Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (May 2017)
50 slides from Citizens Financial's debt investor presentation, May 2017
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation May 2017
Slide 2: Forward-looking statements and use of key performance metrics and Non-GAAP Financial Measures
Forward-looking statements and use of key performance metrics and Non-GAAP Financial Measures 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
Slide 3: Overview
Overview Company overview and strategy Improving financial performance Capital/funding and liquidity Risk management 2
Slide 4: Company overview and strategy
Company overview and strategy 3
Slide 5: Key investment highlights
Key investment highlights Attractive, 12th largest retail bank holding company in the U.S. with attractive client-centric demographic opportunity in core markets franchise with Attractive business mix with improving profitability scale Client-centric model focused on deepening customer relatio
Slide 6: We are led by a strong and experienced board & leadership team
We are led by a strong and experienced board & leadership team Since January 2015, have attracted or promoted from within ~32% of our Executive Leadership Group (top 137) Leadership Team Member Title Board Member Committees Bruce Van Saun Chairman and Chief Executive Officer Bruce Van Saun Chairman
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension(1) Rank(2) Top 5 deposit market share in 9 of 10 largest MSAs(3) (2) Assets: $150.3 billion #12 Loans: $108.1 billion(4) #11 Deposits: $112.1 billion #12 Manchester, NH: #1 Rochester, NY: #5 Branches:
Slide 8: Robust product offerings and balanced business mix
Robust product offerings and balanced business mix Consumer Commercial Retail Deposit Services Corporate Banking Mobile/Online Banking Deep client Extensive Commercial Real Estate Credit/Debit Card + relationships product set Franchise Finance Wealth Management Asset Finance Home E
Slide 9: Strong, clean balance sheet funded with low-cost deposits
Strong, clean balance sheet funded with low-cost deposits Well capitalized with a common equity tier 1 capital ratio of 11.2% Strong asset-quality performance with net charge-offs of 33 bps(1) in 1Q17 Robust deposit franchise with $91.0 billion of average core deposits(2), with 55% retail, and
Slide 10: Improving financial performance
Improving financial performance 9
Slide 11: Delivered attractive balance sheet and revenue growth in 1Q17
Delivered attractive balance sheet and revenue growth in 1Q17 1Q17 vs. 1Q16 A strong platform well-positioned to drive value Strong loan growth Growing revenues faster Higher NIM expansion (Average total loan growth) (Total revenue growth) (Net interest margin change) ` 7.8% vs Peers 12.2% vs Peers
Slide 12: With continued focus on expense control and improving returns
With continued focus on expense control and improving returns 1Q17 vs. 1Q16 Well-controlled expenses; Strong operating leverage Efficiency improvement (Efficiency ratio(1) change) investing for growth (YoY Positive operating leverage(1)) (Noninterest expense change) vs Peers vs Peers vs Peers 6.9% 7
Slide 13: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 1Q17 Initiative Commentary Status Primary households up ~23,000 YoY and added ~15,000 primary HHs with a loan or investment. Continue to Grow and deepen relationships build out Mass Affluent and Affluent value propositions. Citizens Checkup continues to h
Slide 14: Self funding necessary investments through our efficiency initiatives
Self funding necessary investments through our efficiency initiatives Tapping Our Potential (TOP) programs remain on track TOP III Program Launched mid 2016 — Targeted run-rate pre-tax benefit of $100-$115 million by end of 2017 Revenue initiatives Target ~$25-$30 million Commercial Attrition: Pre
Slide 15: Making consistent progress against our financial goals
Making consistent progress against our financial goals Goal is to deliver a 10%+ run-rate ROTCE in the medium term Key Indicators Medium-term 9.68% targets 8.98% Adjusted ROTCE(1) 6.76% 6.73% 6.67% 6.60% 6.75% 6.61% 7.30% 8.02% 8.43% 10%+ 4.34% 5.24% 5.24% 6.28% 6.22% Adjusted return 0.91% on averag
Slide 16: We remain positioned for rising rates…
We remain positioned for rising rates… …but also see continued opportunity to enhance performance by executing well on our initiatives Interest rate sensitivity ranking 11.0% (200 bps gradual increase) 6.5% 6.5% Net interest income poised to benefit from rising rates 6.0% 5.2% ─ Continue to target
Slide 17: 2Q17 outlook
2Q17 outlook 1Q17 2Q17 expectations vs. 1Q17 Net interest $108.1 billion average loans Period-end loans up ~1.5%; ~1% average loan growth income, net 2.96% NIM Expect ~3-4 basis point improvement in net interest interest margin margin given benefit of recent rate rise Noninterest $379 mill
Slide 18: Keys to successful 2017 financial performance
Keys to successful 2017 financial performance Expect improved economic environment with steady GDP growth, solid loan demand and gradual rate hikes Drive strong, prudent loan growth across Consumer and Commercial Deliver improving NIM with continued focus on asset optimization and gathering low-
Slide 19: Capital/funding and liquidity
Capital/funding and liquidity 18
Slide 20: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers Total capital comparison(1) Highlights Continue to maintain strong CET1 capital position relative to our peers FITB 10.4% 15.0% Executed $2.4 billion in net capital transactions since June 2014, mix of PNC 10.6% 14.3% capital now broadly a
Slide 21: 2016 DFAST minimum stressed capital levels substantially above peers
2016 DFAST minimum stressed capital levels substantially above peers Severely Adverse Scenario 4Q15 Common equity tier 1 ratio 4Q15 Total capital ratio 11.7% 15.3% 10.3% 13.6% 151 bps 195 bps 12.3% 8.8% projected above peers projected above peers minimum 10.4% minimum 7.3% CFG Peer Average (1) CFG P
Slide 22: Consolidated average balance sheet
Consolidated average balance sheet 1Q17 change from Highlights $s in billions 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Total earning assets up $1.7 billion, or 1%, with loan Investments and interest bearing growth of $1.5 billion, or 1.5%. Period-end loans up $442 deposits $ 27.8 $ 27.7 $
Slide 23: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 91% U.S. Agency MBS 2.42% $26.0 2.45% $23.6 $0.9 4% AAA-rated non-agency $0.9 $0.9 $1.1 $4.1 Total HTM 19% of total earning assets, in line with peers $4.0 $0.4 $0.5 Primary goal is to provide a sour
Slide 24: Solid deposit base provides attractive funding
Solid deposit base provides attractive funding $98.8 billion 2009 average deposits $110.0 billion 1Q17 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 6% Demand 18% 11% 26% Term 30% Checking 16% with Interest 38% 19% Savings & Checking with 35% Money Market Interest Savin
Slide 25: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities(1) 16.8% 14.8% 13.6% 12.6% 12.5% 12.3% 11.5% 9.7% 9.2% 8.1% 7.2% PNC FITB CFG KEY BBT USB Peer Avg STI MTB CMA RF FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordin
Slide 26: Risk management
Risk management %£ Citizens Financial Group, Inc” 25
Slide 27: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Provision for credit losses, Highlights net charge-offs (recoveries) Overall credit quality continues to improve, reflecting growth in higher-quality, lower-risk retail loans and $104 $102 stable risk appetite in commercial $96 $91 $90 $6 NPLs
Slide 28: Diversified and granular loan mix
Diversified and granular loan mix $56.0 billion $51.7 billion 4Q16 retail portfolio 4Q16 commercial portfolio Business Non-Core Other Out of Banking Non-Core Out of 26% footprint(1,2) 34% footprint(1,2) Education Finance 3% Home Leases 2%5% 3% 11% Equity 6% Credit Cards 14% Midwest 28% 12% Midwest 3
Slide 29: Strong credit quality
Strong credit quality Overall portfolio credit metrics have generally trended in line with regional banking peers Core portfolio credit trends are favorable; non-core portfolio has been a drag, but continues to run off Net charge-offs Non-performing loans $s in millions $s in billions $1,849 $2.
Slide 30: Appendix
Appendix %£ Citizens Financial Group, Inc” 29
Slide 31: Core retail portfolio
Core retail portfolio Highlights 4Q16 $54.5 billion core retail portfolio Weighted-average core FICO score of 760 by Product type by Geography (1) by refreshed FICO (1) 63% of the retail portfolio has a FICO score Cards Other <600 of >750 Education Out of New 600-649 Finance 3% 3% Home Footprint
Slide 32: Core home equity portfolio
Core home equity portfolio(1) Highlights 4Q16 $14.1 billion HELOC 4Q16 $1.8 billion HELOAN 53% of the portfolio is secured by 1st lien by Lien position(2) by Lien position (2) Weighted-average FICO of 766 88% has an LTV of less than 80% 1st 2nd 34% 4Q16 HELOC originations of $1.3 billion 51%
Slide 33: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of December 31, 2016 Between 2017 – 2019, $3.1 billion in drawn balances 2014 – $899 million 2015 – $1.26 billion 2016 – $916 million ($3.0 billion of undrawn balances) are scheduled to 3% 3% 3% 2% 1% 4%1% 3% mature, or 22%, of the tot
Slide 34: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 4Q16 $14.9 billion core mortgage portfolio Jumbo mortgages originated primarily within the (1) (1) Bank’s lending footprint by Refreshed CLTV by Refreshed FICO 90-100%100%+ <600600-649 Predominately in-footprint with a 80-89% 1% 2% 650-699 7% 3% 2%5% w
Slide 35: Auto portfolio credit metrics
Auto portfolio credit metrics Highlights(1) 4Q16 $13.9 billion Auto portfolio Auto Finance portfolio – purchase only, no by Refreshed FICO score (1,2) by Origination LTV (2) leasing, weighted-average FICO score ≤ 600 of 730 % new car ≥ 120% ≤ 80% ≥ 800 601-649 5% 64% − 4Q16 originations of $1.4 bi
Slide 36: Core education finance portfolio overview
Core education finance portfolio overview Highlights 4Q16 $6.3 billion core education finance portfolio Core education finance portfolio average FICO score of 774 (1) by Refreshed FICO by Segment and co-sign rate of 49% <650 650-699 Acquired 95% of InSchool loans co-signed with average FICO of 7
Slide 37: Consumer unsecured
Consumer unsecured* Highlights Consumer unsecured portfolio Launched merchant partnership financing in 3Q15 2016 growth trend $s in millions and in 2016 expanded our unsecured offerings with the launch of our consumer unsecured installment $1,049 product $712 33% − Originated ~$1.2 billion unsecur
Slide 38: Core commercial portfolio overview
Core commercial portfolio overview Highlights 4Q16 $50.6 billion core commercial portfolio Asset quality relatively stable and has reached by Industry Sector (1) pre-crisis levels All Other(3) Overall credit risk is moderate and compares well Retailers 11% Real Estate with peers Lessors 2% 20% A
Slide 39: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview (1) Highlights 4Q16 $10.0 billion Commercial Real Estate Line of Business Continued progress in uptiering portfolio to by Facility Type by Property Type larger, more well-capitalized institutional and Land Hospitality Other CRE collateral upper midd
Slide 40: Shared National Credit portfolio overview
Shared National Credit portfolio overview Highlights 4Q16 $22.9 billion SNC portfolio Shared National Credits (SNC) $22.9 billion in outstanding by Geography Out of footprint Well-diversified portfolio with average commitments of about CA 7% $23.4 million and outstandings of $11.9 million Out of
Slide 41: Oil & Gas portfolio overview
Oil & Gas portfolio overview 4Q16 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 $326 million of corporate aircraft leases arising from Asset Finance Les s pri ce-s ens i t
Slide 42: Non-core portfolio overview
Non-core portfolio overview $s in billions Highlights Non-core assets $20.5 $20.5 billion legacy non-core portfolio identified in June 2009 with only $1.6 billion remaining; in September 2016, transferred an $17.3 additional $1.2 billion of commercial loans and leases, largely investment-grade air
Slide 43: Appendix – Key performance metrics, Non-GAAP financial measures and reconciliations
Appendix 2 – Key performance metrics, Non-GAAP financial measures and reconciliations 42
Slide 44: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $ % $ % Noninterest inc ome, adjusted: Noninterest income (GAAP) $379 $377 $435 $355 $330 $2 1% $49 15 % Les
Slide 45: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,384 $1,363 $1,380 $1,278 $1,234 $21 1.54 % $15
Slide 46: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Tangible book value per c ommon share: Common shares - at end of period (GAAP) M 509,515,646
Slide 47: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $ % $ % Other inc ome, adjusted Other income (GAAP) $24 $25 $87 $15 $20 ($1) (4%) $4 20 % Less: Notable item
Slide 48: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Inc ome before inc ome tax expense (GAAP) A $434 $414 $332 $20 4.8 % $102 30.7 % Inc ome tax expense a
Slide 49: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data FOR THE THREE MONTHS ENDED MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, 2017 2016
Slide 50: Citizens Financial Group, Inc.
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