Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2021 Earnings Presentation
32 slides from Citizens Financial's earnings presentation, Oct 20, 2021
Slide 1: 3Q21 Financial Results
3Q21 Financial Results October 20, 2021
Slide 2: Forward-looking statements and use of non-GAAP financial measures
Forward-looking statements and use of non-GAAP financial measures This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends as well as the potential effect
Slide 3: 3Q21 GAAP financial summary
3Q21 GAAP financial summary Q/Q Y/Y $s in millions 3Q21 2Q21 3Q20 $/bps % $/bps % Net interest income $ 1,145 $ 1,124 $ 1,137 $ 21 2 % $ 8 1 % Noninterest income 514 485 654 29 6 (140) (21) Total revenue 1,659 1,609 1,791 50 3 (132) (7) Noninterest Expense 1,011 991 988 20 2 23 2 Pre-provision profi
Slide 4: 3Q21 Underlying financial summary
3Q21 Underlying financial summary(1) Q/Q Y/Y $s in millions 3Q21 2Q21 3Q20 $/bps %/bps $/bps %/bps Net interest income $ 1,145 $ 1,124 $ 1,137 $ 21 2 % $ 8 1 % Noninterest income 514 485 654 29 6 (140) (21) Total revenue 1,659 1,609 1,791 50 3 (132) (7) Noninterest expense 988 980 957 8 1 31 3 Pre-p
Slide 5: Overview
Overview(1) ■ Underlying net income of $546 million and EPS of $1.22 reflect broad-based strength across our businesses and excellent credit results ■ Underlying PPNR of $671 million, up 7% from 2Q21 and down 20% from 3Q20 Strong 3Q21 – Strong results in Capital Markets and Wealth, along with a rebo
Slide 6: Net interest income
Net interest income Modest interest-earning asset growth and stable NIM NII and NIM Linked Quarter ■ NII up 2% $s in millions, except earning assets – Given interest-earning asset growth with stable NIM, $160.2B $163.5B $164.4B $166.3B $167.3B higher day count ■ NIM of 2.72%, stable $1,137 $1,129 $1
Slide 7: Noninterest income
Noninterest income Strong results in Capital Markets, record Wealth fees, and rebound in Mortgage $ Linked Quarter $s in millions 3Q21 2Q21 3Q20 Q/Q Y/Y ■ Noninterest income increased 6% Mortgage banking fees $ 108 $ 85 $ 287 $ 23 $ (179) – Mortgage banking fees up $23 million, given strong originat
Slide 8: Noninterest expense
Noninterest expense(1) Reflecting strong expense discipline and the benefit of efficiency initiatives Underlying, as applicable $ Linked Quarter $s in millions 3Q21 2Q21 3Q20 Q/Q Y/Y Salaries & employee benefits $ 522 $ 524 $ 511 $ (2) $ 11 ■ Underlying noninterest expense up 1% Equipment & software
Slide 9: Loans and leases
Loans and leases Period-end loans up 1% QoQ; 2% ex PPP, reflecting strength in retail(2) Average loans and leases(1) Linked Quarter $s in billions ■ Average loans down $849 million, or 1%; up 1% excluding $124.9 $123.5 $122.8 $123.5 $122.6 PPP impact – Retail up $1.1 billion, or 2%, reflecting growt
Slide 10: Average funding and cost of funds
Average funding and cost of funds Average deposits up 7% YoY and 1% QoQ; continue to drive down cost of funds Growing lower-cost deposits(1) Linked Quarter $s in billions $146.6 $150.3 $151.9 ■ Average deposits up $1.5 billion, or 1%, with growth in $141.4 $145.3 demand deposits, savings and checkin
Slide 11: Credit quality
Credit quality(1) Provision for credit losses, net charge-offs Highlights $s in millions ■ NCOs of $44 million decreased $34 million QoQ, driven by 0.70% 0.61% excellent results in commercial given improved macro 0.52% environment 0.25% ■ Nonaccrual loans decreased 3 bps to 0.61% of total loans QoQ
Slide 12: Allowance for credit losses
Allowance for credit losses Reserve release of $77 million; robust reserve coverage of 1.63% Allowance for Credit Losses $s in millions $2,081 $81 $2,004 $1,747 $(44) $(71) $(43) CECL Day 1 2Q21 New Loan Net Charge-offs Portfolio Economic/ 3Q21 Originations Changes 1. Qualitative Changes 2. Commenta
Slide 13: Capital remains strong
Capital remains strong $s in billions (period-end) 3Q20 4Q20 1Q21 2Q21 3Q21 Highlights (1)(2) Basel III basis ■ 3Q21 CET1 ratio of 10.3%, stable with 10.3% in 2Q21, Common equity tier 1 capital $ 14.3 $ 14.6 $ 14.9 $ 15.3 $ 15.6 above our target 9.75%-10.0% operating range Risk-weighted assets $146.
Slide 14: Business highlights and strategic priorities
Business highlights and strategic priorities ■ On track for total TOP 6 target pre-tax run-rate benefit of ~$400-$425 million by YE2021 Execution of TOP 6 and Balance Sheet ■ TOP 7 program build out making good progress, details to be announced late this year Optimization ■ Evaluating originate-to-d
Slide 15: Digital engagement and branch optimization trends
Digital engagement and branch optimization trends Digital Metrics(1) 83.6 thousand 2.7 million 1.7 million 3.1 million Digital booked sales P2P Zelle transactions Mobile active users Digital check deposits 24% YoY 34% YoY 20% YoY 5% YoY 29% of total deposits Note: Digital Metrics as of 3Q 2021 withi
Slide 16: Making banking more transparent and accessible
Introducing Citizens Peace of MindTM and meeting Bank On National Account standards Making banking more transparent and accessible Citizens Peace of MindTM Expected benefits ■ New feature added October 1st to all checking products to help customers avoid unexpected overdraft fees – Automatic rebate
Slide 17: 4Q21 outlook vs. 3Q21
4Q21 outlook vs. 3Q21 3Q21 Underlying(1) 4Q21 Underlying outlook - CFG standalone ■ NII broadly stable / down slightly given lower PPP Net interest forgiveness benefit ■ $1,145 million income ■ Average loans up 1.5-2% (2.5-3% ex PPP) with ~3% spot growth (~4% ex PPP) Noninterest ■ Broadly stable as
Slide 18: Key messages
Key messages Citizens 3Q21 results reflect diversity across fee income businesses, expense control and excellent credit ■ Underlying PPNR of $671 million, up 7% from 2Q21 and 20% from 3Q20(1) – Reflects strong results in Capital Markets and Wealth, along with a rebound in Mortgage – Continued excell
Slide 19: Appendix
Appendix
Slide 20: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Pre-provision profit Average loans Return on average total $s in millions $s in billions tangible assets $671 é7% ê1% ê27 bps $629 $123.5 $122.6 1.48% 1.21% 2Q21 3Q21 2Q21 3Q21 2Q21 3Q21 Net income available to Return on average tangible Average deposits common s
Slide 21: Year-over-year Underlying results
Year-over-year Underlying results(1) Pre-provision profit Average loans Return on average total $s in millions $s in billions tangible assets ê20% ê2% é42 bps $834 $124.9 $122.6 1.21% $671 0.79% 3Q20 3Q21 3Q20 3Q21 3Q20 3Q21 Net income available to Average deposits Return on average tangible common
Slide 22: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type June 30, 2021 September 30, 2021 Loans and Allowance Coverage Coverage Loans and Allowance Coverage Coverage $s in millions Leases (ex-PPP)(3) Leases (ex-PPP)(3) Allowance for Loans and Lease Losses Commercial and industrial(1) $42,842 $674 1
Slide 23: Notable Items
Notable Items(1) Second quarter and third quarter 2021, and third quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives as well as integration costs. Third quarter 2021 also includes a pension settlement charge recorded in other
Slide 24: Notes
Notes Notes on Non-GAAP Financial Measures See important information on Non-GAAP Financial Measures, as applicable, at the beginning and end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and their reconciliations to GAAP financial measures. “Unde
Slide 25: Notes continued
Notes continued Notes on slide 15 - Digital engagement and branch optimization trends 1) Digital and mobile banking active users reflects retail checking user base. Digital booked sales includes checking, deposits, credit card, HELOC, ERL and In School. Digital payments and transfers includes intern
Slide 26: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q21 Change 3Q21 2Q21 3Q20 2Q21 3Q20 $ % $ % Total revenue, Underlying: Total revenue (GAAP) A $1,659 $1,609 $1,791 $50 3% ($132) (7%) Less: Notable items — — — — — — — Total reven
Slide 27: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q21 Change 3Q21 2Q21 3Q20 2Q21 3Q20 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,659 $1,609 $1,791 $50 3.11% ($132) (7.33%) Less: Noninterest expense (GAAP) C 1,0
Slide 28: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q21 Change 3Q21 2Q21 3Q20 2Q21 3Q20 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) P
Slide 29: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q21 Change 3Q21 2Q21 3Q20 2Q21 3Q20 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $509 $524 $524 ($15) (3%) ($15) (3%) Less: No
Slide 30: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q21 4Q20 Total revenue, Underlying: Total revenue (GAAP) A $1,659 $1,707 Less: Notable items — — Total revenue, Underlying (non-GAAP) B $1,659 $1,707 Noninterest expense, Underlyi
Slide 31: Non-GAAP financial measures and reconciliations - excluding the impact of PPP loans
Non-GAAP financial measures and reconciliations - excluding the impact of PPP loans $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q21 Change 3Q21 2Q21 1Q21 4Q20 3Q20 2Q21 3Q20 $/bps % $/bps % Total loans, excluding the impact of PPP loans: Total loans (GAAP) A $123,318 $12
Slide 32: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q3 2021 Earnings Presentation on 6ix