid results, investors have been hesitant to buy, given the economic uncertainty that still looms. The KBW NASDAQ Bank Index, which tracks the returns of the 24 largest U.S. banks, shows that, as the index is down about 1% since bank earnings started rolling in Tuesday morning.

However, there is one bank that has outperformed the rest this week, Citizens Financial (NYSE:CFG), the nation’s 17th largest bank.

Citizens Financial, the holding company for Citizens Bank, saw its stock price climb about 5% on Thursday after it reported second quarter earnings. It has also outperformed the KBW Nasdaq bank Index year-to-date with a return of 12.3% and it has gained roughly 20% over the past 12 months.

The bank hauled in $2.04 billion in revenue, which was up 4% year-over-year and beat estimates of $2.01 billion.

Net income rose 11% to $436 million while earnings increased 18% to 92 cents per share. That was better than estimates of 88 cents per share. The revenue and earnings numbers were even better compared to the first quarter of 2025, which is notable, as many other banks saw their numbers come in lower sequentially.

Net interest income rises

Citizens saw gains in two key areas, with net interest income rising 2% to $1.44 billion and non-interest income jumping 8% year over year to $600 million.

The higher NII is reflected in the net interest margin, which rose 8 basis points to 2.96%. That means that the bank made slightly more in interest income than it paid out in interest for deposits.

The higher noninterest income stems from increases in fees for equity underwriting, card fees, wealth management fees, and mortgage banking, to name a few. M&A fees were down a bit as several significant deals pushed into July due to market uncertainty.

“We are pleased to report strong results today that came in ahead of expectations, paced by strong NII and fee growth, disciplined expense management, and credit results that are trending favorably,” Citizens Chairman and CEO Bruce Van Saun said. “We saw some sizable M&A advisory fees push out to July but offset that with strong performance across other fee categories.”

Improved efficiency

Citizens also improved its efficiency ratio to 64.8%, from 66.3% in the same quarter a year ago and 67.9% in Q1 of 2025. The efficiency ratio gauges how efficient the bank is, measuring how much is spent to generate each dollar of revenue.

The ratio was boosted by its disciplined expense management, as expenses were roughly flat year-over-year.

In addition, Citizens reduced its provision for credit losses from a year ago due to improved asset quality. The net charge-off ratio, which measures bad loans, was down 4 basis points to 0.48%.

The momentum is expected to continue into Q3 as Citizens anticipates net interest income to rise 3% to 4% compared to Q2 and the net interest margin to increase 5 basis points. Further, non-interest income is targeted to rise in the low single digits over Q2 with expenses up just 1% to 1.5%. Additionally, net charge-offs are anticipated to be lower.

Also, the bank is planning on $75 million in share repurchases. For the full fiscal year, Citizens maintains the guidance it set at the beginning of the year.

Why it stands out

Citizens Financial stock has had multiple price target upgrades over the past week, from Morgan Stanley, JP Morgan, Keefe Bruyette, and Bank of America. Lower interest rates, an improving economy, and reduced regulation are all cited as macro reasons for the bank to see continued gains.

Citizens stock is considered a buy by most analysts, with a median price target of $52.50. That would suggest about 7% upside over the next 12 months. It is also reasonably valued with a P/E ratio of 14.

Its hard to know exactly why investors were buying, but they must have liked the improved efficiency and asset quality, as well as the expectations for slow and steady gains.