Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q2 2024 Earnings Presentation
44 slides from Citizens Financial's earnings presentation, Jul 17, 2024
Slide 1: 2Q24 Financial Results
2Q24 Financial Results July 17, 2024
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. Any statement that does not describe historical or current facts is a forward- looking statement. These stat
Slide 3: 2Q24 GAAP summary
2Q24 GAAP summary Q/Q Y/Y $s in millions 2Q24 1Q24 2Q23 $/bps % $/bps % Net interest income $ 1,410 $ 1,442 $ 1,588 $ (32) (2) % $ (178) (11) % Noninterest income 553 517 506 36 7 47 9 Total revenue 1,963 1,959 2,094 4 — (131) (6) Noninterest Expense 1,301 1,358 1,306 (57) (4) (5) — Pre-provision pr
Slide 4: 2Q24 Underlying financial summary
2Q24 Underlying financial summary(1) Q/Q Y/Y $s in millions 2Q24 $/bps % $/bps % Net interest income $ 1,410 $ (32) (2)% $ (178) (11)% Noninterest income 549 35 7 43 8 Total revenue 1,959 3 — (135) (6) Noninterest expense 1,265 (8) (1) 32 3 Pre-provision profit 694 11 2 (167) (19) Provision for cred
Slide 5: 2Q24 Underlying financial performance detail
2Q24 Underlying financial performance detail(1) (A) (B) (C) = (A) + (B) (D) (E) = (C) + (D) $s in millions Legacy Core(2) Private Bank Core Non-Core(3) Total CFG Net interest income $1,415 $26.2 $1,441 $(31) $1,410 Noninterest income 545 4.1 549 — 549 Total revenue 1,960 30.3 1,990 (31) 1,959 Nonint
Slide 6: 2Q24 Overview
2Q24 Overview(1) Underlying PPNR drivers ■ Underlying EPS of $0.82; ROTCE of 11.1% $s in millions ■ PPNR up $11 million, or 2%, driven by 2Q24 QoQ – Strong fee performance, up 7% QoQ NII $ 1,410 (2)% Solid – Capital Markets fees up 14% QoQ 2Q24 results – Record Card and Wealth fees Fees 549 7% – NII
Slide 7: Net interest income
Net interest income NII and NIM Linked Quarter $s in millions, except earning assets ■ NII down 2%, primarily reflects: $201.5B $199.6B $203.1B $200.1B – NIM of 2.87%, down 4 bps QoQ, driven by higher $198.5B swap and borrowing costs, partially offset by improved asset yields and the benefit of Non-
Slide 8: Noninterest income
Noninterest income(1) Fees up 7% QoQ reflecting higher Capital Markets and record Wealth and Card fees Linked Quarter $ ■ Underlying noninterest income increased 7% with the following key business $s in millions 2Q24 1Q24 2Q23 Q/Q Y/Y drivers: Service charges and fees $ 106 $ 96 $ 101 $ 10 $ 5 – Ser
Slide 9: Noninterest expense
Noninterest expense(1) Underlying expense down 1% QoQ reflecting expense discipline while strategically investing Linked Quarter $ $s in millions 2Q24 1Q24 2Q23 Q/Q Y/Y ■ Underlying noninterest expense of $1.27 billion, down 1% – Salaries and benefits decreased $37 million, primarily Salaries & empl
Slide 10: Loans and leases
Loans and leases Loans down 1% reflecting paydowns and continued balance sheet optimization (BSO) Average loans and leases Linked Quarter $s in billions ■ Average loans down $1.8 billion and period-end loans down $153.7 $150.8 $148.0 $1.3 billion, or 1%, reflects: $144.8 $143.1 $14.4 $13.0 $11.7 ~11
Slide 11: Deposit performance and cost of funds
Deposit performance and cost of funds Broadly stable period-end deposits reflecting strong growth in the Private Bank 2Q24 Period-end deposits Linked Quarter $s in billions ■ Period-end deposits broadly stable $177.7 $178.2 $177.3 $176.4 $176.4 – Private Bank deposits increased $1.6 billion offset b
Slide 12: Highly diversified and retail-oriented deposit base
Highly diversified and retail-oriented deposit base $176.4B Period-end deposits Business mix (As of 6/30/24) Product mix Wealth Business 1% Banking Term Citizens 12% 14% NIB Access 21% 6% Commercial 26% Savings 10% Citizens Access Savings Money Market 5% 30% Treasury/ Checking Branch With Interest O
Slide 13: Credit quality overview
Credit quality overview Credit provision expense; Highlights $s in millions net charge-offs ■ NCOs of $184 million, or 52 bps of average loans and 0.46% 0.50% 0.52% leases 0.40% 0.40% ■ Nonaccrual loans increased 4% QoQ to 108 bps of total $176 $172 $171$171 $171 $181 $182$184 loans primarily reflec
Slide 14: Allowance for credit losses
Allowance for credit losses Allowance for credit losses Commentary $s in millions 1Q24 2Q24 ■ The increase in the ACL reserve coverage to 1.63% % % primarily reflects the decrease in loan balances and ACL Coverage ACL Coverage includes slightly higher reserve coverage for Retail $ 883 1.25 % $ 877 1
Slide 15: Strong capital position
Strong capital position Highlights $s in billions (period-end) 2Q23 3Q23 4Q23 1Q24 2Q24 (1)(2) ■ 2Q24 CET1 ratio of 10.7%(1) up from 10.6% in 1Q24 Basel III basis – 9.0% CET1 ratio adjusted for AOCI opt-out removal Common equity tier 1 capital $ 18.4 $ 18.4 $ 18.4 $ 18.1 $ 18.1 – Preliminary Stress
Slide 16: Capital level remains near the top of the peer group
Capital level remains near the top of the peer group ■ Well positioned for changing regulatory environment ■ CET1 ratio under current rules of 10.7%(1), and 9.0% adjusted for AOCI opt-out removal; among the strongest within the peer group – Expect both ratios to converge to the 10.0-10.5% range over
Slide 17: Well positioned for the future
Well positioned for the future Consumer Commercial Private Bank Transformed franchise Best positioned Building a premier private bank Low-cost branch-based deposits ■ Focused client coverage model on middle Deposits market, industry verticals, financial ($ billions) as of 6/30/24 sponsors $4.0 +7% ■
Slide 18: 3Q24 outlook vs. 2Q24
3Q24 outlook vs. 2Q24 2Q24 3Q24 Underlying(1) Underlying outlook Net interest income $1,410MM ■ Down ~1-2%* Noninterest income $549MM ■ Up slightly Noninterest expense $1,265MM ■ Stable ■ Net charge-offs down modestly Net charge-offs $184MM; 52 bps ■ ACL will continue to benefit from Non-Core run of
Slide 19: Citizens is an attractive investment opportunity
Citizens is an attractive investment opportunity Citizens continues to have a series of unique initiatives that will lead to relative medium-term outperformance – Transformed Consumer Bank with further deposit growth and Wealth revenue potential; well positioned in NYC metro to gain market share; pe
Slide 20: Appendix
Appendix
Slide 21: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets ê1% $176.1 $173.7 ê1% é3 bps 0.94% 0.94% $144.8 $143.1 0.75% 0.78% 1Q24 2Q24 1Q24 2Q24 1Q24 2Q24 Pre-provision profit Net income available to Return on average ta
Slide 22: Year-over-year Underlying results
Year-over-year Underlying results Average loans Average deposits Return on average total $s in billions $s in billions tangible assets ê7% stable ê21 bps $173.2 $173.7 $153.7 1.18% $143.1 0.94% 0.99% 0.78% 2Q23 2Q24 2Q23 2Q24 2Q23 2Q24 Net income available to Return on average tangible Pre-provision
Slide 23: Medium-term NIM
Significant NII contribution from Non-Core and swaps in 2025 and beyond given run off and lower rates Medium-term NIM ■ 2Q24 NIM of 2.87% expected to benefit ~64 bps by 4Q27 from Non-Core and swaps, partially offset by a ~15-25 bps impact of an asset sensitive core balance sheet, resulting in a medi
Slide 24: Interest rate swaps
Interest rate swaps Protecting NII from adverse outcomes while reducing earnings volatility through economic cycles ■ Maintaining significant protection to downside in rates well into 2026 Receive-fixed cash flow swaps (avg. notional in $ billions at 6/30/24) $28.5 $30.1 $27.5 $25.8 $21.1 $22.3 $19.
Slide 25: AOCI accretion
AOCI accretion Projected accretion to TCE and CET1 adjusted for AOCI opt-out removal(1) Accretes to CET1(2) TCE CET1(2) 6/30/2024 $(1.3) $(0.3) $(2.5) $(4.1) $(2.8) 12/31/2024 $(0.8) $(0.3) $(2.1) $(3.2) $(2.4) 12/31/2025 $(0.2) $(0.3) $(1.6) $(2.2) $(2.0) 12/31/2026 $(0.3) $(1.4) $(1.7) $(1.7) ~59%
Slide 26: Non-Core portfolio update
Non-Core portfolio update Focusing on relationship-based lending with attractive risk-adjusted returns Non-Core portfolio Commentary $s in billions ■ Non-Core portfolio of $8.9 billion retail loans as of $9.9 June 30, 2024 $8.9 $2.6 $2.5 $7.2 – $1.1 billion decline in 2Q24 $2.2 $4.6 $7.3 $1.8 – ~4.4
Slide 27: $71.9B Commercial credit portfolio
$71.9B Commercial credit portfolio Diverse and granular portfolio Commercial portfolio risk ratings(4) $s in billions % of ($ in billions) Balances total CFG C&I $78.3 $72.8 $71.9 Finance and Insurance B- and lower 6% 7% 8% Capital call facilities $ 5.6 4% B+ to B 16% 19% Other Finance and Insurance
Slide 28: Commercial Real Estate - $5.6B Office portfolio: well diversified
Commercial Real Estate - $5.6B Office portfolio: well diversified Property type $3.3B General Office class & location Life Sciences $1.0B 17% CBD Class A Suburban Class B 14% 29% Credit Tenant 24% CBD Class B $1.3B 11% Suburban Class A 39% General Office 59% $3.3B Suburban Class C 2% CBD Class C 5%
Slide 29: $69.9B Retail credit portfolio
$69.9B Retail credit portfolio Retail loans(1) High quality, diverse portfolio Other retail ■ Mortgage – FICO ~785 Education - 7% Residential – Weighted-average LTV of ~53% refinance mortgage ■ Home equity – FICO ~765 12% – ~34% secured by 1st lien Education - 4% – ~98% CLTV less than 80% in school
Slide 30: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type June 30, 2024 March 31, 2024 Loans and Loans and Allowance Coverage Allowance Coverage $s in millions Leases Leases Commercial and industrial(1)(2) $ 43,623 $690 1.58 % $ 43,951 $691 1.57 % Commercial real estate 28,311 739 2.61 28,872 734 2.
Slide 31: Delinquency by product type
Delinquency by product type June 30, 2024 (%) March 31, 2024 (%) Days Past Due and Accruing Days Past Due and Accruing Current 30-59 60-89 90+ Nonaccrual Current 30-59 60-89 90+ Nonaccrual Commercial and industrial(1) 99.28 % 0.06 % 0.04 % 0.02 % 0.60 % 99.05 % 0.17 % 0.06 % 0.05 % 0.67 % Commercial
Slide 32: Notable items
Notable items(1) Quarterly results reflect notable items primarily related to integration costs associated with recent acquisitions, as well as TOP revenue and efficiency initiatives and other items. In addition, second quarter 2024 and first quarter 2024 include a notable item for the FDIC special
Slide 33: Notes
Notes Notes on Non-GAAP Financial Measures See important information on our use of Non-GAAP Financial Measures at the beginning this presentation and reconciliations to GAAP financial measures at the end of this presentation. Non-GAAP measures are herein defined as Underlying results. Where there is
Slide 34: Notes continued
Notes continued Notes on slide 17 - Well positioned for the future 1) Compounded annual growth rate is calculated using 1H24 annualized results. Notes on slide 18 - 3Q24 outlook vs. 2Q24 1) See note on non-GAAP financial measures. 2) See general note d). Notes on slide 21 - Linked-quarter Underlying
Slide 35: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations QUARTERLY TRENDS $s in millions, except share, per share and ratio data 2Q24 Change 2Q24 1Q24 2Q23 1Q24 2Q23 $ % $ % Noninterest income, Underlying: Noninterest income (GAAP) A $553 $517 $506 $36 7% $47 9% Less: Notable items 4 3 — 1 33 4 100 Nonintere
Slide 36: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 2Q24 Change 2Q24 1Q24 2Q23 1Q24 2Q23 $/bps % $/bps % Operating leverage: Total revenue (GAAP) C $1,963 $1,959 $2,094 $4 0.27% ($131) (6.26%) Less: Noninterest expense (GAAP) E 1,30
Slide 37: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations QUARTERLY TRENDS $s in millions, except share, per share and ratio data 2Q24 Change 2Q24 1Q24 2Q23 1Q24 2Q23 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) Q
Slide 38: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 2Q24 Change 2Q24 1Q24 2Q23 1Q24 2Q23 $/bps % $/bps % Card fees, Underlying: Card fees (GAAP) $92 $86 $80 $6 7% $12 15% Less: Notable items 4 3 — 1 33 4 100 Card fees, Underlying (n
Slide 39: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 4Q23 3Q23 Noninterest income, Underlying: Noninterest income (GAAP) A $500 $492 Less: Notable items — — Noninterest income, Underlying (non-GAAP) B $500 $492 Total revenue, Underly
Slide 40: Non-GAAP reconciliations - CET1 adjusted for AOCI opt-out removal
Non-GAAP financial measures and reconciliations - CET1 adjusted for AOCI opt-out removal $s in millions, except share, per share and ratio data 2Q24 1Q24 CET1 Ratio adjusted for AOCI opt-out removal CET1 capital $ 18,086 $ 18,090 Less: AFS securities - AOCI 1,716 1,687 HTM securities - AOCI(1) 795 8
Slide 41: Non-GAAP reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core $s in millions, except share, per share and ratio data QUARTERLY TRENDS 2Q24 1Q24 2Q23 Net income available to common stockholders, Underlying: Net income available to common stockholders (GAAP) $357 $304 $444 Add: Not
Slide 42: Non-GAAP reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core $s in millions, except share, per share and ratio data QUARTERLY TRENDS 2Q24 1Q24 2Q23 Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) $219,2
Slide 43: Non-GAAP reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core* 2Q24 (GAAP) 2Q24 Notables 2Q24 (Non-GAAP) Commercial Consumer Legacy Private (3) Private Legacy Private Other Non-Core Legacy Non-Core Non-Core Total $s in millions Banking Banking(1) Core(2) Bank Bank Core Bank Net i
Slide 44: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q2 2024 Earnings Presentation on 6ix