Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2017 Earnings Presentation
38 slides from Citizens Financial's earnings presentation, Oct 20, 2017
Slide 1: 3Q17 Financial Results
3Q17 Financial Results October 20, 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: 3Q17 highlights
3Q17 highlights Net income of $348 million up 17% and diluted EPS of $0.68 up 21% YoY; On an Adjusted basis(1) up 25% and 31%, respectively Net income up 9% and diluted EPS up 8% QoQ ─ Achieved IPO ROTCE target with ROTCE of 10.1%, compared to 9.6% in 2Q17 and 8.6% in 3Q16, or 8.0% on an Adjuste
Slide 4: GAAP financial summary
GAAP financial summary YoY Highlights Adjusted(1) 3Q17 change from Linked quarter: $s in millions 3Q17 2Q17 3Q16 2Q17 3Q16 Net income available to common up 7% and EPS up 8% from 2Q17 $ % $ % NII up $36 million, or 4%, reflecting loan growth, an 8 bp improvement Net interest income $1,062 $1,026
Slide 5: Net interest income
Net interest income $s in millions, except earning assets Net interest income Highlights $136B $138B $137B Linked quarter: $132B $135B NII up $36 million, or 4% ─ Reflects loan growth, day count benefit and an 8 bp increase in NIM NIM of 3.05% up from 2.97% in second quarter 2017 $1,026 $1,062 ─
Slide 6: Net interest margin
Net interest margin NIM walk 2Q17 to 3Q17 0.12% (0.02)% (0.04)% 0.02% 2.97% 3.05% 2Q17 NIM% Loan Borrowing Deposit Investment 3Q17 NIM% yields costs/other costs portfolio yield/growth NIM walk 3Q16 to 3Q17 0.35% 0.01% (0.03)% (0.13)% 0.01% 3.05% 2.84% 3Q16 NIM% Loan Balance Borrowing Deposit Investm
Slide 7: Noninterest income
Noninterest income $s in millions Highlights 3Q17 change from Linked quarter: 3Q17 2Q17 3Q16 2Q17 3Q16 Noninterest income increased $11 million $ % $ % ─ 2Q17 results include an $11 million impact from finance lease Service charges and fees $ 131 $ 129 $ 134 $ 2 2 % $ (3) (2) % impairments recorde
Slide 8: Noninterest expense
Noninterest expense $s in millions 3Q17 change from Highlights 3Q17 2Q17 3Q16 2Q17 3Q16 Linked quarter: $ % $ % Noninterest expense decreased $6 million from 2Q17 levels Salaries and benefits $ 436 $ 432 $ 432 $ 4 1% $ 4 1% that included $15 million of operating lease impairments Occupancy 78 79 7
Slide 9: Consolidated average balance sheet
Consolidated average balance sheet 3Q17 change from Highlights $s in billions 3Q17 2Q17 3Q16 2Q17 3Q16 Linked quarter: $ % $ % Total interest-earning assets remained stable. Average loans Investments and interest and leases, including loans held for sale, increased by $454 bearing deposits $ 27.3
Slide 10: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $56.2B $56.9B $57.6B $58.3B Linked quarter: $55.0B $3.4 $3.6 Average loans increased $741 million, or 1%, reflecting growth $3.0 $3.1 Other(1) $2.6 $2.8 in residential mortgages, education and consumer uns
Slide 11: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $48.0B $48.5B $48.4B Linked quarter: $46.5B $46.9B Average loans were relatively stable despite a $390 million $2.3 $2.5 $2.9 Other (1) $1.7 $2.2 impact tied to the 2Q17 sale of $512 million of lower-ret
Slide 12: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $126.2B $127.5B $127.5B Linked quarter: $124.3B $121.0B Total average deposits up $2.2 billion, or 2% $12.4 $13.6 $12.2 $10.8 ─ Largely reflects strong growth in term deposits, money Total long
Slide 13: 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 remains strong, reflecting growth in higher quality, lower risk retail loans $104 and broadly stable risk profile in commercial $102 $11 $87 $96 NPLs t
Slide 14: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 3Q16 4Q16 1Q17 2Q17 3Q17 Capital levels remain at the higher end of the range for (1,2) regional peers Basel III transitional basis Common equity tier 1 capital $ 13.8 $ 13.8 $ 13.9 $ 14.1 $ 14.1 Risk-weighted assets
Slide 15: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 3Q17 Initiative Commentary Status Continue to build out Mass Affluent and Affluent value propositions. Added ~7,000 primary HHs with a loan or Grow and deepen relationships investment. Embarked on several customer journey transformations to enhance custom
Slide 16: Making consistent progress against our financial goals
Making consistent progress against our financial goals IPO-based Key Indicators medium-term 8.0% 8.4% 9.0% 9.6% 10.1% targets 6.8% 6.7% 6.7% 6.6% 6.8% 6.6% 7.3% 6.3% 6.2% Adjusted 4.3% 5.2% 5.2% ROTCE(1) 10%+ 0.96% Adjusted return 0.80% 0.79% 0.85% 0.89% 0.68% 0.66% 0.69% 0.69% 0.67% 0.68% 0.67% 0.6
Slide 17: 4Q17 outlook
4Q17 outlook 3Q17 4Q17 expectations vs. 3Q17 $109.5 billion average loans 1.0% - 1.25% average loan growth Net interest 3.05% NIM; including 2 bp NIM broadly stable income, net impact from higher than interest margin expected commercial loan recoveries Noninterest $381 million Broadly st
Slide 18: Key messages
Key messages Citizens 3Q17 results highlight disciplined execution and continued momentum ─ Exceeded IPO medium-term targets of 10% ROTCE and 60% efficiency ratio ─ Delivered EPS growth of 21% YoY, 31% on Adjusted basis;(1) YTD 2017 YoY Adjusted growth of 38% ─ Operating leverage of 6% YoY, 7% on
Slide 19: Appendix
Appendix 3% Citizens Financial Group, Inc.” 19
Slide 20: At Citizens, we continue to smartly grow our balance sheet
At Citizens, we continue to smartly grow our balance sheet Total loans(1) $ billions $103 $109 $89 $96 22% Good loan growth with rising yields 3.96% 3.37% 3.32% 3.51% 2014 2015 2016 3Q17 Loan yields Loan portfolio returns 25% 14% 22% 21% 22% (2) Return on loan book regulatory capital improvi
Slide 21: Year-over-year results
Year-over-year results Pre-provision profit Average loans(1) Return on average total $s in millions $s in billions tangible assets(2) $585 14% $110.2 5.4% 0.96% 10 bps $104.6 0.86% $513 Adjusted Adjusted 21% 0.80% 16 bps $482 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 Net income available to Average dep
Slide 22: Linked-quarter results
Linked-quarter results Pre-provision profit Average loans(1) Return on average total $s in millions $s in billions tangible assets(2) $585 10% $109.8 $110.2 0.4% 0.96% 7 bps $558 0.89% Underlying $532 4.8% 2Q17 3Q17 2Q17 3Q17 2Q17 3Q17 Net income available to Average deposits Return on avera
Slide 23: 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 10.0% (200 bps gradual increase) Net interest income positioned to continue to benefit from rising rates 6.5% ─ Our asset sensiti
Slide 24: Consumer Banking segment
Consumer Banking segment Highlights 3Q17 change from Linked quarter: $s in millions 3Q17 2Q17 3Q16 2Q17 3Q16 Net income up $4 million, or 3% $ % $ % Net interest income up $17 million, reflecting improved loan yields, Net interest income $ 674 $ 657 $ 621 $ 17 3% $ 53 9% mortgage, higher educati
Slide 25: Re-balancing retail loan mix to drive improved risk-adjusted returns
Re-balancing retail loan mix to drive improved risk-adjusted returns Retail loan performance 2013 2017 YTD $ billions Loan Loss Loan Loss $56.7 Mix(1) rate Mix(1) rate $54.2 $51.3 Core resi mortgage 18% 0.38% 28% 0.04% $46.7 $48.1 98% 97% Core home equity 44 0.66 27 0.13 95% Auto 19 0.06 24 0.75 91%
Slide 26: Commercial Banking segment
Commercial Banking segment Highlights 3Q17 change from Linked quarter: $s in millions 3Q17 2Q17 3Q16 2Q17 3Q16 Commercial Banking net income up $14 million, or 7% $ % $ % Net interest income up $10 million, or 3%, as the benefit of higher loan yields was partially offset by an increase in deposi
Slide 27: Other
Other Highlights 3Q17 change from Linked quarter: $s in millions 3Q17 2Q17 3Q16 2Q17 3Q16 Other recorded net income of $25 million, up $12 million $ % $ % Net interest income up $9 million, driven by higher residual funds transfer pricing, partially offset by higher Net interest income $ 34 $ 25
Slide 28: 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 3Q17 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 $ % $ % Noninterest inc ome, Adjusted: Noninterest income (GAAP) $381 $370 $379 $377 $435 $11 3% ($54) (12%)
Slide 29: 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 3Q17 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,443 $1,396 $1,384 $1,363 $1,380 $47 3.37 % $63
Slide 30: 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 3Q17 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 $/bps % $/bps % Tangible book value per c ommon share: Common shares - at end of period (GAAP) M 499,505,285
Slide 31: 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 3Q17 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 $ % $ % Other inc ome, Adjusted Other income (GAAP) $18 $2 $24 $25 $87 $16 NM ($69) (79%) Less: Notable item
Slide 32: Non-GAAP financial measures and reconciliation - Segments
Key performance metrics, Non-GAAP financial measures and reconciliation - Segments $s in millions, except ratio data THIRD QUARTER 2017 SECOND QUARTER 2017 FIRST QUARTER 2017 Consumer Commerc ial Consumer Commerc ial Consumer Commerc ial Banking Banking Other Consolidated Banking Banking Other Conso
Slide 33: Non-GAAP financial measures and reconciliation – Segments
Key performance metrics, Non-GAAP financial measures and reconciliation – Segments $s in millions, except ratio data FOURTH QUARTER 2016 THIRD QUARTER 2016 Consumer Commerc ial Consumer Commerc ial Banking Banking Other Consolidated Banking Banking Other Consolidated Net inc ome available to c ommon
Slide 34: Non-GAAP reconciliation – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliation – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q17 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 $/bps % $/bps % Noninterest inc ome, Underly ing: Noninterest income (GAAP) $381 $370 $379 $4
Slide 35: Non-GAAP reconciliation – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliation – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q17 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,443 $1,396 $1,384 $1,380 $47 3.
Slide 36: Non-GAAP reconciliation – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliation – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q17 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 $/bps % $/bps % Return on average total tangible assets and return on average total tangible
Slide 37: Key performance metrics, Non-GAAP financial measures and reconciliation
Key performance metrics, Non-GAAP financial measures and reconciliation $s in millions, except share, per share and ratio data FOR THE THREE MONTHS ENDED SEP. 30 JUN. 30, 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
Slide 38: Citizens Financial Group, Inc.
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