Citizens Financial Group’s latest quarterly disclosures suggest a notable shift in commercial real estate (CRE) credit performance, offering a data point of stabilization rather than escalation in sector stress.

CRE loans remain a material component of the bank’s balance sheet, underscoring ongoing exposure to property-level fundamentals and refinancing conditions. However, quarterly net charge-offs in the CRE book swung to a slight negative, indicating that recoveries and reserve reversals exceeded newly recognized losses. This marks a sharp improvement from prior-quarter charge-off activity and points to contained credit deterioration rather than accelerating stress.

Importantly, the bank reported loans held-for-sale activity without announcing a broad, programmatic CRE disposition strategy. This suggests management is opting for selective, opportunistic exits—likely asset-specific or relationship-driven—rather than forced portfolio reductions that could pressure pricing or signal distress to the market.

At the same time, Citizens continues to carry a substantial allowance for loan losses, maintaining reserve coverage well above recent net charge-offs. From a risk-management perspective, this buffer provides flexibility should property values or leasing fundamentals weaken further, while also allowing room for recoveries to flow through earnings if conditions continue to normalize.

Taken together, the data portray a regional bank managing CRE exposure with balance-sheet discipline: tolerating near-term volatility, avoiding indiscriminate sales, and preserving capital protection through reserves.

➤ TAKEAWAY

Citizens’ results do not imply the CRE cycle is “fixed,” but they do signal that acute credit stress is not compounding. The combination of negative CRE charge-offs, selective loan sales, and strong reserve coverage points to controlled risk rather than forced deleveraging—an important distinction for investors assessing which regional banks are managing through CRE headwinds versus reacting to them.