By Julie Steinberg And Angela Chen 

Citizens Financial Group Inc. said its profit climbed 26% in the first quarter as its revenue and average total loans increased.

Earnings beat Wall Street estimates, while revenue was in line. Shares were little changed in midmorning trading.

The bank posted earnings of $209 million, up from $166 million in the prior-year period. On a per-share basis, earnings rose to 38 cents from 30 cents. Excluding restructuring costs and other items, earnings were 39 cents a share.

Revenue at the Providence, R.I.-based lender, which sold shares to the public in an initial offering last year, rose 1.5% to $1.18 billion.

Analysts had expected 34 cents a share in earnings and $1.18 billion in revenue, according to Thomson Reuters.

"It was a solid start to the year," Chief Executive Bruce Van Saun said on a call with analysts on Wednesday.

Royal Bank of Scotland Group PLC has been steadily reducing its stake in Citizens and now retains a 40.8% stake, Citizens said on Wednesday. The U.K. lender in March sold 135 million shares as it looked to push its ownership below 50%. RBS plans to divest its entire stake by the end of 2016.

Average loans increased by $7.8 billion because of commercial loan growth and an increase in residential mortgage, auto and student loans. These were offset by a decrease in home-equity loans outstanding.

Net interest margin, an important measure of lending profitability, fell less than 1% to 2.77%. Executives said the measure is likely to be down slightly next quarter. Mr. Van Saun said it has been a "challenge" to keep net interest margin "broadly flat" in the current low-interest rate environment. Regional banks for several quarters have been grappling with low interest rates that have dented net interest margin and other profitability metrics.

Write to Julie Steinberg at julie.steinberg@wsj.com and Angela Chen at angela.chen@dowjones.com

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