First Citizens signals $143B-$146B Q4 loan growth target with cautious optimism amid BMO branch acquisition

Earnings Call Insights: First Citizens BancShares (FCNCA) Q3 2025

MANAGEMENT VIEW

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Chairman & CEO Frank Holding highlighted, "During the third quarter, our business segments continued to deliver strong performance... Key earnings metrics were solid, marked by net interest income growth, stable NIM and adjusted noninterest expense at the low end of our guidance range." He stated the company achieved adjusted earnings per share of $44.62, an adjusted ROE of 10.62% and an adjusted ROA of 1.01%. Loan growth reached 2.5% over the prior quarter, notably led by a 10% sequential increase in SVB Commercial's global fund banking loans. Deposits increased by $3.3 billion or 2%, marking the seventh consecutive quarter of deposit growth. Holding announced, "We recently announced an agreement to purchase 138 branches from BMO Bank... we are excited about this opportunity to expand into new markets and offer our client-centered approach in even more regions." The company returned $900 million to shareholders through share repurchases during the quarter. He emphasized, "We remain committed to deepening client relationships, optimizing our balance sheet and making investments in our franchise that underpin scalable growth."

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CFO Craig Nix stated, "Adjusted net income of $587 million was driven by positive operating leverage which included net revenue growth and expenses at the low end of our guidance range." He noted an $82 million charge-off related to the First Brands bankruptcy, but expressed confidence that "this loss is not reflective of broader issues within our supply chain finance portfolio." Nix reported, "Headline net interest income was up 2.3% sequentially and in the upper half of our guidance range... Net interest income ex accretion grew by 2.7% sequentially." He also highlighted continued strong capital and liquidity positions, with tangible book value per share increasing 2% sequentially.

OUTLOOK

* The company anticipates Q4 loans in the $143 billion to $146 billion range. Nix explained, "We anticipate loans in the $143 billion to $146 billion range in the fourth quarter, driven primarily by the same areas we have seen growth year-to-date." Deposit guidance for Q4 is $161 billion to $165 billion, with expected growth in the general bank and some offset from known SVB Commercial outflows. Full-year headline net interest income guidance tightened to $6.74 billion to $6.84 billion. Nix signaled, "We expect fourth quarter headline net interest income to be relatively stable compared to the third quarter." Full-year net charge-off guidance increased to 43 to 47 basis points. Adjusted noninterest income is expected in the $480 million to $510 million range for Q4. Adjusted noninterest expense for the year is forecast at $5.12 billion to $5.16 billion.

FINANCIAL RESULTS

* Adjusted earnings per share for Q3 was $44.62. Adjusted net income was $587 million. Net interest income increased 2.3% sequentially, and NIM remained at 3.26%. Loan growth was $3.5 billion or 2.5% sequentially, led by Global Fund Banking within SVB Commercial. Deposits grew by $3.3 billion, with SVB Commercial contributing $2.1 billion. Net charge-offs rose to $234 million, with $82 million from the First Brands bankruptcy. The CET1 ratio was 11.65%, down 47 basis points from the previous quarter, as share repurchases and loan growth outpaced earnings. Share repurchases reached $900 million for the quarter, and $4 billion since July 2024.

Q&A

* Christopher McGratty, KBW: Asked about the NII guide and timing of NII bottoming. CFO Nix responded, "If we get two cuts, which frankly would be our base forecast... we would expect those numbers to be down low single digits percentage points sequentially... both headline NII and ex-accretion NII and headline NIM and ex accretion NIM would trough in the first quarter of '26."
* Bernard Von Gizycki, Deutsche Bank: Sought more detail on the supply chain finance portfolio after the First Brands charge-off. Chief Credit Officer Andrew Giangrave assured, "Our supply chain portfolio is about $300 million across 24 borrowers... feel very comfortable with the remainder of that portfolio." Von Gizycki also asked about future M&A appetite; Nix answered, "Beyond BMO, we have no specific M&A plans... but long term, M&A will remain a significant part of our growth strategy."
* Casey Haire, Autonomous Research: Questioned the conservatism in loan growth guidance. Managing Director Marc Einerman explained, "Borrowings and repayments tend to swing around a lot... with Global Fund Banking, in particular, that can happen."
* Anthony Elian, JPMorgan: Asked about total client funds and continued activity in SVB; Einerman cited uncertainty in IPO and VC environments and a cautious Q4 outlook.
* Other analysts focused on expense growth, share repurchases, credit migration, and the impact of AI-driven trends on business segments, with management providing detailed responses but maintaining a cautious tone on forward guidance.

SENTIMENT ANALYSIS

* Analysts pressed for clarity on forward loan growth, NII trajectory, and the durability of expense levels, with a slightly skeptical tone regarding the conservatism in guidance.
* Management maintained a measured and confident tone in prepared remarks, but responses in Q&A reflected ongoing caution, particularly regarding outlook for SVB, loan growth, and expense pressures. Phrases such as "we remain cautiously optimistic" and "it is just really difficult to predict" signaled prudence.
* Compared to the previous quarter, management's tone remained steady, but with incrementally more caution around credit and growth forecasts. Analysts' questions reflected an increased focus on potential headwinds and the specifics of guidance ranges.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for Q4 loans was raised to $143 billion to $146 billion, compared to a prior Q3 guide of $141 billion to $144 billion. Deposit growth guidance was updated to $161 billion to $165 billion. Net charge-off guidance for the full year increased to 43 to 47 basis points from 35 to 45 basis points previously. There was a shift from modest contraction in commercial lending to growth in the quarter. Management continued to emphasize disciplined cost management and capital returns. Analysts in both quarters questioned the sustainability of growth, but current-quarter inquiries showed more skepticism regarding the forward-looking guidance.

RISKS AND CONCERNS

* Management cited ongoing macro and geopolitical uncertainty, including the rate environment and credit risk related to specific sectors such as supply chain finance, equipment finance, and commercial real estate. The $82 million First Brands bankruptcy charge-off was noted, but management indicated confidence in the broader portfolio. Expense pressures were attributed to investments in technology and Category 3 readiness. Management also highlighted the potential impact of tariffs and the difficulty in estimating their long-term effect on asset quality.

FINAL TAKEAWAY

First Citizens BancShares delivered another quarter of growth in loans and deposits, supported by disciplined cost management and strong capital levels. While the company is expanding its branch footprint through the BMO acquisition and remains focused on its strategic initiatives, management signaled a cautious approach to loan and deposit growth through year-end amid macroeconomic uncertainty. Adjusted guidance for net charge-offs and tightened ranges for net interest income and expense reflect a prudent stance, with flexibility to navigate ongoing market volatility and maintain capital strength.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fcnca/earnings/transcripts]

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