Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2016 Earnings Presentation
35 slides from Citizens Financial's earnings presentation, Apr 21, 2016
Slide 1: 1Q16 Financial Results
1Q16 Financial Results April 21, 2016
Slide 2: Forward-looking statements
Forward-looking statements This document contains forward-looking statements within the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “
Slide 3: 1Q16 highlights
1Q16 highlights GAAP diluted EPS of $0.41 up 8% from 1Q15 and up 5% from Adjusted(1) diluted EPS Improving Adjusted(1) operating leverage of 3% YoY profitability and NIM improved 9 bps to 2.86% from 2.77% in 1Q15 and 4Q15 returns ROTCE and efficiency ratio stable with 4Q15(1) Generated 7%
Slide 4: Financial summary — GAAP
Financial summary — GAAP Highlights Linked quarter: 1Q16 change from GAAP net income improved modestly from 4Q15 $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 ─ Diluted EPS reduced $0.01 by the preferred dividend $ % $ % Net interest income $ 904 $ 870 $ 836 $ 34 4 % $ 68 8 % NII up $34 million driven
Slide 5: Adjusted financial summary — excluding restructuring charges and special items
Adjusted financial summary — excluding restructuring charges and special items(1) Highlights Linked quarter: 1Q16 change from Net income improved modestly from 4Q15 $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 ─ Diluted EPS reduced $0.01 by the preferred dividend $ % $ % Net interest income $ 904 $ 870
Slide 6: Net interest income
Net interest income $s in millions, except earning Net interest income Highlights assets $123B $123B $124B $126B Linked quarter: $121B NII up $34 million, or 4% ─ Reflects 2% average loan growth driven by commercial, student and mortgage loans, and a 9 bp improvement in NIM, partially offset by lo
Slide 7: Net interest margin
Net interest margin NIM walk 4Q15 to 1Q16 0.11% –% –% (0.02%) 2.86% 2.77% 4Q15 NIM% Loan Investment Deposit Borrowing 1Q16 NIM% yields portfolio costs costs/other yields NIM walk 1Q15 to 1Q16 0.10% 0.03% (0.01%) (0.03%) 2.86% 2.77% 1Q15 NIM% Loan Investment Deposit Borrowing 1Q16 NIM% yields portfol
Slide 8: Noninterest income
Noninterest income $s in millions 1Q16 change from Highlights 1Q16 4Q15 1Q15 4Q15 1Q15 Linked quarter: $ % $ % Noninterest income decreased $32 million, or 9%, which Service charges and fees $ 144 $ 156 $ 135 $ (12) (8) % $ 9 7 % reflects the impact of seasonality, market volatility and an Card fe
Slide 9: Adjusted noninterest expense — excluding restructuring charges and special items
Adjusted noninterest expense — excluding .restructuring charges and special items(1) 1Q16 change from Highlights $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 Linked quarter: $ % $ % Adjusted salaries and benefits(1) $ 425 $ 404 $ 420 $ 21 5 % $ 5 1 % Noninterest expense relatively stable Adjusted occup
Slide 10: Consolidated average balance sheet
Consolidated average balance sheet 1Q16 change from Highlights $s in billions 1Q16 4Q15 1Q15 4Q15 1Q15 $ % $ % Linked quarter: Investments and interest bearing Total earning assets up $2.0 billion, or 2%, with loan deposits $ 25.5 $ 25.7 $ 27.1 $ (0.1) — % $ (1.5) (6) % growth of $2.1 billion, or
Slide 11: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $52.5B $53.5B Linked quarter: $50.7B $51.6B $50.1B $2.5 Average loans increased $1.0 billion, or 2%, largely reflecting $2.4 $2.6 growth in higher yielding student, mortgage and iUp balances $2.5 $2.3 $3.0
Slide 12: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $43.8B Linked quarter: $41.8B $42.5B $41.3B Average loans up $1.3 billion, or 3%, with solid growth in Mid- $40.1B $3.3 $3.1 corporate and Industry Verticals, Corporate Finance and Commercial $2.8 $3.1 $
Slide 13: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $113.3B $113.0B $114.0B $115.9B $111.2B Linked quarter: $3.9 $3.9 $4.1 $6.0 $9.9 Total average deposits up $613 million $6.5 $5.1 $5.0 $3.1 $7.0 $2.9 $1.6 $0.9 ─ Growth in interest checking and
Slide 14: Strong credit quality trends continue
Strong credit quality trends continue $s in millions Net charge-offs (recoveries) Highlights $78 $83 $54 $75 $77 Overall credit quality remains solid with charge offs and NPLs relatively stable $3 $7 $7 $7 $4 Net charge-offs of $83 million, or 0.33% of average loans and leases increased $68 $66
Slide 15: Planned TDR transaction highlights
Planned TDR transaction highlights $s in millions TDR transaction detail Highlights Category Consumer Banking Segment Other Total Planned TDR transaction expected to further improve credit profile and is consistent with overall balance sheet optimization Home strategies Mortgage Equity Total Mortg
Slide 16: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 1Q15 2Q15 3Q15 4Q15 1Q16 Capital levels remain above regional peers (1,2) Basel III transitional basis Common equity tier 1 capital $ 13.4 $ 13.3 $ 13.2 $ 13.4 $ 13.6 1Q16 Basel III common equity tier 1 ratio (trans
Slide 17: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 1Q16 Initiative Commentary Status Retail checking households grew by ~15,000 or 1% vs. 1Q15. Deposits up 5% vs. prior year quarter and services Reenergize household growth charges up 5%. Origination volume up 15% from the prior year quarter, though LOs re
Slide 18: 2Q16 outlook
2Q16 outlook(1) 2Q16 expectations vs. 1Q16(1) Net interest income, ~2.0% loan growth net interest margin Expect relatively stable net interest margin Noninterest Mid-single digit growth income Modest increase Noninterest expense Committed to YoY operating leverage goals Credit trends, Pr
Slide 19: Key messages
Key messages 1Q16 was another good quarter for Citizens ─ Financial results continue to improve and meet expectations ─ Good progress on strategic initiatives, mindset of ‘continuous improvement’ ─ Balance sheet management showing results (NIM, loan growth, TDR sale, sub-debt repurchase, dividend
Slide 20: Appendix
Appendix %£ Citizens Financial Group, Inc” 20
Slide 21: Quarter-over-quarter results
Quarter-over-quarter results Adjusted pre-provision profit (1) Period-end loans (2) Adjusted return on average $s in millions $s in billions tangible assets (1) $423 10% $101.0 $101.0 7% 1 bps $383 $94.5 0.69% 0.68% 1Q15 1Q16 1Q15 1Q16 1Q15 1Q16 Adjusted net income (1) Period-end deposits Adju
Slide 22: Linked-quarter results
Linked-quarter results Pre-provision profit Period-end loans(1) Return on average tangible assets(2) $s in millions $s in billions $422 $423 0.2% $99.0 $101.0 $101.0 2% 1 bps 0.67% 0.68% 4Q15 1Q16 4Q15 1Q16 4Q15 1Q16 Net income Period-end deposits Return on average tangible(2) $s in millions $
Slide 23: Consumer Banking segment
Consumer Banking segment 1Q16 change from Highlights $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 Linked quarter: $ % $ % Net income up $4 million, or 6% Net interest income $ 581 $ 565 $ 533 $ 16 3 % $ 48 9 % Noninterest income 208 226 219 (18) (8) (11) (5) Net interest income up $16 million, driven
Slide 24: Commercial Banking segment
Commercial Banking segment 1Q16 change from Highlights $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 Linked quarter: $ % $ % Commercial Banking net income decreased $19 million, or 13% Net interest income $ 300 $ 301 $ 276 $ (1) — % $ 24 9 % Noninterest income 99 107 100 (8) (7) (1) (1) Total revenue
Slide 25: Other
Other 1Q16 change from Highlights $s in millions 1Q16 4Q15 1Q15 4Q15 1Q15 Linked quarter: $ % $ % Other recorded net income of $19 million, up $17 million as Net interest income $ 23 $ 4 $ 27 $ 19 475 % $ (4) (15) % higher net interest income and lower provision for credit losses Noninterest incom
Slide 26: Diversified and granular loan mix
Diversified and granular loan mix $53.0 billion $48.0 billion 1Q16 retail portfolio(1) 1Q16 commercial portfolio(2) Business Non-Core Non-Core Out of Banking 0.3% Other 25% Out of footprint(8) Leases 31% Education Finance 2%4% 6% footprint(8) 8% Home 8% Credit Cards Equity 15% Midwest 3% 32% 13% Mid
Slide 27: Oil & Gas portfolio overview
Oil & Gas portfolio overview 1Q16 Oil & Gas Outstandings Highlights Well-diversified portfolio with ~100 clients Tota l Uti l i zed Cri ti ci zed Nona ccrua l $s i n mi l l i ons O/S % % s ta tus Includes $339 million of corporate aircraft leases arising from Asset Finance Les s pri ce-s ens i t
Slide 28: Restructuring charges and special items
Restructuring charges and special items $s in millions, except per share data GAAP results included restructuring charges and special items related to enhancing efficiencies and improving processes across the organization and separation from The Royal Bank of Scotland Group plc (“RBS”). Restructurin
Slide 29: Non-GAAP financial measures
Non-GAAP financial measures This document contains non-GAAP financial measures. The table below presents reconciliations of certain non-GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are usually included, where applicable, in the financial results pres
Slide 30: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) QUARTERLY TRENDS $s in millions, except per share data 1Q16 4Q15 3Q15 2Q15 1Q15 Noninterest income, excluding special items: Noninterest income (GAAP) $330 $362 $353 $360 $347 Less: Special items — — — — — Noninterest
Slide 31: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions, except per share data QUARTERLY TRENDS 1Q16 4Q15 3Q15 2Q15 1Q15 Return on average total assets, excluding restructuring charges and special items: Average total assets (GAAP) K $138,780 $136,298 $135,10
Slide 32: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions, except per share data QUARTERLY TRENDS 1Q16 4Q15 3Q15 2Q15 1Q15 Salaries and employee benefits, excluding restructuring charges and special items: Salaries and employee benefits (GAAP) $425 $402 $404 $4
Slide 33: Non-GAAP reconciliation table
Non-GAAP reconciliation table Non-GAAP Reconciliation - Segments $s in millions THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED DECEMBER 31, THREE MONTHS ENDED SEPTEMBER 30, 2016 2015 2015 Consumer Commercial Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking
Slide 34: Non-GAAP reconciliation table
Non-GAAP reconciliation table Non-GAAP Reconciliation - Segments $s in millions THREE MONTHS ENDED JUNE 30, THREE MONTHS ENDED MARCH 31, 2015 2015 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income available to common stockholders
Slide 35: 3< Citizens
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Citizens Financial Group — Q1 2016 Earnings Presentation on 6ix